Industry news, views and occasional strange stuff.
David Bodamer
Inland American, which last month bought shares in CapLease Inc., has purchased shares in another REIT. This time it’s Ramco-Gershenson Properties Trust, according to an SEC filing from Friday. Inland now owns 1,652,887 shares in Ramco-Gershenson, about 9 percent of the company’s outstanding stock.
The credit crisis continues to deepen. Yet another large development has secured financing. This time it’s the mammoth CityCenter project in Las Vegas.
MGM Mirage said Monday that it completed the first stage of its $3 billion financing package for CityCenter, a $9.2 billion Las Vegas Strip casino project being developed with Dubai World.
MGM said it had secured a $1.8 billion senior bank credit facility that will mature in April 2013.
CityCenter has received addition commitment letters of more than $500 million, which executives said will be added to the facility once completed.
CityCenter - which MGM Mirage (nyse: MGM - news - people ) officials have called the most expensive private commercial development in U.S. history - is expected to include six high-rise towers with a 4,000-room hotel-casino, condominiums, boutique hotels and a retail, dining and entertainment complex.
Related Topics: News, Development, Finance, International, Retail Real Estate, Mixed-Use |
Hypo Real Estate Holding was rescued over the weekend. This is an ominous sign for commercial real estate because Hypo was a big player in financing the sector. At least part of the problem seems to be how Hypo was funding itself as opposed to this stemming from its pool of assets.
“It was basically a funding mismatch. The maturity of the liabilities was shorter than that of the assets,” said Philip Haessler of German broker Equinet. “As the financial crisis and the funding situation deteriorated, in large part because of the bankruptcy of Lehman, HRE found itself unable to cover its short-term liabilities.”
“It was a strategic mistake. Under different circumstances it wouldn’t have been an issue. But now nobody trusts anyone and it’s impossible to raise short-term funding,” he said.
HRE said the additional credit line “became necessary as a result of the intensification of the financial crisis in the last week.”HRE shares fell 35% in Frankfurt trading, a measure of how concerned investors still are that the bailout in place may not be enough. The shares are down 86% so far this year.
UBS isn’t waiting for the bailout to pass. It’s found a way to move some of its commercial and residential mortgage assets. Terms were not disclosed so there’s no way to know how much the bank marked down its assets or who bought them. But perhaps some of the vulture funds we’ve been hearing about were involved.
Shares of UBS soared 10.5%, or 2.06 Swiss francs ($1.81), to 21.76 Swiss francs ($19.21) on Thursday afternoon in Zurich, after the Swiss bank said it had “substantially reduced” its U.S. commercial and residential mortgage-related assets, mainly through disposals. A spokeswoman for UBS declined to value the size of the disposal or say where the toxic assets had gone.
UBS’s comments on Thursday suggest it could have disposed of up to 10.0 billion Swiss francs ($8.8 billion) of its toxic assets, said Jean Sassus, an analyst at Raymond James Equities in Paris. “This shows that there are buyers out there who we didn’t know about before, which is good news for everyone,” he said.
UBS declined to say whether the assets were going into government or private hands, but Sassus said the most likely situation was that a club of investors, possibly distressed debt funds, had snapped them up.
Grapevine-based GameStop Corp. announced it has acquired Micromania, a French video game retailer that has 332 locations throughout the country. The transaction, worth about $700 million in cash including the assumption of debt, still needs to be cleared by the European Commission and is expected to close in November.
GameStop bought Micromania from L Capital, a private equity fund that was the company’s controlling shareholder. GameStop didn’t have any stores in France, but the Micromania acquisition will put GameStop’s European store count at more than 1,077.
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Shares in embattled shopping centre owner Centro Properties Group shot up nearly 50% in morning trade today when the company announced a string of victories in discussions with the syndicate of bankers which hold the fate of the group in their hands.
Centro chief executive Glenn Rufrano also said it was his preference to stay on at Centro as its boss beyond January when his formal contract runs out. He said he was keen to manage the company as it stabilises and begins to reorganise its corporate structure assuming its debt problems are eventually solved.
Centro said today that its US lending group had further extended facilities of $US1.3 billion ($1.5 billion) associated with Centro’s joint venture with Centro Retail Trust until December 15.
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The asset sale Centro announced one month ago has seemingly collapsed. This pushes the firm even closer to the brink.
Centro’s chief executive, Glenn Rufrano, said yesterday that talks had been terminated with the private US pension fund that signed a contingent agreement on July 15 for the purchase of the Centro America Fund portfolio.
“The agreement was subject to certain closing conditions, including a due diligence period and lender consent,” Mr Rufrano said. “Centro now advises that the due diligence period has expired and the purchaser has elected to terminate the agreement.” He said that despite this, discussions were continuing, albeit that no assurance could be given that they would lead to an agreement.
Centro says it still has the support of its banker and financiers. A Goldman Sachs JBWere analyst, David Lloyd, said that while the termination of the agreement was an obvious setback for Centro in its attempts to recapitalise the business “asset sales alone will not be enough to keep Centro as a going concern”.
“Although asset sales will enable some debt to be paid, Centro’s future is dependent upon a significant equity injection, most likely through a hybrid instrument.
“With this unlikely to occur before calendar year-end, Centro will likely remain at the mercy of its lenders,” Mr Lloyd said.
Past stories:
Centro Properties Group, the shopping mall owner seeking a debt extension to stay in business, canceled the sale of a Sydney shopping center after failing to find a buyer.
No “satisfactory offers” were received for Centro Bankstown before the August deadline, Centro said in a Sept. 4 letter, posted on its Web site, to members of its MCS 28 Syndicate, owner of 50 percent of the shopping mall.
Centro Chief Executive Officer Glenn Rufrano, 58, is trying to sell assets and raise cash to help repay as much as A$6.6 billion ($5.4 billion) of debt. The company said last month it may offer lenders securities convertible into shares in lieu of borrowings, affecting shareholders.
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Past stories:
Business Week has a profile up on H&M, which is defying the retail sector’s gloom. It continues to post solid sales numbers and hasn’t slowed on expansion plans.
Indeed, as a purveyor of stylish clothing for reasonable prices, H&M sees the economic slowdown as an opportunity to expand. With its entry into Japan, the company will boast more than 1,600 stores in 30 countries, including China, where it launched in 2007. Over the next year, the company plans to increase the number of its stores by as much as 15%, focusing expansion on the U.S., Europe, and Japan.
As economic conditions worsen, H&M, which leases its store sites, is finding it easier to secure prime locations at better terms, especially in the U.S., where the company now has 153 stores, mainly on the East and West coasts. “We’re getting much better deals now that we are a known player in the U.S.” says H&M’s head of investor relations, Nils Vinge. “Landlords are approaching us.”
How is H&M managing to thrive in what many observers call the toughest trading conditions in decades? Credit a relentless focus on costs that extends from the company’s merchandise to its business model. For starters, H&M’s average sale prices are lower than those of its main rivals, Spain’s Zara, owned by parent company Inditex, and the Gap. This will enable the Swedish chain to gain “market share in the current downturn, as consumers trade down in search of better value,” says Kaupthing analyst Sandstedt.
While Simon Property Group struggles to fill vacancies in its malls in the U.S., it may be looking to Britain to boost its retail property portfolio.
On Tuesday, U.S. real estate investor Simon Property Group (nyse: SPG - news - people ) upped its stake in U.K. mall operator Liberty International to 4.22%, after raising its stake to 3.45% on Friday, a sign some think may mean it is preparing to bid for the entire firm.
But Simon may have some competition. Australia’s Westfield Group also announced on Tuesday that it increased its stake in Liberty to 2.96%. Westfield built up its stake, which now totals $41.9 million, between June and July.
Liberty shares jumped 5.3% to 995 pounds and 50 pence on Tuesday afternoon, after falling 13.1% in the last year as investors feared consumer spending in Britain would hurt business. Liberty owns retail assets throughout Britain including London’s Covent Garden.
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