Legal news and trends for Canadian in-house counsel and c-suite executives
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or buying up undervalued real estate as is the case with Canada's Brookfield Asset Management Inc. The Toronto-based company that focuses on property, power, and infrastructure assets, is one group that has made crystal clear its inten- tions to cash in on the current eco- nomic situation. Brookfield's gambit came in August when it announced the creation of a US$4-billion investor consortium aimed at underperforming real estate talize on struggling U.S. businesses as well. Valuations in the industry have taken a steep drop from highs reached two years ago, which he attributes to a decline in energy demand due to the recession. Prices may be tantalizing, but Kohlenberg says it is vital to take a step back and determine just how much of an opportunity you are look- ing at. That consideration has forced TransCanada to take a conservative approach to possible deals. "Because of the fact that these opportunities Because of the fact that these opportunities exist in a time of economic downturn, you've got to really still fi gure out whether there is a need, [and] what is the longer-term value of this particular opportunity. DAVID KOHLENBERG, TransCanada PipeLines Ltd. opportunities. The group, including various institutional real estate inves- tors, each assigning at least US$300 million to the initiative, will invest in equity and debt in real estate compa- nies or portfolios where greater value could be created. The consortium is focusing its efforts on North America, Europe, Australia, and Asia. Joseph Freedman, Brookfield's gen- eral counsel, is confident opportunities abound in this volatile environment, but he suggests just how much can be gained remains up in the air. "It will depend on the nature of what comes out on how much the capital availabil- ity and lending availability becomes pervasive, and whether we continue to have the type of recovery in the credit markets, or increase in activity in the credit markets, that we've seen." David Kohlenberg, deputy general counsel of corporate development and finance law at TransCanada PipeLines Ltd., says his company is eager to capi- 16 • DECEMBER 2009/JANUARY 2010 INHOUSE exist in a time of economic downturn, you've got to really still figure out whether there is a need, [and] what is the longer-term value of this particular opportunity." The company has noted, for exam- ple, project developers have run into difficulty financing ongoing develop- ment activity. As capital markets col- lapse, the developers have often come up empty in searching for the funds needed to move projects along. Many are teetering on the brink of insolvency. A quick appraisal may make such a deal seem encouraging, but Kohlenberg says it is easy to get scared off. "It's difficult to deal with those kinds of entities, because you're not 100-per-cent certain whether any transaction that you do is going to get challenged or not in a proceeding that some other creditor, or interested party, might take." Counsel involved in the purchase of an insolvent company must work out the same types of considerations Undervalued Real Estate dervalued Real Estate Undervalued Real Estate Undervalued Real Estate