THE 4 FOOD GROUPS – April 2006

RESIDENTIAL
Saving Hollywood
No one was more surprised than the Los Angeles City Council when, in 2002, a private equity partnership called Fox River Land Co. purchased Cahuenga Peak, a tract of land just west of the gigantic H of the famous “HOLLYWOOD” sign in the Hollywood Hills section of Los Angeles. For years the piece of land had been assumed to be part of neighboring Griffith Park, which was owned by the city. But it turns out the peak has a much more interesting history.

The 1,920-foot tract of land was actually bought by aircraft builder-turned-filmmaker-turned-recluse Howard Hughes, who acquired it in the 1930s. His intention for the property was to construct a love nest for his girlfriend at the time, Ginger Rogers. However Rogers wasn’t so touched by the gesture. In a 1991 television interview she cited Hughes’ “gift” as one of the reasons she never married him.

“He wanted to take me and lock me up in a hilltop house and never let me see anyone,” Rogers said.

The relationship ended and the house never materialized, leaving the property to fall into Hughes’ trust, where it lay dormant for decades until a group of Chicago investors got wind of the holding and bought the peak from Howard Hughes Properties in 2002 for $1.7 million. A year later the partners divided their holdings into five pieces under a partnership called Hollywood Hills LLC.

The investors are reportedly hoping to develop luxury homes on the steep peak, which would be possible with modern engineering techniques. City leaders and conservationists are horrified at the prospect and are now scrambling to come up with $6 million, which is what they think they need to buy the land back from the investors. Many fear a housing development would encroach on the world-famous view of the “HOLLYWOOD” sign.

Representatives for the Chicago owners have said they are “open” to a bid from the city.

OFFICE
Déjà vu in Orlando
Orlando-based Tower Realty Partners may have thought something felt awfully familiar about their recent joint venture with New York-based private equity real estate firm Praedium Group. The two banded together to purchase One Orlando Centre, a high-rise office property located in downtown Orlando, Florida, for $70 million, a purchase that should have been old hat to Tower. The firm had already bought the building in 1995 as part of a joint venture with Feldman Equities of New York. Back then, the property was called Olympia Place, and went for a meager $30 million. In 1997, it was rolled into a REIT on the New York Stock Exchange, and in 1999 that REIT was bought by Reckson Associates Realty Corp, which has now sold the property back to Tower.

The acquisition of the 19-story, 356,000 square-foot office property is Praedium’s seventh joint venture acquisition with Tower in Central Florida. So far the two have acquired $200 million in various asset types.

RETAIL
Myer family reaps rewards
In an incredible success for the legendary Myer clan, Australia’s largest department store chain, Coles Myer, fetched a surprising A$1.4 billion ($1 billion; €0.8 billion) in its recent sale to Newbridge Capital, the Asia-Pacific investment arm of Texas Pacific Group. The deal will secure the Myer family a stake in its 106-year-old heirloom as well as a spot on the board.

Since Russian immigrant Sidney Myer opened the first Myer store in Country Victoria in 1900 with his brother, the chain has developed into the definitive department store for the continent. In 1985, the Myer chain merged with GJ Coles & Coy to form Coles Myer, making it the largest retail chain in Australia.

The sale follows a sevenmonth review of the 61 underperforming Myer stores, which analysts had expected to fetch a total of about A$1 billion. TPG has been involved with a number of retail investments, including Neiman Marcus, J. Crew, Petco and Bergdorf Goodman in the US.

INDUSTRIAL
Tar Heel fever
The basketball team for the University of North Carolina, the national champions in 2005, may have disappointed in their title defense during the NCAA basketball tournament in March, but the state is seeing plenty of powerhouse potential in its industrial market. BPG Properties recently made the single largest acquisition ever of industrial property in North Carolina. The investment firm paid $251 million, or a cap rate of nine percent, for the 66-building Parker Lincoln portfolio, which is spread throughout the Raleigh-Durham area and totals more than 4.2 million square-feet of flex, industrial and office space.

The deal includes land that could allow for 530,000 square feet of additional development, and analysts are saying both the land and the properties represent a solid investment because of the improving economy in the area. BPG made the investment through its BPG Investment Partnership Fund IV, a private equity fund with total commitments of $550 million.