Snarkless in Vegas
A once-major real estate syndicator is selling notes through a newly formed company.  One of the company's first investments with the proceeds from the notes was a single condo in a Las Vegas high rise.  This morning I saw this Calculated Risk post referencing a Las Vegas Sun article that states that there are 4,000 unsold condo units on the Strip alone.  I am trying to think of something nasty to post, but the sheer scale of unsold units and a syndicated real estate investment buying one unit overwhelms my sense of snark. 

Dry Hole
While the fortunes of Atlas Energy are soaring, the outlook for another oil and gas sponsor, NGAS, is murkier.  NGAS reported disappointing earnings yesterday, said it was in violation of debt covenants and that it is:

evaluating all of its strategic alternatives and that it is actively pursuing possible transactions that may include the sale of the company or of some, or all of, the company's assets.

NGAS stock dropped 40% today and closed at $.36 per share.  NGAS has $170 million of oil and gas profits on its balance sheet, but it does not have the cash to repay the up to $57 million of debt that is now due under covenant violation.  NGAS says it will keep drilling despite the financial worries.

Piedmont's Third Tranche Release
The third tranche in Piedmont's listing is occurring this week, as shares are being delivered to custodians.  This likely explains Piedmont's (PDM) small price drop over the past two days.  All Piedmont shares should be full listed by February 2011.  Remember that the breakeven price per share is $25.14.  The current price is approximately $18.20 per share.

I don't want to jinx PDM's shares, but with one more tranche release left, it looks like Piedmont's strategy of spacing share liquidation has helped stabilize the stock.  Rightly or wrongly it appears that deferred liquidations are the new model for sponsors that are looking for liquidation.  The IMH deal I wrote about over the weekend is spacing its sales, and another large REIT is contemplating using the tranche method, but over an 18-month period compared to Piedmont's which took about a year. 

It's not the tranche strategy that stabilized Piedmont's share price, it is a good underlying business.  Entities with shaky business models or suspect financial statements won't have the same results as Piedmont.  The results could be just the opposite of Piedmont's, where a stock's price drops after the initial IPO and continues to drop, especially before and after each tranche release, until all shares are liquid or the company suspends tranche releases in an attempt to halt liquidations.  Investors will be in a frenzy to sell if a company is trending down.

Atlas Hits A Gusher
Well, Atlas Energy Inc.'s stockholders hit a gusher.  Today Chevron acquired Atlas for $3.2 billion or $43.34 per share, a 37% premium over Monday's closing price.  Atlas stockholders will receive $38.25 in cash and $4.09 of units in Atlas Pipeline Holdings.  Chevron's attraction was all Atlas' acreage in the Marcellus Shale natural gas region, which spreads over Western New York, Western Pennsylvania, West Virginia and parts of Ohio.  Atlas controls 622,000 acres in the Marcellus Shale formation with 1 trillion cubic feet of natural gas reserves.  A  Bloomberg article quotes an RBC analyst who figures that Chevron paid $9,000 per acre.  Last spring Atlas entered into a joint venture with India's Reliance Industries, Ltd, at $14,000 per acre.  While not a direct comparison, Atlas contributes its Marcellus Shale lease interests to its limited partners at a value of $45,000 per acre. 

For many years Atlas tapped a network of independent broker / dealers to raise capital for limited partnerships, which in effect were a form of corporate finance for Atlas.   The Atlas oil and gas partnerships are long-lived programs, so I am guessing there must be some kind of plan to continue to manage or to liquidate these assets.  The syndication business is moving to Atlas Pipeline Holdings, so I am guessing Atlas will keep the pushing out its rich, sponsor-feed energy programs.  It looks like any  assets in Michigan and Marcellus Shale (some that are owned by partnerships) are staying with Atlas and will be managed by Chevron.  I have read through Atlas' 8-K discussing the acquisition, but other than what is stated above, there is not much more information.   This is a fluid situation that needs watching.

IMH IPO - Where's My Checkbook?
I had not thought about IMH and its combination of the IMH management company and the IHM Secured Loan Fund lately.  But earlier this week I checked IMH's website and it looks like the consolidation has been approved, and on October 28, 2010, IMH filed a pre-IPO S-11.  I guess IMH and investors in the IMH Secured Loan Fund figured out the senior management compensation issues enough to get the consolidation approved (there are lawsuits filed so the saga is not over).   I always felt that the whole compensation argument was like arguing over carpet and wallpaper on the Titanic. 

I am not going to read the whole S-11, but will cherry-pick a few highlights.  These comments are out of context and if you're serious about this investment you should read the entire document. 

• For the first six months of 2010, IMH posted a loss of $45 million, of which $39 million was loss provisions and impairment charges.  The operating loss for the first half of 2010 was approximately $6 million.
• Accumulated losses are $454 million.
• "Substantially all of our commercial mortgages are in default, and currently performing loans may default in the future."  Yikes.
• IMH is using outside consultants to workout its defaulted loans.  I am curious how much these firms or individuals will receive for their workout efforts and how much IMH will net on any asset recovery?
• At June 30, 2010, IMH estimated that it had $15.9 million in cash funding requirements for existing loan commitments.  At June 30, 2010, IHM listed $3.5 million of cash.
• Existing investors only receive partial liquidity on the IPO, and are having their  equity diluted.

IMH has wide latitude in making investments with net IPO proceeds. It does not look like it is going to attempt to save any of its existing loans or assets.  It will be originating new loans and acquiring exisitng loans to take advantage of the real estate upheaval and aftermath of the credit crisis.

My question with IMH has always been its valuation for exisitng assets.  It still lists nearly $300 million in total assets, about half its asset value at the end of 2007.  I estimate that IMH has lowered valuations about 50%.  Is this enough?  I don't know, but my gut tells me it is not.   Land values have dropped considerably, and more than 50%, especially in the location and in the pre-development space where IHM operated.    The market's appetite for this IPO will tell us whether IMH was accurate in its asset valuation.

I never thought that IHM Secured Loan investors had much of choice but to approve the consolidation.  Snark aside, I hope this investment works out for investors.