Real Estate Daily News Buzz – September 3, 2014
Real Estate Daily News Buzz is designed to give news snippets to readers that our (yet to be award winning) editors thought you could use to start your day. They come from various business perspectives, real estate, government, the Fed, local news, and the stock markets to save you time. Here you will find the headlines and what the news buzz for the day will be.
On Tuesday, the Dow Jones Industrial average fell 30.89 points, or 0.2%, to 17,067.56. The Standard & Poor’s 500 index slipped 1.09 point, less than 0.1%, to 2,002.28. The NASDAQ composite added 17.92 points, or 0.4%, to 4,598.19.
Benchmark U.S. crude fell $3.08 to close at $92.88 a barrel on the New York Mercantile Exchange, its lowest level since January. Brent crude, a benchmark for international oils used by many U.S. refineries, fell $2.45 cents to close at $100.34 on the ICE Futures exchange in London. Wholesale gasoline rose 3 cents to close at $2.783 a gallon. Natural gas fell 17.5 cents on forecasts for milder fall weather to close at $3.890 per 1,000 cubic feet. Heating oil rose 0.8 cent to close at $2.857 a gallon.
DG APPLIES PRESSURE TO FAMILY DOLLAR FOR BUYOUT
GOODLETTSVILE, TN—Following Family Dollar Stores’ turndown of its previous bid of $78.50 per share, Dollar General Corp. on Tuesday came back with an all-cash offer of $80 per share, or about $9.8 billion including the assumption of debt, and threatened to go hostile if the board rejected the new bid. The Goodlettsville, TN-based retailer, already the largest in the dollar-store segment, has also more than doubled the number of stores that it would be willing to divest to satisfy antitrust concerns. DG’s previous bid for Family Dollar came three weeks after its smaller rival and Dollar Tree announced that the boards of both companies had approved a $9.2-billion cash-and-stock deal for Chesapeake, VA-based Dollar Tree to acquire Family Dollar. The combination would create a company with more than 13,000 stores across the US and Canada and annual sales exceeding $18 billion. In its upsized bid for Matthews, NC-based Family Dollar, which cited antitrust concerns among its key reasons for rejecting the original offer last month, DG said it would be willing to divest as many as 1,500 stores, up from the previously announced 700, if ordered to do so by the Federal Trade Commission. Even so, a buyout of Family Dollar would give it a store count of nearly 20,000 locations across 46 states. DG also said it would pay a $500-million “reverse-breakup” fee to Dollar Tree should a union between DG and Family Dollar run afoul of antitrust regulators.
SELECT REIT AGREES TO ACQUIRE COLE FOR $3 BILLION
NEWTON, MA—Select Income REIT has agreed to acquire Cole Corporate Income Trust in a cash-and-stock $3 billion deal, which is still subject shareholder approval. The transaction, expected to close in the first quarter of 2015, includes the assumption of $298 million of mortgage debt. Part of the deal calls for Select Income to sell 23 healthcare properties it is acquiring from Cole to Senior Housing Properties Trust for approximately $539 million, a transaction-within-a-transaction that will net Select some $509 million in proceeds as it assumes $30 million in debt. Select Income will use the proceeds to fund the cash portion of Cole’s acquisition; it will also borrow $1 billion from its revolving credit facility and a new bridge loan. Select Income estimates the acquisition cap rate is approximately 6.4% per annum, with the sale of the healthcare properties calculated on the same cap rate basis. It also estimates the merger will be modestly accretive to its normalized funds from operations per share in 2015. In the end the deal will create an office and industrial net lease REIT with a portfolio of 43-million-square-feet of assets located in 35 states that are 98% occupied, according to Select Income’s president and COO David Blackman. Cole, a non-traded net lease REIT, is bringing some 64 office and industrial properties with approximately 16.1-million- rentable-square-feet to the table. The combined portfolio will have an 11.1 year weighted average remaining lease term, an average property age of 10.7 years and investment grade rated tenants paying 37% of annual rents.
MATTRESS FIRM OPENS 1,500TH LOCATION IN SCOTTSDALE
PHOENIX—The first Arizona, large-format Mattress Firm came to Scottsdale last week. The 23,958-square-foot outlet store is the largest Mattress Firm Supercenters in the country—and the company’s 1,500th location. Typically seeking stores between 3,500 and 5,000 square feet, Mattress Firm approached Darren Pitts, executive vice president of Velocity Retail Group, with a special request; find a warehouse-sized space in an affluent location with high-traffic, national tenants, and great visibility. The new store, located in Sonora Village at the southwest corner of Frank Lloyd Wright Boulevard and Loop 101, meets those requirements. Pitts and Michael Clark, vice president with Velocity, identified the center with co-tenants such as Walmart Supercenter, Sam’s Club, Best Buy, Staples and Kohl’s. The location draws thousands of shoppers every day. The intersection has excellent access to Loop 101 on- and off-ramps at both the Frank Lloyd Wright and Raintree interchanges. The new store’s location also boasts phenomenal visibility to Hayden Road, Frank Lloyd Wright Boulevard, and the Loop 101. Traffic passing the site exceeds 130,000 cars per day.
NorthMarq ARRANGES $23M IN ACQUISITION FINANCING
PHOENIX—Michael Elmore, executive vice president and managing director of NorthMarq Capital’s Los Angeles office, and James DuMars, senior vice president and managing director of NorthMarq Capital’s Phoenix office secured $22.8 million in acquisition financing for Ocotillo Springs, a class A, 272-unit multifamily property located at 825 W. Queen Creek Road in Chandler. The transaction was structured with a seven-year term with three-year interest only followed by a 30-year amortization schedule. NorthMarq arranged financing for the borrower, Crown Realty, through its seller/servicer relationship with Freddie Mac. Weidner Apartment Homes was the seller.
IT’S NO LONGER SAFE TO RECLINE YOUR AIRPLANE SEAT
NEW YORK (AP) — Squeezed into tighter and tighter spaces, airline passengers appear to be rebelling, taking their frustrations out on other fliers. Three U.S. flights made unscheduled landings in the past eight days after passengers got into fights over the ability to recline their seats. Disputes over a tiny bit of personal space might seem petty, but for passengers whose knees are already banging into tray tables, every inch counts. There are fights over overhead bin space, legroom and where to put winter coats. Airlines today are juggling terror warnings in Britain, the Ebola outbreak in Africa and an Icelandic volcano erupting and threatening to close down European airspace. Yet, the issue of disruptive passengers has captured the world’s attention.
IN LIGHT OF CELEBRITY HACKS, HOW TO PROTECT DATA
NEW YORK (AP) — The circulation of nude photographs stolen from celebrities’ online accounts has raised questions about the security of storing information over the Internet. Apple acknowledged Tuesday that computer hackers broke into the accounts of several celebrities, a security breakdown that Apple blamed on the intruders’ ability to figure out passwords and bypass other safeguards. Apple says it found no evidence of a widespread problem in iCloud or its Find my iPhone service. Instead, the affected celebrity accounts were targeted by hackers who had enough information to know the usernames, passwords and answers to personal security questions designed to thwart unauthorized entries, according to Apple. Knowing this crucial information would enable an outsider to break into Apple accounts, including iCloud.
SOME FEAR AUTO INDUSTRY RETURNING TO BAD HABITS
DETROIT (AP) — Big discounts. Six- or seven-year loans, in some cases to buyers who would have been turned down in the past. As the auto industry strives to sustain its post-recession comeback, car companies are resorting to tactics that some experts warn will lead to trouble down the road. Vehicle discounts have risen 5.5 per cent from a year ago. More than a quarter of new buyers are choosing to lease, a historically high percentage. Auto company lending arms are making more loans to people with low credit scores. The industry is adding factory capacity. And the average price of a car keeps rising, forcing some customers to borrow for longer terms to keep payments down.
HALLIBURTON REACHES $1B GULF OIL SPILL SETTLEMENT
NEW ORLEANS (AP) — Halliburton’s agreement to pay more than $1 billion to settle numerous claims involving the 2010 BP Gulf of Mexico oil spill could be a way for the company and victims of the spill to avoid years of costly litigation — if all the pieces fall into place. A federal judge still has to approve the settlement. That same judge has rulings pending on the extent to which parties, including Halliburton, were negligent in the deadly explosion of the Deepwater Horizon offshore oil rig. Those rulings could affect plaintiffs’ decisions on whether to participate in the settlement, which was announced Tuesday. Pending action by the Supreme Court over interpretations of an earlier BP settlement with businesses also comes into play.
SURVEY: FOREIGN COMPANIES IN CHINA FEEL ‘TARGETED’
BEIJING (AP) — Foreign companies in China feel increasingly targeted for unfair enforcement of anti-monopoly and other laws and might cut investment if conditions fail to improve, a U.S. business group said Tuesday. The American Chamber of Commerce in China’s report adds to mounting complaints about a flurry of investigations of global automakers, technology suppliers and other companies. It is a reversal for companies that welcomed plans unveiled by the ruling Communist Party in late 2013 to open the state-dominated economy to more private competition and adds to pressures at a time of slowing growth and rising competition from local rivals.
US MANUFACTURING GROWS AT FASTEST PACE IN 3-1/2 YEARS
WASHINGTON (AP) — U.S. manufacturing grew in August at the strongest pace in more than three years as factories cranked out more goods and new orders rose. The Institute for Supply Management’s manufacturing index rose to 59 from 57.1 in July, the ISM said Tuesday. That was the highest reading since March 2011. Any measure above 50 signals that manufacturing is growing. Tuesday’s ISM report coincides with other signs that manufacturing is helping drive the U.S. economy’s improvement. Factories are benefiting from strong demand for aircraft, furniture, and steel and other metals. The boost from manufacturing has helped offset slower homebuilding, a slowdown in consumer purchases and weaker spending on utilities and other services.
REVEL CASINO FOLLOWS SHOWBOAT, CLOSES ITS DOORS
ATLANTIC CITY, N.J. (AP) — Atlantic City’s newest casino — and its biggest, costliest flop — went out with barely a whimper. Revel Casino Hotel opened a little more than two years ago amid high hopes of turning around Atlantic City’s struggling casino market. But the $2.4 billion resort shut down Tuesday as its casino closed one day after the hotel checked out its last guest. The property that debuted at sunrise on April 2, 2012, with its then-president joining New Jersey Lt. Gov. Kim Guadagno in a blueberry smoothie toast, quietly ended operations in the early morning darkness as the last handful of gamblers, who never turned out in great enough numbers to keep Revel alive, filed out of the sleek glass tower. It never lived up to the hype as the resort town’s “Next Big Thing.”
PG&E PENALIZED $1.4B FOR DEADLY PIPELINE BLAST
SAN FRANCISCO (AP) — California regulatory judges issued a $1.4 billion penalty on Tuesday against the state’s largest utility for a lethal 2010 gas pipeline explosion that engulfed a suburban San Francisco neighborhood in flames, killing eight people and prompting national alerts about the oversight of aging pipelines. The California Public Utilities Commission said the figure reached by two administrative law judges against Pacific Gas & Electric Co. in the San Bruno pipeline explosion represented the largest safety-related penalty it had ever imposed. The amount of the penalty is meant to “send a strong message to PG&E, and all other pipeline operators, that they must comply with mandated federal and state pipeline safety requirements, or face severe consequences,” judge Timothy J. Sullivan wrote in his order.
