From Bloomberg:
May 11 (Bloomberg) -- A package of Los Angeles real estate on sale for 35 cents on the dollar is attracting investors to the depressed shares of Meruelo Maddux properties Inc., the biggest private landowner in the city's four-square-mile downtown.
The stock has plummeted 85 percent since an initial public offering 15 months ago as the global credit crisis threatens to disrupt refinancing of $200 million in mortgage debt coming due in the next 12 months, as well as completion of the city's tallest downtown residential tower.
Meruelo Maddux owns or controls 80 acres including the Little Tokyo Shopping Center, home of the country's largest Japanese supermarket, as well as warehouses and buildings used in Tom Cruise's action film ``Mission Impossible III.''
``It sure looks like a cheap way to play the downtown L.A. market,'' said Mike McGarr, a portfolio manager at $2.4 billion Becker Capital Management in Portland, Oregon, which has added shares this year and owns 1.55 million. ``You're not hanging your hat on a few properties. You've got about 50 properties in various states of development or redevelopment.''
Meruelo Maddux's market capitalization of $142 million is about a third of the book value of its properties minus debts. Loan payments and maintenance consume $500,000 a month more than the company takes in, eroding the developer's $13.5 million in cash.
This company owns a couple of large buildings in Barstow, as well as a large land stake in the region as well. My guess is that they would rather sell the entire portfolio rather than sell each property off individually.
There was talk about Maguire Properties looking for a buyer as well, since they were having some financing issues. Maguire is a major office landlord in the Los Angeles region.
2 comments:
"The stock has plummeted 85 percent since an initial public offering 15 months ago as the global credit crisis threatens to disrupt refinancing of $200 million in mortgage debt coming due in the next 12 months, as well as completion of the city's tallest downtown residential tower."
i wonder if, in addition to the disrupted financing, the value of their other properties are declining due to weak economy
I guess we will see if and when they start to sell the properties.
This will send a price signal to other properties in the area. If these properties are sold at "below market price" then what actually constitutes the market price will change.
Kinda like what happens when someone sells their house for cheap, it lowers what other houses in the area could have sold for (because that low priced house is a comparable sale).
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