Carmel Partners Closes 3rd Discretionary Equity Fund with

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					P2JW276049-0-B00700-1--------MW                              10/03/2007 CL,CX,DX,MW,SL
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     THE WALL STREET JOURNAL.                                                                                                                                                                                                                            Wednesday, October 3, 2007                        B7

                                               REAL ESTATE FINANCE
                                                                                                                                                                                                                       The following appears as a matter of record only
                                                                                                                                                                       September 2007

     Pralle Joins J.E. Robert Cos.                                                                                                                                                                                    *Realizing          the Potential of Real Estate

                                                                                  pany went into Russia; in June, it closed on a $321
     GE Ex-Head of Real Estate                                                    million fund with investments in Russia and
                                                                                  neighboring countries. More recently, J.E. Robert                                 *C A R M E L            PARTNERS               Carmel Partners, Inc. is pleased to
     Is President, Operating Chief;                                               made its first foray in South America, with a $10
                                                                                  million investment in an Argentine developer.
     Global Expansion Is Planned                                                      Mr. Robert says the U.S. real-estate market
                                                                                                                                                                                                                   announce the closing of its third
                                                                                  will provide new opportunities after this sum-
     By Kathryn Kranhold                                                          mer’s credit squeeze, because there will be fewer                                                                                discretionary equity investment fund
                                                                                  players. “For those who have the best skill sets
         General Electric Co.’s former real-estate                                this will prove to be an extraordinary time of op-
     chief, Michael Pralle, has joined closely held real-                         portunities,” he says.
     estate firm J.E. Robert Cos., as president and                                                       Mr. Pralle says he decided                                                                               Carmel Partners Investment Fund III
     chief operating officer.                                                                         to join Mr. Robert’s company
         Mr. Pralle left GE in June after taking the real-
     estate business from about $18 billion in assets
     under management to more than $80 billion over
                                                                                                      because it offered an opportu-
                                                                                                      nity to grow another business.
                                                                                                      He says he was uncertain how
     seven years, making it one of the Fairfield, Conn.,                                              much more GE would expand
     conglomerate’s fastest-growing units. At J.E.                                                    its real-estate division. Ana-
     Robert, he will oversee a smaller portfolio, with                                                lysts who cover GE have en-                                                                                  Carmel Partners Investment Fund III
     $8 billion in assets under management mostly in                                                  couraged the conglomerate to
     the U.S. and Europe.                                                                             divest some of its financial-
         J.E. Robert’s most recent deals were the $2 bil-                                             services business, including
                                                                                                                                                                                                                   is a discretionary, value-added fund
     lion purchase of nursing-home operator Genesis                                                   real estate.
     HealthCare Corp. with private-equity firm Forma-                               Michael Pralle        Mr. Pralle declined to set a                                                                             concentrating on the acquisition and
     tion Capital LLC and the $2.1 billion purchase of                                                target for J.E. Robert’s portfo-
     Highland Hospitality Corp., which owns Marriott,                             lio, saying that could lead to bad investments.
     Westin and Ritz-Carlton hotels among others.                                 “You want to make good investments,” he says.                                                                                    repositioning of multi-family assets.
         Joseph Robert Jr., the company’s founder,                                “Anybody can write checks for three billion if
     chairman and chief executive, says his company                               that’s what you want to do.”
                                                                                                                                                                                                                   SAN FRANCISCO • DENVER • IR VINE • SEATTLE • WASHINGTON, DC • HONOLULU
     is looking to grow globally, particularly in emerg-                              At GE, Mr. Pralle expanded the business to
     ing markets and Asia, while continuing to invest                             more than two dozen countries, including emerg-
     in the U.S. and Europe. Three years ago, his com-                            ing markets such as Turkey and China.                                                                                                       1000 Sansome Street
                                                                                                                                                                                                                                                              San Francisco, CA 94111

     Macklowe Move Keeps Creditors at Bay
     By Jennifer S. Forsyth                                                           Harry Macklowe’s son, Billy, the president of
                                                                                  Macklowe Properties, declined to comment.
         New York developer Harry Macklowe, who is                                    Investors who bought the Drake’s short-term
     walking a debt high-wire on his real-estate acqui-                           debt got a nice return but may be disappointed
     sitions, avoided a slip this week, although there’s                          that Mr. Macklowe paid it. That’s because, in the
     still danger ahead.                                                          case of a default, holders of mezzanine debt can
         Mr. Macklowe paid off the                                                be in line to assume ownership of a building if
     $340 million short-term debt                                                 they take over the mortgage payments. Mr. Mack-
     on his $418 million purchase of                                              lowe plans to raze the Drake, on Manhattan’s Park
     Manhattan’s Drake Hotel, ac-                                                 Avenue and 56th Street, and build an office tower.
     cording to several people famil-                                                 Vornado didn’t return calls but disclosed in
     iar with the matter. That kept                                               public filings last year it had bought part of a $38
     creditors at bay, including Vor-                                             million mezzanine loan on the Drake with an inter-
     nado Realty Trust—a real-es-                                                 est rate of about 15%.
     tate firm that held a piece of                                                   The investment follows a pattern. Vornado,
     the short-term debt. The                                                     led by Steve Roth, bought short-term debt on the
     Drake’s loan was due Monday                                                  General Motors building on Fifth Avenue after Mr.
     but Mr. Macklowe paid the Harry Macklowe                                     Macklowe outbid it for the property in 2003 for
     short-term debt, a so-called                                                 the then-record price of $1.4 billion.
     mezzanine loan, and put up more cash to secure                                   In a recent filing, Vornado said it had acquired
     an extension from Deutsche Bank on the senior                                mezzanine loans totaling $158.7 million on four of-
     mortgage.                                                                    fice properties Mr. Macklowe bought from Equity
         The move gives a reprieve to the 70-year-old                             Office. That raises the possibility that Vornado,
     developer, who still has $5.1 billion in short-term                          which lost a bidding war for Equity Office to Black-
     debt due in February from his $6.8 billion pur-                              stone Group LP this year, could wind up with some
     chase of seven New York buildings from Equity Of-                            of Equity Office’s New York buildings after all.
     fice Properties Trust. In some ways, Mr. Mack-                                   Also this week, New York landlord Sheldon So-
     lowe is a symbol of the recent commercial frenzy,                            low says he plans to ask a federal judge to put the
     when real-estate moguls bought with little cash                              GM building in receivership until a court case
     and large amounts of debt.                                                   over its proper ownership is resolved.

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