Business Highlights

AP News
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Posted: Feb 28, 2011 6:02 PM
Business Highlights

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Fewer people sign contracts to buy homes in Jan.

WASHINGTON (AP) _ Fewer Americans signed contracts to buy homes in January, the latest evidence that the housing market is struggling to rise above depressed levels.

The National Association of Realtors says its index of sales agreements for previously occupied homes fell 2.8 percent last month to a reading of 88.9, the second straight monthly decline.

The reading was higher than the 75.9 reading from June, the low point since the housing bust. But it's below 100, which is considered a healthy level. The last time it reached that point was in April, the final month people could qualify for a home-buying tax credit.

Sales of previously owned homes fell last year to the lowest level in 13 years. Economists say it will be years before the housing market fully recovers. High unemployment, strict lending standards and a record number of foreclosures are deterring potential buyers, who fear home prices haven't reached the bottom.

Contract signings of previously owned homes are usually a good indicator of where the housing market is heading. That's because there's usually a one- to two-month lag between a sales contract and a completed deal.

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Tax cut has little impact on economy in January

WASHINGTON (AP) _ A Social Security tax cut that economists say should help the economy this year is off to a slow start. Consumers increased their spending last month at the weakest pace since June, even with the extra money in their paychecks.

Some people may be using the additional money to pay down holiday credit card bills or higher gas prices, analysts said. And harsh weather may have deterred some people from shopping in January.

Personal finance experts say the real test of the tax cuts impact will come this spring, when the Easter holiday sales begin.

Still, consumers increased spending by only 0.2 percent in January, the smallest gain since June, the Commerce Department said Monday. At the same time, their incomes rose 1 percent _ the biggest jump in nearly two years and a reflection of the tax cut.

The increased income is part of an additional $110 billion that economists say workers will receive this year from the cut in their Social Security taxes. Most families will see about $1,000 to $2,000 in extra income. Households with two high-income earners could receive up to $4,000 more.

In December, when President Barack Obama signed the tax cut as part of a broader tax package, economists predicted Americans would spend about two-thirds of the extra money and save the remaining one-third. Higher-income taxpayers were expected to save a little more; lower-income households would spend a bit more.

Economists said the extra spending would help boost growth and could lead businesses to hire more. Still, all that was before tensions in the Middle East sent oil prices spiking. And a surge in global commodity prices is now expected to push U.S. food prices up slightly this year, too.

Many analysts say such inflation could siphon off most of the benefit of the tax cut. Several scaled back expectations for growth Monday after seeing January's disappointing report.

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Ventas buying Nationwide Health for $5.8 billion

NEW YORK (AP) _ Ventas Inc. said Monday that it will buy Nationwide Health Properties Inc. in a $5.8 billion stock deal, creating the nation's largest health care real-estate investment trust.

The Nationwide purchase solidifies Ventas' position as a leading owner of senior housing communities, along with real estate properties including skilled nursing facilities, hospitals, and office buildings. The move also will make the company more diverse, combining Ventas' health care facilities with Nationwide's focus on senior housing and long-term care facilities.

The company will have more than 1,300 assets in 47 states, the District of Columbia, and two Canadian provinces. That includes operating 643 senior housing facilities and 379 skilled nursing facilities.

Ventas said private pay sources will account for 70 percent of the company's net operating income. Meanwhile, senior housing will account for about 55 percent of the combined company's net operating income, with skilled nursing facilities and medical office buildings accounting for about 22 percent and 11 percent, respectively.

Health care is one of the fastest growing segments of the economy, and both companies foresee growth as the population ages with the first wave of 79 million baby boomers turning 65 in 2011. Health care spending is projected to grow to 20 percent U.S. gross domestic product by 2019, from about 18 percent today.

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US approves first deep-water well in Gulf

NEW YORK (AP) _ The U.S. has approved the first deep-water drilling permit in the Gulf of Mexico since last year's massive oil spill.

The Bureau of Ocean Energy Management, Regulation and Enforcement announced Monday that it issued a permit to Noble Energy Inc. to continue work on a well about 70 miles southeast of Venice, La.

Noble started drilling the well four days before the Deepwater Horizon exploded. Drilling activity was suspended on June 12 under a moratorium the U.S. placed on exploration in waters deeper than 500 feet.

No new deepwater permits had been issued since the moratorium was lifted in October. Regulators have been under pressure from the oil industry and some lawmakers to get drilling projects started again in the Gulf while ensuring that new safeguards were in place.

Director Michael Bromwich said that regulators approved the permit after the company demonstrated it is capable of containing a well blowout. Noble contracted with the Helix Well Containment Group to use its emergency capping stack to stop the flow of oil in case it loses control of a well.

Another emergency containment solution, offered by a consortium led by Exxon Mobil Corp., was announced earlier this month.

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China's holdings of US debt jump 30 percent

WASHINGTON (AP) _ China, the biggest buyer of U.S. Treasury securities, owns a lot more than previously estimated.

In an annual revision of the figures, the Treasury Department said Monday that China's holdings totaled $1.16 trillion at the end of December. That was an increase of 30 percent from an estimate the government made two weeks ago.

The government made the change to its monthly report based on more accurate information it obtains in an annual survey. That survey more does a better job of determining the actual owners of Treasury securities.

China was firmly in the top spot as the largest foreign holder of U.S. Treasury debt even before the revisions. But the big increase in Chinese holdings could ease fears that Chinese investors might begin dumping their U.S. holdings. Such a development could send U.S. interest rates rising. That would slow America's economic recovery and increase Washington's costs for financing the $14.3 trillion national debt.

China and Britain were the countries with the biggest revisions in the new report.

The amount of U.S. Treasury securities held by Britain fell to $272.1 billion in the new report. That's a drop of $269.2 billion from the last monthly report which put the Britain's holdings of U.S. debt at $541.3 billion. The holdings of the two countries often show big revisions when the annual report is released.

The reason for the change is that Chinese investors who purchase their Treasury securities in London are often counted as British investors. The more detailed annual report does a better job of tracking the countries in which investors reside as opposed to the location where investors make their purchases.

Even with the revision, Britain remained the third largest holder of U.S. Treasurys.

Japan had the second highest foreign holdings, totaling $882.3 billion at the end of December. The revision was only slightly below the original estimate.

The total foreign holdings of Treasury debt stood at $4.44 trillion at the end of December, according to the new report. That's up 1.5 percent from the estimate made two weeks ago. About two-thirds of U.S. Treasurys owned overseas are held by foreign governments and central banks.

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St. Joe shakes up board amid shareholder pressure

LOS ANGELES (AP) _ Fairholme Capital Management founder Bruce Berkowitz's bid to replace the board of directors of Florida landowner St. Joe Co. ended Monday with the ouster of the company's CEO and three other directors.

The Fairholme Fund _ a mutual fund and St. Joe's largest shareholder _ also got to name four new board members, including Berkowitz, and agreed not to pursue any more changes to the board.

The remarkable turn of events comes as St. Joe, based in Jacksonville, Fla., weighs its strategic options, including a possible sale, after suffering massive losses during the real estate downturn.

St. Joe President and CEO Britt Greene, who has been with the company for 13 years, resigned his seat on the board Monday. He will step down as president and CEO later this week, the company said.

Also due to resign this week are directors Michael Ainslie, John Lord and Walter Revell.

In addition to Berkowitz, Fairholme named three other new directors: Fairholme Capital Management President Charles Fernandez, former Florida Gov. Charlie Crist and Carnival Corp. Chief Operating Officer Howard Frank.

Surviving the board shakeup were Hugh Durden, Thomas Fanning and Delores Kesler.

Less than two weeks ago, Berkowitz released a letter to St. Joe shareholders where he argued the entire board needed to be replaced in order to turn the company around.

The fund manager even reserved a website _ takebackjoe.com _ for the campaign.

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Health Care REIT in $2.4B Genesis property deal

NEW YORK (AP) _ Health Care REIT Inc. is buying the assets of rehabilitation facility and nursing home operator Genesis HealthCare for $2.4 billion in the second major health care real estate deal announced Monday.

The Toledo, Ohio, company said it will buy all of Genesis' real estate assets, which include 147 post-acute care, rehabilitation, assisted living and long-term care services in 11 states across the Northeast and Mid-Atlantic regions. It will have an option to buy a 9.9-percent stake in Genesis for $47 million. Genesis of Kennett Square, Pa., will continue to run the facilities.

Health Care REIT is buying the assets from JER Partners and Formation Capital LLC. The boards of Health Care REIT and Genesis have both approved the deal. The company said it expects the sale to close during the second quarter assuming regulators approve.

The company said it plans to sell 25 million shares of stock and $625 million in convertible preferred stock to finance the deal. The underwriters of that offering will have an option to buy as much as 3.8 million common shares and $93.8 million in preferred stock to cover any over allotments. Health Care REIT also obtained a commitment for a bridge loan worth as much as $2.4 billion.

Health Care REIT said it expects $198 million in rent in the first year after closing. The deal is expected to increase its annual funds from operations by 39 cents per share. Funds from operations, which adds in such items as amortization and depreciation, is considered key to measuring the financial performance of real estate investment trusts.

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Live Nation's loss for 2010 more than triples

LOS ANGELES (AP) _ Live Nation Entertainment Inc., the concert promoter that merged with Ticketmaster last year, said Monday that its net loss for 2010 more than tripled as concert attendance fell and ticket sales for other events also declined.

The annual net loss through Dec. 31 hit $228 million, or $1.39 per share, from $60 million, or 73 cents per share, a year ago.

The company did not break out the quarterly loss. But its cumulative net loss over nine months through September was $95 million. With 164 million shares outstanding, that amounts to 58 cents per share.

Revenue in the quarter fell 2 percent to $1.24 billion and was down 9 percent for the year at $5.06 billion.

Analysts surveyed by FactSet expected Live Nation to post a quarterly adjusted loss of 17 cents on revenue of $1.12 billion.

For the full year, analysts expected revenue of $4.95 billion.

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Libya oil chief: Production down 50 percent

CAIRO (AP) _ Libya's oil chief said Monday that production had been cut by around 50 percent, and argued it was safe for foreign oil workers to return after a mass exodus sparked by Moammar Gadhafi's increasingly violent campaign to retain control of the country.

The assurances by Shukri Ghanem, the head of the state-run National Oil Co. and Libya's de facto oil minister, came as uncertainty swirled about the state of the OPEC member's production and who was actually in control of the brunt of the nation's oil. Libya sits atop Africa's largest proven reserves.

The country is the only member of the Organization of the Petroleum Exporting Countries so far seriously affected by the protests roiling the Arab world, and unrest there has sent shudders through global oil markets.

Ghanem claimed that the government in Tripoli remained firmly in control of the country's oil installations _ from fields to refineries and pipelines. He rejected an assessment put forward by EU Energy Commissioner Guenther Oettinger on Monday that Gadhafi had lost control of the country's main oil and gas fields.

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By The Associated Press

The Dow Jones industrial average gained 95.89 points, or 0.8 percent, to close at 12,226.34. The Standard and Poor's 500 rose 7.34, or 0.6 percent, to 1,327.22. The Nasdaq composite rose 1.22 points, or less than 0.1 percent, to 2,782.27.

Benchmark West Texas Intermediate crude for April delivery lost 91 cents to settle at $96.97 per barrel on the New York Mercantile Exchange. In London, Brent crude fell 34 cents to settle at $111.80 per barrel on the ICE Futures exchange.

In other Nymex trading, heating oil for March delivery fell less than a penny to settle at $2.9389 per gallon and gasoline futures for March delivery fell 1.59 cents to settle at $2.8927 per gallon. Natural gas for April delivery added 3.2 cents to settle at $4.037 per 1,000 cubic feet.