Housing Market Tracker - Some REITs Slow Down, Some Speed Up

 |  Includes: AVB, CSU, GGP, MPG-OLD, PLD, SLG, VNO
by: Judy Weil

Commercial Real Estate and Real Estate Investment Trusts (REITs)

Macklowe Receives Default Notice As His Debt Negotiations Stall. "Sources: NY developer Harry Macklowe was served a notice of default... as negotiations with his lenders over $7 billion of debt on seven Manhattan buildings bogged down... Mr. Macklowe bought the skyscrapers last year [with] short-term debt that was due Saturday... Mr. Macklowe already had worked out an agreement with [senior debt holder], Deutsche Bank AG [and] most of the subordinate [or] mezzanine debt- holders... [But] NY REIT Vornado Realty (NYSE:VNO) balked... because it holds the junior-most slice of debt... Vornado believes if the buildings are sold now, the price would be considerably less than [what] Macklowe bought them for... wiping out Vornado's investment." (Wall St. Journal, Feb. 12th)

Murray Hill Pre-Empts Bids on 1250 Broadway. "Only days before the first bid was due for locally based SL Green Realty Corp.’s (NYSE:SLG) 1250 Broadway, Murray Hill Properties has purchased the 770,000-sf tower for $310 million... About a year ago, SLG recapitalized on the property due to its jump in value. In 2001, when SLG and SITQ, a subsidiary of the Caisse de depot et placement du Québec, formed a JV, the property was valued at $126.5M. In October 2006, the class A building was worth $260M. In early January... SLG hoped the property would fetch approximately $350M." (Globe St., Feb. 11th)

General Growth 4Q Results Fall 37 Pct. "Retail REIT General Growth Properties Inc. (NYSE:GGP) said Monday Q4 results dropped nearly 37% due to lower land sale revenue. Funds from operations, [FFO], decreased to $190.4M, or $0.64/share, from $301.3M, or $1.02/share, in the year-ago period. Analysts expected FFO of $0.66/share." (Forbes, Feb. 11th)

Commercial Real Estate: New Plans For Old Plainview. "[The] RexCorp Realty chief Scott Rechler and Charles Wang partnership is in contract to sell the 22-acre parcel [in] Old Plainview [which] would have turned into a mix of housing and retail -- to Steel Equities... The move reflects a decision by national developer AvalonBay Communities (NYSE:AVB) not to build there. AvalonBay VP Matthew Whalen: AvalonBay, had considered building some high-end rental units on the site... later on... decided that it would not have been worth facing the same pushback that the initial proposal drew." (Newsday, Feb. 11th)

Perseus Realty Capital Secures $11M Mezzanine Loan For Denver Condo Development. "Perseus Realty Capital, LLC... has secured $11 million in mezzanine financing on behalf of The Nichols Partnership, Inc. The mezzanine loan will complete the financing package needed for the construction of The Spire, a 503-unit high-rise residential condominium under construction in downtown Denver. This transaction closed despite waning appetite for condo deals because of the strong sponsorship and demand for more affordable condo units. When complete, the 41-story tower will be one of Denver's tallest and most energy efficient buildings with a total project cost of $172.5M." (Ad Hoc News, Feb. 11th)

Capital Senior Living Terminates Hearthstone Transaction. "Capital Senior Living Corp. (NYSE:CSU) announced that it has terminated its previously announced agreement with Hearthstone Senior Services, L.P. to acquire Hearthstone's interests in 32 leases with a healthcare REIT. The Company intends to convert 256 independent living units in eight communities to units of assisted living and dementia care. Upon stabilization, these converted units are projected to increase the Company's revenues by $4.3 million with a 60% incremental margin. In addition, the Company is planning to expand three communities adding a total of 180 assisted living units, 60 dementia care units and 30 independent living units." (Trading Markets, Feb. 11th)

What Fortunoffs Own. "Storied retailer Fortunoff filed for bankruptcy this month... Westwood Llc, which owns the chain's flagship Westbury site at the intersection of Old Country Road and Fortunoff Way, is controlled by the Fortunoff family, according to a Fortunoff's spokeswoman... Court papers show that the retailer owes Westwood $776,606. The family sold its Fortunoff's stake to private-equity investors last year but [kept] the real estate... assessed at $29.4 million in 2006... The Fortunoff chain itself did not own any real estate -- one reason for its relatively low $100M sale price. By comparison, Macy's owned $9.33 billion of buildings and land as of February 2007." (Newsday, Feb. 11th)

Big Jobs Help Keep Builders In Business. "Oregon: Building permits issued for new single-¬family homes throughout Lane County... dropped 33% in 2007 compared to 2006. [However,] commercial and industrial permits held their own... Construction Lead Services statistics: Last year, builders took out 577 permits for new residential construction in cities throughout Lane County, compared with 864 in 2006... During the same period, commercial and industrial builders and remodelers received 701 permits valued at $250 million, putting the total value of the 2,183 building permits issued for all projects in 2007 at more than $406M." (Register Guard, Feb. 10th)

Foreign Investors Look to Land for Profits. "Foreign investors are interested in US commercial real estate, thanks to favorable exchange rates. Private equity firms and other funds are increasingly targeting land parcels in this country in anticipation of the next real estate cycle. Now, it appears that the twain is about to meet. Anthony M. Graziano Jr., associate managing director with Integra Realty Resources: “We are seeing strong interest from the European market in the US real estate markets -- with a particularly strong interest in land investments where there is a long time horizon and a low leverage play." (Globe St., Feb. 10th)

MDC Down $281 Million In Q4. "Real estate company ProLogis (NYSE:PLD) reported net income of $113.3 million, or $0.44/share, compared with $331.1M, or $1.33/share, in Q4'06. Revenue was up 29% to $799.9M. For 2007, net income was $1.05 billion, or $3.94/share, compared with $849.0M, or $3.32/share, in 2006. Revenue was up 154% to $6.2B on the strength of a $3.7B increase in sales of developed and acquired properties. The company also said Walter C. Rakowich plans to retire as president and COO effective Jan. 2, 2009." (Rocky Mountain News, Feb. 8th)

Maguire Mum as Analysts Ponder Sale Options. "Maguire Properties (NYSE:MPG-OLD) has taken the unusual step of not conducting a quarterly conference call to report its fourth-quarter and year-end earnings, [saying] it wouldn't comment on earnings or its efforts to arrange a sale... Analysts say that its financial performance and other factors continue to present big hurdles for a [buyer of Maguire's] 35 million sf of Southern California office space... David Loeb, senior real estate analyst and managing director for Robert W. Baird & Co.: The hurdles to a Maguire sale range from tax implications to changes in capital markets to the uncertainties of the Orange County office market to the heavy debt load on Maguire's portfolio." (Globe St., Feb. 8th)

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