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Inquirer Daily News

Archive: July, 2013

POSTED: Monday, July 22, 2013, 3:36 PM
FILE - This Jan. 28, 2010 photo shows the abandoned 3.5-million-square-foot Packard car plant in Detroit. (AP Photo/Carlos Osorio)

America's troubled cities are like Tolstoy's unhappy families: each has problems all its own. New York's 1979 near-bankruptcy, like Orange County's 1997 financial collapse or Pennsylvania's seizure of Harrisburg's books in 2012, like Detroit's Chapter 9 bankruptcy filing last week, all made end-is-near headlines. But maybe they tell less about our present and future than about local conditions, including political incompetence...

Writing in the Bond Buyer, Mark Schwartz, the colorful Main Line lawyer who led Harrisburg City Council's initial Quixotic attempt to stiff bondholders instead of selling city assets, points out that the Chapter 9 filing Detroit's state proconsul filed last week isn't like corporate bankruptcy -- it doesn't give debtors control. Rather it creates 'an uncharted free-for-all" in which state officials try to cobble together a more realistic, or at least sustainable, financial plan.

City government, Schwartz notes, is supposed to provide basic services to (often poor) people. But too often cities end up as vehicles to sell bonds for stadiums and other "economic development" boondoggles, scarfed up by investors' "insatiable appetite for tax-free investments tha twill forever ensure Wall Street's ability to market any piece of garbage," Schwartz added. Bond insurers, squawking loudest about forcing cities to pay investors, merely "bet wrong"; they deserve to share the pain of not getting paid every dollar they are owed, he argues. If General Motors and Chrysler paid noteholders "cents on the dollar" so they could stay in business (and also keep paying retiree pensions), why should muni investors expect much beter treatment?

POSTED: Sunday, July 21, 2013, 3:48 PM
FILE - In this Jan. 23, 2013 file picture CEOs Jim Hagemann Snabe and Bill McDermott, right, pose for photographers prior to a press conference in Walldorf, southwestern Germany. (AP Photo/dpa, Uwe Anspach, File)

Newtown Square-based SAP AG executive Bill McDermott will become sole CEO of the German business software giant, under a proposal announced by the company's board today. Read the profile I wrote on McDermott, a Main Line resident and onetime Xerox salesman, in the Philadelphia Inquirer here. McDermott's official profile here.

The plan by SAP's Supervisory Board would have McDermott's Germany-based co-CEO, Jim Hagemann Snabe, step down at next May's shareholder meeting, leaving Snabe on the board. During their three-year partnership in the top job, SAP has inked a series of bold acquisitions meant to cope with the increased fragmentation of business software purchases as cloud servers and handheld devices challenge enterprise systems, while also pushing to move its brand downstream to computer users through marketing deals with the NFL and other mass marketers.

In a statement, Snabe said putting McDermott in the position of sole CEO will help "further accelerate SAP's success." Separately, SAP co-founder Hasso Plattner called McDermott "a visionary leader." The company will explain its decision to shareholders and reporters in a Monday conference call.

POSTED: Friday, July 19, 2013, 10:22 AM

California-based Ryland Group Inc., a publicly-traded national homebuilder and home-finance lender with projects in all the suburban counties surrounding Philadelphia, says it has purchased Cornell Homes, of Media, for an undisclosed price. Cornell boss Greg Lingo will continue to run the operation for Ryland, and Ryland says it is hiring Cornell's employees. Cornell currently owns 97 homes available for sale, 1,716 unbuilt lots and 8 model homes in 12 ongoing developments.

In a statement, Ryland boss Larry Nicholson called the deal "consistent with our strategy of expanding into markets that present opportunities for growth."  Ryland bought North Carolina's Timberstone Homes last summer, Arizona's Trend Homes last winter, and LionsGate Homes of Dallas in June. 

The suburban home market collapsed in the financial crisis of 2008, pressing builders to seek urban or apartment projects or to shut down; construction has shown recent signs of revival, thanks partly to cheap mortgage rates backed by federal loan guarantees.

POSTED: Friday, July 19, 2013, 9:41 AM

One of the Northeast's largest office landlords is pulling out of the Philadelphia suburban office market, where rents remain stuck at the levels of 10 and 20 years ago, as weak corporate hiring and a shift to home offices and shared space has reduced demand for large office leases. Mack-Cali Realty, which controls 20 million sq ft of offices in north and central New Jersey, has agreed to sell its remaining 1.66 million sq ft in Philadelphia-area properties for $201 million in cash, a $10 million mortgage, and $22 milllion in "subordinated interests," to suburban re-developer Bill Glazer's Keystone Property Group. Mack-Cali will shift its local focus to developing residential rental apartments in the Bala Cynwyd area.

The price works out to around $140 a square foot, not including the value of the unbuilt land or Mack-Cali's remaining interests. That price "seems reasonable" for the market, Stifel & Co. real estate analyst John Guinee told me. It's below the portfolio's $253/sq ft replacement cost, or its $194/sq ft value adjusted for the buildings' partly "obsolescent" condition, according to a report Guinee sent clients July 18. Investors are unlikely to finance new offices in the region with prices so low.

The buildings Mack-Cali plans to sell include 1000-1235 Westlakes Drive, Berwyn; 100-300 Stevens Drive at the Airport Business Center, Lester; Rose Tree Corporate Center I and II, Media; 4 and 5 Sentry Park, Blue Bell; 150 Monument Road, Bala Cynwyd; 1000 Madison Ave., Lower Providence Township; and the landmark One Plymouth Meeting tower adjoining the Plymouth Meeting Mall near the Pennsylvania Turnpike north-south and east-west intersection, which is securing the $10 million mortgage. The deal also includes empty lots at Airport Business Center, Rose Tree, and Westlakes. Mack-Cali sold Moorestown Corporate Center (NJ) and 16 and 18 Sentry Park West to Keystone last year.

POSTED: Friday, July 19, 2013, 8:47 AM
(John Lok/The Seattle Times, via Associated Press)

The six-month sentence meted former broker and convicted inside-trader Timothy J. McGee by Philadelphia federal court Judge Timothy J. Savage "fell far below the federal sentencing guidelines of 41 to 51 months in prison," wrote Dan Packel in this July 2 report for Lexis/Nexis' Law360. I wrote about the SEC's related civil prosecution of McGee, a former Ameriprise Financial Services executive in Plymouth Meeting, here. SEC complaint here.

McGee learned about the $6 billion sale of James Maguire's publicly-traded Philadelphia Consolidated Holdings to Tokio Marine Insurance through Alcoholics Anonymous meetings he attended with Christopher Maguire, a friend, fellow triathlete, Philadelphia Consolidated executive, and member of the family that founded and controlled the company until its sale to the Japanese firm and continued to run it under Tokio until last year.

The government said McGee illegally passed this insider information to his colleague Michael Zirinsky and that McGee, Zirinsky's father and friends then bought the stock, pocketing a total of more than $1.8 million in illegal profits (including $292,000 for McGee) after the deal went through and the stock rose in value. McGee was convicted of securities fraud and perjury last fall. FBI statement here. SEC civil complaints against both McGee and Zirinsky are still pending. 

POSTED: Thursday, July 18, 2013, 12:00 PM
Berkshire Hathaway Chairman and CEO Warren Buffett, right, and Microsoft founder and Berkshire director Bill Gates play bridge outside of the Borsheims jewelry store, a Berkshire Hathaway subsidiary, in Omaha, Neb., Sunday, May 5, 2013. The Berkshire Hathaway shareholders meeting was being held this weekend in Omaha. (AP Photo/Nati Harnik)

"Warren Buffett's newspaper company said Thursday it plans to acquire the Press of Atlantic City, N.J., for an undisclosed price," from Pittsburgh-based, family-owned Abarta, reports Buffett's Omaha World-Herald. Read it here: http://www.omaha.com/article/20130718/MONEY/130719281/1697#warren-buffett-s-newspaper-company-to-buy-atlantic-city-paper

Buffett had been among the operators expressing interest in the Press since it went up for sale.

The Press sells about 67,000 copies daily and 77,000 Sunday. Former Press controller Mark Blum will move back to Atlantic City to run the Press, moving on from his publisher's job at the Florence, S.C. Morning News, which Buffett's BH Media also owns. Press editor Neill Borowski, an Inquirer veteran, left last week to rejoin another previous employer, the Gannett chain.

POSTED: Thursday, July 18, 2013, 9:55 AM
Aramark headquarters in Philadelphia. (Matt Rourke / Associated Press)

Aramark, the Philadelphia-based cafeteria operator whose headquarters tower is based at 12th and Market Streets, "announced the construction of a new business services center in Nashville" that will move hundreds of back-office jobs out of Center City, writes Curtis Skinner for the Inquirer here.

"An Aramark spokesman said that about 300 workers here, primarily in finance and human resources, may choose to apply for positions at the new facility or elsewhere in the company, or face being laid off over the next two to three years," the Inquirer report added. "The Nashville center would house up to 1,000 workers and is slated to be completed by year's end."

Aramark employs over 300,000 worldwide; it built a relatively small corporate headquarters here under longtime chief executive Joseph Neubauer before his recent retirement. 

POSTED: Thursday, July 18, 2013, 9:43 AM
Ex-Penn State assistant coach Jerry Sandusky was found guilty on 45 of 48 sex-abuse counts. He was sentenced to 30 to 60 years in prison. (DAVID SWANSON / Staff Photographer)

The Penn State board of trustees has approved a number around $60 million to settle a majority of the claims made by people claiming convicted serial child molester Jerry Sandusky sexually abused them, according to the Legal Intelligencer. Inquirer item citing Legal Intelligencer and Wall St Journal reports here. The Legal adds that 32 victims have called the school alleging they were molested by former assistant football coach Jerry Sandusky, who was convicted of child rape.

"Penn State confirmed last week that its board approved tentative settlements reached with some of the claimants at a board meeting last Friday, voting unanimously to greenlight the accords. However, the university is not expected to announce an overall dollar amount until it has settled with everyone," accordding to the report. Lawyers for some complaints are still in talks with university reps.

University President Graham Spanier and the late football coach Joe Paterno were fired for failing to stop Sandusky sooner. Spanier, Paterno and other administrators were blamed for the abuse in a university-paid report by Louis Freeh, a former FBI chief and MBNA Bank executive who currently heads Philadelphia's Pepper Hamilton law firm. Spanier and two other administrators face criminal charges, which they are fighting. Spanier has challenged the Freeh report and plans to sue. Both the university's handling of Sandusky, and its later acceptance of the Freeh report and NCAA sanctions, have provoked strong reaction among Penn State alumni. Pro-Paterno activists who reject Freeh's conclusions and the idea that the university and senior administrators share responsibility for Sandusky's assaults have been gaining influence on the Penn State board.

About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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