The Dirt Lawyer's Blog Archive

That's what it looks like, and I think it is nicely done. The investment arm of a Baltimore law firm, according to this report , has bought an industrial site from a pharmaceutical company. I like the way the firm is doing this: as a separate arm in which the partners can presumably invest. By buying their own dirt, they eliminate any ethical considerations that may come in to play if a lawyer wants to go in with a client and take a piece of the action. All they need is business savvy. Some say lawyers are lawyers because they don't know business, but I know some that don't fit that stereotypical mold.

Fortune this week is echoing my sentiments. Some over-levered homebuilders are in trouble. Face it: You pay your (less, in this case) money, you take your chances. And -- no big surprise -- private equity firms and hedge funds, flush with cash, are ready to buy, buy, buy . Take these smart guys, pair them up with savvy local developers (not amateurs) who really understand dirt, come to the table flush with cash, and voila ! Gold in them thar hills.... Remember, one company's misfortune can be another's fortune - literally. It is not pretty sometimes but it is reality, like it or not.

This may be one . I was introduced recently to Kevin Kingston's blog, and he has a good post about Harry Macklowe's acquisition earlier this year of seven NYC buildings in the old EOP portfolio. Kevin gave us these terms: Purchase Price: $6.8 Billion Down Payment: $50 Million Amount Borrowed: $7.6 Billion (that's $800 million more than the purchase price) Cash Flow: Negative for at least five years Occupancy: 95% Deal Consummated: 10 Days Aprox. Square Feet: 8.41 million Aprox. Price Per Sq. Ft.: $808 He also compares the cash flow issue to that of Harry Helmsley, who bought buildings for cash flow rather than developing. He did all right, eh? This probably ends in one of three ways: success (rents will probably rise, and think of the phenomenal IRR on a $50 million investment for a $6.8 billion deal!), the mother of all workouts (short-term debt is coming due soon) or properties on the market cheap next year. Keep an eye open.

When I first read this story about large residential projects pulling back, I was not a happy camper. Things looked bad. But then I read it again, between the lines, and came to the following conclusions: 1. Projects are still being done. Of course, if you want the penthouse at the Chicago Spire, it'll cost you $ 40 million . 2. I saw no mention of any mess in non-residential commercial deals. Then I read that cap rates in August are still slightly lower. Take a look . A look at the chart in the WSJ showing where cap rates were, even pre-9/11. (On the other side, however, the Journal also reports that there is a current "paralysis" in the market, notwithstanding rate cuts. But is that for huge portfolio deals or for everything? From what I am hearing, there's money to be had for smart, well-planned single asset deals, especially from traditional lenders. 3. Check out this quote: "The debt market is frozen for the inexperienced developer," said ...

Traffic Court led me to learn about a retailer called Peebles . These guys have over 600 stores in 33 states and yet I've never heard of them. Why? Probably because I live in an area large enough to be off their radar screen. The m.o. of this company looks deceptively simple: provide upscale brands in small markets that you'd otherwise have to travel a long way to get to. This is sheer genius for several reasons. As David Bodamer said, with 20,000 sf stores (and by focusing on name brands) they do not compete with Wal-Mart. From a business perspective, they are going to pay DIRT cheap rent on their spaces because, based on a quick look at their website, they are going to markets that are not exactly what one might compare to New York, Chicago, SF or LA. And that is the beauty of it. The business side is obvious. But what also makes this company attractive to me (granted, I know nothing about its financials or anything like that -- I'm no Jim Cramer ) is the legal si...

I was interviewed last night for a publication about my blogging, and the discussion really made me think about my role as a blogger more than I have since I started doing this. The main thing I realized was this: I have not, will not and cannot be a newsbreaker, even when I have the inside scoop. Why? Ethics. I can think of half a dozen times in the last few months when I could have broken a story, sometimes weeks before word got to the media, but I never even thought of doing so because of the confidentiality I owe my clients. I know at least one instance where I could have brought what I think were some interesting insights on a deal that was already leaked in the press, but again, my duty to my clients had to outweigh the fun I have here ruminating on deals. It is funny that I just did this but never really thought about why. Perhaps it is just ingrained into you with all the courses you take and warnings you receive about legal ethics, a term which is not an oxymoron even...

I have said before that I think Sam Zell is just an mega-genius, and that it was reaffirmed by the EOP sale to Blackstone. Never media-shy, Sam in lectures at Wharton is saying that we have a confidence crisis going on, not a credit crisis. If you read this blog, you know I agree. According to the Forbes story: "We're not really in a 'credit crunch.' I think we're in a 'confidence crunch,'" said Zell, funder of the Samuel Zell and Robert Lurie Real Estate Center at Wharton. "I would argue the excess liquidity that existed eight weeks ago still exists today. It has a different risk premium on it, but the actual amount of liquidity has not changed." Zell said the slump should come as no surprise: "Over the last three years, people were flippant. They bought anything they wanted and were proud that they didn't do due diligence. I think they have all been chagrined and are scared out of their minds." Bingo. Sam also made me th...