Market experts are bracing for a possible wave of initial public offerings to hit the real estate world in the next two to five years as many speculate that private-equity firms may use IPOs as exit visas.

Such firms have been on a tear over the past five years, snapping up commercial properties and taking private a record number of real estate investment trusts. And observers speculate that many of these firms may opt to do IPOs to exit the transaction at the end of the five- to seven-year investment window, especially if the credit markets remain in turmoil.

“I’m one of them,” said Ettore Santucci, a partner and chairman of securities and corporate finance with Boston-based Goodwin Procter LLP, referring to those anticipating a surge in REIT IPOs.

“I think we are likely to see companies come public again,” agrees David Loeb, an analyst at Robert W. Baird & Co. Inc. in Milwaukee. “Some of them may be similar to portfolios that went private in the last several years.”

For investors wondering when to jump into real estate, an IPO wave would signal that the sector is in growth mode, because savvy private-equity players would not sell at the bottom, Mr. Loeb said.

In the United States alone, there were 26 going-private real estate transactions, valued at $87.85 billion, in 2006, up from 18 transactions, valued at $34.19 billion, in 2005 and 18 transactions, worth $29.27 billion, in 2004, according to Dealogic Ltd., a market research firm based in London. The flurry of transactions continued in the first half of 2007 until the meltdown in the credit markets caused private equity to dry up and deals to grind to a halt.

So far in 2008, there have been only four public-to-private real estate transactions valued at $4.86 billion, down from 12 transactions valued at $55.31 billion during the comparable period a year ago, Dealogic reported.

Historic low interest rates, easy lending standards and a flood of capital, which included hedge funds and private-equity firms, led to the surge in mergers and acquisitions activity in the real estate universe over the past five years. Going-private transactions, in particular, made headlines in 2004 and 2005 when The Blackstone Group in New York went on a buying binge, snapping up a flurry of hotel companies, including MeriStar Hospitality Corp., Extended Stay America, Prime Hospitality Corp., Boca Resorts Inc., Wyndham International and La Quinta Corp.

The wave gained momentum through early 2007 when it peaked with the takeout of the country’s largest REIT, Equity Office Properties Trust of Chicago, in February of that year. Each transaction drove up the values of public REITs as investors would speculate on which might be the next target.

But the subprime debacle, economic downturn and credit crunch caused takeover activity to halt abruptly. Investors dumped REITs along with the financials in late 2007, causing equity REITs to deliver dismal returns for the year of -15.7%, according to the National Association of Real Estate Investment Trusts Inc. in Washington.

Equity REITs have rallied back in 2008, delivering returns, which include dividends, of 6.2% as of the close of business June 16.

Private-equity firms, by nature, tend to hold on to an investment for five to seven years, often refurbishing and re-tenanting the properties to boost values before exiting the transaction. Speculation is now growing over how they plan to exit.

They can either auction off the properties piecemeal to different entities, sell the entire portfolio to a larger entity, hold on to it by rolling the fund into an open-ended fund or do an IPO to exit, said Stephen Cordes, managing director and head of portfolio management at ING Clarion Partners LLC in New York.

The IPO scenario would be the most likely option if the debt markets remain in turmoil, interest rates rise, inflation spikes up and the public markets start valuing real estate higher than the private one.

If credit becomes easy and cheap again, “it would be more attractive to do portfolio sales than to do IPOs,” Mr. Santucci said. However, he said, it is unlikely that credit will become cheap when inflation and rates are rising.

Those who do IPOs will likely be middle-market in size — between $800 million and $1.3 billion — and bring savvy management teams and development expertise with them, Mr. Santucci said. “It is so difficult to outperform if you start off with a big asset footprint” in a huge IPO, he said.

Valuation is also key. If public REITs are trading at a healthy premium to their net asset value, then private-equity firms will likely favor IPOs as an exit strategy, Mr. Cordes said. Currently, equity REITs are trading at about a 5% discount to NAV on average, with hotels trading at the steepest discounts at about 25%, making IPOs less likely in the near term.

Some experts see some eerie similarities between today’s credit environment and the savings and loan crisis of the late ’80s and early ’90s that led to a surge in REIT IPOs. Vulture funds and others swooped in to purchase properties at bargain-basement prices through the government-owned Resolution Trust Corp. back in the early ’90s, with many of them bundling up the properties and taking them public as REITs.

“There was a big shakeout because the banks contracted like they’re doing now,” said Chip MacDonald, an Atlanta-based partner in Jones Day, a Cleveland-based law firm. “I don’t think we’re quite at that point in time yet for a repeat of that, but it could happen again.”

Mr. MacDonald said the number of IPOs will likely depend on how the public markets value real estate, the number of distressed properties doing fire sales and the number of foreclosures. A few real estate moguls, such as New York’s Harry Macklowe, already are facing financial troubles and starting to sell properties, such as the landmark General Motors Building, to keep creditors at bay. A deeper or more prolonged recession would likely cause even more distressed sales, Mr. MacDonald said.

Still, a surge in IPOs is likely a couple of years off.

“The REIT market, although it’s been pretty strong, hasn’t gotten to the pricing where it’s more attractive than selling to private buyers,” said Kent Richey, a partner in the New York office of Jones Day.

Philip Blumberg, founder of American Ventures, a real estate investment management company based in Coral Gables, Fla., speculates troubled property owners needing access to capital likely will resort to IPOs first.

Mr. Santucci predicts that the IPO wave likely will begin in 2010 or 2011. “It’s difficult to imagine IPOs sooner than 24 months from now because there is too much volatility and too much nervousness out there,” he said.

When bids came in 10 percent below its asking price for a Tampa, Fla., office building, Blumberg Capital Partners stirred the process by offering gap financing.

The Coral Gables, Fla., firm eventually got the property under contract for the full asking price after it had provided the buyer 15 percent financing for the transaction.

According to Philip Blumberg, chief executive officer, the buyer had been hoping to line up 90 percent financing, but was only able to line up a loan totaling 75 percent of the purchase price due to the tightened credit markets. “We had to step in to make up the difference,” he said.

He said the three-year loan with an 8 percent fixed rate is being funded by his firm, which owns the office building.

“It’s not like we’re taking an unknown risk, we already know the underlying asset because we own it,” he said.

He declined to provide specifics on the transaction because it has not closed yet.

NFIB

It’s become such common knowledge that it’s almost cliché to say it: We spend most of our time at work. Everyone knows this, yet there are many employers who give scant thought as to the conditions of our home away from home. This is an unfortunate oversight because the appearance, comfort, cleanliness and security—or lack thereof—of a physical work environment exert a huge impact on retention, productivity and overall employee satisfaction, explains Philip Blumberg, chair and CEO of Blumberg Capital Partners, a commercial real estate firm, with offices in Miami, Houston and New York. Extrapolating from this, it’s relatively safe to say that work conditions can also wield a sizable, if indirect, impact on a company’s profitability.

Last December the firm, which focuses on developing, managing and leasing high-end office space to small- and medium-sized businesses throughout the country, surveyed 500 workers nationwide asking how they felt about their office conditions and what was important to them when it came to their workplaces (they did not survey their own tenants, says Blumberg). Some of their key findings include:

• Basic work conditions have caused one in three workers to either accept or quit a job recently.

• The biggest complaint was extreme air conditions that left employees freezing or overheated. Dirty, filthy bathrooms were another frequently mentioned complaint.

• More than three-quarters of respondents reported that their office conditions influenced how they thought of their employers and also factored into how likely they would be to remain in their jobs.

• Unhealthy, unsafe conditions caused 30 percent of those polled to worry that they might become sick or be physically harmed because of their buildings.

Also mentioned were bad-smelling offices; dingy, depressing décor; leaky ceilings and windows; worn carpeting; and rodent and insect infestations. To take the survey yourself, visit www.blumbergcapitalpartners.com.

All of these complaints bother Blumberg, who prides himself not only on running first-class facilities, but on providing an impressive list of amenities to tenants, such as on-site health clubs, concierge support, conference facilities, advanced technology (like wireless Internet access in common areas) and energy-efficient utilities. The bottom line is: Shoddy buildings offend both his sensibilities and his business sense.

“It matters to tenants the kind of buildings they’re in, and it should matter to employers,” he says. “You will lose good employees if you don’t supply adequate quality of life. And this makes even more sense in an economic downturn. Maybe you’re not raising salaries as much, and so benefits become even more important.”

Blumberg advises small business owners to ask themselves the following questions:

• Is the overall appearance of the building shabby or well maintained both inside and out? What conditions are the grounds in?

• Are there any maintenance issues, such as leaky plumbing, gaps in ceiling tiles, etc? (And don’t forget those bathrooms).

• What kind of amenities does the landlord provide?

• Have you taken measures to provide safety and security? This is important if the building is in a questionable area or if employees work into the evening.

• Is the building reinforced to withstand weather damage or other disasters?

Another way small business owners can improve the workplace experience is by allowing employees to personalize their office space. Although the building itself may be up to snuff, inside, the surroundings could look as sterile as an operating room, with barren rows of cubicles or offices giving no clue about the personalities of those who toil within. It’s hardly an inviting sight, and it’s one that can also negatively impact employee satisfaction.

Chris Komisarjevsky, former CEO of New York City-based PR firm Burson-Marsteller Worldwide, spoke to me on this issue a few years ago when he was still with that firm. Komisarjevsky, author of Peanut Butter and Jelly Management (AMACOM, 2000), is an enthusiastic proponent of allowing employees to personalize their office space.

“Allowing employees to display pictures and mementos encourages balance and acknowledges they have lives outside of the office,” he said. “This makes the workplace more appealing and consequently, improves retention and productivity.”

Not only that, this personalization affords business owners and their managers more valuable insight into what motivates employees and also provides great opportunities for relationship building.

“By walking around, visiting with their staff, commenting or asking about the things they see displayed, owners will not only get to know their employees better, but will also send the message that they are a leader who cares,” he explained.

But for all the positives, there is the potential for conflict. Think of what could ensue if a deer hunter decided to display a photo of his latest trophy in full view of a neighboring colleague—the animal rights activist. Consequently, the personalizing of office space needs to be undertaken cautiously and in stages, especially if this is a first attempt. According to Komisarjevsky, small business owners can avoid missteps by:

• Setting an example. Bring in your own items from home and establish the tone for what is considered appropriate.

• Being welcoming, not dictating. You can’t force people to dress up their spaces. Don’t make this a requirement, but instead, create an environment that encourages this.

• Forming a committee. Get a group together and involve them in the decision-making process. Brainstorm ways to desterilize the office. Discuss the potential pitfalls and how these might be avoided.

Finally, stay patient. The limits of what is acceptable will be tested and defined over time. Although your employees will make mistakes, don’t abandon the effort to make the workplace more comfortable, inviting and productive.

If the message that workers sometimes receive during tough economic times is “your job is your perk,” it seems unlikely that an employer would give a rip about the decor, or the break room, or the room temperature.

Yet experts say that employers who pay attention to such niceties are more likely to retain their best people and improve worker productivity–which leads quite naturally to making more money and saving on the cost of having to train new people. In a recent study released by Blumberg Capital Partners, 80 percent of workers said the condition of their work environment affects their perception of their company, and 33 percent said they’ve actually left a job or taken a new one based “the condition of the building and/or the amenities offered.” Whoa.

“To be honest, employers may not be aware of the impact the physical environment has on individuals,” said Steve Schiavo, a Wellesley College psychology professor who has presented papers at the Environmental Design Research Association (EDRA). “Employers may only think of financial compensation as contributing to morale, but clearly there’s more than that.”

With that in mind, Q headed out with environmental psychologist Sally Augustin, publisher and senior editor of the scholarly Research Design Connections, a publication of the EDRA, to check out some pretty cool places to work around Chicago. Augustin says you don’t usually grow immune to a positive environment as a worker–it can recharge and refresh you. But the employer does need to tweak the environment from time to time.

On our recent tour we visited:

–Digitas, an ad agency that helps companies navigate the digital age, whether it’s designing ways for a firm to connect directly with its customers or developing Web sites for its clients, which include Miller Brewing, American Express and Lancome.

–Google, the Internet search engine and advertising company with offices throughout the world, including a fast-growing Chicago branch on Kinzie Street.

–Remedy, an ad agency that is helping many health and wellness brands reinvent and repackage themselves, from the American Hospital Association to Motorola Life Sciences to Planned Parenthood of Chicago.

What can you learn about by analyzing the physical environment at these employment hot spots? With Augustin’s astute eye, here are some key components on why these places work.

Reflect your culture

That means a lot of green (the color of health, Augustin said) at Remedy, and wide-open spaces and playful decorations for the 20- and 30-somethings who work at Google and Digitas. “A lot of this kind of looks like a college atmosphere, but there’s serious business being done here,” said Kevin Willer, head of central region development for Google.

Change with the times

Both Digitas and Google have an abundance of scooters that people can use to get around the massive offices. Sure, it’s gimmicky and trendy, but you can bet that if they abandon the wheels when the fad fades, they’ll probably latch on to some new trend while other companies still have a subcommittee studying scooters.

Individual expression

When new employees join Remedy, they get to choose whether they prefer an office with walls and a door or an open workspace. They can change their mind down the road too. “We’re anti-cubicle,” said Remedy founder and president Carol McCarthy. “I think they’re depersonalizing.” Remedy workers also get choices for office furniture and layout, and the scent of candles wafts from several desks.

Employees “work better and have more of an attachment for our employer in a place that we’ve personalized,” Augustin said.

Both Digitas and Google name physical elements, like conference rooms or presentation rooms, for local icons or neighborhoods. Google’s Chicago office sign, for instance, shows the Google logo altered to feature the image of the John Hancock Center. Even the copy machines at Google are named for Chicago film characters, such as Cameron, the sidekick from “Ferris Bueller’s Day Off.”

Creature comforts

Anyone for billiards? The pool table at Digitas awaits. The “Adventures in Babysitting” room at Google (named for the movie filmed in Chicago) features everything from foosball to Wii systems. The company also brings in manicurists on Fridays. And with research showing how a rest or nap can re-energize employees during the afternoon, McCarthy is planning to install a room for resting at Remedy.

Hungry? Digitas has an enormous, gleaming kitchen for its staff. Remedy’s bright yellow kitchen doubles as a popular gathering spot. Google offers free hot lunches in Chicago and may be adding free hot breakfasts as its staff here expands.

The perfect office: Nap areas. Energy-efficient elevators. Color. Free food.

A survey of office workers’ attitudes toward their work spaces found that a third had taken or left a job because of the amenities or unsavory conditions of a building. Another one in three worried about sickness or injury due to the unsanitary or unsafe state of the building.

The top complaint: The office is too hot or too cold.

The top requests: Covered parking and subsidized cafeteria food.

The survey, which drew more than 5,000 comments and suggestions, painted a diverse picture of workers’ wants.

• It would be nice to have better artwork.

• Security measures, such as metal detectors and security guards.

• Area to lay down for a quick nap during lunch.

• A good rug cleaning.

• Free popcorn, coffee and fruit once a week.

• Fix the roof so it doesn’t leak.

The online survey was commissioned by Blumberg Capital Partners. It polled 500 American adults who work in office buildings.

A survey by Blumberg Capital Partners has come to this conclusion…

“The biggest complaint among the 500 office workers surveyed was extreme temperatures in the office followed closely by unclean restrooms, outdated furniture, persistent odors, leaky ceilings, crime and rodents or insect problems.

Among the amenities that are most desirable by office workers are a subsidized cafeteria or restaurant, followed by covered parking, a conference center, a food delivery service, fitness center and an on-site day care.”

Full Story:

http://www.cnbc.com/id/24295205

Office workers may want improved conditions, but experts say other factors are still key

Large-scale layoffs were up in March from a year ago, a fact that could have many workers fretting about their job security. But some are apparently focused on less extreme problems, like the shoddy artwork in their office hallways.

Blumberg Capital Partners, a real estate investment firm, surveyed U.S. office workers and reports they have a wide variety of complaints about their office conditions, from "It’s so boring, all blah colors, no fun" to "The lighting is very harsh and causes eyestrain and migraines."

Certainly, complaints about dirty rugs and leaking roofs make sense, but if some requests sound frivolous ("free popcorn," for example), Blumberg says that the overall results confirm that office conditions have a direct effect on employee retention, recruitment, and productivity. Blumberg reported in January that one third of office workers said they had accepted or left a job based on the condition or amenities of the building where they worked.

That’s big news for companies concerned with retaining talented workers.

But Rich Wellins, senior vice president at human resources consulting firm Development Dimensions International, is skeptical that office environments have such a significant effect on employment decisions.

"I would just bet my annual salary that people would not list, as one of their top three reasons, the physical office environment as a reason for leaving," Wellins says. "I just think there are other factors that are far more important in retention than a physical office, up to a certain point."

Employers may need to meet a minimal level of office comfort and space, Wellins says, but there are well-known companies, like Costco and Wal-Mart, that make a conscious effort to keep office expenses and frills to a minimum and still have solid retention rates.

Another recent survey by Robert Half Technology, an information-technology staffing firm, seems to support Wellins’s opinion. The survey of 1,400 chief information officers found that their most effective method of holding on to staff is increased compensation, followed by professional development or training and flexible work schedules. The survey respondents also cited telecommuting, extra vacation time, and company stock or options as retention tools. Office conditions were not on the list.

For sure, some companies have made their working environments a recruitment tool. Employers like Google, where employees at its Mountain View, Calif., headquarters can munch free gourmet meals or visit a massage therapist, have put office perks front and center in the recruitment process. Google CEO Eric Schmidt says on Google’s corporate benefits page that the company’s goal is "to strip away everything that gets in our employees’ way."

Wellins says that Google’s many office perks may make sense in its particular field, because the company faces a tight labor market for software engineers. Other companies, like Best Buy, have had success by allowing employees to maintain flexible work schedules. But as far as massages go, "I’m not sure companies necessarily need to go to that extreme to retain employees," Wellins says.

Basic improvements to the physical space may benefit a company’s bottom line. Research suggests office conditions like lighting and temperature affect employee productivity. Researchers at the Leeds Institute of Psychological Sciences recently reported finding that short bursts of very bright light may trick the brain into alertness in the afternoon.

Office temperature also seems to make a difference. In a 2004 study, Cornell University Prof. Alan Hedge found that a thermostat increase from 68 degrees to 77 degrees resulted in a 44 percent decrease in typing mistakes and a 150 percent increase in typing output. Two subsequent studies have borne very similar results, Hedge says. "We feel fairly confident that when people are working in conditions where they’re pretty close to thermal comfort, their computer-work performance is improved," he says.

But for companies looking to hang on to talent, office contentment may have the most to do with people. Brock Boyd, president and CEO of Career Management Inc., a Vienna, Va., search firm, says the first question his firm asks candidates is "What’s the main thing driving you to look around?"

At the top of the list: their boss.

Boyd, himself a boss of seven employees, says he prefers to be in nice office space, "but it’s not very high on my totem pole." His employees seem not to be much affected by improvements, either. "Right now we’re probably in the best space we’ve been in, but I don’t think they’ve noticed," Boyd says.

Forget job perks like access to the company car or a cushy expense account. Keeping and recruiting employees might be as easy as keeping the bathrooms clean.

One-in-three employees surveyed by Blumberg Capital Partners, a U.S. investment firm that specializes in commercial real estate, have accepted or left a job due to the condition of the building or the amenities.

“Office conditions, indeed, directly impact employee retention, recruitment, and productivity,” said Philip Blumberg, chairman and CEO of Blumberg Capital, in a statement.

The biggest complaint among the 500 office workers surveyed was extreme temperatures in the office followed closely by unclean restrooms, outdated furniture, persistent odors, leaky ceilings, crime and rodents or insect problems.

When asked to write-in their demands for a better workplace, they came up with some basic needs like hot water in bathrooms. Below are some of those requests:

“Mace for protection.”
“Area to lay down for a quick nap during lunch.”
“Men’s room instead of unisex bathroom.”
“I wish the building had windows.”
“Take better care of the grounds, fix the kitchen, and make it not seem like a nursing home.”
“Security measures such as metal detectors and security guards. Bullet-proof glass would be an asset.”
“Some of the bathrooms don’t have hot water.”
“Fix the roof so it doesn’t leak.”
“Free parking.”
“Better vending machine selection.”

The survey, commissioned to gauge the impact of office building conditions on worker attitudes, also found that one-fifth of employees said their office building’s condition decreased their productivity and motivation.

In the survey, a full interactive version of which is now online, workers note a lack of basic needs, such as hot water in restrooms, clean carpets and comfortable chairs, while others seek higher-end amenities like workout facilities, free snacks and coffee, and nap rooms. Among the comments: “I wish the building had windows,” and “Build separate men’s and ladies’ rooms to replace the unisex bathroom.”

The survey was commissioned to gauge the impact of office building conditions on worker attitudes, productivity and motivation. Initial findings, released in January 2008, unveiled a litany of common problems, including extreme temperatures, insects, leaky ceilings, rodents and messy bathrooms. The survey also found that a third of the workers have accepted or left a job due to building conditions or amenities. Nearly half described their office environments as “bland,” “dumpy,” or “stodgy.”

Blumberg Capital Partners today released verbatim feedback from the survey — culled from more than 5,000 written responses. The company also posted its survey live as an interactive online tool for office workers to take the poll and see how they stack up against national averages. The interactive survey and full survey results — including a compilation of the verbatim comments and regional comparisons — are posted at www.blumbergcapitalpartners.com.

“The companies of ‘Corporate America’ have long been judged on the quality of work environments they provide to their employees,” said Philip Blumberg, Chairman and CEO of Blumberg Capital Partners. “The results of our survey confirm that office conditions, indeed, directly impact employee retention, recruitment, and productivity. That is why Blumberg Capital Partners has spent the last 20 years providing the highest quality space and a broad range of exceptional services to our corporate tenants and their employees.”

Philip Blumberg’s Blumberg Capital Partners releases verbatim comments and regional comparisons from landmark office worker survey; ‘I wish the building had windows’

CORAL GABLES, Fla., April 24 — Philip Blumberg’s Blumberg Capital Partners, the U.S. investment firm and commercial real estate investment fund, today released verbatim comments and regional comparisons from its landmark survey of office workers. The comments from the survey respondents highlight the range of conditions under which U.S. office workers toil.

In the survey, a full interactive version of which is now online, workers note a lack of basic needs, such as hot water in restrooms, clean carpets and comfortable chairs, while others seek higher-end amenities like workout facilities, free snacks and coffee, and nap rooms. Among the comments: “I wish the building had windows,” and “Build separate men’s and ladies’ rooms to replace the unisex bathroom.”

The survey was commissioned to gauge the impact of office building conditions on worker attitudes, productivity and motivation. Initial findings, released in January 2008, unveiled a litany of common problems, including extreme temperatures, insects, leaky ceilings, rodents and messy bathrooms. The survey also found that a third of the workers have accepted or left a job due to building conditions or amenities. Nearly half described their office environments as “bland,” “dumpy,” or “stodgy.”

Blumberg Capital Partners today released verbatim feedback from the survey — culled from more than 5,000 written responses. The company also posted its survey live as an interactive online tool for office workers to take the poll and see how they stack up against national averages. The interactive survey and full survey results — including a compilation of the verbatim comments and regional comparisons — are posted at www.blumbergcapitalpartners.com.

“The companies of ‘Corporate America’ have long been judged on the quality of work environments they provide to their employees,” said Philip Blumberg, Chairman and CEO of Blumberg Capital Partners. “The results of our survey confirm that office conditions, indeed, directly impact employee retention, recruitment, and productivity. That is why Blumberg Capital Partners has spent the last 20 years providing the highest quality space and a broad range of exceptional services to our corporate tenants and their employees.”

This Article is also available online at:
ADVFN News
Banker & Tradesman Online
Bolsamania (Web Financial Group)
Breitbart.com
Earth Times
Financials.com
Forbes
Jacksonville Business Journal
KAIT ABC-8 (Jonesboro, AR)
KRON - San Francisco TV4
Los Angeles Times
Orlando Business Journal
PR Newswire
RBC Dain Rauscher Inc. (fka Dain Rausche
South Florida Business Journal
Tampa Bay Business Journal
WFAA - Dallas/Fort Worth TV8
Yahoo! Finance