Alex1963 (29.32)

UPDATED: ON THE BRINK: 15 Real Estate Firms Going, Going...

April 30, 2009 – Comments (2) | RELATED TICKERS: SRS

UPDATED: ON THE BRINK: 15 Real Estate Firms Going, Going... Frozen Credit Markets Put Survival in Doubt for More Than a Dozen Property Holding Companies
By Mark Heschmeyer April 22, 2009Co-Star Group Information Services(not sure if you can follow this link if you aren't a member. If you aren't it's free to join and very good info weekly by email)  

"Just how tough a year 2008 was on property investment companies is evident in the fact that accountants for at least 15 firms issued "going concern" doubts in their year-end annual reports filed with the U.S. Securities & Exchange Commission.

The distressed companies' holdings include controlling or managing interests in at least 618 shopping centers with 230.5 million square feet of space, more than 800 hotels/resorts/casinos with more than 122,000 rooms, 36 office properties totaling 4.8 million square feet and 33 multifamily complexes with more than 2,280 units.

CoStar Group, Inc. has reported widely on the problems of many of the firms, including Centro Properties Group and General Growth Properties (NYSE: GGP). Others, such as Prime Group Realty (NYSE: PGE-PB), Meruelo Maddox Properties, Lodgian Inc. (AMEX: LGN) and Interstate Hotels & Resorts, have not received widespread media coverage.

(EDITOR'S NOTE:We updated the section of this story pertaining to Prime Group Realty Trust. The previous version incorrectly reported that the going concern opinion related to Prime Group's office operations. This version contains the corrected text showing that the going concern opinion relates to Prime Group's investment in Extended Stay Inc.)
Liquidity and debt issues are primary issues raising the most doubt about the companies' survival. The companies either do not have enough cash on hand or don't have the ability to raise new money to meet their debt obligations. Or, the companies are having trouble refinancing maturing debt.

Four of the companies have already sought respite from their most pressing problems through the U.S. bankruptcy courts: General Growth Properties, which filed just this past week, ILX Resorts, Meruelo Maddox Properties and Trump Entertainment Resorts. In the case of Trump Entertainment, the legendary and bombastic investor Donald Trump has even relinquished control over the Atlantic City casino operator.

The following summaries of the 15 firms' property holdings were compiled from the firms' annual reports, identifying their most pressing problems and the primary steps they are taking to address the issues."

 

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"There is substantial doubt about the company's ability to continue as a going concern given its liquidity issues, which includes its ability to negotiate extensions of credit; current prohibition upon its ability to take on more debt and restrictions on operations that increase the risk of default.
 - Davidson Diversified Real Estate III LP is an affiliate of AIMCO Properties in Denver, CO. The partnership owns the Plainview Apartments, a 480-unit complex in Louisville, KY.... - Excellency Investment Realty Trust Inc.  in New York City, owns eight residential real estate properties with 271 apartment units all in Hartford, CT. As of Dec. 31, the properties' occupancy rate was approximately 90.4%....

- FX Real Estate and Entertainment Inc. owns Las Vegas property made up of six contiguous parcels aggregating 17.72 acres on the southeast corner of Las Vegas Boulevard (the Strip) and Harmon Avenue. The parcel is zoned to allow for casino gaming and can support a variety of development alternatives including hotels/resorts, entertainment venues, a casino, condominiums, hotel-condominiums, residences and retail establishments. ...

- General Growth Properties This past week, U.S. mall REIT General Growth Properties as well as 158 of its 200 malls filed for Chapter 11 bankruptcy protection.GGP's third-party management businesses, as well as its joint ventures, have not filed for protection.The REIT made the decision to file after its extensive efforts to refinance or extend its overwhelming debt burden proved futile. For more background on its debt predicament... 

- ILX Resorts Inc. in Phoenix, AZ, develops, markets and operates timeshare resorts in the western United States. The company’s current portfolio of resorts consists of seven resorts. The company also holds 2,241 weeks at the Carriage House in Las Vegas, 174 weeks at the Scottsdale Camelback Resort in Scottsdale and 194 weeks in the Roundhouse Resort in Pinetop, AZ..... 

- Interstate Hotels & Resorts Inc. in Arlington, VA, manages 226 hotel properties with 46,448 rooms and six ancillary service centers (a convention center, a spa facility, two restaurants and two laundry centers), in 37 states and the District of Columbia in the U.S. and in Russia, Mexico, Canada, Belgium and Ireland. Of its managed properties, it owns even with 2,051 rooms and held non-controlling equity interests in 18 joint ventures, which owned or held ownership interests in 50 of its managed properties. Last month, Interstate Hotels was suspended from trading on the New York Stock Exchange and faces potential delisting.... 

- Lodgian Inc. Atlanta-based hotel operator Lodgian owns and operates nearly 7,600 hotel rooms in 41 properties under management. The company lists 35 hotels as continuing operations and six as held for sale. Lodgian has $128 million of outstanding mortgage debt scheduled to mature in July 2009. The current severe economic recession has hurt the company’s operating results, which has affected its operating cash flows as well as its ability to refinance the maturing debt.... 

- Meruelo Maddux Properties is one of Los Angeles' largest owner/developers of commercial properties. It owns 28 properties totaling 3.7 million square feet. It also has a development pipeline underway that includes seven multifamily projects totaling 995,000 square feet. The company has suspended construction of an additional 12 projects totaling 774,000 square feet. Meruelo Maddux has been experiencing significant, recurring cash shortfalls and last month it and numerous of its subsidiaries filed for relief under Chapter 11 in an effort to restructure its debt last month..... 

- NNN 2003 Value Fund LLC NNN 2003 Value Fund based in Santa Ana, CA, holds interests in eight commercial office properties. Three of the properties are classified as held for sale and efforts are actively underway to market and sell these properties. Grubb & Ellis Realty Investors LLC manages the fund. As of year-end, the fund had guaranteed the payment of approximately $2.5 million of mortgage loans payable that mature in May 2009 related to one of its properties. Based on cash flow projections it currently does not have the ability to satisfy this guaranty if it becomes due and is actively marketing the property for sale.... 

- Extended Stay Inc. / Prime Group Realty Trust. Prime Group Realty is a Chicago-based REIT that owns, manages, leases, develops and redevelops office and industrial real estate primarily in the Chicago metro area. Its portfolio consists of nine office properties, containing an aggregate of 3.5 million net rentable square feet. In 2005, an affiliate of The Lightstone Group LLC bought the basically all of the outstanding common shares of the company and its Operating Partnership. In its annual report Prime Group Realty reported receiving a "going concern" opinion from its auditors for BHAC Capital IV LLC, an entity that owns 100% of Extended Stay Inc. and in which Prime Group had invested $120 million in 2007.... 

- Real Estate Associates Ltd. holds limited partnership interests in six multifamily entities controlled by AIMCO Properties in Denver, CO.... 

- Real Estate Associates Ltd. VII Real Estate Associates VII holds limited partnership interests in 11 multifamily entities controlled by AIMCO Properties in Denver, CO. The partnership is obligated for non-recourse notes of $6.32 million due to the sellers of some of its partnership interests, bearing interest at 9.5% to 10%. Total outstanding accrued interest at year-end was $14.13 million. Unpaid interest was due at maturity of the notes and the partnership has not repaid the notes and is in default.....

- Riviera Holdings Corp. owns and operates the Riviera Hotel & Casino on the Las Vegas Boulevard (the Strip) in Las Vegas, NV, and Riviera Black Hawk Casino, a limited-stakes casino in Black Hawk, CO. Riviera Las Vegas’ hotel is comprised of five towers with 2,075 guest rooms Including 177 suites. Its current debt consists of a 7-year, $225 million term loan that matures on June 8, 2014, and a $20 million 5-year revolving credit facility. In February, the company received a notice of default on its New Credit Facility from Wachovia Bank.... 

- Trump Entertainment Resorts owns and operates three casino hotels in Atlantic City, NJ. In February, Trump Entertainment Resorts and some subsidiaries filed voluntary petitions for Chapter 11 restructuring in the U.S. Bankruptcy Court for the District of New Jersey. The filing constituted an event of default on $1.25 billion 8.5% senior secured notes and on $493 million on a senior secured term loan agreement. As a result, all of the debt became automatically due and payable. The company was also was delisted from the Nasdaq Stock Market.... 

 

 (there are more details about each entity including property addresses in some cases or specific actions being taken and I urge you to read the article in it's entirety if you have interest in, or investments relating to any of these entities.) 

More pain coming for commercial real estate.

Alex