Housing Posts Impressive Digits; Banker Gone Bad; Anbang: Be Our Guest!

Pending your review…

ID-10020026

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

The National Association of Realtors is presumably in good spirits today thanks to some fantastic data from pending sales on previously-owned homes. Turns out, that figure is up 3.5%, with the pending home sales index clocking in at 109.1. That’s a nice little welcome after the previous month’s cringe-inducing 3% decline and index reading of 105.4, which by the way, was larger than the initially reported figure. It also marks a 5% increase in sales over the same time last year. What’s even better about this increase is that analysts only predicted sales would go up 1.2%. It’s always kind of fun when analysts get it wrong like that. With employment gains, a healthy labor economy and low borrowing costs, sales are up in most parts of the United States. Unfortunately, not in the Northeast where sales took a super-slight dip. But the Midwest more than made up for it by kicking up 11.4%. The median price of an existing home now stands at $210,800. Previously-owned homes make up 90% of the housing market and there was a nice supply of about 1.88 million homes up for grabs in February.

Bankers behaving badly…

ID-100379192

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

It’s been a bad day for Andrew Caspersen and he’s got a whole bunch those ahead of him. Caspersen, who was until very recently a partner at PJT Partners, was arrested for trying to defraud investors out of $95 million. Apparently, the misbehaved banker raised money using all kinds of fraudulent means and illegal tactics, including fake email accounts and even fake employees. He told an unsuspecting hedge-fund employee that he was looking to raise $80 million for a private equity fund so that it could buy stakes in companies owned by other private equity firms. Got that? He then explained that he already raised $30 million and, with that, the hedge-fund employee forked over $25 million from his hedge fund’s charity. The hedge-fund employee also ponied up an additional $400,000 from his own personal funds. The very smarmy Caspersen then took $8 million of his new found cash to cover money he already lifted from PJT – without authorization, of course. As for the rest of the money, Caspersen plopped it right into his own brokerage account. But the fun doesn’t stop there, because Caspersen lost all of it by trading stock options. After that, Casperesen hit up the hedge fund employee for another $20 million infusion, weaving into his tale the aformentioned fake employee, fake email address and domain. However, Caspersen told the hedge-fund employee that the fake employee worked for a very real private equity firm. The unnamed hedge-fund employee called the very real private equity firm to verify some details about the fake employee and that’s when Caspersen’s fraudulent cookie started to crumble. Classy, huh.

Ante up…

ID-100180639

Image courtesy of hin255/FreeDigitalPhotos.net

You may not have heard of Anbang Insurance Group but you might just end up staying at one of their properties in the not too distant future. The China-based company, together with a consortium that includes J.C. Flowers & Co. and Primavera Capital, just raised their offer for Starwood Hotels and Resorts, the company that also owns Sheraton hotels, the St.Regis and W Hotels, to a whopping $14 billion. All in cash. That price tag easily trumps Marriott International Inc.’s $13.6 billion offer. Anbang is willing to shell out $82.75 per share of Starwood, easily making Marriott’s $78 per share offer chump change in comparison. But, for now anyways, Starwood shareholders are still seriously considering Marriott’s offer and are set to vote on it come April 8. There’s no word yet on whether or not Marriott will even attempt to raise and match Anbang’s offer. But if Starwood does diss Marriott in favor of Anbang’s very generous and enticing offer, Starwood would have to fork over a $450 million break-up fee to Marriott. Marriott would really love to add Starwood to its collection, that also includes Ritz-Carlton, so that it could become the world’s largest lodging company, with over 5,700 hotels. But Anbang’s goal is to simply increase its real estate assets in the United States, like it did last year when it scooped up New York’s Waldorf Astoria to the tune of $1.95 billion. If Anbang does manage to snap up Starwood, whose real-estate is rumored to be valued at $4 billion, it would be the biggest acquisition by a Chinese company in the United States. Of course, a deal that big by a foreign investor would have to go through the ringer by the Committee on Foreign Investments in the United States (CFIUS), a group that basically reviews deals of this magnitude to determine if they pose a threat to national security. But spoiler alert: experts think it’ll pass muster.

 

Using Wallets to Fight Terrorism; Marriott Hotels Gains More Hospitality; Urban Outfitters Now Satisfies Pizza Cravings

Insult to injury…

Image courtesy of basketman/FreeDigitalPhotos.net

Image courtesy of basketman/FreeDigitalPhotos.net

Because terrorists are pure evil on so many levels, they’ve likely calculated that besides causing devastating loss of life, they can also harm an economy as well. And thus, as the holiday season is upon us, while the French are still in the midst of mourning the tragedy that befell its people just days ago, they are likely to endure yet more damage and fallout as businesses, both big and small, see less traffic and sales in the days ahead. In fact, hospitality chains and airlines have been seeing little activity in major markets and indexes, and several shops, cafes and markets remain closed. American performers Papa Roach and Marilyn Manson had to cancel shows this week and artist Prince canceled performances scheduled for December. As the sixth largest economy in the world, and the second in the eurozone, these losses could have a ripple effect on several other economies as well. However, economists and investors all tend to agree that the economic fallout will be minor and brief. Already today, European indexes either remained flat or rebounded from the dips they took before the markets opened. Unfortunately, tourism might not be as fortunate. Back in 2013, France saw almost 85 million tourists who brought in 42 billion euros in revenue with them. With almost 8% of France’s gross domestic product coming from the tourism industry, it might be the one area to suffer most, as major tourist destinations like the Eiffel Tower and Louvre lost two days of business and other places, like EuroDisney, still have their doors closed.  But as President George W. Bush urged American following the September 11, 2001 attacks “go out shopping more.” And if that’s one way to defeat those terrorist, then I’m happy to travel to Paris to do so.

Do not disturb…

Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net

Image courtesy of Salvatore Vuono/FreeDigitalPhotos.net

The “Deal of the Day” award goes to Marriott International, as in the hotel chain that has over 5,500 properties and 1.1.million rooms, which just scooped up its rival, Starwood, to the handsome sum of $12.2 billion. The deal, in which Marriott will pay approximately $72.08 per share, means it becomes the world’s biggest hotel chain, leaving the second largest chain, Hilton Worldwide and its 4,500 properties, in the dust. This deal also gives Marriott some nice new brands, including the push-posh St. Regis. And who doesn’t like a little pish-posh? According to research firm STR, 67% of available hotel rooms were filled in the first nine months of the year by occupants who shelled out an average of $120.35 a night. However, there are many watching, from investors to travelers alike, to see how this merger is going to affect the various partnerships on both sides. Marriott has partnerships with Chase and United Airlines, while Starwood has deals with American Express, Delta and Über. Wall Street seems to think this is the start of a new trend of hotel chain mergers, as companies like Airbnb, have been eating up a chunk of the industry. Sit tight and you might just see another deal coming ’round the Wall Street bend.

Cheesy…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Because nothing says trendy like tomatoes and cheese, Urban Outfitters is getting into the pizza business. I’m serious. The company, whose apparel tends to attract millennials, is plunking down an undisclosed sum to buy the Vetri Family Group of restaurants, which includes the Pizzeria Vetri chain. You’re not the only one who finds this acquisition…strange. Investors think so too and sent the stock down 10%. But it’s not like Urban Outfitters has anything to lose. The retail sector has been hitting the fiscal skids with companies like Nordstrom and Macy’s reporting sales that are nothing short of disappointing. It’s also got many wondering if the brick and mortar model is passé. Urban Outfitters has 240 locations, in addition to the Anthropologie and Free People brands (and more than a couple of them already have food establishments in them). And while other retail companies are looking to amp up their e-commerce and tweak their brands in an attempt to improve those sales, Urban Outfitters is taking an entirely different approach by acquiring a business in an industry that is making tons of money at the moment. Marc Vetri of the Vetri Family Group likes the deal and calls it “a perfect match.” It means his company gets to focus more on the food it serves, while Urban Outfitters has to figure out how to help those restaurants expand. Now if only Urban Outfitters can figure out how to grow and expand its own business instead of losing money…

Starwood Inhospitably Says Buh-Bye to CEO; US Homebuilders Have No Loss of Confidence Over Latest Digits; Higher-Debt Education

Paasschen pit…

Image courtesy of Salvatore Vuono; FreeDigitalPhotos.net

Image courtesy of Salvatore Vuono; FreeDigitalPhotos.net

Starwood Hotels & Resorts, which also owns Sheraton and the “W” hotels, had its CEO, Frits Van Paaschen, do his final checkout (note the two a’s and two s’s). Apparently his resignation was a mutual decision (aren’t they all?) between van Paasschen and Starwood. But in a statement, Chairman Bruce Duncan said: “The board believes now is the right time to take steps to accelerate Starwood’s growth, improve performance and sharpen our focus,”  What are you really saying, Mr. Duncan? That growth slowed under Paasschen’s leadership? Actually, it did. News of the resignation sent shares up 4.3% hitting $81.07. But to be fair, and you have to be fair to a guy with a name as fun as Frits Van Paasschen, under his leadership the company pulled in $234 million and $1.33 per share for the fourth quarter when analysts predicted Starwood would only pull in 76 cents. Now that’s Paasschen! Just sayin’. Don’t feel too sad for the guy, though. He is getting a severance package upwards of $12 million. The company will be now helmed by interim CEO Adam Aron until a permanent replacement is found. But one thing is for sure…there will never be another Frits Van Paasschen  – with two a’s and two s’s. So there.

Show me the confidence…

Image courtesy of cooldesign/FreeDigitalPhotos.net

Image courtesy of cooldesign/FreeDigitalPhotos.net

So today we get some info from the National Association of Homebuilders/Wells Fargo builder sentiment index telling us exactly how builders are feeling. Well, they’re feeling about a 55. Which is good news because a number above 55 is good. It means confidence. Optimism. Money. Happiness…you know all the things that matter, except for health, which isn’t measured in this index. Whatever.  Not to be a downer, but this is the second month in a row that that number fell – last month it was 57 – and the lowest number it has been in four months. By the way, those economists who spend their days away forecasting what that number might be guessed it would be closer to 58. Ah, well. You can’t win (predict?) ’em all. So why, exactly, are builders still so optimistic? Because those numbers, which are not awful anyway, are probably the result of this painfully annoying, snowy frigid winter which isn’t exactly sending people running out of the warm comfort of their cozy homes to look for new ones.  Once the weather begins to cooperate, builders expect to see more traffic. Add to that low mortgage rates and major job gains and you get home-builder confidence, my fiscal-loving friends.

But probably not buying a house anytime soon…

Image courtesy of ddpavumba/FreeDigitalPhotos.net

Image courtesy of ddpavumba/FreeDigitalPhotos.net

The Federal Reserve Bank of New York just regaled us with some thoroughly disheartening new information that puts a damper on the American dream. It seems that the amount of loans due over at least 90 days has grown by over 11%. But wait…there’s more…a lot more. Like $1.16 trillion more. That’s how much money has been borrowed by students in the name of education this year and is more than 7% higher than last year. All those educated young Americans who are eager to scoop up jobs in the workforce may not be among the buyers for all those new homes that all those US homebuilders are building, no matter how reasonably priced they are. That’s because that newly highly educated contingent will be thrilled just to be able to pay down some of that mammoth debt.