Latest: US retailers close, Sunrise sells old folks communities, Ken of Tokyo buys Embassy of Tahoe, Duke-weeks and JP Morgan j/v, reits can trim dividends, new Hyatt HQ in Chicago, Mitsui and Kumagai Gumi seek debt waivers, black TV businessman buys Hilton suites, mobile phone towers sale, there’s better than Ohio, US building inflation up 4.67% for year, phone & wire sites sale, fund bulks up but cost unknown, small US affordable housing boost, US property website sold, Equity Office sells one, 35-37% return target for Miami developer, Sainsbury sells Homebase, Delancey cashes up.
29 December 2000
Chicago-based department store chain Montgomery Ward closed the doors of its 250 stores in 31 states yesterday and filed for bankruptcy after 128 years in business. Weak holiday sales were the final straw for the chain, now owned by General Electric’s GE Capital. Two days earlier, Massachusetts-based discount store Bradlee’s filed for chapter 11 bankruptcy protection. It had 105 stores in seven north-eastern states and turnover of $US1.5 billion last year. Same-stores sales fell 4.4% in the year to November.
Sunrise Assisted Living Inc, of Virginia, has signed to sell nine communities containing 666 units for $US131 million to a limited partnership formed by Prudential Real Estate Investments (for Prudential, five pension funds, and Sunrise with 25% ownership and a long-term management contact). It has sold another two communities containing 133 units to Aureus Group LLC for $US28.1 million, also with a long-term management contract. Sunrise opened 27 communities this year, sold 22 for a total $US314 million, and plans to continue selling 15-20 a year. It operates 163 communities in the US and UK for 12,800 residents. Sales details show the Auereus sale averaged $US211,000/unit and $US176,000/resident, the Prudential sales $US197,000 and $US164,000, and the average overall was $US199,000/unit and $US166,000/resident. The details also showed debt on the Prudential properties was $US12 million above book value, but with a sale $US45 million above book value.
Ken Corp of Tokyo has bought the 400-suite Embassy Suites Lake Tahoe resort for an undisclosed sum, but will make the operation debt-free. The resort, managed by Hilton Hotels, opened in 1991. The previous owners filed for chapter 11 bankruptcy in 1998.
Duke-Weeks Realty Corp and JP Morgan Investment Management Inc have put together an industrial property joint venture in the Dallas area containing 430,000mÂ² in 29 buildings, five of them under development, and 67ha for future development of another 280,000mÂ². The two partners entered a similar joint venture in 1995, and expanded it in October from a $US248 million venture to $US790 million.
The Reit Modernisation Act comes into force in the US on New Year’s Day, cutting from 95% to 90% the minimum distribution requirement of a real estate investment trust’s taxable income.
28 December 2000
Hotel group Hyatt Corporation is to get a 60-storey, 111,500mÂ², $US350 million (total project cost) new headquarters at Wacker Drive and Monroe St, on the south branch of the Chicago River. It will be British architect Lord Norman Foster’s first Chicago work. Construction should start at the end of 2001 and finish mid-2004. Hyatt and affiliates will provide 80% of the required equity and take up to one-third of the tower. The Hyatt-controlling Pritzker family’s Pritzker Realty Group LLC has formed a joint venture with Prime Group Realty Trust, which will provide 20% of the equity, to develop the 5660mÂ² site on a street which already boasts some of the world’s most impressive examples of modern skyscraper architecture.
Mitsui Construction Co has decided to seek forgiveness of Â¥163 billion ($NZ3.2 billion) of debt from 12 lenders. Its negative net worth totals Â¥88.3 billion.
Another Japanese contractor, Kumagai Gumi, is still working towards agreement with its banks on a Â¥450 billion ($NZ8.9 billion) request for a waiver. Its share price lifted 20% on the prospect of a decision from the banks, and the shares of its biggest creditor, Sumitomo Bank, rose slightly on that prospect. Sumitomo is owed Â¥234 billion and Shinsei Bank Â¥100 billion.
27 December 2000
Black Entertainment Television founder, chairman, chief executive and majority shareholder Robert L Johnson has celebrated BET Holdings II Inc’s sale to media giant Viacom at the beginning of November in a scrip deal for $US3 billion, with assumption of $US570 million of debt, by buying seven Homewood Suites by Hilton properties for comparative petty cash â€” 989 rooms for $US95 million (at $NZ217,000/room). Mr Johnson is a director of Hilton Hotels Corp, which will retain long-term franchise and management contracts for all these extended-stay properties. The sale was to a newly formed entity, RLJ Development LLC.
Those mobile phone towers, that so concern environmentalists and people worried about radio-wave impacts, are worth a lot more than the heated air of a planning argument. Crown Castle Australia has just agreed to buy 669 of them from Vodafone Australia for $US130 million ($NZ440,000 each), with an option on another 600 over the next six years. The buyer is two-thirds owned by Crown Castle International Corp of Houston and one-third by Jump Capital, a New Zealand investment group headed by Fay Richwhite.
Associated Estates Realty Corp of Cleveland, Ohio, has continued its expansion out of the US Mid-west by selling two Ohio multi-family communities and buying a block of land on Florida’s Intracoastal Highway at Boynton Beach where it will build apartments, a marina, parking and a small commercial component. The trust still owns 32,000 residential units in 135 properties.
The Turner Corp building index, run by the biggest building company in the US, will show a 1% fourth-quarter rise to 605 points after three 1.2% quarterly rises, putting US building inflation up 4.67% in 2000. Turner increased its construction turnover from $US4.8 billion in 1999 to $US5.7 billion. Turner was bought last year by Germany’s biggest builder, Hochtief AG (which is also the major shareholder in Leighton Holdings of Australia). Ultimate controlling shareholder is the Rhine Westphalia Electricity Co, RWE.
US RealTel Inc has sold its 8870 North American sites to SpectraSite Holdings Inc of Cary, North Carolina, which now owns more than 30,000 communications sites, including 9000 mobile communication towers. SpectraSite provides shared antennae sites and outsourced network services, including owning rooftops.
KWI Property Fund I has done some more shopping to bulk itself up, without disclosing the details like price and return. Latest buys are two fully leased lowrise campus-style office properties in Austin, Texas, containing 11,200mÂ². I questioned the reit’s failure to disclose basic details a fortnight ago, without response. But the market has giving parent company Kennedy-Wilson International a hiding â€” its share price yesterday of $US4.12Â½ compares to $US7.62Â½ a year ago and a year’s high of $US11.25. Total liabilities are 65% of total assets, the debt-equity ratio is 35%, and $US23 million of goodwill is the kind of intangible an outfit on the down doesn’t need.
One of President Clinton’s outgoing bill signings was the first increase in 14 years for the low-income housing tax credit programme allocation formula, which gives investors 10 years of federal tax credits. Under this formula, Lend Lease Real Estate Investments Inc, part of the Sydney-based Lend Lease Group, has structured $US2.8 billion of investments in 900 US properties. Lend Lease says the formula increase should allow an extra 30,000 units a year to be built, but the head of its housing & community investing group, Jenny Netzer, said government figures showed five million US households had worst-case housing needs.
RealEstate.com has been sold for an undisclosed price to Atlanta investment bank JP Carey, which manages assets and investments in small to mid-cap companies for institutions and welathy individuals. The website offers listings, valuation and credit research services. All the key executives have resigned.
Equity Office Properties Trust has sold the 86%-leased, 21,069mÂ² 500 Marquette in downtown Albuquerque, New Mexico, for $US21.7 million (at $NZ2328/mÂ²).
National Residential Properties Inc, of Miami, continues full speed ahead on a development programme which it says should generate net returns around 35-37.5%. Its projects for the next two years include apartment blocks, a subdivision, condominium and a gated community, all around 60-70 units and in the $US7-10 million range.
Britain’s second-largest supermarket chain, J Sainsbury, has concluded the long negotiations to sell the nation’s third-largest DIY chain, Homebase, to Schroder Ventures for Â£416 million in cash and a deferred Â£75million. Sainsbury has a leaseback agreement on its Â£259 million of freehold properties, but has them earmarked for sale too. Another 28 development sites have been sold for Â£219 million to Kingfisher, owner of the B&Q DIY chain. Those deals are worth a total Â£969 million ($NZ3.25 billion), though completion of some may be drawn out.
British property group Delancey Estates, just under 50% owned by George Soros, will sell its four provincial shopping centres for Â£121 million ($NZ406 million), the Milner Estates business for Â£25 million to a 25%-management owned joint venture, and focus investment on central London’s office and retail sectors. Delancey raised pretax profit for the September half-year by 58% to Â£3.9 million and earnings a share by 35% to 1.4p, but its shares are sitting on a 29% discount to the 139.5p net asset value, at 99p.