Latest: Old ExxonMobil HQ sold after long vacancy, domestic uprising against US timber quota, Lafarge introduces new composite material to US, Starwood makes projections, kitset homemaker Southern Energy in trouble, Golf Trust of America to liquidate, HK rail company doubles profit on station developments, Hang Lung turns high revenue into low profit, Lafarge wins Blue Circle takeover approval, Europe the new target for US funds, finance rollover no longer automatic, Equity Office to take over Spieker, World Trade Centre sold on long-term lease, CB Richard Ellis buyout, troubled developer puts Taipei Hilton on market, Weingarten goes shopping and increases earnings 8%, HK writedown cuts Kerry Properties profit by 41%, Taylor Woodrow secures Bryant, Hilton Group expands internationally as UK slips, HK land prices up again, Dallas office trust up 11.5% on year ago.
4 March 2001
ExxonMobil’s old international headquarters in New Jersey have a new owner after being vacant since the mid-90s. The 32,000mÂ² campus was built in the 70s and has four buildings each of three storeys. ExxonMolbil moved to Texas. The new owner, the Advance Realty Investors II joint venture, is paying $US41.1 million for the premises, a major refurbishment and three-year finance package through Holliday Fenaglio Fowler, which specialises in structured finance for the commercial real estate industry in the US. Its transactions last year totalled more than $US11 billion.
The US, home of free trade, runs some seriously trade-inhibiting sanction and tariff schemes when it suits domestic political agendas. One of these, the US/Canada softwood lumber agreement signed in 1996, expires on 31 March. It’s the sort of uneven playing field a Republican president would like, but it might be rolled. Two Congressmen, one Republican and one Democrat, led a list of 49 Congress members wanting it to end, backed by a long list of consumer groups, trade organisations and companies. Their alliance, American Consumers for Affordable Homes, says the quota on Canadian imports adds an average $US1000 to the cost of a new home. The US Census Bureau says the $1000 difference cuts 300,000 people out of qualifying for a mortgage, and the consumer alliance says the US Government has also unilaterally expanded the quota agreement’s scope by changing tariff classifications of several key construction wood products.
Fast-expanding concretes group Lafarge has introduced a composite building material called Ductal, with Superman characteristics â€” strength similar to steel, toughness similar to ceramics, combining compressive and flexural strength, with high resistance to abrasion and corrosion, it can still be produced in standard concrete batching equipment. Lafarge has produced it with two other French industry leaders, Rhodia and Bourges, and has just signed a marketing licensing agreement for North America.
Starwood Hotels presented details this week of its Starwood technology & revenue systems (Stars), strategies to save $US8.5 million in energy costs this year, supply/demand outlooks, timeshare development strategies and economics, and its company financial targets: 8-10% ebitda growth/year, 15% earnings/share growth/year. Starwood has 750 properties. Its hotel brands include Sheraton.
Southern Energy Homes, maker of kitset (in the US, manufactured) homes in Alabama and Texas for retail in 18 states, has recorded its second successive annual loss, a fact it hid in the foliage of reduced revenue and increased market competition in its statement to the market this week. All up, it tells a sad tale of the US economy below the hype level: Fourth-quarter net income fell from $US2.2 million to $US11.4 million (down 418%) on revenue down 24% to $36.4 million and net income down 189% to a $US9.3 million deficit. Full-year net income fell from $US1.6 million to $US17.1 million (down 974%), on revenue down 30% to $US185.4 million and net income down 1500% to $US15.3 million. It sold 5504 homes wholesale, down 28%, and 1539 homes retail for the year, down 16%, wrote off $US6 million pretax quitting half its shops and $US4 million on deferred tax assets. Its average retail sales price fell 15% in the fourth quarter to $US39,290, but the wholesale price rose 2.7% to $US27,000. Never mind, Southern Energy Homes said it should have a new three-year credit line in place by the end of the month, up from $US28.5 million to $US40 million.
Golf Trust of America, which has an interest in 44 courses, has board approval for a liquidation programme after a review that began a year ago. The trust has suffered from lessee defaults, doesn’t control operations and its own secured debt is in default. It said the industry had a supply/demand imbalance, and limited debt or equity capital available. The trust has sold three courses this year, has 12.5 (18-hole equivalent) signed for sale to its main lessee, Legends, for $US112.9 million and 7.5 to other lessees for $US71.5 million.
3 March 2001
Hong Kong railway operator MTR Corp nearly doubled net profit last year, earning just over $HK4 billion, of which $HK3.4 billion came from property developments. A large part of its growth has come from airport railway developments. It sold apartments at three stations last year and will put property developments at a fourth station, Tseung Kwan O Extension, up for tender this year.
Hang Lung Development raised net profit 7.7% for the December half to $HK493.4 million on almost double the turnover at $HK4.34 billion. The 59%-owned Amoy Properties raised net profit 32.5% to $HK830.4 million, on turnover up 53% to $HK1.74 billion. Grand Hotel Holdings made $HK28.7 million, up from $HK4.7 million in 1999.
French building materials group Lafarge has won European Commission approval for its takeover of UK group Blue Circle Industries and will look to increase its Asian investments. It’s already in India, Thailand and Japan. Lafarge also needs to cut its gearing, now at 84%. The company reported net earnings for 2000 up 18% to 276 million euros ($NZ592 million) on sales up 17% to 12.2 billion euros and operating income up 16% to 1.9 billion euros.
Research by Goldman Sachs indicates US institutions are preparing to invest up to $US23 billion in equity and debt in European real estate as the US property scene shows more signs of a slowdown.
27 February 2001
US Concrete reported fourth-quarter revenue up 53% to $US
Here’s a trend indicator from the US: Dallas-based Silverleaf Resorts, owner/operator of 22 country-club-style resorts, warned against relying on any information regarding its 2000 results (which will be late arriving) or 2001 outlook. It said: “The company has been in negotiations for an expansion and extension of its credit facilities with one of its principal lenders. These negotiations were intended to fund the company’s operations through 2001. However, to date, negotiations with this lender, as well as other existing lenders and prospective financing sources have not resulted in agreements necessary to provide financing to sustain normal sales and marketing operations. While the company is actively exploring funding alternatives with all its principal lenders and prospective investors, it has determined to substantially curtail its normal sales and marketing operations effective immediately in order to conserve cash and downsize its business to a sustainable level.” That smacks not of specific problems but of a wider malaise. Expect more of these.
26 February 2001
The $US9.2 billion Equity Office Properties Trust will absorb the $US7.2 billion Spieker Properties in a scrip/cash/debt assumption deal announced on Friday. EOP expects the deal will add US10c to its funds from operations next year (nothing this year). Its share price dropped $US2 on Friday afternoon. The deal, still to be approved by investors, will turn Equity Office into a trust owning 11.5 million mÂ² of office space in 616 buildings (one-fifth of that from Spieker), Spieker’s 1.3 million mÂ² industrial portfolio and 160,000mÂ² of development properties.
Vornado Realty Trust will take a 99-year lease over the World Trade Centre’s twin towers and two other buildings in the complex for $US3.25 billion, or $US325/ftÂ² ($NZ8036/mÂ²), in a deal expected to be finalised in a fortnight. It’s an expensive second prize for a trust that lost in the bidding for the Rockefeller Centre, sold in December for $US1.85 billion, or $US285/ftÂ² ($NZ7022/mÂ²). The 110-storey twin towers, were built in the 70s using Port Authority bonds and can’t be sold.
Directors of Los Angeles-based CB Richard Ellis Inc will go ahead with a plan announced in November to privatise the listed real estate services group. The price has been raised 50c to $US16/share, valuing CBRE at $US750 million. The buyout is being done in association with investment firms Blum Capital Partners and Freeman Spogli & Co. Employees will be able to invest in the privatised company.
Big Taiwanese developer Hung Kuo Group will auction the Taipei Hilton Hotel in March as part of a $T20-30 billion ($NZ1.4-2.1 billion) debt-reducing selldown. The hotel is valued around $NZ420 million.
Houston-based Weingarten Realty Investors has bought the 45,000mÂ² Colonial Plaza Marketcentre in Orlando, Florida, for $US54 million (at $NZ2735/mÂ²) and will settle in March on the $US277.5 million purchase of 19 Californian shopping centres, containing 230,000mÂ². Colonial Plaza was built in the 50s, enclosed in the 60s, redeveloped by Cousins Properties in 1995 as an “open air community centre”.
Weingarten Realty Investors increased funds from operations by 8.1% to $US113.9 million last year on rents up 14.4% to $US264.6 million, but a $US20 million fourth-quarter sale gain in 1999 (against zero this time) made the net income comparison a poor one, $US79 million ($US96.1 million). Excluding the 77c effect of that gain, net income rose 5.3% to $US2.19/share.
A $HK400 million writedown for residential development Ocean Pointe knocked Kerry Properties’ 2000 profit by 41% to $728 million ($NZ214 million). Without that, profit would have fallen 8.5%. The Hong Kong developer was buoyed by its residential developments in Beijing and Shanghai, and said it might yet recoup some of the Ocean Pointe writedown from sales, projected at $HK3900-4000/ftÂ² compared to $HK3700/ftÂ² cost.
Taylor Woodrow won 83% support at the first closing date in its Â£535 million ($NZ1.8 billion) bid for British house builder Bryant, made after Bryant and another major builder, Beazer, planned to merge. Beazer is now subject of a takeover bid by Persimmon.
Hilton Group, the British (former Ladbrokes) owner of the Hilton International chain which will operate the hotel on Auckland’s Princes Wharf, reported 2000 net earnings down 2.3% to Â£277 million ($NZ926 million). A refurbishment programme helped grow revenue per available hotel room 7.9%. Hilton opened 12 hotels last year, plans to open 32 in 23 countries in the next two years and is negotiating to sell Â£300 million of British property.
Prices were pushed well above expectations at Hong Kong’s last land sale for the 2001 fiscal year. K Wah Group’s Perfect Developments Ltd paid $HK560 million ($NZ165 million), at $HK1426/ftÂ² ($NZ4521/mÂ²) for a Ma On Shan site, more than $HK100 million above the top estimate. A smaller Sai Kung site went to Capital Group Development with a 33% premium above top estimates â€” $HK73.5 million, at $HK1771/ftÂ² ($NZ5615/mÂ²).
Dallas-based Prentiss Properties Trust increased fourth-quarter funds from operations by 10.8% to $US34.6 million, and full-year earnings to $US134.5 million, representing 11.5% growth/share. Same-store net operating income grew 6% in the quarter. Prentiss started the new year with $US207 million of new developments under way, 70% leased or committed, with expected first-year cash-on-cash yields of 11.7%. The trust continues to sell down industrials, about 20% of its present portfolio, and is developing eight office projects.