Dispatch Calls the Future! ... Hey, give me some credit. Last week's Dispatch (June 25) began with the heading Cash Flow Rules. And the very next day, WorldCom announced an accounting "oversight" that reduced its net income by $3.8 billion. Oops.

Immediately after the disclosure, research analysts documented the impact on public pension portfolios nationwide. But what about the impact of WorldCom's shaky finances on real estate debt and equity investors? Well, Realpoint, a division of GMAC, turned out a Realpoint Alert within 48 hours. And by coincidence, last week I was visiting both Realpoint and MortgageRamp at GMAC's campus in Horsham, PA, while the story was breaking.

Realpoint's Rob Dobilas later sent me a copy of the report. Twenty-six CMBS (Commercial Mortgage-Backed Securities) portfolios with a total unpaid balance of $25.72 billion include loans on properties leased to WorldCom or an affiliate. However, the largest exposure seems to be only about five percent of a 49-property portfolio. The Alert contains an amazing table showing each relevant loan with property, location, square footage and occupancy percentage, among other data.

Realpoint's Alert notes that five REITs have the most significant exposure to WorldCom: Highwoods Properties (3.9% of annual rent), Parkway Properties (2.4%), Prentiss Properties (2.0%), PS Business Parks (0.8%) and Reckson Associates (2.5%). Highwoods' 3.9% exposure consists of "a considerable block of 816,052 square feet leased to Intermedia Communications and a 1.0% exposure to WorldCom itself through 17 leases totaling 240,250 square feet." I visited each REIT's web site, but as of Saturday, June 29, 2002, only Parkway Properties had posted news documenting its WorldCom exposure. Welcome to the brave new (semi-) transparent world of real estate.

The Straight Story... Need more real estate research? Please patronize these Featured Links in the PikeNet Research "Channel" -- PlainVanillaShell.com, Reis, ComValAVM, National Real Estate Index and Real Capital Analytics. Click "Research" on the PikeNet home page. Thanks!

--Peter Pike