Wednesday, June 30, 2010

Tesco Nearing $1.4 Billion Sale Leaseback of 41 Supermarkets Across UK

Reuters - June 29, 2010

Supermarket group Tesco Plc (TSCO.L) plans to sell a 30-year benchmark sterling bond backed by rents generated by a portfolio of its supermarkets, an official at one of the banks managing the deal said on Tuesday.

HSBC and Goldman Sachs are managing the (30-year) sale and leaseback deal, which will be issued via Tesco Property Finance 3, the official said.

News of the proposed deal comes less than a year after the blue chip retailer tapped 565 million pounds from the sale of a similar batch of property-backed bonds in September.

That sale followed a similar deal in June 2009, which raised 431 million pounds.

Moody's Investors Service assigned a provisional A3 rating to the bonds, which it expects to total 950.15 million pounds, although the official said the final size had yet to be determined.

The bonds are due to mature in April 2040 and would be supported by a portfolio of 41 supermarkets across the UK, Moody's said.

The proposed issue would have a slightly lower total leverage based on the expected issuance amount compared with its previous deals, it added.

"In addition, in this transaction, the tenant has an option to terminate the occupational leases in September 2020 subject to certain conditions in the lease agreements being fulfilled," said Moody's.

Standard & Poor's and Fitch are expected to rate the bond at A-, the official said.

Moody's has estimated the market value of the portfolio at 853.1 million pounds, taking into account the break option of the leases in September 2020.

(NOTE: Sources indicate the 10-year lease break clause is all or none, the initial unlevered yield on the sale leaseback is 5.0%, and the 30-year fully-amortizing bonds sold for around 170 basis points over 30-year gilts (+/- 4.20% + 1.70% = 5.90%.) Sphere: Related Content

Saturday, June 26, 2010

Diagio Completes $269 Million Sale Leaseback of Napa Valley Wineries

The Press Democrat - June 24, 2010

One of the largest California wine deals in years was announced Thursday, not that wine drinkers will ever taste the difference.

Diageo, the London-based alcohol conglomerate, revealed that it is selling most of its Napa Valley wineries and vineyards to an investment firm for $269 million, and then turning around and leasing them back for 20 years.

The sale-leaseback arrangement between Diageo and Realty Income Corp., an Escondido-based real estate investment trust, is the largest such transaction in the U.S. wine business, one that will help Diageo raise cash without impacting its wine operations, said industry analyst Robert Nicholson.

“It's a very meaningful development and it's a very smart move by Diageo,” said Nicholson, a principal at International Wine Associates, a Healdsburg consulting firm

The deal involves two of the best known Napa wineries. The historic Beaulieu Vineyards was founded in 1900 in Rutherford and, under the guidance of the famed viticulturalist André Tchelistcheff, helped spawn the valley's fine-wine renaissance.

Sterling Vineyards, the white stucco winery on a bluff south of Calistoga, was founded in 1964 by British international paper broker Peter Newton and has become one of Napa Valley's most popular tourist destinations.

Diageo Chateau & Estate Wines will continue to manage and operate the properties and will retain ownership and marketing of the wine brands. In return, it will enter into 20-leases for the buildings and 2,000 acres of vineyards. When completed, Diageo will become Realty Income's second-biggest tenant.

The transaction allows Diageo, which has struggled during the recession, to raise cash and increase returns for shareholders.

“We know that to remain competitive in this environment we need to rethink our whole wine business to be more nimble and entrepreneurial,” said Zsoka McDonald, a company spokeswoman. “This is about ensuring the long-term strength of our North America wine business and the health of our core wine brands.”

Diageo's wine and spirits portfolios tend toward the high-end, and it has been hit hard as the alcohol business has proven to be less recession-proof than many thought. It owns such powerhouse brands as Johnnie Walker whiskey, Smirnoff vodka and Guinness stout.

Its wine sales fell 7 percent in 2009. The company announced in May it was restructuring U.S. wine operations, laying off about 14 percent of its workforce and would focus on core wine brands, including Beaulieu Vineyard, Sterling Vineyards, Chalone, Acacia, Rosenblum Cellars and Provenance.

The chief benefit for Diageo is that is can raise cash while paying reasonable leases on the properties, said Joe Ciatti, of Zepponi & Company of Santa Rosa.

“Diageo's saying ‘We've got these wine assets that really don't produce a lot of return for us, and it's better for us to sell those off,' ” Ciatti said.

He said he understood the leases would generate a 6 percent return for Realty Income Corp., a conservative return, he said.

Ciatti ran his own wine industry focused REIT, Vintage Wine Trust, from 2005 to 2008, when he was forced to liquidate it because the returns weren't what investors had hoped.

VinREIT in St. Helena is facing challenges, as well, with several of its properties facing foreclosure.

Nicholson, however, said this deal should work well for Realty Income Corp because it got great properties with a tenant that isn't going anywhere.

“This REIT is smart. They know what they are doing and got some blue-chip assets,” he said.

And wine consumers, whether visiting the Napa tasting rooms or buying the wines in supermarkets, won't notice a difference, Nicholson said.

“This is the same as the way Marriott doesn't own their hotels,” Nicholson said. Sphere: Related Content

US Dept of Justice HQ Sold for $305 Million

Washington Business Journal - June 24, 2010

The Northwestern Mutual Life Insurance Co. has closed on a deal to buy StonebridgeCarras LLC and Walton Street Capital LLC's Two Constitution Square for $305 million.

The 589,000-square-foot project, 145 N St. NE in the NoMa neighborhood behind Union Station, rises to 12 stories and is fully leased to the Department of Justice.

The Department of Justice will fill the building under a 15-year lease and complete its transition into the project in the fourth quarter of the year.
The development team decided to put the project on the market in January because of its long-term lease to the federal government, arguably the most stable tenant in the market.

“It was perfect for what people were looking for in the market. We wanted to find a buyer for a long-term flat deal and in today's world, it became a valuable asset,” said Doug Firstenberg, principal of StonebridgeCarras. “The market is not that deep for someone who can buy a single asset for $300 million.”

Bethesda-based StonebridgeCarras and Chicago-based Walton Street Capital have delivered four of eight floors of Two Constitution Square, part of a larger 2.5-million-square-foot project.

Firstenberg said the price the team netted — about $518 per square foot — was close to what he imagined for the project at its conception, but said he did not expect to sell the project before it delivered.

“This was not in the business plan,” Firstenberg said, laughing.

The first phase of the entire Constitution Square project will deliver a 440-unit apartment building that will open in September, as well as a 50,000-square-foot Harris Teeter that will open in December.

TD Bank, Potbellys Sandwich Works, Georgetown Valet dry cleaner, Constitution Cafe and Tynan Coffee & Tea will fill part of the project's 30,000 square feet of retail and a 204-room Hilton Garden Inn will deliver in the first quarter of 2011.

One Constitution Square, the project's sister building, includes 329,251 square feet and is entirely leased to the U.S. General Services Administration for its headquarters. The development team will sell that project eventually, but opted to put Two Constitution Square on the market first because it had a longer lease than the GSA's, Firstenberg said. The GSA lease is for seven years and gives the federal government the ability to cancel it after five years.

StonebridgeCarras Management will continue to manage the Two Constitution Square building, which is shooting for Leadership in Energy and Environmental Design Platinum certification.

Bill Collins of Cassidy Turley represented the seller in the deal. Cambridge Property Group represented Northwestern Mutual. Sphere: Related Content

Friday, June 18, 2010

Los Angeles Agency Considers $300 Million Sale Leaseback of HQ

Los Angeles Times - June 14, 2010

The top executive at the Los Angeles Department of Water and Power, the nation's largest municipal utility, is laying the groundwork for a sale of some of the agency's biggest assets — including the utility's iconic downtown Los Angeles headquarters — as it seeks to cover rising costs without raising electricity rates.

DWP Interim General Manager Austin Beutner said Monday that he would not pursue any additional power rate increases for the remainder of the calendar year. But that decision would come with a series of tradeoffs, he said.

Beutner, a former investment banker, is hoping to generate $150 million by selling city-owned natural gas reserves in Wyoming. He is looking at unloading the city's stake in an Arizona coal-fired power plant years ahead of schedule. And he said he is "serious" about trying to sell the utility's 17-story office building on Hope Street to a private buyer, who would lease offices back to the agency on a long-term basis.

» Don't miss a thing. Get breaking news alerts delivered to your inbox.

"It's real simple. If you can't raise rates, what are you going to do?" Beutner said.

"Do you want to own a building, or do you want to have renewable energy?" he said. "You pick. I don't care. If you like the building better, that's fine. You can't have both. So policy is about making an informed choice."

The various proposals are part of Beutner's new strategic plan for the nation's largest municipal utility, which will be presented to Mayor Antonio Villaraigosa's five-member DWP board Tuesday. Beutner said the proceeds of the cost-cutting efforts would help pay for upgrading the DWP's aging infrastructure, comply with new government regulations and push ahead with Villaraigosa's directive to get more energy from wind, solar and geothermal sources.

The DWP headquarters, across from the Music Center in downtown, opened in 1965 and was designed by A.C. Martin and Associates. Beutner said the sale of the headquarters could generate $300 million.

Councilman Tom LaBonge voiced strong doubts about selling off critical assets, particularly the DWP headquarters, which is named after former City Council President John Ferraro — LaBonge's boss for 16 years.

"Mr. Beutner is obviously a much better businessman than I," said LaBonge, who voted against electricity rate increases earlier this year. "But as a public official, I wouldn't want to see us sell assets that we might have to buy back again."

Villaraigosa got into a major standoff with the City Council in March over a series of proposed increases that would have boosted residential rates from 9% to 28%, depending on the household. So far, the council has approved a 4.8% increase effective July 1.

In the wake of that dispute, Beutner decided to hold the line on future increases for at least nine months, partly by cutting expenses and partly by tapping DWP assets. Beutner hopes to cancel plans for a new billing office in Van Nuys — a move that could save $20 million — and is weighing a possible sale of 100 acres of property that the DWP owns in Malibu.

The DWP is already scheduled to divest itself of a 21% stake in the Navajo Generating Station, a coal-fired power facility in Arizona, by 2019. But Beutner said he would act far more swiftly to sell that stake, a move that could generate up to $500 million.

One possibility would be to sell the stake within two years while gradually scaling back the city's use of coal from that facility, he said.

That strategy drew strong praise from Rhonda Mills, Southern California program director of the Clean Power Campaign, an environmental advocacy group. Mills said the Navajo plant would lose value as new environmental regulations are put into effect across the nation.

"It will cost us more in the future than if we get out of it now," she said.

Beutner's long-term strategic plan represents the latest shift in direction for a utility that has had five general managers in three years. During much of that time, Villaraigosa has promised to ensure that the DWP gets 20% of its power from renewable energy by Dec. 31 and 40% of its power from those sources by 2020.

By contrast, Beutner said he would focus less on Villaraigosa's numerical target for renewable energy and more on an overall goal: cutting the utility's carbon emissions in half.

Former DWP General Manager H. David Nahai said he retained Goldman Sachs to study the possibility of selling the city's stake in Navajo and purchasing back its power. Still, he voiced dismay at the notion of a lease-back of DWP headquarters.

"We're going to sell a gem of a piece of real estate, an iconic building, in the lowest real estate market since the Great Depression? That does not make sense," he said.

As part of his DWP strategic plan, Beutner said he wants a "ratepayer advocate" to serve as a watchdog on behalf of the utility's customers. That advocate should be housed in the office of City Administrative Officer Miguel Santana, the budget advisor to Villaraigosa and the council, Beutner said.

That marked a change from two weeks ago, when Beutner said he wanted the ratepayer advocate to serve in the office of City Controller Wendy Greuel. Asked about that earlier statement, Beutner said he "may have misspoken."

A June 7 DWP news release also said the utility was working with Greuel to create the ratepayer watchdog. Days later, Greuel released a report sharply criticizing the DWP for threatening to withhold $73 million from the city's budget unless it received its planned rate increase.

Beutner said that having a ratepayer advocate in the controller's office would "politicize" the position. Greuel, in turn, said Beutner's statement on the ratepayer advocate is "the exact opposite" of what he told her two weeks ago.

"It's really obvious that his position changed after I released a critical review of the Department of Water and Power," Greuel said. "That's why this position needs to be independent." Sphere: Related Content

Thursday, June 03, 2010

7-Eleven Seeking $40 Million Sale Leaseback of 24 U.S. Convenience Stores

CSP Information Group - June 3, 2010

7-Eleven Inc. has retained Mehran Foroughi, senior vice president for Colliers International, the third-largest real-estate services organization globally, to sell 24 retail properties anchored by 7-Eleven. The portfolio, valued at approximately $40 million, is owned and operated by 7-Eleven.

The 7-Eleven anchored properties, primarily located in California and throughout the United States, all include at least one co-tenant, with AutoZone as a co-tenant in some locations. All of the 7-Eleven convenience store leases are triple net lease (NNN) and guaranteed by 7-Eleven.

"Colliers International was retained by 7-Eleven as the listing broker because of our aggressive, targeted marketing platform," said Foroughi, the exclusive listing agent for the portfolio. "We are marketing the properties as a portfolio, although offers on individual sites are also welcome."

Based in Dallas, 7-Eleven is the world's largest operator, franchisor and licensor of convenience stores with more than 37,600 units worldwide of which more than 8,100 are in North America.

The announcement follows the early March sale of a portfolio of a dozen 7-Eleven stores to several buyers for a combined value of more than $20 million. The stores retained the 7-Eleven brand in what were essentially sale-leaseback arrangements. "Their intention is not to leave, their intention was just to unload this property as a landlord," Colliers representative Mehran Foroughi told CSP Daily News about the Dallas-based retail giant at the time.

The 12 locations in Nevada, Texas and Virginia were acquired from 7-Eleven through all-cash deals.

Foroughi, said that five stores in the Dallas metropolitan area were sold to a California buyer. The six stores in Virginia were claimed by three individual buyers and the lone store in Las Vegas ended up in the portfolio of a Dallas-based company. Sphere: Related Content

Tuesday, June 01, 2010

Abba Enters EUR 33 Million Sale Leaseback of Hotel in Madrid

PropertyEU - June 1, 2010

Hotel chain Abba has sold the Abba Castilla Plaza de Madrid in a EUR 33 mln sale-and-leaseback transaction. The deal reflects a yield of over 7%. The buyers are a consortium of private investors led by Grupo Milenium.

The four-star hotel offers 228 rooms and is located in the northern part of the city. As part of the agreement, Abba has signed an option to buy the hotel back after 10 years.

Aguirre Newman advised Abba, CB Richard Ellis acted for the buyers. Sphere: Related Content

State of Arizona Seeking $300 Million Sale Leaseback of State Owned Properties to Ease Budget Deficit

The Arizona Republic - June 1, 2010

More state buildings go up for sale next week, as officials hope to raise $300 million by selling and then leasing back the schools for deaf and blind children, more state prisons and other structures in an attempt to raise $300 million.

It's the second time this year that the state has sold off buildings to help close the state budget deficit. A sale-leaseback in January raised $735.4 million for the state. The healthy response prompted lawmakers to authorize a second sale.

The sale will be conducted June 8, and investors will be required to make purchases in $5,000 installments, according to information on the Arizona Department of Administration's Web site.

Investors must work through a list of underwriters provided by the state.

The sale-leaseback comes on the heels of last week's action in which the state borrowed $450 million against the proceeds of future state Lottery revenues. Those bonds carried an interest rate of 4.27 percent.

Next week's sale-leaseback is expected to carry a similar interest rate, said Michael Smarik, deputy state comptroller, although the rate won't be set until next week. Sphere: Related Content

Greek Government Seeking Sale Leaseback of up to EUR 1 Billion in State Owned Property

Greek Reporter - May 31, 2010

From what is seems, the green light has given in order for the new privatization program of state owned enterprises. Over 1 billion euros in revenue is expected if the program is put into action.

In an pushed meeting, which took place last Saturday under the chairmanship of the Minister for Finance, Mr. G. Papakonstantinou with the participation of the Minister’s of Infrastructure, Energy and Tourism, plus twelve general secretaries of different ministries, accepted the plan will present it to the members of the MP’s Board.

According to each enterprise there will be, a percentage sale or the total of the company, or the quest of “strategic investors”, or the opportunity to let public property a specified period of time.

The new privatization program states the following:

Percentage sale to citizens, without, rulling out the possibility of also passing the management along also.

Percentage sale of the company. In the time being, the scenario of further equity is removed form the table of discussion, as the economic team believes that this move is not appropriate during this period, whereas the stock market values are low.

DEPA: Will give away a percentage, as also, the management to private individuals.
Casinos: Shall be privatized
Airports – Ports – Highways: Property: Are decided to proceed with the waiver holding to individuals for 30 or 40 years (sale & lease back). Sphere: Related Content

Wikinvest Wire