Chesapeake sells non-campus real estate
By: Sarah Terry-Cobo//The Journal Record//March 13, 2017
Chesapeake Energy Corp.’s most recent real estate sales signal CEO Doug Lawler is continuing to shed extraneous assets unrelated to oil and gas drilling, said Jason Wangler, managing director with Wunderlich Securities. Board Chairman Archie Dunham’s purchase of about 500,000 Chesapeake shares on March 8 is also a good signal, Wangler said.
Chesapeake’s affiliated real estate companies have sold nearly a dozen properties for about $6.43 million since Jan. 27, according to the Oklahoma County assessor’s website. The properties include the land on which Deep Fork Grill is located, several office complexes and four tracts of land, two of which are vacant. The 11 properties were purchased for about $12 million since 2005. The market value for the 11 assets is about $7.6 million, according to the assessor’s website.
Chesapeake spokesman Gordon Pennoyer said the company’s executives are pleased to have sold the properties adjacent to the Oklahoma City campus. There are a few remaining properties in the surrounding area that were purchased under prior leadership, he said.
David Chapman, finance professor with the University of Central Oklahoma, said Chesapeake co-founder and former CEO Aubrey McClendon had a vision for what he wanted in Oklahoma City and had a strong appetite for buying real estate. When the late executive bought land around the N. Western Avenue and Classen Boulevard area near the company’s headquarters, that drove up prices.
McClendon left the company in March 2013. Lawler has been focused on simplifying Chesapeake’s balance sheet since he took the helm in summer 2013. He spun off subsidiaries and sold real estate, in addition to selling oil and gas wells and land leases in less-profitable petroleum plays.
Chapman said the sale prices suggest distressed sales, which could lower nearby property values for a while. But the sales are a good thing, because the oil and gas driller wasn’t going to develop those properties, he said. So a developer could raise the value if she or he does something with the former Chesapeake properties, Chapman said.
Pennoyer said the remaining for-sale real estate is about 75 acres of commercially zoned and industrially zoned land on the south side of Wilshire Boulevard, north of Chesapeake’s campus. There are also tracts of land ranging from 5 acres to 60 acres near Interstate 40 and Radio Road in El Reno. McClendon pushed for an exit ramp there, where one former subsidiary has field offices.
Chapman said the land near the interstate will be a good investment for a potential buyer. There is more optimism in the oil and gas industry, since commodity prices began to stabilize.
“They (Chesapeake) will get what they paid for it, because that area is doing really well,” Chapman said. “When (companies) are not drilling, they’ll need places to store unused equipment for the next cycle.”
Wangler said he doesn’t follow Oklahoma City’s real estate market closely, but McClendon was known for wanting to get things done quickly. That led him to pay more to close deals expediently. The same was true when he bought oil and gas leases.
Even if Lawler lost money on the real estate transactions, it’s the right thing for the company, Wangler said. The sales give Chesapeake cash and helps simplify the driller’s asset base. Non-oil-and-gas-related properties and businesses take time, money and effort to manage.
Wangler declined to speculate on why Dunham recently spent about $2.6 million buying Chesapeake shares. But he purchased Chesapeake stock before when share prices were low.
“It’s always good to see management and board directors aligning with investors,” Wangler said. “It’s good to see them jumping in and giving confidence to the market, that he would see some additional value there.”
Dunham is an advisory board member of Newport Beach, California-based SAIL Capital Partners. A company representative did not return requests for comment by publication time.
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