The Dirt Lawyer's Blog Archive

The New York Times had a good piece on the five year anniversary of Kmart buying Sears and becoming Sears Holdings .  At the time, I said that Edward Lampert's acquisition of the retailing icon was as much a real estate acquisition as it was a retail deal. Unfortunately on the retail side, the attitude of many people is, as the last sentence of the piece states succinctly, “Honestly, I’d rather go to Target.”  Sears and Kmart are still doing poorly, and many think the future -- if there is one -- lies in the Sears strategy of trying to become an Amazon.com style retailer.  (Go it its website with all the amalgamation of other sellers there and you will see what I mean.)  Apparently Sears Canada is the company's saving grace. The fallback point?  Dump the dirt at some point. But given the current market even that isn't so attractive according to some analysts, and that makes sense.  For every hot Sears or K-Mart location, according to analyst cited in the ...

I could not resist the old Disneyland ticket system analogy in thinking about the Chicago market right now.  (For you younger folks, search the term and you will understand.) The great news in Chicago?  Two trophy properties are trading.  The Hyatt Center is under contract to The Irvine Company (Billionaire Donald Bren is the long time head of TIC) at what is understood to be just over a 6-cap, or $625 million/$419 per square foot.  I suppose that is not a B-ticket price for that great property.  Then you have 353 North Clark trading from a Mesirow/Friedman Properties venture to Tishman with a purchase price, they say, of $385 million/$321 per square foot.  The difference? Well, while I like both buildings, Hyatt is perhaps better located, but even more important is that little detail of a $374 million construction loan at Clark Street.  So, does this mean we are back?  Not for all of us.  Institutional buying is back to some extent for the...

In my first year Contracts class in law school, we learned about liquidated damages; i.e. a clause stating that a  certain amount of money is a reasonable estimate of a party's damages in the event of a default and that, in lieu of litigating the question of damages, the stipulated amount will serve as actual damages and not as a penalty.  Liquidated damages play an important role in many real estate contracts.  I like them for both sides.  It can limit the buyer's downside and quantify the seller's compensation if a deal goes bust.  Most every big deal I run across has a lengthy liquidated damages clause, and more often than not the amount of the earnest money deposit is the stipulated sum.  But this excellent article (about, of all things, the opulent former Adelphia Communications headquarters in Pennsylvania) reminds us that liquidated damages (a) should be tightly drafted; and (b) are supposed to be a reasonable estimate of the actual damages, not a n...

If you look at the blog regularly but do not follow me on Twitter , you will see my updates here on the right of your screen.  I use Twitter for short thoughts (duh) and quick information about what is going on in real estate that interests me.  Long form writing, of course, will remain here. I just wanted to take a moment to thank one of the better bloggers and Twitter folks out there, Duke Long , for including me in his list of the Top 50 Commercial Real Estate People You Must Follow on Twitter. I appreciate the recognition and will try to live up to those standards.

Pop up stores by national chains is supposedly the latest "phenomenon" in retail.  Of course, this has been going on in a smaller scale by small tenants and even national retailers such as Hickory Farms for many years.  The leases, being short term, are figured out and conformed and done.  But what about the long term? Some say this trend will continue over the long term.  I tend to agree.  Unfortunately I think it will depress prices unless lenders and buyers figure out a way to quantify and underwriter the pop ups, or pops enter into long term seasonal leases as a compromise, if landlords are willing to do so (and I would do so if the landlord had a cancellation right if it leases up the rest of the space in the mall -- there are all kinds of legal things we can do!)  In a way, it makes a lot of sense.  Cut down labor costs and dirt costs, concentrating on the couple of months that matter most. What do I think might also happen?  It will hurt t...

This Globest.com piece might be the best I have read in a while.  Why?  Because it makes sense: “Everybody got so burned by the downturn that they want safety and liquidity,” said Jonathan Gray of Blackstone Real Estate Advisors, during New York University Schack Institute’s 43rd Annual Conference on Capital Markets in Real Estate. Partly because everybody is chasing those same few deals in New York City, Washington, DC and a few other key markets, that means more opportunities in properties that are high-quality yet impaired.... Bingo.  If you want to make good money, get out into the rest of the country where the rest of us are not seeing a recovery as much as others.  And the story is also telling as to the amount lenders are putting out there.  Even though everyone says lenders are lending, transaction volume is still down 50%, 60% and more from a few years ago (not that we should be at those volumes again anyway). And even if you get that deal, the L...

This was published in Crain's a week ago, but it bears writing about, however briefly: The long and short?  Mega Chicago restaurateur Phil Stefani guaranteed a $7 million construction loan used to renovate the building where his office is located, and which is owned in part by Stefani and others, including the well-known local developer Keith Lord..  The loan is past-due and the lender, Harris Bank, is pushing what he described as tough new terms for an extension, including new equity and prepaid interest. Why is the project under water? In large part, because its anchor tenant, Amcore Bank, went under.  But here is the real kicker.  Amcore was also the lender for the project!  When it was shut down by the FDIC, the feds rejected the lease at Stefani's building and handed over the loan and Amcore's operations to Harris. So...now Harris is putting on the squeeze because the lease of its predecessor in interest tanked the value of the property. You can read about...