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Simon Said to Offer Total of $18.25 a Share for General Growth Properties

by on May 3, 2010

By Daniel Taub May 3 (Bloomberg) — Simon Property Group Inc., the largest U.S. mall owner, offered to pay a total of $18.25 a share in a new takeover bid for General Growth Properties Inc., according to a person with knowledge of the proposal.  Simon also would pay down about $7 billion in unsecured General Growth debt and assume more than $20 billion of mortgages, said the person, who asked not to be named because the details of the plan haven’t been made public. The company will drop its bid if a group led by Brookfield Asset Management Inc., which has a competing investment proposal, receives warrants under a financing plan to be presented to the bankruptcy court this week, the person said. To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net

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Simon Said to Offer Total of $18.25 a Share for General Growth Properties

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Simon Property Is Said to Plan Revised Offer for Bankrupt General Growth

by on March 16, 2010

By Dan Taub March 16 (Bloomberg) — Simon Property Group Inc. , the largest U.S. mall owner, is preparing a revised bid for its biggest rival, bankrupt General Growth Properties Inc., to be presented within a week, according to a person with knowledge of Simon’s plans. Simon’s lawyers sent a letter to General Growth’s attorneys last night, according to the person, who asked not to be identified because the correspondence is private. The story was first reported by the Wall Street Journal. Indianapolis-based Simon last month offered more than $10 billion for General Growth , which called the bid too low. The Chicago-based company said it instead plans to split itself in two to exit bankruptcy with financing from a group led by Brookfield Asset Management Inc. General Growth, owner of New York’s South Street Seaport and Boston’s Faneuil Hall, filed the largest real-estate bankruptcy in U.S. history in April after amassing $27 billion in debt making acquisitions. To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net

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General Growth Backers Add $3.9 Billion to Boost Brookfield’s Revival Plan

March 9, 2010

By Daniel Taub March 9 (Bloomberg) — General Growth Properties Inc. said its biggest debt and equity holders offered to jointly invest $3.93 billion in the company, bolstering a plan with Brookfield Asset Management Inc. to bring the mall owner out of bankruptcy. The investments from Bruce Berkowitz’s Fairholme Capital Management LLC and William Ackman’s Pershing Square Capital Management LP would allow unsecured creditors to be paid in full with cash, General Growth said in a statement last night. Their funds are in addition to $2.63 billion pledged by Brookfield. The cash payment matches a provision of a competing bid by Simon Property Group Inc. , which has offered to buy its biggest competitor for more than $10 billion and pay all unsecured creditors. Chicago-based General Growth rejected that bid and lined up the Brookfield investment last month with plans to split into two companies — part of a proposal that creditors called risky because of a reliance on debt and equity sales. “If BAM moves ahead with this structure, it removes most if not all uncertainty from their previous bid, and removes any doubt to whether it’s credible or not,” said Jim Sullivan , an analyst at Green Street Advisors in Newport Beach, California. New York-based Pershing Square is General Growth’s biggest equity investor, with a 25 percent economic interest, including 7.5 percent of its shares. Fairholme is the largest creditor with about $1.9 billion of General Growth debt, while Brookfield has about $500 million and Pershing Square owns about $434 million, according to a person familiar with the investments. New Shares Brookfield’s new plan calls for Fairholme and Pershing to buy about 380 million new General Growth shares at $10 each. The investments would combine with 250 million shares Brookfield would buy, $1.5 billion in new debt Brookfield is raising, and a $250 million rights offering for a new company, General Growth Opportunities. Brookfield will backstop $125 million of that sale, and Fairholme and Pershing Square will backstop the rest. Combined, more than $8 billion would be raised. “The proposal from Fairholme and Pershing Square builds on the significant momentum we have created to return GGP to a strong financial foundation for the future,” General Growth Chief Executive Officer Adam Metz said in the statement. “Our goal is to raise capital in the most cost-efficient way to maximize value for all of our stakeholders. We are pleased with the support shown by one of our largest unsecured debt holders and one of our largest equity holders.” The proposal must be approved by General Growth’s board and the bankruptcy court, and better offers may still emerge, the company said. Also, General Growth would have the right to reduce the $3.8 billion investment by $1.9 billion should it be able to raise equity capital on better terms. ‘Significant Contributions’ Ackman stepped down from General Growth’s board as part of the plan, the company said. “Bill Ackman has made significant contributions to GGP during his time on the Board,” Metz said. “We understand his decision to resign to facilitate Pershing Square’s participation in this proposal.” Simon Property spokesman Les Morris declined to comment. Brookfield’s plan gives General Growth equity holders $15 a share, compared with about $9 a share under Simon’s offer. The previous version of Brookfield’s plan called for General Growth to raise as much as $5.8 billion by issuing shares and new debt and through the sale of properties. The new plan “would, if accepted, deliver substantially all of the cash required to fulfill the company’s capital needs in connection with its emergence from bankruptcy and provide unsecured creditors with par plus accrued interest in cash,” General Growth said. Previous Plan Unsecured creditors said in a March 2 bankruptcy-court filing that the previous plan was too risky. Indianapolis-based Simon, in a separate filing, supported the creditors. “While Simon has offered to pay unsecured creditors in full in cash, the consideration to be offered to unsecured creditors under the ‘recapitalization’ is entirely subject to market risk,” David C. Bryan , Eric M. Rosof and Emil A. Kleinhaus, Simon’s attorneys, wrote in the filing. “If General Growth does not raise enough money to pay unsecured creditors, they will be stuck with the equity securities of a highly leveraged company.” David Fick , an analyst with Stifel Nicolaus & Co. in Baltimore, said the new plan is likely an effort to compel Simon to boost its offer. “These guys don’t have the ability to run these assets without the existing GGP management,” he said. “The Pershing Square and Brookfield interests are best aligned with getting a sale done.” General Growth, owner of New York’s South Street Seaport and Boston’s Faneuil Hall, filed the largest real-estate bankruptcy in U.S. history in April after amassing $27 billion in debt making acquisitions. Under its plan with Brookfield, General Growth would split into a company owning shopping malls and another that would own buildings and land with redevelopment possibilities. To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net .

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General Growth Backers Add $3.9 Billion to Boost Brookfield’s Revival Plan

March 9, 2010

By Daniel Taub March 9 (Bloomberg) — General Growth Properties Inc. said its biggest debt and equity holders offered to jointly invest $3.93 billion in the company, bolstering a plan with Brookfield Asset Management Inc. to bring the mall owner out of bankruptcy. The investments from Bruce Berkowitz’s Fairholme Capital Management LLC and William Ackman’s Pershing Square Capital Management LP would allow unsecured creditors to be paid in full with cash, General Growth said in a statement last night. Their funds are in addition to $2.63 billion pledged by Brookfield. The cash payment matches a provision of a competing bid by Simon Property Group Inc. , which has offered to buy its biggest competitor for more than $10 billion and pay all unsecured creditors. Chicago-based General Growth rejected that bid and lined up the Brookfield investment last month with plans to split into two companies — part of a proposal that creditors called risky because of a reliance on debt and equity sales. “If BAM moves ahead with this structure, it removes most if not all uncertainty from their previous bid, and removes any doubt to whether it’s credible or not,” said Jim Sullivan , an analyst at Green Street Advisors in Newport Beach, California. New York-based Pershing Square is General Growth’s biggest equity investor, with a 25 percent economic interest, including 7.5 percent of its shares. Fairholme is the largest creditor with about $1.9 billion of General Growth debt, while Brookfield has about $500 million and Pershing Square owns about $434 million, according to a person familiar with the investments. New Shares Brookfield’s new plan calls for Fairholme and Pershing to buy about 380 million new General Growth shares at $10 each. The investments would combine with 250 million shares Brookfield would buy, $1.5 billion in new debt Brookfield is raising, and a $250 million rights offering for a new company, General Growth Opportunities. Brookfield will backstop $125 million of that sale, and Fairholme and Pershing Square will backstop the rest. Combined, more than $8 billion would be raised. “The proposal from Fairholme and Pershing Square builds on the significant momentum we have created to return GGP to a strong financial foundation for the future,” General Growth Chief Executive Officer Adam Metz said in the statement. “Our goal is to raise capital in the most cost-efficient way to maximize value for all of our stakeholders. We are pleased with the support shown by one of our largest unsecured debt holders and one of our largest equity holders.” The proposal must be approved by General Growth’s board and the bankruptcy court, and better offers may still emerge, the company said. Also, General Growth would have the right to reduce the $3.8 billion investment by $1.9 billion should it be able to raise equity capital on better terms. ‘Significant Contributions’ Ackman stepped down from General Growth’s board as part of the plan, the company said. “Bill Ackman has made significant contributions to GGP during his time on the Board,” Metz said. “We understand his decision to resign to facilitate Pershing Square’s participation in this proposal.” Simon Property spokesman Les Morris declined to comment. Brookfield’s plan gives General Growth equity holders $15 a share, compared with about $9 a share under Simon’s offer. The previous version of Brookfield’s plan called for General Growth to raise as much as $5.8 billion by issuing shares and new debt and through the sale of properties. The new plan “would, if accepted, deliver substantially all of the cash required to fulfill the company’s capital needs in connection with its emergence from bankruptcy and provide unsecured creditors with par plus accrued interest in cash,” General Growth said. Previous Plan Unsecured creditors said in a March 2 bankruptcy-court filing that the previous plan was too risky. Indianapolis-based Simon, in a separate filing, supported the creditors. “While Simon has offered to pay unsecured creditors in full in cash, the consideration to be offered to unsecured creditors under the ‘recapitalization’ is entirely subject to market risk,” David C. Bryan , Eric M. Rosof and Emil A. Kleinhaus, Simon’s attorneys, wrote in the filing. “If General Growth does not raise enough money to pay unsecured creditors, they will be stuck with the equity securities of a highly leveraged company.” David Fick , an analyst with Stifel Nicolaus & Co. in Baltimore, said the new plan is likely an effort to compel Simon to boost its offer. “These guys don’t have the ability to run these assets without the existing GGP management,” he said. “The Pershing Square and Brookfield interests are best aligned with getting a sale done.” General Growth, owner of New York’s South Street Seaport and Boston’s Faneuil Hall, filed the largest real-estate bankruptcy in U.S. history in April after amassing $27 billion in debt making acquisitions. Under its plan with Brookfield, General Growth would split into a company owning shopping malls and another that would own buildings and land with redevelopment possibilities. To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net .

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Fairholme, Pershing Said to Plan $3.93 Billion General Growth Investment

March 8, 2010

By Daniel Taub March 8 (Bloomberg) — General Growth Properties Inc.’s largest creditor, Fairholme Capital Management LLC, and Pershing Square Capital Management LP, the biggest shareholder, plan to jointly invest $3.93 billion in the mall owner to help it emerge from bankruptcy, according to a person familiar with the plan. The investment would combine with $2.63 billion from Brookfield Asset Management Inc. and pay unsecured creditors in full, including interest, in cash, said the person, who asked not to be identified because the talks are private. The new plan is being considered by General Growth’s board and may be announced as soon as today. To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net

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Gap Contacted by Antitrust Regulator on Simon Property’s Prime Outlet Deal

February 28, 2010

By Matthew Townsend, Prashant Gopal and Daniel Taub Feb. 27 (Bloomberg) — Gap Inc. was contacted by the Federal Trade Commission about Simon Property Group Inc. ’s proposed acquisition of Prime Outlets Acquisition Co. “We are aware of the FTC’s inquiry into the proposed Simon acquisition of Prime Outlets and we are responding to its inquiries,” Louise Callagy , a spokeswoman for the San Francisco-based clothing retailer, said in a telephone interview yesterday. Gap has stores at outlets owned by both Simon and Prime. Simon agreed in December to buy Prime Outlets from Lightstone Group for $2.33 billion including debt. The deal would the largest U.S. mall owner an additional 22 retail outlet centers, increasing its total to more than 60. Simon also is trying to buy bankrupt General Growth Properties Inc., its biggest rival. General Growth rejected Simon’s unsolicited bid Feb. 16, saying the $10 billion offer was too low. Simon’s bid to buy General Growth out of Chapter 11 bankruptcy may also face regulatory hurdles, David Fick , an analyst with Stifel Nicolaus & Co. in Baltimore, said in a telephone interview. “If there are issues with tenants on the smaller deal, there’s potentially a bigger issue with tenants on a bigger deal,” Fick said. Simon Property Chairman and Chief Executive Officer David Simon and Les Morris , a Simon spokesman, didn’t respond to telephone calls seeking comment. Cecelia Prewett, an FTC spokeswoman, also didn’t respond to messages. Before Formal Investigation David Keating , a spokesman for Chicago-based General Growth, declined to comment. Robert Pitofsky , a law professor at Georgetown University and a former chairman of the Federal Trade Commission, said the agency often calls competitors and other relevant parties before deciding whether to launch a formal investigation. “This is a very common approach to horizontal or vertical mergers,” he said. “You have to know a lot more about the facts before you fire off some kind of formal investigation.” General Growth this week announced an agreement to split itself into two companies as part of an effort to exit bankruptcy with a $2.63 billion investment from Brookfield Asset Management Inc. Other bids may still be made, General Growth President Thomas H. Nolan Jr . said on Feb. 24. Simon subsequently signed a confidentiality agreement allowing it to review General Growth’s finances as it considers the potential acquisition, according to a person familiar with the pact. ‘Once-Over’ “The bare facts that are known today suggest that the transaction will at least get a once-over, either by the Department of Justice or the FTC, simply because you’re combining No. 1 with No. 2,” said Brian Weinberger, an antitrust attorney with Buchalter Nemer in Scottsdale, Arizona. “If nothing else, the competitors of Simon and General Growth will look at those issues and consider whether to object,” he said. David Simon has dismissed concerns about the FTC blocking a purchase of General Growth. Simon isn’t at risk of having too large a market share or a monopoly in any market, he said in a Feb. 5 conference call with analysts and investors. “We certainly would argue strenuously that neither of those occur with or without GGP or anybody else,” he said. “There’s a lot of retail real estate out there. And it’s very diverse, and retailers go in and out of product all the time. And I don’t think you can look at one particular segment or one particular market.” To contact the reporters on this story: Matt Townsend in New York at mtownsend9@bloomberg.net ; Prashant Gopal in New York at Pgopal2@bloomberg.net ; Daniel Taub in Los Angeles at dtaub@bloomberg.net .

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Brookfield Asset Plans to Bid for a Stake in General Growth, WSJ Reports

February 23, 2010

By Daniel Taub Feb. 23 (Bloomberg) — Brookfield Asset Management Inc. plans to bid for a stake in General Growth Properties Inc., beating an offer by Simon Property Group Inc. for the bankrupt shopping mall owner, the Wall Street Journal reported. The bid would allow Chicago-based General Growth to exit Chapter 11 bankruptcy as a standalone company with Brookfield, the Toronto-based real estate investor, as its largest shareholder, the Wall Street Journal reported on its Web site, citing people familiar with the plan. Simon , the largest U.S. shopping mall owner, has offered to purchase its biggest rival in a deal that would give equity investors about $9 a share and repay unsecured creditors in full. General Growth said the bid, made public on Feb. 16, was too low and would invite other potential buyers to make offers. Brookfield owns almost $1 billion in General Growth debt, two people with knowledge of the company’s holdings said last week. General Growth may raise $1 billion to $2 billion from public markets — or more, were investor demand sufficient — to fund its exit from bankruptcy, according to one of those people, who asked not to be named because the talks are private. Brookfield would invest at least $2 billion, making the company the largest buyer in General Growth’s stock sale, the Journal said. Brookfield’s plan may be announced as soon as this week, the newspaper said. Denis Couture , a Brookfield spokesman, declined to comment. David Keating , a spokesman for General Growth, said he had no immediate comment. Shares Rise General Growth’s shares rallied past Simon’s buyout offer to close yesterday at $12.76, signaling that investors expect a higher bid. William Ackman’s Pershing Square Capital Management LP, General Growth’s largest shareholder, in December issued a 54-page presentation that said the stock is worth $24 to $43. Pershing Square, based in New York, owns a 25 percent economic interest in General Growth, including 7.5 percent of its shares. Based on the current valuations for U.S. mall owners and Simon and Brookfield’s “strong strategic and financial motivations,” General Growth is probably worth $11 to $18 a share, Green Street Advisors Inc. , a Newport Beach, California- based research company, said in a Jan. 13 note. General Growth, the owner of New York’s South Street Seaport and Boston’s Faneuil Hall, filed the biggest real-estate bankruptcy in U.S. history in April after amassing $27 billion in debt during an acquisition spree. Debt Acquired Brookfield said in a Feb. 19 letter to shareholders that it “acquired a substantial amount of defaulted bank debt issued by General Growth Properties” at a discount to par value. In a fourth-quarter earnings conference call that day, Brookfield Chief Executive Officer Bruce Flatt and other executives declined to discuss General Growth. Flatt said in his Feb. 19 letter that Brookfield believes that “acquiring assets through distress situations offers one of the few ways to acquire assets at meaningful discounts to their intrinsic value.” Brookfield owns more than 100 office buildings; 2.9 million acres of timber and agricultural land in Canada, the U.S. and Brazil; apartment complexes; 20 shipping terminals in Europe and Australia; 164 hydroelectric plants; railroads in Australia; natural-gas pipelines in the U.S.; and a property-brokerage business with almost 40,000 brokers in about 2,000 offices in Canada, the U.S. and the U.K. Brookfield last year assembled a $5 billion equity group to invest in distressed properties. Blackstone Group LP , the world’s largest private-equity firm, may join Simon’s bid, two people with knowledge of the discussions said on Feb. 18. Blackstone is in preliminary talks with Simon, said the people, who declined to be identified because the negotiations are private. Simon would lead any resulting partnership, one of the people said. To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net .

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Cadiz Study Shows Enough Desert Water to Provide for 400,000 Californians

February 8, 2010

By Daniel Taub Feb. 8 (Bloomberg) — Cadiz Inc. , the owner of thousands of acres of California desert, said a study shows there’s more water under its land than the company previously estimated, giving it enough to supply 400,000 people. A study conducted by engineering company CH2M Hill shows the aquifer under the Mojave Desert land ranges in size from 17 million to 34 million acre-feet, potentially larger than the Lake Mead reservoir near Las Vegas, according to Cadiz. The data will be presented today at a water-resources conference in Ontario, California. “It’s as close to a lake as you’re going to find in sub- surface geology,” Scott Slater , general counsel for Los Angeles-based Cadiz, said in an interview. “I don’t think there’s new water like this anywhere.” Cadiz, founded in 1983 by British-born entrepreneur Keith Brackpool , owns 70 square miles (181 square kilometers) of land in eastern San Bernardino County. The company wants to supply water to Southern California to become profitable for the first time since 1990. A water shortage in the western U.S. has spurred suppliers to consider desalination of ocean water and other alternatives for meeting the state’s demands. With the amount of water now believed available to Cadiz in the aquifer system, the company would be able to ship 50,000 acre-feet south each year, enough for 400,000 Californians, Chief Financial Officer Tim Shaheen said. That’s about twice the population of Irvine, California, or a third of the inhabitants of San Diego. More Water Before the CH2M Hill study, peer-reviewed by geologists from the University of Texas and the University of Southern California , Cadiz officials expected they might have enough groundwater to pump as little as 20,000 acre-feet a year. CH2M Hill, based in Englewood, Colorado, does engineering and construction work for energy companies and government agencies. The closely held company has $6.4 billion in revenue and 25,000 employees. Shaheen and Slater declined to say how much revenue they expect the water to generate. Cadiz probably will be able to sell the water for at least $1,000 an acre-foot, or a total of $50 million a year, said Disque Deane , chief investment officer at New York-based Water Asset Management LLC , an investor in water companies that owns Cadiz shares. “Could it be a lot more? It could be,” Deane said. “But I don’t think it will be a lot less.” Feinstein Opposition Cadiz’s project has won the support of Republican Governor Arnold Schwarzenegger and has been opposed by U.S. Democratic Senator Dianne Feinstein , who said in June that should Cadiz plan to “drain the water from under the desert, destroying the Mojave ecosystem, I will do everything I can to stop it.” Cadiz plans to send water from the aquifer south through pipelines built along railroad tracks. The company said in June that it signed preliminary agreements with four municipal water agencies and Golden State Water Co., a unit of American States Water Co. Cadiz would replenish the supply by adding rainwater and melted snowpack from the New York Mountains to the aquifer. The water otherwise would be lost to evaporation. Cadiz shares have gained 30 percent since the June announcement. The company is in talks with five more municipal water suppliers, which Slater wouldn’t identify, to participate in the project. The 10 water suppliers combined supply more than 10 million customers, he said. Environmental Review The project would take one to two years to build following a review to comply with California Environmental Quality Act guidelines, Slater said. That review may be completed by the end of this year. “That’s optimistic, but we are optimistic given the significant work that’s gone on to this point,” he said. The work will cost about $260 million, in addition to about $200 million spent over the years to purchase all the land and develop the water plan, Shaheen said. Cadiz has been growing lemons on 260 acres (105 hectares) of desert land and dried-on- the-vine raisins on 160 acres while developing the plan. Slater said he hopes Senator Feinstein will change her position once she sees the results of the CH2M Hill study. “We can’t speak for the senator,” Slater said. “The science speaks volumes, and what we’re trying to accomplish here is good for all of California.” To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net .

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Roski Rescue of California Means Real Estate Tycoon Needs Only NFL to Win

February 2, 2010

By Daniel Taub and Anthony Effinger

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Fewer U.S. Homeowners Owe More Than Properties Are Worth, Zillow Reports

November 9, 2009

By Daniel Taub Nov. 9 (Bloomberg) — The number of U.S. homeowners who owe more than their properties are worth fell in the third quarter as values stabilized and some homes were lost to foreclosure, Zillow.com said. About 21 percent of owners of mortgaged homes were underwater, down from 23 percent in the second quarter, the Seattle-based real estate data provider said today in a report. “The decline in the percentage of homeowners with negative equity is a positive sign, and is directly attributable to the stabilization of home values from the second quarter to the third,” Zillow Chief Economist Stan Humphries said in a statement. “It is also attributable to many homeowners who were previously underwater on their mortgage losing their homes to foreclosure.” U.S. foreclosure filings climbed to 937,840 in the third quarter, a 23 percent increase from a year earlier, Irvine, California-based RealtyTrac Inc said Oct. 15. Zillow estimated that the median value of single-family houses, condominiums and cooperative apartments declined 6.9 percent in the same period. The rate of decline slowed, as home values dropped 0.4 percent from the second quarter to a median of $190,400, Zillow said. Bank sales of foreclosed properties accounted for 21 percent of all U.S. home sales in September, Zillow said. Such transactions made up 74 percent of sales in Merced, California; 69 percent in Stockton, California; and 68 percent in the Las Vegas area. About 27 percent of homes sold nationwide went for less than the sellers originally paid for them, Zillow said. Credit, Unemployment Rising foreclosures that began with defaults on subprime mortgages, a global recession and increasing unemployment have hurt the U.S. housing market. Unemployment surged to a 26-year high of 10.2 percent in October, the Labor Department said last week. Payrolls fell by 190,000 workers. Housing will hit bottom by March 2010, with lower-priced properties recovering value more quickly than expensive homes, First American CoreLogic said last month. U.S. home values have dropped 21 percent from their peak, Zillow said. The closely held company uses data from public records going back to 1996. Its mortgage figures come from information filed with individual counties. To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net .

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Jackson’s Glove, Earhart Goggles, `Trek’ Creator’s Apple Hit Auction Block

October 6, 2009

By Daniel Taub Oct. 6 (Bloomberg) — Amelia Earhart’s goggles, Michael Jackson’s illuminated glove and “Star Trek” creator Gene Roddenberry’s Apple computer headline an auction this week of more than 1,000 items of Hollywood and historical memorabilia. Sale host Profiles in History , a Calabasas, California- based auctioneer, expects the goggles to sell for $100,000 to $150,000, the glove for $60,000 to $80,000, and Roddenberry’s computer for $800 to $1,200. “These are three items that are incredibly iconic,” Joe Maddalena , president of Profiles in History, said in an interview. “Each represents a real significant moment in our culture.” The sale, which runs Oct. 8-9, includes uniforms and props used in the “Star Trek” television shows and movies, costumes Jackson wore on stage and aerospace memorabilia — including the baseball cap Neil Armstrong wore after Apollo 11’s splashdown from the 1969 moon mission. Aviation pioneer Earhart wore the goggles during her 1932 transatlantic flight, when she became the first person to cross the ocean twice and the first woman to fly solo nonstop across the Atlantic. The trip also was the fastest transatlantic flight, breaking Charles Lindbergh’s record. Earhart disappeared five years later during an attempt to circumnavigate the globe. ‘Unconventional Nose’ The lot includes a typed, signed letter about the goggles that Earhart sent to aerial cinematographer Ray Fernstrom, whose son is selling the lot. “That particular pair are rather historic,” wrote Earhart, the subject of a movie starring Hilary Swank and Richard Gere being released Oct. 23. “Also they have grown accustomed to me, and cling around my unconventional nose more effectively than new ones.” The Jackson glove is one of only two illuminating gloves the pop star wore during the Jacksons’ 1984 Victory tour, Profiles in History said. Designed by Ted Shell and given to him by Jackson in 1986, it’s fitted with 50 small lights that “twinkle at random for added visual impact on stage,” according to the auction catalog. Maddalena said he had placed an estimate of $60,000 to $80,000 on the glove before Jackson’s June 25 death, and didn’t change the projected price when the item was put up for sale. “I think that’s a realistic value for what it is worth in the context of collectibles,” he said. “Could it go for half a million dollars? It could go for anything.” Passing It Along The Macintosh computer was given to Roddenberry by Apple Inc. , then called Apple Computer Inc., in the mid-1980s. Not long after, Roddenberry, who died in 1991, gave it to his son, Rod. “I remember him showing me how to use it,” said Rod Roddenberry, 35, chief executive officer of Studio City, California-based Roddenberry Productions . Roddenberry said he doesn’t recall his father writing any “Star Trek” scripts on the Macintosh, which was put up for auction by Gene Roddenberry’s assistant, Richard Arnold. Roddenberry Productions is in talks with Profiles in History to auction another Roddenberry computer — an IBM used for writing “Star Trek: The Next Generation” scripts — and donate the proceeds to The Wonder of Reading , a nonprofit group that helps renovate and stock libraries, said Trevor Roth, chief operating officer at the production company. As for the Macintosh, Maddalena called it a “curiosity” that may appeal to both “Star Trek” fans and computer collectors. “You have the ultimate connection between man’s continuing achievement in science with the creator of one of the great science-fiction television shows in history,” he said. “For it to be Gene Roddenberry’s is cool.” To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net .

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Homebuilders Eliminate Frills as Frugal First-Time Buyers Drive U.S. Sales

August 6, 2009

By Kathleen M. Howley and Daniel Taub Aug. 6 (Bloomberg) — When Lucas Miller bought his first property in June, he decided it was no time to splurge. He opted for laminate rather than granite kitchen countertops in his $127,000 two-bedroom townhouse in Fishers , Indiana. “Spending another $20,000 on upgrades just didn’t make sense to me,” said Miller, 30, a chef at Ball State University in Muncie, who bought from Pulte Homes Inc. , the second-largest U.S. homebuilder. Frugal first-time buyers are driving the new-home market with purchases of low-priced houses with no frills. Sales of new homes costing less than $200,000 jumped to 47 percent of all transactions in June, up from 39 percent in May, U.S. Commerce Department data show. Homes under $200,000 accounted for almost half of the sales in the first six months of this year, the biggest share for a first half in five years. Housing starts rose to a seven-month high in June and sales of new houses gained in each of the last four months, including the 11 percent increase in June that was the biggest in eight years. Spending on residential construction fell to a 13-year low of $252.1 billion in May, the Commerce Department said this week. The average size of new homes is down to 2,065 square feet, the smallest since 2000, and the median price this year has yet to rise above 2004 levels, according to the Census Bureau . June’s median of $206,200 was 12 percent below a year earlier. New Frugality Builders, who lured customers in the housing boom with everything from granite countertops to Sub-Zero refrigerators, are modifying floor plans and options in response to homebuyers’ emphasis on frugality, said Brian Bethune , an economist at IHS Global Insight in Lexington, Massachusetts. “The high end isn’t moving, so builders have got to dumb- down their designs and put in Formica kitchens and the bare- bones carpeting,” Bethune said in an interview. “New-home buyers are being conservative — they’re not willing to pay for the extras because they’re worried about the economy.” Demand is being driven by the $8,000 first-time homebuyer credit, said David Crowe , chief economist of the National Association of Home Builders in Washington. Properties in KB Home’s Bonita Canyon development in Fontana, California, were scaled down for first-time buyers. About 90 houses using KB’s new Open Series design are planned and half are sold, said Steve Ruffner, president of the Los Angeles-based company’s Southern California division. The houses are listed at $235,000 to $278,000. Smaller Homes The homes are 1,400 to 2,200 square feet, 30 percent smaller than previous designs, to reduce building costs, Ruffner said. Bathrooms are built back-to-back so only one plumbing tree is needed and there are fewer internal walls. It takes less than 10 weeks to complete an Open Series home , compared with almost 20 weeks for a house with older specifications, Ruffner said. “It is very open inside,” Ruffner said. “You can decide how big your living room should be or how big your dining room should be.” KB Home officials wouldn’t discuss construction costs. At a company development in Texas, the average Open Series home is priced $60,000 lower than KB Home’s previous models, and the cost to build them is $80,000 less, Chief Executive Officer Jeffrey Mezger said on a conference call in June. Flexible Floor Plan First-time buyers Leona Fisher and husband Will Sankhla bought a four-bedroom house in Bonita Canyon, lured by the flexible interior design, said Fisher, 27, a doctoral candidate in English. She turned a second-story loft space into an office for her and an editing bay for Sankhla, 32, a documentary filmmaker. This year’s best performers in the Standard and Poor’s Supercomposite Homebuilders Index are companies that focus on first-time buyers. Irvine, California-based Standard Pacific Corp. has more than doubled and Meritage Homes Corp. , based in Scottsdale, Arizona, is up 84 percent. KB Home shares are up more than 32 percent this year through yesterday. Standard Pacific and Meritage sell houses that average $279,000 to $302,000. Toll Brothers Inc. , the largest U.S. builder of luxury homes, sells for an average of $600,000 and has the worst performance in the index this year, with a loss of 3 percent. Orders for Meritage homes rose to 1,147 in the second quarter from 987 in the first three months of the year. M.D.C. Holdings Inc., the Denver-based builder of starter homes, said orders increased on a quarterly basis for the first time in four years. ‘Scared Buyers’ The design changes are helping some builders improve gross profit. Standard Pacific said second-quarter gross margin excluding certain expenses rose to 18.5 percent from 12.9 percent a year-earlier in part due to lower construction costs. “Three years ago, everyone wanted the big house with the media room and the three-car garage,” said Sean Donahue, a broker with Re/Max Traditions in Woodstock, Illinois. “Today, a lot of people are scared about their jobs, so they’re opting for smaller floor plans and basic designs.” Miller, the Ball State chef, said he was so determined to buy an affordable home he considered purchasing a foreclosed property . He decided his townhouse was a better deal. “Everything is brand new, and the laminate countertops work just fine,” he said. To contact the reporters on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net ; Daniel Taub in Los Angeles at dtaub@bloomberg.net .

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