Sex, Cash and The King

A Weekly Report on Future Trends and Plans, Acquisition/Disposition Strategies and

Wow. It was hard to choose art for this week's CoStar Lead Street, what with stories about Elvis Presley's and Johnny Cash's old haunts coming up for sale and expansion plans for Victoria's Secret. I opted for this photo of showing Jerry Lee Lewis, Carl Perkins, Elvis Presley and Johnny Cash rehearsing together. We also have stories on The CPP Investment Board in Toronto putting $500 million into office properties; and Maguire Properties, Temple-Inland, Crescent and Ashford Hospitality planning portfolio restructurings. There are other stories as well plus news of facility expansions and the latest properties under contract.

Honky Tonk Properties Up for Sale

The Nashville-based Honky Tonk Hall of Fame is facilitating the sale and marketing of property once owned by Elvis Presley's father as well as one once owned by Johnny Cash.

Presley's father, Vernon, purchased a 270-acre farm in the rolling hills one hour east of Memphis in Moscow in 1974, and sold it only six days before his son died in August of 1977.

"This is just an incredible property," says Stephen Shutts of The Honky Tonk Hall of Fame. "It's no secret that Elvis's money bought it for his father as kind of a big toy for Vernon, who kept nearly 60 cattle on the farm. I walked around the farm myself and wanted to quit everything I was doing and move there. It's just fantastic."

Elvis was a frequent visitor to the property that includes a 1940 era log cabin, a barn and five lakes and ponds. One pond is stocked for fishing.

In addition to the Moscow property, the Honky Tonk Hall of Fame is also leading the sale of two other prominent Presley-related properties.

In Killeen, TX, Elvis Presley's home while in boot camp, on Oak Hill Drive, is also for sale. Presley, who was drafted in 1958 but didn't completely adapt to military life, was allowed to live off base in a quiet neighborhood in this 4-bedroom, 1950s style home. It was in this home Presley entertained his friends and spent what would be the last months with his mother Gladys.

In Memphis, Johnny Cash, under the direction of Sam Phillips, was seeing his career take off when he lived with his wife Vivian, daughters Kathy and Rosanne, in this property from 1957 to 1960. The residence, at 5676 Walnut Grove Place in Memphis, was his home from 1957 to 1960 and continues to this day to maintain the guitar shaped mailbox Johnny himself erected on the front curb.

The Honky Tonk Hall of Fame, which maintains one of the largest private collections of country music memorabilia in the nation, facilitated the spring 2006 eBay sale of Presley's home on 1034 Audubon Drive in Memphis for $1 million.

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Canadian Board Pumping $500 Million into Office Purchases

The CPP Investment Board in Toronto and TIAA-CREF Asset Management closed a $500 million real estate transaction that includes a $300 million investment in a joint venture which will invest in Class A office properties in the United States, and a $200 million investment in a TIAA-CREF Asset Management direct real estate investment strategy.

The Global Real Estate group of TIAA-CREF Asset Management will manage all assets.

The total commitment to the joint venture is $612 million in equity of which TIAA-CREF will contribute 51% ($312 million) and will provide asset management services, and the CPP Investment Board will contribute 49% ($300 million). Including debt, the gross value of the venture is expected to reach approximately $1.5 billion. TIAA-CREF has seeded the joint venture with two suburban Class A office properties in California, near San Francisco, and in McLean, VA, just outside of Washington, DC.

Going forward, the joint venture will invest in large cap, Class A office properties with a gross value ranging from $100 million to $200 million. The investment focus is on strategic acquisitions of partially leased office properties in stable or recovering metropolitan areas with at least 500,000 residents.

In addition, the CPP Investment Board has made a $200 million commitment to a TIAA-CREF Asset Management direct real estate investment strategy that primarily focuses on institutional-quality U.S. real estate assets.

Crescent Redux
By: Jillian Ambroz

After months of rumors that it was planning to follow the same route as several other high profile REITs and pursue a buyout offer, Crescent Real Estate Equities Co., a diversified REIT with four lines of business, instead will reposition itself into a pure play office REIT in a bid to take advantage of the void left by rabid industry consolidation and take-private deals within the sector.

The Fort Worth, TX-based REIT concluded after six months of evaluation that its diversified platform remains largely misunderstood by investors and undervalued by the public equity markets. The REIT is planning to transform itself through a series of bold moves, including the sale of two business lines, and it expects to emerge by year's end with a stronger balance sheet and a tidy portfolio of top quality office assets.

"Clearly influencing the board's evaluation was the significant amount of private equity interest in real estate assets. In the last two years, close to $70 billion in office companies have been taken private -- many high quality companies that have merged and opened up a void of options for public equity markets for pure play office companies," said John C. Goff, vice chairman and CEO, in a conference call. "Our design here was to try to arrive at a company, a redesigned Crescent, that with a pure play strategy in the office space with a demonstrated expertise in this industry, a simplified business model, a portfolio that has built-in growth and a balance sheet that's very powerful. We have the fuel to grow what we think is an attractive business and find our place among high-quality office REITs that remain."

To achieve that new status, the REIT must sell off all of its hotel and resort assets, its resort residential development investments and some office properties -- a heavy pruning that represents about 50% of its gross assets.

It has hired Lehman Brothers to sell its hotel assets and is already deep in the process of those dispositions. The assets include the Fairmont Sonoma Mission Inn & Spa in Sonoma, CA, the Ventana Inn & Spa in Big Sur, CA, and the Park Hyatt Beaver Creek Resort & Spa in Avon, CO. The portfolio also includes three business-class hotels: the Omni Austin Hotel in downtown Austin, Denver Marriott City Center and Renaissance Houston Hotel in Houston.

The REIT is also whittling its office portfolio by about 5 million square feet or cutting 26% of its current holdings, to get down to its "crown jewels." The remaining portfolio will total 22.6 million square feet of managed property and 14 million square feet of office space owned by Crescent in markets such as Dallas, Houston, Denver and Las Vegas.

It is selling all but one of its suburban Dallas properties -- a cut of 55% of its Dallas holdings, representing 3.1 million square feet out of 5.6 million square feet. Holliday Fenoglio Fowler will handle the marketing for the 12 properties. It will retain The Crescent, Fountain Place, Trammell Crow Center and the Carter Burgess Plaza in Fort Worth, Texas.

It is selling all of its Austin assets, six buildings totaling about 1.5 million square feet. CB Richard Ellis has the listing for five of the properties and Holliday Fenoglio has been tapped to sell the property at 301 Congress Ave. downtown.

Crescent will also sell its lone Seattle and Phoenix properties, the 295,515-square-foot Exchange Building in Seattle and the 309,983-square-foot Financial Plaza in Phoenix.

The REIT has not decided yet what to do with its Canyon Ranch brand and its stake in AmeriCold REIT, but it is exploring all options with both businesses. It considers Canyon Ranch, a wellness lifestyle company that is owned in partnership with Mel Zuckerman and Jerry Cohen, to be a valuable brand with rich growth opportunities well beyond the real estate business.

It is also exploring options for AmeriCold, which it owns in partnership with Vornado Realty Trust and The Yucaipa Cos. AmeriCold owns and operates refrigerated warehousing, transportation management and other logistical services, including increasing its leverage capacity.

Maguire Shops 17 SoCal Office Properties
By: Randyl Drummer

Making good on a promise to investors last month when it announced its purchase of, Maguire Properties Inc. plans to sell 17 office properties totaling nearly 4.7 million square feet to help pay for its purchase of most of The Blackstone Group's Southern California portfolio.

Maguire's properties are expected to fetch more than $2 billion when the disposition is completed, likely in the second quarter. The portfolio includes 11 office properties in Orange County totaling 3 million square feet, the company's entire Glendale office portfolio consisting of four properties totaling about 950,000 square feet, and two properties in San Diego totaling approximately 700,000 square feet. Eastdil Secured is acting as advisor for the transaction.

Maguire Chairman and CEO Rob Maguire said the portfolio includes a mix of the company's existing properties and buildings from the EOP portfolio acquisition, expected to close in April. He said the disposition would allow the REIT "to focus on a streamlined asset base in L.A., Orange and San Diego counties, including our development pipeline."

Victoria's Secret Will Be Busting Out all over This Year
By: Sasha M Pardy

Limited Brands Inc., parent company of well-known retail store brands Victoria’s Secret, Express, Bath & Body Works, The Limited, La Senza, White Barn Candle Co. and others, is planning aggressive store expansion and remodeling plans.

Victoria’s Secret: In addition to plans to open 35 new stores in 2007, the company will remodel 105 stores, increasing square footage of those stores by about 50%. Remodeling of stores is expected to begin in the latter-half of the year. Redgrave noted that this brand surpassed $5 billion in sales in 2006.

Bath & Body Works: Expect 55 new stores in 2007; real estate preference will be placed on specialty center locations for these new stores, as opposed to traditional malls.

La Senza: La Senza is a Canadian lingerie brand that has infiltrated the U.S. market in recent years. Limited has owned the company for little more than seven weeks and is planning to use the brand to increase its penetration in foreign markets. Limited plans to open 32 new La Senza stores in 2007.

To support the store expansions, Limited said that a new, state-of-the-art distribution center, which began construction in 2006, will be coming online in 2007 providing an improved distribution infrastructure supporting the anticipated growth of direct sales.

Ashford Starts Deleveraging

Ashford Hospitality Trust Inc. has initiated the first phase of deleveraging strategy in connection with its previously announced agreement to acquire a 51-hotel portfolio from CNL Hotels and Resorts for $2.4 billion. Ashford Hospitality has accelerated its ongoing capital recycling efforts. The total number of non-strategic assets currently being marketed has been increased to 18, including two office buildings. The sales, some of which have already closed or are under contract or letters of intent, are expected to generate approximately $170 million in gross proceeds and result in a net gain of approximately $33 million, or $0.35 per diluted share, in 2007.

The non-core assets marketed for sale include: a portfolio of seven Towne Place Suites; office buildings adjacent to the Hilton Fort Worth in Fort Worth, TX, and Embassy Suites in West Palm Beach, FL; the Doubletree Guest Suites in Dayton, OH; the Radisson Hotel Indianapolis Airport in Indianapolis, IN; the Embassy Suites in Phoenix, AZ; the Radisson Hotel in Covington, KY; the Hampton Inn in Horse Cave, KY; the Fairfield Inn in Princeton, IN; the Fairfield Inn in Evansville, IN; the Marriott Trumbull in Trumbull, CT; and the Sheraton Iowa City in Iowa City, IA. These non-core hotel assets account for a total of 2,399 rooms.

Temple-Inland To Spinoff Real Estate Ops

Temple-Inland Inc. plans to separate into three focused, stand-alone, public companies. The plan includes the spinoff of its real estate operations and the sale of its strategic timberland, the spinoff of its financial services operation, and retaining its manufacturing operations - corrugated packaging and building products.

The real estate business, which operates under the name Forestar Real Estate Group, is focused on real estate investment and development activities which include single-family residential, commercial, mixed use and multi-family housing projects.

Temple-Inland's real estate activities include over 236,000 acres, 85 projects in eight states and 12 markets.

"The most significant concentration of our real estate holdings is around Atlanta, Georgia with over 205,000 acres of real estate property," said Kenneth M. Jastrow, II, chairman and CEO of Temple-Inland. "Atlanta is the largest homebuilding market in the U.S., and over time its projected growth will create significant real estate development opportunities. We believe there is substantial opportunity to accelerate the creation of shareholder value by operating this business as an independent public company."

Navy Picks GMH

The Department of the Navy selected GMH Military Housing to enter into exclusive negotiations for the design, construction, management and maintenance of the military family housing at 11 Southeast Region Navy bases in five states. The 50-year term of the project will commence with a 6-year Initial Development Period (IDP) that is valued in excess of $700 million making this initiative one of the largest public-private venture (PPV) housing initiatives to date.

Throughout the term of the Navy Southeast project, the company will earn management, construction/renovation and development fees, as well as an equity return on its capital investment. The specific Navy Southeast Project family housing locations are: Naval Weapons Station Charleston, SC; Naval Submarine Base Kings Bay, GA; Naval Air Station Jacksonville, FL; Naval Station Mayport, FL; Naval Air Station Key West, FL; Naval Support Activity Panama City, FL; Naval Air Station Pensacola, FL; Naval Air Station Whiting Field, FL; Naval Construction Battalion Center Gulfport, MS; Naval Air Station Meridian, MS; and Naval Air Station Joint Reserve Base Fort Worth, TX.

The company is utilizing its strategic alliances with two homebuilders -- Centex Construction Co. and Hensel Phelps Construction Co. -- to provide construction services for the project. The GMH team also includes Niles Bolton Associates for planning and architecture and Woolpert Inc., for engineering services.

Be Among the First To Read Lead Street

Nearly 2,500 people read CoStar Lead Street each week. If you want to be among the first to know when a new CoStar Lead Street is posted, e-mail me your name, title, company and e-mail address. You can reach me by clicking on the byline above or at mheschmeyer@costar.com

Facility Expansions and Developments

Toyota has chosen a 1,700-acre site in Blue Springs, MS, to build its eighth North American vehicle assembly plant. The new plant, to be just outside of Tupelo, will have the capacity to build 150,000 vehicles annually of Toyota's popular Highlander sport utility vehicle. Production is scheduled to begin by 2010. The new plant represents a $1.3 billion investment by Toyota and is expected to create approximately 2,000 new jobs for the region and indirectly create work for many more. Operations at the plant will include stamping, body weld, plastics, paint, and assembly.

Nike Inc. agreed to acquire a 125-acre land parcel in Memphis, TN, known locally as Northridge, where it plans to build a new 1 million-square-foot footwear distribution center. Nike and Memphis-based Belz Enterprises signed the land purchase agreement March 1, 2007. The new facility is expected to house employees from both Nike's existing Winchester Road facility in Memphis, and employees relocating from a second distribution center based in Wilsonville, Oregon. As a precursor to completing the Northridge purchase, Nike also reached a sale-leaseback agreement on the Wilsonville, OR, facility with CB Richard Ellis Investors, an institutional real estate investment manager that purchased the property on behalf of the Illinois State Board of Investment. The recorded sale-leaseback price was $27.6 million. This agreement will allow Nike's continued operations at the Wilsonville site through 2008. At the end of the Nike lease, the owner may seek proposals for new tenants that will capitalize upon the facility's premier product distribution site.

BAE Systems plans to lease a manufacturing plant in Cordova, AL, beginning in the summer of 2007. The plant will fabricate and deliver ammunition magazines for BAE Systems' Advanced Gun System and missile launcher assemblies for their Mk57 Vertical Launching System. Both of these systems will be used as weaponry on board the U.S. Navy's new DDG 1000 Zumwalt class of surface ships. BAE Systems will lease the Warrior River Steel LLC site in current operation as a metal manufacturing and welding facility. BAE Systems expects to occupy the full facility during the fall of 2007.

As part of its strategy to increase its high-rate manufacturing capability, Raytheon Co. plans to expand operations at its manufacturing facility at the Navajo Agricultural Products Industry Industrial Park south of Farmington, NM. Raytheon will increase the manufacturing space of the 38,000-square-foot facility to 68,000 square feet to accommodate additional work and will increase employment to as many as 200 employees. Raytheon partnered with the state of New Mexico and Navajo Nation to fund the expansion project. Upon completion, the Navajo Nation will retain ownership of the site, and Raytheon will lease the manufacturing space. At the NAPI facility, Raytheon currently assembles parts of 12 missile and munitions programs for the U.S. Army, Air Force, Marine Corps and Navy.

Under Contract

A joint venture among affiliates of NorthStar Realty Finance, Goldman, Sachs & Co. and an unnamed publicly traded real estate finance company agreed to acquire a diversified portfolio of multifamily properties from an unnamed developer and operator of long-term incentive tax credit properties. Each of the joint venture partners will equally share in the approximately $525 million purchase price, inclusive of estimated fees and expenses, and the total transaction value, including assumed debt, will be approximately $1.9 billion. The assets to be acquired consist of notes, general partnership interests and incentive fees relating to the underlying multifamily properties. The transaction, which is subject to a 120-day due diligence period and obtaining limited partner, lender and other consents, is expected to be completed in the third or fourth quarter of 2007. Three weeks ago in CoStar Lead Street, we reported that Boston Capital Tax Credit Fund LP in Boston began soliciting consent from its limited partners to liquidate the assets of the partnership and wind up its affairs. Boston Capital Tax Credit Fund owns 57 apartment complexes across the U.S. totaling 3,591 units. Any tie in could not be confirmed.

University Mall LP, an affiliate of Glimcher Realty Trust, agreed to sell the regional shopping center in Tampa, FL, to Somera Capital Management LLC for $149 million. Glimcher Properties will provide a guaranty for the lease between the company and Ohio Entertainment Corp. involving a theater at the mall until it expires on Dec. 31, 2011. Glimcher will provide property management and other administrative services to the mall for a period of one year after the transaction's closing date.

Base Partners Inc. began the development process for a new 116,000-square-foot state-of-the-art data center in El Segundo, CA. The company entered into an agreement to acquire an existing building on a 6-plus acres in the west Los Angeles municipality.

Embassy Industries Inc., a wholly owned subsidiary of P&F Industries Inc., agreed to sell its Farmingdale, NY, premises at 300 Smith St. to Tell Realty LLC for $6.3 million. The sale is expected to June 1, 2007.

Montgomery Realty Group agreed to sell its London Square Apartments in Austin, TX, for $5.31 million or about $45,000/unit. The agreement allows the buyer to have a 45-day due diligence period to investigate the property with the closing to occur 15 days after the due diligence period has elapsed. Montgomery purchased the London Square Apartments in June 2005 for $3.2 million. The London Square Apartments consist of 118 apartment units. This is Montgomery's second sale of an Austin apartment complex, with the Ashdale Garden Apartments having been sold in October 2006. Montgomery continues to own and operate the Glen Oaks Apartment complex. CoStar Lead Street (March 4-10):