The Dirt Lawyer's Blog Archive

I was sad to read today that Studs Terkel "checked out" at the ripe old age of 96. He was a brilliant, amazingly inquisitive writer and an engaging personality. I was fortunate to have about half an hour alone with this legend in the 1980s. I didn't know at the time how lucky I was. He was in town narrating Lincoln Portrait and I was a member of the Knox-Galesburg Symphony at the time. We (and maybe one other person, as I recall) were the only people in the green room while the rest of the band was playing. I do recall being a little awed, and speaking about history and music -- jazz in particular. He was as kind and nice as one could be to a young kid like me. His oral histories were pioneering and nothing short of genius. He will be missed.

Boy, there's enough bad news this week that I am catching up on to make you want to crawl in a hole. But I won't. It is a spectacular day and as soon as I can get done with work and before trick-or-treating begins, I am going out for a nice walk or maybe even nine holes. Michael Mandel , citing a Morningstar report, tells us there's a 20% chance that CB Richard Ellis could go bankrupt. For dirt folks, that's would be as impossible as, say, Lehman going under. Oops.... I did not go to ULI, but David Bodamer did, and the mood there was pessimistic . Doug Cornelius has a link to the trends report here . On a side note, I got an email from ICSC yesterday telling me that hotels are cutting rates for next year's convention in Las Vegas. You know what that means -- fewer attendees. No wonder the store closing signs are out at Value City -- they filed a BK the other day and plan to liquidate. Don't laugh, but maybe I should go check out the furniture outlets th

That is what the LA Times says it is for lawyers. And it is for some - mortgage fraud, bankruptcy and all that. And perhaps the bailout will create opportunities that lawyers will have to helo their clients wade through. Of course, this is being written as two major California law firms (Thelen and Heller) have dissolved in the last few weeks. Don't tell all the laid off lawyers we're in a boom time. They and support staff are in many cases having a tough go of it. Larry Bodine, citing a Hildebrand International report, agrees . The word is that 2009 will be a tough year for lawyers, not a boom time. More layoffs are expected, profits will be flat or down. And I'll bet a nickel you will see several more major firms dissolve. There''s always opportnuity out there for a good lawyer. And sometimes a downturn in one sector of the business means an uptick in others. But I just don't see this as a boom time.

Well, today we have Arthur Laffer telling us that the present administration is, in a nutshell, Herbert Hoover all over again. And is Obama FDR, and, if he is, is that necessarily a good thing? You'd think the one constant in this would be the Oracle of Omaha, Warren Buffett. He's investing in certain equities as he thinks they are sound. And the Heard on the Street column at the WSJ is taking him to task a little for not timing things right. And others are jumping on that bandwagon . Hey, Buffett's not perfect. He'll be the first to tell you. But he has a darn good track record. And if you read up on him and Charlie Munger, you'll realize that it is all about the long term. If you believe in the BRK model, you are looking at gains over years and decades, not weeks and months. I'm no investment maven by any means, but I've always thought that it is OK to buy above the bottom and sell below the top as long as the investment is sounds. No one times

That's news. Here is the press release , and here is a WSJ story . Bucksbaum remains chairman but is no longer CEO, and Michaels is out as president but staying as COO. The Journal is calling it an "ousting." Their replacements are Adam Metz (the lead independent director, so that makes sense) and Thomas Nolan, respectively. I don't know Nolan but I do know a little about Adam, as I used to do legal work for some of the companies at which he worked. These guys have some big tasks in front of them. Job #1 has to be to get some loan extensions on properties, especially Fashion Show and Shoppes at the Palazzo, which are now on the market but have a billion in debt coming due in a month. That should be an interesting negotiation to say the least. The Bucksbaums have been a cornerstone of Chicago and I hope that continues. Their billions in the company have shrunk to millions, and GGP's stock is down 90%. It will be interesting to see whether GGP stays independ

Moody's is reporting that CRE sales prices were essentially flat in August , with transaction levels at their lowest in four years. Why? Neal Elkin, president of REAL, said that the flattening of prices in August may seem surprising, but that is because they are being looked at through the prism of the tremendous market turmoil of September and October. Transaction levels are still being hindered by a large bid-ask spread between buyers and sellers, he said, but many owners of commercial properties who purchased their properties with high leverage may have to sell, or refinance, although he said “that will be a slow process.” Although Elkin said REAL is not in the prediction business, he said he would be surprised if prices did not show some decline in September. So would most of us. And on another front, we have the Fed trying to intervene in the markets with credit again. The government is already doing its part with its "Who cares about loans, let's give banks money t

Maybe I'm just a dumb dirt lawyer. But I really, really don't get this . A big criticism I had of the government "stimulus package" was that banks would have no obligation whatsoever to actually go out and lend money again. So what are banks planning to do with their government investments? If you said "lend money," guess again. No, they plan to use the taxpayer-financed infusion as cheap money to buy up banks that are weaker. As the story says: If the banks use the government funds to pay for acquisitions, it could prove controversial. Taxpayers essentially would be footing the bill as strong banks gobble up their weaker peers. Such acquisitions probably would provide less of a boost to the economy than would new bank lending. Controversial? That's putting it mildly. Scandalous is more like it. And the impact on the dirt market? Well, what confidence there was about loosening credit may fade. Somebody who understands economics please tell me: h

The NLJ reports that Jenner is once again asking (read: telling) about 10 partners to leave the firm. Why? Staffing changes to meet expertise. I hope no one I know is affected. Once again, here's that reminder that, for better or worse, partnership isn't what it once was. Nothing on associate layoffs though. Indeed, there was apparently an all-hands meeting the other week where employees were told everything is fine . ATL and the WSJ both have their own stories on this event. I guess you call call it the annual event, sort of like GE performance reviews. But GE's a corporation, of course. And much as I deplore the loss of the traditional partnership model, let's look at the flip side: is it the fault of the associates that certain partners are not making targets? Looking at it that way, this makes more sense than dumping younger potential partners. Jenner's press release makes it clear that the bottom line's more important than ever.

Grandpa will forgive me. He always liked computers. And I have this thing for writing about the Spire. So, Calatrava and Perkins & Will have stopped their work on the building . (See also here, here , here and here .) If I were going to be the PR person, I'd say (as I have before), "Well, you have to do this in the ordinary course of business if you are providing work to the project in order to protect your rights against the property under the Illinois mechanics lien laws." Here's the problem. Their PR people have said this, in addition to what I think they should: "“The amount will be disputed,” the spokeswoman says. “These liens, both of them, are sort of the normal course of business for these companies to protect themselves. That’s fully in their right to do that, and we will work to resolve them.” That means there's more than a mere protection of rights here. There's a dispute. You do not have to be a rocket scientist to figure out this

A corollary to my post of yesterday about BigLaw layoffs and living your life. As you may recall, yesterday I said that no one on his deathbed ever said, "I wish I had worked more." Let's face one fact: life is always too short, no matter how long it is. Why do I say this? My grandfather died this morning. He was 89 and had been hospitalized the last two days, but no one was expecting anything this sudden, including his doctors. Our best guess is that he threw a pulmonary embolism in the middle of the night. I apologize for writing about personal matters, but I do so for two reasons. I wanted to let you know that I may not be writing much the next few days. But I also want to preach one last lesson to people who don't spend as much time as they'd like with their families. Find a way. Make it happen. And don't feel guilty about it. Cherish every day with them that you can, because only God can tell you whether you'll have another one. And if you

Above the Law is reporting that Katten Muchin Rosenman and Sonnenschein Nath & Rosenthal are letting go more staff, including associates. While these firms are national now, they are best known as Chicago law firms. This is not the first round at Sonnenschein either, if I recall correctly. I have worked with both of these firms in the past (and interviewed many years ago at SNR). I don't know how many dirt lawyers were impacted, but both shops are well known for having first-rate real estate practices. If you are a young lawyer reading this (and I know a good number of you do), take heed. Without portable business, you are a fungible billing unit at BigLaw. And I don't mean that as a slam on Katten or Sonnenschein, either. That's the business model of law firms in 2008. It is much more that way than it was in 1993. And at least firms are not calling these layoffs "performance-based" like they did in the early 1990s. What is the lesson? Well, you

So much to write about, but so little time. Tales from the front? Deals are closing, but lenders are still stalling. One great story I heard today: a lender has been putting off a borrower for six months now for various reasons; the latest is that the appraisal is more than six months old and therefore stale, thus requiring a new appraisal. Gotta love that one. On the good front, I appear to have wrapped up a deal or two today. Many institutional buyers are still sitting out of the commercial market, even cash buyers. Why? They say there's just no confidence at all that we are anywhere near a bottom. I guess the mentality is why buy a 7 cap when it might be an 8 or 9 in a year? Of course, there is still a lost opportunity risk associated with being on the sidelines. You eventually have to move money to make money. (H/T Traffic Court .) One of the better real estate bloggers out there, Doug Cornelius, has moved on from Goodwin Proctor to an in-house gig. I wish Doug we

So, the latest rescue plan for the economy is that the government may directly inject capital into banks in exchange for an equity stake in the bank. Wow. Now that's a recapitalization. I guess Bank X better not consider having any lavish retreats. Of course, much as the AIG scandal irritated people to no end (including me), if you think the government does not spend money foolishly guess again. But does this end free-market capitalism -- a cornerstone of the greatest nation ever? I don't know. It is more big government and that bugs me. It will, however, bug me less if it helps free up the credit market and it gives taxpayers an investment stake in the banks the government bails out. Perhaps the depth of what is happening justifies this. But it also makes me want to parrot the title of this post : "Bankers of the World, Unite!"

I guess I can talk more about this deal now: in a followup to a previous Crain's piece , Globest.com reports that the New City mixed-use project being developed by Structured Development and Commonfund Realty at Clybourn and Halsted is a go. Dirt should finally start moving by January to meet construction milestones. Why the delay? Well, you've gotta adapt to the market and changing conditions, and that makes a few months' delay worthwhile. Here, this means less residential and some more commercial/retail. As my friend Jeff Berta points out: "We originally envisioned condo uses, but housing market conditions shifted, so we reduced the number of units in total to 280," Jeff Berta, senior director of real estate development with Structured, tells GlobeSt.com. "We also saw opportunities for hotel and theater entertainment uses, which we began to realize were a good fit with our location. We replaced some of those units with space for those commercial use

So says Matt Pitcher at Live Oak Capital (H/T Traffic Court ). He says: The good news is that there is still money available for well-situated and first-rate properties in healthy markets. As swaps have fallen, I’ve been hearing about rates for three-year loans at below 5.5 percent. I would not use a three-year loan (too short) for our assets, but they exist at that rate for the right properties in the right markets for the right investors. Ah yes -- location, location, location gets you a loan. Some things never change. Hopefully we'll start seeing more of this in the news instead of the perpetual media gloom and doom. (But the cynic in me says that will change come early November.)

I'll probably write about the news later. For you sky-fallers, I can't really jump out a window because (a) I don't want to and (b) I'm writing from a basement. Why commentary instead of news? There's a few things on my mind and thoughts I want to share. The first is about the bailout. Okay, it passed. Now what? As my friend and client Dan Lukas discussed yesterday, perhaps nothing. Of course, the Treasury's going to buy the toxic loans and get them off the books of the banks. To which I say, so what? I don't know of anything in the legislation that requires the banks to start lending money again. Indeed, in these market conditions I would not be surprised at all if banks sat on the reserves, fearful of a run on the bank or because they are afraid of their own shadows. Should there have been some kind of requirement to loan money again? That's tough for me to say yes to. The free-market guy in me says, "Well, lenders have to lend to make

Sorry. I couldn't help but think of Howard Cosell this morning for some reason. A GGP press release reports as follows: General Growth Properties, Inc. (NYSE: GGP) today announced the appointment of Edmund Hoyt as the Company’s Chief Financial Officer on an interim basis. Mr. Hoyt succeeds Bernard Freibaum, who is no longer employed by the Company. The Company will promptly commence a search for a permanent chief financial officer. I think we all know what " no longer employed by the Company" means. If you own the stock (and, for full disclosure purposes, I may in some fund or in another indirect way) kiss your dividend good-bye. And that makes sense right now. In an attempt to calm down the market after yesterday, the release also tell us: All continuing executive officers of the Company have informed the Company that they have repaid in full all previously existing margin loans and thus there will be no further sales of Company stock by those executive officers to sa

One more Journal story this morning: Businesses are dumping office space at the fastest pace since the months after the Sept. 11 attacks, increasing the financial stress on commercial-real-estate owners and their lenders, many of them already ailing financial institutions. This of course can put pressure to lower rents and add incentives. Vacancies are up in 66 of 79 markets, but rents are stable or declining in 40 of those 79; that makes sense since rent changes trail vacancies. For the third quarter in a row, businesses vacated more space than they took nationwide, a phenomenon known as negative absorption. About 18 million square feet of space were emptied, the most since the first quarter of 2002, when 23 million square feet were vacated. With the addition of 11.5 million square feet of new space, the nation's office vacancy rate rose 0.5 percentage point to 13.6%, the biggest increase since the months following 9/11. This isn't panic mode. As the story points out, we did

The Journal is reporting about some raw land sales of entitled land in the suburbs and exurbs for pennies on the dollar. The motivation? Taxes, taxes, taxes. Developers see a chance to take the losses and offset them against profits, which will give them refunds (and money). The fact that the land is entitled makes the lawyering easy. But you have to figure out when or if your entitlements expire, so make sure you have good land use counsel take a look at these deals. One last hurdle is finding cash or money to buy this land. This is a speculative play probably made all right by the super cheap acquisition price. But if you need someone else's money, be prepared to pay a premium....

I usually do not write thrice in one day about one company, but General Growth is a major Chicago player, and its stock just plummeted more after the complaint about the short-sale listing. (So maybe I should be more concerned if the market was.) In addition to debt coming due and the inability to access credit lines, I can see two reasons why there might be declining revenue at the company that could impact its bottom line. One is revenue from base rent. If tenants are filing bankruptcies are walking away from malls, you get less money. And the prospects of replacing those tenants aren't great, though there might be a temporary bump in the holidays. Another is percentage rent, also known as overage rent. For you novices, percentage rent is when a tenant pays, as additional rent, a percentage of its gross sales, usually over a certain amount (known as the breakpoint). Sometimes the breakpoint is based on monthly sales (which might differ based on the time of year, given that

I forgot to mention: Eddie Baeb reports that a proxy advisor is none too happy about General Growth being on the no-short list while its execs dump shares. “Since electing to be added to the no-short list of ‘financial’ companies, General insiders have sold $40 million in shares,” wrote Todd Fernandez, a senior research analyst with San Francisco-based Glass Lewis, according to Bloomberg. “We see that as rigging the system and hope General would do shareholders a favor and remove itself from the list.” That may be, but maybe I am naive. It might be a little uncharitable to say the system is rigged when, as Eddie points out, most or all of these sales are covering margin calls. People are losing just their shorts instead of the whole suit. I'm no legal expert on this issue (so I welcome any thoughts/comments here), but it seems the request is simply one to try and stop bleeding. GGP is not the only REIT on the list. And I also wonder aloud whether the suspension of the upti

I'm the first person to admit when I am wrong. And I've said before that I don't see General Growth Properties going anywhere, but I have also said that all bets are off in this market. Then along comes this story in Retail Traffic to the effect that not only might GGP have to put itself up for sale, but that it might happen by year end. The concern is that lending is so tight and so much is coming due that a sale might be the best bet. I know it would be a lawyer's bonanza to work on a deal that size. The due diligence alone would be amazing -- EOP-esque, if I may say so. And there are a lot of CRE lawyers on the sideline right now. This would not be full employment, but the sale of GGP, Lehman and other assets, combined with availability of credit and some investors flush with cash deciding the time is ripe, could mean more employment for a bunch of people soon. FYI -- I've heard vague rumors but nothing I care to write about since I'm not a reporter.

The ABA released a report yesterday stating that legal malpractice claims for the period 2004-2007 are up four percentage points compared to the period 2000-2003. I haven't read the survey, but I found this quote troublesome and perhaps just wrong: As real estate values have fallen across the country, more individuals and businesses are suing their lawyers for bad results, according to panelists who discussed the findings of the 2004-2007 claims study during the conference’s opening plenary. I don't get it. Of those years, only 2007 was really down. 2004 and 2005 were gangbuster crazy. And that's why I think you see the uptick in claims. Here's the rationale. SO many deals were being done that for many it was impossible to keep up. So you cut corners. And those lawyers (and title companies) who did paid or are paying the price in litigation. Here's more: According to panelists, claims resulting from alleged errors in real estate transactions range from confli