Daily Archives: March 10, 2009

$150 million more for Realogy – will it be enough?

The Wall Street Journal reports that Apollo Management, owner of Realogy (and thus Sotheby’s, Century 21 and Coldwell Banker) is throwing another $150 million its way to keep it alive through 2009.

But it isn’t going to be easy. Realogy is parent to Coldwell Banker, Century 21, Sotheby’s International Realty, Corcoran Group and other major brands. Its 16,000 affiliated offices doing business in 92 countries and 50 states all depend on the strength of the housing market — which few project will turn around anytime soon.

Out-of-Balance Sheet

Also, Realogy’s balance sheet is precarious. Last year, Realogy’s revenue tumbled by $1.14 billion to $4.72 billion. The company had only $109 million of cash left over after paying $627 million in debt. The company also has $113 million available on its $750 million revolving loan as well as the $150 million promise from Apollo. But it isn’t clear that this stockpile will be sufficient if revenue continues to plummet.

While bondholders were reassured by Apollo’s $150 million infusion, Realogy bonds continue to trade at extremely distressed levels — as little as 11.5 cents on the dollar, according to MarketAxess, reflecting investors’ concern the company may file for bankruptcy soon.

[realogy's net]

“Their profitability has eroded significantly both because of steady price declines and volume declines in the last couple over years,” says Moody’s analyst Lenny Ajzenman. He downgraded the company’s debt to just three notches above default in December; few companies with a viable capital structure have lower ratings.

Apollo’s decision to put up $150 million into the struggling venture raised eyebrows in the private-equity world, where fund investors are resistant to throwing good money after bad.

Apollo recently succeeded in raising nearly $15 billion for its latest fund. But the $9 billion fund that owns the Realogy stake has spent most of its money, according to the fund summary. An Apollo spokesman declined to comment. In a statement, Marc Becker, a partner in the firm, acknowledged the “challenging task” facing Realogy’s management and the “extremely difficult time in housing.”

Nationally, the market is grim. Home resales fell to a 12-year low in January according to the National Association of Realtors, alongside a 14.8% slide in median home price.

To be sure, some regions of the country are seeing a surge in home sales, particularly suburban areas in which lenders are dumping large volumes of foreclosed homes at highly discounted prices.

Urban Blight

But many of Realogy’s operations are in urban regions, where there is more of a standoff between buyers and sellers, reducing sales activity to a trickle. The firm’s brokerages and its franchises have offices in all 50 states, but Coldwell Banker — one of the company’s largest revenue generators — is concentrated in urban areas.

Corcoran Group, which handled $18 billion in home sales in 2007, operates in the once-robust New York City, Hamptons and Palm Beach, Fla., markets. In New York, transaction activity was down roughly 50% in February, compared to the same month in 2008, according to Brown Harris Stevens’s President Hall Willkie.

Another danger is high-producing brokers jumping ship. Since January, at least three high-earning Corcoran and Sotheby’s brokers have gone to a rival firm, according to local agents. Corcoran says such churn is normal and several agents recently joined the firm. To assure brokers that the company is solid, Mr. Becker, fellow Apollo executive Ali Rashid and Realogy’s Mr. Smith, organized a town meeting in February with Corcoran and Sotheby’s management, held in the headquarters of Sotheby’s auction house.

In an effort to shore up Realogy’s balance sheet last year, Apollo attempted a debt swap — essentially a gambit that asks bondholders to trade in their existing securities for new notes, often with worse terms.

But that strategy was stymied by Carl Icahn, who has battled or befriended Mr. Black on numerous deals. Mr. Icahn’s High River investment firm owns a portion of Apollo’s notes, which stood to lose their place in line if the offering went through, and successfully sued to block the exchange in December. In the suit, Mr. Icahn charged that Realogy was “deeply insolvent” and default virtually “inevitable.”

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There’ll always be an England

 

Lining up for fish and chips

Lining up for fish and chips

Muslims greet homecoming British troops, call them “Murderers” and “Baby Killers”.

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Pelosi’s airforce

 

Nancy of Arabia

Nancy of Arabia

You’ll recall I mentioned last week that Nancy Pelosi, scourge of executives who fly, rather than crawl to audiences before her, Miss Global Warming herself, was stuck in California two weeks ago when her jet was snowed out of Washington’s airport. Now comes this story: she treats the entire fleet of Air Force jets as her personal limo service. 

 

* In response to a series of requests for military aircraft, one Defense Department official wrote, “Any chance of politely querying [Pelosi's team] if they really intend to do all of these or are they just picking every weekend?…[T]here’s no need to block every weekend ‘just in case’…” The email also notes that Pelosi’s office had, “a history of canceling many of their past requests.”

* One DOD official complained about the “hidden costs” associated with the speaker’s last minute changes and cancellations. “We have…folks prepping the jets and crews driving in (not a short drive for some), cooking meals and preflighting the jets etc.”…

* The documents also detail correspondence from intermediaries for Speaker Pelosi issuing demands for certain aircraft and expressing outrage when requested military planes were not available. “It is my understanding there are no G5s available for the House during the Memorial Day recess. This is totally unacceptable…The speaker will want to know where the planes are…” wrote Kay King, Director of the House Office of Interparliamentary Affairs. In a separate email, when told a certain type of aircraft would not be available, King writes, “This is not good news, and we will have some very disappointed folks, as well as a very upset [s]peaker.”

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February 2009 sales from John Cooke

February Sales 2009

February Sales 2009

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Catholic priests again free to plunder assets, kidnap children and burn cats at the stake

The Connecticut Judiciary Committee, astounded to learn that its proposal to regulate the internal affairs of a church might be a tad unconstitutional, has yanked the bill from consideration for this legislative session. “Well golllll lee” said Grand Duke  Andrew McDonald (“No “a” before the “c”, boy, it’s Scots – get that right”) and the bill’s sponsor, “I just don’t see what all the fuss is about – going after godless Catholics is an old Nutmeg tradition, as old as the arrival of the first of those filthy potato pickers, as fresh as the latest bog wallower to come here looking for work. Sheesh, can’t a fella have a little fun anymore?” McDonald has referred the whole question to the state’s Attorney General and until that official returns with a decision, promises to devote his time to banning guns, the private ownership of chimpanzees and forcing citizens to sweep the snow off the roof of their cars. “Hey,” he notes, “we got some serious problems to attend to this year, understand?”

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Hey, here’s a surprise!

WSJ says Madoff will plead guilty Thursday. What about the boys? What about Walter? Later, maybe.

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2005 market vs. 2009

2 leJeune Court

2 leJeune Court

This nice little cape  Georgian in Havemeyer was listed for $995,000 in September, 2005, raised to $1.1 million a month later and sold for $1.2 million. Four years later, the buyers have put it back on the market at $1.195. I don’t want to jinx them, but I think they’ll have a hard time reaching that.

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Scariest photographs you’ll ever see

InstaPundit provides this link to celebrities, before and after. Keith Richards is probably the scariest but if you have a drinking problem and think that vanity might help you stop, scroll down to see what booze has done to Nick Nolte. Very sad.

Update: ya want scary? I’ll give you scary. Here’s Mary Travers of Peter, Paul and Mary, then and now. Jabba the Hut alert!

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Someone’s buying

The past few months my brother Gideon and I have noticed a particular local family buying single family houses. These guys have been doing that at least since the 1950s – not often, and not a whole lot, but they’ve steadily accumulated property and rarely let it go. And now they’re buying again. I’m sure they aren’t paying asking price (we’ll see when the contracts close) but if they’re buying, it’s a good sign.

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So what’s land worth today?

67 Stag Lane

67 Stag Lane

This Stag Lane property sold for $805,000 in August, 1995. I think it’s fair to say that time has not been kind to the house since then and it could use, at the least, a new roof, windows, kitchen, baths, and probably mechanicals. In short, replacement is in order and whatever value the house may have added to the land fourteen years ago I’d say it was nil now.

So what’s it worth? The owners tried selling it for $2.295 million back in 2005, when the market was strong, but got no takers. It’s back now at $1.999, and we’ll just have to see. The five acres are on the good (north) side of Stag, away from the Merritt, but there’s a stream that wends its way around most of the property and Stag Lane itself has never commanded top dollar. Wait and see.

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PETA Furrious – leather boots are back in fashion in Muskogee

With the new adminsitration, the WSJ reports, fur has returned to our capital.

Furs came out around the time of the inauguration, when subfreezing temperatures coincided with high-glamour events. They’ve stayed as nearly 6 inches of snow covered the White House Monday.

Also, the administration has attracted a lot of professional African-American talent to the D.C. area, and fur-industry officials say that black consumers are disproportionately big fur buyers. Their share of the market is up even as nationwide sales have declined. In 2006, the last year for which data are available, black consumers represented 27% of fur sales in the U.S., compared with 16.5% in 2002, according to the Fur Council, based in Los Angeles.

The style may seem at odds with the socially conscious Obama administration. President Barack Obama and first lady Michelle Obama talk often about using locally grown organic food and adopting a rescued shelter dog for their daughters.

You can talk vegetarian Portuguese water dogs all you want, it seems, but you can’t change a leopard’s spots.

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This will help their economy as much as Obama’s helping ours

Swedes raising taxes to fight “global warming”.

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Watch out, Matthews – you’ve got competition

TV commentator bursts into tears at HSBC stock’s fall.

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Did she do any worse than Walter?

Deal Breaker reports on Stanford’s CEO - kind of reminds me of Oola (?) the secretary hired by Zero Mostel in The Producers.

It seems Reuters would have us believe the firm’s CIO, Laura Pendergest-Holt was hired to keep her head down and her mouth shut, and not to say “Hey wait a second,” as she assumed the position with “no business school degree, no internship at a Wall Street firm or stint as an analyst at a mutual fund company managing billions of dollars.” Lawrence Lieberman, senior managing director at Orion Group, is apparently convinced, commenting that “From what it sounds like here, this company may not have wanted a legitimate CIO because that person might have asked a lot more questions and not played ball,” and you might be too, but you sheeple are wrong.

In one instance the regulators asked her about her role in preparing the Stanford International Bank quarterly report. She replied it was her job to edit the report, checking the report’s pie charts “to make sure they equal 100.”

You got a problem with that? The girl was smart!

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Please, sir, may I have some more?

Dealbreaker on auto unions cutting their pay for government handouts.

How wonderfully perverse. A sacrificial beauty contest. Who gave up the most? You? I see you’ve severed the last two fingers on your left hand. Excellent. Wait… is your entire arm gone? Outstanding! Your second born child? Wow, you people came ready to engage in joint sacrifice alright!

Maybe what we really need is two parallel systems. A free market system with normal competitive forces and a captive system where interest groups clamor over each other for government cheese. If we could just replace the currency in the second system with actual government cheese, or maybe something equally worthless like seashells or some other kind of primitive tokens (bottlecaps? red ochre? magic “the gathering” cards? massive, circular stone coins?)

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One less in inventory, 999,785 to go

39 Day Rd

39 Day Rd

This almost-in-Bedford house was bought for $3,113,500 in the spring of 2001 (asking price was $2,995 million). The buyers re-listed it last spring for $5.495 and in August also put it up for rent at $18,000. The sale price eventually dropped to $4.450, without effect, and today it’s been reported as rented at $10,000 per month.

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What a ranch house isn’t worth

14 Buckingham lane

14 Buckingham lane

The owners of this mid-country ranch paid $1.250 for it in March of ’07, did a little sprucing up and tried reselling it for $1.649 million in Februaty, ’08. They withdrew it from the market today having failed to get their price. Nice try, but the time for that of quick rehab/flip has, at least for now, passed.

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Short squeeze?

(12:35 PM) Stocks are up – DJI over 300 points, all on Citi’s Pandit’s promise of profits. Are there bank stock shorts being squeezed out there on the floor or are these guys really as dumb as a box of rocks?

Both, is my guess.

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Price Cuts

7 Orhard Drive

7 Orchard Drive

Purchased for $3.780 million in September ’04, relisted at $4.895 in May, ’06, this Milbrook house is now marked down to $2.999. Short sale? I guess not, since the listing doesn’t mention it.

 

52 Pecksland Road

52 Pecksland Road

The sellers of this home paid $3.495 million for it in November ’05 (full asking price) and tried selling it for $3.995 in September ’08. Today it’s down to $2.950 million.

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Stem cell scam

“Stem Sell” is more like it. All hot air, but as long as that Debbil’ Bush was preventing sick people from being cured, it was worth the hype. Expecting results now that the One has reversed Bush (and Congress, by the way)? Instapundit says, don’t hold your breath.

UPDATE: The Professor’s link is to the New York Times’ Science section today.

However, the president’s support of embryonic stem cell research comes at a time when many advances have been made with other sorts of stem cells. The Japanese biologist Shinya Yamanaka found in 2007 that adult cells could be reprogrammed to an embryonic state with surprising ease. This technology “may eventually eclipse the embryonic stem cell lines for therapeutic as well as diagnostics applications,” Dr. Kriegstein said. For researchers, reprogramming an adult cell can be much more convenient, and there have never been any restrictions on working with adult stem cells.

For therapy, far off as that is, treating patients with their own cells would avoid the problem of immune rejection.

Members of Congress and advocates for fighting diseases have long spoken of human embryonic stem cell research as if it were a sure avenue to quick cures for intractable afflictions. Scientists have not publicly objected to such high-flown hopes, which have helped fuel new sources of grant money like the $3 billion initiative in California for stem cell research.

In private, however, many researchers have projected much more modest goals for embryonic stem cells. Their chief interest is to derive embryonic stem cell lines from patients with specific diseases, and by tracking the cells in the test tube to develop basic knowledge about how the disease develops.

Despite an F.D.A.-approved safety test of embryonic stem cells in spinal cord injury that the Geron Corporation began in January, many scientists believe that putting stem-cell-derived tissues into patients lies a long way off. Embryonic stem cells have their drawbacks. They cause tumors, and the adult cells derived from them may be rejected by the patient’s immune system. Furthermore, whatever disease process caused the patients’ tissue cells to die is likely to kill introduced cells as well. All these problems may be solvable, but so far none have been solved.

Restrictions on embryonic stem cell research originated with Congress, which, each year since in 1996, has forbidden the use of federal financing for any experiment in which a human embryo is destroyed.

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