Developers Struggle Putting Money to Work

"You have thinner deals," noted Fifield Co. executive vice president Richard H. Blum, also on a panel at the meeting. "We've found ways to make money by staying fleet of foot and finding opportunities."

That includes being a player in the local multifamily rental-development arena, in addition to working markets in Las Vegas, Southeast Florida and Southern California. However, Blum is bullish on Chicago, where Fifield Cos. is building the 451-unit Left Bank at Kinzie Station with Prudential Insurance Co. just northwest of the Loop. "We feel the fundamentals of the apartment market in Chicago is getting better, not worse," Blum said.

Earlier Monday, Torto Wheaton's Ray Torto suggested that Los Angeles, Las Vegas and Southeast Florida could become bubble markets. Blum, whose company is building the luxury 80-unit Californian on Wilshire in Los Angeles, disagrees somewhat.

"Los Angeles is a little bit different with the inability to gain entitlements," he explained. "Bubble markets aren't as broad as they used to be." For example, Downtown Miami has an abundance of cranes, but Fifield Cos. closed Friday on the site for Ocean Marine Yacht Club in nearby Hallandale, FL, where oceanfront sites with entitlements are limited.

Fifield got an 80% loan for the $107.5-million project from National City Bank, Blum explained, while Lehman Brothers is putting up 16% in mezzanine financing. "That project started out very profitable, and it's ending up incredibly profitable," Blum said.

Almost half of Transwestern's acquisition volume last year came in the $614-million purchase of Great Lakes REIT. More recently, Aulis said, lenders have offered the best acquisition targets among the plethora of deals being pitched. "Three of the last four deals we've done have involved distressed debt," Aulis noted. "We're working the lending community very hard now."

The three deals have included a mall, office building and industrial property, Aulis reported. Adjacent to Raleigh, NC's Triangle Park, the industrial property originally sold for $100 million, and had a $78-million loan but was added to Transwestern's portfolio for just $54 million, Aulis said.