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IREIzine Vol. 5 No. 29 * July 26, 2001

IREIzine is the FREE electronic newsletter from Institutional Real Estate, Inc. (IREI) going to 4,378 readers this week. IREI also publishes The Institutional Real Estate Letter, Investment Property, REITStreet, Institutional Real Estate Newsline and European Real Estate Quarterly. Learn more at http://www.irei.com.

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In this week's IREIzine
1. News & Observations
2. Recurring Notes on Technology
3. Off the Wall
4. Highlights from the Institutional Real Estate Newsline
5. Notable Quotables
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1. NEWS & OBSERVATIONS

a. EQUITY AND AIMCO?
Last week the 'zine suggested REITs BRE Properties and Summit Properties as possible merger candidates for Equity Residential Properties. One reader has a different take: "In the not-too-distant past, AIMCO had started positioning to take Equity Residential. The AIMCO guys know the EQR product, and I think if they can get the cash or leverage behind the deal they can do it." AIMCO is the second largest multifamily REIT with an equity market cap of $3.5B, but Equity Residential, at $7.5B, is more than twice its size. I think the key here is "if they can get the cash or leverage." Thoughts? E-mail j.heidgerken@irei.com. [JKH]

b. CLEARANCE AT ALBERTSON'S
About 1,600 Albertson's employees will be losing their jobs soon. Albertson's plans to close about 165 stores in 25 states and cut almost 20 percent of corporate managerial and administrative jobs. Albertson's has been struggling since acquiring American Stores in 1999. The acquisition more than doubled the number of stores Albertson's owned, a financial challenge the company is trying to resolve with the layoffs. About 25 percent of the store closings will be in the company's Osco and Sav-On drugstores.

A Boise, Idaho, executive with Albertson's finds himself very stressed by having to decide which 16 people in his division he will lay off. "American Stores seems to be a pretty inefficient group with a big fancy headquarters in Salt Lake City. Albertson's new CEO is going to have a hard job doing the streamlining that has needed to be done since the acquisition." When we asked about the company's prospects, he responded, "It's a good time to buy."

Another Boise resident told us, "When they bought American Stores, all the prices in the local stores went way up. They couldn't compete with other local stores, like Fred Meyer's and WinCo. It was pretty clear that they needed to do something drastic to get their finances in order." No word yet on which stores will close, just that they probably will be the "underperforming" ones. According to "The Wall Street Journal," the company leases space from the following REITs: Developers Diversified Realty, JP Realty, Kimco Realty, Pan Pacific Retail Properties, Regency Centers and Weingarten Realty. [ES]

c. LARRY SILVERSTEIN SATISFIES HIS LUST
It's a done deal. On July 24, Silverstein Properties finalized its purchase of the lease on New York's World Trade Center from the Port Authority of New York and New Jersey for $3.2 billion. The 69-year-old Silverstein, head of the privately held family company, told the "New York Post" earlier this year he lusted after the complex. Now he can have his way with it.

Silverstein, who doubled his real estate holdings when he won the 10 million-square-foot WTC, played David to his Goliath-like rivals. Vornado Realty and a joint venture between Boston Properties and Brookfield Properties both lost New York's richest real estate prize to a small fry. Before the WTC deal, Silverstein only owned about 10 million square feet of commercial space, mostly in New York. The big boys may feel a bit put out by a small, private player making off with the shiny trophy, especially Vornado Chairman Steven Roth, who also lost out on Rockefeller Center to the private Tishman Speyer Properties and the Crown family.

Now Silverstein will have to prove himself to the doubting Thomases, who have questioned his ability to finance and run such a big show. In moves that should stave off his critics for a while, Silverstein Properties hired 70 to 80 staffers of the Port Authority to temporarily handle the asset and brought on board a top-level real estate executive, Geoffrey Wharton.

The WTC is not known for its good fortune. It's been a spot for suicides, and six people died when the complex was bombed by terrorists in 1993. Can Larry Silverstein chase out the ghosts, surprise the naysayers and run a successful operation? Now that he's gotten the object of his lust, we'll see if he can build a long-term relationship with it. [NG]

d. PROBLEM OF PRESIDENTIAL PROPORTIONS
Former president Bill Clinton's move into Harlem is not appreciated by everyone, according to "Bloomberg Business News." Local small business owners say rents have skyrocketed since Clinton announced his new digs on 125th Street. One merchant says his rent will go from $2,000 a month to $8,000 a month starting in January. I don't believe this is the type of economic revitalization officials had in mind when Harlem was designated a federal empowerment zone seven years ago. [JKH]

e. CENTERPRISE-D KNOWLEDGE
IREI's own Geoffrey Dohrmann teaches one of the top-attended classes at Centerprise, a non-profit organization that offers courses for real estate professionals. "When I was in charge of running a retail distribution network years ago, the most enjoyable part of my job was training folks in the areas of sales and managerial skills," Dohrmann says. "Part of our mission here at Institutional Real Estate, Inc. is to help raise professionalism in the industry, and this is a way for me to do something I really enjoy doing, while supporting both IREI's and Centerprise's missions."

Dohrmann's "Marketing Real Estate Investment Products I" has been so popular, an advanced course has been added to the autumn schedule. "No matter how skillful an organization may be on the real estate side of the house, they can't continue to invest money if they fail to remain competitive in the money-raising arena. This course helps them hone a keen competitive edge in this area by giving them a uniform, systematic, professional approach, along with the skills to implement it," Dohrmann says. Those who would benefit from the classes include marketing teams (and their support staffs) who market investment products or services to tax-exempt funds. For more information, see the course list below. [JKH]

CENTERPRISE FALL SCHEDULE OF CLASSES


September 10 -13
Tuition $2,800
  Fundamentals of Real Estate Investment (1)
San Francisco
Richard Peiser Ph.D., Harvard University
 
September 17-18
Tuition: $1,600
  Building Leadership Skills
San Francisco
Gloria Schuck Ph.D.,
Sloan School of Management, MIT
 
September 24-25
Tuition: $1,800
  Benchmarking: Key to Improved Performance
San Francisco
Faculty to be announced
 
October 11-12
Tuition: $1,900
  Managing Global Real Estate Enterprises
Washington, D.C.
Faculty to be announced
 
October 17
Tuition: $950
  Marketing Real Estate Investment Products II (2)
Los Angeles
Geoffrey Dohrmann, Publisher,
Institutional Real Estate, Inc.
 
October 18-19
Tuition: $1,800
  Marketing Real Estate Investment Products I
Los Angeles
Geoffrey Dohrmann, Publisher,
Institutional Real Estate, Inc.
 
October 25-26
Tuition: $1,700
  Understanding Real Estate Cycles
San Francisco
Glenn Mueller Ph.D., Johns Hopkins University
 
November 1-2
Tuition: $1,900
  Fiduciary Standards, Governance and
Management Succession (3)
New York
John McMahan, Univ. of California, Berkeley
 
November 8-9
Tuition: $1,500
  Corporate Real Estate Strategic Planning
San Francisco
Martha O'Mara Ph.D., Harvard University
 
November 12-13
Tuition: $1,600
  Financial Management of Corporate Assets
San Francisco
Kevin Deeble, Consultant;
Sven Pole, Trammell Crow Co.
 
November 19-20
Tuition: $1,900
  Improving Your Real Estate Negotiating Skills
New York
Faculty to be announced

KEY:
(1) For students new to real estate
(2) Prerequisite: Marketing Real Estate Investment Products I
(3) Registration limited to CEOs and board members or trustees

Courses and dates subject to change. For more information, contact Jennifer King at Centerprise, (415) 561-2200 ext.451 or jking@centerprise.org.

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Have a comment, suggestion, news or gossip to share? E-mail me at j.heidgerken@irei.com.

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2. RECURRING NOTES ON TECHNOLOGY

Steve Felix is on vacation. His column will resume in two weeks. In the meantime, if your summer vacation seems a long way off, may we suggest http://www.theflyingcow.com for some at-work stress relief. [JKH]

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IREI'S BOOK OF THE MONTH

Author of "Modern Real Estate Investment, An Institutional Approach," Stephen Roulac has been known for years for his economic forecasting and strategic thinking on the ever-changing property markets. Roulac's newest release is "Stephen Roulac on Place and Property Strategy." Emphasizing the disciplines of strategic management and financial economics, this book explores the opportunities and implications of place, property, real estate and facilities for enterprise operations and creation of wealth. If you are a player in this industry, this book is a must-read and an essential addition to your library.

To order this book, or one of our other real estate titles, visit our bookstore at https://www.ire-net.com/books/roulac.html. You may also place your order by calling our client services department at (925) 933-4040 or by e-mailing your order to Sandy Terranova at s.terranova@irei.com. [ST]
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3. OFF THE WALL

WHAT PRICE GOLFING?
Golden, Colo., doesn't have a public golf course. Apparently, this is a matter of great concern for the Denver suburb. Plans are in place to build a course on a 5-acre parcel of clay pits, but as "The New York Times" reports, there's just one problem. Five sites of fossilized dinosaur tracks have been discovered on the land. The fossils include the only known tracks of ceratopsians, and the only champsosaur tracks ever discovered in the United States. Granted, the city plans to incorporate three of the fossil sites into the course design; the other two are going to be buried "to preserve them," according to Golden's deputy director of public works. Of course, local scientists are up in arms at the idea.

But how many people will go out of their way to golf in Golden? People don't go to Colorado to golf; they go there to ski or hike or raft or buy overpriced crafts made of rocks, leather and sticks. And each year an estimated 70,000 go to visit the fossils at nearby Dinosaur Ridge, a national landmark in Morrison, Colo. As Dinosaur Ridge illustrates, the only reason anyone outside Colorado might make the trip to visit Golden's 18 holes would be to see the fossils. The city should incorporate all five fossil sites into a one-of-a-kind golf course/park design. Think of the marketing possibilities; think of the tourist dollars; think of the potential for overpriced dinosaur-themed crafts! [JKH]

4. HIGHLIGHTS FROM INSTITUTIONAL REAL ESTATE NEWSLINE

a. GETTY REVS FOR REIT IPO
Getty Realty Corp. plans to seek stockholder approval to become a REIT at its August 1 meeting. Getty controls a 1,100-property gas station portfolio in the eastern United States. The company has been considering taking up REIT status since last year.

The board of directors has declared a special one-time cash dividend to stockholders of approximately $64.1 million -- if the company wins approval of its REIT status and successfully completes its proposed public offering of about 7.7 million shares of Getty common stock. If Getty succeeds in its bid for REIT status, to be applied to its tax status as of the beginning of 2001, the company will be required to distribute a minimum of 90 percent of its annual taxable income to its stockholders. Getty intends to meet this requirement by paying common stock dividends of $0.4125 per quarter per share, starting with the quarterly dividend to be declared in September 2001.

This would mark the first REIT IPO by a U.S. firm since February 1999. Toronto-based O&Y Properties Corp. last month completed a $150 million IPO that created O&Y REIT, which owns office properties. [ES]

b. MORE STORIES FROM THE 7/23/01 EDITION OF IREN
* New LoopNet Created; CEO Chosen
* Mezz Debt on the Rise, Market Value May Increase to Between $65B and $135B
* Tokyo Tops List of Most Expensive Cities
* CalSTRS Matches Stride With CalPERS on Affordable Housing

To read the full-text of these stories, visit http://www.irei.com/news/news.html.

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As an IREIzine subscriber, we have reserved a free four-week subscription to IREN in your name. To accept, go to http://www.ire-net.com/trialpromo.html.
IREN is a six-page news digest sent every Monday to your e-mail address. It contains a compilation of stories extracted from thousands of industry-related news items buried in more than 250 daily, weekly and monthly periodicals. Once you have experienced it, you will see IREN is a time-saving necessity that makes it a breeze to stay informed.
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5. NOTABLE QUOTABLES

"I've been called by four banks today. I said, 'Do me a favor. Let me get it zoned first.'" -- Donald Trump, responding to critics who say he won't be able to find financing for his planned mixed-use skyscraper in Chicago, in "Crain's Chicago Business," July 23, 2001

"We're consistently telling our sales force not to buy those high-yield REITs. They will underperform into 2002. But there's a lot of resistance. Retail clients just want yield." -- Art Havener, director of REIT research at A.G. Edwards, as reported on TheStreet.com

"I don't know that we get to valuations exactly equal to the S&P 500, but I think we can build a pretty good argument that REITs will continue to trade up between now and the end of the year. I wouldn't be surprised to see an additional 5 percent to 10 percent total return." -- Steve Burton, senior analyst at CRA Real Estate Securities, as reported on TheStreet.com

"It's a fun and sexy field." -- Laurence Hirsh, speaking about his career as a golf course appraiser

"We didn't have a real estate market before. Unlike Russia, in my country the transfer of ownership of property is one of the things our government did well. It was fast and radical. But they forgot to change the legal conditions for real estate, including the regulation of exchange markets. At first, we had 50 banks working in the market. Now there are only six because the banks just had transactions, no rules." -- Tomas Ctibor, CRE, speaking about the Czech Republic

"Even though we can do things faster, it seems that we can't put together real estate deals a lot faster." -- E. Nelson Bowes, CRE of Denver-based Messick Bowes, speaking about technology in the real estate industry

"We've gone from dot-coms to palm readers." -- Steve Schefsky, landlord, on renting in the once-hot South of Market district in San Francisco, as reported in "The New York Times," July 24, 2001

"[ It] reminds me of the Road Runner cartoon where the Coyote runs into the wall." -- Jeff Congdon, executive director of the San Francisco office of Cushman & Wakefield, on the city's office market, as reported in "The New York Times," July 24, 2001

NOTE: IREN editor Erin Stackle, TIREL editor Nancy Gordon and marketing director Sandy Terranova contributed to this week's IREIzine.

Until next time,
Jessica Kearney Heidgerken
and
Everyone at Institutional Real Estate, Inc.



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WE WELCOME story suggestions, quotes from industry events, trend news, feedback and anything else you think we should know. Submit e-mail to irei@irei.com. We will contact you before using any item.

IREIzine is published by: Institutional Real Estate, Inc., 1475 N. Broadway, Suite 300, Walnut Creek, Calif., 94596. Tel: (925) 933-4040; Fax: (925) 934-4099; E-mail: irei@irei.com; Web site: http://www.irei.com.


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