The Dirt Lawyer's Blog Archive

Maybe I am just getting old and confused. I thought Bill Ackman was saying before that bankruptcy was the solution to GGP's woes . Now he is saying that the answer lies in a seven year debt extension . As we know, management was already trying to get extensions before the filing. Or was his real game plan a BK and then a forced extension to the creditors? You tell me, because otherwise I will never know. I do know this: I hope Ackman's right about the bankruptcy judge for his sake and for others, including the human beings who still work there. I'm not sure a liquidation would be pretty right now. Actually, I am sure it would not . And if he is right, Ackman says that even at a 9.4 cap (compared to what - a 5.3 on the EOP portfolio?) he stands to make a 1300% cash on cash return. Nice money if you can get it.

Here's the latest gloom and doom piece -- perhaps warranted, too -- this time in the Journal . The point? It is great that the government finally got on the darn bandwagon by including CMBS and commercial properties in TALF, but that's just not enough. Now, if we are going to have all this bailout money in the first place (we will not get into the philosophical or practical arguments of how to repay all this debt) including the commercial sector is important in my opinion. But, as the story points out, only top-rated debt is eligible. And S&P is telling us that it may downgrade a boatload of properties, thus rendering them ineligible for TALF money. A lot of people blame the ratings agencies for getting us into this mess in the first place by rating deals AAA that had no business being so. And now when they want to clean up the mess by downgrading these deals, it could create another, even larger, problem. Jeez. The moral? Owners are going to either have to pony up

Before I get another email asking when my next post will be, here it is! I was on vacation for the last week and too out of pocket to really write anything useful. I will be hopefully working on some material this weekend, because my work schedule is packing up with deals the next two weeks. I hope this is a sign. In the meantime, I haven't yet had the chance to get any intel on RECon/ICSC in Las Vegas last week. If anyone has the time to give to quick thoughts or post links to the best material on the convention, I'd be most grateful. Please feel free to do so in the comments section.

Condemnation was a hot legal topic a while back, what with the awful (in my opinion) Kelo decision and all. So, I have to admit I like it when a private property owner is able to buck the system. It appears just that has happened in the south suburbs of Chicago. Here's the story. Anna Mae "Babe" Ahern is 101 years old. She's spent her whole life at the Evergreen Country Club in Evergreen Park, a 95 acre property her family has owned for eons. Before you start thinking it, ECC is not some exclusive private club. It appeals to the average Joe, and Ahern claims her course was one of the first to allow minorities to play. Its rates are affordable, and while I haven't played there, it looks like a nice enough track from the street. In 1999, Ahern offered to sell her "inheritance" to a developer back in 1999, who offered $25 million for the land so it could build a Home Depot and some housing. The village, however, nixed the idea by refusing to rezon

While getting ready for work this morning, I found two excellent posts here and here at Zero Hedge. As you can see, these posts are from last month, but they still bear reading. Why? It states what may be reality tomorrow , depending on the judge: that General Growth may be able to consolidate its SPE malls into the GGP bankruptcy. If that succeeds, chalk that up in part to good lawyering. They are saying this is a procedural consolidation only, but is that really true? I'm honestly not sure. I readily admit that, while I worked on a number (say, a dozen or so) of these opinions over the years, I do not live, breathe and eat non-consolidation. No thanks. Here are some D&B thoughts , by the way. Are there remedies? There could be insurance out there, I suppose. And law firms have, in every case, rendered legal opinions about non-consolidation. These, however, are reasoned legal opinions and while it may not be feasible to go after a law firm for its opinion, don't b

Is this what TIF money is meant for ? Moving Willis, a company that got a great deal at Sears Tower PLUS naming rights, from three downtown locations to one consolidated one? Does anyone seriously think they are moving to Oak Brook or Schaumburg? Or is this a condition to the lease? Are there better ways of spending money? Or is this proposed subsidy a good thing for Chicago and money well spent? I am a fan of good TIFs, but I'm not sure whether this is a good one. Perhaps others have opinions more informed than I.

Now that I have a few minutes, I want to comment on a great story in Friday's Journal about the General Growth Properties bankruptcy. When GGP filed its Chapter 11, it also dragged 166 individual malls with it. How so? Each mall is owned by a special purpose entity, demanded by its lenders to try to prevent what actually happened. And this could have major ramifications throughout the real estate world. Why? Because (a) lenders thought the structure of the deals would prevent this from happening; (b) GGP wants to take the cash flow from the deals into general operating funds for the company rather than into paying these otherwise-performing loans -- in short, use the good malls to prop up the dogs; and (c) get some leverage in the bankruptcy. For those of you saying, "Huh?" here's an explanation: In past years, to get the malls' mortgages, General Growth had set up 166 "special purpose entities" whose sole purpose was to borrow money. SPEs are attr

Crain's is reporting that Strategic Hotels is putting the Chicago Fairmont up for sale. This is a tough time to be selling hotels, and it is not the only property on the market here right now. I've never really "gotten" the Fairmont, nor has it ever really stood out in the Chicago crowd in my opinion. And its RevPAR is, well, not so good. The one thing it does have going for it is an assumable loan until April of 2012 at LIBOR plus 70 bps. So the thought is buy now and ride out the recession for two more years, because money for big hotel deals isn't easy to come by today. People are saying this is yet another sign of trouble at the highly levered SHC and that the company needs cash, and now. I don't know. I do not follow SHC enough to tell you. I only know that I always wish Churchllians well, and since Laurence Geller (who says his company is well-positioned) is also chairman of the Churchill Centre, he gets my best wishes. Maybe today's after-m

I haven't written about anything green in forever (a recession will do that to you), but I was intrigued the other week while driving through a rural windmill farm in Indiana. Now I can combine windmills with my blog! Real Estate Ancillary Revenue has posted a story about the WindCube, a 22-foot high urban windmill of sorts designed to serve a single property. Its $300k cost can apparently be absorbed in part through tax credits and the like, with a relatively short estimated payback time. In an day and age where you are trying to look for possible revenue sources and technologies that might make your building more green, I guess it is worth a look. I"ll also bet there will be some interesting counterparts in Las Vegas in two weeks.

Happy May, everyone! Swine flu scares notwithstanding, I'm looking forward to what is left of the spring. Work is still busy, but I did find a few interesting things in the blogosphere and the internet that I'd like to share with you. Still confused by defeasance? Don't worry, most people are. My first one was . If you really want to learn more, here's a primer you might find interesting (H/T Deal Junkie .) Do you think we're gonna see some M&A activity in the REIT market? (Short answer: yes.) "Banks are shortening the terms on lines of credit that have long been used by companies to avoid cash crunches -- a sign that while lending is reviving, businesses are facing new hurdles to obtaining credit." More news on a " rising tide " of CMBS defaults according to Fitch this morning, including the number of loans going to special servicers. I wonder aloud whether some borrowers are just trying to get to special servicers for workouts or to