Global Viewpoints

Macquarie Group sells majority of Australian real estate management platform to Charter Hall

Edited: Jennifer Brenner
Source: Macquarie Group Limited

Macquarie Group Limited has entered into an agreement to sell the majority of its Australian real estate management platform to Charter Hall Group (CHC). This will involve Charter Hall acquiring the management business associated with two listed and three unlisted real estate funds ('the Platform') and a portion of Macquarie's holding in three of these funds.

As part of the consideration, Macquarie has agreed to a placement of CHC securities such that Macquarie will hold 10% of CHC's securities on issue post the transaction. The remaining consideration will be paid in cash.

Charter Hall is one of the largest specialist real estate fund managers in Australia and will have assets under management in excess of $A10b once the transaction is completed.

The Platform consists of the following real estate funds:

• Macquarie Office Trust (ASX:MOF);
  
• Macquarie CountryWide Trust (ASX: MCW);
  
• Macquarie Direct Property Fund (MDPF);
  
• Macquarie Martin Place Trust (MMPT); and
  
• Macquarie Property Income Fund (MPIF) (together the "Funds").

As part of the Platform, CHC will also acquire the asset service and property management businesses that support the Funds as well as a portion of Macquarie's co-investment holdings in three of the Funds. Macquarie will retain shareholdings of 6% and 4% in MOF and MCW respectively.

Nicholas Moore, Macquarie Managing Director and Chief Executive Officer said:

"Consistent with our strategy regarding the listed specialist funds business, Macquarie has undertaken a process to explore alternatives in relation to the future of Macquarie’s Australian real estate platform and maximise value for investors. As a result of this process, Macquarie has identified Charter Hall as a partner with a specialised real estate capability which Macquarie believes will be attractive for Fund stakeholders."

After taking into account the historical cost of the management businesses and the investments in the Funds, as well as other transaction related costs, the net impact to Macquarie's FY10 profit is expected to be approximately $A30 million.

Over $40 Million in Four Transactions Closed by Ladder Capital

Edited: Jennifer Brenner
Source: Ladder Capital Finance LLC

Ladder Capital Finance LLC, a commercial real estate finance company, has closed on the following four commercial real estate transactions totaling over $40 million since the start of 2010:

• A 5-year fixed rate financing of a 152,786 square foot Wal-Mart anchored retail location in Modesto, CA, totaling $16,250,000
  
• A 5-year fixed rate financing of a 213,228 square foot office building located in St. Louis, MO, totaling $10,750,000
  
• A 5-year fixed-rate financing of 2 Fresenius Medical Care distribution facilities located in California, totaling $6,090,000
  
• A 2-year floating rate financing of a 70,875 square foot retail building located in Aventura, FL, totaling $7,875,000

In 2009, Ladder Capital completed a number of significant commercial real estate market transactions and significantly grew its portfolio of assets. Since its inception in November 2008, Ladder Capital has grown from 11 to 21 employees, including the appointment of four new originators and is continuing to expand its team of highly experienced industry veterans.

"Since we started Ladder Capital, we have been able to leverage our strong team, industry expertise and deep network of contacts to pursue a number of great opportunities in what has been a challenging industry environment. We have maintained our lean operating model and therefore have been able to move quickly to provide the right financing to our clients and execute transactions in a timely manner," said Ladder Capital CEO, Brian Harris. "We are very pleased with our performance to date and are well-positioned to continue to add to our diverse portfolio of commercial real estate mortgages."

Greta Guggenheim, Ladder Capital's president and Head of Origination added, "Our team was able to draw on its industry relationships and expertise in all aspects of commercial real estate financing to successfully complete a variety of exciting transactions in 2009."

Select Ladder Capital transactions from 2009 include:

• A 5-year fixed-rate financing of 15 free standing CVS stores located in 11 states, totaling $33,068,100
  
• A 2-year fixed-rate financing of 138 condominium units plus 24,448 square feet of a retail space in Pompano Beach, FL, totaling $28,200,000
  
• An acquisition of a senior position secured by 16,987 square feet located in New York, NY, valued at $16,000,000
  
• A 5-year fixed rate financing of a 278,738 square foot Wal-Mart anchored retail location in Winter Haven, FL, totaling $14,980,000
  
• A 5-year fixed rate financing of a 135,355 square foot grocery anchored retail location in Glen Ellyn, IL, totaling $12,500,000
  
• A 2-year floating rate financing of a 272,673 square foot Wal-Mart anchored retail location in Greensburg, IN, totaling $10,153,000

Ladder Capital continues to pursue select distressed debt opportunities resulting from the ongoing lack of liquidity in the market, while capitalizing on the Company's positive momentum and strong balance sheet to originate fixed-rate and interim floating-rate mortgages, junior interests in mortgages and mezzanine loans and commercial mortgage-backed securities.

Ladder is a specialty finance company that provides a comprehensive set of financing solutions to the commercial real estate industry.

Fitch U.S. CMBS Newsletter: Multifamily Vacancies To Plateau Later in 2010

Edited: Jennifer Brenner
Source: Fitch Ratings

Despite a continued near-term negative outlook, U.S. multifamily assets may begin stabilizing in certain markets later this year, according to Fitch Ratings in its weekly U.S. CMBS newsletter.

Although multifamily vacancies are likely to peak at 8.9% later this year, the multifamily market still faces several challenges to its recovery, according to managing director Mary MacNeill.

“Rents will take longer to recover as landlords continue to offer significant concessions to maintain occupancy,” said MacNeill. “Also, high unemployment and declining immigration have substantially reduced household formation and demand for apartments.”

Fitch projects multifamily delinquencies to climb to nearly 13% in the near future as the Peter Cooper Village/Stuyvesant Town (PCV/ST) loan becomes delinquent.

Recovery prospects will be more muted in states that have suffered in the residential real estate downturn, including:

• Nevada (23% of loans are delinquent)
  
• Tennessee (21%)
  
• Florida (18%)
  
• Texas (11%)

In contrast, the outlook appears brighter for the following states:

• New Jersey (2%)
  
• Pennsylvania (1.1%)
  
• Washington, DC (0.1%)
  
• Washington State (less than 0.1%)

CoreNet Global Names New CEO

Edited: Jennifer Brenner
Source: CoreNet Global

CoreNet Global announced the appointment of Angela Cain as chief executive officer of CoreNet Global, the world’s leading professional association for corporate real estate (CRE) executives, service providers and economic developers.

In introducing Ms. Cain, CoreNet Global Chairman-elect Lee R. Utke, director, global corporate real estate for Whirlpool Corp., stated, "Angela brings to CoreNet Global a strong combination of association management experience and first-hand knowledge of the real estate industry.

“CoreNet Global is at an important point in time, facing critical change and global opportunity. Our new CEO is well suited to lead CoreNet Global in new directions that will keep improving the strategic value to our members and the CRE industry, and that reflect the need for new business models and approaches. We're excited to welcome Angela as our new CEO," Utke added.

Cain is currently CEO of the Mississippi Association of REALTORS (MAR). She will be officially introduced at the April 18 – 20 CoreNet Global Summit in New Orleans. Cain will assume the CEO role from our Interim CEO Ron Zappile.

“I welcome the challenges and opportunities that this position brings and look forward to building a team that strengthens the CoreNet Global value proposition now and into the future,” said Cain. “I am also looking forward to the opportunity to work closely with our Chapters in crafting our new direction.”

As CEO of MAR, Cain oversaw the state’s largest professional trade association representing more than 6,000 real estate professionals active in all phases of commercial and residential real estate, brokerage and appraisal.

She has more than 14 years of non-profit association management experience at the global, national, state and local level. Prior to joining MAR, she served as director of global events for CoreNet Global and NACORE International where she managed global event operations.

With a proven track record in developing sound fiscal and operational policy, strengthening revenue streams, and maximizing value for members’ dues money, Angela was recognized in 2007 as one of Mississippi’s 50 Leading Business Women by the Mississippi Business Journal. She also was honored by the American Society of Association Executives with the 2007 Associations Advance America Award of Excellence.

Cain is a graduate of the University of Florida College of Journalism & Communications. She presently serves on the 17-member Finance Committee of the National Association of REALTORS and as Vice Chair of NAR’s REALTOR Relief Foundation.

Ferguson Partners conducted the CEO search leading to Cain’s appointment.

With 6,500 individual members based in more than 50 local and regional chapters worldwide, CoreNet Global is the only professional association that brings together all facets of the CRE industry to develop global networks based on common interests and opportunities.

Sun Hung Kai Properties Pays $434M for a Prime Site on Chinese Mainland

Edited: Jennifer Brenner
Source: Sun Hung Kai Properties

Sun Hung Kai Properties (SHKP) has added to its mainland land bank a new prime site in Lanshi, Chan Cheng District in Foshan, Guangdong . The site was acquired for RMB 4.705 billion or $434M according to a Wall Street Journal article and will provide about 1.6 million square metres (approximately 17.2 million square feet) in gross floor area. It has a strategic location and great development potential with a rail network under construction.

Late last year, Sun Hung Kai acquired another site in the vicinity, which provides about 1.2 million square metres (approximately 12.9 million square feet) in gross floor area. The two sites will be developed together forming a large-scale world-class integrated development with premium residences and top offices plus a shopping centre with an array of international retailers. It will sit atop the extended rail line under construction that will link Guangzhou and Foshan, boasting a superb river view and a convenient transport network. The development will benefit from the city's further economic integration with Guangzhou and is destined to be a new landmark in Foshan.

Simon Responds to GGP Proposal

Edited: Jennifer Brenner
Source: Simon Property Group, Inc.

Simon Property Group, Inc. issued the following statement in response to the highly conditional recapitalization proposal announced by General Growth Properties, Inc.

"General Growth's proposed recapitalization amounts to a risky equity play on the backs of its unsecured creditors. While continuing to block the immediate and certain 100% cash recovery provided by Simon's offer, General Growth has preempted its own self-proclaimed 'process' in favor of a highly speculative and risky plan to attempt to raise $5.8 billion of new capital in today's uncertain markets -- including $3.3 billion of dilutive new equity, $1 billion in asset sales and $1.5 billion in new debt -- on top of the approximately $28 billion it already owes. Simon is providing $10 billion of real value -- $3 billion to shareholders as well as $7 billion to creditors -- as compared to a complex piece of financial engineering that is so highly conditional as to be illusory."

Simon's offer is far superior to the General Growth proposal in many ways, including:

• $9 billion of cash upfront vs. the General Growth plan which offers only $2 billion in cash and the hope of additional cash down the road, subject to highly uncertain market conditions.
  
• 100% immediate and certain cash recovery to unsecured creditors vs. the General Growth plan which would likely result in unsecured creditors receiving most of any recovery at some point down the road in the form of equity in a highly leveraged, capital constrained entity. In addition, the inevitable sale of shares by creditors who receive stock would put downward pressure on the value of General Growth shares.
  
• Cash value to equity holders with no dilution vs. the General Growth plan which would result in significant dilution of General Growth shareholders -- who would be left with two speculative equity securities that are likely to underperform.
  
• Fully addresses claims of unsecured creditors vs. General Growth's proposal which turns the bankruptcy process on its head by favoring equity holders at the expense of creditors.
  
• No financing condition vs. the combination of the massive required capital raising and asset sales in the General Growth plan which amount to a financing condition for the majority of potential cash recovery for creditors.
  
• Potential for equity holders and certain creditors to elect SPG stock in lieu of cash, providing certainty and upside potential in an established equity security of an S&P 500 company that has historically outperformed. Stakeholders who elect SPG stock will be investors in an entity that has enhanced growth prospects through superior management, synergies and access to capital to realize value creation.

BPO Properties Proposes to Convert to Canadian Office REIT

Edited: Jennifer Brenner
Source: Brookfield Properties Corporation

Brookfield Properties Corp. and its Canadian-based subsidiary BPO Properties Ltd. are proposing to create a Canadian office real estate investment trust (REIT). Upon conversion, the new REIT, to be named Brookfield Office Properties Canada, will acquire BPP’s directly owned office assets in Toronto, Calgary and Vancouver and will also acquire Brookfield Properties’ interest in Brookfield Place, widely regarded as the top commercial complex in Canada.

If approved by BPP shareholders, upon closing of the transaction, it is expected that Brookfield Office Properties Canada will pay a special distribution of $1.02 per unit to unitholders and will also begin to pay monthly distributions of $0.0667 per unit (being $0.80 per unit on an annualized basis), double BPP’s current quarterly dividend of $0.10 per common share.

The board of directors of BPP unanimously recommends that shareholders approve the reorganization. The board of directors of BPP believes that creating the REIT will enhance shareholder value by broadening the investor base to retail and institutional investors and making the entity more suitable for income investors.

Brookfield Properties believes that this reorganization will create an opportunity for BPP’s assets to be more fairly valued in the public markets. In the future, and subject to valuation and market conditions, Brookfield Properties may consider reducing its interest in the REIT to enhance market liquidity of the REIT.

As part of the transaction, the REIT will acquire the Bay Wellington Tower office building and Brookfield Properties’ interest in adjacent retail and parking facilities at Brookfield Place in Toronto, adding 1.8 million square feet of premier space to the Brookfield Office Properties Canada portfolio. The purchase price will be paid to Brookfield Properties by the assumption of debt and in units of the new REIT valued at approximately $20.90 per unit.

If approved by the Toronto Stock Exchange (TSX), the new REIT, Brookfield Office Properties Canada, will commence listing on the TSX immediately following closing of the transaction. Holders of BPP common shares will receive one unit of Brookfield Office Properties Canada for each common share held of BPP. Upon closing of the transaction, BPP’s common shares will be delisted from the TSX and all of its common equity will be owned by Brookfield Properties. Select assets of BPP, including the Canadian Office Fund and certain development properties, as well as certain assets which are not permitted to be owned by Brookfield Office Properties Canada, will be retained by Brookfield Properties. No changes will be made to the terms of BPP’s preferred shares.

If approved, upon closing of the transaction, Brookfield Office Properties Canada will own a portfolio of 19 premier office properties totaling approximately 14.4 million square feet in Toronto, Calgary and Vancouver with a fair value of approximately $3.7 billion, property specific debt of approximately $1.7 billion and an equity capitalization of approximately $2 billion. Brookfield Office Properties Canada is expected to earn approximately $118 million in funds from operations available to unitholders, representing approximately 1% commercial property net operating income growth, on an annualized basis in 2010, or $1.20 per unit. Upon closing of the transaction, there will be approximately 98 million units outstanding on a fully diluted basis.

Brookfield Properties will continue to provide asset and property management services for this portfolio to Brookfield Office Properties Canada under new arrangements which have been set at market terms. The board of directors of BPP believes that this will provide Brookfield Office Properties Canada with a unique competitive advantage because of the ability to draw upon Brookfield Properties’ senior management team and other individuals and relationships from its global affiliates in providing such services.

The board of directors of BPP appointed a committee of independent directors to consider the proposed transaction. The independent committee retained Macquarie Capital Markets Canada Ltd. (“Macquarie”) as its financial advisor with respect to the transaction and to prepare formal valuations of certain elements of the proposed transaction, including the common and non-voting equity shares of BPP, the units of Brookfield Office Properties Canada and the interest in Brookfield Place being acquired by Brookfield Office Properties Canada. The independent committee received an opinion from Macquarie that the transaction is fair, from a financial point of view, to shareholders of BPP other than Brookfield Properties and its affiliates. The board of directors, on the unanimous recommendation of the independent committee, has determined that the proposed transaction is in the best interests of BPP and is unanimously recommending that shareholders vote in favour of the transaction at the meeting.

The transaction will be effected by way of a plan of arrangement under the Canada Business Corporations Act. It requires the approval of at least two-thirds of the votes cast by all shareholders as well as the approval of a simple majority of the votes cast by common shareholders other than Brookfield Properties and its affiliates. The transaction must also be approved by the Ontario Superior Court of Justice.

The transaction is also conditional upon receipt of all necessary regulatory, TSX and third party consents and approvals.

Brookfield Properties has advised BPP that Brookfield Properties and its affiliates intend to vote all of their shares of BPP in favour of the transaction.

If approved, on closing of the transaction, Brookfield Properties and its affiliates, which currently hold approximately 89.7% of BPP’s common equity, will hold in aggregate an equity interest in Brookfield Office Properties Canada of approximately 91%, including the consideration Brookfield Properties is receiving for the sale of Brookfield Place, net of the impact of retaining certain assets and preferred shares which are not being transferred to Brookfield Office Properties Canada.