Real Insight. Real Estate.

Archive for the ‘Top 10 Lists’ Category

Hint: Stuy-Town's not the biggest

Toward the end of last year, Jerry Ascierto of Apartment Finance Today published a list of the largest multi-family real estate transactions to have taken place in the ‘oughts.’  It’s no surprise that many of these deals were acquisitions of REIT assets considering few private owners own as many units as the large public companies.  The most interesting transaction in the list, in my opinion, is the #1 largest multi-family deal; not because of its size, but because the deal went through in spite of a collapsing CMBS market.  That deal was a harbinger of things to come.  When CMBS financing was unavailable, Fannie and Freddie stepped in to push the deal through.  Hmmm…that sounds like every other multi-family deal that has traded since then.

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For this week’s top ten, Llenrock is looking back at some of the largest M&A deals of the past decade involving a REIT on either side of the deal. While these top ten deals all carry substantial price tags, they are only a small fraction of the $215 billion in total transactions from 2004 to 2009. Not surprising, there were no deals done in 2009. For the complete list of deals see REIT.com’s statistical publications page.

10. Blackstone Group LP acquires CarrAmerica Realty Corp. $5.6 bil
Deal Completed on Jul. 13 2006

9. SL Green Realty Corp. acquires Reckson Associates Realty Corp. $6.0 bil
Deal Completed on Jan. 25 2007
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Llenrock has sifted through the data of Forbes’ list of top paid executives to bring you the top paid CEOs of commercial real estate investment firms from 2009.

5. Adam S Metz - General Growth Properties - $3.78 mil
Adam S Metz, at 48 years old, has been CEO of General Growth Properties (GGP) for one year. General Growth Properties has been in the shopping center business for over fifty years. One of the nation’s largest REITs, General Growth owns, develops, operates, and/or manages shopping malls in 44 states.

4. David Simon - Simon Property Group - $4.88 mil
David Simon, at 47 years old, has been CEO of Simon Property Group (SPG) for 14 years. Simon Property Group, Inc. is an S&P 500 company and the largest public U.S. real estate
company. Simon Property Group operates from five retail real estate platforms: regional malls, Premium Outlet Centers,
The Mills, community/lifestyle centers and international
properties. It currently owns or has an interest in 387
properties.
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The PERE 30 (from Private Equity Real Estate Magazine) revealed that the top 30 real estate private equity firms raised $211.9 billion over the past five years, up from $190 billion as calculated by last year’s ranking. Listed are the top 10 largest real estate private equity firms.

As a note: the top two largest firms raised $25.6 billion and $20.15 billion respectively in dedicated real estate funds between January 2004 and April, 2009. Together the pair raised a fifth of all the direct-investment capital secured by the world’s 30 largest real estate private equity firms.

10. Westbrook Capital Partners
Westbrook has raised and invested $10 billion of equity in over $35 billion of real estate transactions in major markets throughout the world. Westbrook’s investment equity is committed by a broad base of institutional investors, which includes public and private pension funds, endowments, foundations, and financial institutions.

9. The Carlyle Group
The Carlyle Group is one of the world’s largest private equity firms, with more than $87.9 billion under management with funds across four investment disciplines (buyouts, growth capital, real estate and leveraged finance). Carlyle has committed more than $3.6 billion of its own capital to its funds.
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10. You aren’t in control More recently as we watch credit card companies increase rates, banks penalize their best customers, and governments shift and change policies on a regular basis we learned another valuable lesson: credit should be used as a safety net, not a crutch. With guidelines and terms of use left largely to the whims of corporate giants and legislators, you can be left feeling like a puppet on a string. The big lesson here: it’s their game, and they can change the rules whenever they want.

9. Optimism vs. blinders There is a big difference between optimism regarding investments, business trends, and economic forecasts, and just moving blindly ahead assuming that economic conditions will remain positive. Bubbles burst, businesses fail, and jobs are lost. It is a fact of economic life that we often lose sight of risk during the euphoria of the good times, and it can be a costly lesson that is all too clear when we are on the financial downslide.
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10. Mellon Bank Building 150,979
The Mellon Bank Building is a 54-story skyscraper. The height to its structural top is 792 ft. About half of the available space is for sublease.
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President Obama, in his recent State of the Union Address asserted that, “the worst of the storm has passed, but the devastation remains.” Of course, Obama was referring to the economy in general, however, there are some indicators in particular real estate markets that seem to support the president’s assertion. In December, CNBC.com published a list of housing markets most likely to have hit bottom. CNBC did not rank the list, however, based on the numbers, below are what I believe to be the the top 10. The criteria for the ranking was a combination of the overall decline in prices by percent, number of months with year-over-year favorable change, last year’s overall change, and December’s month-to-month change.

10. Philadelphia, PA
Fall from peak: 10.6%
Months with YoY favorable change: 7
Current YoY change: -4.1%
Current month-to-month change: N/A

9. New Haven, CT
Fall from peak: 13.5%
Months with YoY favorable change: 8
Current YoY change: -1.3%
Current month-to-month change: 0.8%
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Half way through 2009, we posted a list published by CNBC.com of the largest bank failures we had seen to that point.  I thought we’d revisit this topic since the second half of ’09 proved to be even worse.  To put things in perspective, consider this: Silverton Bank, which was the second largest failure on CNBC’s list in July just barely made their new version of the list at #10.  8 of the 10 banks on this list went under in the second half of ’09.

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Happy New Year!  Llenrock’s New Year’s Resolution is to stay away from deals in 2010 that were as catastrophic as these turned out to be.  What’s your new year’s resolution?

5. Iceland & Ireland Lenders - Investing in Iceland and Ireland: Two years ago, these plucky little island nations were the toast of Europe. Now they’re just toast, undone by continent-size bank debts and, in Ireland’s case, a real estate bubble to boot. Good news for travelers: they’re a lot cheaper to visit now. Read the rest of this entry »

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As we round out 2009, one of the most interesting top 10 lists we could conjure deals with all of the various changes in the capital markets as it pertains to the commercial real estate sector.  The availability of capital has diminished significantly, and for capital that remains available, return requirements, interest rates and loan terms have all changed substantially.  Let’s take a look at the top 10 changes:

10. Shorter amortization periods for fixed rate loans by 5-10 years - Many banks have cut back the amortization schedules on loans from 30 years to 25 years, and from 25 years to 20, or even 15 years in some asset classes. Shorter amortization periods means more expensive annual debt service payments.  This of course has a subsequent effect on cash flows as well as tradition debt service coverage ratios.

9. More equity deals being structured with debt-like components - Equity partners have shifted much of the weight of their return to their preferred position.  This, of course, means that they face losing significant upside on strong deals.  However, they seem to be happy to trade that upside return potential for greater security of their minimal required return.

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