REITs Repositioning For Growth [Housing Tracker]

Includes: MPG-OLD, PPS, SPG
by: Judy Weil

Commercial Real Estate and Real Estate Investment Trusts [REITs]

Simon Says. “The stage is set for some heavy negotiating between Simon Property Group Inc. (NYSE:SPG) and Lend Lease Corp. over the King of Prussia Mall, a 2.6 million-square-foot behemoth near Philadelphia. Lend Lease owns a 50% interest while Simon owns only a 12.4% stake. Nevertheless Simon manages the mall with its joint-venture partner, Kravco Cos., the mall's original developer… Lend Lease, recently announced plans to sell its interest because it has [just] a "passive management position." Bernard J. Haddigan, managing director at brokerage Marcus & Millichap, estimates the stake could fetch $1B-$1.2 billion. Simon, the largest U.S. mall owner by number of properties… has ample cash and borrowing capacity.” (WSJ, Sept. 3)

Post Sets Tighter Focus to Get Through. “When Post Properties Inc. (NYSE:PPS) put itself on the selling block earlier this year, no buyers emerged. Now Post, an Atlanta-based residential landlord that owns more than 20,000 mostly upscale apartments, outlined last month a plan designed to downsize and streamline the company. The strategy includes selling an estimated $500 million of property -- eight sites, marking the biggest asset sale since its founding in 1971 -- and using the proceeds to buy back stock, reduce debt and, potentially, issue a special dividend to shareholders… Post has also whittled the bloated and criticized development pipeline -- previously estimated at $1 billion.” (WSJ, Sept. 3)

Downtown Office Space Vacancies Rise In Second Quarter. Wisconsin: “Colliers International: The vacancy rate for downtown Milwaukee office space rose during Q2… Office space vacancy rate for downtown Milwaukee rose from 14.9% in Q1 to 15.9% during Q2. The vacancy rate for class A office space in downtown Milwaukee rose from 7.9% to 10.4% during Q2. In Milwaukee's suburban areas, the office space vacancy rate held steady at 11.5% during Q2. However, the vacancy rate for class A office space in Milwaukee's suburban areas rose from 14.3% to 16.0% during Q2… Milwaukee area's industrial space vacancy rate [rose] from 7.4% in Q1 to 7.5% in Q2.” (Business Times, Sept. 3) 

Maguire Sells Another OC Office Tower. “Maguire Properties Inc. (NYSE:MPG-OLD)… has sold City Plaza tower in Orange to an entity owned by Hudson Capital LLC. The office REIT said the sale was completed in a cooperative arrangement with the property’s lender. Both the lender and purchase price were undisclosed… The 327,000-square-foot tower is only about 45% full… largely because subprime lender Ameriquest Mortgage Co. was a major tenant until it went defunct last year. City Plaza is Maguire’s second large Orange County sale in recent weeks. The office landlord and developer said in March it planned to sell 11 office properties in the county totaling roughly 3 million-sf. The REIT wants reduce its debt load after acquiring $2.9 billion worth of local buildings in the past year.” (LA Business Journal, Sept. 2)

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