Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Wilkes Graham – Friedman, Billings, Ramsey & Co.
Wilkes Graham – Friedman, Billings, Ramsey & Co.
Diana, was there any discussion to not include the gains from the condos that are under contract in excess cash flow even though they have to be included in GAAP?
Diana M. Laing
Well again, we’ve pretty much always maintained that because our business strategy includes development and re-development in realizing gains we feel strongly that it should be included in the operating measure that we show there.
Wilkes Graham – Friedman, Billings, Ramsey & Co.
Jim, you talked about the Philly market a little bit improving, and I think we’re seeing some evidence as well. Do you have any comment on the potential for Blackrock to move there and any affect that may have on the assets?
James A. Thomas
We think it’s a positive and certainly with respect to Murano, and we understand that all of the Comcast people have still not arrived so the combination of new people coming in to town and the finishing of the project and having it occupied substantially and moving in to the fall selling season we’re optimistic about Murano sales picking up.
Wilkes Graham – Friedman, Billings, Ramsey & Co.
How about any prospect for the Commerce 2 lease next year?
James A. Thomas
The 200,000 feet?
Wilkes Graham – Friedman, Billings, Ramsey & Co.
Yes.
James A. Thomas
We are actively marketing that, as I indicated in my remarks we have a high degree of confidence that we are going to be able to fill up all or most of that space very quickly. We are talking to tenants now that – and way down the road that could take all or most of that space.
Wilkes Graham – Friedman, Billings, Ramsey & Co.
Then just lastly, you mentioned that you feel like maybe it was you or maybe it was a combination of you and [inaudible] that the market has improved enough that you can go back to fully marketing City National Plaza. Can you just talk a little bit more about that and what improvements you’ve seen? If there’s any kind of anecdotal evidence for improvements in the markets?
James A. Thomas
Well, we’re talking to Eastville to give us guidance on what they feel about the market and as I mentioned, we thought that the O’Melveny building trading at $440 a foot. The O’Melveny building was purchased by Tishman Speyer, I don’t know maybe a year and a half two years ago for like $390 or something, I don’t have the number right at my fingertips, so they have flipped that very quickly at a handsome gain. We think that the sale of Citigroup at $315 a foot and a 4.6 going in cap rate was a pretty aggressive purchase given the fact that the building is primarily occupied by tenants who are paying far less than the master lease so we see that Heines is going to have to spend a lot of money – we don’t think the tenants are going to stay in large part. So, it shows a strong interest in downtown and also the Maguire portfolio, there’s been strong interest in the downtown assets of the Maguire portfolio and rumors that they were offered upwards of $450 a foot. So, downtown LA, all of the things that have happened with residential, over $5 billion being spent, the transportation hub with what’s happening with gas and traffic, and the response that we are getting just in terms of the number of people who have signed confidentiality agreements and who are working in the war room, all of these things encourage us that a transaction is definitely a possibility.
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