The Hot Potato

Is The Playing Field Level? ... Does your broker buy real estate? Should your agent ever act as a principal? What constraints would you like to see? Wow, talk about a hot potato. As Wall Street grapples with conflicts of interest between independent analysts and investment banking relationships, the real estate industry, too, has become more sensitive to potential conflicts.

That's why Cushman & Wakefield's recent announcement of its agreement with Goldman Sachs' Whitehall Street Real Estate Fund to assist Sienna Capital in acquiring "office properties in central business districts (CBDs), targeting large, value-impaired assets" in return for "all leasing, management and sales for the venture's properties worldwide" caught my eye.

According to the Wall Street Journal (Nov 13, 2002), "The partners say they are putting themselves in position to beat the competition to the best opportunities in the market." And a Goldman & Sachs spokesman comments, "This new venture affords us the opportunity to utilize real-time information [from Cushman & Wakefield] in order to make creative and thoughtful investment decisions in these difficult times."

C&W's press release states, "This structure is unique in the real estate industry and was carefully crafted to provide the maximum transparency and separation between Cushman & Wakefield's service business and the investment business of Sienna Capital and Whitehall." Translation: Our professionals are firmly committed to providing unbiased advice to all our clients. That's great disclosure.

Does your company have a policy on acting as a principal? How do you disclose possible conflicts? Isn't it natural that real estate professionals invest in real estate? Send me your comments. I'll report more in a future Dispatch.

Building Your Brand... Thanks to our new sponsor this week, RealWinWin, which provides tools to maximize your building's revenues. Would you like to sponsor the PikeNet Dispatch? Dates available starting in January 2003. Send e-mail or call me at 415-485-6700. Thanks!

--Peter Pike