commercial real estate
Commercial Real Estate News Digest
Mercury News wire services
Article found 03/27/2007at mercurynews.com
read also 'Opportunist' Zell
embraces challenges beyond commercial real estate
New S.F. hospital planned. Sutter Health and California Pacific
Medical Center announced plans last week to build a $1.7 billion hospital in
San Francisco, the first new acute-care facility to be built in the city in 40
years. When the 455-bed hospital opens in about 2015, it will have an
emergency room, surgical and intensive care units and a women's and children's
center. CPMC, an affiliate of Sutter Health, already owns the site, which is
the home of the Cathedral Hill Hotel. The chain owns four other hospitals in
San Francisco, employing more than 1,600 doctors and 6,600 nurses and staff,
according to a CPMC.
 Larkspur firm acquires two more hotels. Larkspur Hospitality
acquired the Best Western Truckee Tahoe Inn in Truckee, and the Holiday Inn
Express Mill Valley-Sausalito in Mill Valley from affiliates of Pacific Valley
Investors. The purchase price for the two 100-room properties was not
disclosed. Larkspur Hospitality, a hotel company founded in 1996, owns and
operates 23 hotels, including two brands: Larkspur Landing and a collection of
three- and four-star independent hotels known as the Larkspur Collection in
California and the Pacific Northwest.
Plans for the Philippines' tallest building tied to IPO. Rockwell
Land plans to raise $100 million in an initial public offering as early as
this year, according to a report in the Philippine financial publication,
Business World. The funds will help finance the construction of a 65-story
building, the Philippines' tallest, at the Rockwell Center, the newspaper
said. The company, which plans to build a 20-story building for call centers
and other back-office service providers in the Manila suburb of Pasig, plans
to spend as much as $62 million on various projects this year, the newspaper
said.
MERCURY NEWS
'Opportunist' Zell embraces
challenges beyond commercial real estate
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CHICAGO (AP) -- If there were a Hall of Fame for real estate
investors, Sam Zell would be a certain first-ballot inductee.
The Grave Dancer, as he long ago dubbed himself for his ability to revive
moribund properties, has had a golden touch with real estate ever since he got
his start managing apartment buildings as a college undergrad. The blockbuster
sale of Equity Office Properties Trust last month, which netted Zell about $1
billion, only enhanced that legend. |
But it shouldn't surprise anyone if the 65-year-old magnate adds a giant
newspaper and TV company like Tribune Co. to his holdings. The stable of
companies he chairs or is the major shareholder in already do everything from
run supermarkets in Brazil and sell and grow wine in Chile to create an oil
company in Kuwait, convert waste to energy in the U.S. and sell electrical
wiring systems worldwide.
Real estate may be his trademark, the billionaire investor noted recently, but
it's only "probably 25 percent of my world."
"I'm a professional opportunist," Zell said in an interview with The
Associated Press. "I'm pretty sure that no matter what topic you pick,
we're involved in some way or another."
Newspapers could be next. Zell has been in talks with Tribune about a possible
acquisition of the ailing media company, which has been reviewing options for
its business since last fall. He confirmed that his proposal calls for taking
the Chicago-based conglomerate private and that he does not intend to break it
up, but otherwise declined to disclose details.
Tribune has promised a decision by the end of March.
Los Angeles billionaires Ron Burkle and Eli Broad, who made their own public
leveraged buyout offer in January, sent a letter to Tribune's board Saturday
raising objections that they didn't get fair treatment in the bidding process,
The Wall Street Journal reported.
Burkle and Broad say the company favored Zell by giving him detailed information
necessary for the employee stock-ownership plan that is part of Zell's proposal,
and that they may be able to make a better offer if they have that information,
according to a person familiar with the letter.
Representatives of Burkle, Broad and Tribune declined to comment.
While he loves analyzing opportunities, spotting bargains and making deals, the
jeans-wearing, raspy-voiced Zell is more free-spirited entrepreneur than
pinstriped mogul.
His office overlooking the Chicago River is stuffed with evidence of other
passions: a model of a Ducati motorcycle, photos of outdoor expeditions, a
memento of the Chicago Bulls' championships and the humorous and elaborately
personalized talking music boxes he designs annually as holiday gifts for
business associates.
He rules questions about personal interests or family off-limits -- perhaps
understandable from a personal security standpoint from someone ranked 158th on
Forbes magazine's list of the world's richest people, with a fortune estimated
at $5 billion. His business style, though, is anything but a mystery: bold,
thorough, and opportunistic at times when others are fearful.
"He's been a pioneer in many ways," said Arthur Oduma, an analyst who
follows real estate for Morningstar Inc. "Not necessarily as a developer,
but as a financier. He really understands the capital markets. His instincts
seem to be right -- buying at the bottom in many cases, and selling at the
top."
Zell went on a buying spree of properties after the savings and loan crisis of
the 1980s, when few others dared to, Oduma said. He encouraged institutional
investors to pool their money for commercial real estate in the early '90s when
it was on the outs.
He also has championed the real estate investment trust as the optimum model for
owning real estate in terms of liquidity, the analyst said, resulting in the
investment community looking more favorably on REITs.
Zell said that while his biggest deal ever was this year's $23 billion sale to
Blackstone Group of Equity Office, the office-tower company he spent three
decades building up, he wouldn't call it his most successful.
"I've never thought about it in those terms," he said. "What does
the word 'successful' mean? Rate of return? No, not even close."
Declining to single out any other deals as his best, he said he doesn't go out
of his way to rate them.
"The truth is that I have been economically very successful, but I was
never really driven by accumulation," he said. "I was much more driven
by achievement."
Zell's business philosophies, and his sense of humor, are encapsulated in a
little red booklet entitled "Quotations From The Chairman" that
contains aphorisms accompanied by cartoons he conceptualized. Among his favorite
adages: "Unless you're the lead dog, the scenery never changes," and
"Be a risk taker; however, define risk by your own terms."
At an age associated with retirement, he remains a lead dog and a risk-taker.
Zell shared his views on current real estate issues and other topics in the AP
interview. Here are excerpts:
AP: What's your take on the meltdown of the subprime mortgage market and people
defaulting more on loans?
ZELL: Perhaps the biggest question is why is anybody surprised? Having said
that, I also don't understand why a problem in the subprime market would have
much of an impact anywhere else. These are marginal customers. These people
don't have any disposable income to begin with. So they're certainly not going
to affect retail sales.
AP: So you think Wall Street has overreacted?
ZELL: Absolutely. They're acting as though subprime loans were like dot-com
companies, where in effect it went poof and it went to zero. There are assets
behind all these loans. ... Some people will get hurt, as they do in every
excess. But the idea that this excess is some kind of a giant contagion that's
going to destroy the economy is preposterous.
AP: What's your outlook for commercial real estate?
ZELL: I think the commercial real estate market is very strong. I think it's
going to get stronger. ... When we have our next recession, and I don't know
when that might be -- if I were betting, I'd bet on the first quarter or the
first half of '09 only because historically in a new administration everybody
wants to fix everything -- but when that next recession comes, you're obviously
going to see an impact on office, as you would in any recession.
AP: And for residential?
ZELL: The for-rent market is very strong. It is not as strong as it was last
year, but it's still very strong by historical standards. As it gets stronger,
the rent-to-buy comparison narrows. So in effect, it'll result in more balancing
and probably generate more buyers in some markets.
AP: What about the outlook for the REIT markets, both internationally and in the
U.S.?
ZELL: We see a worldwide growth in liquid real estate vehicles. We also see
enormous opportunity to use the capital markets to assist the development,
particularly in the developing world.
One of the things that I think many people don't recognize is that in many of
the developing countries, there's vast real estate ownership. It's very
concentrated and very illiquid. And that by virtue of creating these real estate
vehicles, one of the things you're doing is you're unleashing the power of the
wealth and making it much more productive than in effect having it sit in fallow
land or agriculture or something like that.
AP: How do you measure your success professionally?
ZELL: I believe that I was given certain talents and abilities, and that my
responsibility to myself and to society is to maximize. And that's really what's
driven me throughout my life. And when I hold up achievements, those
achievements revolve around making a difference, doing something better that
nobody else has ever done before, or solving a problem. Those are the
definitions of success.
AP: What remaining goals do you have?
ZELL: I think the answer is that if I wasn't doing new things and attacking new
challenges every day, I'd be bored silly. So as far as I'm concerned, it's
taking on those challenges, taking on those risks, understanding, and then
seeing if my judgment and my vision is correct.
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“There’s
so much inventory out there that the buyer can pick and choose,” said
Susan Sirles Fidler, a Realtor at Re/Max 10, Oak Lawn. But she cautioned, “The
stuff that’s almost free is almost free because it’s going to cost you an
arm and a leg to put it back together. It’s not buyer beware as much as buyer
be smart.”
