Friday, May 27, 2005

09/22/97 THE NEW WORLD OF REAL ESTATE: "INCREDIBLE BARGAINS.

That was the catalyst that revolutionized the industry's financing. Seeing an opportunity, real estate financiers paired with Wall Street firms to form ''vulture funds'' that bought up distressed properties. Led by Goldman, Sachs & Co., they picked up bargains at what now seem incredibly low prices. For his efforts, Zell, partnering with Merrill Lynch & Co., earned the moniker ''the grave dancer.'' Crushed by debt, cash-strapped developers had no choice but to turn to the public equity market. In late 1991, Merrill Lynch launched a new era for REITs by raising $130 million in an initial public offering for mall developer Kimco Realty Corp.--the first integrated operating company to come public as a REIT. Soon after, Taubman Centers pioneered a new twist on the REIT format called an ''umbrella partnership,'' or UPREIT, which let entrepreneurs exchange buildings for stakes in a parent company that was then sold to the public. That opened the floodgates, allowing private developers to obtain liquidity without having to pay capital-gains taxes. By 1993, REIT offerings hit a record high, with 50 REITs going public, raising a total of $9.3 billion. Also stepping into the capital vacuum were innovators such as Nomura Securities Co.'s Ethan Penner, who almost single-handedly jump-started the commercial mortgage-backed securities market."