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Archive for the ‘Owners & Developers’ Category

There is an article in this week’s Philadelphia Business Journal about one of Texas-based Behringer Harvard’s Philadelphia assets.  BH owns, among other buildings downtown, 1650 Arch Street.  After having lost the real estate law firm Wolf Block (after its dissolution last summer) as one of its long term anchor tenants, the property faced significant challenges. While vacancy issues are a problem for all landlords (and can subsequently worry its tenants base…after all who wants to reside in a half empty building with a landlord who has to skimp on maintenance due to belt tightening?), BH showed that at the end of the day, cash is still king. Read the rest of this entry »

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As I’m sure most of you heard, yesterday Simon Property Group made an unsolicited offer to acquire General Growth Properties for about $10 billion, which translates to $6 per share in cash and $3 per share interest in Simon’s assets.  For those who didn’t realize, the largest mall owner in America just bid for the assets of the second largest mall owner in America.  While traditional fears of the issues a corporate monopoly could pose in terms of thwarting fair market competition do not really apply in real estate, there is an interesting parallel.  If a corporate company has a dominant market share in a given industry, it can lower the prices of its goods or services to undermine its competitors.  While it may lose money in the short term by setting prices below the supply/demand equilibrium, it will gain in the long term by driving its competitors out of business.  While  mall owners do not really offer any good or service to the public, the same effect could occur if Simon is successful.  After all, we’ve seen signs of it happening int he commercial real estate marketplace already… Read the rest of this entry »

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Maybe the Mortgage Bankers Association (MBA) needs to get an M.B.A. in real estate. As a recent Wall Street Journal article detailed, the company charged with helping borrowers source financing, drank their own financing Kool-Aid and succumbed to a tanking economy and real estate market.  Its one thing for an unknowing and unsuspecting homeowner to get a variable rate mortgage.  Its another for an organization of professionals taught to understand the pitfalls of such financing in an economy with unsustainable low interest rates.  The MBA sold their Washington D.C. headquarters, which they bough in 2007 for $79.1 million,  to commercial real estate data provider CoStar Group for just $43 million.

Rather than writing a blog post, I figured I would simply make the following comments, and let you, the reader respond with your own: Read the rest of this entry »

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The Burj Khalifa, known for much of its (seemingly decade long) construction period as the Burj Dubai, opened January 4th 2010 to much fanfare and fireworks, which were televised around the globe. It is the tallest tower the world has ever seen. It was supposed to serve as a metaphor for the grandiose and burgeoning man-made (and oil-financed) structures of the city of Dubai itself….a “Mecca” not just for the Arab world, but rather to for the industrialized world as well. It was supposed to attract tourists, all by itself, to a region that was lacking them desperately. But the name change it recently underwent at its grand opening turned out to be a metaphor for something else… Read the rest of this entry »

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Gretchen Morgenson, columnist for the NY Times wrote an article the other day referencing Tishman Speyer and BlackRock’s default on Stuyvesant Town and Peter Cooper Village.  Her point is essentially that Tishman Speyer and BlackRock were not the only investors who took advantage of credit in ’06 and ’07 to make the numbers work on multi-family properties.  Many smaller players had a similar strategy in which they would make highly leveraged acquisitions and ratchet up rents aggressively not only to meet debt obligations but achieve stellar equity returns as well.  Morgenson draws attention to Vantage Properties, an owner of 9,500 rental units in NYC whose strategy has been to acquire rent controlled apartments and ratchet up rents quicker than scheduled to achieve the returns required by Vantage and its equity partner Area Property.  Vantage began to operate in an ethical “gray area” to carry out this strategy.  Will lawsuits and foreclosures in a depressed CRE market trigger the ethical conscience of owners? Read the rest of this entry »

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In her latest blog entry, a woman named Megan McArdle took a brave stance!  She said that Tishman and Blackrock’s collective decision to buy Stuyvesant Town for $5.4 Billion was a “…breathtakingly stupid deal.”

Well, if it was the largest commercial real estate trade of all time, then she’s about the biggest Monday-morning-quarterback of all time.

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Editors Note: This post is the first in a three day, three person opinion on the aftermath of the Stuyvesant Town/Peter Cooper Village deal going kaput. Today Dave Jacobs writes about its effect on the capital stack. Tomorrow Rich Weidel examines the effect on the CMBS market. Thursday, Dave Weinstein will explore the world of risk/reward. Stay tuned and enjoy!

So by now I’m sure you’ve heard about Tishman Speyer giving back the keys (deed -in-lieu of foreclosure) to its creditors on the Peter Cooper Village/Stuyvesant Town Apartment deal in Manhattan.  Once the largest price ever paid for a residential building in the world (a record $5.4 billion dollars in 2006) to original developer and seller MetLife Insurance, it is now the poster child for capital market chaos and rapid devaluation.  Rather than tell the sob story again, we’ve decided to look specifically at how this transaction was capitalized, and how it will soon be capitalized. Read the rest of this entry »

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Wondering how to squeeze some more liquidity from credit markets still thawing at a glacial pace? The solution may lie in your property itself. Traditionally a developer apportions 100% of the cost of improvements among initial buyers. Each buyer then has no choice but to pass along these costs to future buyers. What if there were a way to share such burden with future buyers of your asset, and capitalize on it today? Read the rest of this entry »

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I recently read about NYU’s purchase of the Forbes building at Fifth Avenue and 12th st. in NYC.  As an NYU grad, I’m well aware of the University’s proclivity for buying prime real estate with income derived from obscenely high tuitions.  In hearing about the University’s new buy, two thoughts immediately crept into my mind: 1) Why was I such an idiot for paying such a ridiculously high tuition, and 2) Doesn’t it seem like universities are the best buyers of real estate in the current climate?  Few people probably care about my personal foibles, so I will not dwell on the first thought.  But in a commercial real estate market where everyone is wondering where momentum will come from, the second thought deserves further consideration.

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We’ve been hearing more and more stories about commercial real estate owners handing the keys back to the bank on properties that are under water.  We’ve heard even more stories about banks extending financings so that they don’t actually have to take those keys back.  The reason being that banks are not in the business of owning real estate, they are in the business of taking deposits and lending those deposits out to make interest revenue.  With the economy in the doldrums, this is happening not just in the real estate world, but the corporate world as well.  Many companies are giving up huge stakes in their business to their commercial lenders to alleviate indebtedness.  Wouldn’t banks like to take advantage of some of the opportunities that are falling into their laps?

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