KPMG Weekly Newsletter – For the Week Ending January 21, 2007

Posted on


January 22, 2007

The following information was obtained from newspaper articles appearing
in the Globe and Mail and the National Post for the week ending
January 21, 2007

Brookfield Asset Management Corp. has agreed to purchase Mills Corp. for US$1.35-billion in cash, or US$21 a share. With debt and preferred stock, the total value of the deal is about US$7.5-billion. Brookfield will provide debt financing for Mills until the transaction is completed, probably in the second half of 2007. Brookfield’s long-term goal is to bring institutional partners into the acquisition.
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Kentucky-based Ventas Inc. is offering $2.14-billion (including debt), or $15 a unit, for Sunrise Senior Living REIT. A special committee of the Canadian REIT’s board is recommending acceptance of the offer.
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Chartwell REIT will spend $52-million on new acquisitions, mezzanine financings and the expansion of a nursing residence. Chartwell purchased a retirement home in Ontario for $22-million from Spectrum Seniors Housing Development LP and its partners. The REIT also acquired a 50% interest in the Peninsula Retirement Residence in White Rock, British Columbia, for $14.6-million and is investing about $3.1-million to expand a five-storey building attached to Manoir Pierrefonds in Montreal.
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RioCan REIT closed a $151.5-million equity offering of six million units at $25.25 per unit through a syndicate of underwriters led by RBC Dominion Securities Inc. The proceeds will be used for acquisitions, including partially funding the recent $223-million purchase of the Yonge Eglinton Centre office-and-retail complex in midtown Toronto. The underwriters have the option to issue 600,000 additional units, which would generate additional proceeds
of about $15.2-million.
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The Greater Toronto Airports Authority plans to lease land for a new hotel development and two office towers as part of a $300-million development project on a 15-acre site now used for parking. The proposed project could include between 300 and 400 new hotel rooms, and up to 400,000 square feet of office space in buildings limited by regulations to a height of about 12 or 13 storeys, as well as conference, restaurant and retail space. A request for proposal has been issued to the real estate community and the winning
developer is expected to be named in April, with preliminary planning work beginning in the summer of 2007.
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Alcan Inc. has purchased the Salvation Army’s heritage-protected sanctuary and adjacent administrative building in Montreal, as part of a plan to expand its 25-year-old headquarters next door. Alcan plans to spend up to US$50-million to renovate and expand its head office complex.
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Summit REIT, owned by ING Real Estate, reportedly acquired its 19.9% stake in Alexis Nihon REIT by purchasing about 2.8 million units from Fidelity Investments. Halifax-based Homberg Investment Inc. has purchased an 8.6% stake in Alexis Nihon.
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Toronto-based Whiterock REIT announced last week that it is seeking a buyer or a merger partner.
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Former Royal Host REIT CEO Greg Royer and his brother Terry purchased Royal Host’s US$3.6-million U.S. hotel management business in December and plan to grow it to 125 hotels by the end of 2007.
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Magna Entertainment Corp. will cease operating the Great Lake Downs racetrack in Muskegon, Michigan, after the 2007 race meet. Great Lake Downs is expected to generate a pretax loss of about US$1.8-million for the year ended December 31, 2006.
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According to Royal Bank of Canada, Canadian REITs generated returns of more than 25% in each of the last two years. In 2006, the market capitalization of REITs listed on the TSE rose nearly 40% to $31-billion.
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According to the city of Vancouver’s recent jobs and land-use plan, downtown Vancouver will need about 65 million square feet of space to accommodate job growth over the next 20 years, which is about 10 million more square feet than the capacity under current land-use regulations. According to Cushman & Wakefield, Class A office vacancy rates in downtown Vancouver have dropped to 3.3% from 12.3% two years ago. There are currently 47 residential buildings under construction in the city’s central core.
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According to the Canadian Real Estate Association, sales of existing homes in Canada totalled 336,271 in 2006, down slightly from a record 336,513 units in 2005. Calgary, Edmonton, Saskatoon, Winnipeg, Sudbury, Ottawa, Montreal and Quebec all set records for sales activity last year. Sales in December increased 4.9% to a seasonally adjusted 29,077 homes from 27,707 in November. Sales rose to a record monthly high of 2,015 units in Calgary, up 18% from November. New listings fell 0.6% nationally to 46,482 units. Average
prices in major markets rose 10.6% to a record $294,270 in 2006. The average price in December climbed 8.1% to $294,190. Prices increased 9.2% in the fourth quarter from a year earlier. The average price of a home in Calgary rose 32% to $361,611 in December from a year earlier.
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According to Canada Mortgage and Housing Corp., construction starts on low-rise housing across the GTA fell 14% to 20,765 units in the period from January to November, 2006, from 24,247 units during the same period in 2005. The average price for a new detached home across the GTA increased 10.1% to $450,483 from $408,839. In Durham Region, the average price rose 11.9% to $341,853. In Halton Region, the average price climbed 20% to $507,920, with average prices of above $500,000 in Burlington and more than $650,000 in Oakville.
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According to the Toronto Real Estate Board, sales of existing homes in the GTA rose 6% to 1,592 units in the first half of January from 2006. The average price dropped 1% to $340,793 from December but was up 10% from the same period in 2006.
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Vornado Realty Trust teamed up with Starwood Capital Group Global LLC and Walton Street Capital LLC to offer US$21.6-billion, or US$52 a share, for Chicago-based Equity Office Properties Trust. This tops Blackstone Group LP’s offer of US$20-billion, or US$48.50 a share, accepted by Equity Office’s board on November 19.
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Morgan Stanley Real Estate will purchase CNL Hotels & Resorts Inc. for about US$4.2-billion, or US$20.50 per share, including debt to take control of 8 luxury hotels. CNL Hotels will sell its remaining 51 properties to Ashford Hospitality Trust for about US$2.4-billion in cash immediately before its transaction with Morgan Stanley.
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Investor Carl Icahn boosted his stake in Florida-based home builder WCI Communities Inc. to 6.1 million shares, or a 14.6% interest, from 1.7 million shares.
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The U.S.-based National Association of Home Builders/Wells Fargo index of sentiment climbed to a six-month high reading of 35 in January from a revised 33 in December.
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According to the Mortgage Bankers Association, applications for U.S. home mortgages have risen in seven of the past 11 weeks and are up 17% from their 2006 low in late October.
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According to the National Association of Realtors, the median price of a new home in the U.S. is projected to climb 3% in 2007 to US$248,900, following a 0.3% increase in 2006.
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California-based Mortgage Payment Deferral Inc. has launched a “no payment for 12 months” mortgage and plans to offer the product across the U.S. this year.
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According to Mitchell, Maxwell and Jackson Inc., the average sale price of Manhattan apartments fell 5.7% in the third quarter of 2006. The average price of a condominium in the fourth quarter dropped to US$1,079,363 from US$1,144,024 a year earlier. Sales of properties worth more than US$2.5-million climbed from 4.7% to 6% of all transactions in the fourth quarter.
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