Brookfield Asset Management has made an offer to purchase the remaining interest in Rouse Properties it does not already own. Shares of Rouse have been trending lower over the past year and currently have a dividend yield of just over 4%. Rouse owns a portfolio of malls across America. Rouse was spun out of General Growth Properties a few years ago and has been floundering ever since. It was only a matter of time before Brookfield made an offer as they held a 33% stake since the spinoff. Some of Rouse’s properties have potential for intensification and development because they are in growing communities, while others are stuck in terrible locations in shrinking communities. Maybe full ownership of Rouse will give Brookfield the flexibility to restructure the portfolio aggressively.
Happy to hear this week that Morguard will take over management of Temple Hotels, details listed in the press release below. This is positive news for Temple which is being hurt by the Western Canadian slump and a weak balance sheet. Hopefully Morguard will clean up Temple’s balance sheet, re position and further diversify its assets, and ultimately create new shareholder value.
Dec. 23, 2015 /CNW/ – Temple Hotels Inc.
There were so many red flags for investors in Titan Equity, I don’t really feel sorry for them. Here are some tips for investors in private equity, especially private placement real estate and hedge funds.
Pay attention to the promoter’s lifestyle. What kind of car does the promoter drive? If they are driving Aston Martins and Bentley’s then beware. Why would they be asking you for an investment when they are already wasting funds on luxury items? Also, if someone is spending their personal money on luxury items, how careful would they be with investor’s resources? Is the promoter going on fancy vacations and living in a fancy house? What does the promoter’s spouse do? If they are a trophy wife who goes shopping all day, this may put pressure on the promoter to maintain a lifestyle for her and this might cloud his judgement. If you are investing in someone, make sure that person is living an average lifestyle and pouring all his time and money into the project as well.
Make sure you are being provided with adequate financial reports. Especially for private equity investments that involve more than just family and close friends, financial statements should be audited and provided on a regular basis. There is a significant cost to providing audited financial statements, but this cost goes along with a large project with numerous unrelated investors. The other benefit to audited financial statements is that in order for an accountant to sign off, an internal accounting process must meet certain standards. Its not easy to provide audited financial statements and requires a advanced level of management. Smaller projects with a few related investors can get by without audited financials, but other checks and balances should be in place such as providing all investors with access to bank statements in order to keep everyone better informed.
Keep management on track. Sometimes privately funded investments get off track as the founders constantly pivot to new ideas. These founders can’t stay focused long enough on one project and so they spread resources too thin and end up accomplishing nothing. In the case of Titan Equity, they had investments in a retirement home, but also in a townhouse development. These are different types of real estate and management should have been focused on a specific type of real estate such as just retirement homes or just townhouse developments, but not both.
Make sure management is communicating. Sometimes a business project does not always go as planned. There will be times when projects fail and its important that management is transparent and honest to investors. It can embarrassing for founders to admit they have failed, especially to close friends who have invested in their project. But hiding the truth is what ponzi schemes and fraud are made of.
A real estate investment company that once ran a $1-Million Dream Home contest for Toronto FC is facing allegations that its chief executive officer misused investors’ money to buy luxury cars, an expensive home and pay himself “excessive” management fees. Titan Equity Group Ltd.
Last week MGM Resorts International announced they will carve out a REIT from their operations to be called MGM Growth Properties. This is the first major Las Vegas strip property owner to clearly give intentions on REIT creation. Caesars has a desire to convert to a REIT, but its still mired in a long bankruptcy battle with its creditors. For MGM, 10 of their properties will be rolled into MGM Growth Properties including most of its Las Vegas strip properties with the Park development, but the REIT will exclude Bellagio and the MGM Grand. The festival grounds on the corner of Sahara and the Strip as well as Circus Circus will also be excluded from the REIT. MGM Detroit and the gulf coast properties will be included, and MGM Springfield will likely be folded into the REIT once its operational.
The creation of an MGM REIT will have major impacts on the Las Vegas Strip, but at first, MGM Resorts International will retain a 70 percent stake in MGM Growth Properties. This means that MGM Resorts International will control the REIT and operate the two divisions with parallel business strategies.
RioCan REIT announced today it is considering strategic alternatives for its US portfolio. I think this is good news for shareholders. I have never wanted RioCan to stray from its Canadian base, especially now since cap rates in the US have moved lower and the Canadian urban market (particularly downtown Toronto) offers much more attractive returns and better scale for RioCan. Focusing on Toronto will focus RioCan’s expertise. Shareholders should be excited about the urban focus of investment RioCan is continuing on. A sale of US assets could also come at a time of favorable exchange rates and could also free up capital for RioCan, who has been pressured recently by Target Canada vacancies.