GeekyDad
Member
Well, selling your headquarters in the U.S. probably can't be seen as a sign of stability.
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Sony sells US headquarters for $1.1billion. Boost in operating income by $685 million
- Thread starter nickcv
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Well, selling your headquarters in the U.S. probably can't be seen as a sign of stability.
Even after countless explanations there are still some thinking this is a sign of Sony going under and not them trying to make changes to get some cash money. Mess
lunchwithyuzo
Banned
Not necessairly, that was only the case because they inhabited the property. If they'd leased it (whole or by unit), the building would've been far more valuable both through significant income and as a higher value asset (could be recorded at market value afaik). This is a short term move too since NYC real estate is pretty much a sure thing investment. Moreso than Gaikai or Olympus I'd argue.
I don't know if I'd really describe Midtown as "hot" or suggest a real shift in the area's desirability. This is just how NYC real estate works, it's insane. Even during the housing crash property values still kept climbing at alarming rates.
MWS Natural
Member
This.
What kills me is people say sony needs to focus and get their house in order. They do that and they say sony is doomed.
Apple was in a much worse position back in the early 90's and look at how they turned around.
That's because there's still no sign of this focus. When Jobs came back to Apple the first thing he did was shut down a ton of internally competing products, fired a ton of non-performing staff, killed the Mac clones and set about bringing the first iMac and iBook to market.
What exactly are Sony doing to right the ship?
Dreamgazer
Member
Not necessairly, that was only the case because they inhabited the property. If they'd leased it (whole or by unit), the building would've been far more valuable both through significant income and as a higher value asset (could be recorded at market value afaik). This is a short term move too since NYC real estate is pretty much a sure thing investment. Moreso than Gaikai or Olympus I'd argue.
I don't know if I'd really describe Midtown as "hot" or suggest a real shift in the area's desirability. This is just how NYC real estate works, it's insane. Even during the housing crash property values still kept climbing at alarming rates.
Mark to Market accounting currently only applies to securities/debts.
We hear about it relative to the sub-prime crisis due to banks being forced to mark to market on their mortgage loans. Nothing to do with actual real properties.
A long term asset, such as buildings not held for investment purpose, would still be recorded at cost.
Also, renting the building will not generate the instant capital that Sony wants.
How much money do you think they can make off of renting offices?
They sold a <200M book value building for 1.1 billion. NYC rent is not expensive to the point where it would "swallow up" 700M+ of cash in 3 years. We're also not accounting the rent expense deductions. In fact if they were dumb enough to sign for a lease that would take up that much cash, then their management should just perform seppuku.
There's also another thing you need to think about leasebacks.
Say Sony doesn't sell the building but still need large some of cash, what do you think their option would be?
They'll have to take out a loan.
Sony is not in that good of a financial situation to get a decent fixed rate loan.
Since their rates are likely to be high. As long as their rent is below, equal or just slightly above what their annual loan repayment is, they're actually making a better move without all of the hassle of a regular business loan (ex: maintaining certain equity ratios in the assets.)
You're essentially arguing that no one should sell their home cause they can make rent income.
(then there's also capital gain vs. ordinary tax rates, debt to equity ratios blah blah blah blah)
vivftp
Member
So far Kaz has done a fair bit to get them in the right direction. Here's a list of various transactions they've done over the past year:
-Sony bought out of the mobile joint venture with Ericsson for $1.47 billion dollars
-Sony sold off its shares in the LCD joint venture with Samsung for $939 million dollars
-Sony sold off its shares in the LCD joint venture with Sharp for $125 million dollars
-Sony buys EMI publishing for $2.2 billion dollars
-Sony announces a joint venture with Panasonic to develop next gen OLED TV displays
-Sony has pledged to invest about a billion dollars into CMOS development over the next year.
-Sony spun off its small to medium LCD business to join with Hitachi and Toshiba to form Japan Display Inc.
-Sony sold off some of its chemical business to the Japanese government for $730 million dollars.
-Sony bought Gaikai for $380 million dollars
-Sony invested $397 million into Olympus
-Sony is selling its US HQ for $1.1 billion now
They've focused the company on 3 main product categories - Mobile, Gaming and Digital Imaging. For mobile we are now seeing the first efforts of Sony Mobile in the form of the Xperia Z and ZL as opposed to all previous phones which were at least designed under the Sony Ericsson regime. For their very first efforts, they're off to an amazing start. For gaming, the Vita is still working to find its legs and we have the impending PS4... we'll see how that all works out. We do have an amazing service in Playstation Plus which launched under the Kaz regime. For digital imaging, Sony CMOS sensors can be found in the majority of their competitors products and they are one of the, if not the biggest player in the camera sensor world (correct me if I'm wrong). Under the Kaz regime we have seen amazing, industry leading/changing proucts like the DSC-RX100 and the DSC-RX1 Cybershots. In all 3 of those divisions, we're going to be seeing the fruits of their labour from this year onwards so it should be interesting to see how it all plays out.
On the TV front, Kaz has taken it upon himself to personally turn the TV business around. He's already done a great job by getting out of the panel producing business and instead Sony now purchases their panels on the open market which will help keep costs down as they can now shop around. Sony is leading the charge on the 4k UHD front with their TVs, home projectors, cameras both pro and prosumer, movie studios, theatre projectors, and an upcoming streaming service. They've got a great new tech in the form of triluminos displays to improve the colour accuracy of LCD screens to near OLED levels.
Anyways, it takes time to right a ship as large as Sony but in less than a single year Kaz has done a great job. Under his rule, Sony has gone from 4 straight years of losses to possibly earning a profit. He's also gone on the record of personally taking unique projects he thinks are winners under his wing to ensure they don't get lost in the shuffle in Sony. So far he's done a pretty damned good job, so at this point all I can say is give the man time and we'll see if he's the miracle worker we hope him to be.
Kazuo Hirai layed out a plan and direction, believe it or not, that is important. I work for a company that is also having financial struggles and is looking at the people that lead my company, I recognize how important an executive public address and appearance is.
Bought out the remaining stock of erricson, going full retard on its mobile devices.
Shutting down game studios that are not profitable or working hard enough. I'll miss you zipper, but socom is sadly like a battered wife. But still purchasing exclusive second party deals and buying companies like gaikai.
Outsourcing parts that don't provide any savings or profits but maintaining their led's, oled's etc production.
The building purchase was when they had money, the building sale is from when they needed money.
Their cost cutting alone has paid for their recent acquisitions. They're stopping the bleeding. The ps3 costing $599 wasn't really the problem, it was costing sony $900 to build one where the problem existed. Not including their lackluster of software/online approach because we are looking at their core business which is hardware.
Just before the new year their stock was dancing just below $9.50 and are about $12.70 into the new year. Throw in a small gain in the new quarter vs a loss in the last and yeah, they are on the right track one can only hope it continues.
Kind of. They'll spend a significant amount of the profit from this in getting a new space though at a price much higher than their original expenditure.
Dreamgazer
Member
lunchwithyuzo
Banned
Well I'm no expert but it's my understanding in NYC if a property is generating income (or potential income, such as it's on the market) it's often recorded at market value. Which isn't always a benefit financially.
I agree this is the best route to raising a large amount of capital fast, but this is also still a short term move and something I really doubt Sony would be resorting to if their credit wasn't in the toilet.
I also feel like you're undervaluing the notion of leasing a bit too much in your responses. Yes it would in no way generate the same short term cash infusion as this sale is and transitioning to landlord would definitely bring new expenses (for example Sony would likely lose any tax abatement they could have on the property) but NYC rents far, far exceed even market values. This is also prime real estate, within blocks of Apple, Dior, Bergdorf Goodman, H&M, MOMA, Saks, St. Patrick's Cathedral, and a ton of other flagship stores and institutions. It's basically the center of American shopping tourism. Sony could generate significant income going this route, long term.
Very well summed up..
People need instant result.. Only failure in his reign is VITA.. which i think will turn around .. although technically the hardware, the price, the games all were right at launch but the draught of games after launch really hurted. One Think which sony still lacks in is a good marketing buzz.
In order to maximize the value of the building as a rental property, it needs to be gutted and converted to residential/retail. Instead of contributing cash, it would burn cash until it was ready for lease. And Sony would have to learn to be a property developer and manager. I don't see how that plan makes any sense at all, especially for a company in Sony's precarious position. The last thing the need is an expensive distraction.
lunchwithyuzo
Banned
Not necessairily, there's still heavy demand for office space in Midtown and Sony could easily subcontract building management/maintenance, although it'd cut into rental income. And don't get me wrong, I'm not saying this is a good solution for big cash fast, it isn't. But some in the thread are acting like this move was strategically perfect and longer term term I feel that's very much questionable. If Sony's credit were better and as a result they had better access to capital, I doubt they'd be selling this property.
Haunted
Member
Well, they need the money now and this was a good opportunity to make some.
not really, Sony doesnt need 1.1 billion office.
and as to the rest:
http://www.nytimes.com/2013/01/19/n...eal-is-reached-to-buy-sony-building.html?_r=0
lunchwithyuzo
Banned
Way to not actually engage anything I've just said.
Dreamgazer
Member
Again, mark to market, the accounting method does not apply to long term assets like the Sony tower. I suspect you're thinking about property appraisals done by the local government, which only has a tax and market impact but no accounting/book impact. No one other than than the NY government or NYC real estate market cares or feels the impact about the market value of the building.
As for New York Real Estate - Is NYC retail space lucrative? yes. However, you're forgetting that only applies to retail space not office space. In other words, the 8000 or so square foof of public space used by Sony Style and wonderlab are the only space having prime rental opportunities (x3 if you go up may a few floors.) Everything above, the remaining 600-700K square foot space, isn't going to make you that much money. Midtown office space only averaged to around $60 per square foot as compared to the the 200-1000+ range for retail spaces. That's also not accounting for the 6-7% office vacancy that's been around since last year (correct me if this stat has went down.) Simply put, NYC office is not as lucrative and "in demand" as you think it is. Could it work if Sony was to something else like transient rentals? yes. However, as others pointed out, that would require Sony to get into a market they're not familiar with. Anyway, the point is - no one would ever sell anything if they don't have to. In this case, having rental income in the long term (not going to make all that in just 3-7 years), is not one of those "don't have to" reasons.
That being said, it still boggles my mind that no one has adopted the Asian style "department store towers" in nyc.
Well, the opinion of actual real estate developers is gut and convert to residential. From the times:
“This building has the right height and the right location to be a success,” said Mitchell Moss, an urban planner at New York University. “The only question is, what goes inside the building? The underlying appeal of that neighborhood has gotten so strong that it’s too expensive for a corporate headquarters.”
Many buyers said the Sony Building, now 30, will have to be gutted, which would cost tens of millions of dollars. They are considering a mix of uses, including hotels and high-end shops.
Mr. Witkoff confirmed that he had submitted a bid, with plans to convert the top of the tower to condominiums. “There’s no way that you can make sense out of this deal if it’s office space,” he said. “In my opinion, the only way it works is if the top goes residential. You’ll get the highest numbers from condominiums.”
lunchwithyuzo
Banned
You're right, but I'm not talking about MTM. I'm not sure what the exact term is, but essentially property is treated as inventory when it's income bearing (or potentially income bearing) and value can be based on the market. And again, I'm not sure if this is unique to NYC, and I'm also not in finance so I could certainly be getting wires crossed here somewhere.
And don't get me wrong, I'm not saying this is a surefire alternative, it would definitely be a complex process and incur additional costs, and it's not at all a short term windfall like sales. But even using your figures (which are a little low btw, Midtown offices averaged about $65 per square foot, with prime spaces like Sony's Madison ave building often netting upwards of $85-90 per square foot) that's still $36-52m annually for just offices. And ground floor retail on Madison is an easy $1.2k-2k/sq ft. I mean even at the most conservative estimates Sony could would be looking at a good $60-70m annually for the building, and that would be increasing each year really (at stupid rates). If Sony decided to rezone and redevelop for residental they could make significantly more as well. I mean, I guess my point is there's still good other options, long term options here, were Sony so inclined. We're talking about some of the most valuable real estate in the world.
Well, yes, of course they would. Welcome to New York.
Even after countless explanations there are still some thinking this is a sign of Sony going under and not them trying to make changes to get some cash money. Mess
As someone who's seen this move happen to multiple companies in the corporate world, it... Well you won't see the effects of this right away.
Every corporation writes its own history. All i will say that they are trying, it can work or it can fail miserably. Couple of hit products will all it takes and couple of more failures and they are history.
zomgbbqftw
Banned
To extract maximum value from the building, Sony would have had to spend a lot of money refurbishing it and turning it into a mix of apartments, a hotel, a shopping mall and a few floors of offices. That would not have been cheap, and even then they would be getting into business they are not geared up for, namely real estate leasing, it would require the creation of a new department and taking on a few hundred employees to look after the interests of said new department.
Selling up still extracts almost maximum value from the building and if Kaz has a rethink in the next couple of years, it is likely they will get somewhere cheap either on the other side of the bridge or up town. Sony have literally no need for a 43 storey building in Manhattan's prime real estate area and while the market is up, they should sell.
Look at Google, they just bought a piece of cheap land and are spending $1bn building a whole new campus in London (among the highest land and construction costs in the world) if Sony were to go to California they could easily get a massive campus built for $250m.
Selling up still extracts almost maximum value from the building and if Kaz has a rethink in the next couple of years, it is likely they will get somewhere cheap either on the other side of the bridge or up town. Sony have literally no need for a 43 storey building in Manhattan's prime real estate area and while the market is up, they should sell.
Look at Google, they just bought a piece of cheap land and are spending $1bn building a whole new campus in London (among the highest land and construction costs in the world) if Sony were to go to California they could easily get a massive campus built for $250m.
dragonfart28
Banned
So was everyone in the building laid off?
Or are they just taking the earliest flight to Cali?
Or are they just taking the earliest flight to Cali?
Sony Expected to Turn First Profit Since 2008
After years of red ink, things may be turning around for Sony. Projections have the company turning a profit for the first time since 2008.
After years of red ink, things may be turning around for Sony. Projections have the company turning a profit for the first time since 2008.
They only had to sell their HQ for that. Seriously, it looks like a nice deal, but you can´t repeat it that often.
Shadow of the BEAST
Banned
good job kaz.
thats one fucking ugly building.
zomgbbqftw
Banned
Unsurprisingly this is bullshit. They are basing their annual profit figure on the pre-sale projection which Sony have said will be adjusted to take into account the sale of the HQ.
Sony should show a net profit this year of over $1bn including the sale of the HQ and just under half that without the sale.
Fucking games journalists.
good job kaz.
thats one fucking ugly building.
You have bad taste.
MotorbreathX
Member
New Sony Real Estate division?
Where do you people pull this shit from.....?
zomgbbqftw
Banned
Yeah, but then they added their own bullshit "We've noted that Sony expects that profit to be somewhere in the range of $223 million when fiscal year results are revealed in March." Which is false, since the Sony said in their note that the original projection is now wrong due to the sale of the HQ.
Also, thestreet are wrong, the gain will be recorded in Sony's Q4 since the sale goes through on March 15th.
Yeah I agree but I don't think that Kaz has anything to do with the Sony Pictures side of things. They needed to hold on to a popular character/mascot/figure.
It holds back potential Disney/Marvel Spider-Man movies and cameos.
Does the sony spider man license also hold for animation films as well?
Good catch.