Apr 28, 2011 10:15 AM,
NREI Staff

The two fiercest rivals in the commercial real estate information marketplace will become one powerhouse. CoStar Group Inc. (Nasdaq: CSGP) has signed a definitive agreement to acquire archrival LoopNet Inc. (Nasdaq: LOOP), a giant in the online commercial real estate marketplace.

Just two years ago, the two companies were locked in a legal battle in three states over copyright, Web access and advertising issues.

Pursuant to the merger agreement, LoopNet shareholders will receive $16.50 in cash and 0.03702 shares of CoStar Group common stock for each share of LoopNet common stock, representing a total equity value of approximately $860 million and an enterprise value of $762 million.

The boards of directors of both companies have unanimously approved the transaction, which is expected to close by the end of 2011.

Based upon results in the first quarter of 2011, the combined companies have annualized revenue of approximately $321 million. CoStar is headquartered in Washington, D.C. and LoopNet is based in San Francisco.

CoStar operates the largest commercial real estate information database with more than 77 billion sq. ft. of office, retail, and industrial inventory, 1.5 million listings, and 10.6 million images.

LoopNet.com is the industry’s largest and most heavily trafficked online marketplace with 4.8 million registered members and more than 6 million unique visitors quarterly, according to Google Analytics. LoopNet also is the leading website for marketing commercial property listings.

As commercial real estate brokers and owners continue to move property listings to online channels, CoStar anticipates that LoopNet’s marketplace will become increasingly important to buyers and sellers searching for or marketing properties.

To continue reading coverage of the merger, go to NREIonline.com.

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By Robert Freedman, senior editor, REALTOR® Magazine

The upcoming vote in Congress to increase the federal debt ceiling is one of those procedural matters that takes on a new importance in this age of high budget deficits. Ordinarily, members of Congress would vote to increase the debt ceiling without too much controversy, which isn’t to say lawmakers enjoy casting their votes. No one likes to increase the amount of money the United States can borrow. But in the previous hundred or so votes since the early 1900s, when Congress first raised the debt ceiling, the votes were painful but necessary on a bipartisan basis. This time, however, some lawmakers are saying they won’t vote to raise the debt ceiling.

Sen. Mark Kirk (R-Ill.), for example, told reporters this past weekend that he was keeping his options open to see what budget cuts would be made part of the deal. “I will vote no on that debt ceiling unless we have comprehensive, dramatic, effective, and broad-based cuts to federal spending,” he told reporters. His quote was included in The April 25 Washington Post.

Whatever your view on the federal budget deficit and the procedural tactic of attaching budget cuts to the debt ceiling vote (it has in years past been a clean vote with no cuts attached to), analysts and lawmakers agree that the impact of failing to increase the debt ceiling will be unprecedented, on the economy and particularly on real estate, which is so interest-rate sensitive.

That’s because failure to increase the ceiling will send the global economy into turmoil: for the first time, the United States will default on its bonds. “Once we default, then the United States is no longer the safe haven for cash anywhere in the world,” says NAR Tax Counsel Linda Goold. For it to attract investment to finance its debt in this new world order, the federal government will have to raise interest rates, possibly dramatically. That will hurt home ownership. But, more importantly, the ability of the United States to resume its position as the world’s financial safe-haven will be compromised, maybe for good.

Against this background the upcoming vote on the debt ceiling becomes crucial for real estate, even though the vote itself has nothing to do with real estate and REALTORS® in the past have not lobbied on the matter. The U.S. Treasury Department estimates we have about two weeks before we hit the debt ceiling, After that, the government can make administrative changes to keep the government solvent until about the first week of July. So, ideally, Congress will act to let the government take on more debt in the next two weeks or so, before the situation becomes dire.

You can learn more about the matter in the video above with NAR Tax Counsel Linda Goold.

Chester Higgins Jr./The New York Times Stephen A. Schwarzman, the Blackstone Group’s chairman and chief executive.

7:34 p.m. | Updated

For the Blackstone Group, the first three months of the year were something of a blast from the past.

On Thursday, the investment giant reported its strongest earnings since it went public nearly four years ago. Its quarterly profit rose 58 percent as the company continued to reap benefits from improving real estate markets.

Blackstone said that it earned $568.1 million in the quarter on $1.2 billion in revenue. Its assets under management swelled 43 percent, to $150 billion. (The profit was reported as economic net income after taxes because it excludes charges tied to the company’s initial public offering of stock. On a generally accepted accounting principles basis, the company earned $43 million, a big swing from a $121 million loss in the period a year earlier.)

“Blackstone’s first-quarter results further demonstrated our ability to generate outstanding returns for our investors and attract new capital,” Stephen A. Schwarzman, Blackstone’s chairman and chief executive, said Thursday in a conference call with analysts.

The results again show how private equity firms have rebounded from the financial crisis. As the stock and credit markets have risen, the value of buyout shops’ holdings has risen, and their ability to strike deals for a variety of assets has improved as cheap financing remains readily available.

These firms have also benefited from their ability to sell their portfolio companies through initial public offerings, allowing them to realize profits.

Blackstone has seized upon these opportunities to bolster its businesses. It has held stock offerings for holdings like Nielsen, and it plans to hold more for other companies, like Vanguard Health, Freescale Semiconductor and Kosmos Energy.

And the company has struck a few deals, notably its $9.4 billion purchase of the American malls of the Centro Properties Group, its biggest purchase since its $25 billion deal for Hilton Hotels nearly four years ago.

The Centro deal was struck through Blackstone’s huge real estate arm, which propelled the firm’s quarterly profit. The division nearly quadrupled its revenue, to $555.6 million, thanks to an improvement in real estate values, especially for hotels and commercial office buildings. That has helped bolster performance fees.

Blackstone’s best-known division, its private equity unit, reported a small decline in revenue, to $273.7 million, and disclosed a drop in investment income. The value of its holdings rose about 5 percent in the quarter, and the average paper value of those assets was marked at 1.5 times their original investments.

Hamilton E. James, Blackstone’s president, suggested in a conference call with reporters that traditional leveraged buyout deals might be out of fashion for now. With corporations embarking on a buying spree, using their piles of cash and able to pay more because of greater cost savings, buyout firms are at a competitive disadvantage.

“There’s a lot of corporate competition that has come out of the woodwork,” he said. “That has made the plain vanilla buyout pricey.”

But Blackstone is seeking other investment opportunities, he added, including some in the energy industry and in emerging markets.

Blackstone still has plenty of money to invest, with $25.5 billion in uninvested capital between its private equity and real estate units. It has finished raising capital for its sixth buyout fund and is raising money for its seventh real estate fund.

Shares in Blackstone rose 1.6 percent on Thursday, to $19.31. They remain well below the firm’s initial offering price of $31.

Zillow, the ubiquitous real estate information company that has been providing online estimates on property values – and an ever-widening array of other real estate related services – has filed for initial public offering[1]. This puts it on track to become a publicly traded stock in the coming months. The data provider maintains information on more than 100 million U.S. homes and was used by 19.4 million unique users in March of this year alone. Interestingly, however, the Wall Street Journal reports that “the company, which was incorporated in 2004, has never been profitable.” In the past twelve months, though, it has shown year-over-year growth of more than 90 percent.

According to the company, it hopes to raise around $51.8 million to use for “general corporate purposes, including a possible acquisition.” Some experts believe that even though this move has been “widely anticipated,” a “still-weak housing recovery makes for potentially bad timing”[2]. According to Scott Sweet, IPOBoutique.com’s senior managing partner, another real estate related software company that recently went public was hurt by the recent housing downturn and Zillow could potentially experience the same issues. As yet, though, Zillow has not set a target price for shares nor announced when the offering will take place.

Would you invest in Zillow?

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[2] http://abcnews.go.com/Business/wireStory?id=13403628

A former commissioner of a local volunteer fire district in Rockland County was charged on Friday with a scheme to defraud the public by arranging a real estate deal between the fire district and one of his own creditors to pay off personal debts, according to federal officials.

Nathan Rothschild surrendered Friday on a felony mail fraud charge in federal court in White Plains, according to U.S. Attorney for the Southern District Preet Bharara.

Rothschild, 54, of Monsey, faces a maximum sentence of 20 years in prison if convicted.

“This charge, if proven, represents a serious violation of public trust,” said Bharara. “Public officials should not think that their office can be used as a personal piggy bank.”

Charges were brought against Rothschild after a probe by the Federal Bureau of Investigation. Rothschild was arraigned Friday by federal Judge George A. Yanthis and released on bail after he pleaded not guilty.

Rothschild is former chairman of the Monsey Fire District, which is the financial oversight arm of the all-volunteer Monsey Fire Department. The federal charges do not specify details of the real estate deal or link anyone else to the probe.

Rothschild also served as president of the East Ramapo school board. He resigned that post on Friday as he was hit with the federal mail fraud charge.