Ciri sheds real estate holdings

Posted: Friday, November 15, 2002

ANCHORAGE (AP) -- Cook Inlet Region Inc. has unloaded a huge slice of its real estate holdings over the last few years.

CIRI has exhausted the net operating losses that helped shelter the real estate income from taxes. Loss of the tax write-off, combined with a seller's market, prompted the Anchorage-based regional Native corporation to shed most of its properties.

''Our theory was twofold: CIRI's changing tax position made it less desirable to hold a portfolio of passive income-producing real estate, and secondly, we believed that prices were more favorable for sellers than buyers,'' said chief operating officer Mark Kroloff.

Real estate has been a steady performer for CIRI since the mid-1970s, when the corporation received a special right to bid on surplus federal property. Over the years, the company built a huge portfolio across the country.

CIRI began selling its real estate four years ago. In 1999, the corporation sold 2,300 apartments in the Southwest, Kroloff said. CIRI made $42 million from that, according to an annual financial report. Since then, CIRI has also sold business parks and office-warehouse complexes in the Lower 48, as well as office buildings in Anchorage.

The company still owns a commercial subdivision in Texas, an industrial park in Honolulu, and business parks in Albuquerque and Phoenix. CIRI plans to sell the Albuquerque and Phoenix properties when local business conditions improve, Kroloff said.

CIRI has sold all its Anchorage real estate except CIRI headquarters and an office building used by Cook Inlet Tribal Council, Kroloff said. CIRI had owned eight office buildings in Anchorage.

CIRI slimmed its real estate investments to $118 million last year from $242 million in 1997, according to the company's annual reports.

The Native corporation isn't getting out of real estate altogether. It's shifting focus from passive investments to development projects that, while riskier, can yield higher returns.

CIRI is involved in building upscale resort hotels near Las Vegas and in Arizona.

''We intend to remain active on a selective basis in real estate development, but I don't think we'll return to passive income properties,'' Kroloff said.

As CIRI cuts its real estate portfolio, other Native corporations are expanding in that sector to diversify revenue sources and become less dependent on natural resources and stocks.

CIRI starting building its real estate portfolio years ago and many of the properties had appreciated in value, Kroloff said.

The stock market downturn also factored into CIRI's decisions.

''There is a flight of capital from volatile stock investments to real estate investments,'' Kroloff said. ''As capital moves into that area, prices can be favorable for sellers. So we're selling,''

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