A tiny apartment with 24 rooms
If you follow green building and architecture, you’re probably aware that size does indeed matter.
Meet Gary Chang, a Hong Kong architect who transformed his pint-sized living space — a cramped 330-square foot apartment typical for densely populated Hong Kong — into a super-efficient, 24-room bachelor pad with the help of an ingenious system of sliding walls, panels, and gizmos.
Chang’s apartment — dubbed “The Domestic Transformer" — truly has to be seen to be believed so check out the below video from World’s Greenest Homes. The New York Times also profiled Chang and his amazing mini-mansion. Would you able to live in this kind of set-up? Or are actual rooms irreplaceable?
Image: Marcel Lam/New York Times
Image: Marcel Lam/New York Times
Intel’s Cure for Home Energy Management
Training architects of the future
Afghanistan Wartime Architecture July 2010
Architecture's Long Fade
Posted by: Michael Arndt on June 23, 2010
Architecture just might be this season’s Biggest Loser. The Architecture Billings Index, a gauge the American Institute of Architects uses to show the industry’s strength (or weakness), indicates that business has now been in decline for a record 28 months in a row. Moreover, in issuing its latest report today, the institute reports that May’s rating fell from the month before. The weakest area geographically is the West. By sector, it’s institutional.In an email to me, Clark Davis, vice chairman of HOK, writes: “I believe this will be a very slow recovery in the private sector, because businesses are still very reluctant to add people—and job growth is the single largest driver in commercial real estate, design, and construction.”
Since payrolls peaked in mid-2007, the nation’s architecture firms have shed a quarter of their employees. And at least some still collecting a paycheck have too little to do, says Phil Harrison, president of Perkins + Will. “Design firms are holding onto staff, even without sufficient work to keep them busy, because staff are so valuable and there is a hope that work willl pick up,” he says in an email.
Harrison predicts the rut (or rout) will last another two years. “The combination of three factors—expensive marketing, lower fees, and excess staff—is causing many firms to operate at significantly lower levels of financial performance, which is likely unstainable,” he says.
And I thought the media biz was in bad straits.
The shrinking American home
BPI Certified Professionals will play a major role in this $6 billion program. Why? Because the BPI Building Analyst Certified Professional designation is one of two accepted credentials announced so far that allow you to conduct test-in/test-out and quality assurance inspections under this program. And only BPI GOLD STAR Accredited Contracting Companies – or another accreditation approved by the Secretary of the U.S. Department of Energy - will be allowed to implement energy efficiency improvement measures under the program. That’s to protect the investment of homeowner and taxpayer dollars.
Here's how it will work...
HOME STAR incentives will be split into two levels—GOLD STAR and SILVER STAR. Under GOLD STAR, homeowners will receive $3,000 for modeled savings of 20%, plus an additional $1,000 incentive for each additional 5% of modeled energy savings, with incentives not to exceed 50% of project costs.
GOLD STAR is a two-year program that offers the highest homeowner incentive amounts because it requires the whole-home, performance-based approach that delivers deep energy efficiency retrofit results.
On a GOLD STAR project, a BPI Building Analyst Certified Professional or a Residential Energy Services Network (RESNET) qualified rater (or an approved equivalent) conducts an energy audit and comprehensive home performance assessment before work begins, then develops and prioritizes improvement measures specific to the needs of the particular house. Those measures are then implemented by a BPI GOLD STAR Accredited Contracting Company.
When the work is complete, the certified analyst or rater returns to the house to conduct a test-out energy audit. This test-out assessment ensures that the installed measures are working properly and determines the modeled energy savings achieved. It also provides risk reduction for homeowners and taxpayer dollars by creating a formalized quality assurance program that is hard-coded into the GOLD STAR incentive level.
To qualify for funding under the GOLD STAR level:
- Energy audit and home assessment test-in/test-out procedures may ONLY be performed by a Building Performance Institute (BPI) Building Analyst Certified Professional or a Residential Energy Services Network (RESNET) qualified rater (or an approved equivalent).
- Energy efficiency improvement measures may ONLY be installed by a BPI GOLD STAR Accredited Contracting Company (or another accreditation approved by the Secretary of the U.S. Department of Energy).
- All Quality Assurance inspections may ONLY be conducted by a Building Performance Institute (BPI) Building Analyst Certified Professional or a Residential Energy Services Network (RESNET) qualified rater (or an approved equivalent).
Click here to learn more about training programs leading into BPI certification.
The SILVER STAR level is a one-year program designed to jump-start job creation. It provides a near-term incentive for specific energy saving investments and is simple to administer and easily introduced into the existing marketplace.
Homeowners will receive between $1,000 and $1,500 for each qualified measure installed in the home, or $250 per appliance, with a benefit not exceeding $3,000 or at most 50% of total project costs.
Qualified, covered measures include:
- air sealing
- attic, wall and crawl space insulation
- duct sealing or replacement
- replacement of existing windows and doors, furnaces, air conditioners, heat pumps, water heaters and appliances with high-efficiency models
Download the draft "HOME STAR Act of 2010" legislation.
By Mike Weiss, CGR, GMB, CAPS
Who is the ‘new’ client?
Everyone is trying to forecast what the new remodeling client will be like — buying habits, budgets, preferences and the like. That is a healthy thing to do, if there is such a thing as the “new” remodeling client. OK, from one year to the next the “new” client tended to get smarter, more conservative, more computer savvy, more value oriented, but definitely not a new client psychologically. What has the recession done to the psyche of that “pot of gold” we once knew? You know, the one that trusted our judgment, listened to our recommendations and didn’t haggle over who had the Roquefort?
They still believe
Trust me, they still believe in remodeling, maybe more than in the past because of prices of new construction and difficulties of getting mortgage funds. Are they scared, afraid they’ll spend too much, afraid the “green police” will stage a raid at 3 a.m., afraid Alan Greenspan will be lurking around the interest bushes? I wouldn’t call it fear, but they’re certainly concerned. The most sound of clients will attentively listen to the benefits of building green but will almost always asks about the “value,” the what’s in it for me, and they still will in my opinion. The same concept will apply to everything but necessary maintenance. Self-indulgence is probably a thing of the past.
What kind of business?
So what kind of business should we go after — green, aging-in-place (CAPS), low price, small or everything? Since the client really isn’t new but is just smarter and better informed, use the same methods of attracting them back as you used to get them in the first place. Be a current company — technologically up to speed, not to impress but to function better. Investigate the job and the products more; check into reliability before touting a new product.
Builders may stick around
Custom builders ventured into remodeling to keep their doors open when the axe fell. Many did a good job but charged too little and diluted the market. That will have to be overcome, but price selling always failed in a sound remodeling market, and it will again. Be aware also that some of the builders who became builder/remodelers will continue to work on the “ReDo” side,
but they will have learned how to price.
Product is the only variable
I have seen no persuasive arguments that my customers will expect more or be willing to settle for less service than they ever did, so that means product is likely the only variable in the recovered marketplace. It is always good to try to be prepared for what is new and different, and this is no exception. Be careful, though, not to assume that after this three- to four-year struggle the principles of sound remodeling are somehow different. Homeowners will continue to prefer to do business with contractors with character rather than with ones who are “characters,” while you’re here . . .
By Michael A. Menn, A.I.A., CGR, CAPS,
Recently the Chicago Tribune (Leslie Mann, Jan. 8, 2010) ran an article on design elements that make a home stand out, or give it the “wow factor,” which she defines as “something that will stop people in their tracks, or trigger a stare, head shake or raised eyebrow.”
This got me to thinking about the “wow factor.” After all, our natural instinct as architects and remodelers is to create something that will make people take notice. So I was wondering:
- Is the “wow factor” real?
- What does the “wow factor” mean to professionals?
- Is it still relevant in today’s economy?
- If it is real and relevant, what is our role, as professionals, in creating the “wow factor”?
I decided to take these questions on the road. So at the International Builders Show in Las Vegas, I was sitting in the Qualified Remodeler booth, and I asked several of the remodelers and builders who stopped by what they thought the “wow factor” was. The responses were very intriguing. Some examples:
- Flooring
- Lighting design
- Bedrooms with integral bathrooms for guests
- Green
- Multihead showers
- Large pantries that accommodate bulk purchases
- Motion sensor lighting
- Living roofs
- Gray water management systems
- Home automation systems
- Dumbwaiters
- Trim work
- Wireless music systems
- Bringing in the outdoors
- Higher efficiency building systems
- Master bedroom coffee stations
When I got back to the office, I contacted a few architects I knew. They had a somewhat different philosophy best articulated by the following comment:
“The ‘wow’ has been reduced to gadgetry. The typical homeowner does not care about the flow of a floor plan, consistent use of materials or the nurturing proportions of the spaces.”
So where do I stand? First, I agree strongly this comment. And I have to say that our profession has been guilty of promoting “gadgetry,” or style over substance. “Bigger…better…fancier” seemed to be the credo. “You want people to come in and say ‘wow’ ” was the pitch we would use.
Second, I think there is a “wow factor.” But it is different for everybody. There are two ways we can put “wow” in a job. The first, and wrong way, is to communicate our “wow” to our clients and sell them on it. The second is to listen to our clients and be their advocates. This is not as easy as it sounds. I try to jump into my clients’ heads, unscramble all the different and sometimes convoluted ideas they have floating around and then make some semblance of order out of those ideas using my skills as an architect. My job is to then create something they want that will get them to “wow.”
Third, this is somewhat of a generalization, but what is getting people to “wow” today is not about what will make other people say “wow.” It is not so much about amenities to impress their friends and tell them that they have “made it.” Instead, it is about moving toward the extras that suit their lifestyle choices. In other words, what makes people say “wow” today is more personal. It is about comfort, whether that is automatic lighting or heated bathroom floors or more functional closets. To a certain extent, this has been driven by economics. During the last 18 months, people’s priorities have changed and the “wows” of just a few years ago, such as great rooms and showcase kitchens, are things of the past. Instead, in most of the rooms we are designing, our clients are thinking more of finishes and amenities and less about square footage.
Fourth, architects and designers are more important than ever in creating “wow” for our clients. Anyone can leaf through the multitude of magazines available to find ideas. But these ideas are meaningless without working with someone who possesses a sense of design and can communicate aesthetic options. Today’s buyers want “wow-ing” architecture coupled with the expertise we bring as building professionals. We all want to live in spaces where we feel cozy.
So in summary:
- “Wow” is a reality; not a myth.
- Everybody’s definition of “wow” is different and, without sounding like a Zen master, everybody is seeking their “personal wow.”
- “Wow” is evolving from something to impress others to something that is personally important to the client, whether that is about saving money, being comfortable, or both.
- To maximize “wow” the role of the architect and contractor is simply indispensable.
Wind power is one of the fastest growing forms of alternative energy in the world. More and more, wind power mills are seen in the countryside, in large wind farms and for the most part, away from city life. But a new form of wind power is now designed to work in an urban environment. VOA producer Zulima Palacio has the story. Mill Arcega narrates.
Category: Science & Technology
Tags:power alternative energy green environment friendly mariah Windspire windmill windfarm farm electricity palacio voa new
The guidelines say electrical wiring, outlets, circuit breakers, fire alarm systems, carbon monoxide alarms, fire sprinklers, gas pipes and drywall need to be removed.
"We want families to tear it all out and rebuild the interior of their homes, and they need to start this to get their lives started all over again," said Inez Tenenbaum, chairwoman of the commission, the federal agency charged with making sure consumer products are safe.
About 3,000 homeowners, mostly in Florida, Virginia, Mississippi, Alabama and Louisiana, have reported problems with the Chinese-made drywall, which was imported in large quantities during the housing boom and after a string of Gulf Coast hurricanes.
The drywall has been linked to corrosion of wiring, air conditioning units, computers, doorknobs and jewelry, along with possible health effects. Tenenbaum said some samples of the Chinese-made product emit 100 times as much hydrogen sulfide as drywall made elsewhere.
The agency continues to investigate possible health effects, but preliminary studies have found a possible link between throat, nose and lung irritation and high levels of hydrogen sulfide gas emitted from the wallboard, coupled with formaldehyde, which is commonly found in new houses.
U.S.
"The way I see it, homeowners didn't cause this. The manufacturers in China did," Nelson said. "That's why we've got to go after the Chinese government now."
Southern members of Congress have sought to make it easier to sue Chinese manufacturers and to get the
About 2,100 homeowners have filed suit in federal court in New Orleans against Chinese manufacturers and U.S. companies that sold the drywall. U.S. District Judge Eldon Fallon is expected to rule soon in a pivotal case against the Knauf Plasterboard Tianjin Co., the only Chinese company that has responded to U.S. suits.
Separate claims by thousands more homeowners against Chinese manufacturers are pending, said Jordan Chaikin, a Florida lawyer whose firm represents about 1,000 homeowners.
They are "continuing to live in their homes with Chinese drywall, patiently waiting for this thing to be resolved so they can move on with their lives," Chaikin said. "We're not waiting for the government to move quicker than we are in the courts."
In some cases, homebuilders have paid to gut and rewire homes. In others, homeowners who can afford it have paid for the work themselves.
On Friday, Knauf Plasterboard agreed that high hydrogen sulfide levels appeared to be the main concern, but it noted the commission's studies were preliminary and may not reflect conditions inside a home. The company said its studies have shown that drywall should be removed, but that plumbing and wiring do not need to go.
Daniel Becnel, a New Orleans lawyer representing Chinese drywall plaintiffs, including Sean Payton, the head coach of the Super Bowl champion New Orleans Saints, said the government guidelines issued Friday were "word for word what our experts said."
He also said Congress should give homeowners grants to cover the cost of home gutting.
"Get these people out of this environment," he said. "You're making these people sicker and sicker and sicker. You will have long-term effects."
In Cape Coral, Fla., Joyce Dowdy, 71, and her husband Sonny, 63, plan to move out of their $150,000, 1,600-square-foot home while it is gutted to get rid of tainted Chinese drywall.
Joyce Dowdy said she suffers from nose bleeds and her husband has a persistent cough. They blame the drywall.
"We can't live like this anymore," Dowdy said.
They're borrowing money to do the gutting, which means that instead of a mortgage-free retirement they will be paying monthly bills cover the costs of repair.
"It's costing us as much as we paid for the house," Joyce Dowdy said. "But we can't just walk away ... Our house is worth nothing at the moment."
But Randy Noel, past president of the Louisiana Home Builders Association, said the Chinese drywall problem has been exaggerated. He called the new guidelines "overkill."
"Nobody has come up with a house yet that has caught on fire from the Chinese drywall, no one has come up yet with a house that leaks water or gas because of Chinese drywall," he said.
He has examined numerous homes containing Chinese drywall and found minor problems, he said.
"It's a black soot on top of the copper, brass and silver," he said. "You wipe the stuff off and it looks as good as new."
Associated Press Writer Brian Skoloff in West Palm Beach, Fla., contributed to this report.
On The Web:
Drywall Information Center: http://www.cpsc.gov/info/drywall/index.html
Qualified Remodeler
By Patrick O'Toole
This month, I interview Stephen J. Klein, a remodeler who is also president of Kachina Lead Paint Solutions, www.kachinaleadpaintsolutions.com. He provides a “quick start” guide for the many thousands of you who have yet to take the first steps. I won’t get into all of the details here but you can find them on pg. 62. In brief, you need to get your company certified; then you need to get your people certified. It takes some time, but not as much as you think.
Here’s a good example: Some companies will want to train their salespeople to handle the initial testing. Others may decide to have two or three steady field employees handle the task of testing for all jobs in the company — two different models, two different cost structures, both comply with the new rule. This is just one of a series of decisions that you need to make and all are important.
A combination of hot rocks and water like those that created Yellowstone's geysers have been tapped by the city to keep the sidewalks toasty since the early 1990s. They also heat downtown buildings, kettles at a brewhouse, and greenhouses and keep the lights on at a college campus.
Geothermal wells in this town of 20,000 mark one of the nation's most ambitious uses of a green energy resource with a tiny carbon footprint, and could serve as a model for a still-fledgling industry that is gaining steam with $338 million in stimulus funds and more than 100 projects nationwide.
"We didn't know it was green. It just made sense," said City Manager Jeff Ball.
Geothermal energy is unknown in much of the country but accounts for 0.5 percent of the nation's energy production.
It can be seen on a snowy day in a handful of Western towns like Klamath Falls. That's because hot rock is closer to the surface here, and comes with the water needed to bring the energy to the surface. Northern California is home to the world's largest geothermal power complex. The Geysers, 75 miles north of San Francisco, produces enough electricity for 750,000 homes.
With more than 600 geothermal wells heating houses, schools and a hospital as well as turning the turbine on a small power plant, Klamath Falls shows what everyday life could be if stimulus grants and venture capitalists turn geothermal energy from a Western curiosity to a game-changing energy resource.
Until now, geothermal energy has been limited by having to find the three essentials ingredients occurring together in one place naturally: hot rock relatively close to the surface, water, and cracks in the rock that serve as a reservoir.
Those limitations go away if engineers can tame a technology known as EGS, for Enhanced Geothermal Systems.
A 2007 Massachusetts Institute of Technology report estimates that EGS, with support, could be producing 100 gigawatts of electricity — equivalent to 1,000 coal-fired or nuclear power plants — by 2050, and has the potential to generate a large fraction of the nation's energy needs for centuries to come.
"If we are going to try to achieve a transformational change in this country, geothermal should be part of that recipe," said Jefferson Tester, chairman of the committee that produced the report and professor of sustainable energy at Cornell University. "It's not treated that way. It's typically forgotten."
One form of EGS involves drilling thousands of feet down to reach hot rock, pumping water down to fracture the rock to create reservoirs, then sending down water that will come back up another well as hot water or steam that can spin a turbine to generate electricity.
The system can be dropped in practically anywhere that hot rocks are close enough to the surface to make drilling economical.
The major problem with EGS is the potential to create earthquakes.
Pumping water into the ground to open numerous tiny fractures in the rock for a reservoir makes the earth move — what scientists call induced seismicity. Earthquakes stopped an EGS project in the middle of Basel, Switzerland, last year, and an international protocol has been developed for monitoring and mitigating earthquake problems.
As long as the wells are not close to major earthquake faults, "it is not damaging, but very upsetting to the community that lives literally on top of it," said Ernie Majer, a seismologist at Lawrence Berkeley National Laboratory in California, and lead author on the protocol.
Federal funding for geothermal started during the 1970s Arab oil embargo, waned when oil prices subsided, and essentially stopped when Texas oilman George W. Bush entered the White House, Majer said.
With interest growing in energy with a tiny carbon footprint, the Obama administration revived support for geothermal energy. Besides handing out more than $40 million a year from the Department of Energy, it is funding 123 demonstration projects in 38 states with stimulus funds. Projects include home heat pumps, power plants, drilling, rock fracturing, exploration and underground mapping.
"The goal of the department is to try to validate that a source of energy could be produced at an adequate price," said Jacques Beaudry-Losique, deputy assistant secretary for renewable energy. He expects results in two to three years.
The centerpiece is $25 million to AltaRock Energy, Inc., of Seattle and Sausalito, Calif., to demonstrate EGS can produce electricity economically and without producing earthquakes just outside the Newberry Craters National Monument in central Oregon. Investors, Google among them, put in $60 million.
Earthquake concerns were mounting around AltaRock's EGS work at The Geysers when they shut it down over drilling problems, before getting to the point of trying to fracture rocks, AltaRock CEO Don O'Shei said. They are developing a system to monitor quakes at Newberry.
"If EGS becomes economical, it will really be a game-changer," O'Shei said. "Even though it is relatively high risk in terms of the money to develop that kind of technology under the ground ($6 million to $20 million for a well that could prove worthless), it is very important."
People in Klamath Falls don't have to be convinced.
IFA Nurseries, Inc., wouldn't have come to Klamath Falls if there wasn't geothermal energy. The geothermal heat cut greenhouse heating costs by a third compared to natural gas, said Jacqueline Friedman, nursery manager for IFA Nurseries.
The city is stepping beyond heat to electricity, building a geothermal generator like the one at Oregon Institute of Technology with the help of an $816,000 stimulus grant.
Stepping gingerly from the icy street to the dry sidewalk on his way to a bakery for a cinnamon roll, Klamath County Museum Manager said visitors are often curious about the geothermal energy in town, which also heats the museum.
"I've always said the city should adopt a slogan, `City of Warm Sidewalks,'" he joked. "But I've been told we'll get every hobo in America who will be drifting into town."
Simon (NYSE: SPG) has amassed 162 regional malls, 41 Premium Outlet Centers and 16 Mills retail centers generating combined annual sales of more than $60 billion. Among shopping center owners, the company is No. 1 in gross leasable area, with 245 million sq. ft. It also ranks as the nation's largest real estate investment trust (REIT) by market capitalization.
But Simon still has an appetite for growth. General Growth Properties, that is. Although his $10 billion offer to buy the nation's second-largest mall owner was rejected in February, Simon's CEO has no intention of backing down as the Chicago-based REIT struggles to emerge from Chapter 11 bankruptcy.
Simon can afford the prize he covets. At a time when many other commercial real estate companies are taking drastic steps just to survive the effects of a devastating recession and credit shortage, Simon has stockpiled a war chest of $7.4 billion, including $4.3 billion in cash and $3.1 billion in corporate credit. “That firepower is available for something like a General Growth, among other things,” the CEO says.
He will use some of the capital, along with other financing sources, to buy Baltimore-based Prime Outlets Acquisition Co. and its 22 stores for $2.3 billion, a deal scheduled to close later this year.
“It's got to be smart growth,” says Simon. But he is determined to expand the REIT's portfolio. “I think our shareholders would like to see us grow the company. We certainly would like to see us grow the company.”
But cautionary tales abound, demonstrating the downside of what can happen when a commercial real estate firm grows too quickly. General Growth's plunge into bankruptcy last April, the largest real estate failure in U.S. history, is often blamed on its $14.2 billion acquisition of mall owner Rouse Cos. in 2004, which was highly leveraged. General Growth Chairman John Bucksbaum, however, said in February that the unavailability of credit to refinance maturing mortgages caused the collapse.
Simon is well aware of the dangers of expansion. “We think about them all the time,” he says. “You've got to learn from history.” But he has a duty to shareholders to maximize their investment. “It's a public company. The expectation is to grow, but don't do it to the point where you risk the foundation. We've seen that before in our industry. We certainly have no intention of following in those footsteps.”
Shoes of the father
The footsteps David Simon follows are those of his father, the late Melvin Simon, who became a legend in Indianapolis after he founded the real estate company Melvin Simon & Associates in 1960 with his brother Herb. Melvin Simon developed grocery-anchored, open-air centers and shopping plazas, signing major tenants such as Sears before building the first enclosed malls in Indiana.The company grew steadily, riding a wave of suburban development as it expanded into Illinois and Michigan and branched into Western states. In the process, the developer helped to shape the American postwar landscape. Known for his eclectic interests and gregarious personality, Melvin Simon started a film production company, and with his brother bought the Indiana Pacers basketball team.
In the meantime, David, the oldest son, graduated from Indiana University in 1983 and earned an MBA from Columbia University's Graduate School of Business in 1985. He took a job at First Boston Corp. and in 1988 moved on to Wasserstein Perella & Co. in New York, a Wall Street investment banking firm specializing in mergers, acquisitions and leveraged buyouts.
Bruce Wasserstein, a former banker at First Boston, was a prolific dealmaker and a philanthropist. Wasserstein, who died in October at 61, has been credited with turning major takeover deals into high art, using strategies more commonly associated with battlefields, according to an obituary.
Simon quickly absorbed Wasserstein's lessons and strategies. At 29, he was a vice president at Wasserstein Perella when he left to join his father's firm in 1990 as chief financial officer.
It didn't take the newcomer long to put his own ideas to work. He started a program of upgrading the company's properties, and in 1993 led the ambitious project to take the family firm public with an initial public offering (IPO) of $840 million — setting a record for the largest IPO in the country at the time, according to The National Association of Real Estate Investment Trusts. With that feat, Simon Property Group was formed. Two years later, in 1995, David Simon became CEO.
It has been a long road, acknowledges Simon, now 48. And the company he guides has a great deal to show for the journey. “We went from $2.5 billion of assets to $50 billion of assets over the last 16 years,” he says.
Along the way, he acquired some firms that bore the names of old family dynasties that had reigned in the retail property realm for generations. In 1996, just a year after his promotion to CEO, he steered the company through a bold, $3 billion merger with rival mall owner DeBartolo Realty Corp., founded by the late Youngstown, Ohio developer Edward DeBartolo.
The merger created the largest U.S. mall company at the time, Simon DeBartolo Group, with 111 regional shopping centers, 66 community centers and six specialty centers. It gave the company a presence in 32 states. In 1998, the company dropped the DeBartolo name and again became Simon Property Group.
Growth spurt?
If David Simon prevails in absorbing General Growth's 200 regional shopping malls, it would bring the REIT's portfolio to more than 500 malls and the company would command a hefty 40% of the mall market, analysts point out.Extending from the Ala Moana Center in Honolulu, where Chanel, Coach, Fendi and other upscale shops draw 42 million visitors annually, to the Staten Island Mall with its 2 Cute, Ann Taylor and Disney stores, General Growth encompasses more than 24,000 retailers.
But Simon is not the only company angling for General Growth. Rival Brookfield Asset Management, based in Toronto, reached an agreement with General Growth in February to invest $2.6 billion and acquire a 30% stake in the company. Undeterred, Simon Property issued a public statement Feb. 24, calling the rival plan a risky equity play and an inferior proposal.
Simon's offer would give the bankrupt company $9 billion in cash upfront, rather than just $2 billion and “the hope of additional cash down the road,” scoffed Simon's statement.
General Growth's initial response to Simon's offer was to thumb its nose and call $9 per share insufficient. The flurry of public letters and terse exchanges has made for great theater, but Brookfield, for one, is unfazed.
“We're very pleased. This is quite a step in the right direction,” says Denis Couture, senior vice president of Brookfield, which manages $40 billion of global property, infrastructure and financial assets.
Bankruptcy Judge Allan Gropper's March 3 decision to give General Growth four more months to develop a plan to emerge from bankruptcy works in Brookfield's favor. If its proposal is approved, it would be a coup for the Canadian company. “That would give us a platform in the U.S. that we have coveted for a number of years,” says Couture.
Old rivalries resurface
A Brookfield victory would also be payback, of sorts, for a run-in with Simon several years ago. In 2007, Brookfield consented to buy The Mills Corp., a shopping mall REIT based in Chevy Chase, Md. “We made an agreement with them and at the last minute in the bankruptcy proceeding, Simon Property Group [submitted a larger bid],” says Couture. “We had a right to match it and decided not to.”Old memories may not fade. “Brookfield has been trying to figure out a way to snatch the company away from Simon,” asserts Ralph Block, a REIT historian and author in Westlake Village, Calif. As for General Growth, it wants to remain an independent company, says Block. “They've been looking for Brookfield to help them stay independent.”
Simon may team up with New York-based private equity firm The Blackstone Group to acquire all or part of General Growth, says Block. “Blackstone's muscle means that it would reduce the risk that Simon could be overexposed after swallowing the company.”
The friction between Simon and General Growth isn't surprising, says Dennis Mitchell, vice president at Sentry Select, a wealth management company based in Toronto. “These two families are rivals,” he says of the Simons and Bucksbaums.
“If Simon Property were to take over General Growth, they would have no use for the Bucksbaum family. They would have no use for most of the existing executive and senior level management. So the Brookfield Asset Management alternative sort of preserves the Bucksbaums as the managing family or influential shareholder and allows them to continue their legacy,” says Mitchell.
With many old retail real estate dynasties, preserving a family name is worth fighting for. “You start talking about family-created businesses that have been around for 40, 50 years, those sorts of things matter,” says Mitchell.
But to prevail, the Bucksbaums would have to outfox David Simon, and that won't be easy. “He doesn't like to lose. He's very, very competitive,” says Mitchell. “For him, winning means that he's got better assets and he's making money.” If General Growth turns down Simon's offer, says Mitchell, “I think they'll take it to court.”
But David Simon doesn't always win. “The only deal he wanted that he didn't get was Taubman,” says Barry Vinocur, editor of the newsletter REIT Wrap, based in Novato, Calif.
In late 2002 and 2003, Simon made a hostile offer to acquire mall owner Taubman Centers, based in Bloomfield Hills, Mich. The offer came after founder Albert Taubman resigned as chairman following his conviction and brief imprisonment in an antitrust case involving price-fixing at auctioneers Christie's and Sotheby's, where he had been chairman.
In a bitter, 11-month fight for control of the malls, Taubman managed to get a law enacted prohibiting Simon's planned $1.7 billion takeover and Simon withdrew. “When the history is written people will have to remember that Taubman escaped Simon's clutches by getting the law changed in Michigan,” says Vinocur, who calls David Simon a “superb” leader. Otherwise, Simon might have won, he adds.
“Anybody that's in that business will tell you that he's a tough-as-nails competitor. He's a take-no-prisoners type of guy,” says Vinocur. “When you go to war, you want a general out in front who's experienced and able to lead the troops into battle. And that's what David is.” Vinocur has known Simon for 20 years and watched him become a dominant force in the REIT industry.
Retail malls of the caliber owned by Taubman or General Growth only rarely become available. They represent business and real estate prizes that took family dynasties generations to build, and it stands to reason that competition for them will be rough.
“This is like the Super Bowl,” says Vinocur. “When guys get to the Super Bowl, they come to play. They know they're going to get knocked around, they know they're going to knock some other people around. This is the big game.”
Denise Kalette is senior associate editor.
Asia intrigues Simon as venue for expansion
As Simon Property Group looks for new acquisitions and projects, some of them undoubtedly will be in Asia, according to David Simon, chairman and CEO of the Indianapolis-based real estate investment trust (REIT).“We have a very strong outlet business in Japan, and that continues to prosper. We also have a wonderful outlet center in South Korea. We're looking at another development opportunity there,” says Simon. “I like the outlet business in Asia. We'll continue to hopefully broaden that appropriately.”
It's unlikely that the REIT will open shopping centers or malls catering to middle-class consumers in China in the immediate future, however. In late 2009, Simon sold its joint venture interest in the development and operations of its shopping centers in China to its Chinese partner, SZITIC Commercial Property Co. Ltd., for about $29 million. Simon lost some $20 million on the venture.
The Chinese middle class is not yet ready for discretionary spending at shopping centers, he says. “The high-end spending in major metro markets in China has obviously been successful. But the middle-market consumer, kind of the suburban shopper there, still needs increased disposable income, we think, to support a lot of the retail development activity that's transpired there.”
He expects the market to improve with time. “It's a great opportunity, but you've got to be very patient for that consumer.”
In Europe, meanwhile, Simon and Montreal-based developer Ivanhoe Cambridge agreed to sell their interest in Simon Ivanhoe, headquartered in Paris, to investor and developer Unibail-Rodamco, also based in Paris. The portfolio is valued at 715 million euros ($U.S. 970 million) and includes assets in Poland and France. Simon expects to gain $300 million this year when the sale closes.
“We're always looking to allocate capital appropriately,” says Simon. “We thought it was a good price and we can reallocate that capital toward higher returns. And we feel those [returns] right now are in the U.S.”
His company is buying Baltimore-based Prime Outlets Acquisition Co. for $2.3 billion. Other purchases will depend on the market and price.
“We're not just a high-end mall company, or a mall company or a strip center company. We have exposure to all forms of retail real estate,” says Simon. “It's important because retailers themselves are very diverse. It just boils down to having good, quality real estate.”
— Denise Kalette