Wednesday, February 2, 2011

The Case for Debt Investment

The Case for Debt Investment

Thursday, January 27, 2011

ProLogis-AMB Merger Roundup

Warehouse Giant AMB Near Merger With Rival ProLogis ("WSJ")

ProLogis Confirms Ongoing Discussions Regarding Strategic Combination With AMB ("ProLogis")

AMB-ProLogis: ‘An Industrial M&A Shocker’ ("Deal Journal")

What the AMB-ProLogis Tie-Up Means for Real Estate ("Developments")

Deal Profile: AMB Nears Merger With Rival ProLogis ("Deal Journal")

AMB Property/ProLogis deal would be interesting but not indicative, analysts say ("SNL")

Potential AMB Property/ProLogis deal a merger or sale? ("SNL")

Potential AMB Property/Prologis Merger Comes as Operating Fundamentals are Strengthening ("Seeking Alpha")

Tuesday, August 24, 2010

RREEF: Investment Outlook: A Mid-Year 2010 Review The Bulls Have Taken Over the Investment Market!

RREEF Investment Outlook 8-10


Friday, August 13, 2010

Commercial Real Estate Ready to Move On Up?

James McCaughan, of Principal Global Advisors shares his view on CNBC.

Thursday, August 5, 2010


I haven't been a frequent Twitter user until recently. It is increasingly becoming a great way to consume news and media. If you user Twitter, you can follow me here. I do post a lot of links that I usually don't post on this blog.

Viva Las Vegas Building?

Dick Rizzo, from Tutor Perini Corp discussing whether there are signs of a bottom in Vegas construction on CNBC.

Wednesday, August 4, 2010

Undercover Testing Finds For-profit Colleges Encouraged Fraud

The Senate held a second hearing on for-profit schools today. This time focusing on the student recruitment experience. Gregory Kutz, Managing Director of Office of Forensic Audits and Special Investigations at the U.S. Government Accountability Office testified the GAO findings:
Undercover tests at 15 for-profit colleges found that 4 colleges encouraged fraudulent practices and that all 15 made deceptive or otherwise questionable statements to GAO’s undercover applicants. Four undercover applicants were encouraged by college personnel to falsify their financial aid forms to qualify for federal aid—for example, one admissions representative told an applicant to fraudulently remove $250,000 in savings. Other college representatives exaggerated undercover applicants’ potential salary after graduation and failed to provide clear information about the college’s program duration, costs, or graduation rate despite federal regulations requiring them to do so. For example, staff commonly told GAO’s applicants they would attend classes for 12 months a year, but stated the annual cost of attendance for 9 months of classes, misleading applicants about the total cost of tuition. Admissions staff used other deceptive practices, such as pressuring applicants to sign a contract for enrollment before allowing them to speak to a financial advisor about program cost and financing options. However, in some instances, undercover applicants were provided accurate and helpful information.
The entire report is attached GAO below.


Friday, July 30, 2010

Commerecial Real Estate in Distress

Citigroup global head of real estate Thomas Flexner discussing the state of commercial real estate on CNBC.

Brookfield Properties Becomes Brookfield Office Properties

Brookfield press release:

NEW YORK, July 30, 2010 – Brookfield Properties Corporation (BPO: NYSE, TSX) today announced a strategic repositioning plan to transform itself into a global pure-play office property company. The plan includes the acquisition of an interest in a significant portfolio of premier office properties in Australia from Brookfield Asset Management (BAM: NYSE, TSX, Euronext) as well as the divestment of Brookfield Properties’ residential land and housing business.

“This strategy will position Brookfield Properties at the forefront of the global office property scene,” stated Ric Clark, president and chief executive officer of Brookfield Properties Corporation. “Expanding internationally to dynamic gateway cities such as Sydney, Melbourne and Perth, Australia, with similar characteristics to our current North American markets, provides great operational synergies.”

Clark added: “Given its rich resource base and strong trading relationship with the world’s fastest growing economies, investment in Australia should put Brookfield Properties in a strong position to experience meaningful growth as the global economies emerge from the economic downturn. Following these transactions, Brookfield Properties will have leading office portfolios in each of the United States, Canada and Australia, as well as a modest but growing interest in the United Kingdom, transforming Brookfield Properties into the global security for investors looking for ownership in premier office assets.”

Australia Office Transaction
Brookfield Properties has agreed to enter into a transaction with Brookfield Asset Management whereby Brookfield Properties will pay Brookfield Asset Management A$1.6 billion (US$1.4 billion) for an interest in 16 premier Australian office properties comprising 8 million square feet in Sydney, Melbourne and Perth which are 99% leased. The properties have a total value of A$3.8 billion (US$3.4 billion).

Brookfield Properties’ board of directors established an independent committee to assess the transaction. The committee retained Morgan Stanley & Co., Incorporated as its financial advisor. The independent committee unanimously recommended that the board of directors approve the proposed transaction.

This transaction is expected to be completed in the third quarter of 2010 following the receipt of third party consents and approvals.

Brookfield Properties will fund the transaction from available liquidity of US$1.3 billion and from a US$750 million subordinate bridge acquisition facility from Brookfield Asset Management, which will be repaid from the completion of some or all of the following: asset sales, including a sell down of Brookfield Properties’ equity interest in its publicly-listed company Brookfield Office Properties Canada (TSX: BOX.UN), or other financing or capital activities.

A supplemental information package relating to this transaction is available on Brookfield Properties’ website at

Residential Operations Disposition
As a further step in the strategy of converting Brookfield Properties into a global pure play office company, the company announced that it intends to divest of its residential land and housing division. To this end, Brookfield Properties intends to commence discussions with Brookfield Homes Corporation (NYSE: BHS) regarding the possible merger of these operations with Brookfield Homes. Should the merger proceed, Brookfield Properties’ equity interest in the residential business would be converted into a listed security in the merged entity which Brookfield Properties would then dispose of through an offering to its shareholders. Brookfield Asset Management would commit to acquire any shares of the merged entity that are not otherwise subscribed for in the offering, thereby ensuring that Brookfield Properties will successfully dispose of its residential interests and receive full proceeds.

The above transaction would complete Brookfield Properties’ process of divesting of its residential land and housing business that commenced with the initial creation and distribution of Brookfield Homes in 2003. At the time, the current, largely Canadian business was relatively small and therefore retained within Brookfield Properties. Since that time, the operation has grown substantially and Brookfield Properties now believes that it is appropriate to separate the businesses, serving the dual purpose of furthering the strategic repositioning of Brookfield Properties and enhancing the value of the residential business through the creation of a diversified North American residential land and housing company.

Brookfield Homes, listed on the New York Stock Exchange with a market capitalization of approximately US$500 million, is a land developer and home builder focused primarily in California and the Washington, DC area markets. Brookfield Asset Management is the owner of approximately 82% of Brookfield Homes. Brookfield Asset Management has advised that it is supportive of the merger discussions. Any transaction would be subject to review by Brookfield Properties’ independent committee.

Name Change
To reflect this strategic repositioning, Brookfield Properties Corporation will begin operating immediately under the name “Brookfield Office Properties” and intends to seek approval at its next shareholder meeting to change its name to “Brookfield Office Properties Inc.” The company’s shares will continue to trade under the ticker symbol BPO on the New York and Toronto Stock Exchanges.

* * *

Brookfield Properties Profile
Brookfield Properties owns, develops and manages premier office properties. Its current portfolio is comprised of interests in 93 properties totaling 70 million square feet in the downtown cores of New York, Washington, D.C., Houston, Los Angeles, Toronto, Calgary and Ottawa, making it one of the largest owners of commercial real estate in North America. Landmark assets include the World Financial Center in Manhattan, Brookfield Place in Toronto, Bank of America Plaza in Los Angeles and Bankers Hall in Calgary. The company’s common shares trade on the NYSE and TSX under the symbol BPO. For more information, visit

Brookfield Asset Management Profile
Brookfield Asset Management, focused on property, renewable power and infrastructure assets, has over $100 billion of assets under management and is co-listed on the New York and Toronto Stock Exchanges under the symbol BAM and on NYSE Euronext under the symbol BAMA. For more information, please visit our website at

For more information, please visit our web sites at and or contact:

Brookfield Properties
Melissa Coley
VP, Investor Relations and Communications
Tel: 212-417-7215

Brookfield Asset Management
Katherine Vyse
SVP, Investor Relations and Communications
Tel: 416-369-8246

This press release does not constitute the offer of any securities.

Forward-Looking Statements
This press release contains forward-looking statements and information within the meaning of applicable securities legislation, including statements about Brookfield Properties' and Brookfield Asset Management’s beliefs and expectations relating to the Australia office transaction and a possible transaction involving Brookfield Properties’ residential land and housing business and benefits that are expected to be realized as a result of the transactions. There can be no assurance that any of the transactions will be consummated or that the anticipated benefits will be realized. Although Brookfield Properties and Brookfield Asset Management believe that the anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve assumptions, known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the companies to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements and information. Accordingly, the companies cannot give any assurance that their expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements and information include, but are not limited to, general economic conditions; local real estate conditions, including the development of properties in close proximity to their properties; timely leasing of newly-developed properties and re-leasing of occupied square footage upon expiration; dependence on tenants' financial condition; the uncertainties of real estate development and acquisition activity; the ability to effectively integrate acquisitions; interest rates; availability of equity and debt financing; the impact of newly-adopted accounting principles on the companies’ accounting policies and on period-to-period comparisons of financial results; and other risks and factors described from time to time in the documents filed by the companies with the securities regulators in Canada and the United States, including in Brookfield Properties’ Annual Information Form under the heading “Business of Brookfield Properties – Company and Real Estate Industry Risks,” and in each of the companies’ most recent “Management’s Discussion and Analysis.” The companies undertake no obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by law.

Thursday, July 29, 2010

RREEF: A Double-Dip Recession and US Commercial Real Estate

Recession US Commercial Real-Estate7-10


Wednesday, July 28, 2010

Can commercial real estate recover without securitization?

Scott Rechler, CEO of RXR Realty on CNBC discussing the outlook of commercial real estate.

Beige Book: Commercial and industrial real estate markets continued to struggle

From FRB:
Commercial and industrial real estate markets continued to struggle in all twelve Districts. Overall, vacancy rates were flat to slightly increased and continued to exert downward pressure on rents. Construction activity remained weak in most Districts. The New York District noted that commercial development remained generally sluggish despite some pickup in office and retail leasing in New York City. Atlanta, Minneapolis, and Dallas reported that construction activity continued to be weak or to decline, and Cleveland reported that the increase in construction from previous reports has begun to diminish. Philadelphia reported that projects funded with federal stimulus support were near completion with no prospects for additional major construction, while Chicago reported that public infrastructure construction picked up. Developers reported difficult credit conditions in the Cleveland, Richmond, St. Louis, and Kansas City Districts, while the Dallas District reported a few developers going out of business. The outlook for commercial and industrial real estate across the Districts ranged from further declines in activity to slow growth.

Thursday, July 22, 2010

Tom Barrack: Real estate has returned to the hands of real estate professionals.

A few weeks ago Colony Capital CEO Tom Barrack wanted you to read Twilight. This week he comments on commercial real estate. His latest blog post "Tiring and Boring" truly captures the current state of the commercial real estate market. An excerpt:
In summary, solid risk-adjusted returns will be made by true real estate professionals with the tools and the teams to plow and hoe. By being in the marketplace, we will sense when that next repricing opportunity exists and will avail ourselves of it. The business is not about inventing the next iPad or launching the largest leverage buyout. It is about showing up, doing a good job, harvesting reasonable returns for our investors (which will look strong in hindsight against other asset classes), and waiting for the repricing moment.

The fast money, high velocity, handsomely leveraged, quickly appreciating days of real estate investment are not in the near-term tea leaves. Real estate has returned to the hands of real estate professionals, not financial arbitrageurs, and most real estate opportunities in the US involve hand-to-hand combat on restructurings or intensive value-added implementation. In either of those two circumstances, the process is slow and low. It is an era of what real estate is supposed to be – singles and doubles. Home runs will be few and far between, while the World Series is still a bit in the future and only after a very long season of individual games, made up of individual innings, made up of individual at-bats.
Go read it now!

Wednesday, July 21, 2010

Time For Financial Institutions to Get Out of Commercial Real Estate?

Back in the late 90s, all the banks in Canada sold off its commercial real estate holdings. The conventional wisdom was that banks are in the lending business, not in the real estate business. Fast forward to 2010, a similar trend appears to be emerging in US.

Already we see that Dutch financial giant ING Group has put its entire real estate investment management unit for sale. The sale of its Canadian unit industrial REIT Summit REIT is so big that it has frozen the entire Canadian commercial real estate market. The largest non-bank financial institution in this country GE Capital wants to cut its $80 billion real estate portfolio in half and focus on its lending business.

In March, Citigroup agreed to sell its real estate investment business to private equity firm Apollo Management. Last week, WSJ reported that Blackstone group is set to take over management of Bank of America's Asia real estate fund.

The latest financial institution that's contemplating selling its real estate investment business is Morgan Stanley. According to WSJ:
The firm is considering what to do with its family of funds known as Msref, according to people familiar with the matter. One option could be to reduce its own capital in the funds, while another could be to sell them, the people said. They emphasize that planning is in the early stages and no decisions have been made.
I welcome this trend. It appears Morgan Stanley has already done its first sale. Maybe Goldman's Whitehall will follow?

Saturday, July 17, 2010

Weekend Roundup

Is Commercial Real Estate Bouncing Back? ("Time")

Some REITs Flee IPO Altar ("WSJ")

How FINRA Impacts REITs ("")

The accidental CMBS recovery ("Fortune")

A Tale of Two Refinancings ("WSJ")

Tom Barrack: RE workouts are ‘hand-to-hand warfare’ ("PERE")

First Half Deal Volume 3.2 Times Greater Than a Year Ago ("Commercial Real Estate Direct")

Commercial Property Sales Fall to One-Quarter of Prevailing Six-Year Average ("Real Capital Analytics")

The Mogul, Lost and Found: Developer Shaya Boymelgreen in the City of Second Acts ("The Commercial Observer")

Uncle Sam still saving D.C. real estate ("WBJ")

CoStar Reports Office Markets Have Bottomed ("CoStar")

Industrial Sector Lags Despite Manufacturing Gains ("NREI")

"Summer Doldrums," With Expected Slowdown In Dealmaking, Still Raise Many Conflicting And Contradictory Questions ("Shopping Center Digest Blog")

Miami's Downtown Comes Alive as Condos Fill With Renters ("Bloomberg")

Demand Drives Data Center Growth ("Crunched Credit")

Thursday, July 15, 2010

Grubb & Ellis CEO on Bloomberg

Thomas D'Arcy, chief executive officer of Grubb & Ellis Co., talks with Bloomberg about the commercial real estate market.

Tuesday, July 13, 2010

Deal of The Day: DC Senate Square Sells Again

For $41 million more than its auction price just five months ago. From Washington Business Journal:
The 432-unit Senate Square apartment building that sold at auction in February has traded hands again, selling for $162.3 million to LaSalle Investment Management.

Westbrook Partners sold the property, on the 200 block of Eye Street NE, for a whopping $41 million more now than its price at auction five months ago, fetching about $375,741 per unit.
Here's some background on the property. Senate Square was developed by troubled New York based Broadway Management Co. in 2007. The units were originally marketed as condos, but eventually all sold units were cancelled and the project was converted to a rental as a result of the housing market downturn. The property went into receivership in late 2009 and was put up for auction in February this year. According to DCmud, the sole bidder was the mezz lender, bidding $1 million, plus the $120 million outstanding note. Final auction price was approximately $280K/unit.

At $162 million, Lasalle is paying almost $376k per unit, 25% more than what Equity Residential paid for Dumont, another Broadway failed condo project located in a better submarket. I don't know what the average unit size is at Senate Square, but at $376k/unit, I would think the price is getting closer to the original condo sale price. Maybe Lasalle will convert the units back to condos, given the rumored condo boom in DC?

US Real Estate Still Struggling

Richard York from Real Capital Analytics: "There are tentative signs of recovery in the US real estate market, but there are still enormous challenges."

Monday, July 12, 2010

Short Sellers Continue to Show Interest in For-profit Schools

ProPublica has done some excellent reporting on the for-profit education industry. I certainly hope that retail landlords are doing their own due diligence before signing up for-profit schools as their tenants. In this piece ProPublica provides more insight into the role hedge fund managers are playing in this industry:
Short sellers have shown a steadily increasing interest in for-profit schools, according to Will Duff Gordon, an analyst at Data Explorers, a company that collects and analyzes data about short-selling. Since April, his company has also seen a spike in short positions in the sector, indicating a strengthening view that the stocks will fall. In general, short sellers place bets that a company's stock or some other financial instrument will decline in value.

"This is not an opportunistic bit of short selling," Gordon said of for-profit schools. "People have worked out that these companies are overvalued. They've put on bigger and bigger short positions as the price keeps going down. And they have been right because the price keeps dropping."

For their part, short sellers claim they are merely bringing to light the fundamental problems of an industry that survives in large part on taxpayer largesse.
Related posts:
A Trend I don't Appreciate

Sunday, July 11, 2010

Tom Barrack Wants You to Read Twilight?

If you've read this piece from WSJ's Development blog, you know that Tom Barrack, CEO of real estate private equity firm Colony Capital shared his insights into the vampire novel series Twilight with his employees in an internal company memo:
For you male Colonists, here is a brief synopsis. Stubborn teenage girl meets a handsome but moody vampire and against all odds they fall in love.

Here is my macho take – Stephanie Meyer is a total genius. As I flipped through the pages I was startled by the lack of detailed description of Bella and the surgical and illuminating development of Edward. As hard as I tried I could not really picture Bella, but I was grabbed by Edward’s character – gorgeous, super human, super strong, super fast and most importantly encompassing the wisdom of a 109-year-old man in the guise of a 17-year-old boy.

The description of Bella on the other hand, was not moving, or compelling. What I realized is the genius of Stephanie was that she knew that by keeping the character generic, any and every woman could climb inside and picture herself in Bella’s shoes. Thus the fascination and deep emotional reactions to what many (including myself) thought was a foolish teenage trashy novel.
Okay, I'm lost. When comes to Twilight, I'll admit I'm completely clueless. My only encounter with Twilight was at a dinner party a couple of years ago, when one of the guests commented how ridiculous the dialogues were in the popular vampire novel she just read. We then spent the entire evening making up silly dialogues and discussing how we could all become vampire novel writers. I certainly don't understand the recent Twilight Phenomenon and I definitely don't know the difference between Team Edward and Team Jacob.

But I do know Team Tom Barrack. With over $16 billion capital raised since inception in 1991, Colony Capital is one of the largest private equity real estate firms in the world. The firm is known to be an opportunistic buyer and is an active player in the NPL markets in Asia, Europe and North America. In recent years, the company has also been active in gaming, making several large casino acquisitions.

So does Tom Barrack really want you to read Twilight? Read through the long company memo, and you'll learn Tom Barrack's final point:
Here is my point. The idea of devoting half a day to reading these books was something that never, NEVER, entered my mind as something I would ever, EVER do. I hated them. I mocked them. It made no difference to me that over 20 million books were sold, movies made, and Team Edward and Team Jacob pandemonium had engulfed the world. I was simply stuck in my point of view.

Once I ventured into the books I learned something. I now understand why some women are emotionally altered from merely reading a book. I have also gained a deeper realization that understanding the circumstances and points of views of those with whom we are negotiating, working, living, loving or fighting is the key determinant factor in an enduring relationship.

In every day business, we think we know it all. We are the captains of our industry and we possess all the global knowledge. That which we don’t understand we push a button and it appears before us. We are lacking creativity…. it is hard for us to dream… harder for us to change our lives… hard to live in a situation that other people view as unconventional. And for sure, we all have no idea on how to be satisfied with the status quo.

It is time for all of us to become more creative, spend more time outside of the strict arithmetic cadence of our business, and understand foreign points of view. Most importantly we must really find the “moment”. Anticipation is everything. The process of getting to a destination is the objective and the more illumination, color, and vitality we give to the “road” the less important the final destination becomes. It will be what it will be!!!
I don't think I will rush out to get the Twilight novels. Tom Barrack may know a great deal about real estate, but when comes to popular literature, may I suggest The Girl with the Dragon Tattoo? The late Swedish journalist and writer Stieg Larsson was the best selling fiction author in the world in 2008 and the second best selling fiction author in 2009.

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