Corporations and Real Property

1. Corporations and Real Property Write a paper on the real estate activities of a public corporation

2. Real estate activities • A. Companies that produce goods and provide service • Own real estate and use it – offices, mines, forests, hospitals, landfills • Own land and lease it, or buildings, to another company • Lease land and/or buildings

4. Real estate activities • B. Companies that specialize in real estate • Construction • Buying and selling, financing, insuring, managing, businesses and structures • Real Estate Investment Trusts • Timber Investment Management Organizations

5. Real estate activities • C. Companies that invest in the above companies • Insurance • Investment companies – retirement funds

6. Public corporation • A public company, publicly traded company, publicly held company is a company that offers its securities (stock/shares, bonds/loans, etc.) for sale to the general public, typically through a stock exchange, or over the counter markets • TheSecurities and Exchange Commission requires that such firms provide a variety of reports • The World's 2000 Largest Public Companies (Forbes)

7. Private corporation • Aprivate companyis a company owned by a relatively small number ofshareholders or company members which does not offer or trade its securities companyto the general public • There are no reporting requirements for such companies • America’s Largest Private Companies (Forbes)

8. Private equity firms • use privately raised funds to acquire control of a company • Goldman Sachs Principal Investment Group • The Carlyle Group • Bain Capital  • The Blackstone Group • TPG Capital • Minnesota Venture Capital Firms (Minnesota Headhunter)

9. Corporations(Wikipedia) • A corporation is a legal entity determined by the law of the state in which the business is incorporated • Composed of individual owners but exists separately from them • stockholders – stock holders own a part of the company that issues the stock • bondholder – bond holders loan the company money • Employs individuals and produces good or provides services

10. Corporations(Wikipedia) • “Born" into existence through a certificate of incorporation • “Die” when they lose money and become insolvent – bankruptcy • Recognized by law to have rights and responsibilities like actual people • May be responsible for human rights violations – be convicted of criminal offences, such as fraud (IRS, 2013) • Politics and Corporate Crime Legislation (Cato Institute) CorpWatch.org • Corporate law (Legal Information Institute)

11. Corporations(Wikipedia) • A corporation is legally a citizen of the state in which it is incorporated • Corporate business law differs from state to state, and many prospective corporations choose to incorporate in a state whose laws are most favorable to its business interests • Many large corporations are incorporated in Delaware without being physically located there because it has very favorable corporate tax and disclosure laws • May incorporate in any state • Minnesota Statutes • Minnesota Secretary of State

12. Public Corporations • Joint stock company - capital is collected from the individual contributions of shareholders, each of which is given certificates of ownership (stocks) in return • The shareholders are free to transfer their ownership interest at any time by selling their stockholding to others • Ownership of stock confers a number of privileges • The company is managed on behalf of the shareholders by an elected Board of Directors – unusual for shareholder to be on board

13. Public Corporations • Hold annual general meeting, produce an annual report, are audited yearly • Shareholders share in the company's net profit – also called a dividend – calculated as net profit divided by the total number of owned shares • (Individual share of the profit is the dividend multiplied by the number of shares owned) • Shareholders are liable for company debts that exceed the company's ability to pay but limited to the face value of their shareholding

14. Public Companies (Wikipedia) • Public corporations – those owned by the public, whose stock is traded on the New York Stock Exchange or other exchanges • Any company that files a Form S-1 with the Securities and Exchange Commission (SEC) and raises money from the public • A public company needs to file reports • a public company with 300 or more shareholders as defined in the 1933 Securities Act can elect to become a reporting company • a public company with 500 or more public shareholders or a company with some public shareholders and assets of $5 million dollars must become a reporting company

15. Stock corporations sell stock to generate capital • Many also sell bonds – bond v stock • Most are generally for-profit • Publicly traded corporation, the shares of which are traded on a public stock exchange (the New York Stock Exchange or NASDAQ in the United States where shares of stock of corporations are bought and sold by and to the general public • Most of the largest businesses in the world are publicly traded corporations

16. Non-stock corporations are corporation without stockholders • owned by only a few individuals who have no interest in selling shares • formed for a single, short-term purpose or a specific transaction - to build an office building or other construction project • non-profit, with members instead of shareholders. • Tax-exempt non-profit corporations are often called “501(c)3 corporation”, after the section of the Internal Revenue Code that addresses their tax status • A mutual benefit nonprofit corporation is a corporation formed in the United States solely for the benefit of its members - a golf club

17. Consumers' cooperative Limited company Limited liability company Limited liability limited partnership Limited liability partnership Limited partnership Low-profit limited liability company Not-for-profit corporation Partnership Sole proprietorship Trust company (Trust law) Minnesota Business Corporation Act (Minnesota Statutes 302A) Corporations, Business Organizations, and Associations Law (LawMoose) Importance of Corporations (ActionPA.org) CorpWatch.org Corporations (Anup Shar) Other corporate entities (Wikipedia)

18. Securities & Exchange Commission • The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation • Statutes and rules that govern the securities industry in the United States derive from a simple and straightforward concept • All investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it • How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation • 17 CFR Securities and Exchange Commission • Securities Law (FindLaw) • SECLaw.com (The Securities Law Blog)

19. Private Corporations • Companies which are privately owned • Capital raised via private funds • Does not need to meet the strict Securities and Exchange Commission filing requirements of public companies • US largest private companies (Forbes.com) • How can I find out about a private company? (The Adviser.com) • Private Company Research (Library of Congress) • Often family owned Cargill, Carlson Companies, Dairy Queen, Anderson Windows

20. The 200 largest U.S. Charities (Forbes Magazine) A guide to environmental nonprofits (MotherJones) Environmental Law Institute Environmental Defense Fund Natural Resources Defense Council Land Trust Alliance Nature Conservancy Tax for Nonprofits (Internal Revenue Service) A Guide to Minnesota's charity laws (MN Dept of Agriculture) Council of Minnesota Nonprofits Minnesota Largest Nonprofits (Star Tribune) Political, religious, environmental, and charitable purposes Nonprofit Organizations (Wikipedia)

21. Government Corporations (CRS) • A corporate entity established by Congress in which the government holds all equity • Most listed in the Government Corporation Control Act (1945) • The Act does not serve as a general incorporation law; each of these corporations have their own enabling legislation that stipulates its powers • Commodity Credit Corporation • Federal Deposit Insurance Corporation (FDIC) • Pension Benefit Guarantee Corporation • Tennessee Valley Authority (TVA) • The Saint Lawrence Seaway Development Corporation • US Postal Service • Fannie Mae • The burden of government enterprises (Cato Institute)

22. Federal Statutes 15 USC Commerce & Trade 12 USC Banks & Banking 26 USC Internal Revenue Code Federal Policy in part

23. Federal Statutes 15 USC Commerce & Trade 12 USC Banks & Banking 26 USC Internal Revenue Code Federal Regulation 12 CFR Banks & Banking 13 CFR Business Credit & Assistance 16 CFR Commercial Practices 17 CFR Commodities & Security Exchange Federal Policy in part

24. Federal Statutes 15 USC Commerce & Trade 12 USC Banks & Banking 26 USC Internal Revenue Code Federal Regulation 12 CFR Banks & Banking 13 CFR Business Credit & Assistance 16 CFR Commercial Practices 17 CFR Commodities & Security Exchange US Department of Labor Occupational Health & Safety Administration US Department of Commerce International Trade Administration Federal Trade Commission Consumer Product Safety Commission Federal Policy in part

25. Municipal corporation (Wikipedia) Minnesota Statutes Minneapolis Government Minneapolis Government Partners

26. Standard Industrial Classification • United States government system for classifying industries by a four-digit code • Established in 1937, it is being supplanted by the six-digit North American Industry Classification System released in 1997 • Certain government departments and agencies, such as the U.S. Securities and Exchange Commission (SEC), still use the SIC codes • Manual Structure

27. Virtually all corporations possess real estate interests • Proprietary interest - lease or own land on which the corporate offices, production, storage, distribution facilities, are located • Investment interest – corporations with money invested in real estate market • Proprietary and investments interest – companies that own real estate as an investment

28. Companies with a proprietary interest • Homebuilding Industry • Home Remodeling Industry • Commercial real estate companies • United Properties – develops – private company • Welsh Companies– develops and manages • The Inland Real Estate Group of Companies Inc – develops, finances, and manages • Ryan Companies – retail, healthcare, publci sector, distribution • The Opus Group – office, industrial, retail, institutional, residential, government • Trammel Crow – office, industrial, retail, healthcare, high street residential

29. Division C. Construction • building construction • heavy construction other than building • construction activity by specialized construction activities - plumbing, painting, and electrical work, and work for general contractors under subcontract or directly for property owners • general contractors usually assume responsibility for an entire construction project, but may subcontract to others all of the actual construction work or those portions of the project that require special skills or equipment • general contractors may or may not have construction workers on their payroll

30. 1531 Operative Builders • Establishments primarily constructing buildings for sale • Builders primarily engaged in constructing single-family houses and other buildings for sale on their own account rather than as contractors • Condominium developers – on own account • Cooperative apartment developers on own account • Operative builders on own account • Speculative builders • Establishments primarily engaged in constructing and/or renovating buildings for lease or rental on their own account are classified in Real Estate, Industry Group 651

31. Industry Group 651 • 6513 Operators or Apartment Buildings • Establishments primarily engaged in operating apartment buildings (containing five or more housing units) • apartment buildings • apartment hotels • residential hotels • retirement hotels • Does not include hotels, rooming and boarding houses, camps, and other lodging places for transients which are classified in Services, Major Group 70

32. Industry Group 651 • 6512 Operators of Nonresidential Buildings • Bank buildings • Insurance buildings • Lessors of piers, docks, and associated buildings and facilities • Commercial and industrial buildings • Operators of nonresidential buildings • Retail establishments • Shopping centers • Theater buildings

33. Companies with a proprietary interest • Target • Target and Ackman: A timeline (Star Tribune May 17, 2011) • Best Buy • General Mills • Blue Cross and Blue Shield seeks a sale-leaseback office deal

34. Forthcoming Development • Ford Site Planning • Vikings Stadium

35. Companies with an investment interest • Secondary mortgage market players • Mortgage assigned to another legal entity - who packages them together into pools that are then sold to investors (who are buying the underlying value of the property and the financial ability of the borrower) • Investors are usually corporations with large pools of capital

36. Division H: Finance, Insurance, And Real Estate • Major Group 60: Depository Institutions • Major Group 61: Non-depository Credit Institutions • Major Group 62: Security And Commodity Brokers, Dealers, Exchanges, And Services • Major Group 63: Insurance Carriers • Major Group 64: Insurance Agents, Brokers, And Service • Major Group 65: Real Estate • Major Group 67: Holding And Other Investment Offices

37. Industry Group 601 - Central Reserve Depository Institutions· 6011 Federal Reserve Banks 6019 Other Central Reserve Depository Institutions Industry Group 602 - Commercial Banks 6021 National Commercial Banks 6022 State Commercial Banks 6029 Other Commercial Banks Industry Group 603 - Savings Institutions 6035 Savings Institutions, Federally Chartered 6036 Other Savings Institutions Industry Group 606: Credit Unions· 6061 Credit Unions, Federally Chartered· 6062 Other Credit Unions Industry Group 608: Foreign Banking 6081 Branches and Agencies of Foreign Banks 6082 Foreign Trade and International Banking Institutions Industry Group 609: Functions Related To Depository Banking 6091 Non-deposit Trust Facilities 6099 Other functions Related to Depository Banking Major Group 60: Depository Institutions - institutions engaged in deposit banking or closely related functions, including fiduciary activities

38. Major Group 61: Non-depository Credit Institutions - establishments engaged in extending credit in the form of loans • Industry Group 611 - Federal And Federally-sponsored Credit Agencies· • 6111 Federal and Federally-Sponsored Credit Agencies • Industry Group 614 • Personal Credit Institutions·6141 Personal Credit Institutions • Industry Group 615 - Business Credit Institutions • 6153 Short-Term Business Credit Institutions, Except Agricultural • 6159 Miscellaneous business Credit Institutions • Industry Group 616 - Mortgage Bankers And Brokers • 6162 Mortgage Bankers and Loan Correspondents • 6163 Loan Brokers

39. Industry Group 631 - Life Insurance 6311 Life Insurance Industry Group 632 - Accident And Health Insurance And Medical 6321 Accident and Health Insurance 6324 Hospital and Medical Service Plans Industry Group 633 - Fire, Marine, And Casualty Insurance 6331 Fire, Marine, and Casualty Insurance Industry Group 635 - Surety Insurance 6351 Surety Insurance Industry Group 636 - Title Insurance 6361 Title Insurance Industry Group 637 - Pension, Health, And Welfare Funds 6371 Pension, Health, and Welfare Funds Industry Group 639 - Other Insurance Carriers 6399 Other Insurance Carriers Major Group 63: Insurance Carriers - carriers of insurance of all types, including reinsurance • Agents and brokers dealing in insurance and organizations rendering services to insurance carriers or to policy holders are classified in Major Group 64

40. Major Group 64: Insurance Agents, Brokers, And Service • Includes agents and brokers dealing in insurance, and also organizations offering services to insurance companies and to policy holders • Industry Group 641 - Insurance Agents, Brokers, And Service • 6411 Insurance Agents, Brokers, and Service

41. Division H. Finance, Insurance, And Real Estate • Major Group 65: Real Estate Includes owners, lessors, lessees, buyers, sellers, agents, and developers of real estate • Industry Group 651: Real Estate Operators (except Developers) and lessors • Industry Group 653: Real Estate Agents And Managers· • Edina Realty Inc, Coldwell Banker, Century21, ReMax, Exit Realty • Industry Group 654: Title Abstract Offices • Industry Group 655: Land Subdividers And Developers

42. Companies with an investment interest – Insurance Companies • Corporations that manage risk • Individuals and companies pay money to such companies to hedge against the risk of a loss • to property (fire, floods, winds, …) • to employees (injury, death, …) • to consumers of products • to board members • Insurance is the transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guarantee and known small loss to prevent a large, possibly devastating loss • An insurer is a company selling the insurance; an insured or policyholder is the person or entity buying the insurance

43. Companies with an investment interest – Insurance Companies • State Farm Group • Allstate Insurance • Berkshire Hathaway • Travelers PC Group • Liberty Mutual  • CNA Insurance  • The Hartford Group • Insurance companies derive income mainly from two sources: • income derived from policy sales -- insurance policy and annuity sales • income derived from their investment portfolios • Process: an insurer collects funds from policy holders, invests those funds, and then over time pays claims to policy holders from its received funds

44. Companies with an investment interest - Pension funds • Funds representing the contributions to a pension plan for the exclusive purpose of financing pension plan benefits • Usually established by an employer to facilitate and organize the investment of employees' retirement funds contributed by both employer and employees • The pension fund is  meant to generate growth over the long term to provide pensions for employees when they retire • Pension funds are commonly run by a financial intermediary for the company and its employees, although some larger corporations operate their pension funds themselves • Pension funds control relatively large amounts of capital and represent the largest institutional investors in many nations

45. Two US pension funds see $52 million hit from Madoff • Stocks Weigh Down U.S. Pension Funds (NPR) • As Values Decline, Pension Funds Jump Into Real Estate (Wall Street Journal) • California pension funds close to bankruptcy (World Socialist Web Site) • Pension Real Estate Association – non-profit association for companies investing in institutional real estate* (high-quality commercial properties - office buildings, retail centers, industrial facilities, apartment complexes and hotels)  • Pension Benefit Guarantee Corporation • Minnesota Teachers Retirement Association • Minneapolis teachers pension fund in a deep financial hole (MPR, 2005) • Minnesota State Retirement System • Public Employees Retirement Association of Minnesota • University of Minnesota Retirement Savings Plan • Vanguard Target Retirement Funds • Fidelity • Securian

46. Investment trusts, investment companies, holding companies, and miscellaneous investment offices Industry Group 673: Trusts 6732 Educational, Religious, and Charitable 6733 Others Industry Group 679: Miscellaneous Investing 6792 Oil Royalty Traders 6794 Patent Owners and Lessors 6798 Real Estate Investment Trusts 6799 Investors, Not Elsewhere Classified Major Group 67: Holding And Other Investment Offices

47. Companies with an investment interest - Mutual Funds • A professionally managed fund that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, mortgage-backed securities, and/or other securities • The mutual fund will have a fund manager that trades the pooled money on a regular basis • The net proceeds or losses are typically distributed to the investors annually, often the proceeds are reinvested

48. Mutual Fund company • A mutual fund is a professionally managed sum of money from many investors that purchase securities – a debt (bond), equity (stock), or a derivative • Several such funds may be managed by one investment company • Most mutual funds are "open-ended," meaning investors can buy or sell shares of the fund at any time • There are several hundred registered mutual funds in the United States, • Most companies offer dozens • List of mutual-fund families in the United States (Wikipedia) • List of 50 Largest Mutual Fund Companies Ranked by Assets for 2008

49. Investment Companies • Cohen & Steers established in 1986 as the first investment company to specialize in listed real estate • Real estate securities • U.S. Real Estate Securities - provides access to U.S. commercial properties through a diversified portfolio of REITs and other real estate securities • Invests in REITs and other real estate securities based in the United States • Diversified by property sector, including retail, offices, apartments, industrial, health care, hotels, self storage and others • Typically consists of 45–55 securities • Individual positions will generally not exceed 8% of the portfolio

50. Mutual Funds (Investopedia) • Oppenheimer Funds • Vanguard • T. Rowe Price Funds • Fidelity • The Royce Funds • Morningstar Inc. - a leading provider of independent investment research in North America, Europe, Australia, and Asia • Standard & Poor’s - provide investors who want to make better informed investment decisions with market intelligence in the form of credit ratings, indices, investment research and risk evaluations and solutions  • Moody’s