Real Estate Florida - November/December 2009

Realty, an earlier incarnation of the company—focused solely on fast-food restaurant properties until the 1990s, when it began to delve into income funds to buy more diverse types of real estate. It eventually expanded into hotels and resorts, retirement centers and recreational properties.

The 2006-07 selloff included four REITs formed by CNL over the prior decade: National Retail Properties Inc., CNL Hotels & Resorts Inc., CNL Retirement Properties Inc. and Trustreet Properties Inc. The company currently distributes two non-listed REITs, CNL Lifestyle Properties Inc. and CB Richard Ellis Realty Trust.

Not surprisingly, those seemingly contrarian plays had a solid basis in history—specifically, the cyclical nature of real estate. “We don’t do things just to try to be opposite,” the elder Seneff says. “We do it because that’s just the way the world works.”

Seneff points to a railroad model, as opposed to the roller coaster many think of in terms of real estate cycles, in which each track equally represents opportunities and obstacles. “When things are very good, people tend to obsess about the opportunities, and when they are bad they tend to obsess about the obstacles,” he says. “We try to do just the opposite. There are more opportunities in this environment than we have ever seen, but if you’re totally obsessing about the obstacles you will not see them.”

Opportunities beyond Central Florida, and the US for that matter, led to the CNL Macquarie partnership that had Seneff traveling to Australia quite a bit earlier this year. Although up to 30% of the funds may be put into properties outside the US, McWilliams says the trust’s management still sees greater investment potential stateside, particularly in southern markets hit hardest by the current economic downturn.

The focus of the growth-oriented REIT will be properties that require repositioning or redevelopment, face time-sensitive deadlines, are located in markets undergoing positive changes, need new leasing or management strategies and have deferred maintenance needs, Mc Williams says. A time frame of five to 10 years has been set for investment and acquisitions, he adds.

While global real estate investment never figured into CNL’s original 50-year game plan, Seneff says the plan has been constantly refined: “Experience is the best teacher in life, and I wish I had known 20 years ago what I know today,” he says. “I always say what you don’t know will hurt you and we know a lot more now, and I’m sure we will know a lot more five years from now.”

Starting out with $5,000 from his father, James M. Seneff Jr. invested in fast-food restaurant properties before buying 11 acres along Orange Avenue in Downtown Orlando, in what was essentially written off as a “dead” market. The property now serves as CNL’s headquarters, with two midrise office towers built in

Photos by Nick Koutoufas

Jim Seneff, seated, and son Tim Seneff gather quite a bit of useful information for real estate decisions from the library within the CNL Center II building in Downtown Orlando.

president of CNL amid the selloff, boils it down even more: “The farther we have gotten from those sales in 2006 and 2007, the more we look like geniuses,” he says.

Now more than halfway through a 50-year game plan dating back to the company’s origins in 1973, Jim Seneff has drawn on the experience of five prior market downturns. CNL has formed or acquired at least $23 billion worth of REITs and assets over the past 36 years—and it’s getting ready to take things a giant step further.

CNL and Australia’s Macquarie Group Ltd. recently launched two non-traded REITs, each offering $1.5 billion worth of shares, for which proceeds will be invested in various commercial property sectors over the next five to 10 years. The effort has been more than a year-and-a-half in the making, during which property values in many harder-hit markets have sunk to all-time lows.

“We believe right now is the perfect time to raise money to buy real estate on a global basis,” says Curtis McWilliams, president of the newly formed CNL Macquarie Global Growth Trust. “There are some opportunities that are available now and will become available.”

CNL and its various companies plan to buy $1 billion to $1.5 billion worth of properties annually. While many of its REIT peers are scrambling for capital, CNL has disposed of its legacy assets through the massive selloff of two to three years ago and has set those funds aside while awaiting the next downward cycle.

“Selling, waiting and buying sounds sort of simplistic, but it is dramatic in terms of how it changes your business,” Seneff tells Real Estate Florida. “Those who have legacy assets right now, purchased at five or six caps, will be living with those for the next three to five years. Not having legacy assets is a huge advantage in this environment.”