Failing to get price, developer pulls Silicon Valley holdings off market

Silicon Valley real estate mogul Carl Berg on Monday pulled his Mission West portfolio off the market, refusing to budge from his $1.8 billion price tag despite the crisis in the financial markets.

Berg's inflexibility drove away investors seeking to buy the 6.9 million square feet of mostly research and development buildings, a deal in play since March.

"Bottom line, because of the subprime interest fiasco, the guys who have the cash to close the deal believed they should get a discount," he said. "We disagreed."

The septuagenarian said that several weeks ago, he made an ultimatum to the most recent buyer, whom he refused to identify: "Either give me an offer or my price is going up by three-quarters of a billion dollars. If you don't want to, forget it. I'm not serious about selling unless you give me the right price."

Berg stood firm on his $13.55-a-share price that the portfolio was trading at in July before negotiations with a prospective buyer fell apart. On Monday, the stock price had sunk to just below $10 a share. "It will be back up in six months," he predicted.

The developer, who built his first one-story tilt-up in 1969, said he was not "hot to sell" the portfolio that had made him rich, but decided to test the waters as prices for commercial real estate skyrocketed over the past few years.

"It was in the best interests of the shareholders if we could sell at the top of the market," he said. "But they didn't really want us to sell. And I'm very happy not to have sold the company."

Berg, who had gall bladder surgery last week, said he plans to announce new ideas for his real estate holdings, which are almost one-third vacant, in a February conference call with investors.

Observers of the back-and-forth deal that began in March were not surprised that it ended with no sale, given the precarious state of the financial markets. Deals such as Blackstone's buyout of Equity Office Properties in February for $39 billion including debt probably couldn't happen in the current financial situation, said Dan Fasulo, managing director for RealCapital Analytics of New York.

"We've seen very few mega-deals since the advent of the credit crisis in August," he said. So many of the commercial real estate deals over the last few years occurred because credit was relatively easy to obtain. "When debt got more expensive, by default it lowered the value of some of the portfolios," he said.

Jim Beeger, a broker with Cornish & Carey Commercial, said he's walked through every one of Mission West's 100-plus buildings this year with various buyers and believes Berg should be able to fill up his vacant buildings without too much trouble. The Mission West portfolio has been described as aging and tired, but Beeger said it was clean and had good curb appeal.

"He's about 35 percent in South San Jose, but the solar industry is going nuts in the Bay Area, and they are very attracted to his one-story buildings," he said. "He has very quietly gone through and cleaned up his buildings. I liked what I saw.

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source: mercurynews.com

Forgiven mortgage debt tax eliminated

WASHINGTON - President Bush on Thursday signed a measure to provide relief for financially strapped homeowners facing foreclosure or in bankruptcy.

The bill gives a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or renegotiation of a loan. No taxes would be owed on the value of any debt forgiven or written off. Currently, such debt forgiveness is taxable income.

"When you're worried about making your payments, higher taxes are the last thing you need to worry about," Bush said in a bill-signing ceremony. He stood alongside members of his Cabinet and lawmakers who pushed the measure.

While the measure is anticipated to reduce taxes of some strapped homeowners by $650 million, the cost to the government would be offset in part by limiting a tax break available on the sale of second homes.

The bill was in response to a mortgage crisis touched off this spring by a blowup in home loans for risky borrowers, throwing a pall over the economy. Foreclosures are at record highs and late payments are spiking. Lenders have been forced out of business and investors have taken huge financial hits.

"This is going to make a happy holiday for many homeowners," Bush said of the bill, moments before signing it into law.

An estimated 2 million to 2.5 million adjustable-rate mortgages - worth about $600 billion - will jump from low initial "teaser" rates to higher rates this year and next. Steep prepayment penalties

have made it difficult for some to get out of their mortgages, and some over-stretched homeowners can't afford to refinance or sell their homes.

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source: mercurynews.com

SEC investigating Washington Mutual's handling of mortgage loans, home appraisals; stock falls

WASHINGTON - The Securities and Exchange Commission is probing how Washington Mutual Inc., the nation's largest savings and loan, handled mortgages that were possibly based on inflated home appraisals.

"We are voluntarily and fully cooperating with the SEC's inquiry as well as the (Office of Thrift Supervision) and look forward to bringing the facts to both the regulators and public," according to a company statement. OTS is the company's federal regulator.

Shares of Seattle-based Washington Mutual fell 46 cents, or 3.1 percent, to $14.21 in midday trading. The company's stock has traded between $13.99 and $46.38 in the past year.

SEC spokesman John Nester declined to comment Friday.

Shares of WaMu have dropped about 65 percent since mid-September, following some dismal financial disclosures and a lawsuit filed in November by New York's attorney general against one of its real estate appraisers, alleging the companies colluded to inflate home values.

"After spending a month and a half investigating these allegations, we can say with confidence that there has been no systematic effort by WaMu to inflate home appraisals," the company statement said. "We take these allegations very seriously."

The company's chief legal officer, Fay L. Chapman, this week said she was retiring. Chapman, 61, will serve as a consultant for two years to help with the transition, and a WaMu spokeswoman said then that there was no connection between the company's legal troubles and Chapman's departure.

WaMu also said this month that it was closing offices, laying off more than 3,100 people and that it would no longer issue loans to people with shaky credit histories.

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Homes sales slow to a crawl but upscale areas lift prices

At first glance, Santa Clara County's housing market might seem to have entered a kind of twilight zone.

Just 750 existing detached houses were sold in November, down about 42 percent from November 2006, according to DataQuick Information Systems. That's the fewest sales for that month since the research outfit began tracking such statistics in 1988 and the lowest number for any month since February 1995.

Yet despite the apparent anemic demand for housing here, the median price of those 750 houses shot up 9.5 percent from a year ago to $799,000.

So what gives?

The answer has a lot to do with the yawning disparity between Silicon Valley's affluent and less-well-to-do areas, say some real estate experts.

On the one hand, "life is good, I guess, for well-paid techies" who can afford to buy in relatively pricey neighborhoods, said DataQuick analyst Andrew LePage. "Meanwhile, some of your most affordable neighborhoods aren't contributing many sales," which boosts the median sale price.

Richard Calhoun also sees evidence of that in the data he compiles as owner of Creekside Realty in San Jose.

Although San Jose's relatively inexpensive east, central and south areas accounted for 16 percent of existing single-family houses sold earlier this year, he said, that's down to 7.5 percent now.

Over about the same period, the median price of houses in those areas also dropped from about $660,000 to about $580,000, he said.

Another sign of the disconnect between areas is how long existing detached houses linger on the market.

Based on the current pace of transactions, Calhoun estimates, it would take 246 days to sell the houses on the market in Santa Clara County. But it would take 599 days in San Jose's east, central and south areas, whereas only 46 days would be needed in Mountain View, Los Altos and Palo Alto.

Jeff Barnett, vice president and regional manager of Los Gatos-based Alain Pinel Realtors, said he's had no problem peddling homes, especially along the county's west side.

"We're selling more high-end properties than we've sold in a couple of years," he said. Although many of his clients aren't rich, he added, they tend to have good credit and "the interest rates are great right now."

The median price of detached existing homes in Santa Clara County rose more than it did in any of the Bay Area's other eight counties in November. The prices increased by 1.4 percent Bay Area-wide, 3.1 percent in San Mateo County and 6.9 percent in San Francisco County.

But they dropped 11.3 percent in Contra Costa County and 18 percent in Solano County.

LePage said the Bay Area's innermost counties have long tended to have higher home prices than counties on its fringe. But he said the high cost of gasoline now may be pushing more people to live closer to their jobs in Santa Clara and San Mateo Counties, nudging up the cost of homes there.

Many people can't afford a home because banks have toughened their lending practices. That's largely due to an increase in foreclosures, many of which resulted from low-income buyers taking on mortgages they couldn't afford.

Lender skittishness particularly has limited the number of so-called jumbo loans - those exceeding $417,000 - which Bay Area buyers need to purchase a home.

During the first seven months of this year, before the credit crunch got bad, "jumbo loans accounted for 72.4 percent of all home purchases in Santa Clara County" and 62 percent of all homes Bay Area-wide, LePage said. But in November, just 54 percent of all home loans in Santa Clara County were jumbos and 44 percent in the Bay Area, he said.

Still, things may be improving for people shut out of the real estate market so far.

The jumbo-loan shortage shows signs of improving, for one thing, LePage noted. The percentage of home transactions done with jumbos has increased since October, when it was 49.5 percent in Santa Clara County and 42.6 percent Bay Area-wide, he said.

Some new home developments also are dropping prices and offering discounts on such things as landscaping and granite countertops. Their builders typically owe substantial bank loans, he said, and they're worried the houses "aren't flying off the shelf."

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source: mercurynews.com

Fantasy home: History brought up to date in Rose Garden

WHAT: Historic two-story house on one-third acre; 91 years old; expanded and remodeled; 5,124 square feet; six bedrooms, 4 1/2 baths, kitchen with breakfast room, finished basement with wine cellar; pebble-tech pool, large level yards, verandas; four-car garage with large workshop/storage area.

WHERE: 1294 Hanchett Ave., San Jose

ASKING: $2.5 million

BROKER: Amy McCafferty, (408) 754-1625, Alain Pinel Realtors

DETAILS: Located in San Jose's historic Rose Garden neighborhood, this Spanish-style vintage house is almost 100 years old, expanded and remodeled, yet adhering to the charm of the original. Great attention was paid to detail in order to preserve the architectural significance of the structure, while edging gently into the 21st century with modern amenities.

The living room has large windows facing both the front and rear yards and a small adjoining "dessert" room or tea room. The formal dining room has a built-in china cabinet with leaded glass doors and adjacent sun room that's a mirror image of the tea room. The chef's kitchen is designed to accommodate entertaining, with its professional appliances, granite counters, pendant lighting, pantry and sunny breakfast room.

A mahogany staircase ascends to the upper level, where the landing provides space for a sitting area, and leads to the master bedroom suite in the south wing and additional bedrooms and baths in the north wing.

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source: mercurynews.com