Equitec Group Near Deal to Transfer Properties : Real estate: Hallwood Group may take over 27 choice assets of the Oakland financial services company, sources say.
Equitec Financial Group, a troubled financial services and asset management company based in Oakland, is getting ready to turn over 27 of its choice real estate properties to Hallwood Group Inc., according to Wall Street sources.
As part of the transaction--which is expected to be announced early next week--some 80,000 investors who own pieces of Equitec’s limited partnerships will receive shares of a new master limited partnership that is being formed. The new partnership units will trade on the American Stock Exchange, according to the sources, who added that the price of the units has not yet been determined.
“This deal gives Equitec investors an opportunity to survive and thrive, instead of facing oblivion,” says a source close to the transaction.
Equitec will receive slightly more than $5 million from Hallwood for its 1% interest in the partnerships. Hallwood will also replace Equitec as the general partner of the properties. The 27 properties are located in Anaheim, Atlanta, Baltimore, Bethesda, Md., Chicago, Sacramento, San Diego, St. Louis and St. Paul, Minn.
Thirteen of the properties are office buildings, seven are industrial parks and seven are retail outlets. As part of the deal, Hallwood will relinquish ownership of about 11 of Equitec’s less attractive properties.
A source says Hallwood, an international merchant banking company in New York that specializes in corporate rescues, believes that it has cleaned up the real estate portfolios of the Equitec partnerships so that the properties will have a positive cash flow. Hallwood feels its action will permit it to pay the limited partners a dividend starting the first year under new management.
“At the end of the day, people should have buildings that go up in value,” says a source. Equitec is endorsing the transaction, but at least 50% of the limited partners must approve the transaction before it can be implemented.
Hallwood’s stock is selling for about 47 cents a share on the New York Stock Exchange, having traded as high as $3.125 in the past 52 weeks.
Last fall, Hallwood announced that it would try to intervene in a bailout of Equitec, but no details have been announced since then.
Hallwood fancies itself as a “white knight” for troubled companies. It showed off its skills with Integra, a hotel and restaurant company that was formerly known as Brock Hotels. It also arranged a spinoff of ShowBiz Pizza Time Inc. from Brock, and it owns 15% of Heck’s, a West Virginia-based retailer that it helped rescue.
Sources say Hallwood will attempt to use the Equitec situation as a springboard for other deals involving real estate partnerships. “If this works, Hallwood sees it as a model that it can use in other distressed situations,” one source said. “This is an outside party coming in on a rescue basis. It’s not the same guys who messed up in the first place” trying to rescue the company. Pacificorp, the utility holding company based in Portland, Ore., owns about 49% of Equitec’s stock.