| GlobeSt.WEEK |
Volume 6 - Number 23 | June 2, 2008
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NEW YORK CITY-Boston Properties has entered an agreement to acquire the General Motors Building and three other Manhattan assets for almost $3.95 billion, as was speculated last week. The REIT is spending just under $1.47 billion in cash, $10 million in stock and will assume about $2.5 billion on debt.
"The idea of a REIT like Boston Properties or any other REIT for that matter stepping up to the plate and doing a deal here is that they bring a lot to the table," Anthony Paolone, an analyst at JP Morgan, tells GlobeSt.com. "They are liquid, they are good operators, they know the market, they know the assets and they have the ability to underwrite and close quickly on the transaction." he says.
On the two-million-sf GM Building, located between 58th and 59th streets at Fifth Avenue and Central Park South, the firm is assuming $1.9 billion of secured and mezzanine loans. That part of the deal is set to close next month.
Boston Properties is also buying the 292,000-sf 540 Madison Ave. building at Madison and 55th Street, a 591,000-sf office building at 125 W. 55th St., and the 664,000-sf Two Grand Central Tower at 44th Street between Lexington and Third avenues. Those deals are being financed with a combination of secured and mezzanine loans and are expected to close after the GM Building.
An unidentified industry source tells GlobeSt.com that they believe this sale "comes close to solving Macklowe's debt issues." Macklowe Properties faced a $7 billion debt on a portfolio of office buildings it acquired last February from Equity Office Properties Trust. That acquisition was paid for by a $5.8 billion short-term loan from Deutsche Bank AG, $50 million in equity from Macklowe, and a $1.2 billion loan from Fortress Investment Group LLC. The unidentified source tells GlobeSt.com that "the big issue is the $1.4 billion bridge loan to Fortress, which is due very soon," they explain, noting that they believe it is due sometime in June.
Goldman Sachs and Morgan Stanley are Boston Properties’ financial advisors, as well as Lehman Brothers and Deutsche Bank. Proskauer Rose LLP and Goodwin Procter LLP are giving the Boston-based REIT legal assistance. Goodwin Procter partners Mark Kirshenbaum, Edward Glazer and Ettore Santucci are advising on the tax and structuring issues related to the transaction.
The closing of the acquisitions is expected to occur in multiple steps, with the acquisition of the GM Building expected to close in June 2008 and the acquisition of the remaining assets occurring thereafter, according to a prepared statement. Boston Properties has posted a deposit in the form of a letter of credit in the amount of $165 million. The firm currently owns 139 buildings in Boston, Washington, DC, New York City, San Francisco and Princeton, NJ. It’s portfolio is currently 94.9% leased.
Additional reporting done by Natalie Dolce, Northeast bureau chief.
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The collapse occurred two months after a tower crane collapsed on 51st Street between Second and First avenues, killing seven people. The New York Fire Department said that it has pulled people from the wreckage, but their conditions were not immediately known.
According to published reports, the building under construction at the site is the Azure, a 245,000-sf building being constructed at 333 East 91st St. between First and Second avenues by the DeMatteis Organizations and the Mattone Group.
A resident at 1760 2nd Ave., an apartment building which overlooks the construction site, saw the collapse a "few minutes after eight o'clock." The resident says the "top piece" fell off, referring to the pivoting boom arm which sits atop the crane. The arm crashed into the street below at the corner of 91st Street and 1st Avenue, caving in part of the northeast corner of the Electra, an apartment building at 354 E. 91st St.
The boom of the crane is man-operated from a cabin at the joint of the arm. The resident believes the operator was still in the crane, operating the turret, when it fell "because the guys start at 7:30." There was no comment to Globest.com inquiries about the condition of the operator.
A resident at the 23-story Electra tells GlobeSt.com that the crane collapse mostly damaged the top floor, where the administration office is. He explained that there was some flooding on the 4th floor, and the crane tore off a 19th floor balcony. "Last week, Thursday I believe, there was a 40-foot extension added to the crane. They wouldn't let us leave the building," he explains. "As of now, we are told we are not allowed back in the building."
The cause of today's crane collapse has yet to be determined, but clearly, construction safety is still a concern. In April, the city’s buildings commissioner, Patricia Lancaster, was forced out of her job and an extensive review of the city’s cranes was conducted in the aftermath of that March accident.
This article had additional reporting by GlobeSt.com managing editor Ryan Clark.
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BOSTON-It was a pessimist’s paradise yesterday during the fourth annual RealShare Boston, as the ebullient atmosphere enjoyed during 2007’s program was largely supplanted by concerns over a torpid economy, skyrocketing energy prices and the daunting credit crisis that some speakers warned could shift the commercial real estate landscape dramatically in the coming months.
"I think its going to be a tough couple of years," Taurus Investment Holdings President Peter Merrigan told more than 300 attendees during the half-day conference’s opening program at the Hyatt Regency. Merrigan and three other respected industry veterans assessed local conditions and handicapped various sectors going forward, with most indicating the near-term outlook is bleak.
"We certainly are nervous," fellow speaker William McCall Jr. relayed. The president of McCall & Almy indicated demand for office and flex space has slowed considerably, a notion shared by Paradigm Holdings President Kevin McCall (no relation), who voiced fears that the US economy could face "stagflation" such as that experienced in the 1970s. "It’s eerily similar," he says of the present situation to those dire days, adding he believes unemployment could soar to 8 or 9 percent as it did in the 1970s, if problems persist for such areas as hospitality, housing and retail.
The most upbeat of the four at the inaugural panel seemed to be National Development President Thomas Alperin, predicting demand will recover sooner than many anticipate. "I feel very good about our regional economy," Alperin says, albeit citing the threat of inflation as a wild card that could disrupt a recovery. On the sales side, Alperin says the cost of debt and tighter underwriting should result in pricing adjustments of 5% to 20%, a view shared by others who agreed the feeding frenzy that led to record investment sales in 2007 is long gone, and could mean difficult times ahead for property owners needing to harvest assets.
But while those who bought at the top of the market might face challenging times, Kevin McCall and Merrigan said it creates opportunities for companies such as Taurus and Paradigm that have had trouble competing in the highly leveraged atmosphere. "We hated the environment of the past couple of years," says Kevin McCall. "It was nutty." Although owners have largely resisted adjusting their pricing to date, Kevin McCall says many will be forced to do so because of financial engineering gone amok, including shaky bridge financing about to mature. "Thank goodness that is over, because now I can compete on some of these deals," said Merrigan of the leveraged atmosphere.
Entitled, "Is the Glass Half Full or Half Empty in Today’s Boston Market," the opening program segued to a special focus on "credit, capital and inappropriate leverage" moderated by Eastdil Secured Managing Director Frank Petz, as he and five other experts from the debt and equity fields debated how long the CMBS drought will linger, and other issues, including where cap rates and interest rates are headed, plus the state of customized products such as construction financing and mezzanine debt. BayNorth Capital Managing Director Chip Douglas says equity funding is finally starting to free up and will continue to do so as returns become more in line with returns. On the debt side, Anglo Irish Bank lending chief Eddie Byrne says his institution has doled out $2.5 billion in loans thus far in 2008, concentrating on such markets as Boston, Chicago and New York.
Byrne joined others in citing the dearth of supply in the pipeline and tight vacancy rates as reasons for being comfortable about Boston, a belief underscored by the bank’s just-completed $120 million loan to the developers of Westwood Station, a major mixed-use complex underway in the Route 128 submarket. Other panelists included AEW Capital principal Robert Plumb, mortgage broker David Douvadjian of Colliers Meredith & Grew and Joseph Iadarola of Babson Capital. "We are still active in the market today doing loans, albeit more conservatively," said Iadarola, with Babson having closed on $1.2 billion year-to-date versus $1.9 billion thus far a year ago. Iadarola did, however, express concerns that life companies will run out of money later in the year, while panelists expressed doubts about the availability of construction financing. "Speculative development for the foreseeable future is going to be choked," Byrne said.
The focus event was followed by two series of discussion panels, each with three programs that delved into specific areas such as the suburban and Downtown leasing markets, another program on the capital markets and one reviewing who is looking to buy real estate and how they can accomplish their aims in a market lacking product. That program featured Barrington Capital Partners principal Jeffrey Miller; investor Michael Price of Legacy Real Estate Ventures and Grubb & Ellis investment broker Anthony Biette along with Brian Kavoogian of Charles River Realty and Passco Cos. VP Peter Nicoletti. Attorney Samuel Richardson of Goodwin Procter LLP was moderator for the discussion.
Another special program, moderated by John Hirschfeld of Class Green Capital Partners LLC, took a hard look at the sustainability design movement in terms of its support among tenants and the cost of building green. Panelists included developers such as Tod Brainard of Griffith Properties, William Kane of Davis Marcus Partners and James Trudeau of Cummings Properties, whose firms are all employing that method throughout Greater Boston. Architect Bill Holland of Margulies & Associates joined the group, which discussed the costs of maintaining such elements as motorized dimming switches or under-floor HVAC, which speakers said can be more efficient but also disruptive to the construction process. Energy credits have become one popular tool used by developers to offset costs, said Brainard, whose firm is using those credits at its redevelopment project in Quincy, HarborSouth.
The conference also featured a one-on-one interview between RealShare executive director Richard Kelley and developer John B. Hynes III. Now CEO of Gale International, Hynes has already made his imprint on Boston’s skyline in the 1.1 million-sf One Lincoln St. office tower near South Station, and he is presently redeveloping a $700 million mixed-use complex in the city’s Downtown Crossing District. The program, "Inside the Real Estate Mind," detailed the developer’s ascent from a Harvard University graduate in 1980 to a major real estate force whose imprint spans two hemispheres thanks to a 1,500-acre master planned city Gale is building in South Korea. Hynes cited program attendee Lawrence Bianchi as a key mentor, after the Codman Co. principal hired Hynes for his first position, a relationship Hynes said aided him when he joined Lincoln Property Co. in 1983 to build his first project, 101 Arch St., in Boston.
Hynes went on to reveal his subsequent ups and downs in the business, including riding out the 1990 recession that quashed office development in Boston for nearly a decade. While still building out the South Korean site, Hynes also told of his desire to move ahead on a 6.5-million-sf mixed-use project in Boston’s Seaport District, telling the crowd that Gale hopes to have permitting in place by year’s end, and that he wants to develop the ambitious venture in one phase.
Hynes also said he will not let a down cycle deter him from moving forward. "You want to build into the downward draft of the cycle," he opined. At the prodding of Kelley, Hynes closed out the interview with three predictions for the coming year, one that John McCain will win the presidential election after naming New York City Mayor Michael Bloomberg his running mate. Hynes also said he expects the Red Sox will win the World Series, and that freedom will come to North Koreans in 2008.
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DALLAS-With 300 acres of entitled land now ready for development, Incap Fund is pulling the cloak of secrecy off its plan after two years of market speculation and limited details. The $2-billion build-out is a vision to reshape the landscape of Oak Cliff.
"We had a blank canvas for master planning," says Alan McDonald, managing director of Dallas-based Incap. "Now we're starting to take offers on this." Incap has divided the assemblage into four districts, investing $240 million into the land acquisitions, scraping roughly 2,000 apartments and prepping the dirt for resale, he tells GlobeSt.com.
Incap has nearly 100 acres of the ready-to-go mixed-use land under contract or under negotiation, with closings set to start in July. The dirt is bringing $30 per sf to $35 per sf, McDonald says.
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In October, McDonald says Gus Woehr of Dallas will buy four acres for an 80-unit residential project. Woehr's site once held the Kings Highway Apartments in the city's oldest conservation district.
Closing in November will be 4.3 acres that once held the Chateau Crete Apartments along Stevens Forest Drive. McDonald says the development partnership is Beck/Holley, with Dallas-based Beck Group at the forefront of the deal.
Another 10.15 acres near Methodist Hospital will be sold in November to a national homebuilder. The hospital controls another 5.44 acres, also earmarked for development. McDonald says he can't release the homebuilder's name due to a confidentiality clause, but the build-out plan calls for 200 multifamily units, 200 senior housing apartments, 150,000 sf of medical office and 150,000 sf of retail.
A 4.9-acre site at 1836 W. Davis St., once Cliffwood Apartments, is being marketed to retail developers for $32 per sf. McDonald says the vision is to create another eclectic shopping district like Knox-Travis. Another 5.34-acre tract along Cedar Hill Drive also is being marketed.
The lion's share of Incap's land assemblage is earmarked for a sustainable mixed-use urban campus spanning 100 acres. Marketing begins next month. The Westmoreland urban campus tentatively calls for 200 single-family lots, 400 townhouses, 1,800 condos in mid-rise towers, 4,800 apartments, 450,000 sf of retail and possibly 30,000 sf of office space atop some street retail.
The urban campus is "the largest undeveloped tract in the inner city," McDonald says. And, he quickly points out that it's just 3.5 miles from Downtown and Uptown.
McDonald says Incap's tracts aren't contiguous like other massive redevelopments that he's undertaken in Dallas. "But, the unique part of these tracts is they are in the most fabulous neighborhoods in the city and the oldest ones in the city," he says. Many surrounding homes were built in the 1920s and 1930s. "They are little jewel boxes," he says. In the past five years, he says the various neighborhoods have transitioned from an aging population to the Gen Y age crowd, spawning eclectic emerging pockets like the Bishop Arts District.
Incap's land bank is situated within the 589-acre Davis Garden District Tax Increment Financing District. McDonald labels it a "new generation TIF" because it is so broad-based and focused on residential redevelopment, including affordable and seniors housing, unlike TIFs of Downtown and Uptown. Interstate 30 is Incap's northern boundary; Davis Street, southern; Methodist Hospital, eastern; and Pinnacle Park, western.
But for the veteran McDonald, the assemblage is another opportunity for him to reshape a Dallas neighborhood like he did with projects in Uptown and Knox-Travis.
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He says the second-story view from all the assembled tracts will be the city skyline, the Trinity River and the to-be-built Calatrava bridge trio. "That's the view corridor from every single site on the second floor," McDonald stresses, "and it's unobstructed because of the Trinity River's flow. The river is coming back with the Calatrava bridges and town lake plan and it connects to the original neighborhood that was the birth of Dallas."
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DALLAS-Duke Realty Corp., with a new equity partner at its side, has shifted its build-to-suit strategy with a 10-year plan to keep clients close to its on-the-ground teams. The Indianapolis-based developer has pledged to roll all build-to-suits into a joint venture with CB Richard Ellis Realty Trust until it depletes the $800-million fund.
"CB Realty Trust will exclusively look at all the build-to-suits that Duke will be building in the next two to three years," Josh McArtor, first vice president in Dallas for CB Richard Ellis, tells GlobeSt.com. The JV, disclosed May 6, was seeded by 5.2 million sf of bulk industrial space, valued at $250 million, built in the past 18 months. The fully leased five buildings are single-tenant, net-leased properties with an average of 12 years on the term, he says. A sixth property is due to roll into the portfolio any day now.
McArtor, who helped to mastermind the JV marriage, says the expectation is the fund will be spent in three years, but Los Angeles-based CBRE Realty Trust and its partner plan to hold onto the portfolio for 10 years. Another 10 million to 12 million sf in the Top 20 MSAs will easily flow into the pool. Duke holds a 20% interest and gets to control leasing and management.
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"These are good single-tenant buildings with famous-name tenants in metro markets," says Jack Fraker, CBRE's vice chairman, whose capital markets team was the deal's equity placement agent. Duke's underlying strategy is to stay close to the build-to-suit tenants once construction ends. He says 75% of the tenants have expansion options in their leases, with early signs that they will execute those plans.
"Duke wants to be there for that type of situation as well," Fraker says. "Duke wants to maintain the tenant relationship with these customers." In the past, it wasn't uncommon for Duke to build and then sell the development rather than hold it on its books long term.
London-based Unilever US Inc.'s 822,550-sf distribution center in southern Dallas County and its 722,210-sf building in Jacksonville, FL helped to seed the portfolio. In the first planting, Duke also delivered the 630,570-sf Anson Building 1 in Indianapolis, occupied by Amazon.com; a 1.2-million-sf building leased to Prime Distribution in Plainfield, IN; and a 1.1-million-sf building occupied by Kellogg's in West Jefferson, OH. Soon to be added is the 604,678-sf Buckeye Logistics Center in Phoenix, also occupied by Amazon.com.
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SAN DIEGO-Economists and commercial real estate leaders expect continued job growth here, but they are chalking up 2008 as a tough year and don't expect to see a turnaround in the regional economy until 2009. Those were some of the themes sounded as 175 industry professionals and others in related fields gathered on Thursday at the fifth annual RealShare San Diego conference and networking event at the Hyatt Regency LaJolla.
Keynote speaker Kelly Cunningham, economist and senior fellow at the San Diego Institute, kicked off RealShare San Diego. Kelly acknowledged the commercial real estate markets in the city and county of San Diego are facing the same challenging conditions as the rest of the country. But he noted that San Diego also benefits from its coastal location, a strong biomedical industry and a growing tourism base.
“I see San Diego continuing to grow,” he said. “We will continue to add jobs.” Cunningham’s keynote address was followed by a town hall meeting that weighed in on the question, "How Will San Diego Fare in 2008?" His remarks and the town hall meeting were part of a combination of individual and panel discussions, keynote remarks and networking opportunities designed for commercial real estate professionals at Thursday's event.
Panelists agreed that the San Diego area, like the rest of the country, is in uncertain territory, and all said they see a turnaround starting sometime in 2009. “It’s amazing, when you get out of this forest that you’re in you see the trees,” said Jay Alexander, senior vice president with Colliers International. “In 2010 you’ll have a landlord market again.”
Ken Calegari, senior vice president and division president of Champion Development, said 2008 is poised to be a bad year when all is said and done. “Over the next year, with consumer spending declining, we’re going to have some difficult times,” Calegari said, adding, “I’m bullish long term.”
During a session titled "Pardon the Interruption" Scott Brusseau, president of Newport National Corp. and Dennis Hearst, senior director with Cushman & Wakefield challenged each other's views in a fast-paced exchange regarding the San Diego area’s hottest real estate and economic issues. The two discussed everything from local politics to the impact of rising fuel prices.
A session titled "Million Dollar Question" featured Jon Walz, senior director of Cushman & Wakefield; Einar Roden, commercial lending officer for Imperial Capital Bank; Jeff Schindler, chief investment officer for Equastone and John Wickenhiser, senior vice president and manager of Wells Fargo Real Estate Group.
The RealShare San Diego conference wrapped up with two concurrent sessions. One addressed "Prime Opportunities in the San Diego Investment Sales Market," while the other presented a leasing market forecast.
“There will be a period of opportunity out there,” panelist Chris Rosenstock, managing director of Pacifica Equity Partners, said of opportunities in investment sales in San Diego. “How far off it is, is anybody’s guess. But we don’t see it there right now.”
Talking about leasing, panelist Missy Moore, vice president with The Staubach Co., said fuel costs are playing bigger roles in the decision making process of users. “That’s really been the driver,” she said. Fellow panelist Adam Molnar, senior vice president of Coldwell Banker Commercial/Almar Real Estate Group, said an increasing number of prospective tenants are commissioning commute studies to get a handle on the impact that longer drives will have on employees before they make a move. “I think we’re going to be seeing more and more of that,” he said.
The RealShare San Diego conference and other RealShare events are produced by Real Estate Media, the publisher of GlobeSt.com, Real Estate Forum magazine, Real Estate Southern California magazine and other publications devoted to commercial real estate.
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WOOD-RIDGE, NJ-AvalonBay Communities has signed on as a JV partner in Somerset Development’s Wesmont Station mixed-use project here. Site work is under way for the 70-acre transit-oriented development, which has also been selected as a pilot project in the US Green Building Council’s LEED Neighborhood Development Initiative.
Specifically, AvalonBay will develop 400 high-end rental apartments in four buildings as part of phase one of the project, or more than half of its 788-unit residential component. For-sale residential development will come in later phases.
Carrying a reported price tag of $500 million, Wesmont Station will also include 130,000 sf of retail and office space, a public square, community center, a new middle school, athletic fields and other recreational facilities, and a new commuter train station on NJ Transit’s Bergen Line. The Lakewood, NJ-based Somerset had picked up final site plan approval in the summer of 2006.
"With Wesmont Station, we’re looking to create an entirely new neighborhood based on smart growth principles and sustainability," Ralph Zucker, Somerset’s president, tells GlobeSt.com. "The sheer scale of it requires a team of experienced companies to achieve the goals we’ve set. AvalonBay is one of the industry’s most accomplished and well-regarded companies."
AvalonBay VP Ron Ladell, says in a statement that "AvalonBay believes strongly in the driving principles behind Wesmont Station and actively pursues transit-oriented, mixed-use development opportunities of this caliber because we know that this type of design will ensure the long-term value of the residences we build, regardless of market cycles." The Alexandria, VA-based company has its New Jersey offices in Woodbridge.
Actual construction for phase one is slated to start in early 2009, with occupancy a year later. The train station is scheduled to be under construction in early 2009 as well. The 70-acre site is part of a former Curtiss-Wright industrial complex once used to make and test jet engines, but more recently utilized as multi-tenant W/D space. The Wesmont Station site itself had been in use as a parking lot for the two-million-sf complex.
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SCOTTSDALE, AZ-International Capital Partners Inc. is in the permitting process for the first phase of the $500-million District on Camelback. As soon as approvals are in hand, the local developer plans to immediately begin converting 278 empty apartments into a 260-condo project, dubbed Orchid on Camelback.
ICP's 20-acre project will include the retooling of the Orchid Tree Apartments at 6801 E. Camelback Rd. and a massive redevelopment at 68th Street and Camelback Road. The District on Camelback is mapped out as a financial and business center with more than two million sf of office, retail and residential space.
James Petersen, ICP's marketing director, says the commercial space will include a boutique hotel and an arts component. "There are several components to this," he says. In addition, he points out that some buildings are vacant and some have tenants along the 20-acre commercial swath.
ICP is in the process of negotiating a 10-year-lease with a New York City restaurateur for 6828 E. Camelback Rd. That same company signed a letter of intent to convert a residential penthouse at the top of 6909 Camelback Rd. into a first-class restaurant. "That penthouse is zoned residential and the highest building in Scottsdale so this will be the highest restaurant in Scottsdale," Petersen says.
ICP also is in discussion with several development partners and institutional investors to lend a hand with the project. "We're coming close to announcing deals with some partners," Petersen tells GlobeSt.com. "There are a number of developers interested in this $500-million master plan."
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NEWARK, NJ-The RealShare Industrial East conference will have its fourth annual renewal here on June 5th, and the issues facing commercial real estate in general are certainly more difficult now than in any of the three previous years. The day-long networking event, which is expected to attract approximately 250 attendees, will be held at the Sheraton Newark Airport Hotel. It is produced by Real Estate Media, publishers of Real Estate Forum, GlobeSt.com, Real Estate New Jersey and Industrial Property Journal.
Those issues include the current economic slowdown and the ongoing turbulence in the capital markets, and a slate of industrial experts will try to provide some answers as to where the national, regional and local industrial markets are right now and where they’re going. The larger theme of the program will be how companies and industry professionals can best position themselves to best take advantage of the opportunities that continue to exist in the marketplace, while at the same time weathering the market conditions that cloud those opportunities.
"RealShare Industrial East will gather the leading owners, investors, developers, financiers and brokers, as well as supply chain and logistics executives, for networking and to address the economic slowdown, inflation, tight credit and turbulence in the capital markets and how it will impact industrial real estate in the eastern US," says Jason Young, conference producer at Real Estate Media.
Highlights of the program include a keynote presentation by Curtis Spencer, president of IMS Worldwide Inc., and Howard Covert, president of H.A. Covert Enterprises Inc. The duo will present their thoughts on a variety of industry topics, ranging from global logistical trends to the impact of industrial real estate on economic development in the US and around the world.
And the popular Town Hall Meeting panel will address the overall state of industrial real estate. "The real estate industry is facing tough times, but industrial may be able to muscle its way through while taking less of a beating than other property sectors," says panel moderator Tom Tucci, senior managing director with CB Richard Ellis. Other panelists include Craig Guers, SVP and general manager of Opus East, and Jojo Yap CIO of First Industrial Realty Trust.
Other general and concurrent sessions will cover everything from innovations in streamlining the distribution and supply chain to opportunities in urban infill and brownfield development. Topics on the program also include investment sales trends, the outlook for leasing, getting deals done in the current market, getting the most out of new and redeveloped space, smart growth and the greening of industrial real estate.
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ATLANTIC CITY, NJ-Rumors have been circulating about the possible sale of Trump Entertainment's three casino/hotel properties here, and one of them, Trump Marina, is indeed being sold. Coastal Marina LLC, an affiliate of the New York City-based Coastal Development, is under contract to buy the 728-key property for $316 million, subject to regulatory approvals. The buyer and seller have also agreed to drop prior, unrelated litigation, details of which were not released.
And the new ownership plans to refurbish and rebrand the property as the Margaritaville Marina Resort & Casino. Besides the room count, the 14-acre, 27-story property includes 79,000 sf of gaming space, 58,000 sf of ballroom and meeting space, a 540-seat theater, a rooftop helipad and a nine-story parking garage with a capacity of 3,000 cars. Also part of the package is the lease for the adjacent Sen. Frank S Farley State Marina.
"Together with Jimmy Buffett's team at Margaritaville, our plans are to create an exciting new property that we believe will tap its full potential and make it one of the most successful destination gaming resorts in Atlantic City," says Coastal Marina chairman Richard Fields, in a statement. "In the weeks and months ahead, there will be additional announcements and more details about the transition of ownership and our new resort concept."
Donald Trump says in a prepared statement that "they are buying a wonderful building in a great location. It has been an important part of our company with a loyal customer base and a dedicated team."
Trump CEO Mark Juliano, also says in a statement that "the execution of this transaction will provide us with additional financial flexibility to effectively master plan the future path of our company in the midst of an overall transformation which has already been marked by many successes. As we look forward to the opening of the new 782-room hotel tower and Il Mulino restaurant at the Taj Mahal later this year, we are encouraged by the success of the projects we have already introduced…at the Taj Mahal and [Trump] Plaza.
"Now we are closely evaluating the variety of options before us to create value for our shareholders, including additional development in Atlantic City, reducing the company's debt, and potential projects to diversify our interests outside of Atlantic City," Juliano says.
Latham & Watkins, led by partner Raymond Lin, and Bear Stearns, led by senior managing director Kenneth Shea, provided legal and financial advice respectively to Fields and Coastal Marina. Weil, Gotshal & Manges partners J. Philip Rosen and Malcolm Landau advised Trump Entertainment on the legal end, while the financial advice was provided by Merrill Lynch, led by managing partner Ragavan Bala.
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YONKERS-While some redevelopment work is under way at the property, the ownership of the Cross County Shopping Center has made some revisions to its $250-million improvement plan. The original redevelopment initiative was approved by the city last November. However, after discussions with the property’s existing retailers and re-thinking the plan’s components, a revised plan was filed last month and presented to the Yonkers Planning Board earlier this month.
Robert Ryan, general manager of the Cross County Shopping Center, says the property owner Brooks Shopping Centers LLC, has decided to go away from new big-box oriented space and add new multi-tenant buildings geared to smaller tenants. In addition, one of the property’s chief anchor’s Macy’s is looking to expand its more than 250,000-sf store by another 75,000 sf. In the original plan, Macy’s was to expand its store by 50,000 sf. Construction has commenced on the façade improvements on some of the existing retail stores at the center.
The redevelopment project will add a total of 245,375 sf to the more than one-million-sf shopping center, which now consists of 960,773 sf of retail space ad 60,200 sf of office space. The center, which was built in 1954, is anchored by Macy’s, Sears, Super Stop & Shop, National Amusement Multiplex Theater and Old Navy.
"The vast majority of our retailers wanted more square footage," Ryan says, and that fact drove the need to revise the original plan. In addition to Macy’s, Aeropostale, New York & Co., Wet Seal, Bath & Body Works are all expanding their stores at the property. He also reports that Guess has signed a lease for a 3,000-sf store and Body Shop inked a deal for 1,200 sf. Macerich will be looking to add restaurants to the property.
Ryan, who is an executive with The Macerich Co., of Santa Monica, CA, was the keynote speaker at the May 22 meeting of the Westchester County Board of Realtors Commercial Investment division held at the WCBR offices in White Plains. Macerich manages the property for Brooks Shopping Centers. Macerich is hoping to begin development on the expansion of the retail at the property in late 2008 or early 2009.
Ryan says another key component of the multi-phased revised plan is the proposed demolition of an existing eight-story 60,000-sf office building. In its place will be built a new 150-room hotel with ground floor retail. The revised plan also reconfigures some of the planned new parking facilities that allow more visibility from adjacent roadways. Currently there are approximately 4,000 parking spaces at the property. If approved, the new plan would bring that total to 5,500 spaces.
When asked the cost of the project will be, Ryan says that the final numbers are still being calculated, but notes the redevelopment will wind up "well in excess of $250 million," including approximately $10 million worth of infrastructure improvements that will enhance the center’s access to the Cross County Parkway, New York State Thruway and adjacent local access roads.
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NEW YORK CITY-BCN Development CEO Craig Nassi tells GlobeSt.com that his firm is currently in the works to build a 400,000-sf hotel near the World Trade Center site. Although details are scarce at this point, with the specific site and financing information not disclosed, Nassi says it will be a five-star hotel with 200-plus condos, and groundbreaking is expected to be in early 2009.
Nassi says the hotel is expected to be complete within 36 months. He notes that "debt is at a maximum of 55% to 60% today, which makes the capital stack difficult to fill while still fulfilling your proforma." He adds that construction costs throughout Manhattan are at a "$500-plus-per-sf to build cost, only this has to be built union which is very costly." He expects to close within 90 days. Factoring in that $500-plus per sf, a 400,000-sf property would be approximately over $200 million, according to GlobeSt.com's calculations, although one source put the construction cost closer to $1000. Another unidentified industry source tells GlobeSt.com that $1,000-per-buildable-sf is too high, but $500-per-sf is low. After following up with Nassi again regarding the construction costs, he again says that "hard costs are only $500-per-buildable-sf."
Nassi says that anything near the World Trade Center is desirable because "it's going to be the largest tourist attraction in New York City and the USA for decades to come." He says that Costas Kondylis & Partners LLP Architects has been hired. A rendering on BCN's website shows a proposed tower by Costas Kondylis at 111 Washington St., which is more than likely the tower's location, although Nassi would not further confirm. Calls to Costas Kondylis were not returned by deadline.
Sumner Baye, president and partner of International Hotel Network LLC, tells GlobeSt.com that a lot of the success of hotel properties downtown depends on the WTC's plans and how quickly it will get done, which is difficult, he explains. He adds that the location is very competitive--with Silverstein's Four Seasons and the Ritz Carlton in the area, for example. "You have to be careful. The cost of construction is very high, so to build a hotel today from the ground-floor up is a very costly business depending on what type of hotel you are going to build," he says.
Baye says that in order to compete with the Four Seasons hotel and the Ritz Carlton hotel, rates will have to be $500 to $1000 per night to be competitive based on constructions costs, which he notes are "probably closer to $1000 per-buildable-sf to get it done." Baye also explains to GlobeSt.com the importance of branding in order to compete with these other hotels in the area. "The question is, who are they going to bring in to compete with these other brands in the area?"
As GlobeSt.com previously reported, hotel experts have a lot of confidence in Downtown at the moment. Swig Equities LLC recently revealed plans to construct a 62-story, luxury, mixed-use development Downtown. Also, Daniel Lesser, senior managing director of CB Richard Ellis Valuation & Advisory Services and Hospitality and Gaming Group, told GlobeSt.com last week that "hotels are experiencing strong occupancy levels and increases in room rates that exceed underlying inflation rates." He further explained that similar to all of Manhattan, "Downtown is currently 'under-hoteled' with a variety of new lodging projects in various stages of development. Given the increased corporate and leisure/transient demand expected during the foreseeable future, occupancy levels should remain strong coupled with continued growth in room rates above inflationary levels."
BCN last year purchased 315 Park Ave. South as GlobeSt.com exclusively reported. BCN was started in 1993 by Nassi and focuses mainly on creating high-end, mixed-use properties.
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NEW YORK CITY-Hudson River Park Trust chair Diana Taylor and president Connie Fishman today revealed that there is currently $170 million of construction activity now happening at Pier 25, 26, 62, 63, 64, and 86 here, and it will soon undergo a surge in construction--with the goal of completing 80% of the park by 2010. An additional $110 million in activity is expected to start in the coming months. The major sections of construction activities currently are in Tribeca and Chelsea.
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In addition, a new request for proposals for the development of Pier 57 is to be released within the next couple of months. The 300,000-sf pier at West 15th Street, a city bus garage until 2003, will be offered for redevelopment with uses that are allowed under the Hudson River Park Act.
Since construction of the park began in 1999, roughly $350 million in capital funds from the state and New York City and the federal government have been used to build 10 new piers and about 2.5 miles of upland park area, according to Taylor. It is the largest recreational amenity and open space to be built in Manhattan since the opening of Central Park more than 150 years ago, she told attendees at a media briefing Thursday morning. Hudson River Park Trust is a partnership between New York State and City charged with the design, construction, operation and maintenance of the five-mile Hudson River Park.
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Early this summer, the newest section of the park, running from Laight Street in Tribeca up to Houston Street will open to the public, and another new public pier in Chelsea is expected to open by the end of the year. The Tribeca section of the park was built with $70 million in funds obtained from the federal government through the Lower Manhattan Development Corp. to assist in New York City’s recovery from the 9/11 attacks, as GlobeSt.com previously reported. The Tribeca section will include a playground, practice recreation field, mini-golf and snack bar, beach volleyball courts, historic ships, mooring field , skate park, basketball, comfort station, boathouse and waterside café, an estuary research center, dog run, tennis and public art. A mile-long waterfront esplanade will offer native grasses, trees and gardens, landscaped seating areas, and a seaside boardwalk. The northern half of this section will open this summer, according to Taylor.
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"Commercial activities such as parking at Pier 40 and Chelsea Piers Sports and Entertainment Complex generate most of the funds needed to maintain and operate the park on an annual basis; in the future however we know that those funds will not meet our entire fiscal need," Taylor said, which is the reason for issuing a new RFP for the development of Pier 57. "We are also hoping to conclude our review of proposed uses for a development at Pier 40 in the next several months to create a mix of recreational playing fields, parking and new commercial or educational uses on that 15 acre site. These two developments will help produce the money needed to maintain and operate a great park well into the future."
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As the park continues to take shape, the level of funding needed to maintain it and offer high quality programming increases, added Fishman. "Therefore, it is essential that we move forward with the development of the revenue-generating commercial nodes in a way that supports the park and guarantees its future."
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BOSTON-Taurus Investment Holdings has been as active as anyone in buying Boston real estate during the past year, most notably on Newbury Street, but the locally based firm’s global footprint is also rapidly expanding, as evidenced by a series of acquisitions just completed in Turkey. The investments are being made in a partnership with Apollo Real Estate Advisors for their Taurus of Galata Gayrimenkul Yatirim AS fund.
Focused on residential, the vehicle has now acquired seven multifamily properties totaling more than one million sf of space, including ground floor retail in certain assets. Taurus and Apollo aim to buy and develop residential buildings throughout Istanbul’s city center, pursuing both restoration and new construction, according to company officials. The program plans to spend between $125 million and $155 million via private equity and debt finance, with an exit strategy to sell to owner occupiers or investors seeking rental income.
Taurus secured more than 75 residential and commercial units in securing the seven latest deals. The Bereketzade Apartments in Galata Kuledibi has six floors and approximately 20,000 sf, with the 15 residential units offering views of the Bosphorus, the Golden Horn and the Marmara Sea. The fund also secured the Nuri Ziya Apartments just off the main street of Beyoglu, another six-story building, featuring one retail shop and 18 apartments. The fund’s Hoca Ali Apartments are off the principal street of Istanbul’s Galata district, plus Taurus acquired the nearby Haci Mimi complex, a 30-unit complex centered around a common garden.
Also purchased during the shopping spree, is the seven-story, 14,000-sf Vakif Building, an historically protected structure that has retained its original Art Nouveau detailing, and the Eysan Hotel on the waterfront in Kadikoy. That six-story, 40,000-sf property offers a panoramic view of the Galata Tower and Sultanahmet peninsula.
According to Taurus, Istanbul is an up-and-coming market that fits its global profile for emerging markets promising the potential for increased returns, with the group active throughout Europe and North and South America. The firm also has seven international offices in addition to 14 in the United States, and has purchased and sold more than 20 million sf since being founded in 1976. In between his trips globally to eye new deals, Taurus President Peter Merrigan was a guest this week at RealShare Boston, as reported by GlobeSt.com.
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WASHINGTON, DC-Patriot Transportation Holding expects to begin developing phase 1 of a 5.8-acre site that stretches along the Anacostia River within the next two years. The Jacksonville, FL-based firm got the word recently from DC’s Zoning Commission that its planned unit development application received final approval, allowing the company to begin thinking about taking the next steps to bring the project to fruition.
Patriot Transportation will either develop the site--located next to the Washington Nationals Baseball Park--on its own or with a partner, CEO John Baker III tells GlobeSt.com. Davis Buckley Architects and Planners is the architect for the 1.1 million-sf development. According to Baker, the first building to deliver will most likely be an office. At full build-out, the site will have four buildings, with approximately 545,800 sf devoted to office and retail and 569,000-sf to residential and hotel, which will be LEED certified, according to the architect’s website. The development would include publicly accessible open spaces and a waterfront esplanade along the Anacostia River waterfront. The site currently is occupied by a subsidiary of Vulcan Materials Co. under a short-term lease. Baker could not provide development costs for the project.
This project represents new inroads for Patriot Transportation, which has a strong footprint in the warehouse and industrial space, including assets in the Baltimore-Washington Corridor. The Anacostia development, Baker says, will be the firm’s first project in the District itself--and its first office and retail mixed-use project.
Once this project gets underway, undeveloped acreage fronting the Anacostia in DC will become even more scarce. Earlier this month, the District issued a Request for Expressions of Interest for a master developer to redevelop the Hill East neighborhood on the Anacostia--the last major piece of the District’s Anacostia Waterfront Initiative calling for redevelopment, which hasn't yet been identified for redevelopment.
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BOSTON-Public officials and community activists in the city’s Brighton district are scrambling to address plans by Boston College to acquire a 16-story apartment building near its main campus after the school’s secretive campaign was unveiled last week by GlobeSt.com. BC has finally acknowledged intentions to buy 2000 Commonwealth Ave. from Archstone-Smith, maintaining in a prepared statement that the venture is being pursued to appease mounting local concerns over institutional expansion.
"Boston College’s interest in 2000 Commonwealth Ave. reflects the university’s desire to improve the quality of life for our neighbors and our students, by housing as many undergraduates as possible in university controlled residence halls," spokesman Jack Dunn explains in an e-mail response to GlobeSt.com. Noting that BC students have been renting units in the tower on their own, he says the school wants to keep those apartments available to its constituency. "While no deal has been finalized, we are exploring this option in light of our overall housing goals," Dunn concludes.
Concerns already being raised regarding fears that students will be disruptive to residents living in and around the hulking property, which dominates surrounding structures and was considered so out of scale, that efforts to erect the 190-unit building were fought vigorously in the early 1980s. Developer Jerome Rappaport ultimately prevailed, opening 2000 Commonwealth Ave. in 1985. His partnership sold the building to a predecessor of Archstone-Smith in 1997 for $27.5 million. In between was an attempt during the early 1990s by Boston College to acquire the asset, but that effort was quashed by local opposition.
Town/gown tensions have increased since BC bought a 43-acre swath of land from the Boston Archdiocese, two years ago, that has brought the school’s reach even closer to Brighton residents. Others are complaining about the rapid absorption of real estate by tax-exempt institutions, most acutely in the Allston-Brighton district. BC has been acquiring individual homes on top of the larger purchases, while Harvard University and Boston University are also rapidly expanding throughout the neighborhood.
One source tells GlobeSt.com that a local civic group has already penciled in 2000 Commonwealth Ave. as a topic of discussion for its monthly meeting next week, and says activists are lobbying for the matter to be vetted at an ongoing task force addressing BC’s overall expansion plans. "They’ve told us nothing," complained the source, a Brighton resident who questions whether Mayor Thomas Menino’s office has been informed of BC’s intentions. The mayor’s office did not return a call by press deadline, and BC officials also did not respond to inquiries about Menino’s awareness of the negotiations, which are being handled by Cushman & Wakefield’s Capital Markets Group in Boston.
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WHITE PLAINS-Core Plus Properties of Stamford, CT is set to break ground in early fall on its $25-million the Venue on Bloomingdale Road retail project. The development will total 42,000 sf of boutique retail space and specialty shops as well as a 6,000-sf restaurant and an outdoor café,
The Venue will be constructed on a 6.6-acre site that includes the former NYNEX office building at 120 Bloomingdale Rd. that was originally constructed as the headquarters for Nestle USA. The 145,000-sf building, owned by Core Plus, is now a multi-tenant office building with the New York State Department of Labor as its largest tenant. The Venue will be built on what is a surface parking lot for the office building, Core Plus officials stated. The project received final approval from the White Plains Common Council earlier this month.
A two-level parking garage will be built as part of the complex. There will be a total of 501 parking spaces on-site including the new garage and existing outdoor parking adjacent to the front and rear of the office building and at the upper level parking lot along Hale Avenue, company officials say.
"The Venue will be a perfect fit within this very strong, up-scale retail area," says Frank Gallo, managing director of Core Plus. "We have approached the site with special care to assure that we create a project that will not only complement the existing retail environment but that will enhance the entire surrounding area."
The center is located in the Bloomingdale Road retail corridor and will be adjacent to such retailers as: Bloomingdale’s, The Container Store, Fortunoff, Whole Foods, Morton’s, Cheesecake Factory, P.F Changs, Crate & Barrel, Brooks Brothers, Tiffany’s, Sony Style, The Apple Store, Abercrombie and Fitch, Tommy Hilfiger, Louis Vuitton, Club Monaco and Hugo Boss.
Although Gallo reports no lease signings to date, he adds, "the interest we have already received from retailers and restaurant operators has been tremendous. With the plan now approved, we expect the level of tenant interest will increase. There are very few locations that offer what Bloomingdale Road in White Plains does, and prospective tenants are acutely aware of that."
The building has been designed by architectural firm, Arrowstreet Inc. of Sommerville, MA and is being planned with "green" technologies and efficient heating and cooling systems to minimize its carbon footprint.
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HAZLETON, PA-Amazon.com has chosen the Humboldt Industrial Park here as the site of its newest distribution center. According to the governor’s office, the company plans to invest more than $20 million in the property and received almost $2 million in state grants.
The 600,000-sf distribution center, which is scheduled to open in July 2008, is expected to create 1,100 jobs over the next three years. In addition, more than 800 seasonal employees will work at the center. This is the fifth facility Amazon will operate in the state. The others are in Carlisle, Lewisberry, Chambersburg and Allentown.
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Pennsylvania provided Amazon with two grants to encourage the company to move into Hazleton. Amazon received $500,000 to put toward job training programs and a nearly $1.3 million opportunity grant, which can be used to purchase machinery, make improvements to the land or buildings and provide additional job training programs. A spokesperson with the state Department of Community and Economic Development cited the large number of jobs the company would bring to the area as a reason why Amazon received assistance from the state.
"Not only will this project result in more than a thousand new jobs for Pennsylvanians, but those jobs, along with the large amount of private investment, will provide ancillary benefits for the entire region," says Pennsylvania Gov. Edward Rendell in an official release. "This is the type of project that could have happened anywhere in the US and Amazon’s renewed commitment to Pennsylvania attests to our strong pro-business climate."
The state previously worked with Amazon in 2005. Amazon received $400,000 to open two warehouses in Carlisle, Cumberland County and Lewisberry in York County.
"We’ve had a good working relationship with the government in Pennsylvania and the facilities we currently have have worked out well for us," a spokesperson for Amazon tells GlobeSt.com. "We look at a number of factors when we relocate in a given area, one being the availability of talent so we can hire and staff the site appropriately, the proximity to customers and the availability of real estate and whether that’s going to suit our needs. Hazleton had all those things going for it."
With its new property, Amazon will receive an additional boost from the state for choosing a building in a designated Keystone Opportunity Zone. KOZ businesses can receive exemptions, deductions, abatements and credits for many state and local taxes, including corporate net income taxes, personal income tax and sales tax.
Humboldt Industrial Park is a 3,000-acre project on a former brownfield site. Developer Greater Hazleton Community Area New Development Organization received nearly $4.3 million from DCED’s Business on Our Sites program and more than $3 million in loans from the Pennsylvania Industrial Development Authority to prepare and develop infrastructure at the site. The tenant roster includes OfficeMax, the Hershey Co. and Quebecor World. Calls to Amazon seeking additional information and comment were not returned as of press time.
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NEW YORK CITY-Alpha Equity Management LLC and the Praedium Group LLC are joint venturing to manage and develop investment products focused on publicly-traded real estate securities. The joint venture draws on Hartford and New York City-based Alpha Equity’s securities investment experience and performance record and Manhattan-based Praedium’s experience as a seasoned real estate investor and fiduciary, according to a prepared statement.
Alpha Equity’s investment process has been refined by their investment team for more than eight years and incorporates real estate fundamentals and stock characteristics to capitalize on inefficiencies in a variety of market conditions. "Alpha Equity has an exceptional team of experienced professionals with a distinctive investment process," says Russell Appel, president of Praedium in a prepared statement. Both Alpha Equity and Praedium sources were unavailable for further comment by deadline.
Appel continues that "while Praedium’s core strategy continues to be identifying opportunistic, value-added real estate deals, we are very excited to team with Alpha Equity and look forward to working closely with them on various real estate securities products."
Kevin Means, Alpha Equity’s founder, managing partner, and real estate portfolio manager, says in a prepared statement that "we believe that their [Praedium's] private market expertise complements our public market experience, and that their well-established reputation in the real estate community complements our growing presence in the hedge fund community."
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MILWAUKEE-Lauth has dramatically increased its plans for a mixed-use property going up next to the Bradley Center, home of the city’s basketball and hockey teams. In December, the developer announced plans for a $70 million, 200,000-sf retail project, but recently the company has released a concept drawing that can accommodate more than 500,000 sf of retail on 12 acres, as well as two towers that could be added for condos and/or offices. The projected cost is now more than $100 million, says a spokesman.
The new concept includes space for major anchor tenants, junior anchors and small shops, as well as a parking garage as well as space for dining and entertainment venues. Larry Evinger, FVP of retail, says they would like two anchors, “standard kind of retail,” which could include a movie theater if anyone is interested. “We have no deals with any tenants, the sketch is relatively new. We’ve marketed this concept, there a lot of companies who want to take a look at it,” Evinger tells GlobeSt.com.
The sketch also includes two towers with an unidentified amount of space, that are not part of the 500,000 sf, Evinger says. These will be tall towers, where the project could incorporate another block north of the Bradley Center, put in to meet potential demand, he says. “When we first looked at the space, we looked at it as a small project, but then we started seeing what’s happening around there. There have been a lot of new restaurants that have come into this area of downtown, and a lot of proposals for offices and hotels. There’s been some slowdown of condo sales, but we are still excited when we saw that there’s 5,000 new condo units that are on board, built and sold in the downtown,” Evinger says.
He says the company is meeting with city staff and aldermen over the next two-three months, and will present a more detailed plan after that. “We want to make sure we have input, and get retailer attention,” Evinger says.
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ROCKTON, IL-Chemtool Inc., headquartered in Crystal Lake, IL, is consolidating a couple of its locations and moving its headquarters to a 178-acre site at 1165 Prairie Rd., here. The maker of industrial lubricants has acquired the property from Mallory Properties, based in Milwaukee.
The property currently has a 330,000-sf industrial building on the site, says Sue Mroz, the economic development director for Winnebago County. Chemtool plans to renovate the 330,000-sf building and construct a 75,000-sf office addition which will house the company’s global headquarters, says Mroz, who helped facilitate the deal. “Some of (the facility) had problems. There was a hole in the roof (and) there were some electrical issues,” she says.
The estimated cost to acquire the land, renovate the building and construct the addition is reportedly $40 million. Chemtool is expected to move into the facility this year, Mroz says. Reload had been leasing the 330,000-sf building and will continue to occupy some of the building until August when a new Reload facility is completed in Rockton, Mroz says. Beloit Corp. had owned and occupied the property until it closed its plant in the late 1990’s. Beloit’s parent company went bankrupt and Mallory Properties acquired the site, which is part of a TIF district, she says.
Chemtool’s headquarters is currently at 8200 Ridgeland Rd., Crystal Lake, IL. The privately-held company was founded in 1963. Chemtool’s clients include Boeing, John Deere and Caterpillar, Mroz says. The company will be consolidating the Crystal Lake facility, which houses the global headquarters and manufacturing, and a facility in Elkhorn, WI where they have 60,000 sf that is used for service and distribution, Mroz says. The facility is expected to create between 200 and 250 jobs and employ a total of 500 to 600 people, she says.
Chemtool had initially been in negotiations to acquire the site in 2005 but, “in the 11th hour, it all kind of unraveled,” Mroz says. Chemtool’s CEO Jim Athans had also considered moving the company to Garden Prairie, IL but decided he preferred the Rockton site, she says. “It is strategically perfect,” Mroz says of the Rockton site. “It is already zoned heavy industrial (and) it has a tremendous amount of land with it.” Athans also liked that there was an existing building on the site and that it had rail access, she says.
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TECUMSEH, MI-The city has moved one step further in approving the sale of land for a 158-acre industrial and flex office park on former farmland here. City officials heard a proposed master plan for the Tecumseh Business and Technology Campus, and approved more than $1 million to help put in infrastructure to the site, to prepare the property for interested developers.
Paula Holtz, economic development planner for this small city, says it’s believed that companies will want to locate corporate headquarters, smaller automotive plants, business incubators and research and development facilities at the park. The city already has Tecumseh Industrial Park, which is 95% occupied, she tells GlobeSt.com.
“When we bought the property for $2 million a few years ago, we put it out, and we thought we would get manufacturing interest. However, we started getting different potential tenants, and we used a matching state grant to hire Albert Kahn and Associates to draw us up a master plan. They talked about us focusing on high-tech businesses. It makes sense, we’re about 25 miles from the new ($150-million) Toyota research and development facility in York Township, near Ann Arbor, and close to the Global Engine Plant in nearby Dundee, MI.” Tecumseh is about 45 miles southwest of Detroit.
The park would be located along the main highway through the city, at 5000 E. M-50, about 15 miles west of US 23. The city Planning Commission will hear a final plan by Albert Kahn in June, and then it will go before the City Council. If approved, the city would market and sell the property to developers. “We’re prepared to sell the lots,” Holtz says. A minimum of 5 acres would be available, with no regulated wetlands, nor rail, on the site. A plan of the site, now zoned industrial, shows a cluster of five developmental areas.
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MARYLAND HEIGHTS, MO-Elsevier, a science, technical and medical publisher, has asked Duke Realty Corp. to build it a 146,000-sf office building here in the Riverport Business Park development. The property, to be owned by Duke and leased back to Elsevier, will go on 11 acres at 13610 Riverport Dr.
The tenant, a subsidiary of Reed Elsevier Group PLC with its world headquarters in Amsterdam, Netherlands, is consolidating a few nearby offices into this new building for a regional HQ. Toby Martin, SVP with Duke, says the three-story building will have 48,000-sf floor plates and more than 825 parking spaces. “We weren’t the only ones trying to get this business,” he tells GlobeSt.com. He says he estimates that the project will cost about $200 per sf to build, or at least more than $25 million. The building should be completed next summer, Martin says.
He says the office market is strong everywhere in the St. Louis area right now. “It’s a bit of an anomaly compared to the national office market, particularly in the suburban, value areas. There’s very few good choices, and the good sites left are in play for the big office projects. It’s really competitive in this market. But this is an excellent credit tenant, with each of the company’s products doing about $4 billion to $5 billion in business.”
The suburb competes well with downtown and the popular office location of Clayton, MO, Martin says. “There’s challenges right now with the CBD, which is a little behind in its recovery. Clayton is almost a mini-CBD, with 10 million sf of high-rise. Maryland Heights is just well out there, with most of the buildings not needing structured parking, just open, free parking. It’s just a low-cost environment for corporations, and that’s right in Duke’s wheelhouse.”
Martin says he can’t quote the planned rate for the 10-year lease, which will fully occupy the building. Rates in this area are averaging about $24.70 per sf, according to a Grubb & Ellis first-quarter market report.
Whitaker Varley, VP of leasing, represented Duke in the deal. Scott Panzer, principal with Newmark Knight Frank and head of its Strategic Occupancy Solutions practice, was joined by Lisa Campofranco in negotiating on behalf of the tenant.
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ANN ARBOR, MI-The day after launching its independent e-commerce site, Borders Group also said it would continue to open its new concept stores, executives said at the company’s first quarter conference call.
The company will open a total of 14 new “concept stores,” which include a number of technological improvements and a smaller reliance on music retailing. The first opened in Ann Arbor in February, with “substantially” all to open in the first half.
“The concept store is one of the key planks in our strategic plan,” said George L. Jones, president and CEO. “We’re really thrilled by how customers are responding to this.”
A day earlier, Borders launched its new e-commerce site, now independent after a seven-year partnership with Amazon.com, which also showed numbers, said Edward W. Wilhelm, executive VP and CFO.
“Sales and profits will all go to Borders,” Wilhelm said.
Total consolidated sales were $784.7 million, down 1% over a year ago. At domestic superstores, comparable-store sales for the period decreased 4.1%. Without the impact of music (a staggering 25.8% decline), same-store sales at Borders domestic superstores decreased by 1.7% for the quarter. Waldenbooks comp sales decreased by 0.8% over the same period a year ago. Same-store sales in the international segment rose 3.1%. The first quarter loss from continuing operations was $31.7 million, compared to $29.1 million a year ago.
Borders Group, Inc. operates more than 1,100 stores worldwide.
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DENVER-Arthur Hill & Co. of Chicago has made the first acquisition for its third private equity fund. The company’s director of asset management Rob Gilbert tells GlobeSt.com the fund paid $9.3 million for Cherry Creek Place, a 107,000-sf building at 3151 Vaughn Way in Aurora, CO., near the regional light rail line.
The acquisition was financed by Private Bank Corp., which put up 75% of the cost of the acquisition. The loan floats over LIBOR and is currently just under 5.35%, Gilbert says.
The seller was Cherry Creek Place Associates III Ltd., whose general partner is Angelo Mariani, according to public documents. The limited partner is listed as Cherry Creek Equities, which includes Bill L Walters.
The seller also owns an adjacent 200,000-sf building but is restricted from taking any tenants from Arthur Hill’s building for five years, Gilbert says. The other adjacent property is a hotel, which has been useful for the building’s tenant. The US Office of Personnel Management leases 38,000 sf for a training facility, flying people in from all over the country and housing them in the adjacent Radisson hotel. The hotel was put under contract by Red Lion Hotels Corp. earlier this month.
The office building is currently 95% leased and a lease is in negotiation that would take it to 98%. Gilbert tells GlobeSt.com that approximately 11,500 sf will come available next year when Ironwood Communications vacates following a merger. He characterizes the event as an opportunity because the tenant’s existing rent is below current market rents.
“We see rents rising more than last year,” he says. The current market rent for comparable space is $16.50 full service gross, he says.
The second largest tenant in the building is the University of Phoenix, which has been in the building since 1983 and has signage on the building. UofP leases 17,000 sf on the building’s first floor. The third largest tenant is another government tenant, the US Passport Office.
Arthur Hill’s third fund has $30 million of equity provided by high-net-worth individuals. With leverage, the fund expects to acquire $125 million of real estate. The five-to-seven year fund’s focus is office, retail and multifamily properties in Portland, Texas, Florida and the Carolinas.
When asked about the funds’ performance, Gilbert declined to be specific but did share an anecdote: “We liquidated about $35 million of assets about the same time we were raising money for the third fund; [the investors] rolled the money into the third fund.”
Red Lion Hotels Corp. said earlier this month it has agreed to acquire the 478-key hotel property for $25.3 million. The 53-hotel chain headquartered in Spokane, WA, will close on the Radisson Hotel Denver Southeast later this quarter.
Like the office building, the hotel is adjacent the region’s light rail system along Interstate 225, 20 minutes from downtown Denver and 25 minutes from Denver International Airport. Amenities include 25,000 sf of meeting space, a two-story parking garage, swimming pool, business center, and full food and beverage service, including a 120-seat restaurant and 50-seat lounge.
Immediately upon taking ownership, Red Lion plans to put its company name on the asset and begin n $8-milliom improvement program. Most of the money will be spent upgrading rooms and common areas, according to the company.
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EAGAN, MN-Buffets Holdings Inc., a 500-restaurant steak buffet chain based here that is going through a chapter 11 bankruptcy restructuring plan, has given a verbal agreement to continue its 100,000-sf headquarters lease at 1460 Buffet Way. Brian Fogelberg with CB Richard Ellis confirmed that his firm was hired to find other space, and the owner of the building, New York City-based W.P. Carey & Co., reportedly hired Cushman & Wakefield to market the building.
However, a Buffets spokeswoman tells GlobeSt.com that the company has now decided to stay in its current space, though she says she does not know the lease term. She says the lease will be revealed in a court motion that will be filed by Monday. “As part of our bankruptcy, we had to review every contract, including our property leases,” she says.
The company, which now operates less than 600 restaurants such as Old Country Bueffet, HomeTown Bueffet, Ryans, Fire Mountain and Tahoe Joe’s Famous Steakhouse in 39 states, has pulled out or is vacating about 50 restaurant leases, including the Tahoe Joe’s at 1030 Howe Ave. in Sacramento, CA. “We don’t anticipate any other closures at this point, we’re doing business as usual and think we’re moving forward,” the spokeswoman says.
The bankruptcy was filed in January, and the company was granted approval for a debtor-in-possession credit facility of $285 million in February. Company officials said in a statement that a decline in discretionary spending and rising costs and commodity prices forced the restructuring.
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VILLA PARK, IL-LPC Ovaltine Apartments LLC has received $31 million in financing for Lincoln at One Ovaltine Court, here. LPC Ovaltine Apartments is a joint venture between Lincoln Property Co., based in Dallas, and the AFL-CIO Building Investment Trust.
Director Matthew Schoenfeldt and senior managing director Mike Kavanau, both with the Chicago office of Holliday Fenoglio Fowler LP, secured the refinancing for the 344-unit Lincoln at Ovaltine Court. The term of the loan is five years. The financing has a 5.35% fixed-rate with Freddie Mac.
The joint venture decided to refinance because “the existing loan was at a higher rate and was open to be prepaid,” Schoenfeldt says. The previous financing was around 6%, he says. The loan to value is approximately 50%, he tells GlobeSt.com.
The 344-unit apartment community was developed in 2001. The former Ovaltine headquarters and factory, which had been occupied for more than 75 years, was redeveloped as part of the Lincoln at Ovaltine Court development. The redeveloped space has 121-loft style units. An additional 223 units and six commercial units are in garden-style buildings constructed on the 14-acre site. The one and two-bedroom residential units range in size from 673 sf to 1,318 sf. Rental rates range from $1,000 to $1,700, Schoenfeldt tells GlobeSt.com.
Amenities include high ceilings of between nine feet to 16 feet, washers and dryers, balconies or patios, a fitness center, a business center, a clubroom and an outdoor swimming pool. Additionally, many of the units have fireplaces and direct access garages. “It really does offer an apartment product that you do not find anywhere in the western suburbs,” Schoenfeldt says. The apartments are 93% rented. The property is near Interstate 88, Interstate 294 and Interstate 290, and is also near the Illinois Prairie Path bicycle trail, which “is just a tremendous amenity for people who are active,” he says.
Lincoln Property Co. had put the property up for sale last summer but is no longer selling the property, Schoenfeldt confirmed. “It was more of a test of the waters,” he says. “They are making a great return (and) it is very well-occupied,” he added, although he declined to give the rate of return. The project cost to develop Lincoln at Ovaltine Court was reportedly $44 million.
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CHICAGO-Wrightwood Capital, based here, is buying a 349,000-sf manufacturing and distribution building at 2500 W. Bradley Pl., here. The sales price was approximately $22 million, sources say. The seller is Amin Amdani, who used to own Alstyle Apparel, one of the tenants in the building, says Tim Walsh, senior director of industrial fund management for Wrightwood Capital. The cap rate for the sale was approximately 9%, Walsh tells GlobeSt.com.
The building was constructed in multiple phases beginning in 1958 and has about 66,000 sf of office space. The building is currently 85% leased, Walsh says. Tenants include Bodine Electric, Alstyle Apparel, Heltzer and the city of Chicago. However, Bodine plans to relocate its manufacturing to Iowa and may reduce the amount of space it leases from 130,000 sf to about 40,000 sf, Walsh says. The asking lease rate is $5 per sf, net. Ronan Remandaban, with Lee and Associates, will lease the building.
The opportunity was brought to Wrightwood by Saxony Capital and Lee and Associates, Walsh says. “It is on 20 acres of land right in the middle of the outskirts of Lincoln Park,” he says. The building was acquired for Wrightwood’s Industrial Property Fund III, which has 20 properties and an estimated value of nearly $200 million, Walsh says.
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CHICAGO-Thornton Tomasetti Inc., an international engineering design firm, has signed a leased for 25,045 sf at the former IBM Building, 330 N. Wabash Ave. The company expects to move into the space in January.
Peggy McTigue, SVP with CB Richard Ellis Inc., represented Thornton in the lease transaction. Building owner Prime Group Realty Trust was represented in the lease transaction by Anita Pallardy, SVP with the REIT.
The firm has leased 15,000 sf at 14 E. Jackson since 1999. Thornton needed to expand and was attracted to the former IBM building because its architecture and “they absolutely loved the improvements that the Prime Group Realty Trust has made,” McTigue says. The heating, ventilation and air conditioning system has been redone for several floors, including the 15th floor, which the firm will occupy, she says. The building will receive a property tax reduction by approximately 50% for a 12-year period, due to a landmark tax status, once renovations to convert 12 floors to a hotel are complete, she says. The reduction in real estate taxes will reduce the tenants’ gross rental rates. The cost for operating expenses and taxes is currently approximately $15 per sf, McTigue says. The asking lease rate is between $19 per sf and $20 per sf net.
The office space in the building is more than 90% leased. However, Jenner & Block, the major tenant in the building, plans to move to a new building at 353 N. Clark.
The 1.5-million-sf 330 N. Wabash, which is a designated Chicago landmark, was designed by Mies Van der Rohe and constructed in 1971. This spring, Prime Group sold floors two through 13 to a joint venture between an affiliate of Chicago-based Oxford Capital Group LLC and LaSalle Hotel Properties, based in Bethesda, MD for $46 million, as previously reported by GlobeSt.com. The joint venture plans to open a hotel on the floors in early 2010.
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GAINESVILLE, FL-The University of Florida’s monthly statewide consumer confidence index reached a new low in May, with the score falling to 64. The index beat by a single point the previous low of 65 set in December 1991, despite the issuance of federal tax stimulus checks that researchers believed would help rebound from a few months of tying the previous all-time-low number.
“That would likely have showed up in one of the questions about personal finances, but those index components were essentially flat,” says Chris McCarty, director of the Survey Research Center at the UF Bureau of Economic and Business Research. “Some of this is probably due to record gas prices and increasing debt obligations.”
Commercial real estate brokers say consumer confidence ripples to sectors such as retail, which suffers from reduced sales, and industrial, which sees fewer deliveries from distribution centers. "It ultimately impacts all property sectors, and we are seeing it in our business," observes Larry Richey, senior managing director of Cushman & Wakefield of Florida in Tampa.
Richey also tells GlobeSt.com that reports like the UF index contribute somewhat to the decline in confidence, yet they require attention to gauge the overall economy. "It's an important survey and it has to be reported, but it just adds to the feeling," he says.
Components making up the index, based on 429 responses to a random telephone survey, vary on either side of the main number. One component measuring perceptions of personal finances compared with a year ago remained at 59, its all-time low, while another addressing expectations about personal finances a year from now slipped one point to 78.
Interestingly, consumer confidence among lower-income households actually rose this month, although McCarty says reasons are unclear. It could relate to the $300-per-person stimulus checks, earlier adjustments to rising gas prices, or the effect of falling home prices on middle- and upper-income households, he says.
“Florida consumers are certainly in a tight spot,” McCarty says. “Housing prices are still declining, lowering the equity consumers have in their homes. Worse is the confusion about when price declines will stop.”
McCarty adds that he expects many of Florida’s housing markets to bottom out by this summer, based on price patterns thus far. Once those declines stop, he says, potential buyers and mortgage lenders will have a better idea what homes are worth.
“This will dramatically improve circumstances in Florida, which is more dependent than other states on housing activity,” he says. “However, significant increases in housing prices are years away.”
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ATLANTA-Some of Fulton County’s largest office buildings are facing double and triple property tax bills this year, according to an analysis by Jones Lang LaSalle. The hikes are the result of the first major revaluation in 15 years of commercial properties in the county’s 14 municipalities.
“There hasn’t been a consistent reassessment process in the Fulton County tax assessor’s office,” Rob Metcalf, managing director of JLL’s Atlanta office, tells GlobeSt.com. “Some properties haven’t been revalued in the last ten years or so. There’s a huge discrepancy in the last valuation that occurred.”
Many of the estimated property tax increases appear somewhat normal for the city’s landmark buildings such as Bank of America Plaza in Downtown Atlanta, which faces 18% higher taxes of $6.7 million this year compared to what it paid for 2007, according to JLL figures. Other trophy assets with big tax bills include Midtown’s One Atlantic Center at $4.2 million, up 30%, and Downtown’s 191 Peachtree at $2.5 million, up 73%.
Other properties face percentage increases in triple digits, and quadruple in one rare case. The Pinnacle office tower in Buckhead, which changed hands in recent years, faces a 208% higher tax bill of $3.7 million this year, and Two Peachtree Pointe in Midtown saw its property taxes go up 316% to $1.5 million.
One more statistical anomaly occurred at the 55 Allen Plaza building Downtown, which went from paying $96,090 in property taxes last year to at least $1.4 million this year—a hike of 1,240%, based on JLL’s analysis. Metcalf attributes that to an unusual situation in which the building benefited from previous tax abatements based on its location.
Office landlords in Atlanta are reluctant to discuss the higher property tax bills because of ongoing negotiations with the Fulton County tax assessor for possible relief. However, Metcalf points out that tenants will likely get the worst of it because the increases will likely be passed through in the form of higher rents.
The property tax hikes couldn’t happen at a worse time for tenants seeking new or better space at a bargain, or to renew current leases at more favorable rents, according to Metcalf. “The taxes and the economy are counterbalancing the flight to quality that traditionally happens in a downturn,” he says.
Buckhead is the most expensive of Atlanta's three major office markets, averaging nearly $28 per sf, while Midtown is around $23 per sf and Downtown is just above $19 per sf, according to JLL figures.
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(Crystal Proenza is associate editor of Real Estate Florida.)
WEST PALM BEACH, FL-NAI/Merin Hunter Codman, is expanding its medical real estate properties in terms of brokerage and leasing advisory services. The company has been named leasing agent for more than 100,000 sf on two local medical campuses, with plans to continue seeking more opportunities.
“The medical segment of the real estate market is a unique niche,” says C. Todd Everett, managing director at NAI/Merin. “Whereas traditional real estate investors are focused on the highest return on properties, hospitals and medical facilities that own real estate focus on finding the best physicians to occupy their properties. Returns don’t drive their property transactions. Doctors do.”
The brokerage has been awarded the assignment of leasing 86,000 sf of medical office space in three buildings on the campus of St. Mary’s Medical Center, a Tenet Healthcare-owned hospital that has served West Palm Beach for 70 years. The buildings include the two-story, 18,000 sf Professional Center; the three-story, 35,000-sf Children’s Pavilion; and the three-story, 32,500 sf Medical Pavilion.
Alliance Properties PBL LLC has also chosen NAI/Merin to market an 18,000-sf medical office building to be developed near Good Samaritan Hospital. The land parcel is known as Flagler Commons and is located at Flagler Drive and Palm Beach Lakes Boulevard, directly opposite Good Samaritian Hospital. “Demand for medical space surrounding the hospital has always been strong,” says David W. Knott, senior commercial associate at NAI/Merin.
The company plans to capitalize on the medical segment of the real estate market as the baby boomer generation requires more medical care and landowners look to new uses for property originally intended for condo development.
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ATLANTA-In the current commercial real estate market where availability of capital is difficult to come by, all-cash transactions may become the norm for smaller transactions. Such is the case with the $2.9-million sale of a three-building, 96,000-sf flex package handled by locally based Carter.
Atlanta West Business Park, at 3201 Atlanta Industrial Parkway North on the city’s west side, was sold to a private investor group called Atlanta West Business Center LLC by Aetna Life Insurance Co. for an undisclosed price. The class B property is currently 62% leased, primarily by state and local government tenants, according to Andrew Murphy, vice president of investment advisory sales with Carter’s Atlanta office.
“Having an all-cash buyer in the final round makes the decision all that much clearer for us,” Murphy tells GlobeSt.com. “Those buyers are differentiating themselves when they approach deals with a higher leverage stack.”
Because of the current credit crunch, sellers prefer dealing with buyers who can bring more equity to the closing table, or better yet can complete a total cash sale, Murphy says. He further notes that there was only a $100,000 differential between the buyer and the next-highest bidder.
Murphy, who worked with fellow Carter brokers Gary Lee and Mark Joines in representing Aetna, says Atlanta West drew strong interest from the local investment market. The team has handled other significant commercial property sales this year, including the Cornerstone Building in Downtown Atlanta and Interchange Business Center and Perimeter Place, both in suburban Doraville, GA.
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(Crystal Proenza is associate editor of Real Estate Florida.)
MIAMI-Condo.com, an online marketplace that lists over 600,000 condos, has formed a financial institution brokerage and marketing division in an effort to assist lenders with asset management and dispositions. The site will reach out to institutional owners and lenders through its new institutional services group led by James L. Fried, president of Miami-based Sandstone Realty Advisors.
Fried has been in the real estate business since the mid-1980s, and in the past has worked in South Florida as managing director for Aztec Group Inc. and senior VP for Grubb & Ellis of Florida Inc. During the last down cycle, Fried served as principal of Condovest/Realtrust Inc., where he gained experience with government and financial institutions that he will use in his new position, he tells GlobeSt.com.
“From 1991-93, Condovest bought, managed and brokered portfolios of condos from the RTC, FDIC and solvent financial institutions,” said Richard Swerdlow, CEO of Condo.com, in a release. “Jim is well versed in all phases of the special situations that occur as a property begins to fail and is eventually taken over by the lender(s).”
Condo.com’s new division will offer asset preservation, property marketing, advertising, customized reporting and overall market advice that pertains to specific properties. In addition to its home state of Florida, the company can currently broker sales in Georgia, South Carolina, Pennsylvania, New York, Texas, Arizona, Nevada and California, with more states pending.
“The main thing we bring is experience in times like these to the table,” Fried says. “We have senior people on our staff that have decades of experience. Our goal is to provide services to the many financial institutions that we work with on a daily basis and that, quite frankly, need our help.”
According to its website, Condo.com was formed to assist in the sale of condos, lofts and townhomes by developers, builders, brokers, financial institutions and others. The company lists more than 600,000 condos valued at over $150 billion.
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DALLAS-After grappling with new lending rules and renegotiations, Cannon Commercial Inc. yesterday took title to the 1.4-million-sf Galleria Tower I, II and III in North Dallas. The trophy sale, topping $300 million, required two loan assumptions and patience.
"We are extremely proud. This is the best real estate in all of Dallas," says Kam Mateen, president of the Los Angeles-based Cannon Commercial. "It is second to none." The deal closed yesterday afternoon, with titles rolling to the 468,750-sf, 25-story Galleria I at 13355 Noel Rd., 430,045-sf, 24-story Galleria II at 13455 Noel Rd. and 519,675-sf, 26-story Galleria III at 13155 Noel Rd. The deal included a 1.5-acre tract primed for development.
Mateen tells GlobeSt.com that $261 million in two loans were assumed. He says Chicago-based Transwestern's loan servicing division and Midland Loan Services Inc. of Overland Park, KS are the servicing agents for the 10-year notes, both of which have locked-in interest rates.
Mateen and his brother, Shervin, who is CEO of Cannon Commercial, put the Galleria landmark under contract in January. "With a transaction of this size, there's a lot of rules and regulations and that creates more paperwork," Cannon's president explains about the long road to the closing table. In addition, he says there was some renegotiation for the blended assumption before final documents were signed.
The Galleria buildings are 99% occupied, with minimal lease roll for two years. Mateen previously said the roster is filled with long-time tenants, some with 10 years left on their terms. Jones Lang LaSalle is remaining in charge of leasing. Cannon is taking the management reins from the seller, Brooklyn, NY-based Fortis Property Group. JLL managing directors John Alvarado, Jack Crews and Evan Stone brokered the deal.
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PHOENIX-Pacific Office Properties Trust Inc. and an institutional partner have taken control of the last of three office buildings in the region that were owned by the Shidler Group. Sources say the close-out deal came close to meeting the $66.25 million that San Diego-based Shidler paid in 2006 for the 370,400-sf US Bank Center in the CBD.
Dallas Lucas, president and CEO of Los Angeles-based Pacific Office Trust, says it had been Shidler's intent to sell the 31-story landmark at 101 N. 1st Ave. and two other office buildings to the REIT following its merger with Arizona Land Income Corp. Previously sold were the one-million-sf CitySquare at 3800-4000 N. Central Ave. and 226,700-sf Black Canyon Corporate Center at 16404 N. Black Canyon Hwy. "A couple of those transactions occurred after the merger and now we own all of the square footage in the Phoenix market," Lucas says.
Lucas says improvements are still being done to the US Bank Center although many upgrades were completed during Shidler's hold. The building's occupancy is 90%, with tenants including Jacobs Engineering Group and Valley Metro Rail, which is overseeing the light-rail development in the region. Lease rates hover $28 per sf, gross.
John Bonnell, senior vice president with Phoenix-based Grubb & Ellis BRE/Commercial LLC, says there is limited roll in the building during the next two to three years, which is reflective of the CBD market. "Unlike other markets that are going through the crazy economic environment, Downtown Phoenix seems isolated because so many things are happening," Bonnell says. "That's a submarket with a 7% to 8% vacancy rate." Grubb & Ellis' senior associate Brett Abramson, vice president Brian Kocour and Bonnell hold the building's leasing assignment.
Bonnell tells GlobeSt.com that US Bank Center is seeing some good activity, with one prospect considering a half floor and smaller groups looking at its spec suites. "Lots of people want to be Downtown these days, both employees and owners," he adds.
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HOUSTON-KPMG LLP is the first tenant to take space in the one-million-sf MainPlace. The audit and tax advisory firm will take down the top four floors, totaling 108,904 sf, of the under-construction office building in the CBD.
MainPlace, rising at 811 Main St., will be completed in 2011. John Burke, vice president with Staubach Co.'s Houston office, tells GlobeSt.com that KPMG searched for new office space throughout the CBD, including weighing plans to stay put in Bank of America Plaza at 700 Louisiana St.
"This lease validates the market demand for new construction in Downtown Houston. We are very pleased and excited about Hines' role in the next generation of sustainable-designed buildings here in Houston's CBD," Mark Cover, executive vice president of Hines, says in a press release. The CBD's vacancy stands at slightly more than 10% in the 35-million-sf inventory. Space in class A office buildings is quoted at $37 per sf to $39 per sf plus electric.
Houston-based Hines' executives were unavailable to comment before deadline. The 46-story building is developed by the Hines CalPERS Green Development Fund, which is focused on building sustainable office buildings throughout the US. MainPlace recently attained LEED Silver pre-certification although Hines expects it to qualify for a "Gold" ranking.
Staubach president Dan Bellow and executive vice president Ronnie Deyo teamed with Burke to represent KPMG. Stewart Robinson and Chrissy Wilson were Hines' in-house brokers.
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DEER PARK, TX-Clay Development & Construction Inc. will develop Deerwood Glen Business Park on a 149-acre tract once destined for residential development. The Houston-based developer is planning to use the land for build-to-suit and design-build projects.
The acreage in the 4900 block of Texas 225 is situated between the Houston Ship Channel and Port of Houston's Bayport Terminal. Although there is no firm groundbreaking date, the ground-up development will consist of warehouse, flex and back-office and light-industrial space. According to the street, the acreage is believed to have sold for $65,000 to $90,000 per acre.
Clay Development couldn't be reached for comment prior to deadline. "He has a few deals lurking and one plan calls for about 80,000 sf of office product," Joel Hill, a Houston associate for Dallas-based Henry S. Miller Commercial, confirms for GlobeSt.com, "but nothing is firmed up right now." He and Douglas Bates, senior vice president for Henry S. Miller, represented Clay Development in the land deal.
A local homebuilder had planned to use the land for the third phase of Deerwood Glen. Hill says the builder decided to put the land on the market rather than building more homes as demand slowed in single-family housing sector.
Hill says the land buy is a good one for a developer like Clay Development because there is a lack of its preferred product in the immediate area. He adds the area will generate demand as business picks up at Bayport Terminal. "Highway 225 has become a great thoroughfare for industrial property going up in the area," Hill says. "I think Robert [Clay] saw an opportunity for office buildings and light industrial that aren't there."
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DALLAS-Drawing a close to a six-year hold, CKW Gleneagles LP has sold the 590-unit Gleneagles on the Creek Apartments to Austin-based Mission Residential LLC. In the Collin County submarket, comparable class A and class B apartments are selling for $90,000 per unit on the high end to roughly $50,000 on the low end.
In 2002, Beverly Hills, CA-based Kennedy-Wilson International used the complex at 4909 Haverwood Lane, which is assessed at $19 million, as its first major acquisition in Texas for a multifamily fund. The 25.9-acre complex reportedly brought upward of $25 million six years ago following a market run at $37 million. The dissolution of a partnership subsequently pushed the asset into the portfolio of Austin-based CKW Gleneagles.
This time, the 95%-leased Gleneagles hit the market without an ask in an all-cash, value-add scenario. Mission Residential was up against 23 offers for the 43-building asset, according to Brian Murphy with Atlanta-based Apartment Realty Advisors in Dallas. The deal went full circle within 60 days.
"Mission Residential wasn't the highest bidder, but they were a proven buyer. They had a track record with us and the seller and was willing to put non-refundable hard money at the execution of the contract," Murphy tells GlobeSt.com. "This brought out what we were expecting in offers and pricing. We had a Who's Who of buyers."
Gleneagles consists of one- and two-bedroom apartments, some with garages and sunrooms, in 34 residential buildings. Other buildings include cabanas, clubhouse and amenity-related services. Units range from 700 sf to 1,205 sf, with the average monthly rent resting at 94 cents per sf.
"With half of this being built in the 1990s and its strong occupancy, there's tremendous upside," Murphy explains. "It's a good value-add story in a great location." The ARA sales team included Brian O'Boyle Sr., Brian J. O'Boyle Jr. and Jerry Lamm.
Gleneagles is positioned close to the intersection of the President George Bush Turnpike and Dallas North Tollway. Word is locally based Billingsley Co. is planning on developing class A apartments on the southeast quadrant. In addition, Gleneagles abuts a city park and is close to retail and office hubs.
Murphy says the seller delivered a well-maintained complex, allowing the buyer to focus on minor upgrades as units turn. The value-add plan will include upgrades to the leasing office and clubhouse, he adds. The 326-unit phase one was completed in 1986. Phase two, with 264 units, came on line in 1996.
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DALLAS-The on-off rumor that Staubach Co. is poised to merge with Jones Lang LaSalle has surfaced once again. Well-placed industry sources say it is still rumor at this time, but aren't discounting that it won't turn to fact at some point.
A spokeswoman for Jones Lang LaSalle Inc. in Chicago says there is no comment from its camp. Like others, JLL's corporate policy bars commenting on material transactions until finalized. An interview request is pending with Dallas-based Staubach's corporate chief, who was unavailable by GlobeSt.com's early afternoon deadline. Neither company has arbitrarily dismissed the inquiry as purely rumor.
The long-standing merger rumor has been surfacing periodically in the market for nearly two years. Some market watchers say the catalysts have been the 2007 corporate shifts by Roger Staubach and a value-building move earlier this year when Staubach gave up stock to franchisees so they'd convert their operations into branch offices.
Of course, JLL's buying mode this year lends more credence to the street talk than previous market chatter. Earlier this month, JLL completed the acquisition of Kempber's Holding GmbH, a Germany-based retail company. In a May 6 filing with the SEC, JLL, which signed the merger agreement in January, reported the deal made it the largest property advisory business in Germany, picking up offices in Leipzig, Cologne and Hannover. In April, JLL bought Leechiu & Associates, an agency business in the Philippines, and a 10% stake in Alkas, a Turkish-based commercial real estate firm. According to the SEC filing, the triple play cost $134.2 million.
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MESQUITE, TX-A private buyer from Los Angeles has pocketed the deed to the 240-unit Pine Oaks Apartments. The 24-year-old complex, set on nearly 12 acres, was 89.5% occupied at sale time to the first-time investor in North Texas.
"It's a bread and butter B deal," says Brian Murphy with Atlanta-based Apartment Realty Advisors in Dallas. The deal for the 1716 N. Galloway Ave. property took 90 days to complete due to a loan assumption, he says.
Murphy tells GlobeSt.com that 22 offers were on the table, but the dealmaker was the buyer's willingness to go hard with non-refundable earnest money at the contract's execution. Based on the marketing flyer, the buyer assumed a $7.35-million loan at 5.9% fixed-rate interest with a 10-year term through Charlotte, NC-based Wachovia Bank. ING is the loan's special servicing agent.
Pine Oaks has a Land Use Restriction Agreement resting against it, which requires 84 units are rented to low-income residents. The mix ranges from 555-sf efficiencies to 950-sf two-bedroom units. The monthly rent averages $630. Murphy says the seller, ARG1 Investors LLC of Dallas, renovated the asset's exterior and put on new roofs in 2005-06 so the new owner "can focus on interiors and move rents slightly."
Pine Oaks was marketed for $10.9 million, but the final price is not being disclosed due to Texas' confidentiality rules. Dallas Central Appraisal District has the asset assessed at $8.23 million. In Mesquite, class B deals have been trading for $30,000 to $45,000 per unit.
Murphy says the "value-add story" has been the drawing card for offers in this cycle. "On a few deals, we've been fortunate they've been in good locations and had a value-add story so we've been able to attract some good interest," he says.
Pine Oaks is located east of Interstate 635 and south of US Hwy. 80, close to schools, retail and Lake Ray Hubbard. The ARA team included Brian O'Boyle Jr., Jordan Cortez, Chris Epp and Mike Girard.
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FORT WORTH-Carlos & Costanzo LLC has taken another complex in the struggling Woodhaven district under wing, buying 176 units next door to its April acquisition. The value-add play calls for $200,000 of renovations to the 17-building asset.
Carlos Vaz, principal of the young Dallas-based company, says the purchase of the 62%-leased Willows of Woodhaven at 5816 Boca Raton Blvd. involved more than just location. "Being next door was important, but the bank had spent a considerable amount of money on it so the units were in good shape," he says. Nita Stewart of CB Richard Ellis in Dallas was marketing the foreclosed asset for the lender.
Vaz tells GlobeSt.com that the $3.85-million ask was whittled to $3.05 million after waiting several months for it to ride market before putting in an offer. "We closed the deal in three weeks after we renegotiated," he says, making the close with 50% down in a new loan with the seller. He says the plan is to refinance the complex in three to six months after the Willows is renovated and occupancy picks up. According to Tarrant County tax records, the seller is Lsf5 Willows LLC, which had given oversight to a Dallas law firm.
Carlos & Costanzo is looking to amass 2,000 class B and class C units in Dallas/Fort Worth by year's end. Vaz classifies the Willows as a class B, with the gated complex's units averaging 650 sf in one- and two-bedroom floor plans and an average rent of 64 cents per sf.
Vaz and his partner, Brad Costanzo, are betting on the Woodhaven district's future. "The area has opportunity," Vaz contends. "The area is going to get better."
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YUMA, AZ-Although elected officials decided to put the 6,000-seat Yuma Events Center before voters in November, the Greater Yuma Economic Development Council and the $52-million project's developer are already looking ahead. If approved, dirt will move immediately on the 20-acre site, with completion scheduled for summer 2010.
Amid concerns from local residents that a sales tax-financed events center might ultimately force taxpayers to pay for the project, Christopher Comacho, president and CEO of the regional EDC, says the center is necessary to build a revenue base. The development is along Pacific Avenue and north of the one-million-sf Yuma Palms Regional Shopping Center. Comacho says the center would bring more people into Yuma for entertainment.
"Right now, we have a lot of sales tax leakage going to other communities," Comacho tells GlobeSt.com. "The only entertainment venue we have here are casinos. And beyond a farm-league baseball team, we have no professional sports or a venue for concerts and rodeos."
Steven Bielewicz, president of Global Properties, the Phoenix-based company that will oversee the center's development, says Yuma's location is ideal for a multi-purpose facility. For one thing, the town is along Interstate 8, halfway between Phoenix and San Diego. In addition, Yuma is close to the Mexican border. "Approximately one-third of all the tickets sold will come from patrons south of the border," Bielewicz believes.
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Assuming voters approve the facility, it will be used as a typical events center for concerts, the circus and a minor league professional hockey franchise that will play in the facility. Bielewicz says he hopes to attract an arena football team as well.
Global Properties is develops mid-size entertainment venues in secondary markets. It has one center operating in Hidalgo, TX, also near the Mexican border, and one about to break ground in Allen, a far northern suburb of Dallas. Other centers have been in operation for several years.
Bielewicz says he's seen commercial development thrive in the general area of events center developments. "We never know what the future will bring, of course," he adds. "But in looking back on prior experience that's the norm."
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GRAPEVINE, TX-Staking its first claim to industrial real estate in Texas, Hines REIT Inc. has paid $42.8 million to Dividend Capital Trust for two buildings in the 180-acre DFW Trade Center. The 643,429 sf of class A space is fully leased to five long-time tenants.
Hines REIT was the highest of seven offers, secured in a 30-day marketing period for 4050 and 4055 Corporate Dr., according to Conor Feeney, a CB Richard Ellis associate in Dallas. He says the Denver-based seller isn't planning to sell any other buildings in its 1.8-million-sf DFW Trade Center, which it bought in 2006. "They were just looking to recycle some capital," he explains of the just-sold pair.
Hines REIT, owner of Chase Tower in the Dallas CBD, has spent 18 months sizing up industrial real estate in North Texas. "We educated them about the submarkets and Dallas industrial real estate," Josh McArtor, first vice president of the CBRE investment sales team led by vice chairman Jack Fraker.
The 441,068-sf cross-dock on 22 acres at 4050 Corporate Dr. and 202,361-sf rear-load warehouse on 12 acres at 4055 Corporate Dr. were developed in 1997 and 1996, respectively, by Atlanta-based IDI Inc. The larger building has a 28-foot clear height, six foot higher than its sister.
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Houston-based Hines manages and leases the REIT's assets. The Corporate Drive buildings are occupied by Kay Chemical Co. Inc., FleetPride Corp., John H. Harland/Harland Clark Corp. and Verizon Communications Inc., which operates a call center in its space. Feeney says the average lease has 6.8 years left on the term.
"The Verizon call center pushed up the rental rate and made it a higher per sf," Feeney points out. The math for the sale breaks down to $66.51 per sf, which is pushing the top of the market for class A industrial space.
The seller's park, a mix of office and industrial space, is located four miles north of Dallas/Fort Worth International Airport. The location and tenant base were the dealmakers, Charles Hazen, president and CEO of Hines REIT, says in a press release.
The four-year-old Hines REIT owns 46 properties, adding its third industrial property with the pick-up from Dividend Capital. Its other industrial holdings are located in Minneapolis and Rio de Janeiro. "We expect them to continue to increase their presence in Dallas/Fort Worth," Feeney says.
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LAS VEGAS- Texas developer Christopher Milam has just over a month to exercise a $475-million purchase option for 27 acres on the Las Vegas Strip or lose some $75 million in non-refundable option payments. An SEC filing by seller Archon Corp. shows that Milam kept the option alive by continuing to make monthly $2.3-million payments through the first quarter of the year.
Assuming Milam also made the $2.9-million payments required for April and May, he and his equity partners have made approximately $70 million of non-refundable payments to Archon Corp. -- including more than $24 million that will not be applied to the purchase price, which jumped from $450 million last year following a missed option payment.
Located immediately south of the Sahara hotel-casino, the site is one of the last large available properties on the Strip that has not recently traded. Milam tied up the property in June 2006. In May 2007, Australian billionaire James Packer invested $22.5 million to gain a 37.5% interest in the ownership entity, which had initially had plans for a multi-billion-dollar, 5,000-room casino resort on the property that would include the tallest building in the Western Hemisphere at 1,888 feet.
Later that year, those plans were shot down by the Federal Aviation Administration due to its proximity to McCarran International Airport. In December, Clark County commissioners approved the site for 1,064-foot tower, which would be the tallest building in the US, but plans have since been revised to a shorter, twin tower concept, sources familiar with the situation recently told GlobeSt.com.
Two months ago, published reports out of Australia stated that Packer was growing wary of the opportunity and was looking to be bought out of the Wet ‘n Wild site but would remain invested in the adjacent Fontainebleau Casino and Resort development. Milam, meanwhile, was reportedly hoping to retain his interest in the property. Neither Milam nor a Packer representative could be reached for comment.
Assuming the option is exercised in June and the transaction closes in August, Archon will have received $78 million in option payments, approximately $33 million of which won’t be applied to the $475-million purchase price, taking the total purchase price for the property to approximately $508 million, or just under $19 million per acre.
In September 2007, a partnership formed between MGM Mirage Inc. and Kerzner International Holdings valued 40 acres abutting the Strip and MGM’s Circus Circus resort at $20 million an acre. One month earlier, Israeli billionaire Yitzhak Tshuva’s New York City-based El-Ad Properties paid $1.24 billion or $34.7 million per acre for the 34.5-acre former New Frontier casino-resort site immediately north of Fashion Show Mall, across from Wynn Las Vegas.
Despite the New Frontier sale, local industry sources tell GlobeSt.com that the current value of Strip land is probably very close to $20 million per acre.
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SAN JOSE, CA-Brocade Communications is spending approximately $223 million on a new headquarters office complex on North First Street. The locally based public company currently keeps its headquarters at 1745 Technology Dr. on a lease that runs out in the middle of 2010.
In an SEC filing this week the provider of datacenter networking solutions says it purchased three unimproved building parcels from MFP/Hunter@First Office Partners LLC for $50.9 million. It retained an affiliate of the seller to develop three office buildings totaling 562,000 sf for an additional $173 million that will be paid in installments over the next 27 months.
The new campus will consist of two seven-story buildings and one four-story building and will have a capacity of approximately 2,200 people, allowing the company to consolidate not only its headquarters at 1745 Technology Dr. but also a building it owns several blocks away at Skyport Plaza. Brocade’s two existing local buildings total about 400,000 sf, a company source tells GlobeSt.com.
With regard to the decision to buy or lease, a company source tells GlobeSt.com that the company evaluated both kinds of transactions and “found that this was very fiscally responsible and met our needs.”
Depending on the market or other circumstances, Brocade may evaluate entering into a sale-leaseback transaction with respect to the property and buildings at a future date, according to SEC documents. As part of the deal the company also obtained a four-year option to take down a fourth parcel totaling four acres for $26 million.
The seller, MFP/Hunter@First Office Partners, is Deke Hunter and Ed Storm, the principals of Cupertino, CA-based Hunter Properties. The duo in June 2007 paid Palm Inc. $70 million for 39 acres with visions of 880,000 sf of class A office space in four buildings, a 100,000-sf hotel, a 75,000 sf retail village and a 150,000-sf retail anchor.
“This site is the gateway to San Jose from Highway 237,” Hunter told GlobeSt.com at the time. “Our idea is to embed a corporate campus environment in a top-tier, class A retail concept with outdoor dining, plenty of parking and other amenities.”
Hunter tells GlobeSt.com this week that the plans now include the aforementioned office space, retail village and hotel (168 rooms by Lodgeworks, parent company of the Sierra Suites chain). And instead of 150,000-sf retail anchor, Hunter is seeking approval for another hotel (a 220-room Renaissance Club Sport), an additional 200,000 sf of office and 8,000 sf of retail.
Construction of the office campus and the first phase of the parking garage are under way, Hunter says, and site work for the retail village and Lodgeworks hotel will get under way in August. Lodgeworks will develop its own hotel while Hunter and Storm will develop the retail center, Hunter says.
A new application has just been submitted to convert the entitlements for the large format retail anchor into the second hotel and additional office space. Hunter expects to break ground for that piece of the project early next year.
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LAS VEGAS-Offers are due June 12 for Vegas Grand, a 20-acre off-Strip development that includes a 212-unit residential building that is nearing completion and entitlements for an additional 782 units on the remaining 16 acres, according to CB Richard Ellis. There is no overall asking price, but approximately $107 million will have been spent on the first building and infrastructure including streets and utilities for the entire development, sources familiar with the project tell GlobeSt.com.
The development site is located at East Flamingo Road and Swenson Street, adjacent to the University of Nevada-Las Vegas and 1.5 miles from both the Las Vegas Strip and the Las Vegas Convention Center. The seller is Lehman Bros., which gained control of the project in October at auction for $55 million after developer Del American defaulted on its development loan, according to county property records. The outstanding balance on the loan stood at between $90 million and $100 million, one local source tells GlobeSt.com.
Earlier this year, Lehman retained the local office of CB Richard Ellis to liquidate the asset, which CBRE began marketing in April. The marketing brochure does not list an offering price for the building nearing completion, Bella Venezia I, but says $72 million will have been spent to complete it. The units average 1,290 sf and the parking ratio is approximately two per unit. The offer price for remaining land and entitlements is $44 million ($2.75 million per acre), a big discount to its year-old appraised value of $72.5 million ($4.55 million per acre) and approximately $10 million more than was spent to acquire it and prepare it for development.
The listing brokers are Geoffrey West, Jeff Swinger, Spence Ballif, John Knott and Michael Parks. West tells GlobeSt.com that despite the entitlements the property will support a variety of uses including luxury apartments or timeshare units--likely results for the building nearing completion because it was originally intended to be condos and has higher-end finishes. Beyond that, the site could support a non-gaming hotel or resort, or, due to its location next to the University of Nevada-Las Vegas, student housing. In the longer term, condos may again become a viable play for the property, West says.
“We have had very strong response from major timeshare developers, major condo developers and a lot of players on the multifamily side,” West says. “No [condominium] units were ever sold so the buyer will have a clean slate, a blank canvass with which to work.”
The property is expected to be under contract by the end of June. The sale is expected to close sometime in the fourth quarter.
Del American chief executive Christopher Del Guidice acquired the property from Nevada Power in May 2003 for about $4 million, a price reflective of the fact that it was raw land that would require some $35 million more for flood control, streets and utilities. In 2004, Del American received a $240-million development financing commitment from Lehman Bros. and Hypo Real Estate Capital Corp. for Vegas Grand.
At one time Del American said that 90% of the units had been reserved. Later, the company canceled all reservations and raised prices, prompting a class-action lawsuit that was settled in 2006 when Del agreed to pay 2.5% of future gross sales into a common fund for several hundred people who had reserved a unit, according to published reports at the time that cited court documents.
The Vegas Grand site was not the only Vegas property Del American lost last year. At the end of 2004, Guidice paid $50 million for a 10-acre parcel at West Flamingo and Hugh Hefner Dr.--next to the Palms hotel and casino--with plans for a $500-million, 50-story, 542-unit luxury condo development. It also defaulted on that loan, which had about $82 million outstanding, and the property was sold at auction in February 2007 to the lender for $65 million, according to property records.
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PORTLAND-With condo sales slowing to a trickle and apartment vacancy in the low single digits, the developers of a 323-unit condominium project nearing completion in the South Waterfront district here have converted the project to rentals and are recapitalizing the asset in “a $145-million transaction” set to close in August. The development group includes locally owned Gerding Edlen Development Co. and Williams & Dame Development among others.
Come August that group will include Multi-Employer Property Trust, a union benefit fund (aka Taft Hartley fund) whose investments are managed by Seattle-based Kennedy Associates Real Estate Counsel. The announcement by Gerding Edlen did not say how much of the $145 million MEPT would be putting up or what percentage of the project it would get in return, only that MEPT would be the “primary joint venture partner.”
The transaction value is less than the project’s total development cost, according to the project’s construction lender. How much less was not immediately known, however, and neither Gerding Edlen principal Mark Edlen nor Kennedy executive vice president Preston Sargent could be reached Thursday morning for comment. A source with Gerding Edlen declined to provide the total development cost but alluded that, when "avoided costs" related to selling the project as condos are accounted for -- such as marketing expenses and sales commissions -- the total development cost may be at or below the transaction value.
In a prepared statement, Williams & Dame principal Homer Williams says the investment by MEPT is a “show of confidence” in Portland and the South Waterfront while Sargent says Kennedy and MEPT are “enthusiastic about the Portland market and the opportunity to invest early in South Waterfront” because the city "has great quality of life, continues to attract new residents and create jobs, and has a strong apartment market with very low vacancy rates.” Sargent calls the development a “long-term asset” for MEPT.
The project, 3720 Bond, also its address, is located one block from a riverfront greenway running along the west side of the Willamette River, in an in industrial area just south of the Downtown core that is being redeveloped with a mix of uses. A majority of the area has not yet been redeveloped, meaning there are as yet very few amenities in the immediate area, but the high-rise lifestyle provides for spectacular views of the region and proximity to the greenway gives residents immediate access to 40 miles of paved trails.
Regardless of whether it costing more than $145 million to complete, the per-unit value of the transaction is nearly $500,000, which is very high for the Portland area for an apartment building. In addition to the units themselves, which average 1,083 sf, the development also will generate revenue 17,000 sf of retail and a 380-slip parking garage.
The only recent sale comparable is the 16-story Louisa Apartments in the city’s tony Pearl District, which has 37,000 sf of street-level retail and apartment rents of approximately $2.60 per sf. Also developed by Gerding Edlen, the project sold last summer for approximately $300,000 per unit or $73 million – at least that was how much was allocated to the property, which sold as part of a three-block, $292-million sale. The units rent for approximately $2.60 per sf.
Both projects were built to achieve a high level of certification from the US Green Building Council. And while Louisa was built as apartments from the start, Gerding Edlen says 3720 Bond was designed to be either. With condo sales slowing to a crawl in the neighboring condominium towers and vacancy rates in downtown class A apartments tight -- in the 3% range, according to some first quarter reports -- the need for the switch was obvious.
Gerding Edlen says 3720 was designed to be either condos or apartment depending on market conditions. Corus last spring said it and the developers worked together for nearly a year to underwrite the $113-million construction loan, however Corus Bank SVP Dwight Frankfather tells GlobeSt.com he never anticipated the development being an apartment building and that as part of the MEPT deal Corus’ loan will be paid off in full.
“From a lender’s point of view, the building is not worth as much as an apartment building as opposed to a condominium building, so the risk is up, and it’s a pioneering area down there,” he says. “But these guys were brilliant in finding a buyer who is paying them a great price.”
That having been said, Frankfather says MEPT is buying at less than cost and is holding long-term, “so they’ll be there when the next wave comes and can convert to condos any time they want.”
Leasing at 3720 will begin next month via an on-site leasing office, with the first residents taking occupancy in August 2008. The building is scheduled for final completion in November 2008.
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FOOTHILL RANCH, CA-Stirling Capital Investments has added the latest distribution and warehouse space at the Foothill Ranch-based company's Southern California Logistics Centre SCLC. Its newest building is a 296,490-sf class A facility known as Distribution Centre 13A on approximately 17 acres at the SCLC project.
According to Brian Parno, vice president of Stirling Capital, the new building is the largest industrial facility now available in the Inland Empire North region of San Bernardino County. It is also a green building targeted for LEED certification that was designed to be leased to any combination of one to four users.
Distribution Centre 13A is the fourth class A industrial building completed at Southern California Logistics Centre as part of phase one development totaling more than 6.5 million sf. The space is being marketed by the CB Richard Ellis team of Jay Dick, Darla Longo and Mark Latimer.
Besides the newly opened building, the phase one development at SCLC includes a 408,000-sf Rubbermaid West Coast distribution facility that was occupied in October 2007 and two multi-tenant industrial buildings totaling approximately 224,000 sf that were completed earlier this year.
Southern California Logistics Center is being developed at the former George Air Force Base. The master plan for the 8,500-acre site is creating a multimodal freight transportation hub supported by air, ground and rail connections.
In addition to the 2,500-acre SCLC, which is entitled for 65 million sf of development, the project includes the 2,500-acre Southern California Logistics Airport and Southern California Rail Complex, a planned 3,500-acre intermodal and multimodal complex including rail-served facilities. Foothill Ranch, CA-based Stirling and DCT Industrial Trust Inc. of Denver are developing the project in a public/private partnership with the City of Victorville.
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LOS ANGELES-Some Downtown L.A. projects have switched from condominiums to apartments in light of changing market conditions, but developers of the Ritz-Carlton residences at L.A. LIVE say that sales are exceeding expectations, and the South Collection reports steady sales. Less than a third of the 224 high-rise homes at the Ritz-Carlton are still available, according to its developer, a partnership headed by the Anschutz Co.'s AEG subsidiary.
The 224 Ritz-Carlton Residences at L.A. LIVE will top a 54-story glass and steel structure also housing the Ritz-Carlton and the JW Marriott Hotel Los Angeles. Designed by the Gensler architectural firm , the hotel and residential tower will span two million sf on 2.5 acres of the 27-acre L.A. LIVE site.
The Ritz-Carlton will share the floors below the 224 residences with the four-star JW Marriott Hotel. The hotel project will include ballrooms, meeting spaces, rooftop decks, swimming pools, resort facilities and 1,001 hotel rooms.
Nearby at the South Collection, a development of the South Group that is near the Staples Center in the middle of South Park and L.A. LIVE, the developer says that it is selling units despite other delayed projects, rising residential inventory and sagging home sales. The South Collection consists of a trio of residential buildings called Evo, Luma and Elleven.
The 311-unit Evo is scheduled for completion this summer, the 236-unit Luma is occupied with its final few residences now selling, and the 179-unit Elleven is fully occupied. Elleven also stakes a claim as California’s first LEED Gold certified condo, with Luma and Evo expected to be LEED certified later this year.
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CARSON, CA-Industrial tenants have signed three leases for more than 233,000 sf of space, including two deals in this South Bay submarket totaling 121,000 sf and one in the City of Industry for 112,000 sf. The two Carson deals involve leases by freight fowarder BNX Shipping Inc. and Cedarlane Natural Foods, while the City of Industry deal is a lease by the Singing Machine Co., a maker of karaoke machines and related equipment.
The BNX lease is a seven-year deal for 98,100 sf at 910 E 236th St. in Carson, according to SVP and principal Craig J. Poropat of the South Bay office of Lee & Associates, who represented the freight forwarder in the approximately $5 million deal. The landlord, Watson Land Co., was represented in-house by Mike Bodlovich.
In the other Carson deal, 25-year-old Cedarlane Natural Foods signed a five-year lease for a 23,040-sf warehouse at 1264 E. Walnut St. to consolidate three other area storage facilities, according to the Klabin Co. Both Cedarlane and the building owner, Howard Street Associates, were represented by partner David Grote and David Bales of the Torrance office of the Klabin Co.
Cedarlane, which is headquartered a half a block from the new space, has already occupied its new Walnut Street facility. The natural foods company now has a plant capacity of approximately 100,000 sf in Carson.
In the City of Industry lease, the Singing Machine Co. signed a five-year sublease for a 112,000-sf industrial space at 280 Machlin Court, according to D. Jerry Evans, president of Lee & Associates’ Los Angeles South Bay office. Evans represented the tenant; building owner Sun Yin USA and Nexgrill Inc., was represented by Tony Phu of Colliers International. Evans notes that the transaction illustrates the growing availability of sublease space in today's market.
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LOS ANGELES-Younan Finance, which plans to invest at least $200 million in office loans throughout the US, has signed a contract to acquire a B note that is part of a first mortgage for a 290,820-sf class A office building and a 42,685-sf 24-Hour Fitness club at a property called Orange Tower in Orange County. Zaya Younan, chairman and CEO of parent company Younan Properties Inc., tells GlobeSt.com that the company expects to close within two weeks on the deal, which is the second for Younan Finance since the firm's recent formation.
Orange Tower is a Maguire Properties asset at 500 N. State College Blvd. in Orange, CA, that is part of the EOP Southern California portfolio that Maguire purchased last year from Blackstone. Younan, who writes an office blog for GlobeSt.com, tells GlobeSt.com that the purchase of the $6.5 million B note, which the company is acquiring from Rubicon Capital America LLC, is a sign of the times. When the CDO market shut down during 2007, many REITs that were accumulating assets for securitization using short-term warehouse and repurchase facilities were left with short-term debt that could not be refinanced via the CDO market, he explains.
Younan points out that the Orange Tower property is "a high quality, performing asset." Although the initial plan for Younan Finance calls for investing in performing and nonperforming loans, he says that the company has so many opportunities to invest in performing loans that it may well be able to place the entire $200 million without turning to nonperforming loans.
"We have such a big pipeline of inventory of performing loans that we feel we can satisfy that $200 million and more buying paper on performing loans," Younan says. He tells GlobeSt.com that the company might be able to place the $200 million in 60 days or less.
The $200 million is entirely Younan money, which has enabled the company to "be agile and move quickly," he says. Once the company has placed the $200 million, it may take in financial partners for further investments in office loans, he says.
After forming Younan Finance in April, Younan acquired its first loan earlier this month, a $22.9 million mezzanine note on the 1.4-million-sf Thanksgiving Tower in Dallas. Younan says that in addition to acquiring debt on Southern California properties, the company is now ready to move back into buying office buildings here. The Los Angeles-based firm sold its Southern California assets some time ago and stayed out of the market because it felt that prices were too high and cap rates too low.
"Now we feel that the time is appropriate to get back in the Los Angeles market," Younan says. "We feel that this is a good time to buy because there are a lot of assets on the market but a lot fewer buyers for them. Valuations are far more reasonable today than they were in the past," he says.
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LOS ANGELES-Developer Fred Afari, who converted the Chapman office building in Downtown L.A. into 163 condo units for sale, has instead switched the project to a rental building in response to changing market conditions. “The strategy we developed with Killefer Flammang three years ago is equally viable for rentals," Afari says. Killefer Flammang is the Santa Monica-based architectural firm that designed the Chapman conversion and also has designed many of the other condominium projects in Downtown Los Angeles.
The strategy that Killefer Flammang and Afari conceived was based upon creating smaller units. "Smaller units translate into lower prices—whether for-sale or not," Afari explains. Killefer Flammang and Afari reasoned that the lower prices, whether condo prices or rents, would be more likely to attract buyers or tenants.
Built 1912, the Chapman is a 13-story Beaux Arts structure at 756 S. Broadway, at Broadway and Eighth Street. According to Karin Liljegren, an associate with Killefer Flammang, the units range from 625 sf to 1,300 sf, with the average size being 768 sf. Wade Killefer, principal of the firm, points out that the adaptive reuse project involved a broad range of interior, exterior and environmental considerations to remain true to its original design while modernizing the building and converting it from office to residential use.
Among the additions that the architectural firm designed are rooftop amenities including a landscaped lounge. Inside, the project restored the original two-story lobby and its floor-to-ceiling marble walls, grand staircase, brass railings and mosaic floors.
Outside, the building was formerly blighted with signage and deterioration, but the lower floors have now been completely renovated to articulate the original façade. The project added street level retail including a new coffee shop, plus plantings and awnings.
When it was built by the Los Angeles Investment Co. in 1912, the Chapman building was one of the first high rises in Los Angeles. It is listed in the National Register of Historic Places and is designated a City of Los Angeles Cultural Monument.
Before the conversion to living units began, the Chapman building was occupied by tenants involved in light industrial production and jewelry stores on the ground floor. Its location is in the heart of the historic theater district, home to movie palaces of the 1920s and 1930s.
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TORRANCE, CA-Locally based Storm Properties is set to tilt the walls on three buildings totaling 182,189 sf in the second phase of its 400,000-sf Storm Business Park. Upon completion of the three buildings, Storm Properties will have constructed half of the project, according to David Simard, vice president of Storm.
The three buildings measure 59,731 sf, 50,469 sf and 71,989 sf and are located on Storm Parkway. They are scheduled for completion in December.
The development site, on Storm Parkway near the cross streets of Normandie and Sepulveda, is a 40-acre infill location that is part of extensive land holdings that Storm Properties assembled over many years. The site is close to the ports of Long Beach and Los Angeles in an unincorporated area of Los Angeles County that Storm Properties is redeveloping.
All of the properties at the new project are designed for multi-tenant use and outfitted for distribution, warehouse and light manufacturing. The three phases of Storm Business Park will include 10 class A industrial buildings ranging from 13,000 sf to 70,000 sf; phase one, consisting of two buildings, was completed earlier this year.
Storm Properties Inc. is a division of Storm Industries Inc., a developer of industrial properties throughout Southern California. The buildings at its Storm Business Park are being marketed by the CB Richard Ellis team of Jeff Morgan, Scott Huber and Jae Yoo.
The 10 new buildings at Storm Industrial Park will join eight that Storm developed beginning in the mid-1980s. The new buildings are being developed at former manufacturing facilities that are being redeveloped for warehouse, light manufacturing and light assembly uses.
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CHENGDU, CHINA-Amid the sorrow and recovery, the early forecast is many newer commercial buildings in the earthquake-ravaged provinces have sustained little or no damage from the May 12 quake and continued aftershocks rattling the rural region.
US-based developers, who have ventured into China and provinces like Chengdu, have been noticeably quiet about the state of their properties while they concentrate on providing financial aid and teams to the devastated areas. The May 12 quake, registering 7.9 on the Richter scale, has claimed 62,000 lives with 30,000 still missing and more than five million people left homeless.
To a large degree, the thousands of buildings and residences that crumbled were older structures and not newer ones being built to international building codes, according to Mark Karlan, president of Strategic Partners Asia for Los Angeles-based CB Richard Ellis Investors. In Dujiangyan for example, news reports say many residential buildings are cracked and now empty, but they didn't topple.
"It's way too early to say if there will be any meaningful impact from an investors' standpoint," Karlan tells GlobeSt.com. "There will be a negligible economic impact on the nation as a whole, but there will be a massive impact on the region and massive impact on the people."
A spokeswoman for Denver-based ProLogis reports its Chengdu properties escaped unscathed based on an assessment by its on-the-ground team. Tishman Speyer of New York City didn't respond by deadline about its properties, but there also hasn't been any public report of damage to its assets in Chengdu. "The kind of investments we at 'Investors' buy would have survived," Karlan stresses. CBRE has 1,000 employees in brokerage and investment in China in 14 offices, including Chengdu.
Karlan points out that China's Tier II and III cities in the center of the country haven't yet developed economically because they aren't close to seaports or international airports so he expects the impact on the country as a whole will be minimal. He estimates 90% of China's economic activity is concentrated along its eastern seaboard while Chengdu and other earthquake-zone provinces account for just 2.5% of the nation's GDP.
"The foreign investment impact as a result of the earthquake in Chengdu is relatively small," Karlan says. "This region represented a small portion of foreign investment and was likely to continue that way for several years."
The Chinese government's immediate response and openness, though, has shown a new side to Westerners. Karlan says many Western investors have long held a bias toward China, stereotyping it as cold and closed. "At Investors, we looked through that and understood the Western bias isn't always the right one," he says.
As media worldwide have noticed, protests over the upcoming Olympics, intended to showcase China to the world, have silenced since the earthquake. The change in perception resulting from the earthquake is "a small, small positive," Karlan says. "The openness of the response and the commitment of all elements of China's government are apparent. China is no longer seen as cold."
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BELGRADE, SERBIA-Bayer and Heineken are among the major corporations signing on to Airport City Belgrade, an office park under phased construction here. The leases were brokered by the Serbian brand of Colliers International.
The Bayer space totals just more than 16,000 sf of class A space, from where the pharmaceutical giant will conduct its operations for the entire country. Heineken is taking 6,781 sf after acquiring local beer brewer MB.
Colliers has also leased space to electronics companies Canon and Asus. The real estate services firm has had a presence in the country since 2000, and does business across commercial and residential property types.
Airport City is currently nearly 700,000 sf and is planned to exceed just more than million sf when it is completed. The project is being developed by Netherlands-based AFI Europe and Tidhar Group Ltd., based in Israel.
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LONDON-This city’s West End is the world’s most expensive office market, at $299.54 per sf (all figures are US dollars), according to CB Richard Ellis Group Inc. Research’s Global Market Rents report, released this morning. The report tracks world markets with the highest and fastest-growing occupancy costs for the past year. Moscow, Mumbai, India and two sections of Tokyo rounded out the top five in the report.
As far as fast-growing markets, Ho Chi Minh City had the most impressive occupancy cost growth numbers, up 94% to $85.84 per sf, and was followed by Moscow close behind at 93% to $232.37 per sf, and Singapore at 86%. Nicosia, Cyprus and Oslo, Norway rounded out the top five in this category.
“Office occupancy costs are continuing to defy sluggish economic conditions and the credit crunch, as they rise faster than global inflation,” said Raymond Torto, CBRE’s global chief economist, in a statement about the report. “These cost increases are dominated by emerging markets, caused by both supply and demand imbalance and the depreciation of the dollar relative to local currencies. In some of these emerging markets, class A office space is seriously lacking.”
No US city made it to the top 10 of either most expensive markets or the fastest growing. The cities of London, New Delhi, India, Paris, Singapore and Dubai finished out the top 10 for most expensive, in order, and Tel Aviv, Dubai, Mumbai, Manila and Perth, Australia rounded out the top 10 for fastest growing occupancy costs.
Midtown New York City was ranked at number 13 for most expensive, at $103 per sf, with only Los Angeles being the other US city to be in the top 50 of this list, at number 48. Suburban Miami ranked as the fastest-growing occupancy-cost US city, ranking at number 14, up almost 30% this past year. New York City Midtown was at number 21 on this list, with a 22.7% increase, followed by San Francisco (number 25), Los Angeles (26), Miami CBD (28), Los Angeles (30), Seattle (32), New York City Downtown (44), Boston (46) and Albuquerque, NM (50).
The report is based on a hard data monitored, assembled and analyzed by more than 500 local researchers from CBRE, a company spokesman tells GlobeSt.com. “This semi-annual report provides a timely analysis of the level and direction of global office market rents and occupancy costs and is a valuable benchmarking tool for the industry,” he says. The data is gathered from 173 cities worldwide.
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 Job Opportunities
 PromotionsNo more than one submission per company will be considered per week.
Submissions with multiple names will be capped at three for coverage in Executive Watch.
 New HiresNo more than one submission per company will be considered per week.
Submissions with multiple names will be capped at three for coverage in Executive Watch.
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When industry observers think of sustainable-building standards, often the first program that comes to mind is the US Green Building Council's LEED (Leadership in Energy and Environmental Design) initiative. The LEED rating system, widely considered the industry-sustainability standard, gives developers points toward specific steps they can take to make their projects greener, like building with recycled materials and installing efficient HVAC systems. The more points, the higher the level of certification. One organization, the National Multi Housing Council, felt that LEED and other similar standards didn't quite meet its constituents. So the organization has come up with its own system, called National Green Building Standard, to specifically address the multi-family sector. Paula Cino, the director of energy and environment for the NMHC, recently spoke with us about what makes her organization's program different and sustainability trends in multi-housing:
GlobeSt.com: Why did you feel that there was a need to set up an alternative to programs like LEED?
Cino: First of all, we have to recognize that the National Green Building Standards serves dual purposes. It provides multifamily firms with uniform guidance on green building practices, and it establishes the first consensus-based standards for jurisdictions considering mandatory green building requirements. Where that differs from other programs, such as LEED, is that those programs were not well suited for multifamily buildings.
GlobeSt.com: What are some specific differences between your standards and others?
Cino: The fundamental difference between the two is that no other building program was designed and written to be code compatible. That lack of code compatibility led to implementation problems, inconsistencies with existing building codes, uncertainty of enforcement as well as unnecessary costs.
GlobeSt.com: How has multi-family fared in the area of sustainable building compared with other sectors?
Cino: There are two different aspects to this. In terms of sustainability overall, multifamily has long been the most sustainable housing type and certainly one of the most sustainable real estate types. In terms of our site selection and development, we're very smart growth. We promote density development, and transit-oriented development, and those are important characteristics. In terms of actually following these green-building programs that look at a broader range of issue areas, including water conservation and energy efficiency, we saw the biggest movement on this front from the commercial-office sector, and it spilled over into other areas. We attribute that to mere ownership structure and the way commercial transactions are financed and moved forward versus residential real estate. It's just a different terminology. We're seeing a lot of interest in the residential sector across the board, looking into green building and being very conscientious about energy efficiency and water conservation.
GlobeSt.com: How much interest is coming from the tenant, or is more developer driven?
Cino: Where green building goes in the multifamily sector hinges largely on questions of financing and valuation, as well as operational data that is not yet available. The consumer appetite for these things, and what green building can do in terms of consumer preference, is still an open question. It's something that we're closely watching, but we just don't have any handle on where we're going to end up in that regard.
GlobeSt.com: What are the costs of sustainable development for the multifamily sector compared to offices?
Cino: Again, we don't have good data to support that. All we have are individualized case studies, which we really felt did not give a generalized view of the true cost of implementing these programs in our sector. Anecdotally, we've heard that you can implement a green-building program in a new construction program for only marginally more than what traditional construction would cost.
GlobeSt.com: Are there challenges a developer could face in a condo versus an apartment since the owner is occupying that space?
Cino: We principally represent multifamily firms engaged in rental apartments, but it's very clear that when you're dealing with a mixed-ownership building, such as condos, there are a lot of private-property right issues that come into play. In some programs, they really reach beyond the design and construction phase into ongoing operations and maintenance that really create a lot of problems in the condominium sector. The replacement of systems that were designed and originally installed as very high efficiency; How do you control that once an owner is in there replacing appliances to their individual preferences? We see these issues even on the rental side, where many of the green building programs out there specify something like the building being smoke free, including inside dwelling units. That raises a lot of legal issues inside the multifamily sector.
GlobeSt.com: Are there any types of developments that are more sustainable-friendly than others?
Cino: The first multifamily buildings that we saw define themselves as green were high-rise, urban properties. It's because those types of multifamily buildings are very close in design and construction to commercial office buildings. We saw a lot of the technology coming out of that commercial sector that could be easily implemented in that kind of construction. There was definitely a lag time in seeing those practices move to low-rise garden-style multifamily communities, which in fact is the vast majority of new apartment construction in the country. That's why this standard is important. It is specifically applicable to low-rise multifamily buildings.
GlobeSt.com: Are there a lot of developers out there looking to retrofit their projects to implement these standards?
Cino: The vast majority of apartment communities in this country are 1960s or earlier construction. There is a big interest in bringing these buildings up to date, especially in an environment of volatile energy costs and water shortages. Unfortunately, it is much more challenging in an existing building to qualify for some of these programs unless you're doing a true gut rehab. If you're going through and doing fairly moderate renovations, there are really limitations on what you can do, especially if the building is occupied.
GlobeSt.com: What is the biggest challenge going forward putting these standards into place?
Cino: Some of the unanswered questions. It is still an open question as to how the valuation of these properties work. Financing is an issue in those terms. Until we really figure out how to work through the financing and valuation and make these transactions happen, that's going to be the impediment to really pushing this out into the sector.
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Has the Downturn Impacted Turnover at Your Firm?
It seems a good amount of firms may not be feeling the pinch of an economic slowdown as bad as others. Many respondents to last week’s Quick Poll replied “Not at all” (42%)—that’ a solid amount to be sure. However, a number of respondents say their firms are feeling some hurt—35% chose “Tremendously” as an answer—while 24% picked “Looking for a Job. Don't Bug Me.” Shannon Hondl, senior vice president of acquisitions and development for Irvine, CA-based Birtcher Development & Investments, said his company has so far weathered the economic doldrums, but he attributes that to a sort of jack-of-all-trades philosophy practiced by Birtcher.
We don’t over hire. Employees tend to come here and stay here. I started my career in real estate with this firm. We just don’t bring in a lot of people, even when things are going strong. Here, it’s like once you’re in, your in.
Also, we’re not like a typical development company where people have specific roles. We have a senior vice president of construction who is really is an entitlement guy. Our CEO does property management sometimes. Everybody’s got multiple roles. It’s a utility type organization.
It’s the firms that have specific people doing only specific things that are getting hurt. People are looking around trying to justify keeping people on staff with a smaller pipeline.
One specific developer I frequently meet with from Denver told me they’re trying to find deals to keep people employed. They just want to get enough to cover their overhead. And I know a lot of companies we work with, construction companies and brokerages in particular, are really getting hurt.
