Published: March 23, 2023 at 4:26 a.m. ET
By Michael Susin
Seplat Energy PLC said Thursday that it has taken legal action against its former chair after terminating a consultancy agreement with its wholly-owned subsidiary and its co-founder with immediate effect.
The Nigeria-focused energy company said the termination follows repeated warnings about breaches of a material nature such…
By Michael Susin
Seplat Energy PLC said Thursday that it has taken legal action against its former chair after terminating a consultancy agreement with its wholly-owned subsidiary and its co-founder with immediate effect.
The Nigeria-focused energy company said the termination follows repeated warnings about breaches of a material nature such as “unilaterally making significant commitments on Seplat’s letterhead without prior board authority or knowledge”.
The company said that under the consultancy agreement, Mr. A.B.C Orjiako, acting through Amaze Ltd., was obliged to provide defined assistance with certain external stakeholder engagements following his retirement from the board.
The company has commenced legal action against Mr. Orjiako and Amaze Ltd. at the Federal High Court in Abuja, Nigeria.
Mr. Orjiako served in the company as chair and stepped down in May 2022.
Write to Michael Susin at michael.susin@wsj.com
Published: March 22, 2023 at 4:57 p.m. ET
Shares of KB Home KBH rose 3% in the extended session Wednesday after the home builder reported first-quarter earnings and sales that topped views, saying it saw an uptick in demand that continued into March. KB Home earned $125.5 million, or $1.45 a share, in the quarter, compared with $134.3 million, or $1.47 a share, in the year-ago period. Revenue was flat at $1.38 billion. Analysts polled by FactSet expected earnings of $1.13 a share on sales of $1.32 billion. The company delivered 2,788 homes, a decline of 3%, and the average selling price increased 2% to $494,500. “As we entered the Spring selling season during…
Shares of KB Home
KBH
rose 3% in the extended session Wednesday after the home builder reported first-quarter earnings and sales that topped views, saying it saw an uptick in demand that continued into March. KB Home earned $125.5 million, or $1.45 a share, in the quarter, compared with $134.3 million, or $1.47 a share, in the year-ago period. Revenue was flat at $1.38 billion. Analysts polled by FactSet expected earnings of $1.13 a share on sales of $1.32 billion. The company delivered 2,788 homes, a decline of 3%, and the average selling price increased 2% to $494,500. “As we entered the Spring selling season during the quarter, we began to see an increase in demand,” reflecting the company’s sales strategies and “stabilizing” mortgage interest rates, Chief Executive Jeffrey Mezger said in a statement. “As a result, we achieved a sequential improvement in our net orders in both January and February, and net orders have remained strong in the early weeks of March.” While there are “considerable interest rate and economic uncertainties, we are encouraged by this progression,” Mezger said. KB Home guided for housing revenues in a range between $5.20 billion and $5.90 billion for the year, and an average selling price in a range of $480,000 to $490,000. KB Home is “well positioned with a solid balance sheet and healthy cash flow expected for this year,” Mezger said. Its board has approved a $500 million share buyback authorization, and the company has flexibility to continue to return cash to stockholders. Shares of KB Home ended the regular trading day up 0.4%.
Published: March 22, 2023 at 10:25 a.m. ET
By Michael Susin
Superdry PLC said Wednesday that it has signed an intellectual-property transfer agreement with South Korea-based Cowell Fashion Co. for the sale of its assets in certain countries within Asia Pacific for an upfront payment of $50 million in cash.
The British clothing brand said net proceeds from the deal are expected to be…
By Michael Susin
Superdry PLC said Wednesday that it has signed an intellectual-property transfer agreement with South Korea-based Cowell Fashion Co. for the sale of its assets in certain countries within Asia Pacific for an upfront payment of $50 million in cash.
The British clothing brand said net proceeds from the deal are expected to be around 34 million pounds ($41.5 million), which will be used to strengthen its balance sheet and to fund its ongoing working-capital requirements, including a significant cost-reduction program.
The company added that it is considering an equity issue as part of the turnaround program.
According to the deal, Cowell will own and use the Superdry brand in key APAC markets, starting with South Korea and extending to other countries including China.
Both Superdry and Cowell will work together to develop products relevant for those markets, the company said.
Following the completion of the sale, Superdry will provide certain support during the first two years and receive a further management fee of $1.0 million.
“Superdry believes that the partnership with Cowell will provide the best opportunities for the future growth of the Superdry brand in the APAC region and allows the company to focus on growing its brand and increasing sales in its more established territories where it has strongest expertise,” it added.
Shares at 1402 GMT were up 0.2 pence, or 0.2%, at 108.2 pence.
Write to Michael Susin at michael.susin@wsj.com
Published: March 22, 2023 at 8:51 a.m. ET
By Robb M. Stewart
OTTAWA–New-home buyers in Canada saw another month of cooling house prices in February as the jump in interest rates over the last year continued to dampen demand.
Statistics Canada’s new-house price index declined 0.2% from the month before, matching the fall in January.
The…
By Robb M. Stewart
OTTAWA–New-home buyers in Canada saw another month of cooling house prices in February as the jump in interest rates over the last year continued to dampen demand.
Statistics Canada’s new-house price index declined 0.2% from the month before, matching the fall in January.
The index has dropped in five of the last six months, although compared with a year earlier prices in February were 1.4% higher, the data agency said Wednesday.
Canada’s housing market has weakened sharply since the Bank of Canada began one of the most aggressive rate-rising campaigns among developed-world central banks in an effort to tackle stubbornly high inflation, boosting its policy rate eight times over the last year. The central bank earlier this month left its benchmark interest rate unchanged at a 15-year higher 4.50%, based on indications the economy and inflation are cooling.
In a sign of dented demand, the Canada Mortgage and Housing Corporation reported about 44% more unsold, newly constructed single-family homes in Canada in February compared with the same month last year, while the Canadian Real Estate Association reported national sales of existing homes fell 40% year-over-year for the month.
Statistics Canada said builders cited deteriorating market conditions as the driver of the price decline for the month.
New-home prices were lower in Toronto and Vancouver, the two largest housing markets in the country, and were down most sharply in St. Catherines-Niagara in southern Ontario.
The new-house price data from Statistics Canada covers single-dwelling, semi-detached and row houses. It doesn’t incorporate prices for newly built condominium units.
Write to Robb M. Stewart at robb.stewart@wsj.com
Published: March 22, 2023 at 3:16 a.m. ET
By Michael Susin
Superdry PLC said Wednesday that it has signed an intellectual property transfer agreement with South Korea-based Cowell Fashion Co. Ltd. for the sale of its assets in certain countries within Asia Pacific for an upfront payment of $50 million in cash.
The British clothing brand said that Cowell will own and use the Superdry…
By Michael Susin
Superdry PLC said Wednesday that it has signed an intellectual property transfer agreement with South Korea-based Cowell Fashion Co. Ltd. for the sale of its assets in certain countries within Asia Pacific for an upfront payment of $50 million in cash.
The British clothing brand said that Cowell will own and use the Superdry brand in key APAC markets, starting with South Korea and extending to other countries including China.
Both Superdry and Cowell will work together to develop products relevant for those markets, the company said.
Following the completion of the sale, Superdry will provide certain support during the first two years and receive a further management fee of $1.0 million.
“This agreement offers the Superdry brand a fantastic opportunity to expand its global reach, whilst providing additional funding to help deliver our turnaround program in the face of the challenging consumer landscape,” Chief Executive Julian Dunkerton said.
Write to Michael Susin at michael.susin@wsj.com
Published: March 21, 2023 at 4:45 p.m. ET
By Bob Henderson
AAR Corp. said Tuesday that third-quarter revenue rose 15% due to gains in its commercial segment, which continues to benefit from the ongoing recovery in air travel, while net income fell slightly because of higher interest expenses.
The Wood Dale, Ill.-based aviation services provider reported net income of $21.8 million,…
By Bob Henderson
AAR Corp. said Tuesday that third-quarter revenue rose 15% due to gains in its commercial segment, which continues to benefit from the ongoing recovery in air travel, while net income fell slightly because of higher interest expenses.
The Wood Dale, Ill.-based aviation services provider reported net income of $21.8 million, or 62 cents a share, for the three-month period ended Feb. 28, compared with a profit of $22.5 million, or 63 cents a share, in the same quarter a year ago.
Adjusted for certain-one time items, AAR said that per-share earnings were 75 cents. Analysts surveyed by FactSet were expecting earnings of 70 cents a share.
Total sales were $521.1 million, up from $452.2 million last year, compared with analyst estimates of $487 million.
The company said sales to commercial clients increased 28% from a year ago, primarily because of the further recovery in air travel, while sales to government customers decreased 3% due to the completion of contracts that occurred in the last fiscal year.
“We are encouraged by the optimism we see from our airline customers regarding the recovery in air travel and this continues to drive demand for our services,” Chief Executive John Holmes said.
Profit was hit by higher interest expenses, which were $3.5 million for the quarter, up from around $600,000 in the prior year.
Write to Bob Henderson at bob.henderson@wsj.com
Banking sector jitters and higher interest rates likely spell trouble for the roughly $5.5 trillion U.S. commercial real estate debt market.
The banking sector has been in the crosshairs of jittery investors since Silicon Valley Bank’s collapse in mid-March after it sold a portfolio of rate-sensitive “safe” securities at a loss, sparking a run on the bank by fearful depositors.
Since then, a subsidiary of New York Community Bancorp
NYCB
snapped up assets and liabilities from the failed Signature Bank
SBNY
at a 17% discount. However, the deal didn’t include its commercial real-estate portfolio, according to Barclays researchers, who viewed the development as “a negative” for commercial real estate, as the portfolio likely would have sold at a discount.
Another regional lender, First Republic Bank,
FRC
has been in the spotlight too, after it received a historic $30 billion injection in deposits from big American banks to shore up confidence in smaller banks. Its shares were up more than 50% on Tuesday, but still were down 84% on the year to date, according to FactSet.
“I don’t think it’s going to be a repeat of the 90s,” said Michael Thom, a partner at law firm Obermayer, referring to the boom and bust cycle in U.S. commercial real estate that led to a wave of bank failures.
But Thom does see landlords already having a tougher time getting new loans, especially on half-empty office buildings due to flexible work arrangements.
Here’s a look at 3 charts that highlight key areas of worry for commercial real estate and where debt tied to these properties reside in the U.S. banking system and beyond.
Who holds the risk?
Multifamily properties has been a “favored” property asset class in the wake of the global financial crisis, after a foreclosure wave hit underwater homeowners and boosted demand for rentals.
Since that time, the federal government has come to own nearly half of the $2 trillion multifamily loan pie (see chart), according to Deutsche Bank research. Banks own almost half of the exposure to the rest of the $3.5 trillion in commercial property debt market.
Related: Be cautious of floating-rate commercial real estate debt, says Barclays
Deutsche Bank researchers led by Ed Reardon noted that commercial property prices dropped by 21% during the global financial crisis.
While it’s unclear how this cycle will play out, the Deutsche Bank team pointed to recent Fed stress tests of big banks that projected $75 billion in commercial real estate losses, at a 9.8% stressed loss rate.
The Green Street Commercial Property Index pegged U.S. property values as down 15% in March from a year before.
Watch small U.S. banks
Small banks have become key players in commercial real estate over the past two decades. Their share of the loan pie among all banks rose to almost 68% in January, up from 52% 18 years ago, according to recent tally from Apollo Global Management.
What’s more, small banks grew lending in the sector by nearly 20% in March from a year before (see chart) as the Fed was rapidly increasing interest rates. Large banks increased their exposure by only about 5%.
Office albatross?
While small banks often keep commercial real-estate loans on their books, Wall Street often looks to package larger loans on skyscrapers, office towers and other property types into bond deals.
In good times, loan payments are passed onto investors in the bond deals. But when credit issues, late payments or defaults arise, it’s a bondholder problem. That’s the roughly $670 billion commercial mortgage-backed securities (CMBS) market in a nutshell.
Financing through the CMBS market has been a key way for many trophy office buildings in New York, San Francisco and other big U.S. cities to receive funding in recent decades.
Office properties, once considered a relatively safe investment, aren’t viewed the same way any longer, particularly with Kastle Systems’ gauging office vacancy in its 10-city barometer at only 47.3% as of March 20.
Shares of office REITs, or real-estate investment trusts, have plunged 51% over the past 12 months, according to Morgan Stanley researchers. That compares with a 23% drop for the Dow Jones Equity REIT Index
DJDBK
for the same stretch.
The concern with hybrid work is that tenants won’t need as much office space as in the past, which could drag down property prices and hurt landlords with billions of debt coming due in the next few years, likely at higher rates.
While some borrowers will get loan extensions or modifications, a “more expensive funding regime” could force others to “hand back the keys,” said BofA Global’s Alan Todd, who leads the bank’s CMBS research effort, in a recent client note.
To help gauge borrower costs, the average coupon for office loans in multi-borrower, or “conduit,” commercial mortgage bond deals has almost doubled to 6.3% since 2021.
Against this backdrop, Todd at BofA expects new CMBS issuance to finance buildings of only about $50 billion this year, or roughly half the volume of 2022.
Published: March 20, 2023 at 4:34 a.m. ET
By Elena Vardon
Dolphin Capital Investors Ltd. on Monday said it has removed director Miltos Kambourides with immediate effect after claiming a breach of contract.
The investor in high-end resort developments in the eastern Mediterranean also said its investment management agreement with Dolphin Capital Partners Ltd. (DCP) has been terminated…
By Elena Vardon
Dolphin Capital Investors Ltd. on Monday said it has removed director Miltos Kambourides with immediate effect after claiming a breach of contract.
The investor in high-end resort developments in the eastern Mediterranean also said its investment management agreement with Dolphin Capital Partners Ltd. (DCP) has been terminated with immediate effect.
Mr Kambourides is the founder and Managing Partner of DCP.
The London-listed group said DCP entered into an undisclosed option agreement with the purchaser of the Amanzoe resort in Porto Heli in Greece at the same time that it sold its interest in the resort in 2018. The failure to disclose the existence of this agreement at the time–which entitled DCP to buy an extra 15% of the special purpose vehicle holding the resort–constitutes a breach, Dolphin Capital Investors said.
The company said it would seek to pursue all legal options to recover the value from the undisclosed option agreement, which it says is its property. It added the value could be material given the size of the company but not enough information is available to put a number on it.
Nicolai Huls and Nick Paris have been named executive and managing directors with immediate effect and the company doesn’t intend to appoint a new investment manager, it said.
Mr Kambourides didn’t immediately respond to a request for comment.
Write to Elena Vardon at elena.vardon@wsj.com
March Madness for REITs? Here's a 'final four' for investors seeking dividend income.
Published: March 17, 2023 at 2:14 p.m. ET
“Final four” is an eye-popping term, and will signal maximum excitement for fans of the NCAA Men’s Division 1 Basketball Tournament, when we see which teams win games among the “elite eight” on March 26.
But if you are an income-seeking investor who doesn’t want to risk dividend cuts during a long period of market turmoil that might be followed by a recession, a team of analysts at Jefferies led by Jonathan Petersen has already narrowed down a group of 76 publicly traded real-estate investment trusts to its own “final four.”…
“Final four” is an eye-popping term, and will signal maximum excitement for fans of the NCAA Men’s Division 1 Basketball Tournament, when we see which teams win games among the “elite eight” on March 26.
But if you are an income-seeking investor who doesn’t want to risk dividend cuts during a long period of market turmoil that might be followed by a recession, a team of analysts at Jefferies led by Jonathan Petersen has already narrowed down a group of 76 publicly traded real-estate investment trusts to its own “final four.” These are companies with good records for increasing payouts that Petersen expects to continue doing so over the next three years.
A REIT is a company that owns property or invests in mortgage-backed securities and distributes at least 90% of its earnings to shareholders as dividends, in return for tax advantages. Most dividends received by investors are taxed as ordinary income.
There are two broad types of REITs. An equity REIT holds property and rents it out. A mortgage REIT either operates as a lender, or invests in mortgage-backed securities, or both.
Narrowing an “elite eight” of REITs to the “final four”
In a report on March 17, Peterson wrote that among 76 publicly traded U.S. REITs that have existed for at least 15 years, only 22 have been able to avoid cutting their dividends. He noted that “the list of stalwart dividend payers isn’t heavily weighted to one subsector,” and added that the key to selecting the best performers for the next 15 years “boils down to the quality and durability of its current dividend.”
For its “elite eight” REITs, Jefferies narrowed the list to companies with “solid dividend outlooks,” before narrowing further to its “final four” that it rates a “buy” and are on the firm’s “conviction list.”
Here are the Jefferies “elite eight” REIT stocks, with the “final four” bolded and topping the list. Each group is sorted by current dividend yield. The right-most column has Jefferies’ expected compound annual growth rates (CAGR) for dividend payouts from 2022 through 2025.
NSA
LXP
PEAK
VICI
GLPI
AKR
O
KIM
Click on the tickers for more about each REIT. If you are interested in any individual stock, it is best to do your own research and form your own opinion about how successful a company is likely to be over the next decade at least.
Read Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Don’t miss: 10 U.S. banks that have been the best earnings performers over the past 15 years — are any of them bargain stocks now?
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