Housing Market Tracker - Commercial RE Solid in Some Areas

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Includes: ASN, CLI, FCE.A, MGM, STAR
by: Judy Weil

Quote of the Day

"Real estate is involved in any aspect of business, so we're thinking that whether you're a school or a government commissioner or a city councilman or a general business owner, theoretically you should be interested in what's going on in the commercial real estate business." - Memphis Area Association of Realtors' Commercial Council president Steve Guinn, on the Commercial Property Forecast summit to be held in Memphis, Tenn. this week. Guinn says commercial real estate industry types are not the only ones who will be attending the conference. (Memphis Daily News, Feb. 19th)

Commercial Real Estate and Real Estate Investment Trusts (REITs)

Millions Could Go To Revamp Landmark Union Trust Building. "An investment group that paid $24.1 million to buy the ornate Union Trust Building plans to spend "several million dollars" more to bring the landmark structure back to life. The group, led by executives of the Mika Realty Group in Los Angeles, promises to refurbish the nearly empty, block-long structure at 501 Grant St., Downtown, and restock its 595,000-plus sf of rentable space with new office and retail tenants." (Pittsburgh Tribune Review, Feb. 19th)

Duke Construction Triples Dallas Staff. Texas: "Duke Realty Corp. said Monday that it has dramatically expanded its North Texas construction operations. The Indiana-based commercial real estate developer said that it has tripled the size of its Duke Construction staff. And the company said the value of projects it is handling grew to $142 million last year, up from $27M in 2005. Duke is building more than 4.5 million sf of industrial and office space in the Dallas area." (WFAA, Feb. 18th)

Lenders Could Still Foreclose On Macklowe. New York: "While developer Harry Macklowe has received extensions from his biggest lenders on his overdue $7.1 billion short-term loans, he has not reached a deal with subordinate lenders. On Friday, hedge fund Fortress Investment Group gave Macklowe an extension on $1.4B in debt that went into default a week ago. For that loan, Macklowe used the General Motors Building as collateral; bids for the building were due Friday. But the $5.8B Macklowe owes Deutsche Bank is still up in the air. Subordinate lenders hold debts on four of the seven highly-leveraged NYC buildings Macklowe bought from Equity Office Properties Trust last year." (The Real Deal, Feb. 18th)

Istar Financial Outlook Cut To Negative, IDR Affirmed At 'BBB' – Fitch. "Fitch Ratings said it downgraded its outlook on iStar Financial Inc (SFI) to negative from stable citing the reduced capital availability in the commercial real estate debt capital markets and its potential impact on the company, among other reasons. Fitch affirmed the commercial real estate finance company's issuer default rating at 'BBB'; unsecured revolving credit facilities at 'BBB'; senior unsecured notes at 'BBB' and preferred stock rating at 'BB+'. The affirmation reflects SFI's largely unencumbered asset base and risk underwriting and management processes and the strength of SFI's franchise as a finance company focused on the commercial real estate sector." (CNN Money, Feb. 18th)

Mack-Cali Exceeds Expectations ; But REIT's Chief Sees Difficult Times Ahead. "Mack-Cali Realty Corp. (NYSE:CLI), the third-biggest U.S. office REIT, said Thursday that a measure of profitability rose 7% in Q4, topping analysts' expectations. While Q4 revenue increased slightly... net income plunged 76%. CEO Mitchell Hersh: "We're seeing a very significant lack of clarity in the economy." Funds from operations, an industry gauge of profitability, rose to $73 million, or $0.89/share, from $68.2M, or $0.87, a year ago. Analysts [had] forecast an average FFO of $0.85/share." (Black Enterprise, Feb. 17th)

Clark Realty To Develop $2.5B Poplar Point. "Washington DC: Clark Realty’s plan to redevelop the District’s Poplar Point--a $2.5-billion project--has been selected by local officials. The firm beat out an Archstone-Smith (ASN) and Madison Marquette joint venture, and Forest City Enterprises (NYSE:FCE.A)--the two other developers that made it to the District’s short list last month--to win the plum assignment. According to Mayor Adrian Fenty, it is the largest economic development project on which District has ever embarked." (Globe St., Feb. 15th)

$1.2B MGM-Dubai World Tender Offer Successful. "MGM Mirage: Nearly 102 million shares of MGM Mirage common stock were tendered in response to the 15-milion-share joint tender offer by MGM Mirage and Dubai World that expired Thursday evening... Per the offer, the duo will acquire only the 15 million shares, with Dubai World subsidiary Infinity World (Cayman) LP getting 6.5 million shares and MGM getting 8.5 million shares... The per-share purchase price is $80, which equates to a total purchase price of $1.2 billion." (Globe St., Feb. 15th)

GM Leaving Namesake Building For Citi Center. "General Motor’s treasury operations and asset management group, which are now housed in the GM tower on Fifth Ave., will move to the Citigroup Center next summer. GM has had offices in the eponymous building for 40 years but the move was not a surprise. After occupying a significant chunk of the building, GM now only occupies three floors and its contractual naming rights for the property expire in 2010. Jones Lang LaSalle: The automotive company signed a l0-year lease for 135,000-sf at 153 E. 53rd St... Asking rent at the building is $115/sf. GM spokeswoman: "The new location is more economically attractive." (Crain's NY Business, Feb. 15th)

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