Global Viewpoints

Fed to Bailout Citigroup

By Jennifer Brenner Andrade

The US Treasury and the Federal Deposit Insurance Corp. are coming to the rescue of beleagured Citigroup by agreeing to provide protection against possibly large losses on a $306 billion asset pool of loans and securities backed by residential and commercial real estate among other things. Citigroup will keep these risky assets on their balance sheets. Additionally, the Treasury will invest $20 billion in Citigroup with funds from the Troubled Asset Relief Program. Finally, the Federal Reserve is prepared to offer Citigroup a non-recourse loan to “backstop residual risk in the asset pool.”

In exchange for a federal bailout, Citigroup will issue preferred shares to the Treasury and FDIC as well as provide preferred stock with an 8% dividend to the Treasury to specifically offset the $20 million capital infusion. Also, Citigroup will be required to be prudent and allow oversight with regards to executive compensation as well as implement the FDIC’s mortgage modification program.

In a joint statement issued by the Treasury, FDIC and Federal Reserve, the government expressed its commitment to supporting financial market stability, which in their words “is a prerequisite to restoring vigorous economic growth.

This official statement was much more brief and to the point than some of the past bailout announcements. It ends with a series of confirming statements assuring the American people that the government is working to support the resurgence of credit flows to households and businesses, provide prudent stewardship of taxpayer resources, minimalize government involvement in the financial sector and bolster the efforts of financial institutions to attract private capital.

New Modern Shopping Centre Announced for Slovakia

By Jennifer Brenner Andrade

It is not all bad news out there. Central and Eastern European real estate developer, Quinlan Private Golub (QPG), announed at MAPIC 2009 last week the construction of a 60,000 m2 shopping centre in the City of Bratislava in Slovakia.

Set to open in the third quarter of 2012, the South City Shopping project will host retail, leisure, office and residential components for Bratislava, which has a population of 125,000 people. Local developer Cresco Group will handle part of the residential component of the project.

In a prepared statement made available on QPG’s website, John Newton, QPG country manager for Slovakia and Hungary says, “Our plans are still being worked on in close cooperation with the City of Bratislava, so they are not cast in stone yet, but I believe that this is the scheme that is missing today in Bratislava. It is superbly designed and totally modern, the kind of regional shopping centre that you would expect in any European city. It will be a development that responds to the needs of shoppers and the environment in equal measure.”

The project is being built with good access to both motorway and public transport. Additionally, the shopping centre will feature a low energy design. Newton hopes the modernity along with the easy access to the centre will attract shoppers from as far away as Vienna.

Starwood Tapped to Manage Three Hotels In Saudi Arabia

By Jennifer Brenner Andrade

Alhokair Group has tapped Starwood to manage three new hotels in Saudi Arabia. Starwood, which already has ten other properties in the region, will lends its brand and operations expertise to the projects which include the Four Points by Sheraton Mall of Arabia in Jeddah, Four Points by Sheraton Dharan and Aloft Riyadh.

In a prepared statement, Starwood calls the region one of the “strongest” components in its global portfolio. Roeland Vos, president of Starwood Europe, Africa and Middle East division says the signing of these new properties “underscores Starwood’s commitment to expanding its footprint in this fast-growing market.”

The 300-room Four Points by Sheraton Mall of Arabia is scheduled to open in early 2010 in a prime location in Jeddah, less than three miles from the King Abdul Aziz International Airport and just five miles from the old city. The new-build hotel will provide direct access to the Mall of Arabia, Jeddah’s premier shopping complex, which is home to numerous retail stores, restaurants, an office complex, a gold Souk and an entertainment area with an ice rink. Facilities will include two restaurants, a lobby lounge, swimming pool, poolside snack bar, fitness center, business center and more than 3,000 square feet of state-of-the-art meeting space for events and conferences.

In early 2011, the 236-room Four Points by Sheraton Dhahran is expected to come online at the prominent intersection of Prince Faisal Bin Fahd Road and King Saud Road in Dhahran, a major administrative center for Saudi Arabia’s oil industry. The hotel’s ideal location adjacent to the state-of-the-art Mall of Dhahran will provide guests with easy access to dining, shopping and entertainment. The newly constructed hotel will be 24 miles from the King Fahd International Airport and 20 miles from the Kingdom of Bahrain. The hotel will also offer a swimming pool, fitness center, gift shop and more than 3,700 square feet of meeting space for meetings and conferences of various sizes.

Scheduled to open in early 2011, Aloft Riyadh will be the second Aloft in the Middle East, following the opening of Aloft Abu Dhabi in 2009. Aloft Riyadh will be located in the Olaya district at the intersection of Olaya Street and Mecca Road, which links Riyadh to Jeddah and Saudi Arabia’s eastern province. The new-build hotel will offer 225 large, loft-like rooms, tech-savvy touches, a hip, social atmosphere and easy access to Riyadh’s commercial and shopping hubs. Additional facilities include the re:mixSM communal lobby area, bar w xyzSM, the re:chargeSM fitness center, the splash pool and re:fuel by aloftSM – a one-stop food and beverage area.

Canary Wharf Group and JP Morgan Agree on Sale and Development of Riverside Project

Source: CBRE

J.P.Morgan and Canary Wharf Group plc have successfully concluded an agreement for the staged development of the Riverside South site at Canary Wharf.

Under this agreement the 999 year leasehold interest of Canary Wharf Group plc (‘CWG’) in the land has been sold to JPM for £237m. Infrastructure work on this site has already started and JPM has instructed CWG to complete on its behalf the design, planning and further infrastructure works for a new European headquarters building which will be designed to meet the expected future operational needs of JPM.

CWG will act as Development and Construction manager. While CWG is completing the design, planning, piling and raft construction JPM will, subject to market conditions, decide when to instruct CWG to proceed with final construction. If construction of the building is postponed, or put off altogether, CWG will be paid for completed work and also retain £76m representing a portion of Developers Profits related to the development.

CB Richard Ellis and Jones Lang LaSalle are joint leasing agents for Canary Wharf Group on its Estate at Canary Wharf.

HSH Nordbank Gets New CEO

Source: HSH Nordbank

The Supervisory Board of HSH Nordbank today officially appointed Prof. Dr. Dirk Jens Nonnenmacher as CEO.

"The Supervisory Board is convinced that Dirk Jens Nonnenmacher will greatly benefit HSH Nordbank with his expertise and experience. The task now is to align the successful business model of HSH Nordbank to the current financial climate, with the support of a transparent and impartial analysis”, explained Chairman of the Supervisory Board Dr. Wolfgang Peiner.

Before his appointment as Chief Executive Officer, Dirk Jens Nonnenmacher (45) was Chief Financial Officer of HSH Nordbank. He held this position from 1 October 2007, following appointments at DZ Bank and Dresdner Bank.

The new CEO retains his ongoing Management Board contract until October 2012.

“I thank the Supervisory Board for the confidence which it has shown in me. The operational strengths of our bank form the basis for a successful future for HSH Nordbank. We will retain these strengths, if we accept the challenges of the global financial crisis with the utmost rigour and follow the right steps on the road ahead. I will set about this with the necessary prudence and transparency”, said Dirk Jens Nonnenmacher.

The Supervisory Board expressed its thanks to former CEO Hans Berger for his outstanding commitment and service to HSH Nordbank and related institutes, which have spanned many years.

Hans Berger offered his resignation to the Supervisory Board last week, which the Board officially accepted today.

MGM Jumps Into Vegas-Style Resort in Vietnam

By Jennifer Brenner Andrade

Vietnam is the lucky recipient of its first “Las Vegas style” resort and MGM Mirage has signed on to assist with the development of the resort as well as manage and lend its flag to the project. The MGM Grand Ho Tram, which has already broken ground, will be owned and financed by Asian Coast Development Ltd., an international development and real estate company. The firm plans to position the MGM property as the anchor for its $4.2 billion multi-property Ho Tram Strip resort complex.

Set on the South China Sea in the Ba Ria Vung Tau Province of southwest Vietnam, some eighty miles from Ho Chi Minh City, the newest MGM Grand will have 1,100 rooms as well as all of the trappings of an MGM property including gaming and entertainment, luxury retail, signature chef eateries, spa services and exclusive VIP areas. The resort is expected to open in 2011 and will be one of five resorts Asian Coast Development has planned for the Ho Tram Strip.

"This is a landmark project not just for our company, but for the people of Vietnam," said Mike Aymong, Chairman of Asian Coast Development. "By creating partnerships with world-class operators such as MGM MIRAGE, this burgeoning destination is poised to transform Vietnam's tourist industry and designed to compete with integrated resorts in neighboring China, Malaysia and Singapore. Our goal is to develop a five-star coastal paradise that attracts tourists year-round with its temperate climate, breath-taking views, and concentration of high-quality resorts and entertainment."

Weingarten and Hines Form $271M JV

Source: Weingarten

Two Houston-based companies, Weingarten Realty Investors and Hines Real Estate Investment Trust, Inc. announced the formation of a joint venture transaction in which a subsidiary of Hines REIT will acquire a 70% interest in a Weingarten portfolio of 12 high-volume supermarket-anchored shopping centers. The aggregate transaction price is approximately $271 million and the transaction will close on multiple dates. The initial closing occurred on November 13, 2008 and included eight of the properties for approximately $205 million, and the purchase of the remaining four properties will be closed upon finalization of their loan assumptions.

The twelve properties consist of 1.5 million square feet and are located in areas across five states that have very strong demographics with average trade area populations exceeding 100,000 people and average household income exceeding $80,000. These centers are anchored by a diversified mix of leading grocers including Kroger, Randall’s (Safeway), H-E-B, Publix, B.J.’s Wholesale and Harris Teeter. Additional anchors include Marshall’s, Barnes and Noble, Palais Royal and Stein Mart.

The supermarkets in these centers average sales of more than $450 per square foot and the portfolio is more than 96% leased. The Joint Venture has a commitment from a major life insurance company to provide a $100 million loan that is expected to close before the end of the year. WRI provided preferred equity in the amount of $134 million for the initial closing. The proceeds of the $100 million loan will be used to reduce Weingarten’s preferred equity position upon closing. Weingarten will be responsible for the ongoing management and leasing of the properties and will receive property management, joint venture management, and leasing fees along with incentive distributions above certain return hurdles.

“Weingarten is extremely pleased to become partners with a world-class organization that also has its deep roots in our wonderful city – Houston . We believe this transaction will provide stable and growing returns to the joint venture while also meeting our objective of recycling capital and building our assets under management,” stated Drew Alexander, President and CEO of WRI.

“We are pleased to acquire an interest in a portfolio of quality supermarket-anchored shopping centers in locations with strong demographics,” said Charles Hazen, President and CEO of Hines REIT. “This is our first joint venture with WRI and we are very pleased with this new relationship.”

ProLogis Halts New Development

By Jennifer Brenner Andrade

Industrial giant, ProLogis, is making sweeping changes in order to deal with market conditions. In addition to significant changes within senior management, the Denver-based firm, which has some $40.8 billion of assets owned, managed and under development comprising 548 million square feet (51 million square meters) in 2,898 facilities, will be halting new development, cutting dividends and significantly reducing general and administrative expenses.

According to Stephen L. Feinberg, the ProLogis board’s new chairman, the firm is “prepared to make the tough choices necessary to ensure the company is positioned to weather this storm and preserve its market leadership position.” 

In a prepared statement, ProLogis reported plans to complete projects currently underway, but will make no additional commitments for new space and will not enter any new markets until “conditions improve and liquidity returns.”

"Obviously, the credit markets and overall market conditions make it clear that we need to significantly reduce expenses," said William E. Sullivan, chief financial officer in the statement. "Difficult times require difficult choices, and we are currently implementing our expense reduction plan."

Prologis expects to reduce general and administrative spending somewhere between 20 and 25 percent through workforce reduction and reduced business spending.

Finally, the ProLogis board has cut dividends 52 percent from the $2.07 per share rate declared in 2008. The move will help ProLogis hold onto precious capital, which per the statement will be used to pay down debt and strengthen the balance sheet.

China Not Immune To Financial Crisis

By Melissa Securda

Years of rapid growth and domestic expansion quickly built up cities throughout China, but economic indicators show the nation is not immune from the effects of the global financial crisis.

For the first time since 2003, China’s economic growth rate fell to 9% in the third quarter and exports slipped downward for the third straight month. With global consumers reining in their spending, export figures could drop even more. Expect to see more manufacturing and distribution facilities closing, especially in Shenzhen or Guangzhou, two cities with dynamic economies based on industry, shipping and logistics.

China was one of the few nations that saw an increase in investment sales transaction volume. DTZ recently released a report indicating a 78% increase in Chinese investment sales for the first half of 2008, however foreign investment dropped off considerably. During that same time period, the number deals originating overseas fell more than 75%, according to the report.

To offset the weakening economy, the Chinese government recently announced a $586 Billion (US) economic stimulus package aimed at infrastructure spending, tax cuts, and less-restrictive credit policies. While specific details of the plan were not announced, the hope is that this aggressive plan will boost the world economy.

Radisson Brand to Add Two New Hotels in Paris

The Rezidor Hotel Group will expand its footprint in Paris with the opening of two new Radisson hotels including the Radisson Ambassador Hotel, Paris Opéra (296 rooms, formerly known as the “Hotel Ambassador”) which will hoist the Radisson flag as of 31 December 2008. In Q3 2011, the group will open the new-build Radisson Hotel Paris La Défense featuring 343 rooms.

Rezidor currently has 1,600 rooms in operation and under development in the highly competitive market of Paris – and more than 4,000 rooms in France.

The Radisson Ambassador Hotel, Paris Opéra sits in the very centre of the Opera Quarter – on Boulevard Haussmann in the 9th district; 300 meters away from the famous Opéra Garnier. The hotel is proximal to a business district featuring headquarters of financial giants such as BNP Paribas, Crédit Lyonnais, Generali and American Express, and the Paris Stock Exchange. The hotel will undergo an extensive renovation which will be completed by end of Q2 2010. The Radisson Ambassador Hotel, Paris Opéra is a common project between Rezidor and Westmont Hospitality.

The Radisson Hotel Paris La Défense will be built in the upcoming business district La Défense – an area comprising 3.33 million m² of office space with 1,500 corporate headquarters and more than 3,600 companies such as Axa, IBM and Société Générale.