REIT Takes Breather to Earn Back Money

BINGHAM FARMS, MI-Malan Realty Investors, Inc. says it will focus on sellingproperties to pay down debt, has halted new investments and has settled of a lawsuit with Grand Sakwa Properties of Farmington Hills, MI. Recognizing the substantial debt maturities facing the company, Malan’s primary focus will be on retiring debt through the sale and refinancing of currently owned properties, the board of directors says.

The company intends to use any net proceeds from property sales and refinancing activities primarily for the retirement of debt maturing during the next two-and-a-half years.

“While we expect to sell properties in relatively small portfolio groupings, Malan will consider larger transactions, including the sale of all properties or the entire company if opportunities are presented that we believe are in the interest of the shareholders,” says CEO Jeffrey Lewis.

The plan also calls for a cessation of new investment in real estate, other than reinvestment and redevelopment of properties already owned by the company, until the property sales and refinancing activities are completed. Further, Malan may have limited ability to repurchase its common stock during this period.

The amount of cash Malan will be able to pay out each quarter could fluctuate as a result of these sales and refinancing activities. As a result, future distributions could include return of capital and capital gains from property sales.

Meanwhile, the board also approved a settlement agreement with its former joint venturepartner, Grand Sakwa Properties.

“Resolving this matter was critical to enabling the company to market our Farmington Hills property without the encumbrance of a lawsuit,” Lewis says. “We exited the litigation because we have serious indications of interest in the property, and we wanted to clear the path for constructive and forward-looking discussions.”

The suit surrounded the planned redevelopment of up to 90 acres at the intersection of Orchard Lake Road, Northwestern Highway and 14 Mile Road in Farmington Hills. Grand/Sakwa filed suit in June seeking to nullify a joint development agreement. Malan filed a counterclaim seeking specific performance of the agreement, alleging breach of contract.