Monday, February 26, 2007

Paperstand (UTK, TXU) updates UTEK (UTK) story, which they originally ran in Oct’06. According to the article, the top co in UTEK’s securities portfolio has encountered a series of setbacks in its attempt to commercialize a powder-coating technology for kitchen cabinets, bathroom vanities and other wood products. Trio Industries Group (Pink Sheets: TRIG) has been evicted from its offices in Dallas. Its phone and fax numbers have been disconnected and it no longer has control of the 650K-sq-ft building that it hoped to convert to a wood products plant. UTEK licenses technology from govt and university labs and transfers it to other co’s. UTEK has done 5 such deals with Trio and has received 7.79M shares of Trio stock. UTEK valued that stake at $11.6M on Sept. 30, making the shares the biggest single holding in a stock portfolio it valued at $55.7M.

The WSJ reports that a total of 6 private equity firms have signed a deal to buy utility powerhouse TXU (TXU) for $32bn plus more than $12bn in TXU debt. TXU directors last night voted to recommend that shareholders approve the deal. In a creative twist, the firms have moved quickly to pre-empt opposition from powerful environmental groups while seeking support from various regulators and politicians. Already, the potential buyers have promised to cancel plans to build all but 3 of the co's proposed 11 coal-fired plants. And they are planning to placate consumers with rate reductions.

“Heard on the Street” column out on REITs, saying it is being uttered by many investors: "If Sam Zell is selling, I should, too." The real-estate legend's decision to sell his Equity Office (EOP) has been viewed as proof that office REITs were too richly valued. Adding to the anxiety is the word that several REIT execs exercised options or sold shares this month, including Boston Properties (BXP) Chmn Mortimer Zuckerman, who sold $75M of stock in a single day. Yet, investors shouldn't make too much of these signals. While they should be cautious, and refrain from flooding into the office-REIT sector, they don't need to worry about whether to hold their positions for a while. Some of the biggest portfolio managers of REIT funds took their cash out of Equity Office and plowed some of it right back into office REITs instead of choosing other kinds of REITs, such as hotels or shopping malls, or letting their cash levels rise. That is b/c, despite an incredible run in the stocks in the past 6 years, some upside may remain. With relatively few new office buildings under construction, rental rates in certain office mkts are expected to increase significantly in the next 2 years. That should give office landlords the opportunity to renew leases at higher rates, likely increasing future cash flow. These mkts tend to be where some highly regarded office co’s including Vornado (VNO), SL Green Realty (SLG) and Brookfield (BPO), have most of their assets.

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