SL Green Aims to Raise $95M with Sharp Dividend Cut

By Michael Fickes, Contributing Correspondent

-- SL Green Realty Corp. has slashed a planned dividend payment in efforts to pay down debt and conserve funds for future investments. The company set the new dividend payment at $0.375 per common share for the fourth quarter of 2008. The third quarter dividend was $0.7875 per share.

The move follows a third quarter decline in net income of 66 percent, from $1.66 per share in the third quarter of 2007 to $0.58 per share for the third quarter this year.

In a prepared statement, Marc Holliday, SL Green’s CEO, explained the dividend reset as a way of generating $95 million in cash during 2009. The money will be used to pay down near term obligations and to take advantage of investment opportunities should they appear.

SL Green, a real estate investment trust the focuses on Manhattan office properties, has been plagued this year by the chaos in the financial industry, a major SL Green tenant. The company’s 52- week high stock price of $101.07 has plunged.

As layoffs rise in the financial industry, SL Green is expected to continue to suffer. According to a report in Crain’s in late November, for example, the company’s shares plummeted to $11.36 on rumors of a Citigroup bankruptcy. On the day the federal government bailed Citi out, SL Green shares rose 40 percent. The Crain’s report noted that Citi leases around 20 percent of SL Green’s total Manhattan square footage.

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Freddie Mac's New Chief Credit Officer Brings Strong Credentials to Tough Task

By Scott Baltic, Contributing Editor

-- Freddie Mac today named Raymond G. Romano chief credit officer. Romano had been the company's senior vice president of credit risk oversight since joining Freddie Mac in 2004 and in September also took the position of acting chief credit officer.

Romano’s appointment follows a nationwide search to fill the position, which is responsible for credit risk management activities across the entire Freddie Mac enterprise.

“Managing credit effectively is the cornerstone of this company, particularly in a turbulent economy,” Freddie Mac CEO David Moffett said in a prepared statement. “Ray has really demonstrated leadership at Freddie Mac, and I can think of no one better to serve as our single point of accountability on credit decisions.”

Romano’s work in rebuilding Freddie’s credibility is clearly cut out for him. Along with sibling Fannie Mae, on Sept. 7 Freddie Mac was placed into a conservatorship under the Federal Housing Finance Agency, one of the signal early steps in the federal government’s response to the tsunami-sized ripples from the subprime mortgage meltdown.

Before joining Freddie Mac, Romano was senior vice president and chief credit officer and in other executive positions at North American Mortgage Co., Dime Savings Bank of New York, and Citicorp’s Investment Bank. He holds a BS in finance from Long Island University.

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Midwest Industry Hit by Recession

By Dees Stribling, Contributing Editor

-- Various international tempests and other factors, such as uncertainty over the price of oil, seemed to drive the markets down Monday, but only slightly. The Dow Jones index ended 31.62 points down, or 0.37 percent, while the S&P 500 was off 0.39 percent and the Nasdaq was down more--1.3 percent.

According to the Chicago Federal Reserve Bank, manufacturing in the Midwest is at its most sluggish pace in more than a decade (the Midwest in this case being Illinois, Indiana, Iowa, Michigan and Wisconsin, which form the seventh Federal Reserve district). In November, the Chicago Fed's Midwest factory index stood at a seasonally adjusted 96.4, down from 98.0 in October. The index reflects manufacturing activity in the region, with the year 2002 equaling 100 on its scale.

Compared with the same month last year, the manufacturing slowdown is especially dramatic--little surprise here--in the auto industry, which is down 24 points, compared with a decline for the entire index for the same period of 10.8 points.

Among property types, the industrial slowdown will most likely affect warehouse/distribution space directly, as demand for parts and other goods feeding the manufacturing process dries up. The roiling of distribution and logistics is sending industrial real estate owners and developers scrambling, such as when industrial property giant ProLogis suspended its new development pipeline last month. Shipping Digest reports that manufacturers and retailers are forming crisis-management teams "not only to cope with their own suddenly dimming financial picture, but those of their transportation and logistics partners as well... companies are racing to lock in financing and operating capacity as the economy deteriorates."

Right after Christmas, Statistics Canada, the government agency that keeps track of the Canadian economy, announced that Canada's GDP was down 0.1 percent in October compared with the month before. The downward movement is relatively slight when compared to the country's neighbor to the south, but does point to a softening even of the Canadian economy, which has proven more resilient than the U.S. or other industrialized economies recently.

Much of the decline is probably attributable to the fact that the United States is the largest market for Canadian goods. The most significant drop in Canadian output during October was in wholesale trade (down 0.2 percent) and manufacturing (down 0.7 percent), according to Statistics Canada.

"Our markets are closely aligned with the U.S. market," Sandra Pupatello, Ontario's Minister of International Trade and Investment, told CPN recently, adding that the country's economy nevertheless has considerable strengths. "Canada is ranked by the IMF as having the most stable financial system in the world. Long-term that will be good for Canada, but that doesn't mean that next year won't be tough."

In fact, the minister adds, despite the recession in the United States and economic weakness in Canada, both U.S. and Canadian companies are still interested in cross-border investment in each other's countries, with a particularly strong connection between the industrial U.S. heartland of the Midwest and the center of Canadian industry, Ontario. "The downturn won't last forever," she said. "This is the time to investigate opportunities for the long run."

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Sperry Van Ness Gets New President

By Barbra Murray, Contributing Editor

-- Sperry Van Ness International will kick off the new year with a new president, now that the real estate brokerage firm's board of directors has voted unanimously to push COO Kevin Maggiacomo up the ladder to the new position.

Maggiacomo (pictured) will take on responsibility for the Irvine, Calif.-headquartered company's day-to-day operation and execution of its vision, which CEO Mark Van Ness had been supervising.

A player in the real estate industry for approximately 15 years, Maggiacomo has been a leading force at Sperry Van Ness for quite some time. Having joined the organization eight years ago, he has since served in roles ranging from regional director to executive vice president. Sperry Van Ness officials credit Maggiacomo as a key figure in the expeditious growth of the company's presence from just seven U.S. cities in 2001 to well over 150 today.

Prior to coming aboard Sperry Van Ness, Maggiacomo served as an advisor for telecommunications real estate advisory concern RTE Group Inc.; a member of commercial real estate information company CoStar Group's sales team; and a corporate real estate services provider with real estate services firm CRESA Partners.

Maggiacomo is jumping into his new spot at the top of the masthead during what has become the most challenging real estate market of the decade. However, he is undeterred by the currently frosty climate, noting in a prepared statement that he is "confident that this company and its advisors will continue to thrive as we navigate through this economic downturn."

Established in 1987, Sperry Van Ness offers clients brokerage, consultation, asset management, property management, leasing, marketing and auction services. The firm operates in the office, multi-family, retail, industrial, self-storage and hospitality sectors.

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Office Market Positioned to Survive a Bruising Recession

By Michael Fickes, Contributing Correspondent

-- As a deep recession looms around the world, there is a country where a conservative investment community has resisted speculative office construction, enabling vacancy rates to fall to historically low levels and rents to continue rising through the third quarter of 2008.

Where is this magical land? Canada. According to an analysis of the office markets in six major Canadian cities by Toronto-based Colliers International in Canada, the Canadian office market will finish 2008 well positioned to withstand the recession.

The Colliers study looked at Montreal, Ottawa, Toronto, Calgary, Edmonton and Vancouver.

“Generally, Canada’s credit markets have tightened and are probably similar to those in the U.S.” Ian MacCulloch, vice president, research, with Colliers International in Canada, told CPN. “But cap rates are lagging those in the U.S. and have only just begun to move up--maybe 50 to 100 basis points.”

Meanwhile, loan to value ratios have spiked. In 2007, lenders were underwriting debt of 75 percent. That has gone to 60 percent and even 65 percent in primary markets and 50 percent in secondary markets, said MacCulloch.

“Lenders have also changed their underwriting assumptions,” MacCulloch said. “Instead of indicating an upside potential, vacancies mean zero income. Instead of indicating an opportunity for rental growth, rollovers are taken to mean a probable decline in rent.”

Nevertheless, the Colliers study shows that Canada’s major urban office markets have performed well through the third quarter of 2008 and seem by and large to be prepared to weather problems that may arise over the next year or two.

In Vancouver, vacancy rates have fallen throughout the year, from 4.7 percent in the fourth quarter of 2007 to 4 percent at the end of the third quarter of 2008. Over the same period, rents have risen from $24 to $24.50 per square foot. MacCulloch said that a sublet market has begun to emerge, but no significant projects will get underway until 2012. The 2010 Olympic games are also shoring up the market.

In Edmonton, rents are expected to plateau at the current $32 per square foot, as a low 3.8 percent vacancy rate as of September of 2008 appears to have stabilized rents.

The office market in Ottawa has fared less well. Vacancy rates over the past 12 months have risen from 5.6 percent to 6.3 percent. Still, rents have remained stable at $17.23 per square foot. With new space coming to market in 2009, vacancy rates will probably rise more. Still, the Colliers study suggests that the federal government’s need for Ottawa office space will likely prevent any strong move up in vacancies.

Montreal’s office market had a solid 2008 as the vacancy rate topped from 9.1 percent at the end of 2007 to 6.60 percent at the end of the third quarter. Tight credit has delayed new projects and is helping to keep rents stable in the low $20 range.

Calgary and Toronto will feel the fallout of the global economic slowdown, according to the Colliers report. Both markets share short-term oversupplies, with several million square feet of new office space scheduled to come on line in 2009 and 2010.

In Calgary, vacancy rates rose from 3.2 percent to 3.5 percent from the third quarter of 2007 through the third quarter of 2008. Even so, rents spiked from $40 to $48 per square foot over the period and may pad the impact of the oversupply on the market. The Toronto office market saw vacancy rates decline from 5.6 percent to 4.5 percent from the third quarter of 2007 through the third quarter of this year. Rents rose from $21.36 to $22.90. Demand will soften, however, as new space comes to market over the next two years.

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International Groups to Tackle Affordable Housing as Global Real Estate Challenge

-- On a global level, there are no geographical boundaries when it comes to affordable housing shortages. And with that topic in mind the United Nations Economic Commission for Europe (UNECE) recently held a seminar in New York City along with its Real Estate Market Advisory Group (REM) and the International Real Estate Federation (FIABCI) to address the affordable housing issue and the role it can play in rebuilding the real estate market.

In addition to examining the source of the current real estate development plight and its social consequences, the seminar's panel of industry experts spoke about potential solutions to the problem and the importance of determining alternative models and tools to address the housing issue on a worldwide platform.

The group noted that refined and increased regulation should be a vital component of a new approach, as should a retreat from global markets in favor of a more efficient incorporation of domestic resources. Additionally, the experts resolved that a higher degree of monitoring and international coordination should also be a priority. Panel members also cited such cooperative endeavors as public-private partnerships as a practical means of bolstering the refurbishment and construction of affordable housing.

UNECE is already taking action push the ideas promoted at the seminar beyond notion stage and into practice for its member countries. The organization's real estate group, REM, will host a conference in Rome in late March to hammer out the details for a new manual, of sorts, the "Guidelines for the Development of the Real Estate Market for Social and Economic Benefits."

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Port of Houston Planning $283M in Projects

By Tonie Auer, Southwest Correspondent

-- With more than $283 million in construction planned, the Port Commission of the Port of Houston Authority is working to assure Houston's emergence as the nation's busiest port is met with cutting edge facilities.

The Port of Houston has grown in the past few years with the expansion of the Bayport Container Terminal, which will ultimately increase capacity to 2.3 million TEUs, a jump of more than 200 percent, and allow Houston to market itself as a better alternative for shipping to other ports across the country. PHA achieved its eighth consecutive year of record-breaking revenue in 2007. Figures for 2008 were unavailable at press time.

In 2006, the port ranked first in the United States in foreign waterborne tonnage, second in the U.S. in total tonnage, and 10th in the world in total tonnage. A total of 211.7 million tons of cargo and 7,548 vessel calls were recorded in 2006.

The Port of Houston handles 69.6 percent of the containerized cargo market in the U.S. Gulf, and 95.5 percent of the containers moving through Texas. Much of that activity takes place at Barbours Cut Container Terminal, the largest container terminal on the U.S. Gulf Coast.

The Bayport Container Terminal opened its first phase in February 2007 and has a 15-year buildout plan for seven container berths, a 378-acre container yard and 2.3 million TEU capacity design. The Bayport Cruise Terminal opened its first cruise berth in 2008 with three cruise berths slated at buildout.

The Houston market is well positioned to attract more traffic directed away from West Coast ports through the Panama Canal, according to a Grubb & Ellis Co. report. “The Port of Houston is already handling a vast amount of the East Asia-U.S. Gulf Coast container trade and that container traffic is increasing every year,” a spokesperson for the Bay Area Houston Economic Partnership said.

Among the projects approved at the last two PHA meetings of the year were:

*$30 million for Bayport Container Terminal construction contracts including construction of a terminal administration building and a terminal maintenance and repair building
*$5 million for the Houston ship channel and beneficial use sites
*$10.6 million for Bayport Terminal administration building for a two-story, 30,000-square-foot building for operations, customs and future tenants
*$19.3 million construction contract for Bayport Terminal maintenance and repair building Phase I
*$2.2 million to purchase an optical character recognition (OCR) system for use at Bayport and Barbours Cut container terminals
*$40 million to $60 million for Bayport Terminal complex phase I stage 2 container yard for 48 acres of reinforced or roller compacted concrete pavement with a 30-year service life in a configuration that will enable flexible container operations during successive development phases of the Bayport project.
*$55 million to $66 million for the design of the phase II container yard at Bayport Terminal for an additional 55 acres of container yard storage to meet growing demands
*$10 million to construct a terminal administration building at Bayport Container Terminal and seek certification for it as a Leadership in Energy and Environmental Design (LEED) structure
*$19 million to construct a maintenance and repair building at Bayport
*$60 million in proposals for its container yard

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Another Round of Economic Reports to be Released Today

By Tonie Auer, Contributing Correspondent

-- With economic and housing sector reports slated for release today, investors aren't expecting good news. Several housing market reports as well as the government's report on the third-quarter gross domestic product figures will be released today along with a consumer confidence report, according to CNNMoney.com. One report focuses on existing home sales in November with the National Association of Realtors expected to report that sales declined to 4.93 million in November from 4.98 million in October, CNNMoney.com reported. The Census Bureau is expected to report that new home sales fell to a seasonally adjusted 420,000 last month, down from from 433,000 in October, too, the report stated.

Builders such as Centex Corp., Pulte Homes Inc. and Hovnanian Enterprises Inc. have been caught with a glut of unsold properties over the past year as mortgages became harder to get and sales slowed. Developers have slashed prices, but many buyers remain on the sidelines, waiting and watching for bigger discounts, according to the Associated Press. Wall Street expects the gross domestic product, the country's total output of goods and services, fell at an annual rate of 0.5 percent in the July-September quarter, according to the Associated Press. That would match the estimate for GDP made a month ago, but economists believe that small drop will be followed by a much larger plunge in the current October-December quarter, the report stated.

Additionally, the University of Michigan is expected to revise its consumer sentiment index lower to a reading of 58.6, down from the 59.1 reading it announced on Dec. 12, CNNMoney.com reported. Bankruptcy courts have been busy as Circuit City Stores got final approval for $1.1 billion in financing to provide liquidity as it reorganizes and said its same-store sales had dropped even more steeply than predicted, Reuters reported. The debtor-in-possession financing, approved by U.S. Bankruptcy Court, enables the retailer to pay vendors and other business partners for goods and services received. The company filed for Chapter 11 protection last month, the report added. Also, a U.S. bankruptcy judge approved a settlement calling for $1.27 billion in cash plus securities with a face value of $5.7 billion to be transferred to Barclays Plc in connection with its purchase of the core U.S. brokerage business of Lehman Brothers Holdings Inc.

The settlement relates to fund transfers made the week of Sept. 15 to keep Lehman's brokerage business operating while the parent company filed for Chapter 11 bankruptcy, Reuters reported. American International Group Inc. is selling assets with Munich Re, a German reinsurer, buying AIG subsidiary HSB Group Inc., parent of The Hartford Steam Boiler Inspection, an equipment insurer, CNNMoney.com reported. The companies said that Munich Re will acquire all outstanding shares for $742 million in cash and assume $76 million of outstanding HSB capital securities. The deal is expected to close at the end of the first quarter of 2009, AIG said in the article. Smartphone maker Palm received $100 million of private equity funds from private equity firm Elevation Partners on Monday, Forbes reported.

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GenCorp's Mixed-Use Project Takes Next Big Steps

By Coreen Bailor, Research Editor

-- Sacramento County's supervisory board has unanimously approved the final environmental impact report for GenCorp Inc.'s 1,400-acre mixed-use project and amendments to the county's general plan for the project.

The board of supervisors has also unanimously voted in favor for an intent motion to approve the balance of the development’s requested zoning amendments and map conditions, which are expected to be ratified at the board’s Jan. 28, 2009 meeting, according to GenCorp.

Located between Hazel Ave. and Prairie City Rd. south of Highway 50 in eastern Sacramento County, Glenborough at Easton and Easton Place consists of plans for 4,883 residential units and 4.2 million square feet of commercial and office space. Additional elements of the project include more than 480 acres of open space and parks and biking and walking trails that will link the development to the American River Parkway and Hazel Light Rail station.

“In 2004, GenCorp and the County initiated a collaborative planning process that represents a new model in land use planning in Sacramento County,” David Hatch, vice president of GenCorp Realty Investments L.L.C., said in a statement.

As previously reported by CPN, the project was granted approval at the Sacramento County Policy Planning Commission’s July 8 meeting.

Glenborough at Easton and Easton Place is a component of GenCorp’s broader roughly 6,000-acre Easton master plan. Among the other developments in the master plan are Rio del Oro and Westborough in Rancho Cordova, Calif., and the Folsom’s Sphere of Influence, also in California.

GenCorp is a technology-based manufacturer of aerospace and defense products and systems. The company also has a real estate segment that encompasses activities related to the entitlement, sale and leasing of its excess real estate assets.

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Clark Opens Pioneering Military Singles Property in San Diego

By Scott Baltic, Contributing Editor

-- At Naval Base San Diego, Clark Realty Capital and the Department of the Navy opened the doors of Pacific Beacon (pictured), the first of three 18-story luxury apartment buildings in the country's first large-scale housing privatization initiative for unmarried military personnel.

Open to service members ranking E4 (petty officer third class) and above, the privately owned and operated Pacific Beacon is intended to offer sailors a relaxed, upscale housing option with the convenience and security of an on-base location.

Nearly 100 sailors moved in on the first day. Under a first-resident program, they were able to choose their own apartments, and most chose fully furnished units. The building features a hotel-style lobby, rooftop pool, fitness center and Wi-Fi café.

“I am on the seventh floor in a corner unit with one bedroom facing the ocean and one facing downtown,” SKC (Chief Storekeeper) Abe Racela, was quoted in a prepared statement. “I’ve traveled extensively and stayed in many nice hotels, but I’ve never seen anything like what we have at Pacific Beacon.”

The project is being developed through a public-private venture between the Department of the Navy and CRC. A series of focus groups with sailors helped point CRC toward a resort-style setting with high-end finishes and common areas conducive to relaxation and convenience. Construction began in January 2007, and an official ribbon-cutting ceremony is scheduled to take place in March 2009, following the project’s completion.

An affiliate of the Clark Construction Group, the nation’s oldest and largest privately held general building contractor, Clark Realty Capital has participated in residential, office, retail and mixed-use developments with a total value of over $6.5 billion.

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