HawthorneVillager.com

Part one is simple, after years of outperformance the money always comes from the same sources: pension funds, endowments & municipal funds (think Orange County). They increase normal allocations to chase trends.

The second part is more complicated. We used to manage the companies assets, drive top line growth and streamline operations. Now it's more of 2/20 fees (the carry) and layering of additional mgmt. intiative fees.

Take the Blackstone EOP deal. Forget for a minute that the seller is an extremely savvy player in the real estate market. Concentrate on the deal. Thinking on the street is that they are feverishly selling assets from the deal because the interest is just too risky for the firm. Wrong!! If the deal was too big they could have partnered or walked. However, within the partnership agreement was a clause that gave Blackstone execs a 0.5% bonus when they close a deal.

So they closed and collected $195m for the effort. In the next two weeks they sold off about $16b in assets. Clearly these sales were negotiated long before the deal closed. That $16b tranch was worth $80m in bonus money. Not bad for a years work.

Nothing short of theft of investor assets in broad daylight. No doubt the investors are congratulating themselves as I write this for being in on the greatest real estate deal
of the century.


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My parents live at a golf course in Naples, Fl with about 500 homes. They are trying to sell their house and they are getting a good amount of traffic, the only problem is that there are 55 other homes for sale in the community. Two years ago houses like theirs were selling for $900K+, theirs is on the mkt for $699K and no offers.

This could be considered to be the peak selling season in Fl, I would bet that when the peak
selling season comes for the rest of the country this spring, we will hear many more stories like this.

• That is going to happen almost EVERYWHERE....just wait.