пятница, 27 июня 2008 г.

First Horizon National to limit home building, real-estate lending

First Horizon National Corp. said Monday that it will pull out of national home building and commercial real estate lending everywhere except in Tennessee and a few other parts of the Southeast.

The move came a little more than a week after the Memphis-based banking company boosted loan loss reserves, largely related to real estate loan problems, and cut the dividend on the company's stock.

Company executives said then that they planned to cut the home and real estate finance businesses.

"This is the next step in our continued effort to refocus on our regional banking franchise [First Tennessee Bank] in the Southeast and Tennessee," said Dave Miller, investor relations officer.

Any cutbacks in the company won't be in Memphis -- they're more likely, over the course of the year, to be in places like First Horizon Mortgage headquarters in Dallas and in some of the 40 branch offices outside Tennessee and the Southeast, Miller said.

This follows the sale of 34 bank branches First Horizon opened, starting three years ago, in Atlanta, Dallas and Washington, D.C.

The moves won't have a major impact on First Horizon's finances, he said.

"This announcement comes as no surprise, and we expect to see a likely announcement related to the potential sale of the MSR [mortgage servicing rights] assets and/or the complete mortgage business in the coming months," said Robert Patten, analyst in New York for Memphis-based Morgan Keegan & Co.

"We remain convinced we'd like to see the mortgage business and our exposure to it reduced over time," Miller said.

But while talking about the company's fourth-quarter losses and strategy on Jan. 18, First Horizon CEO Jerry Baker said: "Mortgages are something, obviously, we'll always be involved in."

He did say First Horizon leaders would take seriously any compelling offer for the whole division.

Patten didn't change his profit estimates for the company -- $1.25 a share this year, $1.65 in 2009.

But he said the lending cutback was "overall a positive for the stock."

Higher-level learning pairs with real estate

In the GTA we not only have the largest home-building market in the country, we have the only academic program in Canada geared to students wishing to specialize in one or more areas of the development and real estate industries.

It's called the program in real property development and it's been offered by the Schulich School of Business at York University since the early 1990s.

Our industry needs graduates with the skills and expertise delivered by this MBA program, which is aimed at those who want to pursue careers in the management and executive levels of the development, home building, real estate and related industries.

"The need for higher-level learning in the real estate industry is not a luxury, it's a necessity," says George Carras, president of RealNet Canada Inc., a leading provider of real estate information services.

"The role real estate plays in our greater community is growing in importance. As an investment class, it's probably the most important one I think we have today," says Carras, a member of the advisory council to the program in real property development.

In year two of their MBA studies, Schulich students have the option of taking courses specializing in the development, investment and finance side of real estate. Graduates receive a diploma in real property development as part of their MBA degree.

Andre Kuzmicki, executive director of the real property development, says it has had two critical hallmarks. The curriculum is rooted in the practical, real-world needs of businesses active in real estate and development, plus strong ties are maintained with the industry through an advisory council made up of industry leaders such as Peter Gilgan, president and CEO of Mattamy Homes and Julie DiLorenzo, president of Diamante Development Corp.

They are among more than 30 business leaders and executives who sit on the program's advisory council. Industry practitioners are guest speakers at lectures and classes. As well, most of the instructors come from the industry and many are still active in it.

There's a course in real estate law, one on property finance and investment, another on structuring property transactions and another on managing the development process, among others.

"The industry needs people who have a broad understanding of all the basic skills and disciplines that you get in a graduate level, business administration program," Kuzmicki says.

"What we are trying to do is essentially have the students learn from their exposure to people in the real estate industry.

In turn, industry people are increasingly looking at the students as a great talent pool when they need somebody. There's a lot of networking going on," Kuzmicki says.

Patrick Iaboni graduated from the program in 1994. Today, he's president of Berkley Developments Ltd., a Toronto-based company that builds and invests in new home and condominium projects.

Iaboni says he made solid contacts through the program and networking opportunities resulted.

"To this day I still do a lot of business with graduates of the program. Not only with people who attended when I did, but also with those who have graduated more recently," Iaboni says.

"We are getting that action happening where the industry looks to the school as the place to recruit people who have a strong interest in careers in the real estate business," Kuzmicki adds.

Economic Growth Could Hurt California Real Estate Industry

The current surge in economic growth could pose a threat to some debt-laden homeowners and won't soon help owners of vacant office buildings, real estate investors and analysts warned Tuesday.

In an economy that now seems in "full recovery mode," property owners will benefit from job growth but suffer the from rising interest rates, said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics.

About 400 real estate professionals who gathered in a hotel ballroom for the Fisher Center's twice-a-year all-day conference found little to cheer about.

Housing demand and prices in the Bay Area are likely to stall or slump, rents and occupancy rates in commercial properties are stuck in a rut, and California's government is unable to cope, a succession of panelists warned.

Even the normally upbeat Leslie Appleton-Young, economist for the California Association of Realtors, warned that the state's once unstoppable housing markets seem ready to reverse direction. "We may have to pay the piper a little bit for all the feasting we've had on these wonderful rates," she said, referring to house borrowing costs that had reached historical lows but are now expected to rise.

Economists normally view job growth as the underlying factor in strong real estate markets. But in the Bay Area, low interest rates fueled demand and double-digit price appreciation in the house market despite a technology crash in 2000 that chopped 400,000 jobs from the region's economy.

Rosen described low interest rates as the "heroin" that fueled that euphoria in the house market, and warned that prices could be flat or go down over the next three years.

Stephen Chamberlin, a Philadelphia homebuilder, offered an even more grim view. He urged investors to bet on a decline in the stock prices of his publicly traded competitors. "Housing has clearly reached a bubble stage," he said. "Something ugly is going to happen."

Dale Ann Reiss, a real estate analyst for the accounting firm Ernst & Young, said that risks are especially great for homebuyers who took advantage of "very aggressive lending at variable rates." Their distress could spread, since a lack of equity and rising interest rates could prompt some highly leveraged borrowers to walk away from houses and boost housing supply with foreclosed properties, she said.

In the commercial sector, local building owners are still waiting for job growth that would fill some of the acres of empty offices in the Bay Area, Rosen said.

With rents still sharply lower than only a few years ago, the best face that Michael Smith, the Bay Area manager for CB Richard Ellis, could put on things was that "clearly, our market has hit bottom."

But investors still have an appetite for office properties -- as long as they are filled with tenants. "There is more money chasing deals than there are deals," said Luis Belmonte, an executive vice president of AMB Property Corp. of San Francisco.

That has reduced returns on investments in U.S. offices, prompting AMB to sell U.S. office properties and buy buildings outside the country, he said.

Some investors have found bargains at home. Steven Pilch, chief operating officer of Divco West Properties of Palo Alto, was upbeat about his firm's participation in the purchase of the former ChevronTexaco Corp. headquarters in San Francisco. That 777,000-square-foot building was only 20 percent occupied when it sold for $80 million in November, but the new owners expect to boost that rate into the mid-40s soon, Pilch said.

Clouding the long-term prospects of office properties is the lack of investment in deteriorating infrastructure, including crowded roads, in the Bay Area and throughout California, Belmonte said. The need to reduce the state's structural budget deficit will inevitably lead to higher property taxes on commercial properties, he said.

But Rex Hime, a lobbyist for commercial property owners, said higher property taxes on his members would be blocked by a new political alliance with a powerful advocacy group for small property owners. "The commercial real estate community and the Howard Jarvis folks have now become joined at the hip," Hime said.

Owners of Charleston, W. Va., Office Building Hire Manager

The new owners of Laidley Tower have hired a national real estate services firm to manage the office building.

Real Estate Resources Inc. of Charleston, which was hired earlier this month by the new owners to manage Laidley Tower, announced Wednesday that it has teamed up with Trammell Crow Co., a national firm based in Dallas.

Real Estate Resources Inc. already manages several city office buildings, according to a news release, including the United Center, the Kanawha Valley Building and City Center East. The company now manages more than a million square feet of office space in the city.

Laidley Tower was built in the mid 1980s by Lexington, Ky., developer Dudley Webb in partnership with some members of the law firm Jackson & Kelly, which is the building's largest tenant, and members of the Dickinson family.

The group recently agreed to turn over ownership when it was unable to refinance a mortgage held by CIGNA, the insurance conglomerate. The new owner is CORAC Laidley LLC, an affiliate of Connecticut General Life Insurance Co., the news release said. Connecticut General is a CIGNA subsidiary.

Former Chicago-area real estate executive sues investor, firms for $1 million

A former real estate executive with Sam Zell is suing the billionaire investor and two private holding companies, alleging that he is owed more than $1 million for work on various deals.

Beginning in 1989, Gary Beller worked for various companies controlled by Zell, including as executive vice president for parking facilities for Equity Office Properties Trust, Zell's public office building real estate investment trust.

Beller alleges he was never paid his share of the profits for several deals he worked on for Zell, including a downtown parking garage, a hotel company and a land development firm, according to the complaint filed in Cook County Circuit Court.

"The entire complaint is simply without factual or legal merit," said attorney David Bradford, a partner with Chicago-based Jenner & Block LLP, which represents Zell and the private holding companies. "Mr. Beller was very well compensated for the work he did."

Beller is now president of his own real estate firm.

Beller alleges he was promised a $1 million bonus payment and 2.5 percent of the annual cash flow of the Washington Madison Wells parking garage in the Loop.

Although Zell is named personally as a defendant, the complaint does not specifically accuse him of any wrongdoing.

Instead, Bell alleges that the billionaire worked through two longtime top Zell executives, Shelli Z. Rosenberg and Gerald Spector. Rosenberg is a director of Equity Office and Equity Residential, Zell's apartment REIT, while Spector is executive vice president and chief operating officer of Equity Residential. Zell is chairman of both REITs.

REITs part of healthy portfolio, advisers say

Investing in real estate doesn't always mean stomping through grassy lots or renovating old buildings.

Real Estate Investment Trusts, or REITs, have become a popular way to join a pool of investors who earn money on portfolios of buildings most of the investors will never see.

"It's a way of investing in real estate without having to fix the toilet," said Jim Eagleton, vice president of investments at A.G. Edwards & Sons Inc. in Tulsa.

Although the dividends paid by REITs have gone up along with the fortunes of the real estate market as a whole, local investors caution that the payouts already may have passed their peak.

"Any time a particular asset class has the astronomical rise REITs have had, it's a good idea to be cautious," said Jake Dollarhide, chief executive of Longbow Asset Management Co.

Although REITs are tied to portfolios of regional, national or worldwide real estate properties, in some aspects they're like a mirror image of the stock market. Investors in any given REIT are shareholders, and the price of each trust's shares can go up or down based on the amount of enthusiasm people have for buying into the trust.

So, to some extent, REIT investors hope to make money by buying into the trust when its value is low and selling when it's high.

"Investors have the expectation that the share price will go up over time," Eagleton said.

But the true appeal of REITs are the dividends they pay. By law, at least 90 percent of the income from renting as well as selling properties must go to a REIT's shareholders.

The amount of income REITs pay out has remained high over the past five years. A.G. Edwards' index of 120 REIT companies shows the aver age yield moved above 9 percent of stock value through 2001, although it has since dropped to 6 percent as REIT stock prices have risen.

Dollarhide said the main factors in real estate's rising status were the demise of the tech bubble and falling interest rates.

"The tech boom implosion occurred, and high-powered stocks were down 20 percent," he said. "Billions of dollars of paper profits vanished overnight."

As people lose their taste for stocks, they often move their money into low-risk dividend payers, such as bonds or CDs, Eagleton said. But these investments suffer when interest rates fall as they did at the start of the decade.

The real estate market, on the other hand, benefits from low interest rates.

"When the banks wanted to renew an 8 percent CD at 2 percent, they (investors) turned to REITs," Eagleton said.

REITs have performed well over the past five years, though industry watchers caution that their values have started to drop. Jim Brock, senior financial adviser of Brock & Associates, a division of Amerprise Financial Services in Tulsa, feels the peak time for REITs has passed.

"I'd be hesitant to get into them, because when I look at the historic performance, it looks so good," he said. "People would be coming in at the end of the cycle."

The biggest threat to REITs is rising interest rates, which will cause bonds and CDs to become more attractive, Eagleton said. If a large number of people leave REITs, their share prices may go down.

The local investment advisers said interest in REITs has cooled significantly as yields decline and more people worry about the future of real estate.

"Most people are reserved about them," Brock said.

Dollarhide also expects the dividends to fluctuate, especially if vacancies in commercial buildings increase.

"People who are retired shouldn't depend on a certain dividend, because dividends change as prices change," he said.

However, no one expects REITs to crash entirely. Eagleton said they will remain a good choice for investors who want to combine low risk with a regular income, provided they hold onto their investment for the long term.

Local investors said REITs can be a healthy part of most investment mixes, provided investors put 2 percent to 5 percent of their portfolios in them.

Brock said that most investment disasters occur not because certain investments are inherently bad, but because people fail to diversify.

"The biggest problem people can cause themselves is making big bets in one area or another," he said.

BentleyForbes may buy Woodall Rodgers Tower

A California real estate investor is negotiating to purchase an Uptown high-rise on the north edge of downtown.

The 16-story Woodall Rodgers Tower is across the freeway from the Arts District on Akard Street.

BentleyForbes -- a Los Angeles-based company that already owns several buildings in the Dallas area -- has contracted to purchase the 22-year-old office building.

Real estate brokers say that the tower is expected to fetch close to $200 per square foot.

Officials with BentleyForbes did not reply to requests for comment.

For the last five years, the building has been owned by a Dallas real estate partnership that paid about $14 million for the 156,000-square-foot property.

Since then, the nearby Arts District and surrounding Uptown neighborhood have boomed with construction.

Just across the freeway from Woodall Rodgers Tower is the new office tower home of Hunt Consolidated. And behind the building on McKinney Avenue, construction is under way on a high-rise apartment project.

BentleyForbes is a private real estate investor that owns four office buildings in the Preston Center area of North Dallas. The company also owns the Four Seasons Resort and Club in Las Colinas.