Underwater? That global warming must be worse than I thought

All Sam Zell needs to do is to buy a small bank and apply for TARP money

What A Fool Believes, He Sees.
But the wise man has the power to reason away what only seems to be.
-CRE analysts' M. McDonald & K. Loggins

Zell was a genius in selling at the top and going to play with a paper and baseball team.

He doesn't really care about the suckers who bought it all at the top.

Follow what the man does, not what he said.

Someday this war's gonna end...

Nemo - If everybody sold at the top of the market, the system would collapse. There has to be a sucker for every bet.

Zell was a genius in selling at the top and going to play with a paper and baseball team.

Yes, Sam Zell was a genius for selling his RE at the top. Too bad he bought the Tribune company with his real estate profits.

I have a pike in my garage with Greenspan's name on it.

Nemo - I was referring to The Tribune

I'm confused, the title of the article implies that Sam Zell is in trouble, but it would seem to me that Sam Zell sold at the top of the market and is very well positioned to buy back the properties he sold at 70 cents on the dollar.

karelian writes:
Just read the article about the 90-year old who lost his savings to Madoff and just got a gig bagging groceries.

The money quote from the article:

"We don't have any cash reserves now. And we still owe money on our houses," he said in a telephone interview

wtf? 90 y/o owing money on a house...

Yes, it's known as "distribution" when the smart money makes its exit. Having seen the movie a couple of time now in RE, and being on the wrong end of it once, this is familiar.

Did anyone else notice the class-action suit against Marcus and Millichap? Turns out a couple of their brokers are alleged to have purchased small CRE properties, inflated the price, them swapped them at those inflated prices while acting as a party to to 1031 exchanges.

What's old is new again.

the Zell/Blackwater deal would go down as the height of insanity.

Uh, that would be the Zell/Blackstone deal.

The KBR/Blackwater deal was a different sort of insanity.

I also get blackhat and blackhalo mixed up at times.

Sam Zell is in trouble, but not because of his CRE deals. Shortly after he sold Equity Office Properties in 2007, he bought The Tribune for $14 Bil, and just a year later (Dec 2008) The Tribune filed for Ch.11

President Barack Obama warned on Saturday that quick action was needed to avoid catastrophe

See how easy it is to use the words "Obama" and "catastrophe" in the same sentence?

Did anyone else notice the class-action suit against Marcus and Millichap?
sm_landlord | Homepage | 02.07.09 - 12:27 pm | #

I always thought of that firm as one of the better RE brokerages.

The L.A. Times story didn't say anything about 1031 exchanges, but it did outline how the fraud worked.

Just two bad apples?  An entire bad industry?

Zell's personal exposure to the Trib is under $300mm, don't cry any tears for that heartless bastard.

 Trib BK was planned for from the outset, this way he hoses the ESOP and gets the assets cheap.

OT, using the new Firefox(3.0.6) and can't open comments in a new tab, only in a new window. Any suggestions, or does CR need to fix it on his end?

Comrade Alexei Mikhailovich 12:42 pm - Thanks for the details. FUBAR.

1. The employees were not snookered, they were dragooned by the former management of the Tribune Company and Zell into the ESOP that bought the Tribune. Screwed, screwed, and double screwed.
2. Bernard Baruch stated the secret of a fortune is to buy low and sell high. Of course knowing it is knowing when "high" is. Zell of course knew that it was time to take profits, but if fools were willing to listen to his spin of the optimistic side of the picture, well, that is why God created fools. The problem is the foolish banks and insurance companies coming tothe Government saying "make us whole for our foolish bets or face financial armageddon!"
3. At the time, it was noted that Blackstone going public meant that the smart money was buying. Schwartzman and Petersen both got 2 billion dollars each out of the deal.
   2 to get $2.33 billion when Blackstone goes public.
4. What galls me is that Schwartzman and Petersen who both hate paying taxes and invest in propaganda and political contributions for the purpose of destroying social security and medicare while there "deals" destroy the wherewithall of middle class and working class nest eggs.
5. Over optimism in booms (the infamous "its different this time" expression being the clap of doom) is typical of capitalism. What is different and rotten this time is the uttter selfishness of the business and financial elite and their capture of the regulatory and political elite (nothing demonstrates this better then Bernie Madoff. Let's do a thought experiment: in 2005 the SEC, in response to the whistleblower starts a real investigation of Madoff. Bernie sends out an e-mail to all his clients (getting their steady 10% a year still).

OT- But the Stimulus is worth discussing.

If the public is expecting direct benefit from the stimulus then a large fraction are going to be disappointed. The portion of stimulus that was through tax cuts was increased by Senate actions, but (using 2005 data) only 73% of (non-dependent) tax filers had a tax liability. Add to that pensioners and others who had no need to file a return and about 1 out of 3 households will not directly benefit through lower taxes.

One could argue that this is the cohort that is most likely to spend any additional income that might come their way.

OT, using the new Firefox(3.0.6) and can't open comments in a new tab, only in a new window.
Comrade Alexei Mikhailovich | 02.07.09 - 12:44 pm | #

Using the same version here, Comrade. Right click, and open in new tab works for me.

OT, using the new Firefox(3.0.6) and can't open comments in a new tab, only in a new window. Any suggestions, or does CR need to fix it on his end?
Comrade Alexei Mikhailovich | 02.07.09 - 12:44 pm | #

i'm not having that problem.  tabs open ok. running firefox on mac osx.
what add-ins are you using?

Been at work today struggling with how to handle the stimulus package at the state level. This will be a disaster. All of this money falling on states when they should be cutting back. The tendency will be to let expenditures shoot up just making the correction next year all that much worse. Pray for stimulus two or we see state governments implode. Will the insanity ever stop?

And Justice Thomas fast asleep...
MrM | 02.07.09 - 1:06 pm | #

No different than any given day on the bench then.

Baltimore is more or less, avoid the whole city.
lawyerliz
.
That's sad to hear. I got started in construction in Balto, over 30 years ago now. I always liked that town, especially the area around Johns Hopkins and Fells Point.

Hanging by a thread said: "Been at work today struggling with how to handle the stimulus package at the state level. This will be a disaster. All of this money falling on states when they should be cutting back. The tendency will be to let expenditures shoot up just making the correction next year all that much worse. Pray for stimulus two or we see state governments implode. Will the insanity ever stop?"

In my state (NC) the governor has instructed state agencies to cut by 7% and imposed other austerity measures in an effort to balance the budget.

But reasonable and responsible actions like that don't sell many newspapers.

Sebastia

There's an article in today's NY Times about job losses that is probably the most negative economic reporting I've ever read in the Times. It's like the Times editors just said, oh f*ck it, start writing the truth. At the end of the article, an economist says: "My model says it (Obama stimulus plan) will generate three to four million jobs, but I'mnot sure I believe my own models. We're in uncharted waters here."

Models are built on historic assumptions. The "uncharted waters" are structural changes in the economy. For example, newspapers like the NY Times are victims of a structural change away from print and toward getting news on the Net and blogs. Mall operators are victims of less conspicuous consumption and online shopping, both of which are structural changes.

I think hi-rise central business district office buildings also will suffer under structural changes. They were a huge luxury that won't be affordable any more.

One structural change is that employers are quicker to downsize workers now than  before. They also will be slower to hire back. In some companies, every new position proposed in the next 10 years may be subject to a profitability and productivity test. The alternatives to hi-rise CBD office buildings are cheaper space in cheaper places (with Internet and teleconferencing) and hiring people to work from their own homes, whether as staff or outsourced freelancers. Any of these is more productive than hi-rise CBD buildings.

It's not just the economy, stupid. It's the structural changes in the economy that will be, for our lifetimes at least, pretty permanent. Most of them have very negative short-term impact, and very little of the rushed, chaotic Obama stimulus plan addresses them.

Can't figure out how RICO applies in a civil case.
Paradigm Lost | 02.07.09 - 12:54 pm | #

There's a lot of info on Civil RICO here

Sportsfan: Thanks.

Rich re uncharted waters.

Was on late last night and comments ran to PM, esp gold.

Poster thought that AU was overvalued as the oil/AU ratio was @ 23 and far above norm.

But wondered after going off, does the historic ratio still hold in these particular times of veritable printing of $ and other currencies to cover the nominal value of the debts.

Yep. We're through the looking glass.

As to Sheriff Dart, read about it back in late 2008 and commented to wife that he had his head screwed on.

Good for him.

Mom usta live fairly near Hopkins. Got mugged in her home at what the realtor described as a "good" block. Later I discovered a "murder map" Several murders within a block or 2 of her house in the last 2 years. I can't say anything like that about Miami. Murder capital, I think.

Now, she's living here with us. Drove down the street for the first time after getting clearance from the dr.

The special session of the 73rd Congress had hung up an amazing record of achievement in its 14-week sitting.
LS1 | Homepage | 02.07.09 - 1:20 pm | #

They knew there was a crisis and that it was already in its third year.

Meanwhile the 111th Congress can't seem to get its head out of its butt.

Why not?  THEIR lives haven't changed at all.  There are just more whiney constituents and they all know that constituents are whiney by nature.

So let's make sure there's a few hundred billion of tax cuts in the package and maybe a few Republicans will vote for it
.

That's a great point, Rich. In fact, I will go a step further and say many companies are using the cover of the economy as an excuse to relieve themselves of "dead weight."
Morocco Bama | Homepage | 02.07.09 - 1:33 pm | #

Yup. Be a lot more of that in the months to come. I see that where my wife works and also at a company I work with - both planning extensive lay offs for next week (> 10% of workforce).

And cutting hours across the board is 'non-productive'... your best workers leave because even in a down market they have options... the worst workers have no where to go so they stay forever. By the time the recession is over you have nothing but 'bad employees'. To avoid this they 'help' their less valuable employees 'move on' via lay off and then try like crazy to hang on to their better employees - work them harder.

I see no future in trying to spread out the work to more employees... isn't going to happen.

OT, using the new Firefox(3.0.6) and can't open comments in a new tab, only in a new window. Any suggestions, or does CR need to fix it on his end?

Comrade Alexei Mikhailovich | 02.07.09 - 12:44 pm

Yeah, use Google Chrome instead.

Why Sam Zell Is A Billionaire And You're Not.

a good article:

Why Sam Zell Is A Billionaire And You're Not

p.s. let the man speak himself ...

Suppose he did say something. what good would it do?

STIMULUS PLAN #KITCHEN AND SINK 8- GURANTEED EMPLOYMENT FOR HOME BUYERS.

I remember Zell's comments well. I never was able to draw any conclusions regarding his motivations. He did buy Tribune...

Paradigm Lost,

That's what it says about exempting securities fraud.  Gee, I wonder how that got that exemption ?!?

If you're interested in a follow-up to the Supreme Court case, it's located at:

Bridge v. Phoenix Bond

Have a good day.

And between Madoff and the stock mkt demise, I betcha that a lot of them congresspersons have lost a lot of money.

Geithner says banks must modify loans: sources
U.S. linking bank aid to loan changes: sources
| Reuters
Treasury Secretary Timothy Geithner on Saturday told lawmakers that financial institutions that receive government assistance will have to make loan modifications and meet other new standards, according to Democratic sources.

Here come the cramdowns!!!

Hmm, the Mr. Zells of the world don't need to be tarred and feathered, but they need to be 'way more highly taxed.

So they would put some money in the pot to replace the money the banks foolishly lent, which he made.

Either that, or just let the banks fail. Or, find out which banks Zell has his money in and let THEM fail.

I remember in Star Trek Deep Space 9, someone was trying to get the Ferengis to strike or get a better deal than Quark was giving them. Quark said something to the effect that Ferengis never did stuff like that because they all thought that they'd be boss someday, and would get to exploit everyone.

Oops "legislative"

never did stuff like that because they all thought that they'd be boss someday, and would get to exploit everyone.

I have long thought that that was the basis of the post-Reagan Republican constituency.

Deep Space 9 was always my favorite of the Treks.

I loved the idea of the prophets. Imagine, gods that everyone did agree really did exist, and who, visibly and noticeably to everybody did something for the believers.

The only issue of the believers vs everybody else was the nature of the prophets, not whether they even existed or not.

And I adored the evil popess.

Speaking of which, Ratzinger was forced by the horror of the Germans and the rest of the world, to beat up on the Holocaust denier. Which he wouldn't have done without the pressure.

The man is not impressive.

"Simply put, it is far from clear that marginal infrastructure projects are worth building, given that China is already investing more than 45 percent of its income, much of it in infrastructure."

Pension funds chasing yield end up bankrupting themselves buying debt from speculators. Wow - Social Security will be your only hope when you retire at age 80.

And I could not agree more with Madoff is a distraction. Banksters are thanking their lucky stars right now that the light is shining on him instead of them.

That explains the CNBC obsession with Bernie. Rich people get screwed and its a terrible scandal. Poor people get screwed every day and, well, it's just business.

"Poor people get screwed every day and, well, it's just business."

Let's face it, there is only one way for poor people and everyone else to not get screwed - educated themselves!

Otherwise they still will get screwed, this time by government.

No one will really help you but yourself. And not being lazy to go through CR articles could be a good start.

"Ha! Like the US has succeded?"

well we do have pretty high vs. the rest of the world GDP/ capita. We did fueled major scientific and technological advances in the last 40 years.

And as of the future, please don't be in a such a hurry to write us down.

All shall pass and given our flexibility and optimism / desire to become better of some of us, we might shine again.

Who am I kidding, we will shine again.

Link for Uncle Billy on the Marcus and Millichap story:

Investors allege real estate scam - Los Angeles Times

rich [One structural change is that employers are quicker to downsize workers now than before]

There are other structural and social dynamics at work in the financial sector. Never before have there been so many weak handed participants in the stock market. J6P is out of the market as he scrambles to scavenge whatever capital hasn't been vaporized. What's left in the market is day traders and hedge funds. Violent swings are causing panic among politicians.

The entire financial system is totally unstable.

sportsfan writes:
"The L.A. Times story didn't say anything about 1031 exchanges, but it did outline how the fraud worked."

I didn't see your post before I posted the link...

On the 1031 thing, you are correct that it was not mentioned in the article. But I know a bit about how M&M work, as they are a big player in my area. They are big into 1031s, and if you own income property around here, you almost certainly have had a visit from them sometime in the last three years or so. They try to generate business by talking people into trade-ups to maximize their leverage, and thus return on investment, assuming that the deal works out. They have buyers that want apartments and sellers that want to unload CRE, mostly single-tenant with national or regional chains.

I suspect (but cannot prove) that their brokers were playing the role of buyer or seller or both in some if these transactions, and hiding behind the 1031 as a service while they did so.

Fortunately, I saw the CRE calamity coming some time ago, and so did not get involved in any of their deals.

You would not believe the mess of excess drug stores, stationary stores, etc. we have around here, many of them badly managed.

Jas,

You've been hangin' CR out to dry on
CRE for some time now.
What's your point?
How about some insight rather than gotcha' ?

"I didn't say that. I said that the best way of preventing people getting screwed is that of majority of people to make an extra effort to be educated."

Which is why headstart and other education monies were eliminated were eliminated from the stimulus package I presume.

Uncle Billy, Mental Widget writes:
"Thanks landlord."
"http://www.redcounty.com/orange-...-paul-morabito/ "

Aha. Thanks.

Someone down the road got--not one--but TWO PONIES!
Samdog | 02.07.09 - 3:06 pm | #

Must have been Sebastian.

I suppose if Sam Zell is guilty, than those of us who sold our homes in 2006 and made a killing are guilty as well.

[bad link on comment from thread below]

German interview (Deutsche Welle) with Joseph Stiglitz  : "Nationalized Banks Are "Only Answer," Economist Stiglitz Says"

Deutsche Welle: Economists Nouriel Roubini and Nassim Taleb, who predicted the global economic downturn, have called for a nationalization of banks in order to stop the financial meltdown. Do you agree?

Joseph Stiglitz: The fact of the matter is, the banks are in very bad shape. The U.S. government has poured in hundreds of billions of dollars to very little effect. It is very clear that the banks have failed. American citizens have become majority owners in a very large number of the major banks. But they have no control. Any system where there is a separation of ownership and control is a recipe for disaster.

Nationalization is the only answer. These banks are effectively bankrupt. [emphasis added]

Joseph Stiglitz was awarded the Nobel Prize in economics in 2001. Under US President Bill Clinton he served as chairman of the Council of Economic Advisers from 1995- 1997. He was chief economist of the World Bank from 1997-2000 and was a lead author of the 1995 Report of the Intergovernmental Panel on Climate Change, which shared the 2007 Nobel Peace Prize. He is currently a professor at Columbia University in New York.

Paradigm Lost(Unrated) writes:
\tSportsfan: Can't figure out how RICO applies in a civil case. Are the Feds after them too? Story doesn't say.
\t Paradigm Lost | \t \t \t \t02.07.09 - 12:54 pm | #
Paradigm Lost | 02.07.09 - 12:54 pm | #

If I'm not mistaken, that is what our friend Rudy Gulliani did as US Atty of NY to go after Mark Rich of Clinton pardon fame. First time it was apllied that way, and I think it was the last. Told Guliani not to do that again, or anyone else for that manner. Mighthave had something to do with his eventual pardon.