Verde Realty plans buying spree with stock funds [El Paso Times, Texas]

Jan. 31--EL PASO -- Verde Realty has posted multimillion-dollar losses in recent years, but it plans to grow by using money from a stock offering to buy apartment complexes and industrial distribution buildings at bargain prices, recently filed documents show.

Verde, an El Paso real estate investment trust founded by well-known businessman Bill Sanders, will not spend much time or resources on real estate development, it reported.

It has scrapped plans to develop a city-size community on almost 24,000 acres Verde owns in Santa Teresa, on the western edge of El Paso, the documents show.

The credit crisis and recession have played a part in reducing property values. This has "created opportunities in select markets to acquire well-located, current-generation distressed assets at below our estimated replacement cost," Verde reported in documents filed Jan. 22 with the U.S. Securities and Exchange Commission for its initial public stock offering.

The documents provide a public view of Verde's previously private operations.

It plans to raise up to $300 million through the stock offering. A date for the offering on the New York Stock Exchange and an initial stock price have not been set.

Verde, which had annual revenues of more than $70 million in each of the past two years, will focus on buying industrial buildings and apartment complexes in its markets of El Paso-Juarez and other areas of Texas and Mexico.

It also plans to focus on select targeted markets: Los Angeles,

Riverside-San Bernardino, Calif., San Francisco, Las Vegas, Phoenix, Seattle and Denver.

Mike White, a senior partner for TeamNafta.com, an El Paso commercial real estate company, said, "Timing is everything in the real estate business, and they (Verde) are hitting the cycle at the perfect time."

The industrial real estate market has "hit bottom, and now is the time to pick up properties on the cheap," White said.

A lot of investment money is sitting on the sidelines waiting to get back in the commercial real estate market, he added.

Ron White, an investment adviser for Raymond James Financial Services in El Paso, and not related to Mike White, said he had not yet looked at Verde's offering prospectus. But, he said, "Bill Sanders has as good a reputation as you can find in the real estate business. A lot of people believe in Bill Sanders," and that will probably help sell the stock offering whenever it hits the market, he said.

Sanders, 68, and Ron Blankenship, 60, founded Verde in 2003. Both were involved in Security Capital, an international real estate operating and investment company.

Sanders, an El Paso native, founded Security Capital and sold it in 2002 to General Electric for $4 billion.

Verde took its current form as an operating partnership in 2006.

Blankenship and Sanders were Verde's co-chief executive officers until January, when Blankenship became president and CEO, and Sanders became board chairman.

Each received $2.4 million in 2008 in salary, bonuses, partnership shares and other compensation, according to the latest salary data in the documents.

Along with Sanders, Blankenship and three other Verde executives sit on Verde's 12-member board.

The rest of the board is made up of several men who have held top positions in large national companies. Two notable members are Ray L. Hunt, CEO and chairman of Hunt Oil Co., and Hunt Consolidated Inc., in Dallas, and one of Verde's top shareholders, and Jay O. Light, dean of the Harvard Business School.

Verde's revenues increased from $47.8 million in 2006 to $77.5 million in 2008. Revenues were $73.9 million in the first nine months of 2009. But its expenses and losses also increased.

Its annual losses increased from $21.1 million in 2006 to $55.6 million in 2008. It lost $31.6 million in the first nine months of 2009, the latest financial data provided in the documents.

Most of its income was from rental fees on industrial and apartment buildings.

Verde at the end of last year owned 87 industrial buildings in Texas, New Mexico and Mexico with 12 million square feet of rentable space. Almost 84 percent of the buildings were leased in November, and brought in annual rent of $44.8 million, it reported.

Its biggest industrial building holdings are in the El Paso-Juarez area. It has 18 industrial buildings in El Paso, 15 industrial buildings in Juarez, and six in Santa Teresa. They have a combined 5.1 million square feet of rentable space.

It also owned 14 apartment complexes with 4,790 units in Austin, Dallas, Houston and San Antonio. Almost 90 percent of those units were rented in November with average monthly rents of $880 per unit, it reported.

Vic Kolenc may be reached at [email protected]; 546-6421.

Top shareholders

Top owners of Verde's private common shares as of Dec. 31:

--Vornado RTR Inc., New York real estate investment trust, 2.75 million shares.

--Ray L. Hunt, CEO of Hunt Oil Co., 2.59 million shares.

--Wellington Management, Boston investment management firm, 1.99 million shares

--Bill Sanders, Verde founder and chairman, 1.68 million shares.

--Allstate Insurance, 1.59 million shares.

--Fortress Investment Group, New York investment management firm, 1.51 million shares.

--Kodak Retirement Income Plan Trust, 1.33 million shares.

Source: Verde Realty securities registration.

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