Goodwin Procter’s Real Estate, REITs & RE Capital Markets Group issued a Client Advisory on opportunities for real estate funds in the federal Public-Private Investment Program. The Client Advisory is available on the Goodwin Procter website at http://www.goodwinprocter.com/~/media/EEA83A3624EF49548FD5BE86240DBBD7.ashx.

This week, the U.S. Treasury announced the much-anticipated details of the Public Private Investment Program (”PPIP”) that was introduced in summary form by Treasury Secretary Timothy Geithner last month.1 The program, which is part of the Obama Administration’s broader “Financial Stability Plan,” focuses on the purchase of what were described as “troubled assets” under the Troubled Assets Relief Program (”TARP”), part of the Emergency Economic Stabilization Act of 2008 (”EESA”) enacted last October. Although the TARP was originally proposed as a purchase program for troubled loans and mortgage-backed securities, the Bush Administration applied the first portion of the TARP proceeds toward direct capital infusions into banking institutions. The objectives of the PPIP are much closer to the original objectives of the TARP: to thaw the nation’s credit markets by moving legacy assets off the balance sheets of financial institutions so those financial institutions can expand their lending activities. For more information click here.

In recent posts, we addressed ways in which U.S. REITs and other public real estate companies can preserve capital through the use of cash/stock dividends and raise equity capital through at the market offerings (see, Goodwin Procter REIT Alerts “Cash Preservation Strategies for REITs” and “At the Market Offerings: Raising Equity Capital in Volatile Markets,” and BNA International’s “Cash Conservation Strategies for REITs“). While these strategies can be successful in strengthening balance sheets on a small scale and conserving capital, the purpose of this alert is to discuss more meaningful ways to normalize a company’s debt-to-total-capitalization ratio and to position a company for upcoming debt maturities by raising significant amounts of common equity capital (as opposed to preferred stock issuances, asset sales or joint ventures). For more information click here.

This Goodwin Procter Client Alert discusses the issues surrounding firms – ranging from American Express to Goldman Sachs to Merrill Lynch – which have either chosen to become bank holding companies (”BHCs”) or have become subsidiaries of BHCs. These choices typically have been dictated by the benefits of BHC status, including opportunities to participate in the U.S. Treasury Department’s Troubled Asset Relief Program, greater access to the Federal Reserve’s various funding and liquidity sources, and market perceptions regarding stability in this challenging economic environment. These benefits, however, are coupled with costs and restrictions. Chief among them, banking laws, in particular the federal Bank Holding Company Act (”BHC Act”), restrict the ability of BHCs and their affiliates to engage in non-banking activities (”activities restrictions”) and acquire and hold non-banking assets and interests in companies engaged in non-banking activities (”investment restrictions”). A copy of the Client Alert is available here.