Another sign of a market top?

There are several individuals in the world that I’d never want to do business with. John Schuerholz, the general manager of baseball’s Atlanta Braves, is one such individual. Schuerholz has a gift for seeing talent that other general managers and scouts don’t. It’s uncanny how the players he trades away or chooses not to resign often do poorly going forward—a hint that he realized they’d peaked and their value would never be the same—while the players or recruits that he acquires in return often blossom under his tutelage.

In the business world, I’d never do a deal with Sam Zell, the legendary Chicago real estate investor whose ability to buy and turn around troubled properties that had bankrupted others earned him the nickname, the “Grave Dancer.” So when Zell announced months ago that he was selling Equity Office Properties, a collection of trophy office towers in major cities such as Atlanta (where he owns many of the buildings in the Perimeter business district), I smelled a top.

And now Chad Brand, president of Peridot Capital Management, an investment advisory fir mwith a value orientation, provides some early evidence in his blog that Zell’s buyers—the Blackstone Group—may be the ones that Zell once again leaves holding the bag. And he’s got an amazing chart to make his case…

Brand's evidence is the performance of the iShares U.S. Real Estate Fund, an exchange traded fund serving as a benchmark for publicly traded REITs. Brand notes that the iShares Fund peaked on February 2 -- the same day that shareholders of EOP were approving the sale to Blackstone. Since then, the index has fallen 17%.

Blackstone's reasoning for doing the deal--other than the fact that investors have thrown a ton of money at the firm's managers that they have to invest somewhere--is that they believe they can continue to win rent increases from the myriad businesses that lease space in EOP buildings. Not here in Atlanta they won't. My friends in commercial real estate tell me that the smart money is moving to the sidelines -- some of Atlanta's saaviest real estate investors are either selling their buildings to pension funds and other investors or are hoarding their cash to buy properties when the inevitable downturn comes. All of which may be a sign that not only is commercial real estate peaking, but private equity is as well.