Istithmar matched Fast Retailing’s $900 million bid to acquire Barneys New York from Jones Apparel Group. Now Fast Retailing has upped its bid to $950 million.
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Archive for August, 2007
Sun Capital Closes on Limited
Link.
un Capital Partners Inc. said Friday that it has completed the acquisition of the Limited chain of stores and has named the retailer’s co-presidents to top management positions.
The deal finalizes Limited Brands Inc.’s exit from the Limited and Express apparel businesses to focus on lingerie and body care.
Sun Capital didn’t disclose a purchase price, but Limited Brands said last month that it would book a $42 million after-tax loss tied to the sale of 75% of the business. Sun Capital said then that it would sink $50 million directly into the business and arrange for a $75 million line of credit to support the 260 stores in 42 states.The women’s apparel retailer will keep its Columbus, Ohio, headquarters. Linda Heasley was named chief executive and chairman of the stores, while Avra Myers takes on the titles of president and general merchandise manager.
Credit Crunch Takes its Toll
From Wednesday’s Wall St. Journal came a piece describing the effects of few buyers for mortgage-backed securities and how that was affecting commercial real estate.
In the past few weeks, though, nervous buyers of these commercial securities have pulled out of the market altogether or demanded sharply higher yields, fearing that many transactions were too risky. That has forced lenders to raise interest rates, increasing the cost of buying real estate.
“I have major REIT clients, and investment banks are changing the deals on them as we speak because their costs of capital have gone up,” said Gary Mozer, principal with George Smith Partners, a Los Angeles-based commercial-real-estate finance firm.
Mike Kirby, chairman of Green Street Advisors, a Newport Beach, Calif. real-estate research company, estimates that borrowing costs are about 0.3% higher than they were a couple of weeks ago and as much as 0.9% higher than when Blackstone bought EOP.
It’s becoming more and more clear that that debt picture for commercial real estate has shifted considerably. The question that remains to be seen is just how this is impacting how deals are getting done. As debt costs rise, how is that affecting asset prices? In the past deals that were enabled by easy money environment should fall away. Further, the fact that CMBS investors have become more skittish means that conduit lenders are enacting tougher underwriting standards and making debt more expensive.
Our sister publication National Real Estate Investor had an excellent article in its July issue examining some of these trends. But clearly this is an area that we will have to continue to monitor.
Natick Collection Gets Rave Review
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The Natick Collection, a redevelopment of the Natick Mall that’s slated to open in September, got a nice review in the Boston Herald.
When the $500-million-plus expansion of the Natick Collection officially bows Sept. 7, ushering in a new standard for suburban mall luxury retailing in Massachusetts, shoppers can expect about 70 percent of the 94 new tenants to be open for business.
Shoppers also can expect some pampering, with the addition of new valet car service, a separate premium parking area and a full-service concierge.
Retailers that’ll be ready for the grand-opening include one of the mall’s new anchors: Massachusetts’ first Nordstrom. The other new anchor, Neiman Marcus, will start welcoming shoppers to its second Bay State store on Sept. 15, according to Cathie Bryant, vice president and group director at General Growth Properties Inc., the mall’s Chicago owner.
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Retail Traffic reported on the project as part of a redevelopment piece earlier this year.
$377M Portfolio Changes Hands
Tedeschi Realty Corp. of Rockland yesterday sold 25 shopping centers, most in Greater Boston, to a Colorado company for $377 million, in the largest transaction of its type in Massachusetts history.
The Tedeschi family will continue to operate and franchise 200 convenience stores in the area, but it packaged and sold its strip retail centers, taking advantage of the enormous run-up in the values of commercial property.
The buyer is Dividend Capital Total Realty Trust, based in Denver. Tedeschi Realty was represented by the real estate firm Jones Lang LaSalle.
“The shopping center strip came into its own in the 1950s, and this is the strongest pricing we’ve seen generated historically,” said James M. Khoury, managing director of Jones Lang LaSalle, who has specialized in the sale of retail property since the 1980s.
More at the Boston Globe.
CBL Approves Stock Buyback Plan
CBL & Associates became the second big mall REIT to approve a stock repurchase plan in recent weeks. CBL’s board authorized the company to acquire up to $100 million in common stock in the next 12 months.
Earlier today, CBL announced its second quarter results.
Mall real estate investment trust CBL & Associates Properties Inc. said Thursday its second-quarter results fell 3 percent on an income tax provision, missing Wall Street’s average estimate.
Funds from operations, or FFO, in the second quarter fell to $85.9 million, or 74 cents per share, from $88.5 million, or 76 cents per share, in the year-ago period. Excluding a gross redemption charge, FFO was 77 cents per share in the recent quarter.
CBL’s stock closed today at $31.64, a bit above the 52-week low of $30.72. Year-to-date, the company’s stock is down 27 percent.
Previously, Simon Property Group’s board approved a $1 billion buyback plan.
Positive News on the Debt Front
Real Estate Bloggers offers a link to a San Jose Mercury News report on record-low delinquencies on California commercial real estate.
Delinquencies in California’s commercial real estate market hit a 5-year low, in contrast to the residential market that is reeling with a record number of defaults.
In a quarterly report issued today by the California Mortgage Bankers Association, .03 percent of all loans were in foreclosure. The figure is the lowest since June 2002 when it dropped to .01 percent, and significantly below the 13 percent recorded in March.
The loan total included in the survey was $88.2 billion.
“Basically, it’s the economy,” said Peter Ulrich, a consultant for the state association and a retired mortgage banker. “If you follow vacancy rates in the various sectors, vacancies are down. That means the properties are performing well, the income stream is steady and it allows the owners to make their payments.”
Savills Sets Up Shop in U.S.
Savills, a London-based real estate services firm, has acquired Granite Partners LLC, a New York-based real estate investment banking company in a deal reportedly worth $54 million.
Granite Partners is re-branded as Savills Granite LLC under the leadership of company co-founder John D. Lyons, who assumes the title of Savills chief executive of North America.
Among other substantial deals, Savills advised Beacon Capital Partners, LLC of Boston on its $1.32 billion acquisition of the 34-story, 707,301-square-foot CityPoint office building in London in April. Granite, meanwhile, represented Lightstone Group in its $889 million acquisition of Prime Group Realty Trust, among other deals.
More on the deal here.
REIT Bull Run Over?
The seven-year bull run in global property and Real Estate Investment Trust (REIT) stocks finally stalled in the second quarter of 2007 in part due to the fall-out from the US subprime mortgage market, Standard & Poor’s Index Services said in its Quarterly Global Property & REIT report.
The ratings agency noted that the S&P/Citigroup Global Property Index dropped 4.5 percent in the second quarter of 2007, while US property and REIT stocks in general declined. Europe and Asia were also badly affected, with the S&P/Citigroup Europe Property Index worst hit with falls of 10.4 percent.
Only emerging market property remained unscathed in the second quarter, resoundingly bucking the trend in more mature real estate sectors. An unexpectedly strong performer in 2006, the S&P/Citigroup Emerging Market Property Index posted gains of 19.4 percent for the quarter and 26.7 percent on a year-to-date basis, eclipsing the global property sector as well as exceeding the performance of comparable equity market indices. The top five performing property stocks globally came from emerging markets, including three from China.
“A prolonged seven-year stretch of continuous gains, leading to excessive valuations, decreasing yields and a legitimate desire for profit taking caused a sell off for this sector. After such a bull run, global property and REIT stocks finally gave back some of the returns that have made them such an attractive investment in the last few years,” Alka Banerjee, vice president of Standard & Poor’s Index Services, said.
More here.
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