It’s not a well known fact, but Joe Segal briefly owned a real estate brokerage business in the late 1980s.
During NAIOP Vancouver’s monthly breakfast meeting on Thursday, the legendary entrepreneur, philanthropist and real estate investor became interested in a group of properties owned by Olympia & York, then one of Canada’s dominant developers. Figuring that O&Y had lost interest in them, he put in a call to Alberta Reichmann, one of three brothers who founded the company.
The 18 income properties weren’t on the market at the time, but Reichmann was willing to listen to what Segal might offer, so Segal went to Toronto to see him. The potential acquisition included Block Bros., then a booming residential real estate brokerage.
Reichmann told his company’s vice-president to tell Segal “anything and everything” he wanted to know about Block Bros. Segal said he would come back in two weeks to talk with Reichmann again.
But Segal, knowing he could not get through all of the properties in two weeks, did not look at any of them.
“But I really didn’t care,” said Segal. “All was interested in, all the valuation, was in the income stream.”
He did some number crunching and eventually offered Reichmann $140 million.
“I said, ‘I’ll give you $140 million . . . or I’ll give you $145 million if you keep the brokerage business,’ ” said Segal.
Reichmann rejected that pitch and asked for $145 million – brokerage business included. Segal agreed.
Segal’s next step was to get financing. He called the president of his long-time bank and requested $100 million.
His plan was to pay the bank back through the sale of the properties. But the bank boss said Segal would have to wait six weeks until he and the board assessed the proposal.
So Segal went to Canada Trust, made the same offer to its president, who said approval would take six days or so. Segal set the second bank boss in motion, got his money, and then sold Block Bros. back to its president and brokers for $5 million.
It took Segal a year to pay back his $100 million loan. A few years later, Block Bros. and O&Y both went bust while Segal continued to build a commercial real estate portfolio now worth hundreds of millions.
The year was 1988, but with the credit markets still tight, investors developing deals today can probably relate to what Segal went through.
I wonder where that bank president who told Segal to wait six weeks is now . . .
Thursday, January 21, 2010
Segal expresses confidence in B.C. economy
Legendary entrepreneur Joe Segal isn’t worried about the B.C. economy these days.
While the global, national and provincial economies struggled in the past year, Segal’s Kingswood Capital firm has invested more than $150 million in commercial real estate.
“We’re going to be okay in British Columbia,” said Segal during a question-and-answer session at NAIOP Vancouver’s monthly breakfast. “But if the rest of the world goes bad, we’ll go bad, too – because we’re not an island.”
When asked if he is still a buyer, Segal said the answer depends on a particular property listing.
If the zoning is right, if the economy is right, if the property is right and the price is right, we’re buyers,” said Segal.
Around the time Segal was making his second request at a NAIOP breakfast in the past three months, comments, Bank of Canada boss Mark Carney told an Ottawa news conference that the country’s recovery is becoming more solidly entrenched. However, there won't be a sharp rebound in job growth for some time.
"Economic growth is expected to become more solidly entrenched over the projection period as self-sustaining growth in private demand takes hold," the bank said as part of its quarterly update.
Meanwhile, the bank said bankruptcies declined by four per cent in November from October. But the bank is also predicting the economy will grow by 4.3% this spring. On an annual basis, grow is expected to average 2.9% this year and 3.5% in 2011.
Which probably explains, at least in part, why Joe Segal isn't overly worried about his home province's economy as 2010 unfolds.
While the global, national and provincial economies struggled in the past year, Segal’s Kingswood Capital firm has invested more than $150 million in commercial real estate.
“We’re going to be okay in British Columbia,” said Segal during a question-and-answer session at NAIOP Vancouver’s monthly breakfast. “But if the rest of the world goes bad, we’ll go bad, too – because we’re not an island.”
When asked if he is still a buyer, Segal said the answer depends on a particular property listing.
If the zoning is right, if the economy is right, if the property is right and the price is right, we’re buyers,” said Segal.
Around the time Segal was making his second request at a NAIOP breakfast in the past three months, comments, Bank of Canada boss Mark Carney told an Ottawa news conference that the country’s recovery is becoming more solidly entrenched. However, there won't be a sharp rebound in job growth for some time.
"Economic growth is expected to become more solidly entrenched over the projection period as self-sustaining growth in private demand takes hold," the bank said as part of its quarterly update.
Meanwhile, the bank said bankruptcies declined by four per cent in November from October. But the bank is also predicting the economy will grow by 4.3% this spring. On an annual basis, grow is expected to average 2.9% this year and 3.5% in 2011.
Which probably explains, at least in part, why Joe Segal isn't overly worried about his home province's economy as 2010 unfolds.
Wednesday, January 13, 2010
Canadian real estate investment set to climb
Canada's commercial real estate investment market is expected to pick up in 2010.
Avison Young's 2010 Forecast says investment transaction volume dropped 55% to $5.4 billion in the first nine months of last year. Simply put, owners were reluctant to sell their assets at de-valued rates, so they held on to them instead.
Although 2010 is not expected to set any investment records, investors may face more pressure to make moves this year as the economy improves and REITs re-enter the market. Vancouver, Calgary and Montreal are among the cities expected to experience increases.
But Toronto will be a notable exception. Brokers there believe that rents still have to complete an adjustment, and in some cases decline further.
Still, at least two REITS, ARTIS out of Winnipeg and Toronto-based Dundee, have been extremely active in late 2009 and early 2010.
Avison Young's 2010 Forecast says investment transaction volume dropped 55% to $5.4 billion in the first nine months of last year. Simply put, owners were reluctant to sell their assets at de-valued rates, so they held on to them instead.
Although 2010 is not expected to set any investment records, investors may face more pressure to make moves this year as the economy improves and REITs re-enter the market. Vancouver, Calgary and Montreal are among the cities expected to experience increases.
But Toronto will be a notable exception. Brokers there believe that rents still have to complete an adjustment, and in some cases decline further.
Still, at least two REITS, ARTIS out of Winnipeg and Toronto-based Dundee, have been extremely active in late 2009 and early 2010.
Chicago, Washington, D.C., paint U.S. office vacancy picture
If you want to get a read on the U.S. office market, just check out Chicago and Washington, D.C.
According to Avison Young's 2010 Forecast, their office vacancy levels reflect the double-digit norms prevalent in major cities across the U.S. Chicago, a vital transportation hub to many industries, expecially the oil and gas sector, saw its vacancy rise to 15.3% in 2009 from 13.2% a year earlier. Washington's office vacancy level rose to 13.5% from 11.3%
Mounting job losses and a corresponding fall in office demand are cited as the main causes of the declines.
This year, office vacancy is expected to nudge up 50 basis points in Chicago and dip by the same modest amount in the U.S. capital.
To check out Avison Young's Forecast click on the link below.
http://ow.ly/W562
According to Avison Young's 2010 Forecast, their office vacancy levels reflect the double-digit norms prevalent in major cities across the U.S. Chicago, a vital transportation hub to many industries, expecially the oil and gas sector, saw its vacancy rise to 15.3% in 2009 from 13.2% a year earlier. Washington's office vacancy level rose to 13.5% from 11.3%
Mounting job losses and a corresponding fall in office demand are cited as the main causes of the declines.
This year, office vacancy is expected to nudge up 50 basis points in Chicago and dip by the same modest amount in the U.S. capital.
To check out Avison Young's Forecast click on the link below.
http://ow.ly/W562
Canadian industrial vacancy expected to exceed 7%
Canadian industrial real estate vacancy is expected to continue to climb in 2010.
According to Avison Young's National 2010 Forecast, released today, the industrial leasing market was hit hard last year, and vacancy should rise to 7% by the end of this year. The national vacancy rate, which applies to 1.9 billion square feet in 11 major cities, rose 110 basis points (bps) to 6.3% in 2009. Most of the increases occurred in Western Canada.
Edmonton witnessed the biggest jump as industrial vacancy in the Alberta capital rose 300 bps to 4.2%. But Rob Iwaschuk, an Avison Young principal based in the firm's Edmonton office, expects the market to stabilize as a large amount of sublease space released in the past year continues to put downward pressure on rental rates.
With a number of stalled projects in the Alberta oilsands now back on track, activity in Edmonton's industrial real estate market should pick up. The city serves as an important oilsands supply and distribution centre.
Meanwhile, Vancouver's industrial vacancy climbed 200 bps to 4.4%, but still ranked among the lowest in North America. But Vancouver, traditionally one of the tightest industrial markets on the continent, is already show signs of a notable rebound due to limited supply.
Calgary's industrial vacancy is expected to exceed the national average and reach 7.5%. As a result, construction of some 22 million square feet of new projects will be postponed until sufficient preleasing is secured.
To check out the report, click on the link below.
http://ow.ly/W562
According to Avison Young's National 2010 Forecast, released today, the industrial leasing market was hit hard last year, and vacancy should rise to 7% by the end of this year. The national vacancy rate, which applies to 1.9 billion square feet in 11 major cities, rose 110 basis points (bps) to 6.3% in 2009. Most of the increases occurred in Western Canada.
Edmonton witnessed the biggest jump as industrial vacancy in the Alberta capital rose 300 bps to 4.2%. But Rob Iwaschuk, an Avison Young principal based in the firm's Edmonton office, expects the market to stabilize as a large amount of sublease space released in the past year continues to put downward pressure on rental rates.
With a number of stalled projects in the Alberta oilsands now back on track, activity in Edmonton's industrial real estate market should pick up. The city serves as an important oilsands supply and distribution centre.
Meanwhile, Vancouver's industrial vacancy climbed 200 bps to 4.4%, but still ranked among the lowest in North America. But Vancouver, traditionally one of the tightest industrial markets on the continent, is already show signs of a notable rebound due to limited supply.
Calgary's industrial vacancy is expected to exceed the national average and reach 7.5%. As a result, construction of some 22 million square feet of new projects will be postponed until sufficient preleasing is secured.
To check out the report, click on the link below.
http://ow.ly/W562
Canadian office vacancy on the rise
Office vacancy is on the rise in major Canadian markets, says Avison Young's 2010 Forecast.
The report, released today, says the national vacancy rate for office space is up 270 basis points (bps) to 9.0% and is poised to reach 10% by the end of this year.
Calgary (plus-410 bps to 10.1%), where many speculative office buildings are starting to come on the market, and Toronto (plus-340 bps to 10.5%), which is witnessing the launch and effects of new downtown office towers, took the biggest hits. Regina and Winnipeg, on the other hand, experienced modest vacancy increases.
Vacancy in Regina inched up to 1.5% from 1.2% and Winnipeg's rate increased to 5.4% from 4.8%.
Meanwhile, Vancouver vacancy is expected to encroach 8% this year after ending 2008 at 5%.
To check out the Avison Young 2010 National Forecast, click on this link.
http://ow.ly/W562
The report, released today, says the national vacancy rate for office space is up 270 basis points (bps) to 9.0% and is poised to reach 10% by the end of this year.
Calgary (plus-410 bps to 10.1%), where many speculative office buildings are starting to come on the market, and Toronto (plus-340 bps to 10.5%), which is witnessing the launch and effects of new downtown office towers, took the biggest hits. Regina and Winnipeg, on the other hand, experienced modest vacancy increases.
Vacancy in Regina inched up to 1.5% from 1.2% and Winnipeg's rate increased to 5.4% from 4.8%.
Meanwhile, Vancouver vacancy is expected to encroach 8% this year after ending 2008 at 5%.
To check out the Avison Young 2010 National Forecast, click on this link.
http://ow.ly/W562
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