Housing Market Tracker - CMBX Tanks, But REITs Keep Busy

Includes: BX, FCE.A, KIM, SLG, UDR
by: Judy Weil

Commercial Real Estate and Real Estate Investment Trusts (REITs)

ABX and CMBX: Cliff Diving Again. "All of the ABX series are setting new record lows. Also all of the CMBX indices are setting new records again. Note: Up is down for the CMBX indices. The CMBX is quoted as spreads, whereas ABX is quoted as bond prices. When the spreads increase - chart going up - the bond prices are going down. The second graph is the CMBX-NA-BBB-4 close today. The CMBX is a CMBS (Commercial Mortgage-Backed Securities) credit default index just like the ABX - except up is down. The rising delinquencies for commercial real estate is probably impacting the CMBX." (Calculated Risk, Mar. 4th)

Blackstone Closes $635M GSO Acquisition. "The Blackstone Group LP (NYSE:BX) has closed the $635-million acquisition of GSO Capital Partners LP and certain of its affiliates... Blackstone Holdings will also pay up to an additional targeted $310 million over the next five years contingent on specified earnings targets." (Globe St., Mar. 4th)

Two Class B Buildings Fetch a Total of $60M. New York City: "The GVA Williams father-son team of Marty and Eric Meyer has arranged the sale of two local buildings--one in Chelsea and the other in the Penn Plaza District. The buyer, known as 127 W. 25th St. LLC, purchased the Chelsea property for $32 million, or approximately $300/sf... The new owners have planed major renovations to the building that they believe will help nearly double asking rents from the mid $20s to $40s/sf. Within the next 12 months, a number of leases will expire, freeing up 50,000-sf to 60,000-sf to lease at the higher rents." (Globe St., Mar. 4th)

SL Green Sells 1250 Broadway in Manhattan to Murray Hill Properties for $310M. "SL Green Realty Corp. REIT (NYSE:SLG) has sold 1250 Broadway, 670,000-square-foot Class A office tower, to Murray Hill Properties for $310 million, or approximately $463/sf. The capitalization rate on the deal was 4.5%. SLG paid $93M for the building in 1999. In 2001, it sold a 45% stake to SITQ for $126.5M. In October, 2006, SL Green recapitalized 1250 Broadway to reflect the increase in value to $260M. The company also [said it] increased its economic interest in the building at that time to 66.2% because it had exceeded performance thresholds... SLG expects to receive an incentive fee of at least $15M [at] the Q2 closing." (Commercial Property News, Mar. 4th)

UDR Closes $1.7B Portfolio Sale to DRA Fund VI. "UDR Inc. (NYSE:UDR) has completed a $1.7-billion, 25,684-unit portfolio sale... to DRA Fund VI LLC in a joint venture with Steven D. Bell & Co... leaving the locally based multifamily REIT with a younger, 40,000-unit portfolio concentrated in the Pacific Coast, DC corridor and Florida markets... The sold portfolio consists of 86 apartment communities in Arkansas, Delaware, Florida, North Carolina, Ohio, Oregon, South Carolina, Tennessee, Texas, Virginia and Washington. At Dec. 31, the portfolio had total income per home of $744/month, average occupancy of 94.4%, and operating margin of 62.3%" (Globe St., Mar. 4th)

Forest City Refinances Promenade Bolingbroke with $100M Loan. Illinois: "Forest City Enterprises Inc. (NYSE:FCE.A) has refinanced Promenade Bolingbrook town center in Chicago’s southwestern suburbs with a $100 million mortgage loan from The Prudential Insurance Co. of America. The mortgage, which replaced the property’s construction loan, illustrates that the capital markets are providing liquidity to borrowers with strong track records, high quality assets and strong management teams, said a Forest City spokesman: “The terms of specific transactions may be less attractive than 18 months ago, but we have plenty of access to liquidity. In fact, we recently exercised the accordion feature in our revolving credit facility and expanded our line of credit to more than $700 million.” (Commercial Property News, Mar. 3rd)

Tanger Factory Outlet Centers In Talks To Build On Irving Site. Texas: "Tanger Factory Outlet Centers Inc. is negotiating to build a large shopping center in Irving just north of Texas Stadium... The first of several major developments the city of Irving is eying for that area... Irving has selected developer Forest City Enterprises to build on the old stadium site. Forest City – which is redeveloping downtown Dallas' Mercantile Bank complex – is looking at a mixed-use project that would include as much as 3 million sf of commercial space and thousands of residential units." (Dallas Morning News, Mar. 3rd)

Related-Meritage JV to Develop Bahamas Resort. "Developer the Related Group and franchise operator Meritage Hospitality Group have formed a joint venture called TRG-Meritage Bahamas L.L.C. to develop an 884-acre resort property on the island of Eleuthera in the Bahamas... The project is intended to be a low-density, low-rise resort community. Eleuthera is a narrow island about 110 miles long and a mile wide at places, roughly 50 miles east of Nassau. Currently, many of its resort properties are... in the northern part of Eleuthera; the TRG-Meritage property will be on the southern part of the island... The Related Group will function as the lead developer for the project." (Commercial Property News, Mar. 3rd)

Developer Purchases 17-Acre HP Property In Cupertino. California: "Sand Hill Properties has purchased the controversial, long-vacant 17-acre Hewlett-Packard Co. property near Cupertino Square... Sand Hill owner Peter Pau said he plans to avoid the issues that arose when homebuilder Toll Brothers (NYSE:TOL) sought to put hundreds of condominiums on the site at Stevens Creek Boulevard and Finch Avenue. Voters defeated that project and one planned for Cupertino Square in 2006, after the Cupertino City Council approved them. Pau: "We don't expect our plan to be very controversial." Pau said those plans could include a hotel, retail shops, a fitness club, offices and senior housing." (Mercury News, Mar. 3rd)

Low-End Mall REIT Brings In The Gold Without The Glitter. "Forbes: In the 40 years since Milton Cooper co-founded REIT Kimco (NYSE:KIM), Cooper has turned it into a strip-mall behemoth with over $9 billion in assets, [by] focusing on less than glamorous "neighborhood and community shopping centers." Kimco has built an empire anchored by stores like Bed Bath & Beyond, Old Navy, Michael's, and Home Depot. So Fifth Avenue this is not. But Forbes suggests that Kimco's retailers may be better-poised to weather a recession than more upscale locations. With a strong shareholder return since going public in 1992, it's been a consistent upward march that ended precisely at the beginning of 2007." (Blogging Stocks, Mar. 2nd)

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