U.S. retailers used extra promotions and extended hours to draw procrastinators and shoppers delayed by the East Coast snowstorm in the final stretch before Christmas.
Target Corp. extended its hours to midnight Dec. 21 through yesterday. Borders Group Inc., Wal-Mart Stores Inc. and Toys “R” Us Inc. also kept stores open longer. Best Buy Co. offered some DVDs for half off and Jos. A. Bank Clothiers Inc., a men’s clothing chain, deepened discounts to at least 50 percent.
“We didn’t intend to do everything, and now we’re doing everything,” Jos. A. Bank Chief Executive Officer Neal Black, 54, said Dec. 22 by telephone from the company’s Hampstead, Maryland, headquarters. “We’ll be slugging right down to the last minute.”
Sales will be compressed into the final days before Christmas, said Marshal Cohen, chief industry analyst at NPD Group Inc. The snowstorm disrupted the Saturday before Dec. 25. Last year, that was the second-biggest shopping day after Black Friday, the day after U.S. Thanksgiving. Shoppers already had procrastinated more than in recent seasons.
“Retailers will pull out all the stops this week,” Cohen said in a Dec. 21 Bloomberg Television interview. NPD is a Port Washington, New York-based market research firm.
Maintaining Forecasts
The Washington-based National Retail Federation was holding to its forecast for a 1 percent drop in holiday sales, Ellen Davis, a spokeswoman, said Dec. 20. The International Council of Shopping Centers reiterated on Dec. 22 its forecast for a 2 percent increase in sales at stores open at least a year in December, after reporting that the storm slowed growth to 0.4 percent year over year in the week ended Dec. 19.
Jos. A. Bank cut prices of all clothing Dec. 21 and Dec. 22, after store visits slowed, Black said. The chain had planned to offer some of that merchandise at 40 percent and 30 percent off, he said.
The retailer’s shares fell 17 cents to $42.82 at 1:30 p.m. after a shortened pre-Christmas session on the Nasdaq Stock Market. Target, based in Minneapolis, decreased 20 cents to $48.65 in New York Stock Exchange composite trading. Borders, based in Ann Arbor, Michigan, declined 3 cents to $1.22. Bentonville, Arkansas-based Walmart climbed 28 cents to $53.60. Best Buy, based in Richfield, Minnesota, dropped 6 cents to $40.70.
Kathryn Greenberg, a 41-year-old Washington resident who works in philanthropy, said she lucked into some “fantastic” late discounts yesterday 500 fast cash payday loan. She bought clothing for her children and other family members mostly at 60 percent off at a Gap store as well as one of Gap Inc.’s Banana Republic stores.
Bigger Savings, More Buying
“I am spending the same as last year, but getting more,” said Greenberg, who was carrying two bags and heading into Sephora, the cosmetics chain owned by Paris-based LVMH Moet Hennessy Louis Vuitton SA.
Walmart, the world’s largest retailer, will keep most of its 803 discount stores and its Sam’s Clubs open until 8 p.m. today, two hours later than last year, said John Simley, a spokesman. Amazon.com Inc. extended by one day, until Dec. 21, its cutoff for standard shipping.
Gap, based in San Francisco, retreated 20 cents to $20.71 on the New York Stock Exchange yesterday. LVMH gained 44 cents to 77.90 euros in Paris trading. Seattle-based Amazon.com, the largest Internet retailer, dropped 47 cents to $138.47 on the Nasdaq.
East Coast Snow
Stores along the East Coast closed early during the Dec. 19 snowstorm. Twenty-four inches of snow fell on Bethesda, Maryland and 23.2 inches were recorded at Philadelphia International Airport, according to the National Weather Service.
Consumers had completed 72 percent of their holiday shopping through Dec. 20, down from 80 percent a year earlier, the New York-based ICSC said Dec. 22.
Historically, the 10 days before Christmas have made up as much as 40 percent of total holiday sales for November and December, according to Joseph Feldman, a managing director at Telsey Advisory Group in New York.
Sales fell 13 percent to $6.9 billion on the last Saturday before Christmas from the previous year, according to Chicago- based researcher ShopperTrak RCT Corp.
Some of lost sales did translate into online purchases. Sales at Web sites jumped 24 percent on Dec. 18 and Dec. 19 from a year ago, according to Coremetrics, a San Mateo, California- based marketing company.
Some impulse buying and so-called self-purchases, however, were irretrievably lost during the storm, Richard Jaffe, an analyst with Stifel Nicolaus & Co. in New York, said in a Bloomberg Radio interview on Dec. 22.
“It’s not a delay, it’s lost sales,” Jaffe said. “You just don’t recover that.”
Payday loan online - Quick application results in seconds.
WASHINGTON–Home resales surged last month to the highest level in nearly three years, reflecting an extraordinary level of federal support that has pulled the housing market back from the worst downturn since the Great Depression.
Buyers were racing to complete their sales before the original expiration date of a tax credit for first-time buyers that was scheduled to expire Nov. 30. Last month, Congress decided to extend and expand the credit to ensure the housing market could sustain its recovery.
The Realtors estimated that about 2 million homebuyers have taken advantage of the credit so far and forecasts that another 2.4 million will use it by the middle of next year. First-time buyers made up about half of all transactions last month, driving sales up 44 percent above last year's levels, a record jump.
Sales are now up 46 percent from the bottom in January, but down 10 per cent from the peak more than four years ago.
The median sales price was $172,600, down 4.3 per cent from a year earlier, and up 0.2 per cent from October.
"Things are stabilizing," said Pete Flint, chief executive of real estate Web site Trulia.com. "There is a significant amount of buyer interest out there.''
November sales rose 7.4 per cent to a seasonally adjusted annual rate of 6.54 million, from a downwardly revised pace of 6.09 million in October.
Sales had been expected to rise to an annual pace of 6.25 million, according to economists surveyed by Thomson Reuters.
The inventory of unsold homes on the market fell about 1 percent to 3.5 million. That's a healthy 6.5 month supply at the current sales pace, the lowest level in three years.
Besides the existing tax credit of up to $8,000 for first-time buyers, homeowners who have lived in their current properties for at least five years can now claim a tax credit of up to $6,500 if they relocate. To qualify, buyers must sign a purchase agreement by April 30.
Postponing the deadline could mean sales will drop during the winter months and recover in the spring.
"Buyers have no sense of urgency now," said Gary DeRosa, an agent with ZipRealty Inc. in Seattle.
Clayton-based Enterprise Bank & Trust has agreed to acquire the assets and deposits of a small Arizona bank that failed on Friday.
Valley Capital Bank in Mesa, Ariz., was closed Friday by state regulators.
The Federal Deposit Insurance Corp. was appointed as receiver. However, the FDIC reached an agreement with Enterprise Bank.
Valley Capital’s single branch in the Phoenix suburb will reopen Monday as a branch of Enterprise.
Enterprise paid the FDIC a 2-percent premium for the right to assume all the deposits of Valley Capital, the FDIC said. Enterprise agreed to purchase "essentially all" of the bank’s failed assets. Full details on the transaction were not available.
Valley Capital Bank had assets of about $40.3 million and total deposits of about $41.3 million as of Sept. 30.
As part of the deal, the FDIC and Enterprise Bank entered a loss-share agreement on about $30 million of Valley Capital’s assets, meaning the FDIC would absorb 80 percent of losses on loans and foreclosed properties.
The acquisition is small compared to Enterprise’s size, which is about $2.5 billion in assets. But it allows the bank to expand in Arizona, where Enterprise already has a loan production office in Phoenix easy payday loans.
Last year, Enterprise applied to open retail banking in Arizona, but the state’s banking regulators curtailed new charter approvals due to troubles in the Arizona real estate market. The bank later withdrew its application.
The deal "allows us now to operate as a full-service bank in Arizona through our new Enterprise Bank & Trust location in Mesa," Peter Benoist, President and CEO of Enterprise Financial Services Corp., the parent of Enterprise Bank, said in a statement. "Also, it enables us to open additional Enterprise locations in the greater Phoenix area, subject to the normal regulatory approvals."
Currently, Enterprise Bank has 11 branches in the St. Louis and Kansas City metro areas.
Besides Valley Capital Bank, the FDIC also on Friday took over Overland Park, Kan.-based SolutionsBank and Miami-based Republic Federal Bank. Those operations were acquired by other banks. The three failures brought the number of FDIC-insured institutions to fail in the nation this year to 133.
Citigroup Inc said on Sunday it has agreed to sell its stake in Japanese telemarketer Bellsystem24 to U.S. private equity firm Bain Capital for 93.5 billion yen ($1 billion).
Bain has been widely expected to buy Bellsystem24 after securing exclusive negotiation rights earlier this month.
Sources had told Reuters last week that Bain was close to finalizing a roughly 100 billion yen deal for the company, marking the largest buyout by a foreign private equity firm in Japan in nearly two years.
Bain has beaten off rivals Permira and a team of CVC Capital and Blackstone, which had also made offers in the final round of bidding for Bellsystem24.
Citigroup said in an e-mailed statement that it had agreed to sell its 93.5 percent stake in Bellsystem24 for 93.5 billion yen in cash in a tender offer to be launched by a firm owned by funds advised by Bain Capital.
The tender offer will likely start on or before November 20 and be completed on December 30, Citigroup said.
The U.S. bank said the deal was not expected to have a material impact on its net income or capital ratios.
Citigroup put Bellsystem24 up for sale as part of a global effort to raise cash and replenish its capital.
Citigroup has already sold broker Nikko Cordial, a fund management firm and a trust bank this year in Japan. Including the Bellsystem deal, it will have raised a total of about 964 billion yen ($10.8 billion), according to company press releases.
The sale of Bellsystem24 initially drew strong interest from a number of private equity firms including Kohlberg Kravis Roberts & Co, which teamed up with trading house Itochu Corp before dropping out of the race.
The Nikkei newspaper said the total cost of the deal for Bain would reach 120 billion yen, including a special dividend payment. No one at Bain Capital could be reached for comment.
The deal will rank as Japan’s largest buyout by a foreign private equity firm since March 2008, when Permira bought agrichemical company Arysta LifeScience Corp for more than $2 billion.
Bellsystem24 is Japan’s largest telemarketing firm. It competes against Moshi Moshi Hotline Inc and Transcosmos Inc in Japan.
Bellsystem24 is now owned by Citigroup Capital Partners, which was known as Nikko Principal Investments, a private equity arm of brokerage group Nikko Cordial, which was bought by Citigroup in 2007.
Nikko Principal paid 220 billion yen to buy Bellsystem24 in 2004. While the sale price is roughly half its purchase price, Citigroup has generated returns from its investment by restructuring the company’s debt to take some cash out, a method known as recapitalization.
Bain’s financing will be supported by banking units of Mitsubishi UFJ Financial Group Inc, Mizuho Financial Group Inc and Sumitomo Mitsui Financial Group Inc, sources familiar with matter have told Reuters.
(Reporting by Junko Fujita and Nathan Layne; Editing by Will Dunham)
CIT Group is likely to file for bankruptcy in the coming days, analysts and experts said.
The lender to small and medium-sized businesses is trying to restructure its debt, and is offering investors two options.
One path would be getting its unsecured debt holders — who hold a total of about $30 billion — to voluntarily exchange their bonds for new securities and equity. That path would avoid a bankruptcy filing.
The other and more likely option would be approving a reorganization plan before the company files for bankruptcy. CIT had about $70 billion of assets and $65 billion of total debt in the middle of this year, according to the latest publicly available figures.
CIT investors are entitled to vote for the exchange or the prepackaged bankruptcy by the end of Thursday. CIT spokesman Curt Ritter declined to comment.
The company has $800 million of debt due on November 1 and 3, and total liabilities as of mid-June of $64.9 billion.
Sources familiar with the matter have told Reuters that the voluntary debt exchange is unlikely to happen, and bankruptcy is much more likely.
Analysts have argued that the debt exchange was doomed from the start, because it required too many different kinds of investors with too many competing interests to comply.
“The market is by and large sending signals that a prepackaged is the most likely outcome, and it makes sense given the exchange offer,” said Kevin Starke, senior analyst at boutique brokerage CRT Capital Group.
If the company files for bankruptcy, it will likely try to complete the restructuring process as quickly as possible, experts said . In general, borrowers prefer to borrow money from lenders they are confident will be around for the life of the loan.
“A business like this has to get in and out of bankruptcy fast, because if they’re lingering, I would think competitors would start poaching customers,” said Stephen Lubben, a law professor at Seton Hall’s School of Law who focuses on corporate finance and financial distress issues.
The plan needs to win approval from investors holding two-thirds of the company’s debt, and half of the number of investors.
Activist investor Carl Icahn is encouraging individual investors to vote against CIT’s prepackaged bankruptcy plan. The company hopes its plan will eventually help it fund more new business out of its bank but Icahn wants the company to stop planning to make new loans and use its maturing assets to pay off its debt.
A prepackaged bankruptcy requires the approval of investors holding two-thirds of the dollar amount of every type of debt. Of the voting investors, one half by number must also approve.
Icahn has tried to rally retail investors to vote against the plan, in an effort to ensure that CIT does not get half of voting noteholders to approve the deal.
(Reporting by Dan Wilchins; Editing by Gary Hill)
would have to commit to increasing their lending, too.
So far, that hasn’t happened. Bank of America’s small business lending has dipped 4.1% in the last five months. The Charlotte, N.C.-based megabank says the decrease stems from the recession’s grim effect on small businesses’ balance sheets. As a result, Bank of America has tightened its lending standards, according to spokesman Don Vecchiarello.
Increasing the max loan size: The second major component of the President’s proposal involves lifting the maximum on SBA loans.
"These are the type of loans that Joe and Doug used to expand this business and create new jobs," Obama said, referring to his hosts for the day, Metropolitan Archives co-owners Joe Incarnato and Doug Peters. "Larger loans will help more small business owners and franchisees grow."
However, the majority of small businesses looking for loans are not pushing up against the SBA’s loan ceiling. Of the 44,000 loans the SBA backed last year, fewer than 15,000 were for more than $150,000, according to SBA data.
That has some small business owners scratching their heads over the new initiatives. Chuck Blakeman, president of Denver-based small business advisory firm Team Nimbus West, blasted Wednesday’s announcements as "another photo op for politicians that does absolutely nothing to solve the crisis for small business owners."
To score an SBA loan, businesses still have to convince a bank to issue it. With SBA lending down sharply, that’s a daunting challenge. "Somebody please tell me how raising the limits on loans people can’t get is helping them," Blakeman said.
Obama left the door open to further intervention, if these new efforts don’t spark a turnaround.
"[There’s] no question that we have a long way to go," he said.
There may not be as much slack in the U.S. economy as many forecasters believe, which means medium-term inflation risks could be higher, a Federal Reserve official said on Sunday.
In excerpts of remarks prepared for delivery at an economics conference, St. Louis Federal Reserve President James Bullard said it was hard to accurately measure the gap between what the economy is producing and its full potential.
“I am concerned about a popular narrative in use today — the narrative being that the output gap must be large since the recession is so severe,” he said. “And so, any medium-term inflation threat is negligible, even in the face of extraordinarily accommodative monetary policy. I think this narrative overplays the output gap story.”
He said calculations aimed at measuring the output gap do not take asset price bubbles into consideration, so if much of the current drop in output was tied to the bursting of the housing bubble, “then today’s output gap would be smaller than it appears,” which would mean a higher risk of inflation no telecheck payday loans.
Bullard also said the Fed’s $1.75 trillion asset purchase program was adding to uncertainty in financial markets because it was unclear how the central bank might adjust it as economic conditions change.
He proposed establishing something akin to the Taylor rule, which calculates the ideal interest rate for a given set of economic conditions, for asset purchases so financial markets would have a clearer sense of policy direction.
“Good policy means that the Fed needs to communicate to the private sector how it intends to react to shocks in the future,” Bullard said.
“There has been little indication of how or whether these (asset purchase) amounts might be adjusted given incoming information on economic performance. This lack of clarity has created uncertainty in financial markets.”
(Reporting by Emily Kaiser; Editing by Diane Craft)
There was another tick-up in home prices in July, a further indication that housing markets may be stabilizing, according to a report issued Tuesday.
Prices for the S&P Case-Shiller Home Price index of 20 cities rose 1.6% from a month earlier, the third consecutive month of gains. They went up 1.4% in June.
Prices were still down 13.3% compared with July 2008, but even that performance was better than expected. A panel of industry experts surveyed by Briefing.com had forecast a 14.2% loss.
"The rate of annual decline in home price values continues to decelerate and we now seem to be witnessing some sustained monthly increases across many of the markets" said David Blitzer, chairman of the Index Committee at Standard & Poor’s.
Craig Thomas, a senior economist with PNC Financial Services Group, called the report very encouraging.
"The rule of thumb is that three observations is a trend," he said. "There have been three straight good reports, so, this is a trend."
The home-price gains also confirmed other positive recent housing reports such as lower inventories and more traffic being reported by home builders, according to Thomas. Trends in other economic indicators, such as job losses and retail sales have also improved lately.
A pattern is developing, according to Lawrence Yun, chief economist for the National Association of Realtors (NAR), one in which stabilizing prices could contribute to a self-sustaining recovery.
"When prices are falling, consumers ask themselves, ‘Why buy now when I can buy later for less,’" he said, adding that rising prices are a strong incentive to act more quickly.
Minneapolis’ gain: Among the 20 cities, Minneapolis recorded the biggest gain during July; with prices up 4.6%. San Francisco, up 3.3%, and Chicago, 2.7% higher, also recorded sizable gains.
The only price declines occurred in Las Vegas, where they fell 1.1%, and Seattle, down 0.1%.
Las Vegas has become the city hardest hit by foreclosures, which remain one of the big issues facing housing markets.
Yun points out that there will be another foreclosure spike over the next six to 12 months as the terms of option ARMs and interest-only mortgages reset, raising monthly payments for many borrowers and pushing some into delinquency. Foreclosed homes will continue to come back onto the market, padding supplies and dampening prices.
The other major uncertainty is over the first time homebuyers’ tax credit that currently gives back up to $8,000 to taxpayers who buy before Dec. 1 and who have not owned a home within the past three years.
Yun credits the tax credit with being a major market stimulus. NAR estimated that an extra 350,000 homes will be sold because of it. There are bills in Congress that would extend the program and even expand it to every home buyer. If none of these are enacted, the market could suffer a reversal.
There will be a clear-cut market recovery because of buyer interest tied to that stimulus, according to Yun, and if the tax credit is allowed to lapse, we could be looking at another bottom coming our way.
The Case-Shiller index compares the sale price of a home to its price the last time it was sold, then factors in changes in prices over time.
That, ideally, yields a more accurate picture of home price fluctuations than simply calculating the median or average prices of all homes sold during the month. Those averages can be skewed by changes in the mix of homes sold during any one period.
With apologies to the Beatles, the list of the best-performing Fortune 500 stocks in the year after the collapse of Lehman Brothers reads like a stroll down Penny Lane.
Penny stocks — those that trade for less than $5 apiece — are here, there and everywhere.
The top returning Fortune 500 stock over the past year is, ironically enough, Freddie Mac (FRE, Fortune 500). The irony lies in the fact that the government’s seizure last September of the mortgage purchaser and its big sister Fannie Mae (FNM, Fortune 500) kicked off the most turbulent month in the financial markets since the Great Depression.
Taking over the companies didn’t just tip Fannie and Freddie shares into free fall. It also sent shock waves through the financial system, as dozens of banks and insurance companies were left with big losses on preferred shares of Fannie and Freddie they had viewed as safe.
When Lehman failed a week later, Fannie and Freddie shares had a head start in the race to the bottom that many other giant financial firms, from AIG (AIG, Fortune 500) to Wachovia and Washington Mutual, would soon join.
Since then, shares of Freddie are up 367%. Fannie Mae was No. 3, returning 167% over the year ended Sept. 15, 2009.
Yet even after those gains — much of the increase coming during the manic cheap-stock rallies this summer — shares of Freddie were trading recently for only $1.87 each and those of Fannie were fetching just $1.60. Given the tens of billions of dollars of federal aid the companies have received, many analysts doubt the shares will hold even that value for long.
Though Fannie and Freddie are the most prominent penny stocks on the list, they aren’t the only ones. Shares in the eighth-best performer, drug store chain Rite Aid (RAD, Fortune 500), surged 82% over the past year — to $1.82 each. The debt-laden Camp Hill, Pa., company posted a $2.9 billion loss for the fiscal year ended in April and is struggling to reduce a massive debt load.
The top stocks on the Fortune 500 list aren’t all lottery tickets, as some refer to the low-priced shares of companies with poor prospects. But, owing to the depth of the economic meltdown last fall, almost all the top performers have spent some time trading in the single digits.
Take Oshkosh (OSK, Fortune 500), the military truck maker that was the No allstate insurance. 2 Fortune 500 performer over the past year with a 171% gain. It traded recently at $31.47 and fetched as much as $60 a share in 2007, following a big Army order.
But shares dropped as low as $3.85 last fall, as the economy went into free fall.
The only stock among the top 10 performers in the Fortune 500 to have spent the entire year above $10 a share was World Fuel Services (INT, Fortune 500). The Doral, Fla.-based provider of nautical and aviation fuel was the No. 6 gainer last year, rising 101% to a recent $50.
Obviously, though, it wasn’t all fun and games in low-price stock land last year. Three of the worst-performing Fortune 500 stocks — not counting those that were delisted or filed for Chapter 11 bankruptcy protection, such as General Motors, cable company Charter Communications and numerous auto parts suppliers — were AIG, Citigroup (C, Fortune 500) and CIT (CIT, Fortune 500).
AIG, the insurer that was taken over by the government as it teetered on the brink of insolvency the day after Lehman’s failure, dropped 59% over the past year, adjusted for a 1-for-20 reverse stock split the company did in June to retain its New York Stock Exchange listing. It was the sixth-worst performer in the Fortune 500 among companies still listed on a major exchange.
Citi, the big bank that is the biggest recipient of federal aid via capital infusions and loan guarantees, was the fourth-worst performer with a 73% decline. This despite the fact that the stock has more than quadrupled since March, when it hit a multidecade low below a dollar amid fears a government takeover was on the way.
And CIT, the troubled small business lender that this summer pledged all its assets to get its hands on a $3 billion emergency loan, was down 81%. That made it the second-worst performer on the Fortune 500, after Crosstex Energy (XTXI, Fortune 500), the Dallas-based pipeline company that posted an 84% decline.
With research by Fortune senior list editor L. Michael Cacace
Since unveiling his NorthSide plan in May, Paul McKee has done a lot of pitching.
He’s pitched to the neighborhoods he wants to rebuild. He’s pitched to city officials who must approve the plan. He’s pitched to the media, to business groups, to anyone who will listen.
But the people he really needs to pitch to are the guys with the money: Bankers. Investors. The people with the cash to get his vision off the ground. That may be his toughest pitch of all.
The plan to rebuild 1,500 acres of north St. Louis is projected to cost $8.1 billion. In filings with the city, McKee’s McEagle Properties has said it hopes to borrow $6 billion of that and raise most of the rest in the form of equity from investors and partners. And he’ll need to do it in the toughest credit market in decades.
It is worth noting that McEagle won’t need to borrow $6 billion all at once. It plans to "recycle" capital over the course of the 20-year project, and use profits from the early stages to help fund the later ones. But the first four years alone call for nearly $1 billion in expenses, and that money will have to come from somewhere.
Meanwhile, the market for financing big commercial real estate projects keeps getting worse.
The $3.5 trillion industry of office buildings and shopping centers in this country has lost 39 percent of its value in the past two years, according to the MIT Center for Real Estate. Couple that with a wave of commercial mortgages coming due — nearly half will expire in the next five years — and experts worry about a flood of foreclosures and costly refinance deals. That could suck up a lot of cash which might otherwise fuel projects such as NorthSide.
When you figure in the long time frame and complexity of McKee’s project, local finance experts say, raising the money to get it off the ground becomes a very tough sell indeed.
"It’s almost unimaginable," said Edward Lawrence, a finance professor at the University of Missouri-St. Louis. "There are some really knotty issues."
For one, NorthSide will take two decades, starting with a few office buildings and rolling out to include 10,000 homes. That means the project can build on early successes, which is good, Lawrence notes, but it also leaves a lot of time for things to go wrong. "This thing can fall apart at any point," he said.
Then there’s uncertainty about all the different pieces that must come together, from thorny political approvals to an unfunded highway interchange at 22nd Street, to a new $640 million bridge across the Mississippi. And questions about who will fill 4.5 million square feet of new office space in a city where downtown vacancy remains stubbornly high.
The project carries a lot of risk in an environment where many banks don’t want any, said Joe Monteleone, executive vice president of Q10 Triad Capital Advisors, a commercial real estate firm in Creve Coeur.
The way to ease that risk, Monteleone said, is for McEagle to attract a lot of equity — to bring cash to the table and keep its borrowing to a minimum. But that’s no easy task.
"Right now, attracting equity is just very difficult on all projects," he said. "In a very large deal like this, it just becomes that much more difficult."
In documents filed with the city, McEagle says that it and its partners expect to kick in 20 percent, or about $1.7 billion. Then there’s the 75 percent funded through borrowing. The rest would come from tax credits and other government incentives, especially in the first few years as NorthSide gets off the ground.
Most large urban redevelopment projects — such as Atlantic Yards in Brooklyn — have dialed back in this recession, said Stephen Blank, a senior fellow who studies real estate capital markets for the Urban Land Institute. The money just isn’t there right now.
Debt markets are basically frozen. There’s no appetite for commercial mortgage-backed securities. And no one really knows where prices are going, so it’s hard to find buyers for buildings. Simply having a great vision isn’t enough to make a deal happen instant payday loan.
"I don’t know how you could possibly do this," Blank said. "This could be a game changer (for St. Louis), but I don’t see it in today’s environment."
Still, some local banking experts were more optimistic.
Generally speaking, St. Louis banks haven’t been burned like some of their counterparts elsewhere, said Joe Stieven, a longtime bank analyst who heads Stieven Capital Advisors. Some banks have capital, and are willing to lend it, but on their own terms for a change.
"The boring old banking industry — not ’shadow’ banking or investment banking — is willing and able to finance projects," Stieven said. "If you have a good project, you can get it financed."
But so far, just two banks have committed publicly to McEagle’s NorthSide project. And one is defunct.
That’s Corn Belt Bank, which was based in Pittsfield, Ill., and had a branch in Clayton. In 2007, it gave McEagle $3 million in financing, according to deeds filed with the city. But in February, it was shut down by federal banking regulators, and now that note is held by the FDIC, which plans to sell it. McKee said he hoped to extend or refinance that loan with whoever buys it.
The other lender is Bank of Washington, in Washington, Mo., which lent McEagle $27.6 million in December and submitted a letter to city officials pledging to help finance the first two phases of NorthSide if they approve $398 million in tax increment financing.
The bank’s chairman, L.B. Eckelkamp, acknowledged that tough credit markets meant the project might not start as fast as it would have two or three years ago, but he was confident it would succeed. "It’s a wonderful plan," he said. "It does a lot for the city."
McKee says that his capital efforts have been "much more extensive" than just those loans, that he’s talking with banks, private capital groups and institutional investors. He was bullish on his chances.
"We think this project will attract attention from all over the U.S. and foreign investors as well," he wrote in an e-mail interview.
But that money won’t come off the sidelines, he said, until "public commitment to this is evident." In other words, until the city signs that TIF, and grants McEagle the redevelopment rights that will let it start tapping tax credits.
It would certainly help, he said, if the city agrees to back half the cost of that TIF — just under $200 million. In this climate, McKee said, his company can’t afford to carry the full cost of the massive road and sewer upgrades it’s planning for NorthSide. And because the city will benefit from the improvements, he said, it ought to share in the risk.
But city officials are skeptical.
They’ve only backed three other TIFs in recent years, and wound up on the hook each time. And with a tight budget and pension obligations looming, there isn’t much room to pay down bonds if new tax revenue from NorthSide can’t.
Even if Mayor Francis Slay’s office agrees, it’s not clear that there are enough votes on the Board of Aldermen.
"I’m not more of a financial expert than the banks that are looking at this," said Alderman Antonio French. "If they’re still passing on it, who are we to say it’s a good deal?"
Still, in this economic climate, the way to sell the money people on NorthSide may be through the political process, Monteleone said. Lining up public support, and putting down a lot of equity, is the only way to instill enough confidence in a project this big.
"It’s just a difficult project to conventionally finance," Monteleone said. "It’s going to take a lot of public finance. It’s going to take a lot of political clout. I think if anybody is going to be able to pull it off, it’s Paul."
Powered by WordPress -- XHTML 1.0