Attorney Philip Thomas offered a few comments on his blog, Mississippi Litigation Review about the recent sale of several downtown properties to real estate investor Judah Hertz. The Wall Street Journal reported:
"After a four-year hiatus on the sidelines, California investor Judah Hertz is buying office buildings in small cities with some of the highest vacancies and lowest demand in the country. That probably means more torment for other landlords in these markets.
Mr. Hertz is buying for such a low price that he says he is going to be able to undercut the competition, charging lower rents and offering more incentives to tenants. Competitors who can't match him might see their occupancies rise.
"I should be in a very competitive situation," Mr. Hertz says.
As his first test of this strategy since the downturn hit, Mr. Hertz is buying 15 properties in Richmond, Va., Memphis, Tenn., and Jackson, Miss., from Parkway Properties Inc., PKY -0.48% in a deal that values them at $147.5 million. The portfolio's 24% vacancy rate is even higher than those of the overall markets. Third-quarter vacancy rates were 16.1% in Richmond, 22.1% in Memphis and 17.5% in Jackson, according to Reis Inc.
But the price Mr. Hertz is paying is so low that the portfolio's net income represents a yield of about 10%. "By buying buildings at lower prices like $60 a square foot, I'm able to compete with other people who paid $100 or $150 a square foot for their buildings," Mr. Hertz says. On average, Mr. Hertz paid about $76 a square foot for the portfolio.
Attractive yields are increasingly luring investors like Mr. Hertz further afield to office markets in smaller cities and suburban areas. During most of the downturn, investors have focused on major cities like New York and Washington, but this has driven prices up and yields down, to under 5% in some cases.
Mr. Hertz's company, Hertz Investment Group of Santa Monica, Calif., owns a portfolio of 12 million square feet of office space in 16 markets, including the recent purchase from Parkway. Under the terms of that deal, Hertz will acquire the properties for about $105.8 million and assume $41.7 million in existing mortgages on the properties.
At closing, Mr. Hertz also hopes to put other mortgages on the properties, bringing their overall leverage to 75%. The rising availability of financing helped convince Mr. Hertz it was time to begin buying again, he says. .....
A little over a decade ago, Mr. Hertz says his bid to enter the Reno, Nev., casino market also failed after the Nevada Gaming Commission denied him a gambling license, citing concerns about alleged ties to organized-crime figures. Mr. Hertz says he has never been involved in organized crime but that he once made the mistake of being friendly with a reputed mobster. He also says it was a "blessing" that his casino plans were blocked because the office investments he has focused on have been profitable.
For Parkway, the sale to Mr. Hertz closes the chapter on a painful investment for a company whose market capitalization is about $200 million. Parkway says it will recognize a $58 million to $60 million fourth-quarter loss related to the sale of the portfolio as well as two remaining buildings it is still trying to sell in Memphis and Jackson."
The Mississippi Business Journal reported last year some of these properties were
"One Jackson Place, 111 Capitol Building, Pinnacle at Jackson Place, Parking at Jackson Place, and UBS Building / River Oaks Place. The company (Parkway) currently retains the City Centre building at 200 South Lamar Street."
Mr. Thomas wrote:
"I don’t know about you, but I’m asking my landlord to cut my rent in half before Hertz recruits me to move into the Deposit Guaranty AmSouth Regions University Club big tall empty building downtown.
This is not surprising. Parkway was probably wise to take what it could get and exit the Jackson market before it erodes further.
Hertz may feel like he can make money on the deal by simply maintaining current occupancy rates. Hertz could be disappointed if he is planning to fill the buildings by being more competitive on rent. The big banks aren’t coming back to Jackson. Butler Snow is locked into a long-term lease. I guess Baker Donelson’s lease could be coming up for renewal in the next few years. But it would take a sweet deal to get them out of perhaps the best office location in the Jackson area at the Meadowbrook Office Park. It will be interesting to see what Hertz does with that space." Post
Sunday, February 17, 2013
Downtown Jackson: Meet the new boss
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19 comments:
Hertz was also denied a Nevada gaming license due to ties to organized crime. All I'm sayin is.... Pay your rent on time...
Um, did you bother to read the post Its in the WSJ quotes.
Without Leland Speed downtown Jackson would look like hell right now. It's a damn shame he lost so much money for his efforts. Wonder why he just didn't bankrupt and re-organize Park Place under Chapter 13? Then he could be charging the cheap rents . . .
{SNIP}
...Hertz was also denied a Nevada gaming license due to ties to organized crime.
Would that have been Las Vegas Mayor Whack'em Goodman, or Trent Lott's benefactor Steve Wynne?
Never understood why OJ (post-LA)made Las Vegas his playground. Surely, he knew that Judge Jackie Glass and the mob-connected Goldmann family were after him.
1:45 it is Parkway not Park Place, and why would he want to declare bankruptcy on a company whose stock value has increase 70% since selling the moribund properties? Look it up. PKY is the handle.
Speed may still own PKY stock, but that is very different from controlling the company. Unfortunately, the company was taken over by Eola Capital, and they weren't interested in our market or our properties. Speed is still the chairman of EastGroup properties in Jackson.
The biggest loss on this deal four our community was the loss of Jackson's largest corporate citizen. Parkway did a lot for our community (under the leadership of Steve Rogers), and their absence leaves a vacuum- one probably not filled by Mr. Hertz.
The market does its work and efficiently moves capital- but a community like ours needs leadership- Deposit Guaranty, SkyTel, WorldComm, Parkway... all different circumstances but gone nonetheless.
... why would he want to declare bankruptcy on a company whose stock value has increase 70% since selling the moribund properties?
A handful of weak properties was hardly the sole and/or primary reason for the tanking of PKY's shares and the slashing of the dividend, Many shareholders are still dealing with 50-70% LOSSES.
Look it up. PKY is the ticker symbol.
All of you insignificant 75/hour pissants opining on Leland Speed. Laughable at best.
I know Leland is far to saintly (and keyboard challenged) to post here himself; so, I'm left to assume it's his 'jockstrap cadre' who keep lauding his sainthood. These goons, both of them, should contract their services out to Stokes. He could use the rebrand.
Keyboard challenged? Not hardly. Not hardly at all. Don't think you are fooling me with your anonymous comments. I didn't approve them because they went over the line. This latest comment proves what a total dumbass you are and make no mistake, you are one. Proved it very well Friday when you were whining about me not posting something that was clearly in the post. In case you haven't noticed, I've tightened up on your comments lately. The ones that are good and make salient points get approved. The vulgar, insulting ones generally don't, unless its Kenneth Stokes. I didn't approve most of your comments in the discussions about downtown last week and guess what? The discussions went much better.
In short, you are a litterbug and we are tired of dealing with the trash you throw out the pc window because you decide to act like a 13-year old all the time. You act right, then the comment gets approved. I approved this one so I could let people see how stupid you really are.
8:07 just made 8:21's point. What a stroke of luck.
8:14 you rock. Thanks for putting that windbag in his place.
All of this happened over a year ago (check the datelines). What am I missing that makes it relevant again today?
Fair question. I just saw it in MLR blog. The WSJ story appeared a year ago but frankly, I didn't catch this stuff until last week. It happens. Sorry. I'm already hearing rumblings about how things are working out at one of the buildings but I am taking a wait and see attitude.
Jackson could use a whole lot more 75 dollar per hour "pissants".
If 8:58 is worried about relevancy then they should start their own blog.
Unfortunately KF you are making a case against anonymous comments.
Leland Speed is a great man, as proved by his few failures as well as his many successes. He was willing to take risks that most of us would be too cautious to take. We've seen the damage caused when good men do nothing. With Leland Speed it's the opposite.
Geez, Kingfish, I hope you're storing all the poisonous outtakes of "He Who Shall Not Be Named" in a Ghostbusters-like containment facility. Just watch out for dickless bureaucrats.
I didn't realize until now (my bad) that Kingfish was beholdin' to Speed and doesn't welcome any posts critical of Mr. Speed. I failed to kiss the Speed-ring and that may be my downfall. Kingfish has already run off all the posters on here (with few exceptions) who use a regular monicker or their name (count their absence). I'll soon go to anonymous so I'll fit in better.
I'll soon go to anonymous so I'll fit in better.
Very good! Now you hear the grasshopper.
6:17 go anon and also go to hell big ass bore.
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