Landmark Links February 5th – Size Matters


Lead Story:  Brookfield Asset Management has finished raising its largest-ever property fund at $15 billion.  The Wall Street Journal recently interviewed Brookfield’s CEO and he had this to say about actually deploying the mountain of cash:

“You can’t put $15 billion to work $50 million at a time,” said Brian Kingston, Brookfield’s chief executive of Brookfield’s real-estate arm. “We need large-scale transactions.”

Previous Brookfield funds have produced annual yields in the low 20% range.  However, one has to wonder whether such a performance will be possible when trying to deploy capital in today’s environment via a fund where a $50mm investment is considered too small to be taken seriously.

On the other end of the spectrum, Lone Star just cut its fundraising goal because it is having difficulty in achieving the 15% – 20% returns it targets for investors, bucking the trend towards bigger funds from investors like Brookfield and Blackstone.  Bisnow’s Lone Star article contained this particularly interesting quote from CBRE:

“We do a lot of work with smaller opportunity funds, and that’s where all the good opportunities are, on smaller assets that are under the radar of the larger institutions,” CBRE Capital Advisers Senior Director Caroline James said. “But institutions want to put £50M to £100M into a fund, and also don’t want to be more than 20% of a fund’s overall size. So investors get pushed towards the bigger funds, when the reality is the best deals are at the smaller end of the market. How many bigger opportunities are around? In that sense it is not surprising that a manager would look to raise a smaller fund.”

Large commercial real estate investors are bringing in record fundraising hauls s in large part because returns over the past 10-years have been fairly spectacular thanks to a protracted recovery.  However, they now have to invest this massive amounts of capital in an environment where asset values are substantially higher and yields are substantially lower.  In other words, these funds are going to be compared to their predecessors and the results are unlikely to be pretty from a performance standpoint.  At the same time, great opportunities often get overlooked because they “only” require $50MM of capital and don’t allow for the scale necessary to deploy the many billions of dollars of dry powder that the large asset managers possess.  Bigger is not always better from a return perspective as an investor ability to be nimble is ultimately sacrificed at the altar of size.  However, AUM ultimately pays the fees, thus the continued aggressive fundraising.  Kudos to Lone Star for zigging while everyone else is zagging.  Now, we get to watch as it all plays out.


Shrugged Off: Despite the government shutdown, January’s jobs report revealed a domestic economy now adding jobs at the best clip since 2016.

Double Edged Sword: The shale boom has created a glut of high quality crude oil (used to product gasoline) that is keeping a lid on prices.  At the same time, refiners who invested billions to profit from processing lower quality oil (used to produce diesel) can’t find it, leading to a massive mismatch in the market.  Low quality oil is trading at a premium to high quality and refiners are being forced to adapt.

Worse Then it Looks: A big part of the reason that the unemployment rate is so low is that “involuntary” part-time work is 40% higher than it was ten years ago.


Growing Trend: Eight million square feet of vacant and under-utilized big-box stores are being turned into distribution centers in the US.  IMO, this is just the tip of the iceberg.  See Also: What will happen to vacant big box retail in 2019?

Missing the Mark: Whole Foods’ first year under Amazon did not live up to expectations.


Use it Or Lose It: Oakland is instituting a vacant property tax to try to spur more development but the broad-based implementation – including taxation of un-buildable hillside lots – has land owners alarmed.

A Step in the Right Direction: Zoning reform is a necessary step towards building more houses but there have to economic be incentives as well (both positive and negative) in order for that goal to be realized.


This Will End In Tears: A startup that allows you to buy crypto with a credit card is the idea that no sane person ever asked for and yet here we are.

This Did End in Tears: A Canadian crypto exchange says that it can’t repay $190 million to clients after its 30-year old founder – the only person who had the password to access the loot – unexpectedly died while in in India late last year.

I Really Hope This Works: Meet the 24-year old who invented a audacious new device that he claims could eliminate the Great Pacific Garbage Patch.

Chart of the Day

Housing update, courtesy of The Daily Shot.  The new home market is behaving exactly as should be expected when sales slow – builders cut prices and transaction volume goes up as a result.

• New home sales jumped in November as builders offered discounts.

• The median new home price tumbled, with sales of “starter” (smaller) homes outpacing the “higher-end” housing.


• The U. Michigan survey showed that high-income Americans have been less interested in buying homes and cars.

Source: Deutsche Bank Research

• The inventory of new homes pulled back in November.


Persuasive: A stripper-turned-pharma exec gave a doctor a lap dance in order to get him to prescribe drugs because Florida.

Can’t Stop, Won’t Stop: A half-naked woman was arrested after being caught masturbating in public in Austin, Texas — then allegedly continued pleasuring herself while handcuffed in a police car.  I guess that some people take the “Keep Austin Weird” motto literally.

Fair Warning: A restaurant patron in New Orleans was arrested for allegedly threatening to ‘blow up’ the eatery’s bathroom claims he only was only referring to the need to defecate.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at