Wednesday, August 27, 2003

Qantas Reviewing Its A$2 billion Property Portfolio

Qantas Reviewing Its A$2 billion Property Portfolio
Qantas has confirmed that it is reviewing its $2 billion property portfolio, including domestic freight and passenger terminals, to see if they should be retained or sold. It is estimated that the airline's terminals in Sydney and Melbourne alone would fetch up to $500 million. Qantas chief executive Geoff Dixon recently said that considering his airline was one of the few in the world to own its terminals, it could make sense to sell and lease back some assets. He also said it was possible that the terminal assets could be spun-off into a separate property trust, and he suspected it was more efficient not to own them.

The review could take up to six months according to a Qantas spokeswoman as the airline embarks on a three-year $6 billion investment program. Qantas recently announced a $1 billion cost-cutting program over the next two years and is splitting its operations into eight stand-alone units, each with its own budget and management.

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The Pantry to Acquire 138 Golden Gallon Convenience Stores

The Pantry to Acquire 138 Golden Gallon Convenience Stores
SANFORD, N.C.--(BUSINESS WIRE)--Aug. 25, 2003--The Pantry, Inc. (Nasdaq:PTRY), a leading convenience store retailer which operates about 1,300 stores in the southeast U.S., today announced that it has signed a definitive agreement to acquire the operating assets of 138 convenience stores operating under the Golden Gallon name from Ahold, USA. Golden Gallon was founded in 1959 and currently operates 90 stores in markets throughout Tennessee and 48 stores in northwest Georgia generating approximately $375 million in sales.

The acquisition will be funded by a combination of existing cash, sale leaseback financing and additional debt borrowings and is expected to be neutral to the Company's total leverage without incorporating any synergies. The transaction is anticipated to close during the early part of the fourth calendar quarter subject to regulatory approvals and other customary closing conditions. Terms of the acquisition were not disclosed.

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Saturday, August 23, 2003

Bank of Ireland on Brink of E700 Million Sale-Leaseback?

The Irish Times published a story on August 12 that speculated that the Bank of Ireland is on the brink of disposing of its British property holdings in a E700 million sale-leaseback. The rumor has been discounted by the bank. It said it has embarked on a routine review of its British portfolio, but has yet to settle on a concrete strategy.

The bank sold 60 British branches for around E35 million via an auction in May and leased them back for 15 years. A bank spokesman said it has appointed property services firm Nelson Bakewell to investigate options for the portfolio but stressed reviews of this nature were a regular undertaking and should not be regarded as precursor to a round of sell-offs. The bank has 200 outlets in the UK, including 131 Bristol & West branches.

British newspaper reports quoted sources at the bank suggesting it would sell and lease back all UK properties to one outsourcing company, which would then supply all the facilities' management services as part of a 30-year lease-back deal. Sphere: Related Content

Friday, August 22, 2003

Retailer Metro's Multi-Billion-Euro Sale Leaseback in Jeopardy

Retailer Metro's Multi-Billion-Euro Sale Leaseback in Jeopardy
A setback to Metro's MEOG.DE long awaited, multi-billion-euro sale of property assets hit the retail giant's shares on Friday as industry sources warned that the future of one of only two bidders now looked uncertain. Metro is the world's fifth-largest retailer.

Property firm Corpus-Immobiliengruppe has pulled out of one of the consortia bidding for the German firm's real estate portfolio, raising concerns that the deal could colapse. The consortia includes Morgan Stanley, Goldman Sachs and GE Capital. The loss of Corpus-Immobiliengruppe from the group meant the group no longer had the necessary know-how of a local real estate company at its disposal. The only other consortium includes Agiv, Merrill Lynch and the Blackstone group.

Metro's AIB property division is 49 percent owned by Metro and 51 percent owned by German state bank WestLB. The sale is expected to fetch more than three billion euros ($3.3 billion). Metro hopes to realise a 500 to 700 million gain from the property sale.

The Duesseldorf-based firm said as far back as 2000 that it wanted to focus on its core business by selling property that it would then lease back, an increasingly popular strategy among big retailers. Sphere: Related Content

Forbes Magazine Slams Private REITs (Wells & W.P. Carey)

Forbes Magazine Slams Private REITs:
Leo F. Wells has become one of the hottest names in real estate. His real estate investment trust is amassing an amazing amount of fresh capital: In 2003's first half he sold $1 billion of stock, amounting to nearly half what public REITs raised, and he's targeting another $1.5 billion by year's end. Like a latter-day Harry Helmsley, he is using the money for a buying binge of first-class office properties.

As the largest private real estate trust, $3.3 billion (assets) Wells REIT does things on a grand scale. The company owns 18 million square feet of prime office buildings that are 98% occupied, mostly by corporations with investment-grade credit ratings. Wells REIT pays an annualized 7% dividend yield, in line with those of public office REITs.

Although Wells files publicly with the Securities & Exchange Commission, you must buy and redeem the stock directly from the REIT. This private-REIT bunch is madly peddling shares. W.P. Carey, the grandfather of these creatures, right now is offering $1.8 billion in stock.

If you want to redeem your Wells shares, you may have to stand in line. The REIT has committed to cash out (at the full $10) up to 3% of its shares every year. So far redemption orders have been modest and last year's $21 million of cash-outs came to only 1.75% of the stock then outstanding. But if there were a rush for the exits--say, after a big cut in the dividend--the redemptions would be first come, first served, and it might take a long, long time to unwind a position.

Are these good investments? Not according to Stephane Fitch the author of the Forbes article. Private REITs keep their share prices frozen, meaning there's no possibility of appreciation. And there is scant prospect of a hostile tender offer to rescue the shareholders of a mismanaged private REIT.

The REIT buys that service from a company owned by Leo Wells, called Wells Management, to which it pays a fee of 4.5% of the rent roll. Real estate pros find that way high: For a triple net lease, 1.5% is more like it.

Then there's an entity called Wells Real Estate Funds, which gets a 2.5% cut on the purchase price for advice on which properties to buy.

Then come lush fees on all the new capital. Some $400 million--16% of the equity capital Wells is raising this year. By Green Street Advisors' reckoning, that's four times what publicly traded REITs incur when they make follow-on offerings. A third of the boodle goes to Wells' own sales organization, Wells Investment Securities, or its advisory firm, Wells Real Estate Funds.

This one could get ugly! Sphere: Related Content

Persis Sells Wal-Mart Warehouse in California

Persis Sells California Property
Honolulu-based Persis Corp. sold a 656,000-square-foot warehousing property in Mira Loma, Calif leased to Wal-Mart to an advisor to the Washington State Investment Board for $27.6 million.

Persis acquired the recently constructed industrial building in July 2001 several months after Wal-Mart took occupancy. The facility was constructed by Kajima Construction and leased to Wal-Mart on a triple net basis.

Persis will continue to pursue a strategy of rebalancing its 2 million square foot single tenant net leased portfolio by way of opportunistic dispositions for the next 18 months. Sphere: Related Content

Single-Tenant Buildings Are Popular Investments

One-Tenant Buildings Are Popular Investments:
"In recent years, competition for buildings leased to single tenants has heated up as investors fleeing the stock market have sought safer havens for their money and many corporations have been persuaded to sell their buildings and lease them back. With rising unemployment and an average nationwide office vacancy rate of 16.5 percent, buildings with long-term high-quality tenants have become more appealing, both to publicly traded investment companies and private individuals.

According to Real Capital Analytics, a New York research company, $2.7 billion in so-called single-tenant property valued at $5 million or more changed hands in the second quarter of this year, an increase of 40 percent over the sales volume of the second quarter of 2001.

In the largest deal last quarter, a German-financed real estate fund, Jamestown, paid $297 million for 1745 Broadway, near 56th Street, a new Midtown building with 645,000 square feet of offices that are fully leased for 15 years to the publishing company Random House, a subsidiary of Bertelsmann. (The deal did not include the building's 25 floors of residential condominiums.)

And many more single-tenant properties with long-term leases are waiting to be tapped, said Mr. Ralston, whose company owns $1 billion in property. 'This is possibly the largest undiscovered niche in real estate today,' he said." Sphere: Related Content

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