Recondite REITS Report

In commercial REIT news, Boston Properties has won a bidding ware for the Russia Wharf Development, which is located between the Financial District and South Boston. The price is supposedly around $100 million, or $600/square foot- considered to be an extremely expensive price since there are no leases and only minimal work has been done thus far. Furthermore, it is a difficult site for development due to surrounding historic preservation regulations, which will require construction expertise. This looks like a high risk investment for BXP, but they have credibility as being one of the most successful commercial real estate developers, and they certainly see a hidden value other investors have not. The Blackstone Group sold the property, from their EOP portfolio. Blackstone has already sold around $10 billion of their EOP portfolio in an effort to consolidate and pay off debt. (Perhaps their IPO will help pay off EOP debt).

As for the residential sector, economic data continues to support a sharply declining residential market. Lennar Corp., one of the nation's largest homebuilders, announced a 73% decline in 4th quarter profit and said it does not expect to meet 2007 earnings guidance. Lennar fell $1.03, or 2.3%, to $43.51. This pushed other homebuilder stocks down around 2% including D.R. Horton Inc., Hovnanian Enterprises Inc. and KB Home.

KB Home is beginning an interesting marketing venture with Marth Stewart! (I’ve been waiting so long for this day to come.) KB Home and Martha Stewart Living Omnimedia have announced they will build their first community in Los Angeles County, KB Home Terreno Vista: Homes created with Martha Stewart. The homes will be using the Martha Stewart brand name to promote their design and sell the homes based on lifestyle. A new level of branding has been reached! The collaboration has been successful and Jeff Mezger, president and CEO of KB Home, exclaimed, "We are already announcing plans for our ninth community together and see only opportunity ahead as we continue to grow our partnership." The homes will be 1-and-2 stories and range from 1,875 to 2,968 square feet. Prices will be in the low $300's. Homes will have the prestigious Martha Stewart logo on a clearly visible location on the house highlighting the house number-who could ask for more? (OK, I made up this last part, but I bet it would sell!)