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Tuesday, Jul 23, 2024

Real Estate Builders start feeling effects of energy crisis

Realty Income Issues New Shares on

N.Y. Stock Exchange

Senior real estate executives in the state are worried the power shortage will soon begin threatening new homebuilding projects.

Executives who met with business and political leaders at a two-day retreat hosted by the University of Southern California’s Lusk Center for Real Estate expressed concerns that electricity shortages and skyrocketing energy prices could end up delaying or killing new housing projects.

“We are certainly beginning to hear about this anecdotally , we are at the beginning stages of what could be significant effects to the real estate market,” said Professor Stuart Gabriel, executive director of the Lusk Center.

“We’re concerned about a contrast on the supply of energy that ultimately might work to constrain the permitting of real estate development projects,” he said, “and in doing so, add further fuel to the fire of the state’s critical housing shortage.”

Attendees of the conference noted that energy problems are also playing a role in real estate location. Los Angeles has become a more attractive market for investors because it has its own utility and a power surplus.

Gabriel said the energy crisis is part of a larger problem: the state’s shrinking infrastructure budget, which includes transportation, water and education spending.

“The state is ranked about dead last nationally in public infrastructure spending,” he said.

The energy crisis just dries up the infrastructure well, Gabriel added.

“This very significant state surplus disappears,” he said. “We do not have the funds for the investment in our universities, in our transportation infrastructure and public schools.”

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Stock Offering:

Escondido-based Realty Income Corp. announced the public offering of 2.85 million new shares of common stock on the New York Stock Exchange.

Priced at $27.80 a share, the stock is expected to generate $79 million for the company. The income will be used to purchase about 75 new properties, said executive vice president and CFO Gary M. Malino.

The offering closed May 7.

Realty Income currently owns 1,061 single-tenant retail properties at an average of $1 million a property.

“Our basic strategy is to do capital market transactions to purchase real estate,” Malino said.

The company has done five common stock offerings in the last five years, as well as two preferred stock offerings and two bond offerings.

Development Milestone:

Kilroy Realty Corp. of El Segundo has developed 1 million square feet of San Diego office space since 1999.

The company is developing four more projects in the county.

In Sorrento Mesa, it is working on a second phase for biotech Diversa Corp., and a 68,000-square-foot campus-style building.

In Del Mar, Kilroy is developing a second phase for law firm Brobeck, Phleger & Harrison, LLP, and a fifth building at Peregrine Systems Corporate Center.

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Hall Of Famer:

Sherman D. Harmer Jr., vice chairman and managing director of marketing at San Diego’s The Olson Co., will be inducted into the California Building Industry Hall of Fame.

The Hall of Fame announced Harmer’s induction May 3 and a gala dinner will be held July 24 in San Francisco.

The hall recognizes individuals from the building and construction industries for their service and leadership in the community and the industry.

At Olson, Harmer works with founders Steve Olson and Mark Buckland on urban revitalization projects in the state.

Please send real estate news to adonohue@sdbj.com or fax to (858) 571-3628.


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