Here is what the WSJ had to say: “Equity Residential, the apartment company headed by real-estate mogul Sam Zell, has emerged as the lead bidder in the contest to buy roughly half of rival Archstone in what would be one of the largest real-estate transactions since the downturn, according to people familiar with the situation.

Equity Residential has offered more than $2.5 billion in cash and stock to buy the 53% equity stake in Archstone currently held by Bank of America Corp. and Barclays PLC, the people said. An agreement is still uncertain and a higher bidder could step in. The rest of the company is owned by the bankruptcy estate of Lehman Brothers Holdings Inc., which led a group that purchased Archstone in 2007 and is keeping its holding. Lehman and the banks earlier this year disagreed over how to unwind Archstone, leading the banks to put their stakes up for sale.”

The WSJ said that Zell’s offer values all of Archstone-Smith at $16 billion, about $6 billion less than when it sold in 2007. When Tishman bought Archstone, debt and debt and equity capital was provided and arranged by Lehman Brothers Holdings Inc., Banc of America Strategic Ventures, Inc., Barclays Capital and their affiliates. Lehman drafted a pair of debt-market beacons of liquidity, Fannie Mae and Freddie Mac, to provide structured financing and credit for the transaction. As part of the transaction, Fannie Mae purchased a $7.1 billion credit facility secured by 105 Archstone multifamily properties. Freddie Mac executed a $1.8 billion structured transaction that provided new financing for 32 multifamily properties across the country and approved assumption of an additional 15 properties. It may seem ironic now, given the government take over of Fannie and Freddie, but when the deal took place, David Worley, a senior vice president of management at Fannie, had this to say: “Fannie Mae is pleased to serve as a constant and reliable source of liquidity in today’s ever-changing capital markets.”

The markets did change, of course, but probably not in the way he imagined.

Meanwhile, the WSJ article did not delve into how Archstone-Smith created the apartment powerhouse from Denver.

Following is a story I wrote in May 2007 for the Rocky Mountain News, when the blockbuster deal was first announced.

“A New York City real estate firm that owns trophy properties, like the Rockefeller Center, made a $22.2 billion bid Tuesday for Arapahoe County-based  -Smith, the nation’s second largest apartment real estate investment trust. Tishman Speyer, partnered with Lehman Brothers Holdings Inc., offered $60.75 per share for Archstone -Smith – which is 6.2 percent below its 52-week high of $64.77 per share. The price represents a 22.7 percent premium over the price last Thursday, before the deal was publicized. The stock closed at $61.42 on Tuesday, slightly above the offer price, which indicates some investors think there will be a higher bid offered for the company, said Troy Johnson, a partner of Greenwood Village-based Quixote Capital Management.

“Archstone-Smith has created a fantastic portfolio of apartment communities and has developed an industry-leading platform that includes more than 2,500 talented associates who are vital to our success,” said R. Scot Sellers, chairman and chief executive officer, Archstone-Smith. “We have always been committed to maximizing value for our shareholders, and we believe this merger accomplishes that objective, offering a significant premium over the unaffected share price. We are looking forward to continuing to provide great apartments and great service to our customers as part of the Tishman Speyer family, and continuing to grow our business for many years to come.”

Tishman Speyer’s $40 billion real estate portfolio also includes the Chrysler Center in New York. If consummated, the deal would represent one of the largest privatizations of a public real estate investment trust.

Tishman Speyer offered to pay $13.5 billion and assume $8.5 billion in debt. Archstone -Smith’s market cap has risen to $13.6 billion from about $12.5 billion since the deal was announced. Archstone -Smith, which focuses on owning and developing luxury apartment communities, primarily on the East and West coasts, is the 10th largest company in Colorado based on market cap. Denver-based Apartment Investment and Management Co. has a market cap of about $5.3 billion but has about 260,000 apartment units in its portfolio, about three times as many as the 86,014 owned by Archstone -Smith.

Archstone moved to Denver in 1998, when real estate financier William Sander’s Security Capital Group bought an Atlanta company and moved it here. Another former Security Capital company became Denver-based ProLogis, the world’s largest industrial REIT.

R. Scot Sellers, Archstone -Smith’s CEO, will remain with the Tishman Speyer, but the fate of the 300-plus other Denver-area employees is unknown. The company has about 2,500 employees nationwide.

“By keeping Sellers on, it is also clear that the buyers intend to run Archstone as a healthy company, rather than to simply pick over a carcass,” Peter Slatin wrote in his Slatin Report newsletter on Tuesday.

Denver loses HQ

The metro area would lose another publicly traded company headquarters in the deal.

“Obviously, given the choice, I wish all of the New York Stock Exchange-based companies were headquartered in Denver,” said John Lay, CEO of the Southeast Business Partnership. “We hope to have the opportunity to convince them to keep a big presence here.”

A spokesman for Archstone said he could not discuss any aspects in the deal beyond the press release, including whether the company would keep its name and presence in the Denver area, and whether there would be layoffs.

The company’s Web site only lists one apartment project in the Denver area, the 156-unit Champion Park in Thornton.

The company sold its apartment community in the Riverfront neighborhood in Denver’s Central Platte Valley last year for $55 million, to concentrate on more lucrative markets such as New York and San Francisco. The REIT calls itself the largest public owner of apartments in Manhattan.

Johnson, of Quixote Capital, said the deal marks a “long-term play in real estate,” for the buyers, and is indicative of the amount of capital available to buy companies.

“There’s a lot of private money chasing stuff,” Johnson said.

 INFOBOX

Archstone -Smith at a glance

•  Headquarters: 9200 E. Panorama Circle, Centennial
•  Size: An S&P 500 company, it is the nation’s second largest apartment REIT in the country by market cap.
•  How it ranks locally: 10th largest, with a market cap of about $12.5 billion
•  CEO: R. Scott Sellers, who is staying on with Tishman Speyer, the buying entity
•  Holdings: 86,014 luxury apartment units in 344 communities. It has sold most of its Denver holdings to concentrate on more profitable markets, such as Washington, D.C., Southern California, the San Francisco Bay area, New York City, Seattle and Boston.
•  Strategy: It develops, owns and operates luxury apartments in niche markets that have a high barrier to entry, making it difficult for competitors to get a foothold.

Tishman-Speyer holdings

This New York company has acquired, developed and operated more than 230 commercial properties with more than 100 million square feet and 14,000 residential units.

•  Portfolio: Valued at more than $40 billion, with properties in the U.S., Europe, Latin America and Asia.
•  Buildings: Holdings include trophy buildings, such as the Rockefeller Center, and the Chrysler Center, in New York. It also owns the Torre Norte tower in Sao Paolo, Brazil.

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It’s not golf courses, but watching cows graze or tomatoes grow. The article quotes Golden-based land planner Quint Redmond, who uses the term “Agriburbia,” to describe this new trend. The article also highlights efforts of the fledgling Sterling Ranch, the 3,400-acre development in Douglas County, in the Chatfield Basin.

To read the entire article, please visit this link:

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This Aspen home is listed by SDS Real Estate for $22 million.

The Wall Street Journal, in an article today titled “Vacation Homes: Why It May Be Time to Buy,” listed Aspen as one of four “Blue Chip” markets and Vail as one of four “Depressed Markets.”

Aspen found itself in the company of the Hampton, Hilton Head and Santa Barbara. The WSJ also described Aspen as a “luxury market bellwether.”

Vail was grouped with Miami Beach, Martha’s Vineyard and Palm Beach. One broker in Vail said that sales activity has slowed because of fears “the other shoe is going to drop.”

What also interested me was that Aspen also had the highest overall prices of the eight markets profiled, at a median price of $781,000.  It also showed the smallest five-year decline of any of the markets, down a mere 2.6 percent. Palm Beach, Fla., was at the other end of the spectrum, with the median price falling 66.5% to $254,000 from $758,000 five years ago. And Miami, with a median price of $130,000, down 57 percent from $302,000 five years ago, sounds more like a short-sale in Aurora than a home in a glitzy resort.

Resort area	Median Home Price	Median Home Price 5 Years Ago	Percentage Decline
Aspen	$781,000	$802,000	2.6%
Santa Barbara	$695,000	$1,000,000	30.5%
The Hamptons	$680,000	$1,100,000	38.2%
Hilton Head	$307,000	$574,000	46.5%
Martha's Vineyard	$403,000	$638,000	36.8%
Vail	$385,000	$562,000	31.5%
Miami	$130,000	$302,000	57.0%
Palm Beach	$254,000	$758,000	66.55
Source: Wall Street Journal

To read the entire WSJ article, please visit this link.

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The headline on the Wall Street Journal op-ed piece left little doubt on the author’s take on the investment appeal of a house: A Home is a Lousy Investment.

The Opinion-page article by Robert Bridges, a professor of clinical finance and business economics at the University of Southern California’s Marshall School of Business, said that investing in the stock market, hands down beats  buying and owning a home based on historic returns.

He notes that a dollar used to purchase a median-priced, single-family home in California in 1980 would have grown to $5.63 in 2007, and to $2.98 in 2010. “The same dollar invested in the Dow Jones Indusrial Index would have been worth $14.41 in 2007, and $11.49 in 2010, Bridges wrote. He also calculated that if in 1980, instead of putting $19,910 toward a downpayment and instead put it in the Down Jones Industrial Index, the value of the portfolio in 2010 would be worth $1.5 million more than the house. In 2007, the stock portfolio would have been worth almost $2.2 million, exceeding the house value by $1.6 million. Earlier, the most recent Case-Shiller report said the typical home in the Denver metropolitan statistical area rose by 22.3 percent from January 2000 until April 2011. That is below the inflation rate of about 31 percent during that time period.

Bridges cautions future generations as viewing home ownership as the cornerstone of personal finances “Young people planning for retirement increasingly face a choice between house payments and contributions to retirement accounts. They simply can’t afford both,” he writes. He concludes that while “while houses are possessions and part of a good life, they are not always good investments on the road to financial independence.”

Mike Rinner of the Genesis Group, read the WSJ article this morning.

Investment aspect shouldn’t drive home buying

“It contains a germ of truth,” Rinner said. But he indicated that Professor Bridges focused on too much on buying a house as an investment, as opposed as a place that meets other personal, societal and familial needs.

“If you are buying a home just as investment, you are making the same mistake of people who were buying homes a few years ago in California and other places of the idea of buying a home and flipping it the next day for a huge profit,” Rinner said. “You should be buying a home because it is a good place to raise your kids, it’s convenient to where you work, and other lifestyle reasons. You should not be spending money on a house because of it’s so-called “investment value.” You should buy a home that fits your needs and you can afford. If you buy a home for the right reasons, and it shows any appreciation, it then a very good investment.”

He also said that the professor did not seem to factor in the imputed cost of renting, when looking at the financial advantages and disadvantages of home ownership, as compared to stocks.

“You have to live some where,” Rinner said. “Also, you have to consider that rental rates have been rising, and probably will continue to do so for the foreseeable future. Money you put in the stock market over time may go up more than the value of a house. But you can’t live in half of the stock and consider the other half your investment.”

And that is true, he notes, no matter how much the value of a stock rises more than the value of a house.

To read the entire WSJ article, please visit this link.

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The company, which has grown to be the nation’s second largest sub-sandwich chain, with 3,500 store, has a debt load of more than $850 million, according to the WSJ. The newspaper said it notified lenders on Friday that it expects to violate its lending terms that requires it to maintain a certain level of earnings. This is not the first time that Quiznos has been in financial peril, as this column in the Rocky Mountain News reported in 2005. Quiznos, which has stores in 21 countries, as well is in the U.S, on  its website said it is always looking for other stores.

It says the ideal Quiznos location has:

• Great visibility
• Strong mix of population density and traffic
• Daytime population
• Residential population
• Pedestrian traffic
• Auto traffic
• Great access and ample parking

The Ideal Quiznos space has:

• 1,000 to 1,600 square feet
• Ideal frontage of 20 to 25 feet

The ideal Quiznos is near or in:

• High identity storefronts in areas of heavy traffic
• Central business districts
• Regional mall
• Airports
• Free standing or shared pad buildings
• Strip centers
• Strong communities or neighborhoods
• Stadiums
• Hospitals

The Ideal Quiznos lease has:

• 5 or 10 year primary lease term with one or two 5-year options
• Minimum of 15 years total term
• Quiznos standard  vanilla shell delivery or equivalent in tenant improvement allowance

To read the entire WSJ article, please go to this link.

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The WSJ analyzed activity from the 10 largest lenders and found they denied 26.8 percent of loan applications in 2010, compared with 23.5 percent in 2009. One reason lending is to tight because Fannie Mae, Freddie Mac and the Federal Housing Administration, which account for 9 out of every 10 loans made, are under pressure to avoid any losses, the paper notes. Denver had a 22.8 percent denial rate, 14.9 percent better than the national average.

Realtor suffers

Barnes told the paper that Fannie and Freddie are “behaving like a hurricane insurance company that won’t write any policies within 200 mile of an ocean.” Barnes goes on to tell the story  of Amy Menell, a Realtor with a credit score above 800, no debt and is willing to put 50 percent down on an $800,000 Boulder home  a divorce settlement, in order to take advantage of today’s low interest rates and depressed housing prices. However, because she didn’t sell many homes in 2009, she doesn’t have sufficient two years of documented income that the bank requires, and she can’t get the loan, even though business has picked up for her.

“Going back as far as there has been banking, if somebody walked in the door with a 50 percent down payment, good credit, cash in reserve, they’d walk out with a loan,” Barnes said.

To read the entire WSJ article, please visit this link: Tighter Lending Crimps Housing

Contact John Rebchook at JRCHOOK@gmail.com

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The Wall Street Journal today published an article that said despite gloomy real estate reports, such as last week’s S&P/Case-Shiller report that showed housing prices have fallen to 2002 levels, a compelling case can be made that now is the time to buy a home.

The article, titled Why It’s Time to Buy, pointed to a variety of factors including:

• Mortgage rates near a 50-year low.
• Affordability, caused by a glut of foreclosed homes, as well as an almost a complete standstill in housing construction.
• Demographics – housing formations are on the rise.

The article noted that at least for now, the mortgage deduction is still in place.  It also noted that in many parts of the country it is now less expensive to buy than to rent. And if you live in your home long enough to pay off your mortgage, you will be living rent-free. The article, however, did not address the Denver market specifically.

Some prospective buyers who have been waiting for the absolute perfect place, the exact bottom, to sign on the dotted line – and this might be it, at long last.

“The family with elementary school kids and a puppy when the housing debacle began five years ago now has middle-school kids and the dog weighs 80 pounds,” Doug Yearly, CEO of Toll Brothers Inc., told investors last month, the WSJ noted. “Some of our clients, after waiting so long, are starting to move off the fence and into the market, motivated by attractive pricing, low interest rates, and most important, the desire to take the next step in their lives.”

To read the entire Wall Street Journal Article, please visit this link: Why It’s Time to Buy.

Contact John Rebchook at JRCHOOK@gmail.com

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The article noted that with a median-price of $4.6 million for a single-family home it trumps other playgrounds for the rich such as the Hampton, Beverly Hills and Palm Beach. Many of the recent buyers are from outside of the U.S. Buyers have hailed from Turkey, Russia, Australia and Hong Kong.  Rich Americans, however, also have been drawn to Aspen. The article noted that hedge fund manager John Paulson, who made billions of dollars when he correctly anticipated the housing crash – but more recently has been bullish on housing  - last year paid $24.5 million for a 13,000-square-foot estate in Aspen. Paulson can certainly afford it.

To read the entire article, please go to The Most Expensive Town in America.

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A national spotlight, (LED of course), today is highlighting the National Renewal Energy Laboratory research facility in Golden that the Wall Street Journal is hailing  as the greenest office building in the country.

The so-called “net zero” building in on track to meet its goal of a 100 percent reduction in energy use, according to the article. The Denver architectural RNL, which designed it the $64 million office building, and are others are  busy fine-tuning the building to eke out even more energy savings, including those on the next phase, which includes a parking garage and another wing.

The building was built by Denver-based Haselden Construction LLC. RNL also designed the 1800 Larimer office tower in downtown Denver, which is a Platinum rated, LEED-certified building and recently sold for an estimated $430 per square foot, a record price.  To read the entire Wall Street Journal article, please visit this link: Lessons learned.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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In case you missed it, the Wall Street Journal published an article titled: Why 2011 May be the End of the Housing Crisis.

While the article, which was published in the Denver Post on Sunday, as well as being available online (and at a link at the end of this blog), did not specifically mention Denver, the arguments presented would be familiar to anyone who has read numerous articles  in InsideRealEstateNews.

The Wall Street Journal, among other things, said that:

• Houses are good deals
• Affordability is high
• Investors are eager to buy homes, eating up much of the supply

10-year-hold advised

However, the article said that don’t buy a home with the expectation of making a quick buck. It quoted one expert as saying that you should make a purchase with the idea of living there for at least 10 years. That was a point made in the recent InsideRealEstateNews interview with Lane Hornung, co-founder and CEO of 8z Real Estate.

For the Wall Street Journal article, please visit this link: Why 2011 May be the End of the Housing Crisis.

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