Host Marriott hopes being a REIT will be sweet BETHESDA, Md. - In this era of "de-REITing," Host Marriott Corp. has just completed its conversion to a real estate investment trust. The lodging and hospitality company elected REIT status Jan. 1.
"Today is a historic moment in Host Marriott Corporation's history," President and CEO Terence C. Golden says. "As a result of the strategic initiatives we have completed today, the company has dramatically increased its growth potential, diversified its product line, further solidified its position as the leading owner of luxury hotels, strengthened its financial position and increased its competitiveness by lowering its taxes and overall cost of capital."
In April 1998, the company announced its intention to convert to REIT status because it would afford better growth prospects and provide the opportunity for better shareholder returns, the company says. Also, the move would significantly lower the company's corporate income taxes.
"The initiatives which have now been fully implemented have improved our financial flexibility and strengthened our balance sheet, providing Host Marriott with the financial capability to take advantage of opportunities in 1999," says Robert E. Parsons Jr., executive vice president and CFO.
Since the April 1998 announcement, Host Marriott has completed several significant transactions. They include:
* Acquiring the Blackstone portfolio of luxury hotels for $1.5 billion.
* Completing public and private partnership roll-ups representing new acquisitions totaling about $650 million.
* Refinancing approximately $2.2 billion of debt at lower interest rates with extended maturity dates.
* Expanding the company's line of credit to $1.25 billion from $500 million.
* Raising about $1 billion in equity.
Speaker says creating value critical to office success ATLANTA - Office buildings operating under a hospitality/service philosophy with day care, valet services, video conferencing and food service offered by the building's owners or management?
Instead of 50-page lease agreements, nine-page service agreements accompanying flexible, short-term leases and space that can be reconfigured literally over night?
Though posed as questions, those are the answers to "What's next?" - the theme of Carter & Associates-Oncor's 17th annual forecast breakfast held Jan. 14 in Atlanta, where real estate consultant and trainer Mike Lipsey discussed emerging trends in commercial real estate.
"We're transitioning from being in the real estate business to the business of being in real estate," Lipsey says. "We have the opportunity to create more value than ever before."
Lipsey used the example of a 500,000 sq. ft. Class-A building with flexible leases and amenities increasing rents by $2 per sq. ft. and generating an extra $1 million in net operating income. With a cap rate of .1, the building's value increases $10 million, Lipsey says.
Those who don't enhance services will see tenants, cash flow and occupancy rates diminish, he said. "There's only one obstacle: mind-set," Lipsey says. "Two things happen. They see success and loss of business."
As for the Atlanta real estate market and "with almost psychic accuracy," Carter & Associates predicts market equilibrium over the next three years.
Office delivery, at 7.05 million sq. ft. in 1998, is expected to decline to about 4 million sq. ft. in 1999 and 3.5 million sq. ft. in 2000 and 2001.
After absorbing 5.6 million sq. ft. of office space in 1998, the Atlanta market's net absorption is expected to drop to more than 4 million sq. ft. in 1999, about 3 million sq. ft. in 2000 and just under 3 million sq. ft. in 2001. Vacancy rates should hover around 1998's level of 11.2%, according to Carter.
Developer sees C&W, TRESCO as Trump cards NEW YORK - Real estate glamour boy Donald Trump must believe two service providers are better than one. His Trump Organization has hired Cushman & Wakefield and Tishman Real Estate Services (TRESCO) as exclusive co-leasing and sales agents for the GM Building at 767 Fifth Ave.
Trump bought the 2 million sq. ft. trophy building in July 1998. He plans to renovate and upgrade the building, which will officially be known as The General Motors Building at Trump International Plaza (though it's a safe bet businessmen will continue to refer to it by its old name). Studies are being conducted about how to best redesign the plaza area and improve delivery of services and amenities.
The property offers a combination of commercial office space and commercial condominiums.
Both Cushman & Wakefield President and CEO Arthur Mirante II and TRESCO President Joseph J. Simone say they look forward to leasing and selling space for Trump. "This is an extraordinary opportunity to handle the marketing of one of the world's most renowned office towers," Mirante says.
Berkshire asks shareholders to resist low-ball offer BOSTON - "Don't do it," Berkshire Realty Company Inc. is telling its shareholders.
On Jan. 8, the multifamily REIT issued a statement asking its shareholders to reject an unsolicited tender offer by Summit Venture Partners to purchase up to 2% of the outstanding shares of Berkshire's common stock. Berkshire says Summit Venture's offer of $7 a share - 27% below the Jan. 7 closing price of $9.56 per share - is unacceptable.
It seems Berkshire feels Summit Venture Partners could be more aptly renamed "Summit Vulture Partners."
Bizarre merger triangle moves one step closer NEW YORK and FORT WORTH, Texas - With its on-and-off again nature and threatened lawsuits, the possible merger involving Reckson Associates Realty Corp., Crescent Real Estate Equities Co. and Tower Realty Trust Inc. sometimes seems more a love triangle than a real estate transaction. The latest maneuvering occurred in December when the parties issued a three-way release stating that they have revised the merger agreement that will blend Tower Realty into the other two.
Under terms of the revised merger agreement, Metropolitan Partners LLC - an entity controlled by Reckson and in which Crescent holds an interest - will acquire Tower for a combination of cash and a new Reckson equity security. The terms differ from those included in the original agreement that was announced July 9, 1998.
Under the original agreement valued at $734 million, Metropolitan - at the time a 50/50 joint venture with Crescent - would have acquired Tower for $24 per share in cash. The new merger agreement is expected to close during the first quarter of this year, subject to the approval of Tower shareholders.
But shareholder approval is anything but a done.
Since the July announcement, Tower has filed a $75 million lawsuit against Metropolitan, charging the company with willfully breaching the merger agreement. For its part, Metropolitan has contended that during the due diligence process, it found possible problems with Tower's income stream that could jeopardize the company's REIT status.
Tower responded by saying Metropolitan had "unequivocally said they will not proceed with the current transaction."
Soon after, a name-calling battle raged in the daily press between between Tower and Crescent.
Now (as of Dec. 8, anyway), the transaction is back on track. "We are very pleased to have been able to negotiate a new agreement on terms that are beneficial to all parties," Reckson President and CEO Scott Rechler says. "This innovative structure enables Reckson to issue common securities at an 18% premium to our closing common stock price at a time of overall market illiquidity.
"Acquiring Tower on these terms will give Reckson the initial presence and capital structure necessary to launch our New York platform," he adds. Tower's portfolio includes 2.3 million sq. ft. of prime New York City office space.
Crescent President and CEO Gerald W. Haddock says he is glad to have resolved the contentious issues that emerged during negotiations. Larry Feldman, Tower's chairman, CEO and president at the time the original merger was announced, is no longer around. He resigned last year.
LoopNet takes ONCOR International online SAN FRANCISCO - LoopNet Inc. of Burlingame, Calif., has convinced Washington D.C.-based Oncor International to join the modern age.
In December, Oncor became a member of LoopNet, the Internet's largest commercial property listing and information service. The 2,900 real estate professionals affiliated with Oncor will join more than 60,000 of their colleagues in LoopNet's community.
"LoopNet provides our commercial real estate professionals with the exposure they need to market their properties worldwide," says David A. Ball, Oncor president and CEO. "LoopNet has clearly become the leading destination for anyone who is looking for available properties."
At LoopNet (www.loopnet.com), President Dennis DeAndre says adding Oncor to its membership base is significant for his company. "The participation of Oncor International will have a dramatic effect on LoopNet's coverage worldwide," he believes. "Oncor International is comprised of firms that are leaders in all of their respective markets, and its endorsement helps solidify Loop Net's position as the premier location to market commercial real estate on the Internet."
LoopNet, a listing service used by more than 60 commercial real estate organizations, says 115,000 properties are viewed on its site every day.
With Greenwich, WMF has new position in CMBS VIENNA, Va. - The WMF Group Ltd. has expanded its relationship with Greenwich Capital, a subsidiary of National Westminster Bank.
WMF and Greenwich have formed a strategic business relationship with Greenwich Capital to originate, service and securitize commercial loans.
Greenwich Capital already serves as lender for Commercial Mortgage Investment Trust Inc. (COMIT), a mortgage REIT managed by WMF Carbon Mesa Advisors.
As a result of the agreement signed by Greenwich and WMF, WMF has formed WMF Funding, a new division of WMF Washington Mortgage Corp. WMF Funding will be headquartered in Charlotte, N.C.
Mike Greco, WMF Capital CEO, will head WMF Funding. WMF Group President Shekar Narasimhan says Greenwich's backing will benefit the newly formed WMF Funding. "This agreement expands WMF's relationship with Greenwich Capital and reestablishes our position in the securitization business within the risk parameters set by the company," Greco says.
At Greenwich Capital, Paul Nidenberg also is upbeat. "With this relationship, we will be able to efficiently originate loans through WMF's existing network and solidify our position as a primary player in the CMBS industry by coming to market on a consistent basis," he says.
Olympus and Amresco join to invest in securities DALLAS - Olympus Real Estate Corp. and Amresco Capital Trust just formed a joint venture to invest in commercial mortgage-backed securities, mezzanine debt, distressed debt and other structured-finance obligations.
Amreit Manager Inc., which manages Amresco Capital, will identify and manage the joint venture's investments. The JV will create investment opportunities for both member companies in the commercial mortgage sector.
"Amresco Capital Trust brings unique investment expertise to the joint venture and, coupled with the diverse experience of the Olympus team, we believe we have the necessary resources for a successful investment initiative," Olympus President and CEO David B. Deniger says.
First Industrial restructures, eliminates 34 positions CHICAGO - First Industrial Realty Trust, one of the country's largest industrial REITs, recently completed its reorganization aimed at eliminating duplicative capacity and achieving greater organizational efficiency. Under the restructuring, 34 positions were eliminated.
"We have consolidated our national network from seven to three regions and cut approximately $7 million from expected 1999 overhead costs," President and CEO Michael W. Brennan says.