http://www.realert.com Real Estate Alert en-us Copyright 2000-2007 Harrison Scott Publications. All Rights Reserved. Sat, 04 Feb 2012 15:48:03 -0700 60 http://www.realert.com/headlines.php?hid=155622 Two large apartment complexes in suburban Washington have hit the market in what may be a harbinger of value-added listings to come. Both are Class-B properties with upside potential through renovations a type of offering that market players predict will be in big demand this year, as rising prices for high-end properties in core markets make second-tier suburban assets more attractive. The 1,350-unit Howard Crossing in Ellicott City, Md., will likely attract bids of $200 million, or $148,000/unit. The 982-unit Laurel Square in Laurel, Md., is valued at about $100,000/unit, or $98 million. CBRE has both listings. Howard Crossing, at 8732 Town amp; Country Boulevard, was built in phases between 1968 and 1975, and most recently renovated in 2005. Its close to the intersection of Interstate 70 and U.S. Route 29, roughly 12 miles west of Baltimore and 30 miles northeast of Washington. Starwood Capital of Greenwich, Conn., teamed up with apartment operator Hirschfield Properties of West Hartford, Conn., to buy the property in 2006 for $164.1 million. It was part of a five-property portfolio the partners acquired from Morgan Stanley. The garden-style complex is 93 occupied, at rents averaging $1,085. The Starwood team has begun to update cabinets, appliances and lighting as units turn over, allowing it to bump rents to an average of $1,148 on the handful of improved apartments. A buyer could boost rents further by undertaking a major overhaul of units and amenities, which include a pool and a fitness center.... http://www.realert.com/headlines.php?hid=155599 In the biggest sale of a California office property since the downturn, J.P. Morgan Asset Management has acquired the sprawling China Basin Landing complex in San Francisco from Calpers for $415 million. J.P. Morgan completed the purchase of the 902,000-square-foot complex late last month via its $14 billion Strategic Property Fund. The $460/sf price is believed to translate into a sub-5 initial annual return for the open-end fund, which declined to comment. The property, at 185 Berry Street, is about 97 leased. The unbrokered sale came together after J.P. Morgan, hungry for core assets on the West Coast, approached Los Angeles-based Canyon Capital, manager of the CalSmart portfolio of Calpers, which held the property since 2005. The price is the highest paid for a California office property since 2007, when Morgan Stanley sold a 50 stake in the Spear and Steuart Tower, also in San Francisco, to Paramount Group of New York for $730 million. On the entire West Coast, there has been just one larger office deal since then, excluding portfolios: J.P. Morgans $479 million purchase last August of two adjacent Seattle buildings, at 1918 Eighth Avenue and 818 Stewart Street, from Schnitzer West of Seattle. China Basin Landing consists of the 502,000-sf Wharfside Building, which was developed in 1920 and renovated in 1995, and the 400,000-sf Berry Street Building, developed in 1992 and expanded in 2007. About 70 of the total space is devoted to offices, and the rest is used for laboratories and classrooms. Tenants include University... http://www.realert.com/headlines.php?hid=155329 A recently renovated office building on the market in Manhattans SoHo district could attract bids as high as $130 million more than twice what it sold for five years ago. The 154,000-square-foot property, at 148 Lafayette Street, is 95 leased. At the estimated $844/sf value, a buyers initial annual yield would be about 6. Eastdil Secured has the listing. A partnership led by Property Group Partners which was known as Louis Dreyfus Property until a management buyout last month bought the building in 2007 for $59 million, or $457/sf, and later invested more than $21 million in renovations. The previous owner, a group led by AREA Property and J.P. Morgan Asset Management, had refurbished the ground-floor retail space and was planning to convert the 11 upper floors to residential condominiums, but decided to sell instead. Louis Dreyfus partnered with Bruce Toll, co-founder of homebuilder Toll Brothers of Horsham, Pa., on the transaction. They gutted the upper floors of the nearly century-old building and converted them into modern office lofts, including a penthouse. Office leases have a weighted average expiration date of 2020, with contractual rent increases that would boost income. Tenants include Tower Research Capital, architecture firm Callison and luxury retailer Dolce amp; Gabbana which also moved its showroom space to the building in 2008, from its previous location at 660 Madison Avenue. For a tenant to move their showroom space from 660 Madison speaks to the area, one market player said.... http://www.realert.com/headlines.php?hid=155239 CBRE Global Investors is looking to take advantage of Washingtons booming apartment market by selling a luxury complex it acquired two years ago. The 371-unit property, at 300 Massachusetts Avenue NW, is likely to attract bids of at least $160 million, or $431,000/unit. At that price, the buyers initial annual yield would be about 4.25. The two-tower complex, called Mass Court, is listed with CBREs brokerage affiliate. The investment manager stands to turn a hefty profit. Its $1.3 billion CBRE Strategic Partners Value 5 fund acquired the high-rise from Prudential Real Estate Investors for $105.5 million, or $284,000/unit. The transaction closed in February 2010, just as the multi-family market began to recover from the downturn. Apartment specialists will be watching the offering carefully. Strong demand for relatively new Class-A properties like Mass Court made the Washington area the nations most-desirable apartment market last year. Prices were driven up to boom-era levels, with some deals carrying skimpy sub-4 capitalization rates. Some multi-family investors question whether the sky-high prices will hold. As the first luxury listing for 2012, Mass Court will indicate whether the areas multi-family boom continues in the New Year. The complex, which was built in 2004, is about 97 occupied. It consists of attached towers of 14 and nine stories. Units feature granite countertops, walk-in closets, Italian-tile foyers and washer/dryers. Property amenities include a heated rooftop pool ... http://www.realert.com/headlines.php?hid=155033 Several large Manhattan office listings have languished in recent weeks as economic uncertainty and other factors have crimped prices, taking some of the sizzle out of what had been a strong sales market this year. The buildings at Five Times Square, 711 Third Avenue, One Exchange Plaza and 200 West 57th Street have either been pulled from the market or are no longer actively being shopped. Meanwhile, the tower at 1211 Avenue of the Americas, which went on the block in June, still hasnt sold. While a few buildings have traded in recent weeks, investors and brokers agree the market has hit a soft patch, with prices slipping from the levels reached early this year. Market pros said that the combination of concern about instability in Europe, a reduction in the availability of securitized mortgages and a fear of overpaying in an unstable economy have caused some listings to be dead on the vine. Sellers are not willing to take a lower price, and right now, bidders are becoming a little more reserved, said one broker. That has caused the bid-ask spread to widen out. The slowdown seems to be primarily affecting the largest listings and those priced most aggressively. But core investors flush with capital remain willing to pay up in selective cases, and some buyers are hedging their bets by pursuing stakes in properties, rather than outright purchases. CBRE began shopping the 1.1 million-square-foot Five Times Square in September for AVR Realty of Yonkers, N.Y. AVR, which bought the property for $1.3 billion, or... http://www.realert.com/headlines.php?hid=155007 (SEE CORRECTON BELOW) A developer is shopping the leasehold interest in a fully occupied office building in Washingtons East End. The 178,000-square-foot property, at 975 F Street NW, is expected to draw interest from core investors, who have been bidding up comparable buildings to capitalization rates in the 5-6 range. Based on recent deals, the property, called Carroll Square, could fetch roughly $125 million, or $700/sf. The owner, locally based Akridge, has given the listing to HFF, which declined to comment. The site, which is next to historic St. Patricks Church, originally consisted of 19th Century townhouses. Akridge redeveloped the site in 2007, constructing a 10-story office building that incorporates four of the townhouses and the facades of two others. The property is subject to a 90-year ground lease from the Archdiocese of Washington. A buyer must assume a $66 million loan with a 6.2 coupon. The interest-only mortgage, originated by MetLife, matures in November 2017. But it can be prepaid, subject to a penalty. The 10-story building, which has no significant lease expirations until 2017, is occupied mostly by law firms. Two tenants Seyfarth Shaw (77,000 sf) and Holland amp; Hart (13,000 sf) are subleasing from Dewey amp; LeBoeuf until 2022. Fitzpatrick Cella is leasing 17,000 sf until 2017. There is almost 13,000 sf of street-level retail space that is fully occupied by Leica Camera and Le Pain Quotidien, a restaurant. There is also a public art gallery and 6,500 sf of artist studios. Carroll Square is... http://www.realert.com/headlines.php?hid=154843 An AREA Property partnership is negotiating to buy a hotel portfolio from FelCor Lodging for roughly $300 million. The off-market deal would involve 15 properties mostly Embassy Suites, along with a few Sheratons and Holiday Inns totaling 4,000-4,500 rooms. AREA, a New York fund operator, is teamed up with hotel management firm Aimbridge Hospitality of Plano, Texas. The specific hotels are unclear. But apparently they are older properties in need of refurbishment, with less-than-ideal locations. Their sale would be consistent with FelCors ongoing efforts to upgrade its holdings. The Irving, Texas, REIT owns interests in 78 hotels, predominantly operated under such brands as Embassy Suites, Holiday Inn and DoubleTree. It is pursuing a strategy of pruning older, second-tier properties from its portfolio and acquiring high-quality hotels in prime markets. Last year, FelCor paid $98.5 million, or $257,000/room, for the 383-room Fairmont Boston Copley Plaza. In May, it entered the Manhattan luxury market, buying the 168-room Royalton and the 113-room Morgans New York for a combined $140 million, or $500,000/room. The seller, New York-based Morgans Hotel Group, continues to manage the two properties under a 15-year agreement. FelCor has said it may sell as many as 40 nonstrategic hotels as part of its repositioning strategy. In the last five months, the REIT has shed four properties, in Texas and Florida. Its most recent quarterly filing identified five hotels it plans to sell: the 278-room... http://www.realert.com/headlines.php?hid=154581 Winthrop Realty is seen as the leading bidder for a defaulted loan backed by a landmark office and retail building in Chicagos East Loop. Bidding has been heated for the $137 million loan on the 943,000-square-foot Sullivan Center, a century-old former department store that underwent a massive renovation over the past decade. Winthrop, a Boston REIT, has emerged as the leader with an offer north of 90 cents on the dollar. CBRE is reviewing the final round of bids on behalf of PNC Bank, which leads a consortium of five lenders. The floating-rate loan was written in 2007 for local developer Joseph Freed amp; Associates to complete a $200 million remodeling of the 15-story building, at One South State Street. Despite the award-winning renovation, the property has struggled with occupancy. After modifications and a one-year extension, Freed was unable to refinance when the loan matured in March. A wide range of fund operators bid on the note, hoping for a chance to win control of the collateral. The buzz is that bidders anticipate a struggle to foreclose on the property, but that Winthrop is willing to go either of two ways: negotiate a workout with Freed, or take control of the building and eventually sell it. Last year, Freed went to court in an unsuccessful effort to hold on to a nearby retail and entertainment building after defaulting on a $178 million construction loan. In March, Bank of America foreclosed on the 277,000-sf property, called Block 37, at 108 North State Street. Sullivan Centers... http://www.realert.com/headlines.php?hid=154486 Hoping to take advantage of the rebounding Chicago apartment market, a partnership is shopping a new luxury high-rise in the Central Loop. The 389-unit tower, at 215 West Washington Street, has an extimated value of about $400,000/unit, or $155 million. HFF is advising the seller, a partnership between Jupiter Realty of Chicago and Cornerstone Real Estate of Hartford. The 50-story building, which was completed last year, is still in its initial lease-up phase. The occupancy rate is about 85. The units, which range from studios to three-bedroom apartments, have stainless steel appliances, cherry cabinets and granite countertops. Some have balconies. Amenities include a fitness center, a steam room and a library. There is an attached 12-story garage. The offering doesnt include about 14,000 square feet of retail space on the street level. Chicagos rental market has bounced back strongly from the economic downturn. Market-wide occupancy has climbed to 95 from 93 in 2009, according to Marcus amp; Millichap, and newer luxury properties are commanding boom-year capitalization rates. In May, Hartz Mountain Industries of Secaucus, N.J., acquired the 809-unit building at One West Superior Place from Toronto-based Brookfield Asset Management for $320 million, or $396,000/unit. The capitalization rate was reportedly 4.4. And MetLife is under contract to buy the 249-unit EnV tower at 161 West Kinzie Street from Lynd Development of San Antonio for about $520,000/unit, or $130 million ... http://www.realert.com/headlines.php?hid=154372 Fund shops Colony Capital and DivcoWest Properties have bucked the tough fund-raising market by setting up sidecar funds alongside commingled vehicles. Colony has lined up about $400 million of equity via sidecars, supplementing nearly $600 million for the main vehicle, Colony Distressed Credit Fund 2. DivcoWest has amassed about $400 million of pledges for a vehicle that co-invests with its DivcoWest Fund 3, which also has about $400 million of commitments so far. Sidecars are nothing new, but they could be an especially effective option for raising capital at a time when market volatility has left institutional investors wary of making equity commitments. Co-investment vehicles typically carry lower fees than the main funds and give investors greater control of investments. They are akin to a separate account attached to a commingled fund. After seeing the success of Colony and DivcoWest, other investment managers might follow suit, said one placement agent who didnt work on either fund. Anything that works will get replicated, he said. Its so hard to raise capital, if something worked, it will be tried. A sidecar fund usually focuses on a single investment or sector and is often broken out from the main fund to avoid excessive concentrations of a specific investment type. Sidecar vehicles can invest in the same transactions as the main fund, although they can also invest independently, perhaps pursuing deals with a different yield goal than the m... http://www.realert.com/headlines.php?hid=154256 Brookfield Asset Management has agreed to pay more than $200 million for a trophy office tower in Denver thats about to be vacated. Toronto-based Brookfield is expected to make the purchase in cash and then work to lease up the 1.3 million square feet in Qwest Tower, at 1801 California Street. Market pros put the price tag around $166/sf, or $212 million. Cushman amp; Wakefield is brokering the sale for energy utility Public Service Enterprise of Newark, N.J. The 52-story tower, Denvers second-tallest, was completed in 1983. It was fully leased by telecommunications firm US West, which was later acquired by Qwest. After Qwest was acquired by CenturyLink in April, a decision was made not to renew the lease when it expires next June. Qwest has subleased more than 400,000 sf in recent years, and Brookfield presumably will seek to negotiate leases with some of those occupants, which include the SEC and two law firms. That leaves some 900,000 sf of vacant space to fill, in a market where Class-A space is 88 occupied. Brookfield can tap into many existing relationships in the Denver market to drum up tenants. The firm has owned several high-profile Denver properties via various investment vehicles. The 1.8 million-sf Republic Plaza on 16th Street is owned by a REIT affiliate, Brookfield Office Properties of New York. Its unclear which vehicle Brookfield is using for its latest acquisition. Public Service, primarily an owner of energy companies, acquired the building in 1992 for a reported $240 million.... http://www.realert.com/headlines.php?hid=154143 Institutional investors are clamoring for retail condominiums in Manhattan. For pension funds, insurance companies and foreign buyers, such condos provide a relatively high capitalization rate and low price hurdle for a Manhattan retail property, as well as limited management responsibilities. There are more institutional investors focused on retail condos now than at any point in the past, said Studley managing director Will Silverman. More than a half-dozen offerings have hit the market this year. Investors that have either kicked the tires or completed purchases include Invesco, German syndicator GLL Real Estate, Ohio State Teachers, Prudential Real Estate Investors, RREEF, TIAA-CREF, German fund shop Union Investment Real Estate and Vornado Realty. The latest offering is a 100,000-square-foot block of space at Manhattan House, a residential-condominium building that stretches from East 65th Street to East 66th Street, between Second and Third Avenues. The offered space, which is fully leased, encompasses 30,000 sf of stores, 18,000 sf of medical offices and a 230-space garage. The tenants include such high-end retailers as ALDO, Club Monaco, Lululemon Athletica and Madame Paulette. A florist and a nail shop at East 65th Street and Second Avenue could be combined when their leases roll over in two years. The condo, which has no other short-term lease expirations, is expected to attract bids of about $100 million. At that price, the capitalization rate would be about 5.5.... http://www.realert.com/headlines.php?hid=154117 A few giant fund shops have started supplementing their institutional capital-raising campaigns by soliciting equity from high-end retail clients of Wall Street banks. Among the operators employing the strategy are Blackstone, Lone Star Funds and Starwood Capital. The client networks being approached include the wealth-management and private-client groups of Bank of America, Credit Suisse, J.P Morgan and UBS. The tactic can be costly requiring the payment of a bank fee equal to up to 3 of the capital raised. But it gives the fund shops an entree to wealthy individuals and family offices that otherwise might not be reached. And the operators can sometimes pass on at least part of the fee to the investors. Its not that the banks are clamoring to the [private equity] guys, said one fund executive. Its the PE firms going to the banks saying would you please, please, please market this PE fund through your high-net-worth network. The strategy was used occasionally before the market crash, but has reappeared only recently. One longtime placement agent said it reflects the fact that equity commitments still remain hard to come by following the downturn, prompting managers to consider all options for capital. Because large fund managers primarily target institutional investors, their relationships with family offices and wealthy individuals arent as deep. So tapping a bank retail network can be an efficient way of accessing that capital and supplementing the [institutional capital] raise, the placement... http://www.realert.com/headlines.php?hid=153829 The turnover of senior real estate executives who focus on strategy or research has been unusually heavy over the past few months, a trend some view as a harbinger of improving conditions for capital-raising and acquisitions. In the latest example, David Morrison, a former co-head of Morgan Stanley Real Estates Prime Property Fund, was named head of global strategy at fund shop CBRE Investors. Several other fund operators, life companies, REITs and brokerages also have made recent senior-level hires, including Allianz, Abu Dhabi Investment Authority, Cole Real Estate, Bentall Kennedy, RREEF and the brokerage unit of CB Richard Ellis. Meanwhile, American Realty Advisors and Invesco Real Estate appear to be looking to fill similar positions. Openings for high-level research or strategy roles are somewhat rare, as executives tend to hold such positions for relatively long periods. But turnover is often heaviest after a downturn, when firms are preparing to resume capital-raising and property purchases. In some cases, incumbents voluntarily leave to take advantage of new opportunities. Professionals in research and strategy are starting to explore their options, said Christopher Papa, a managing director at executive search firm Bachrach Group of New York. He has fielded calls from several executives seeking new positions in recent months far more than normal. Sometimes incumbents are being pushed aside for executives seen as better suited to deal with the current landscape. And sometimes, as in the c... http://www.realert.com/headlines.php?hid=153741 A Carlyle Group joint venture is shopping two multi-family development sites on Manhattans Upper West Side that could attract bids approaching $400 million. The parcels, which are being offered jointly, are two blocks apart, between West 59th and West 61st Streets along the West Side Highway. They received zoning approval last year for construction of some 1,200 apartments in two towers. The joint venture expects pricing to reach $390 million, or $300 per square foot, for the estimated 1.3 million sf of developable space. We think this is a unique opportunity for large institutional multi-family players to get into New York, said Carlyle principal Jason Hart. Fully entitled sites of this quality and size are typically held on a long-term basis by local families, and they do not trade. HFF is marketing the parcels. A bidding deadline of around Thanksgiving is likely. The strong demand for apartments in Manhattan makes construction feasible. The vacancy rate on the Upper West Side is a skimpy 1.1. Rents at Class-A properties average $3,517, exceeding the citywide average of $3,350, according to local brokerage Citi Habitats. But Carlyle projects that, when completed, the properties on its sites will command rents of nearly double the average about $6,500, or $6.50/sf, for a 1,000-sf unit. The properties value upon completion is projected at well north of $1 billion. The first tower, at the southwest corner of West 61st Street and West End Avenue, will likely have roughly 575 apartments. The second tower,... http://www.realert.com/headlines.php?hid=153574 A developer is shopping a premier office campus in suburban Dallas to core investors, with bids expected to top $480 million. Hall Office Park, in Frisco, Texas, has more than 1.9 million square feet spread over 15 buildings. At the estimated value of $250/sf, a buyer could expect an initial annual yield of roughly 7. Eastdil Secured is advising the seller, Hall Financial of Frisco, which developed the property between 1998 and 2008. Hall is interested in retaining a minority interest but would consider an outright sale. It hopes to continue managing the Class-A property. The master-planned, 162-acre campus is at the Dallas North Tollway and Gaylord Parkway, about 20 miles north of downtown Dallas. It will be 94 occupied in January, when several tenants will move in. Its buildings have consistently maintained occupancy rates above 90 upon stabilization. No single tenant leases more than 15 of the park, minimizing rollover risk. The buildings, which have 2-8 stories, range in size from 87,000 sf to 197,000 sf. The tenant roster boasts many international and national companies, including: Amerisource Bergen (262,000 sf until 2019), Aastra (116,000 sf until October 2014), Tenet Healthcare (75,000 sf until January 2014), Genband (52,000 sf until 2018) and ThyssenKrupp (46,000 sf until 2016). The grounds feature walking and jogging trails, lakes, fountains and a sculpture garden. There is a conference center on the campus, as well as restaurants and stores on adjacent sites. The property is near the Sam Rayb... http://www.realert.com/headlines.php?hid=153444 A bankruptcy court has given the green light for the listing of a big suburban Washington apartment complex that could be a litmus test for whether soaring valuations in the area will be sustained. The 891-unit property, in Silver Spring, Md., is performing well. But an overleveraged Stellar Management entity lost control of it after defaulting on $185 million of debt in February 2010. Comparable older-vintage complexes in suburban Washington have traded at capitalization rates in the area of 6 over the past year or so, reflecting strong investor demand for such properties. But market pros think the recent economic weakening and a softer outlook for rent growth might temper the sky-high valuations. They expect the Silver Spring complex, called The Georgian, will be purchased by a value-added investor at a price closer to a 7 cap perhaps for $192 million, or $215,000/unit. CB Richard Ellis has the listing. The two-building complex, at 8750 Georgia Avenue, was built in 1970. New York-based Stellar bought it in 2004 from GE Capital for $89.5 million and then mapped out an ambitious $30 million renovation, which has been partially completed. Stellar refinanced the property in 2007 with a $185 million debt package arranged by Deutsche Bank, including a $125 million senior loan that was securitized. At the time, the high-rise complex was valued at $227 million. But after the economy tanked and the real estate market crashed, the propertys value plunged to as low as $149 million in February 2010, when the... http://www.realert.com/headlines.php?hid=153355 A Barclays partnership took bids last week on six office properties owned by its Crescent Real Estate operation, with some investors unexpectedly pursuing the whole portfolio. Market pros initially assumed the 8.2 million-square-foot package would be divided among multiple buyers, because the properties are in disparate markets: Houston, Las Vegas, Denver and Fort Worth, Texas. But Brookfield Office Properties and a few other investors made offers for the entire portfolio, whose value is estimated at more than $1 billion. Among bidders targeting individual properties, demand was especially strong for the 4.25 million-sf Greenway Plaza in Houston. The initial bids weighed in at more than $700 million, or $165/sf. That was well above the initial projection of $150/sf, or $638 million. The strong bidding is the latest example of heated demand for core office properties in Houston, where capitalization rates for such buildings have dipped as low as 6. Now the Barclays partnership, which is being advised by HFF, is weighing whether the best execution is to sell the portfolio to one buyer or slice it up. Its like a jigsaw puzzle, said one market pro. A second round of bids will be taken this week. New York-based Brookfield made at least two bids: one for the whole portfolio and another to acquire both Greenway Plaza and the 955,000-sf Carter Burgess Plaza in Fort Worth, which has an estimated value of about $100/sf, or $96 million. Market players said San Francisco-based Shorenstein Properties was also among the... http://www.realert.com/headlines.php?hid=153097 In this years biggest office transaction on the West Coast, J.P. Morgan Asset Management has agreed to buy two new Seattle office towers from developer Schnitzer West for about $475 million. The investment manager is acquiring the 668,000-square-foot building at 1918 Eighth Avenue and the 232,000-sf building at 818 Stewart Street. CB Richard Ellis is advising Schnitzer, of Portland, Ore. The $530/sf price is near the high end of estimated valuations when the properties hit the market in May, which bodes well for other Seattle listings. J.P. Morgans capitalization rate is unknown, but market players estimate it at about 5.5. Nearly a dozen investors participated in the second round of bidding, and almost all made offers for both buildings, which Schnitzer was willing to sell individually. The towers have the characteristics most desired by institutional buyers: recent construction, a downtown location and high occupancy by big-name tenants. The properties are about a block apart in the sought-after Westlake Triangle section. The 36-story tower at 1918 Eighth Avenue, which was completed in 2010, will be 94 occupied once Amazon.com finishes moving in later this year. The on-line retailer signed a 500,000-sf lease in March. The 14-story building at 818 Stewart Street, which was completed in 2008, is 90 leased. The tenants include public relations giant Weber Shandwick, consulting firm Accenture and software developer FiberCloud. Although the average office occupancy rate in Seattle is still... http://www.realert.com/headlines.php?hid=152946 TIAA-CREF is looking to sell a 50 stake in a large office complex in Houston, where surging demand for core office properties has led to a flurry of deals. The 1.8 million-square-foot Four Oaks Place, which encompasses four buildings and a parcel, is worth an estimated $400 million, or roughly $230/sf. At that valuation, a buyers initial annual yield would be about 6.25. But a potential deal to construct another building on the parcel could dramatically boost the value. The complex, in the West Loop/Galleria submarket, is 93 leased. TIAA, which acquired the property in 2004 from an Lamp;B Realty Advisors partnership for $255.4 million, has awarded the listing to Eastdil Secured, but marketing isnt expected to begin until after Labor Day. By that time, the pension system expects to know whether Four Oaks Place has been chosen as the site for an 800,000-sf build-to-suit office building for Apache Corp., a big energy company that has its headquarters nearby. The development and long-term lease with a major tenant would greatly increase the value of the complex but the buzz is that TIAA is a long shot to win the Apache deal. Regardless of the outcome, TIAA plans to market the stake. It seeks to continue operating the property and collect an asset-management fee from its new partner. TIAAs move comes on the heels of another recapitalization of a big Houston office property that illustrates the intense demand for core assets in the market. In June, ING Clarion, acting on behalf of New York Common Fund, agreed to buy a 50 stake... http://www.realert.com/headlines.php?hid=152857 Savanna Investment is under contract to pay $130 million for the leasehold interest in a Class-B office building near Madison Square Garden in Manhattan. The purchase price for the 418,000-square-foot Penncom Plaza, at 132 West 31st Street, translates into $311/sf. Jones Lang LaSalle is advising the seller, a joint venture between Camp;K Properties and Zamir Associates, both of New York. Savanna, a New York fund shop, targets properties that have upside leasing potential. In recent months, it has been buying distressed commercial mortgages with an eye on taking control of the underlying collateral, but the firm also looks to acquire Class-B buildings with up to 500,000 sf. The 18-story Penncom Plaza is 98 occupied, according to CoStar, but 44 of the space will become vacant in January, giving Savanna an opportunity to boost rents. The initial annual yield on the investment couldnt be learned. The Camp;K partnership bought the leasehold interest in Penncom Plaza for $91 million in 2004 from Tribeca Associates of New York and Ritchie Capital of Wheaton, Ill. At the time, it was the third flip of the building in as many years. The Lemle family owns the underlying land. It sold the leasehold interest in 1997 to a partnership between Taconic Investment and Blackacre Capital, both of New York. The ground lease, which has rent bumps every five years, expires in 2046. The lease holder has an option to buy out the Lemle family in 2017. Penncom Plaza, which was built in 1925, was long known as Greeley Arcade. It... http://www.realert.com/headlines.php?hid=152723 J.P. Morgan Investment Management last week acquired a 49.9 stake in the virtually fully occupied office building at 498 Seventh Avenue in Manhattan for $205 million. The transaction valued the 933,000-square-foot Garment District property at $439/sf. That was slightly above the expected price of $429/sf, reflecting the heated demand for stabilized buildings in core markets. J.P. Morgans initial annual yield is about 5.5, market players said. CB Richard Ellis represented the seller, SITQ Immobilier, the real estate arm of Canadian pension-fund advisor Caisse de Depot et Placement du Quebec. The remaining interest in the building is held jointly by Loeb Partners Realty and George Comfort amp; Sons, both of New York. J.P. Morgan evidently divided the investment among several of its vehicles. The well-capitalized investment manager has been an active buyer across the country, and especially in New York. Earlier this month, one of its funds agreed to buy a majority stake, estimated at 90-95, in the 852,000-sf International Toy Center building at 200 Fifth Avenue, between West 23rd and West 24th Streets. The transaction values the property at about $700 million, or $822/sf. Lamp;L Holding of New York holds the remaining interest. Eastdil Secured is brokering that sale for Lehman Brothers. The building at 498 Seventh Avenue is 99 leased, with a weighted average remaining lease term of 7.5 years. Tenants include Group M Worldwide, LN Holdings and Massachusetts Mutual. SITQ bought its interest in the... http://www.realert.com/headlines.php?hid=152619 A Whitehall Street Real Estate fund is pitching a Silicon Valley office complex to both core and core-plus investors. The 469,000-square-foot Central Research Park in Sunnyvale, Calif., is expected to attract bids of about $130 million, or $277/sf. The property, in one of Silicon Valleys most-desirable submarkets, is 100 leased, making it a probable target for core buyers. But leases on about half of the space roll over within four years. That provides potential upside, because some investors think Silicon Valley is headed for another dramatic spike in rents. If that happens, new leases could be signed at higher rents. CB Richard Ellis has the listing. The eight buildings at Central Research Park, built between 1977 and 1984, contain a mix of traditional office and research-and-development space. Despite its age, market players consider the complex Class-A because it has undergone extensive renovations. Since 2000, owners have poured about $48 million into the buildings. Whitehall Street, Goldman Sachs fund operation, bought the property for $118.5 million in November 2006 from Carlyle Group of Washington. Archon Group, a Goldman subsidiary in Irving, Texas, manages the complex. Central Research Park is at the intersection of Central Expressway and North Mary Road, just off the Route 101 freeway about midway between San Jose and Palo Alto. The buildings range in size from 25,000 sf to 87,000 sf. Tenants include Boeing, Dell, Juniper Networks and Synopsys. The high-tech industry... http://www.realert.com/headlines.php?hid=152507 A partnership led by Apollo Global Real Estate is circling the Novotel New York Times Square Hotel. New York-based Apollo and its partner, Chartres Lodging of San Francisco, appear to be valuing the 480-room hotel at $111 million, or $231,000/unit. Its unclear whether they have made a formal offer. But Apollo faces a potential obstacle: Madison Capital has a right of first refusal to buy the hotel, which is at Broadway and West 52nd Street. The New York firm has hired Ackman-Ziff Real Estate to help drum up an equity partner to pursue a purchase. A buyer would have to undertake a substantial renovation, including upgrades to the mechanical systems, rooms and common areas. By some estimates, the all-in cost of buying and renovating the property could amount to roughly $400,000/room, or $192 million. The seller, French hotel company Accor, plans to continue operating the property under a long-term management contract. It is being advised by Jones Lang LaSalle Hotels. The hotel was built on top of a four-story office and retail building formerly owned by a development firm, Brody-Lewis Co. In the early 1980s, Brody-Lewis sold the development rights above the building to Accor, which constructed the hotel. Brody-Lewis retained a long-term leasehold interest in the original space and was given the right of first refusal on the hotel. In 2006, it sold the leasehold interest in the original building and the right of first refusal to Madison. Madison has leased the approximately 100,000 square feet of retail and office space on ... http://www.realert.com/headlines.php?hid=152458 The four Chetrit brothers, who rank among the largest private holders of commercial real estate in Manhattan, have split up. The fissure, which occurred in the past month or so, has divided the family business in two. Elder brothers Joseph Chetrit and Meyer Chetrit will continue to operate under the Chetrit Group name, but have relocated from the firms longtime headquarters at 404 Fifth Avenue into offices at 512 Seventh Avenue. Meanwhile, brothers Jacob Chetrit and Juda Chetrit are working out of the Fifth Avenue office, but will operate under the name of Chetrit Organization. Word of the breakup began circulating through Manhattan real estate circles over the past couple of weeks. Multiple real estate pros said it appeared to be acrimonious, but few details were available. Most sources were reluctant to discuss the matter at all, for fear of possibly alienating the Chetrits, major investors who have a reputation for being both tough-minded and secretive. The Chetrits didnt return calls seeking comment. Its unclear how the brothers joint holdings might be affected. The brothers shun the press, maintain no public website and are rarely photographed. Like developers Joseph Moinian, Yair Levy and Charles Dayan, Joseph Chetrit moved into commercial real estate after being successful in New Yorks garment and fabric industries. The four men have teamed up on deals. Joseph Chetrit was widely viewed as the leader of Chetrit Group. A cousin, Issac Chetrit, has been linked to the firm in years past, ... http://www.realert.com/headlines.php?hid=152285 Vornado Realty is shopping a 2.4 million-square-foot portfolio of retail assets, mostly big-box stores and supermarkets, that could fetch $270 million. The package encompasses 48 stores in 18 states, with the heaviest concentration more than a third of the portfolio in California. The buildings and underlying land are for sale at 25 of the properties, totaling about 1.3 million sf. Eleven stores, with 483,000 sf, are subject to ground leases. The remaining 12 assets consist of long-term master leases on buildings, totaling 670,000 sf, that are subleased to retailers. At the estimated value, a buyers initial annual yield would be about 8. But there is room for improvement, because many of the properties have below-market rents that can be increased upon rollover. In addition, most leases contain significant rent bumps that will boost revenue over time. CB Richard Ellis is advising the New York REIT, which prefers to sell the portfolio intact, but will accept bids on individual properties. The portfolios projected net operating income for 2012 is $21.6 million. The properties have 28 tenants, more than half of which have investment-grade credit ratings, providing a stable cashflow. The average remaining lease term is 8.3 years. The biggest tenant is Best Buy, which has 12 stores that account for 38 of the portfolios net operating income. Stater Bros. Markets (10 stores) and PetSmart (nine stores) each generate 9 of the net operating income. Other tenants include Home Depot, Kohls, Nordstrom Ra... http://www.realert.com/headlines.php?hid=152006 A cluster of office-property offerings has popped up in Southern California as the market revives from its deep funk. The listings include a 997,000-square-foot portfolio in the Los Angeles and San Diego metro areas that could trade for around $160 million, or $160/sf. Also newly listed is the 280,000-sf Bank of America Tower in downtown San Diego, with an estimated value of about $70 million, or $250/sf. Eastdil Secured has both listings. Meanwhile, Equity One recently began shopping two Southern California properties (see article on Page 9). Bank of America Tower, owned by Lehman Holdings, is 82 occupied, with Bank of America committed to a long-term lease for 126,000 sf. The 20-story building, at 450 B Street, was constructed in 1982 and underwent $9 million of renovations in 2008-2009 that included overhauling the lobby and upgrading the elevators. The portfolio, offered by Shidler Group of San Diego, is 88 leased by 90 different tenants. Three of the eight office and office/flex properties are less than 70 occupied, providing upside potential for a buyer who can fill empty space. Others are fully leased, including the largest, the 372,000-sf Savi Tech Center, an office/flex building at 22705 Savi Ranch Parkway in Yorba Linda. The other properties are: Yorba Linda Business Park 1, at 22343-22340 La Palma Avenue in Yorba Linda (115,000 sf, 80 occupied). Yorba Linda Business Park 2, at 22833 La Palma Avenue in Yorba Linda (50,000 sf, 100 occupied). South Coast Executive Center, at 1503... http://www.realert.com/headlines.php?hid=151910 ING Clarion, acting on behalf of New York Common Fund, has agreed to buy a 50 stake in Houstons Wells Fargo Plaza from MetLife for $255 million. The transaction values the 1.7 million-square-foot tower at $510 million the highest price ever attached to a single Houston office property in a trade, according to Real Estate Alerts Deal Database. The $300 valuation on a per-foot basis is also extraordinary, $15 higher than market expectations and just shy of the record $302/sf price on the pending sale of a much smaller property in the city. HFF is brokering the sale for MetLife, which will retain the remaining 50 stake and continue to operate the 71-story tower, which is 95 leased. The insurer plans to redeploy the proceeds into core and core-plus properties this year and may team up with ING and Common Fund on those investments. The price tag for Wells Fargo Plaza, which translates into a capitalization rate of about 6, is further evidence of how frothy Houstons office market has become this year amid a resilient energy industry. The $300/sf threshold is being approached with increasing frequency. Last month, a sales agreement for a trophy office building in the Energy Corridor set a record per-foot mark for Houston. American Realty, an investment manager in Glendale, Calif., agreed to buy the 303,000-sf Energy Center 2 for about $302/sf, or $92 million. The initial annual yield is just below 7.25. CB Richard Ellis is advising the seller, a partnership between Houston-based... http://www.realert.com/headlines.php?hid=151772 The number of bidders for industrial properties has exploded this year, fueling big offerings, driving up pricing and pushing opportunistic investors toward off-market deals. Nontraded REITs have been among the most-aggressive new investors in the sector, but several big private equity firms are also kicking the tires. At the same time, traditional buyers have come off the sidelines after sitting out the downturn. The upshot: Offerings that might have attracted three bids a year ago are now luring two dozen. It feels like 2006 again, said one industrial investor in Southern California, the sectors hottest industrial market, where capitalization rates have dropped to 5. Last year, a few traditional industrial players, including Cabot Properties of Boston and KTR Capital of New York, were active, scooping up properties at depressed prices following the downturn. But one major new buyer also stormed into the sector: fund shop Blackstone, which closed on three portfolios totaling $1.7 billion late last year. Other private equity firms are now seeking to follow its example, in what one industrial pro called the Blackstone halo effect. Two of them TPG of Fort Worth, Texas, and Brookfield Asset Management of Toronto have bid on major industrial portfolios currently on the block, including a 7.8 million-square-foot package that Eastdil Secured is shopping for Ridge Property, a private industrial REIT capitalized by Prudential Real Estate Investors. That package is valued at about $500 million. Another... http://www.realert.com/headlines.php?hid=151663 Lender Credit Suisse is shopping the luxury Gansevoort Hotel and condominium complex in the trendy South Beach section of Miami Beach. The oceanfront property a total of 589 units being marketed as a package could attract bids of roughly $350 million. That would be a 13 discount to the propertys $403 million debt load when Credit Suisse foreclosed last year. Jones Lang LaSalle Hotels has the listing. The offering comes at a time when buyers are clamoring for hotels in the high-end South Beach market, which held up well during the recession and has since seen growth in occupancy and revenues. The F-shaped, 18-story structure consists of the 334-room hotel and 259 residential condos. Only four of the condos have been sold. The other 255, which are vacant, are included in the offering. There is also 63,000 square feet of retail space, occupied by restaurants Philippe and STK and a David Barton Gym and Spa, as well as three pools, a 55,000-sf beach club and a rooftop bar. The property, a hot spot for visiting celebrities, was constructed in 1970 as an apartment complex and later converted into a 593-unit full-service hotel. From 2005 to 2007, a partnership involving William Achenbaum redeveloped the property into a mix of hotel rooms and condos. Although the hotel performed well during the recession, the project was dragged down by the dismal condominium-sales market. A buyer could rent the condos and try to sell them off as the market recovers, or could convert them into fractional ownership... http://www.realert.com/headlines.php?hid=151532 In its second recent high-profile hotel acquisition, Westbrook Partners last week bought defaulted debt on the St. Regis in Washington from Barclays for about $100 million in cash and immediately foreclosed on the luxury property. Barclays, which held $125 million of senior and mezzanine debt on the St. Regis, won the right to seize the 182-room hotel at a foreclosure auction held April 12. The bank then sold that right to Westbrook. At the $550,000/room purchase price, Westbrooks initial annual yield will be roughly 5. The price was far below the hotels $170 million valuation during a recapitalization in September 2007. Claret Capital, an Irish syndicator, acquired a 90 stake from a Brickman Associates partnership for $153 million, with the partnership retaining a 10 interest. That worked out to $881,000/room, because the property had 193 rooms at the time. Brickman and its partner, New Valley Corp. of Miami, had acquired the St. Regis in 2005 for $47 million and plowed $85 million into a renovation. Claret stepped in as the property was re-opening. But the hotels performance and value were dragged down by the recession, and the Claret partnership defaulted when its debt matured in May 2010, prompting Barclays to file for foreclosure, with CB Richard Ellis as its advisor. More recently, performance has improved. Revenue per room climbed 3 last year and is projected to grow 14 this year. Net income is expected to reach $5 million this year, up from $2 million last... http://www.realert.com/headlines.php?hid=151390 Two big industrial deals show how strong demand for stabilized properties is pushing down capitalization rates in the Chicago area, a trend that could spur investors to pursue value-added plays to capture higher yields. Heitman is paying about $140 million to buy seven fully leased warehouses totaling 2.3 million square feet from developer Northern Builders. Meanwhile, Industrial Income Trust has agreed to pay HSA Commercial Real Estate just over $100 million for a 1.4 million-sf portfolio that is 87 leased. Colliers International brokered both deals. The price paid by Heitman, equal to about $61/sf, indicates an initial annual yield of 6. The stabilized cap rate will be 6.5, because a major tenant has a rent bump in the second year. Industrial Income, which is paying $71/sf, anticipates a yield just below 6. By comparison, the average cap rate for Chicago warehouses last year was 8.4. Market players said an enormous amount of core capital is chasing well-leased Class-A industrial properties nationwide. But many investors are getting priced out of the hottest market Southern California, where capitalization rates are hovering at 5. Everyone wants to be in Southern California, but theres not enough product and pricing is super-aggressive, said one Chicago industrial broker. As a result, the recovery is gaining steam in other regions including Chicago, which has always been a liquid market offering geographic diversification to core investors with exposure to the East and West Coasts.... http://www.realert.com/headlines.php?hid=151275 A foreclosure auction is planned for a nearly vacant office building in Midtown Manhattan whose condominium-conversion plan fell victim to the market crash. Lehman Brothers holds more than $325 million of defaulted debt on the 321,000-square-foot property, at 1107 Broadway. It has scheduled a foreclosure auction for June 6, according to marketing materials provided to investors. Lehman has hired Eastdil Secured to drum up interest in the auction. The hiring of a broker is a routine step in Uniform Commercial Code foreclosures, because the courts want to ensure that lenders widely advertise foreclosure proceedings. Meanwhile, Lehman is negotiating with the borrower about a possible settlement that would avert the auction. Lehman is clearly positioned to take over the property. It could effectively bid up to the amount of debt it holds without putting up any cash. But it's unclear whether Lehman prefers to foreclose or would step aside if a third party bid a high enough price for the debt. The Flatiron District property, known as International Toy Center North, is owned by a partnership that includes Tessler Developments of New York. Tessler, which is led by Yitzchak Tessler, bought a 50 stake in 2007. The seller, a partnership between investor Joseph Chetrit and Arbor Realty of Uniondale, N.Y., retained the remaining 50 interest. The transaction valued the property at $235 million. Tessler, continuing the path of Chetrit and Arbor, planned to convert the building into residential cond... http://www.realert.com/headlines.php?hid=151114 Seven apartment properties in northern Manhattan neighborhoods are being pitched to value-added investors. The Class-B buildings have 362 apartments, most subject to the city's rent-stabilization guidelines. Bids for the portfolio could reach $90 million, or $249,000/unit. That would translate into a capitalization rate of about 5.25. It's unclear whether the owner, Vantage Properties of New York, would consider offers on individual buildings or groups of buildings. Massey Knakal has the listing. The mid-rise properties, clustered along Broadway in Washington Heights and Hamilton Heights, were built in the 1910s and 1920s. They range in size from 33 to 63 apartments. The units primarily have 1-2 bedrooms, with a smattering of studios and units with 3-5 bedrooms. There is also street-level retail space in each building. Fifty-three apartments have no rent restrictions, and six fall under strict rent-control rules. The rest are rent-stabilized, allowing for modest annual rent increases and bigger ones as units turn over and are renovated. Only 27 units were fully renovated recently. Because of the large number of rent-restricted units, as well as the sizable amount of retail space, Vantage is stressing the long-term potential upside. Although sometimes difficult, the conversion of rent-regulated apartments to market rates would significantly boost returns. The average rent in the portfolio is about 40 below the area's market average, according to Vantage. Also, a buyer might be able to raise... http://www.realert.com/headlines.php?hid=150998 Savills has teamed up with a company that includes former Lehman Brothers real estate chief Mark Walsh to form a joint venture that will manage debt and equity investments for third-party clients in North America. The alliance adds an asset-management arm to the U.S. division of Savills, a London company that has focused on advising clients, brokering properties and arranging debt and equity. And it gives Silverpeak Real Estate, an investment-management firm led by Walsh and several other former Lehman executives, access to asset-management assignments in the U.S. for Savills' worldwide client roster, which includes foreign and domestic banks, sovereign wealth funds, wealthy buyers and institutional investors. The joint venture is another step forward in Savills' ongoing effort to position itself to represent foreign investors targeting U.S. properties. The U.S. operation, based in New York, recently opened offices in Washington and Los Angeles and hired three professionals from CB Richard Ellis to form a cross-border advisory team to help those buyers scout out properties. The next logical step is to be able to help them asset-manage those properties to make sure that they reach their full potential over the length of the investment, said John Lyons, chief executive of the U.S. division of Savills. The company has some 200 offices globally and offers management services outside of the U.S. The joint venture, Savills Liberty Street Asset Management of New York, is led by Lyons and Brad Lebovitz, a... http://www.realert.com/headlines.php?hid=150882 In one of the largest retail offerings since the market downturn, Simon Property is marketing four malls in Florida and Tennessee that are carried on its books at a combined value of about $350 million. Simon is shopping the 1.9 million square feet it owns at the properties, which encompass 3.7 million sf, including separately owned anchor stores. The malls have an overall occupancy rate of 91. The portion up for grabs includes 1.1 million sf of in-line space that is 82 occupied, some by temporary tenants presenting upside potential for a buyer. The eight anchor stores owned by Simon are leased. All but one of the 12 separately owned anchor slots are also occupied. The Indianapolis REIT is pitching the offering as a portfolio, but will accept bids on individual malls. HFF has the listing. Big mall trades have been extremely scarce in recent years. Just four transactions have exceeded $100 million since the downturn, according to Real Estate Alert's Deal Database. The biggest deal came in March 2010, when Simon paid $300.4 million to German fund operator KanAm for a 51 stake in a 2.5 million-sf portfolio of California properties. The largest mall in Simon's listing is the 1.1 million-sf Boynton Beach Mall in Boynton Beach, Fla. Simon is offering 590,000 sf: 295,000 sf of in-line space that is 83 occupied, plus two anchors Sears (162,000 sf) and JC Penney (133,000 sf). The separately owned anchor stores are Macy's (220,000 sf), Dillard's Women (123,000 sf), Dillard's Men (99,000 sf) and Cinemark Theaters... http://www.realert.com/headlines.php?hid=150858 A Southern California industrial property, fully leased to Hewlett-Packard, is on the market with an expected price of $100 million almost quadruple what a Westcore Properties partnership paid to acquire it vacant last year. The offering consists of two buildings totaling 1.4 million square feet in San Bernardino, Calif. At the estimated value of $71/sf, a buyer's initial annual yield would be below 5, reflecting the intense demand for core warehouses in the Inland Empire, one of the nation's strongest industrial markets. CB Richard Ellis is advising San Diego-based Westcore and its three partners: CT Realty of Aliso Viejo, Calif.; PCCP, a private equity firm in El Segundo, Calif.; and Behringer Harvard of Addison, Texas. The property, known as the Cajon Distribution Center, was acquired last August from CB Richard Ellis Investors for $26.4 million. At the time, CB was under pressure to sell as debt on the property neared maturity. In a major coup, the Westcore group recently signed Hewlett-Packard to a triple-net lease of $3.54/sf that runs through 2019. Hewlett-Packard has credit ratings of A2/A/A+ from Moody's, Samp;P and Fitch. The warehouses were built on a 63-acre site by Hillwood Investment Properties in 2008. Building 1, at 7140 North Cajon Boulevard, contains 672,000 sf, and Building 2, at 7010 North Cajon Boulevard, has 731,000 sf. Both have 30-foot ceilings. The property has immediate access to Interstates 15 and 215. Leasing demand has been strong in the 400 million-sf Inland Empire industrial... http://www.realert.com/headlines.php?hid=150744 In one of the largest non-distressed multi-family offerings since the downturn, a developer is marketing six complexes in South Carolina, Georgia and Tennessee. The 1,800-unit portfolio could attract bids of about $100,000/apartment, or $180 million. The owner, Johnson Development of Spartanburg, S.C., prefers to sell the properties to one buyer. But it will consider bids on individual complexes or groups of properties. The average occupancy rate is about 90, with levels at individual complexes ranging from 88 to 95. At the estimated value, the buyer's capitalization rate would be about 7. Apartment Realty Advisors has the listing. Few large apartment offerings have hit the market since the multi-family sector began to revive last year, and most of those have been in major markets. Institutional investors have said they are willing to expand their scope to secondary markets to capture higher yields, and the Johnson portfolio will offer a relatively large opportunity. Regional apartment operators are also expected to compete. Johnson completed one complex in 2004 and the others in 2008 or 2009. Four are in South Carolina, with one each in Tennessee and Georgia. The properties are: The 328-unit Haven at Lake Murray, at 2170 North Lake Drive in Columbia, S.C. The 284-unit Haven at Market Street Station, at 8034 MacBean Loop in Aiken, S.C. The 268-unit Haven at Mill Creek, at 2350 Freedom Boulevard in Florence, S.C. The 264-unit Haven at Boiling Springs, at 901 Dornoch Drive in... http://www.realert.com/headlines.php?hid=150429 Deutsche Bank is offering $150 million of distressed subordinate debt on a massive apartment complex in the Tribeca section of Manhattan. The offering is likely to draw heavy interest from investors interested in taking control of the 1,328-unit property, called Independence Plaza. Bids are expected to weigh in at 20-30 cents on the dollar, or $30 million to $45 million. Eastdil Secured is the broker. In 2006, a Stellar Management partnership lined up $575 million of floating-rate debt as part of a plan to convert the property's rent-stabilized apartments to market rates. At the time, the complex was appraised at $754 million. But the conversion got bogged down in legal battles, and the market downturn also took a toll. One player familiar with the offering pegged the complex's current value at perhaps $450 million. The interest-only financing package, arranged by Deutsche, consisted of a senior $265 million securitized mortgage, three B-notes totaling $160 million and four mezzanine tranches totaling $150 million. Deutsche is offering a $35 million B-note and the three senior mezzanine tranches, totaling $115 million. The $35 million junior mezzanine tranche isn't being offered. While the debt is performing, it matures in September and can't be fully refinanced, based on the complex's estimated value. As a result, a buyer of the debt could be in a position to foreclose. The complex, which overlooks the Hudson River, was built in the mid-1970s by developer Jerry Belson. A few years later, it ente... http://www.realert.com/headlines.php?hid=150452 UBS is shopping a defaulted $30.5 million loan on a Manhattan site slated for the development of a luxury condominium building. The 5,000-square-foot parcel, at 276-280 Third Avenue in the Gramercy Park section, could support a 105,000-sf building. The owner, developers Norman Kaish and Leonard Taub, started assembling land and air rights along the southwest corner of East 22nd Street in 2006. The UBS loan backs the 5,000-sf parcel, but Kaish and Taub also control 2,800 sf of adjacent land. Their plan for the 7,800 sf of parcels called for the development of a 20-story tower, with 144,000 sf. The building would have had 110 luxury condos and about 5,000 sf of street-level retail space. But their firm, Kaish amp; Taub Development of New York, defaulted on the UBS loan last year. Now the bank is moving to foreclose. It has scheduled a foreclosure auction on March 30 and has hired Jones Lang LaSalle to round up third-party bidders. While lenders often schedule such auctions as a formality to take control of the collateral, in this case the property could end up in the hands of an outside party. That's because the loan might command bids of about $300 per buildable sf, or $31.5 million. At that price, which would exceed the loan balance, UBS presumably would be willing to take the money and let the winning bidder take over the site. It's unclear how many units the 5,000-sf parcel would accommodate. But a buyer might be able to strike a deal with Kaish amp; Taub to also build on the adjacent land. Under its plan for the... http://www.realert.com/headlines.php?hid=150251 Savills, the London brokerage and advisory firm, is expanding its U.S. operation in anticipation of an influx of foreign investment capital. The company has opened offices in Los Angeles and Washington to supplement its Manhattan outpost. And it has recruited three advisors who specialize in working with foreign investors. The executives Robert Stamm, Joel Coren and Brandon McMenomy previously worked on CB Richard Ellis' Global Property Advisors team. In the U.S., Savills handles advisory assignments, brokers properties and arranges debt and equity. It expects an increase in foreign clients eager to invest in the U.S., partly because of this country's political stability and weak currency, which makes properties relatively cheap. There are a significant number of foreign capital sources looking to invest in real estate in the United States, said John Lyons, chief executive of Savills' U.S. division. A recent survey by the Association of Foreign Investors in Real Estate found that foreign investors view the U.S. as having the most stable and secure properties, and also as having the best opportunities for capital appreciation. Another plus, said Lyons: the anticipated repeal of a 1981 law that imposed withholding taxes on property sales by foreigners. The pool of prospective investors includes institutional buyers, sovereign wealth funds, property funds and wealthy individuals in European, Asian and Middle Eastern countries that have previously invested in the U.S., as well as new players... http://www.realert.com/headlines.php?hid=149825 Separate owners are testing investor demand for properties in Dallas' struggling central business district by offering two big office complexes. A Blackstone partnership is marketing the 1.2 million-square-foot Plaza of the Americas, which could command upward of $120 million, or $97/sf. Meanwhile, local developer Lucy Billingsley could attract bids of up to $150 million, or $295/sf, for the 509,000-sf One Arts Plaza. HFF has both listings. The estimated price tags would put the capitalization rates at 6.5 for One Arts Plaza and 7.5 Plaza of the Americas, well below the 8 average for Dallas office trades last year. Dallas continues to be dogged by weak fundamentals, such as an abysmal 73.2 occupancy rate for its 30.2 million sf of office space. That has left sales activity in the doldrums, especially downtown. While trades in central business districts nationwide soared by 239 last year, they plunged by 75 in Dallas, to a paltry $9 million, according to Real Capital Analytics, which tracks deals of $5 million and above. (Sales elsewhere in Dallas and its suburbs lifted overall activity in the market to $1 billion, the 13th highest in the nation.) Those disappointing numbers have some local pros saying that the gap in expectations between buyers and sellers remains wide and could make it tough for listings such as Plaza of the Americas and One Arts Plaza. But One Arts Plaza could benefit from its location in the Arts District, which is the focal point of an effort to revitalize downtown. Market pros... http://www.realert.com/headlines.php?hid=149799 Seeking to exploit rising demand for large industrial portfolios, a UBS fund plans to offer 15 net-leased warehouses valued at upward of $450 million. The 6.6 million-square-foot portfolio, which is 97 leased, is spread out over nine states. The buzz is that CB Richard Ellis has the inside track on the listing. The properties are owned by UBS Wealth Management-North American Property Fund, which is capitalized by clients of the Swiss bank. The fund's advisor is AEW Capital Management of Boston. The portfolio represents about one-third of the fund's holdings and all of its industrial properties, according to market players. The fund has separate investment buckets for retail and multi-family properties. UBS launched the fund's industrial-property investment program in 2006. At the time, it formed a joint venture with First Industrial Realty of Chicago. UBS allocated $255 million of equity, and First Industrial planned to invest up to $45 million, for an 85-15 ownership split. The joint venture was set up to buy single-tenant industrial properties with long-term net leases, often via sale-leaseback transactions, and to hold the properties for 7-10 years. The duo planned to use 60-70 leverage to boost its buying power to as much as $1 billion. But First Industrial subsequently left the partnership, and the acquisition goal evidently wasn't fully achieved. The properties being offered are in Atlanta, Baltimore, Los Angeles, Minneapolis, Salt Lake City and San Diego, as well as Arkansas, New Jersey, Texas and a Chicago sub... http://www.realert.com/headlines.php?hid=149652 The upswing in San Francisco hotel sales that started late last year has gained momentum with two more deals. Thayer Lodging has agreed to buy the leasehold interest in the 338-room JW Marriott in Union Square from Ashford Hospitality for slightly more than $100 million, or $300,000/room. Meanwhile, Walnut Hill Group has agreed to buy the 221-room Best Western Tuscan Inn near Fisherman's Wharf from a joint venture led by Abacus Lodging Investors of Chicago. The price is undisclosed, but market players speculated that the Abacus team is fetching a premium to the $36.5 million it paid just one year ago. The deals are the latest in a string of high-profile sales that have helped establish pricing benchmarks in San Francisco and encouraged hotel owners to test the waters with listings. Ashford, a Dallas REIT, acquired the JW Marriott in 2006 for $95 million and spent $22 million renovating and rebranding the property, which formerly was called the Pan Pacific. Ashford decided to sell the property, which has a recourse mortgage, as part of an effort to reduce its exposure to recourse debt, an Ashford executive said during a conference call with stock analysts in November after the company reported its third-quarter earnings. The hotel, at 500 Post Street, has a ground lease that runs for about 70 years. Cushman amp; Wakefield's Sonnenblick Goldman unit is brokering the sale to Thayer, a fund operator in Annapolis, Md., that specializes in hotel investments. Thayer, which owns 15 hotels with... http://www.realert.com/headlines.php?hid=149607 A joint venture between GE Pension Trust and Lamp;L Holding is seeking to recapitalize the office building at 195 Broadway in Lower Manhattan. The partnership has begun sounding out investor interest in acquiring a stake in the 1 million-square-foot property, one block east of the World Trade Center site. It is valuing the building at roughly $285/sf, or $285 million, according to a market player familiar with the matter. The partners acquired the tower in 2005 from H.J. Kalikow amp; Co. of New York for $265.7 million. It's unclear how large a stake is being offered, or whether one of the partners is seeking to exit the partnership entirely. In its joint ventures, Lamp;L, a New York investment shop headed by David Levinson and Rob Lapidus, usually takes minority interests and serves as operating partner. Eastdil Secured is advising the joint venture. While most recapitalizations these days are being conducted by owners under pressure from heavy debt loads, there's no sign that's the case with 195 Broadway. The property's $196 million securitized mortgage doesn't mature until April 2012. And the cashflow is easily covering the loan payments. Over the first nine months of last year, the building threw off $16.8 million of net operating income on an annualized basis, more than 1.5 times the amount needed for debt service, according to the most-recent figures available in a servicer report. The building is 84 occupied, shy of the 90.7 average for the 80.7 million-sf Lower Manhattan market at yearend,... http://www.realert.com/headlines.php?hid=149285 S.L. Green is shopping a Midtown Manhattan office building that could attract bids of roughly $150 million. The 360,000-square-foot property, at 28 West 44th Street, is 93 leased, in line with the average in the Midtown submarket. Bids are expected to be in the vicinity of $415/sf, or $149 million, according to market players. At that price, the buyer's initial annual yield would be roughly 6. CB Richard Ellis has the listing. A buyer might be able to increase income by raising rents as leases roll over. At least 100,000 sf leased in late 2004 and early 2005 is believed to be rolling over within five years. Asking rents when those leases were signed ranged up to $42/sf, well below the current rate of $56/sf in Midtown. SL Green, a New York REIT, acquired the building in May 2005 for $105 million, or $292/sf, from Transwestern Investment, a Chicago fund shop. The 22-story property, called the National Association Building, was constructed in 1919. It is midway between Fifth and Sixth Avenues, two blocks west of Grand Central Terminal and two blocks north of Bryant Park. It underwent a $4 million renovation in the early 2000s that updated the entrance, lobby and corridors. This is SL Green's second recent listing on West 44th Street. In September, it sold the 262,000-sf Berkeley Building, at 19 West 44th, to German investor Deka Immobilien for $123.2 million, or $470/sf. CB also brokered that deal. Market players said that SL Green decided to break up the listings to maximize... http://www.realert.com/headlines.php?hid=148997 Another high-end office building is on the block in the red-hot Washington market. Developer JBG Cos. and fund shop Rockwood Capital are marketing the 294,000-square-foot property at 1101 K Street NW, which could fetch roughly $200 million. HFF is showing the building, which was completed in 2006. The occupancy rate is 81, below the 92 average in the East End. The potential of leasing the vacant space should appeal to high-yield investors, who resumed bidding for buildings in the area late last year. FTI Consulting has a lease on one-third of the building until 2021. Among the nine other tenants are the District of Columbia Bar (52,000 sf) and Bloomberg (31,000 sf). Financials for the property were unavailable, but asking rents in the East End averaged $52.24/sf at yearend and are projected to rise modestly because the slow pace of construction will limit supply. The 10-story building is at 11th Street NW, between Mount Vernon Square and Franklin Park. It has a two-story lobby, a rooftop terrace and a fitness center. Upscale restaurant Brasserie Beck is on the ground floor. JBG, of Chevy Chase, Md., and San Francisco-based Rockwood shopped the property in 2007, almost selling it to BlackRock Realty of New York for about $200 million. But the ensuing credit crisis scuttled the deal, and the duo opted to pull back the listing to focus on leasing. It also lined up a $100 million mortgage from Helaba Bank that comes due next year. Now appears to be a good time to roll it out once again, given the flurry of activity t... http://www.realert.com/headlines.php?hid=148973 A joint venture between Goldman Sachs and developer Joseph Moinian is preparing to market an office building in the Madison Square section of Manhattan. The 303,000-square-foot property, at 245 Fifth Avenue, is expected to attract bids of roughly $175 million, or $578/sf. At that price, the buyer's initial annual yield would be about 5.25. Eastdil Secured, which has the listing, is expected to take bids in early February. Goldman, acting via its $4.1 billion Whitehall Street Global Real Estate Fund 2007, teamed up with Moinian in 2007 to buy the property for $190 million from Michigan Retirement, which was advised by KBS Realty. The Goldman partnership lined up a $193 million debt package from Credit Suisse exemplifying the type of high leverage available near the peak of the market. The so-called pro-forma loan was written on the basis of projected increases in rents, rather than in-place cashflow. But the market later crashed, scuttling the projections and creating a debt squeeze. Credit Suisse securitized the $140 million senior portion of the five-year package and initially retained the $53 million of mezzanine debt. Last year, the Goldman-Moinian team bought back the mezzanine debt at an unspecified discount, giving itself more breathing room. When the partnership bought the property, it was 99 occupied and throwing off $7.2 million of net operating income. The loan was underwritten with the expectation that rents, which then averaged about $34/sf, would rise to market rates over five years. Leases on... http://www.realert.com/headlines.php?hid=148776 Exeter Property, which has actively acquired industrial buildings over the past couple of years, is seeking to raise up to $500 million of equity for its second value-added fund. The Plymouth Meeting, Pa., firm shoots for a 14-16 return, generally by acquiring, developing or redeveloping industrial and flex properties in the East and the South. With a shortage of properties on the market after the downturn, Exeter has also scooped up distressed industrial mortgages at hefty discounts. Exeter has been an active buyer since 2008, when it completed raising $392 million for its first commingled vehicle, Exeter Industrial Value Fund. The vehicle, which has more than $1 billion of buying power with leverage, is now about 85 invested. For the first fund, Exeter has made about half of the acquisitions in secondary markets, believing that primary markets were overpriced. This time around, Exeter is telling investors it will aim to make up to 90 of purchases in primary markets, because it thinks pricing has normalized and those areas are best positioned for growth. The shop will continue to focus on opportunities involving distressed loans and forced sales. It targets properties that have vacant space or maturing leases. It favors business parks and seeks to achieve critical mass in key distribution markets. In one deal last year, Exeter reached a preliminary agreement to buy 2.2 million square feet of warehouses in the Dallas and Houston areas for about $100 million, or $45/sf, from Granite Properties of... http://www.realert.com/headlines.php?hid=148657 A German bank syndicate is about to market a $116 million defaulted loan on the office building at 1140 Avenue of the Americas in Midtown Manhattan. The offering is likely to draw heavy interest from investors interested in taking control of the 230,000-square-foot property. The syndicate, led by Landesbank Baden-Wurttemberg, is expected to begin the marketing campaign as soon as this week via Holliday Fenoglio Fowler. A bidding deadline will be set for next month. A partnership between fund shop Rockpoint Group of Boston and Stellar Management of New York acquired the leasehold interest in the building in 2006 from SL Green for $97.5 million, or $424/sf. The Rockpoint team lined up a $128.9 million debt package from Lehman Brothers, including $45.4 million of future funding for a renovation. Lehman quickly transferred the $116 million senior portion to the LBBW syndicate and sold the $12.9 million mezzanine piece separately. The current offering includes only the senior mortgage. Rockpoint, acting via its $1.7 billion Rockpoint Real Estate Fund 2, and Stellar intended to upgrade the Class-B building to Class-A status. Plans included a glass exterior, a renovated lobby and upgraded building systems. But last year Stellar, led by principal Lawrence Gluck, filed suit against the LBBW syndicate, alleging it had improperly withheld funding for the renovation after only $17.2 million was supplied. Stellar argued it couldn't complete the renovation without the additional proceeds. The status of the... http://www.realert.com/headlines.php?hid=148557 A Prudential Real Estate Investors partnership is seeking a developer and an equity partner to join forces on a super-luxury mall in suburban New York that could cost up to $1 billion to build. The partnership has already secured zoning approvals for the 2.8 million-square-foot retail complex - the first phase of a massive planned mixed-use development. It would be constructed in Sayreville, N.J., about 30 miles from Manhattan. The site is just off the heavily traveled Garden State Parkway and less than five miles from its intersection with the New Jersey Turnpike. Pru acquired the site in 2008 via a partnership with O'Neill Property of King of Prussia, Pa. The duo is now looking to sell a stake of 20-50 in the retail component, which is expected to cost $800 million to $1 billion. The projected unleveraged return for the new partners is 6-8, although debt would likely be employed to juice the return and reduce the cash outlay. The Pru partnership has tapped Jones Lang LaSalle to recruit two more partners - one that would handle the mall's development and kick in equity and one that would only supply capital. The total investment required by the partners would depend on the amount of leverage used. Jones Lang kicked off its marketing campaign this week in conjunction with the International Council of Shopping Centers' national conference in New York. The brokerage planned to meet with four of the world's top mall developers. In its search for a capital partner, Jones Lang is... http://www.realert.com/headlines.php?hid=148470 In one of the biggest industrial listings in the Midwest since the downturn, a partnership is offering a core portfolio that could attract bids of about $165 million. The 12 warehouses, which encompass 2.4 million square feet, are 93 leased. At the estimated value of $68/sf, the initial annual yield would be about 7. Seven properties, totaling 2 million sf, are in a single Chicago business park - representing an unusually large package of available industrial space in one market. The others are in Milwaukee and Minneapolis. The offering is expected to generate strong interest from conservative investors, especially domestic pension funds. Investors can bid on the entire portfolio or on all of the properties in any market. Cushman amp; Wakefield is advising the seller, a partnership between Towne Investments of Milwaukee and Interstate Partners of Waukesha, Wis. Towne is the majority partner, and Interstate developed the properties. Major tenants include ADT, Giant Bicycle, Illinois Tool Works, PODS, Shaw Industries and Staples. The average remaining lease term is five years. The seven Chicago warehouses, in Northwest Business Park, have a 92 occupancy rate, exceeding the 88.6 average for the metropolitan area's 1.1 billion sf of industrial space. They range in size from 118,000 sf to 548,000 sf. The two Milwaukee properties, in Ridgeview Corporate Park, total 177,000 sf and are fully leased. There are three properties in Minneapolis: two fully leased warehouses at Rice Creek Corporate Park... http://www.realert.com/headlines.php?hid=148373 The strong demand for core office properties in the Washington area is starting to spill over to higher-yield plays. A handful of buildings suitable for core-plus or opportunistic investors have attracted spirited bidding in recent weeks, including the 126,000-square-foot property at 1227 25th Street NW in Washington and the largely vacant 183,000-sf building at 3120 Fairview Park Drive in Falls Church, Va. Local pros say that's a notable development. Since sales began to resume following the market crash, activity nationwide has centered around two categories: core buildings on the one hand, and distressed offerings at sharply discounted prices. Properties that fall in between - such as ones that have significant vacancies or need to be renovated - have mostly been unsellable. The reason: Buyers have been unable to hit their yield goals, because of the weak economy and the lack of available debt financing. But now the Washington area is among the first markets nationwide to see signs of life in the sale of higher-yield office properties by nondistressed owners. To some degree, that's a reflection of strong demand for the region's core properties, which have benefited from the expanding federal government's need for additional space. Multiple transactions have been completed, clarifying valuations and giving buyers more confidence when underwriting higher-yield purchases. What's more, the strong demand has driven down capitalization rates for core office properties in the region to the range of 5.0-6.5, encourag... http://www.realert.com/headlines.php?hid=148275 Brookfield Office Properties has agreed to buy Heritage Plaza in downtown Houston for about $325 million in one of the biggest office trades in the city's history. The seller, Goddard Investment, struck the sales agreement for the 1.2 million-square-foot trophy property after talks with another bidder, USAA Real Estate, fell through. At the $285/sf price tag, New York-based Brookfield's initial annual yield will be roughly 6.25. Eastdil Secured's Atlanta office is brokering the transaction, which exceeds the pricing expectation of $310 million and further demonstrates solid investor demand for core properties. Atlanta-based Goddard began shopping the 53-story tower in June. USAA won a bidding contest against Brookfield, Tishman Speyer of New York and others with a $333 million offer. Goddard and San Antonio-based USAA then came close to finalizing a deal, but the talks broke down when USAA was unable to line up financing to its liking. The owner then began exploring a possible recapitalization or refinancing. First, it lined up a commitment from MetLife for a $200 million fixed-rate loan with a 12-year term. Then it agreed to sell the property outright to Brookfield, which will use the MetLife loan to finance the transaction. Heritage Plaza, at 1111 Bagby Street in the central business district's quot;Skyline Corridor,quot; was acquired by Goddard in July 2005 from Michigan Retirement for $121 million. At the time, the occupancy rate was only 45, following the departure of lead tenant Chev... http://www.realert.com/headlines.php?hid=148173 The surprise departure of senior executive Greg Vorwaller is prompting CB Richard Ellis to weigh whether to divide up his former duties. Vorwaller, who resigned two weeks ago to head up the global capital-markets group at rival Cushman amp; Wakefield, held two titles at CB: chief operating officer of capital markets and president of investment sales. Brian Stoffers, CB's president of capital markets, has told company executives that Vorwaller's exit presents a natural opportunity to take a fresh look at the management structure in the capital-markets group, which oversees investment sales, loan brokerage and advisory work. Vorwaller had been head of investment sales since 1999 and chief operating officer of capital markets for several years. Insiders think the odds are that his duties will be divided among two or three positions, although that is far from certain. Stoffers has indicated to colleagues that he hopes to make a decision by yearend and that in-house and outside candidates will be considered. The company has made preliminary inquiries to industry veterans in order to scout out who might be available and interested. However, CB hasn't retained an executive search firm, and the company said it isn't in a rush to make a decision. quot;We are taking a thoughtful, deliberate approach to identifying our next investment-properties leader, and are not being driven by any timeline,quot; a spokesman said. quot;Our goal is to identify the right leader, and we are considering internal and external candidates.quot; If a... http://www.realert.com/headlines.php?hid=148069 David R. Mark, the longtime managing editor of Real Estate Alert, passed away on Saturday from complications from his second bout with leukemia. During his 13-year tenure at the newsletter, Mark became well-regarded throughout the commercial real estate industry, drawing on his countless relationships with market professionals to provide readers with a constant flow of scoops on deals and dealmakers. He played a key role in expanding the publication's coverage and was the driving force behind many of its features, including a database of high-yield funds. Mark, 42, was known for his relentless pursuit of news, his extraordinary productivity and an uncanny ability to recall facts and numbers. He was also a mentor to reporters on Real Estate Alert and its four sister newsletters, published by Harrison Scott Publications. quot;Our newsroom has lost a great leader, and we have lost a great friend,quot; said Tom Ferris, editor of Harrison Scott. Leukemia was one of several serious illnesses that Mark had to deal with over the years. quot;We had deep admiration for the grace he showed facing the many medical hardships thrown his way in life,quot; said Ferris. quot;David was dealt a bad hand, but he played it beautifully.quot; Mark was diagnosed with leukemia for the second time in August, after being in remission for more than eight years. He was hospitalized in September and at first maintained an almost full workload, filing numerous stories and firing off instructions to reporters by email. His office telephone calls were forwarded... http://www.realert.com/headlines.php?hid=147991 A top executive has left fund shop Lubert-Adler to bring his real estate expertise to Versa Capital, a private equity firm that invests in distressed companies, many with substantial property holdings. P.J. Yeatman spent 11 years at Lubert-Adler, rising to the post of senior managing principal. He was named a principal of Versa, which is currently investing a $650 million fund. The two companies, while separately owned, have their headquarters in the same Philadelphia building, share back-office support and are affiliated through an umbrella group, Independence Capital Partners. They have teamed up previously to buy companies with substantial real estate assets, and Yeatman worked on several of those deals. Versa is tapping Yeatman's real estate know-how as it invests Versa Capital Fund 2. The distressed companies/special situations vehicle, which had its final close last year, invests in North American companies in need of capital for restructurings or recapitalizations. It targets businesses with revenues of $100 million to $1 billion, or assets ranging from $25 million to $500 million. The fund typically invests $10 million to $100 million per deal, with minimal leverage. As of the end of 2009, it was 16 invested. Yeatman's experience will be valuable to Versa because many of the companies it is targeting have substantial real estate holdings, including retail and office properties, hotels and manufacturing and distribution centers. On some investments, it may continue to team with... http://www.realert.com/headlines.php?hid=147897 In one of the biggest deals in Washington this year, Invesco Real Estate last week acquired a fully leased office building near the White House from a Shorenstein Properties partnership for about $220 million. The off-market transaction for the 331,000-square-foot property, at 1111 Pennsylvania Avenue NW, is further evidence of strong demand for core buildings in the nation's capital. The price tag of roughly $665/sf translates into a 4.9 capitalization rate - the lowest seen recently in that market. Cap rates for core office properties in Washington have ranged from 5 to 6.5, with larger properties trending toward the upper end of that range. The Shorenstein partnership marketed the property for two months in the spring via Eastdil Secured, but pulled the listing after bids fell short of expectations. The partnership, still advised by Eastdil, then struck a deal with Invesco, which acted via its $1.7 billion open-end Invesco Core Real Estate Fund. Market players put the price at close to $220 million. The property, known as the Presidential Building, is fully leased to Morgan Lewis until July 2017. The law firm pays a triple-net rent of $32/sf. The local East End submarket has 42 million sf of office space that is 91.3 occupied. The trade is among the biggest in the city this year in terms of both per-foot and outright prices. The only larger trade on a per-foot basis involved the Evening Star Building. TIAA-CREF acquired that 227,000-sf property in June from a KanAm partnership for about... http://www.realert.com/headlines.php?hid=147795 Mezzanine lender Garrison Investment is moving to take control of a struggling 514,000-square-foot office portfolio in suburban Washington. The four buildings, at an office park in Reston, Va., have seen their value plummet since Penzance Partners acquired them in July 2007 for $142 million. Washington-based Penzance started emptying out the 1980's-vintage buildings in order to plow millions of dollars into capital improvements and re-lease the space at higher rents. But the plan was stymied by the economic downturn, and the occupancy rate now stands at only about 45. In August, Penzance was unable to refinance a maturing $107 million senior loan from UBS and Garrison's $31.5 million mezzanine loan. Now Garrison, a New York hedge-fund shop, is seeking to seize the properties via foreclosure. A foreclosure auction has been scheduled for Nov. 1 in New York. Last month, Eastdil Secured shopped the mezzanine loan for Garrison, but didn't receive any acceptable offers. Eastdil is now marketing the portfolio to try to drum up interest in the auction. But market pros doubt Garrison will get an offer high enough to persuade it to walk away. Garrison's game plan is unclear if it ends up with the portfolio, as expected. But market pros presume the firm would have to stabilize the buildings before it could try to sell them. That could be a challenge. First, Garrison, which is operating via its flagship Garrison Special Opportunities Fund, would need to negotiate a loan extension with Berkadia... http://www.realert.com/headlines.php?hid=147671 In one of the biggest deals this year in the Washington area, USAA Real Estate has agreed to pay $240 million for a Northern Virginia office complex. The price tag is slightly below expectations for the 622,000-square-foot property, One and Two Potomac Yard in Arlington. But market pros described it as solid nonetheless, especially for a suburban property, and further evidence of the strong demand for core buildings in and around Washington. USAA Real Estate, a unit of San Antonio insurer USAA, is acquiring the fully occupied complex from J.P. Morgan Strategic Property Fund. At the $386/sf valuation, its initial annual yield will be about 6.5. CB Richard Ellis is brokering the transaction. Earlier this year, investors waged bidding wars for the few office properties listed in the area, driving up prices. The strengthening market, bolstered by an expanding federal government, encouraged other owners, including the $9.7 billion J.P. Morgan fund, to put core and core-plus properties on the block. Capitalization rates for core buildings inside Washington's city limits have ranged from about 5 to 6.5. For example, Generali Group of Italy acquired the 147,000-sf Farragut Building from ING Clarion of New York this month for $93.5 million, or $636/sf, resulting in a cap rate of about 6. In June, TIAA-CREF bought the 227,000-sf Evening Star Building from a KanAm partnership for about $180 million, or $793/sf. That price translates into an initial annual yield of just 5.3. The cap rates for... http://www.realert.com/headlines.php?hid=147585 High-yield funds posted their strongest returns in the first quarter since the market nosedived. Of 98 closed-end funds reviewed by Real Estate Alert, 53 recorded a gain in net asset value from January to March (see list on Pages 9-11). The 54 profitability rate is the highest since the collapse of Lehman Brothers in September 2008 marked a sharp downturn in commercial real estate. The previous high-water mark came in last year's third quarter, when 36 of funds posted positive returns. The figures are based on performance reports that were distributed to investors in recent weeks. Funds report their results on a lagging basis. It's too soon to conclude that the market has hit bottom. But there was evidence that performance picked up, especially at U.S. funds. Some 60 of U.S. vehicles posted positive returns, roughly double the rate throughout 2009. The uptick could reflect in part the impact of sales completed in the first quarter, gains on investments made at a discount after the market collapsed, and increases in property values in select markets. With signs emerging that U.S. real estate markets are starting to bottom out or, in some cases, already reviving, the potential exists for funds with dry powder to build on their first-quarter returns. Nevertheless, most funds still have a large hole to dig out from. Just 26 of the funds reviewed have posted positive returns since inception. The highest first-quarter return among the reviewed funds was recorded by a vehicle that invests in India: the $525... http://www.realert.com/headlines.php?hid=147501 Piedmont Office Realty's effort to wrest control of the distressed office building at 500 West Monroe Street in Chicago from Broadway Partners hit a speed bump this week. Piedmont, which controls about $110 million of mezzanine debt on the tower, had moved to seize the property at a foreclosure auction scheduled to be held in New York on Tuesday. However, Broadway persuaded a state appellate court on Monday to block the auction, at least temporarily. The battle is complicated by the fact that the property's roughly $180 million of mezzanine debt is divided into four tranches and is in the hands of five different parties. There is also a $150 million senior mortgage, putting the total debt package at about $330 million. Broadway arranged the highly leveraged debt package from Morgan Stanley in July 2007, when it acquired the 966,000-square-foot building from Shorenstein Properties of San Francisco for $336.7 million. At the time, the tower was 92 leased. But the occupancy rate has since plunged to 68, largely because railroad giant GATX, which had rented 20 of the space, left when its lease expired in 2008. What's more, another 487,000 sf is set to roll over by November 2012, as leases to GE Capital and Marsh USA mature. The building's value has plummeted below $250 million, according to estimates of local pros, jeopardizing the equity position of New York-based Broadway as well as the holders of junior mezzanine debt. In addition to the senior loan, there is a $45 million senior mezzanine... http://www.realert.com/headlines.php?hid=147352 Exeter Property could attract bids of up to $225 million for 17 industrial properties, including seven that Welsh Cos. backed out of buying last month when its planned IPO failed to get off the ground. The 4.4 million-square-foot portfolio is 98 occupied. At the estimated value of $45/sf, the initial annual yield would be about 7. Exeter prefers to sell the Class-A portfolio intact, but will consider bids on individual properties or groups of properties. CB Richard Ellis has the listing. Exeter, a fund shop based in Plymouth Meeting, Pa., had struck an off-market deal to sell the seven properties, encompassing 1.7 million sf, to Welsh for $69.2 million. They were part of a buying spree that Welsh intended to finance with the proceeds of a $350 million IPO. In all, the Minnetonka, Minn., firm struck deals to buy 23 properties totaling 9.6 million sf in 11 states. But the collapse of the IPO left Exeter and other sellers scrambling to find new buyers. Exeter decided to repackage the properties earmarked for Welsh with others that it owns via its $357 million Exeter Industrial Value Fund and bring a bigger portfolio to market. Separately, Westmount Realty of Dallas and Yucaipa Cos. of Los Angeles are once again shopping Logistics Pointe, a 1.1 million-sf industrial campus in Charlotte that Welsh had agreed to buy for $35 million. CB is also handling that assignment. But Exeter also found opportunity in the Welsh IPO collapse. It scooped up two properties in Memphis totaling nearly 820,000 sf that Welsh... http://www.realert.com/headlines.php?hid=147253 Granite Properties is gearing up to market a Texas industrial/flex portfolio that could attract bids of up to $170 million. The 3.1 million-square-foot package, which is 78 occupied, is divided into two pools. One has 14 Houston-area properties that are stabilized, and the other has three Dallas-area properties with upside potential. Granite prefers to sell the institutional-quality portfolio intact. However, it will consider offers on either pool, groups of properties or individual warehouses. At the estimated value of $55/sf, the initial annual yield would be just below 7. Holliday Fenoglio Fowler, which is advising Dallas-based Granite, will begin the marketing campaign after Labor Day. The Houston-area properties, which are 89.5 occupied, encompass 2 million sf. Such large packages rarely come up for sale in the city, whose 291 million-sf industrial market is 90 occupied, with virtually no construction under way. Among the 78 tenants are Gulf Winds International, Kelsey Seybold, Largo International, Sensor Wise and Morison Enterprises. The weighted average remaining lease term is 4.3 years. The properties, which have 29 total buildings, are spread around the city and in two suburbs. They are 19 years old on average. Some 28 of the properties have finished office space. Ceiling heights are 12-24 feet. Twelve of the properties are within the city limits: Beltway Business Park, Clay Campbell Business Park, Granite Plaza/Tech 290, Greenbriar Place North, Northgreen... http://www.realert.com/headlines.php?hid=147163 An Angelo, Gordon amp; Co. partnership earned a 50 nominal return by flipping a mortgage on a suburban Washington apartment complex just one month after acquiring it from Wells Fargo. While the maneuver was a coup for the Angelo Gordon team, it also underscored the quandary that lenders face in deciding whether and when to liquidate distressed assets. The loan of about $32 million is backed by Regency Pointe, a 599-unit complex in District Heights, Md., that suffers from low occupancy and physical problems, including damage from a fire. Angelo Gordon, a New York fund operator, teamed up with Donaldson Group of Rockville, Md., to buy the senior loan from Wells at the end of June for about $20 million, or $33,000/unit, via an offering handled by Wells subsidiary Eastdil Secured. The duo planned to foreclose, conduct a $15 million renovation and hold the property for 3-5 years. A foreclosure auction was held at the end of July, when the Angelo Gordon team expected to assume control of the complex. But bids came in well above the price the duo paid for the loan, prompting it to take a quick profit. Tristar Management, a regional apartment operator in Baltimore, bought the property for just $30.1 million, or $50,000/unit. The turn of events reflects the uncertain waters that lenders can find themselves in when working out troubled loans. If they delay liquidations in the hope that prices will rebound, they run the risk that the opposite will happen, leading to bigger losses. On the other hand, if they m... http://www.realert.com/headlines.php?hid=147026 A J.P. Morgan fund has paid about $310 million for a coveted office tower and an apartment building in the Seattle area, a sale that underscores investors' hunger for high-quality real estate in that market. On Friday, the bank's Strategic Partners open-end fund completed its purchase of: Advanta Office Commons, a 610,000-square foot office complex in Bellevue, Wash., that is leased entirely to Microsoft. The Equinox, a 204-unit apartment complex in Seattle. The fund bought both properties from Portland, Ore., developer, Schnitzer Investment, a heavily leveraged firm that has been trying to dispose of holdings to pay off maturing loans. Between them, Advanta and Equinox attracted dozens of bids. CB Richard Ellis, which marketed both properties, declined to comment. The pricing of Advanta reflects the sudden surge of demand for core properties. The J.P. Morgan fund allocated about $240 million of its two-property purchase price, or $393/sf, to the complex, at 500 108th Avenue NE. At that price, the fund will reap an initial yield of about 6.8. Advanta, built in 2008, encompasses three seven-story buildings. The complex is one of three Bellevue trophy assets fully leased to Microsoft that have hit the block this year, sparking a mini-stampede of investors attracted to low-risk, stabilized deals. City Center, a 571,000-sf high-rise in Bellevue, was sold by Beacon Capital to Cole Real Estate Investments last month for $310 million, or $542/ sf. Eastdil Secured advised Beacon on that deal. Bellevue... http://www.realert.com/headlines.php?hid=146932 The limited partners of a cash-starved $1.6 billion fund that RREEF launched more than four years ago have pumped in $100 million of additional capital to support the existing investments. The infusion is one of the largest fund recapitalizations prompted by the market downturn. About a half-dozen fund shops have raised additional capital to bolster vehicles. Another 30 operators are soliciting extra money. In most cases, the vehicles are fully invested but unexpectedly need more cash. For example, a partner in an investment might be unable to follow through on an equity commitment for a planned development or redevelopment. Or falling property values may have made it impossible to fully refinance maturing debt. Or repositioning might be needed following the departure of key tenants. Perhaps one-third of the roughly three dozen limited partners supplied additional capital to the opportunity fund, RREEF Real Estate Global Opportunities Fund 2, which is backed mostly by U.S. pension funds. Fund employees and RREEF's parent, Deutsche Bank, were among the limited partners participating in the recapitalization, which closed two weeks ago. The infusion was structured as a senior unsecured debt facility with a two-year term and a one-year extension option. Market players said the money will be used to restructure or retire debt, to deleverage properties prior to refinancing or to improve properties. Through the end of last year, the vehicle posted a 23.8 annualized loss, according to investors. That... http://www.realert.com/headlines.php?hid=146802 A Walton Street Capital partnership is looking to recapitalize a new luxury apartment building in Washington that has an estimated value of at least $200 million. The property, at 145 N Street NE, encompasses 440 units that were just completed, a 50,000-square-foot Harris Teeter supermarket and a planned 175-unit extension. It is part of the massive Constitution Square mixed-use project being developed by fund shop Walton Street and its partner, StonebridgeCarras of Bethesda, Md. The 13-story apartment building, called Flats 130 at Constitution Square, is in its initial leasing phase. The Walton Street team is pitching the offering as a recapitalization, with the size of the stake to be sold open to negotiation. But the partnership evidently is also willing to consider an outright sale. Holliday Fenoglio Fowler is advising the owner. The units have luxury amenities, including granite countertops, balconies and nine-foot ceilings. There is a rooftop pool, a two-story fitness center and a one-acre courtyard with a dog park. The building has an E-shaped design. The top and middle of the E are already constructed, and the 175-unit extension would fill in the bottom prong. A buyer could build the extension within two years, boosting the net operating income by up to $4 million without greatly increasing management costs. Constitution Square is in the growing NoMa (north of Massachusetts Avenue) neighborhood. The project is slated to encompass 1.6 million sf of office, residential, retail and ho... http://www.realert.com/headlines.php?hid=146706 Madison Capital, which for most of the past decade has focused on buying core properties in New York, has formed a unit to target distressed assets in several regions. The New York firm plans to team up with equity partners to make $300 million of unleveraged investments by the end of next year. It will buy distressed properties and senior and subordinate debt. It will also make preferred-equity investments. The quot;special situations strategy unitquot; will seek a return of about 18, focusing on office, retail, hotel and multi-family deals in the Boston-to-Washington corridor, South Florida and California. On occasion, Madison will recruit operating partners to assist with workouts. Heading the effort are managing director David Steinberg and director Christopher Bellapianta. They joined Madison in February after spending about 10 months at FrontView Advisors, which has disbanded. They headed the New York firm with Bret Salzer, who joined SL Green Realty of New York as associate general counsel last month. Before forming FrontView, Steinberg and Bellapianta worked at Antares Real Estate Services, a Stamford, Conn., investment firm that closed last year. Steinberg was a vice president of acquisitions for two years, and Bellapianta was an associate vice president for one year. Madison, which was founded in 2002, has acquired 16 properties totaling $900 million. Among its biggest deals was the $86 million purchase of a 46,000-square-foot retail condominium at Manhattan House, at 200 East 66th... http://www.realert.com/headlines.php?hid=146577 Pharmaceutical giant Roche is marketing the leasehold interest in its soon-to-be vacant Silicon Valley campus, which could attract bids of about $400 million. The 966,000-square-foot office and lab complex is in Stanford Research Park in Palo Alto, Calif. Roche is in the process of consolidating its operations in space occupied by Ventana Medical Systems, which Roche acquired last year. It will be completely out of the sprawling Palo Alto property before a sale closes. Roche's broker, Cornish amp; Carey, is pitching the property both to end-users and high-yield investors. Comparable properties in Stanford Research Park have traded at $500/sf and up in recent years. But Roche's property could trade for significantly less - about $415/sf - because a high-yield investor would have to lease it up and negotiate an extension of the ground lease. The complex is made up of 17 buildings constructed in phases on a 70-acre site from 1964 to 1989. The buildings range from 1-3 floors. About one-third of the space is currently set up for use as laboratories, but could be converted to traditional office space. As with all of the 10.1 million sf of space in Stanford Research Park, Roche's campus is subject to a ground lease from Stanford University. That lease extends to 2036. A high-yield investor would likely want to negotiate an extension to make the property more attractive at re-sale. Roche has instructed Cornish amp; Carey to identify prospective tenants in the meantime. Having leasing agreements for at least some of the space in... http://www.realert.com/headlines.php?hid=146461 Fund operator HEI Hotels is marketing four full-service hotels valued at about $400 million. The 1,120-room portfolio is made up of two Philadelphia properties, one in Florida and one in California. HEI prefers to sell the portfolio intact, but will consider bids on individual hotels. The estimated value equates to $357,000/room. Hodges Ward Elliott has the listing. The four properties are: a 293-room Embassy Suites in Irvine, Calif.; a 250-room Sheraton in Dania, Fla., near the Fort Lauderdale airport; the 289-room Westin Inn in Philadelphia; and the 288-room Embassy Suites Center City in Philadelphia. The average occupancy rates range from about 77 to 82, according to market players. HEI, based in Norwalk, Conn., acquired the properties in 2005 and 2006 via its $425 million HEI Hospitality Fund 2. They are among the fund's last remaining holdings. HEI spent $6 million to $10 million on improvements to each of the hotels, which are managed via its Merritt Hospitality subsidiary. Some of the properties were rebranded. http://www.realert.com/headlines.php?hid=146371 The financial reform legislation before Congress could force three of the largest operators of U.S. real estate funds out of the business, but changes would likely unfold slowly. The sweeping bills approved by the House and Senate both contain provisions that prohibit affiliates of FDIC-insured banks from sponsoring and investing in hedge funds and private equity funds, including ones that focus on real estate. As House and Senate conferees worked to hammer out differences in the bills this week, bank lobbyists waged a last-ditch effort to water down the fund curb, which is part of the so-called Volcker Rule, proposed by former Federal Reserve chairman Paul Volcker. There were signs that the banks and their allies on Capitol Hill were having some success in those efforts. But the fate of some of the largest sponsors of real estate funds remained up in the air. Affiliates of 11 FDIC-insured banks either operate open-end funds or have set up closed-end vehicles over the past five years, according to Real Estate Alert's Fund Database. The sponsors have operated 53 funds with $76.6 billion of aggregate equity since 2005 (see accompanying table). But three shops accounted for three-quarters of the capital raised - Morgan Stanley, Goldman Sachs and J.P. Morgan. Even if adopted as is, the legislation would give banks as much as six years to divest funds. So changes wouldn't occur overnight. The life cycles of many existing funds would run out during that period, so the current operators could wind... http://www.realert.com/headlines.php?hid=146234 GoldenTree Asset Management is spinning off its real estate fund group. The unit, GoldenTree InSite Partners, will start operating independently next month under the name GTIS Partners. GoldenTree Asset, a hedge fund manager and high-yield investor based in New York, will retain a minority interest, but won't invest any equity in two funds that GTIS plans to roll out. The spinoff was envisioned when the fund group was formed five years ago under the direction of Tom Shapiro and Josh Pristaw. GoldenTree Asset founder Steve Tananbaum agreed that a spinoff could occur once the group reached $1 billion of third-party equity under management. The unit, which has set up two funds, recently hit that threshold. New York-based GTIS will immediately turn its attention to launching two more opportunity funds: a $600 million vehicle targeting property investments in Brazil and a $300 million vehicle focused on residential plays in the U.S. GTIS would kick in 1.5 of the equity for each. The Brazil vehicle, GTIS Partners Brazil Real Estate Fund 2, would seek an 18 return by teaming up with local operating partners to develop and redevelop Brazilian properties, with a focus on the office and residential sectors. The initial $510 million fund in the series closed last year and is about 80 invested. Investors were told recently that it is on track to produce a return of about 25. GoldenTree set up a $30 million co-investment vehicle in April to participate in a $90 million acquisition. The two vehicles bought a 50 stake... http://www.realert.com/headlines.php?hid=146122 A joint venture led by Honeywell International's corporate pension fund is shopping a suburban Washington office complex that could command bids of roughly $160 million. The 540,000-square-foot property, in Bethesda, Md., is 97 occupied. At the estimated value of $296/sf, the buyer's initial annual yield would be slightly below 7. CB Richard Ellis has the listing. Honeywell teamed up with local player Moore amp; Associates in 2005 to buy the three-building complex, called Bethesda Towers, for $127.4 million from a partnership led by Rockwood Capital's third value-added fund. The tenants include the U.S. Consumer Product Safety Commission (114,000 sf until 2013), National Opinion Research Center (34,000 sf until 2017) and Europ Assistance USA (34,000 sf through September 2018). Leases for an average of 11 of the space are scheduled to expire annually through 2015. Last year, the Class-B property generated $9.2 million of net cashflow, well above the $5.5 million needed to cover loan payments on its $87.2 million securitized mortgage. The cashflow is currently higher, because the occupancy rate has climbed by 6 percentage points, from 91, at the end of last year. The interest-only mortgage, which has a 6.2 coupon, matures in November, so there is no assumable financing. The three 11-story towers are at 4330, 4340 and 4350 East West Highway, two blocks from a Metro subway station. They were developed from 1973 to 1977, and underwent some $20 million in renovations from 1999 to... http://www.realert.com/headlines.php?hid=146009 Simon Property and a Calpers partnership will take full ownership of the Houston Galleria by acquiring Walton Street Capital's 37.5 stake in a deal that values the trophy mall at roughly $1.65 billion. Simon and the Calpers partnership will get an initial annual return of about 5.9 on the purchase, according to people familiar with the transaction. That indicates that Walton Street's interest was valued at about $619 million, based on the mall's projected net operating income of $98 million. Eastdil Secured is brokering the deal. The stake in the 2.3 million-square-foot Houston Galleria, one of the nation's premier malls, drew bids from foreign investors and large pension funds. But in the end, Walton Street's partners opted to exercise a right of first refusal. It's unclear how the two remaining partners plan to divide the Chicago fund operator's 37.5 stake. Simon, an Indianapolis REIT, currently holds a 31.5 interest and manages the property. Institutional Mall Investors, an entity controlled by Calpers and Miller Capital Advisory of Skokie, Ill., holds the remaining 31 stake. The mall has an $821 million mortgage, most of which was securitized, that matures in 2015. The property was appraised at $1.2 billion in November 2005, according to a servicer report. Houston Galleria was built in 1970 as part of the massive mixed-use Galleria complex, which includes 1.2 million sf of office space and two Westin hotels, which are separately owned. The upscale mall has undergone four expansions and... http://www.realert.com/headlines.php?hid=145920 As the investment-sales market finally begins to show signs of thawing, Cushman amp; Wakefield may find itself in a struggle to retain market share. Key defections have left the brokerage shorthanded in some major markets. Most notably, Cushman's top sales team - the New York-based office group - jumped to Jones Lang LaSalle two weeks ago. But the firm has also been weakened in suburban New York, Los Angeles and Houston. In recent years, Cushman has consistently ranked third nationally in investment-sales volume, behind Eastdil Secured and CB Richard Ellis, according to Real Estate Alert's Deal Database, which tracks sales of $25 million or more. But its position may be in jeopardy. Three rivals nipping at its heels - Jones Lang, Holliday Fenoglio Fowler and Grubb amp; Ellis - all stand to benefit from having poached veteran Cushman earners over the past year. Cushman's failure to replace some big-name defectors so far is fueling speculation that the firm might de-emphasize investment sales in favor of tenant representation, leasing and property management. The company employs nearly 600 leasing brokers, compared to about 120 investment-sales brokers. quot;In 2006, 2007, the sales guys became the darlings [at Cushman] because business was booming,quot; said one former Cushman sales broker. quot;But if you look at it honestly, Cushman is a leasing and management firm.quot; Cushman chief executive Glenn Rufrano, who took over the company in February, didn't return calls seeking comment. As Cushman... http://www.realert.com/headlines.php?hid=145778 A partnership between California State Teachers and Heitman has launched the largest offering of a stabilized apartment property in South Florida since the market tanked in 2007. The 1,520-unit complex, in Pembroke Pines, is expected to attract bids of about $200 million, or $131,000/unit. That would translate into a capitalization rate of about 6. Engler Financial has the listing. The garden-style property, called the Resort at Pembroke Pines, has two features that could spur demand from large investors: a low-rate assumable mortgage and a value-added component uncommon to recent offerings of stable properties. The $120 million mortgage, equal to 60 of the estimated value, was originated via Fannie Mae. The floating-rate loan, whose current coupon is just 1.6, matures in August 2015. A buyer could seek to boost rents by upgrading some or all of the units. Two other properties in the city - La Salle Apartments Lakes at Pembroke and Landings at Pembroke Lakes - have undergone interior upgrades in recent years and command rents about $200 higher than the $1,300 average at the complex up for sale. The Class-A property is 94 occupied, up from about 88 when the residential market crashed. New tenants had been offered as much as three months of free rent at the market's low point, but concessions now average about a month. The listing will be a good gauge of investor interest in stabilized rental properties in South Florida, which was devastated first by the condo-market collapse and then by the... http://www.realert.com/headlines.php?hid=145659 Executive recruiters are starting to see a pick up in hiring following one of the most dismal years on record in the commercial real estate industry. Business plummeted last year at firms specializing in retained searches, as real estate companies continued to consolidate operations amid the deep market slump. But the trend started to reverse over the past few months as the sales market perked up a bit. Some search firms report that assignments are up at least 50 from the lows of last year, according to Real Estate Alert's annual review of recruiting firms, which identified 33 companies that actively place real estate executives (see list on Page 9). Still, hiring is nowhere near the level during the market peak, and recruiters don't expect activity to stabilize until roughly 2012. quot;It's an increase over 2009, but we are still looking for it to get back to the more aggressive levels of years past,quot; said Jon Boba, president of Chicago-based Christenson Advisors. The punishing real estate downturn forced recruiting firms into their own rounds of layoffs and consolidation. But with signs that the market is at or near the bottom, recruiters are dusting off expansion plans and looking to increase staff. Among them: BCGI Real Estate Executive Search of New York, Korn/Ferry International of Los Angeles, Sousou Partners of New York and Terra Search Partners of San Francisco. When the market soured, BCGI suspended plans to add recruiters. But now, quot;we'll definitely be expanding by the end of this year,quot; said... http://www.realert.com/headlines.php?hid=145541 Bainbridge Cos., which has been on the sidelines for more than two years, plans to buy about $1 billion of multi-family properties in Florida and the Washington, D.C., area over the next year. The Wellington, Fla., firm, which is partly backed by a wealthy Greek family, has traditionally acquired properties via joint ventures with institutional players, including Boston Capital, Fidelity Investments, Lehman Brothers and RREEF. Now it is weighing whether to continue that strategy or set up a commingled fund instead. The company is seeking to recruit a vice president of capital markets to help determine how to proceed and to line up new partners, because some of its previous capital sources are no longer making commitments. The position will likely be based in New York, where Bainbridge would set up an office. This will mark the first time Bainbridge has a staffer dedicated to raising equity. In the past, the function was handled by executives who also had other duties or, occasionally, by placement agents. Bainbridge hasn't made any acquisitions since December 2007, when it bought the 711-unit Wellington in Arlington, Va., from Fairfield Residential of San Diego for $125 million, or $176,000/unit. But in 2006 and 2007, the company bought a total of $1.2 billion of properties, split about evenly between metropolitan Washington and Florida, increasing its portfolio to more than 9,000 units. The firm targets luxury, stabilized properties, usually with at least 300 units. It resumed bidding in... http://www.realert.com/headlines.php?hid=145452 CPP Investment Board, which invests on behalf of Canada Pension Plan, is looking to hire a director to oversee an expansion of its real estate investments in the U.S. The $124 billion pension system, which owns stakes in 17 U.S. properties, plans to ramp up its U.S. acquisitions to take advantage of lower prices. Last week, CPP and Kimco Realty of New Hyde Park, N.Y., announced a joint venture to target prime shopping centers nationwide. The initial $370 million investment includes five properties from Kimco's portfolio. CPP holds a 45 stake in the joint venture. The Toronto-based director would identify and execute acquisitions, as well as manage the existing portfolio. The staffer would also oversee investments in Brazil. At least 10 years of experience is required, including a track record with U.S. acquisitions. The search is being handled by BCGI American Real Estate Executive Search of New York. The position reports to Peter Ballon, who held the post until about six months ago, when he was promoted to vice president and head of real estate investments in the Americas. He replaced Andrew Blair, who left CPP. CPP had $7.1 billion of real estate investments in joint ventures and funds at yearend. Most of its portfolio consists of office and retail properties in Canada. However, CPP also has holdings in Mexico, Brazil, Europe and the Asia-Pacific region, as well as the U.S. Among its higher-profile U.S. holdings is a 39 stake in a 2.8 million-square-foot portfolio of Denver office properties. CPP teamed up with... http://www.realert.com/headlines.php?hid=145314 Real Estate Alert's annual review of public pension systems has documented just how big a toll the economic downturn took last year: The 50 largest plans saw their real estate portfolios plunge in value by a whopping 24 on average. The decline is only the second in the review's 11- year history. And it was far higher than the previous drop of 6 in 2001. The portfolios plummeted in value by $39.3 billion, to $127.6 billion (see tables on Pages 6-9). California State Teachers and Calpers, the two largest pensions, suffered the biggest declines by dollar amount. CalSTRS' portfolio dropped by $7.5 billion, or 37, to $12.7 billion. Calpers' portfolio fell $7.2 billion, or 34, to $13.7 billion. Overall, values declined at 44 of the 50 systems, with 12 falling by at least $1 billion. By contrast, only 16 pensions posted declines in 2008, with two experiencing losses of more than $1 billion. Against that backdrop, it's little surprise that for the... http://www.realert.com/headlines.php?hid=145218 A Hines partnership has asked brokers to estimate the value of the office tower at 717 Texas Avenue in Houston, likely setting the stage for a recapitalization. Market pros think the 696,000-square-foot building could be worth $250 million, or $359/sf. Hines, the big Houston developer and fund manager, owns the property in partnership with Prime Asset Management, the U.S. real estate investment arm of the family of Rafki Hariri, the Lebanese prime minister and billionaire who was assassinated in 2005. The partners recently solicited quot;broker opinions of value,quot; raising speculation that the 33-story tower would soon hit the market. However, local players said Hines is most likely trying to establish a price in order to sell its roughly 30 stake to Prime. The building, formerly called Calpine Center, was appraised at $235 million at the top of the market, in June 2007, when the Hines team lined up a $160 million securitized loan. But despite the market downturn, the property may be worth more now because new leases have boosted net operating income. In 2008, energy company Conoco Phillips vacated 284,000 sf, which it was renting at $14.81/sf on a triple-net basis. Hines then shopped the space at $32/sf, and leased it up. The major tenants include power company Calpine, whose 222,000-sf lease at $24.82/sf expires at yearend 2013. Other tenants include oil and gas company Plains Exploration (162,000 sf) and law firm Jones Day (55,000 sf at $26.92/sf until 2019). The tower is in the theater district, within walking... http://www.realert.com/headlines.php?hid=145084 A partnership led by investor Mark Karasick is marketing a Chicago office tower with a large assumable loan. The group is seeking a whopping $140 million for the building, at 550 West Jackson Boulevard in the West Loop. That would translate into a skimpy capitalization rate of 5.7. The partnership acquired the 402,000-square-foot property in 2005 for $125 million. Market players said that some partners were interested in selling the building, but others were reluctant. That prompted speculation that pricing expectations were set high to get all of the partners to go along. In an unusual move for a Chicago offering, the partnership has given the listing to a New York brokerage, Cornerstone Property Group. Most of the partnership's members are based in New York. The offering will likely appeal to core investors because the building is 94 occupied, with little near-term lease rollover. What's more, it has an assumable $97.5 million securitized loan - equal to 70 of the proposed price. The interest-only loan, with a 6.6 coupon, matures in 2017. Shortly after the Karasick partnership bought the property, the largest tenant, Refco, unexpectedly filed for bankruptcy and vacated 200,000 sf. But the partnership was able to lease up much of the space. The largest tenant is Newedge Group, formerly known as Calyon Financial, which leases 130,000 sf at $21.53/sf until August 2019. Other tenants include Corporate Executive Board (52,000 sf at $21/sf until February 2018) and the U.S. Food and Drug Administration (33,000... http://www.realert.com/headlines.php?hid=144973 Trecap Partners, which made a splash this month by acquiring Capmark Investments' advisory business, has now made a major hire. Michael McNamara, a former Lehman Brothers managing director, will oversee acquisitions and dispositions for the Sarasota, Fla., investment-management firm, which was formed about a year ago. McNamara, who was named a managing director, will work out of New York. The move reunites McNamara with Trecap founder Doug Tibbets, who was president of Equitable Real Estate from 1989 to 1998. McNamara was national head of acquisitions for Equitable while Tibbets was in charge. McNamara, who joined Lehman in 2001, was one of a handful of principals who oversaw three Lehman Brothers Real Estate Partners funds, which raised $7.2 billion of equity. The management rights to those funds are in the process of being acquired by three other Lehman veterans - Mark Walsh, Brett Bossung and Mark Newman. Walsh, former head of real estate at Lehman, left after the firm's bankruptcy filing in September 2008. Bossung and Newman, co-heads of Lehman's real estate private equity division, have continued to oversee the funds since the filing. Trecap last week closed on its $19.2 million purchase of Capmark's advisory business, which includes the management rights to three North America funds, a U.K. fund and separate accounts. Combined, the various vehicles have $4.3 billion of assets under management. Thirty Capmark employees, including five senior managers, joined Trecap as part of the... http://www.realert.com/headlines.php?hid=144879 (SEE CORRECTION BELOW) A foreclosed Beverly Hills parcel slated for the development of a luxury condominium and retail complex is expected to command less than one-quarter of the price that it traded for two years ago. Los Angeles developer Hagop Sargisian acquired the site at 9200 Wilshire Boulevard in 2008 for $54 million. It financed the acquisition with $52 million of loans - a $31 million senior loan from troubled Broadway Bank of Chicago and a $21 million junior loan from Connaught Real Estate Finance, a Chicago fund shop headed by a Broadway director, Sean Conlon. Sargisian, operating via his HDS Group, then navigated the cumbersome approval process needed to get the rights to build 53 luxury condominiums and 14,000 square feet of restaurant and other retail space. But Sargisian defaulted on the loans, and Broadway foreclosed in January. When meeting with brokers in recent weeks, Broadway indicated it hoped to get as much as $25 million for the site. However, most market players think bids will come in around $12 million. CB Richard Ellis has the listing. It's unclear whether Broadway would sell at that price. The community bank has been struggling under a mountain of failing loans. It is owned by the family of Illinois State Treasurer Alexi Giannoulias, who told the Chicago Sun-Times this month it is quot;quite likelyquot; the bank will fail this year. The 40,000-square-foot site, formerly used by a car dealer, is just outside Beverly Hill's pricey Golden Triangle district. A local developer acquired it in 2003... http://www.realert.com/headlines.php?hid=144771 Investment firm PNL Cos. is marketing a stalled 875,000-square-foot redevelopment project in Fort Worth, Texas. The City Place project encompasses three buildings: A gutted tower, called One City Place, that was slated for conversion to about 330,000 sf of luxury condominiums from office space. A 329,000-sf office building, called Two City Place, that is 78 occupied. A vacant 215,000-sf retail/office building, called City Place Center Block. Dallas-based PNL is willing to consider bids on individual buildings or the entire complex, which is on Throckmorton Street. Two City Place has an estimated value of $60 million. The entire complex might command only $15 million more, reflecting the renovation and leasing costs a buyer would incur. PNL would consider staying on as a development partner or minority owner. Jones Lang LaSalle has the listing. The complex, which helped revitalize downtown Fort Worth when it was constructed in the late 1970s, was formerly the headquarters of Radio Shack and a 200,000-sf outlet mall. PNL bought the property in 2001 from the electronics company, which leased back the office space for three years while awaiting a move to its new headquarters three blocks away. PNL, which specializes in opportunistic investments, mapped plans for a $100 million-plus renovation and repositioning of the property upon Radio Shack's departure. PNL planned to convert the 19-story One City Place into luxury condos. The 18-story Two City Place was slated for use by multi... http://www.realert.com/headlines.php?hid=144655 A family business is offering three boutique hotels in the San Francisco area that have a combined value of about $110 million. Up for grabs are the high-end Huntington Hotel at the top of Nob Hill, Galleria Park near Union Square and La Playa Hotel and Cottages-by-the-Sea in Carmel-by-the-Sea, Calif. The hotels, which encompass 398 rooms, are being offered as a portfolio via Holliday Fenoglio Fowler. They represent the entire holdings of Nob Hill Properties, a San Francisco firm controlled by the Cope family and formerly run by Newton Cope, who died in 2005. Huntington Hotel and La Playa are unencumbered by brands or management contracts. That represents an unusual opportunity in the San Francisco area, where most hotels are tied up with long-term contracts. Galleria Park is leased to hotel operator Joie de Vivre Hotels. Huntington Hotel is in the luxury category, and Galleria Park is classified as quot;independent boutique.quot; Like other core hotel markets, San Francisco has seen a pullback in occupancy and revenues. But that appears to be leveling off. The 140-room Huntington Hotel, which opened in 1924, hasn't previously been offered on the open market. It has undergone significant renovations that positioned it to compete with luxury hotels, such as the Fairmont and Ritz-Carlton. The 12-story hotel, at 1075 California Street, includes Big 4, one of the city's top-rated restaurants, and the high-end Nob Hill Spa. Financial information for Huntington Hotel was unavailable. But... http://www.realert.com/headlines.php?hid=144529 Phoenix, one of the nation's most-battered apartment markets, is showing signs of life. Brokers report that bidding wars have started to break out for recent-vintage apartments. A case in point: the 512-unit Biscayne Bay complex in suburban Phoenix attracted more than 30 bids last month. The seller, a California State Teachers partnership, is likely to get its $43.1 million asking price, which would translate into a 6.3 capitalization rate - a level unachievable only a few months ago. Meanwhile, special servicer LNR Partners is seeking $52.9 million, or $84,000/unit, for a foreclosed luxury apartment complex in Phoenix. That would provide the buyer with an initial annual return of just 5.1, based on $2.7 million of net operating income last year. While some market players think that price is too aggressive, the fact that LNR and its broker, CB Richard Ellis, are shooting that high reflects the newfound strength in the market. To be sure, no one is suggesting that Phoenix is anywhere near as vibrant as Boston, New York or Washington - markets that never collapsed during the downturn and are now commanding relatively lofty prices, especially for stabilized apartment properties. But Phoenix, one of the first areas to plunge into the abyss, seems to be starting to revive. That is giving it a leg up on Las Vegas and parts of Florida and California - which also were crushed by the housing implosion, but remain in the doldrums. Fund sponsors and apartment operators are clamoring for listings of both stable and... http://www.realert.com/headlines.php?hid=144419 Ezra Beyman's Empire Assets Group is under pressure from lenders on 14 of its apartment properties. Some $485 million of securitized mortgages on the complexes are in special servicing or on servicer watch lists. Among the latest additions: A $63 million mortgage on the 374-unit Empirian Chesapeake in Chesapeake, Va., that was transferred to special servicing on Jan. 11. The 14 properties, most in the Southeast, are suffering from declining rents and occupancy rates. So far, it doesn't appear that Empire or special servicers are shopping any of the properties. A spokesman said Empire is in discussions with servicers to address the loan issues and expects quot;no adverse outcome.quot; But should the Montvale, N.J., firm be unable to renegotiate the loan terms or pump in equity, some or all of the properties could be headed to market. The properties, mostly Class-B, garden-style complexes, encompass 5,134 units. They make up about 10 of the 40,000-plus units in Empire's portfolio. A big chunk of the company's holdings - 289 properties with 26,932 units - was acquired for $1.1 billion in 2006 from Equity Residential Properties of Chicago. Empire refinanced debt on most of that portfolio in 2007 with three securitized loans totaling $1.05 billion. Those loans haven't been flagged by servicers. Empire is more than 90 days overdue on loan payments for the Chesapeake complex, which the company bought in 2006 for $78.8 million. The property's cashflow has shrunk below the amount needed to service the debt, resulting in the loan's... http://www.realert.com/headlines.php?hid=144326 CB Richard Ellis last year retained its position as the nation's most-active brokerage across the five major property types, but a catastrophic drop in sales activity stole the luster from its crown. The outlook for property trades this year is a little brighter - prices are closer to hitting bottom, the credit crunch is starting to thaw and a larger number of distressed assets are working their way toward liquidation. But even after two straight years with substantial declines in volume, the industry faces strong headwinds, and no one expects anything more than a modest increase in sales from the extraordinarily low base of 2009. Only $27.2 billion of office, retail, multi-family, industrial and hotel properties changed hands last year, according to Real Estate Alert's Deal Database, which tracks trades of at least $25 million. That was down from $84.7 billion in 2008 and $242.7 billion in 2007. In more bad news for brokerages, sellers completed a larger percentage of trades without a broker last year - 30, up from 23 in 2008. That means only $19.1 billion of last year's volume resulted in commissions from sellers. Why the lower share of brokered sales It seems to reflect the high degree of distress in the market. When pursuing foreclosed properties, buyers are often approaching lenders, special servicers and receivers directly. That is reducing the need for sellers to hire brokers, although buyers still might use their assistance. Brokers hoped that a steady stream of forced sales and... http://www.realert.com/headlines.php?hid=144216 Investor Ty Warner is quietly marketing the trophy Four Seasons hotel in Midtown Manhattan. The toy tycoon has held discussions with a select group of investors about an off-market sale of the 368-room luxury hotel. He is holding firm on pricing expectations of a whopping $1.75 million/room, or $644 million, according to people familiar with the discussions. The 52-story property, on East 57th Street between Park and Madison Avenues, has taken its lumps during the market downturn, but remains one of the nation's best-known hotels and is sure to pique the interest of hotel players. The property's occupancy rate averaged 58 in the 12 months ending last June 30, down from 72 in calendar year 2008, according to Realpoint. The average room rate dipped slightly, to $1,086 from $1,112, but revenue per available room fell to $635 from $798. That caused net cashflow to plunge to $14.7 million, from $30.6 million. The Four Seasons Hotel New York, as it's formally known, isn't heavily leveraged. The property has $185.6 million of mortgage debt - well below the price being sought by Warner. But declining fundamentals have put the hotel under some pressure. The debt picture is complicated by the fact that the Four Seasons is tied to a larger debt package that includes other Warner hotels. At the end of 2005, Warner lined up a $425 million securitized mortgage from Credit Suisse and pledged as collateral the Four Seasons in Manhattan and four other luxury resorts: the Four Seasons Biltmore in Santa Barbara, Calif.; San Ysidro Ranch... http://www.realert.com/headlines.php?hid=144079 A Starwood Capital-FDIC partnership has dropped its offering of a California condominium project inherited from the failed Corus Bank and will instead finish the complex itself and then seek to sell the units. The move is a bad sign for distressed investors hoping that Corus' hefty portfolio of distressed condo and apartment projects would be a source of dramatically discounted real estate. It now seems more likely that the FDIC and Starwood, which bought a 40 stake in the portfolio in October, will lean toward holding properties in the hope of getting higher prices down the road, rather than dumping them at fire-sale prices. The pulled listing was for the luxury Glencoe Lofts in Marina Del Rey, Calif. It was financed by a $39.2 million construction loan Corus wrote in 2005 for local developer Alan Goodman. Some of the 100 units originally were expected to sell for more than $1 million. But as construction began, the condo market started to collapse. The project was nearly complete when the developer stopped work in 2008. Corus tried to sell the loan for $44 million last summer, but found no takers and then foreclosed. Following the Chicago bank's failure in September, Starwood and the FDIC hired CB Richard Ellis to shop the property, betting that its good location and nearly finished condition would limit the discount that bidders would demand. But offers were a disappointment, ranging from about $22 million to $25 million. Now the Starwood-FDIC partnership will finish the approximately $1 million of remain... http://www.realert.com/headlines.php?hid=143981 A DRA Advisors fund is at risk of losing 16 office buildings it inherited via the 2005 takeover of CRT Properties. DRA is more than 90 days late on payments for a $180.9 million securitized mortgage. The loan's special servicer, LNR Partners, has assigned an attorney to begin foreclosure proceedings, according to a securitization report this month. DRA is negotiating with LNR about a possible modification or extension of the loan, said Paul McEvoy, senior managing director of the New York firm. If those talks are unsuccessful and DRA is unable or unwilling to pump in additional equity, the fund would have to surrender the properties. The vehicle is under the gun because the interest-only loan is scheduled to mature in October. The 1.5 million-square-foot portfolio contains a seven-building complex in Jacksonville, a five-building complex in Orlando, two buildings at a complex in Charlotte and two buildings at an office park in Rockville, Md. They were formerly owned by CRT Properties, a REIT in Boca Raton, Fla., that controlled 11.7 million sf of properties. The DRA fund teamed up with Colonial Properties in November 2005 to buy CRT for $1.8 billion. The transaction valued the 16 buildings at $226 million. Last November, DRA acquired Colonial's 15 stake in those properties, although Colonial, a REIT in Birmingham, Ala., still manages them. The portfolio's occupancy rate fell to 75 in 2008, from 95.6 in late 2005, according to the most recently available information. By that... http://www.realert.com/headlines.php?hid=143869 Five distressed senior-housing properties in Las Vegas are headed to market, and four others could be on the way. A Starwood Capital partnership bought the nine-property portfolio in 2006 for $239 million. Last April, five of the complexes were turned over to a receiver, which is now preparing to put them up for sale. Meanwhile, the Starwood team has indicated it intends to cover cashflow shortfalls at the other four properties, but market players think it's only a matter of time before those are jettisoned as well. The nine garden-style complexes, which encompass 2,265 units, are independent-living properties built in 2000. They are geared for residents 55 and older who don't require intensive assisted-living services. Starwood, of Greenwich, Conn., and its partner, Orion Residential of Phoenix, financed the portfolio acquisition with $195.2 million of securitized loans from Wachovia, equal to 82 of the purchase price. They rebranded the properties, which formerly carried the name quot;Carefree,quot; under the banner quot;Destinations.quot; But the duo struggled with falling rents and occupancy levels when the housing market imploded. In hard-hit Las Vegas, the values of even stable rental properties have plunged by as much as 40. However, the Starwood/Orion complexes have been especially battered. The occupancy rates of some complexes have fallen to as low as 70. Cashflows, in some cases, are less than 40 of the amount needed to service loans. Last April, Integral Senior Housing of Carlsbad, Calif., was... http://www.realert.com/headlines.php?hid=143736 A TIAA-CREF fund is selectively shopping a Dallas office property valued at up to $210 million. The 1.6 million-square-foot Lincoln Centre is being pitched to a handful of core investors via CB Richard Ellis. In a plus for would-be buyers, the trophy property has a low-rate assumable mortgage equal to more than 70 of the estimated value. The interest-only $153 million loan, with a 5.5 coupon, matures in February 2016. TIAA acquired the three-building complex for $255 million in December 2005 from MetLife via its TIAA Real Estate Account fund. The complex is about 86 occupied at an average rent of about $17/sf. The largest tenant, Atmos Energy, occupies roughly 170,000 sf. Other tenants include chemical company Valhi Corp. and law firm Griffith Nixon. Lincoln Centre, which was completed in 1984, underwent some $15 million of renovations in 2004. The complex, which includes a fitness center, a conference center and garages, shares a campus with the 500-room Hilton Dallas Lincoln Centre, a luxury hotel that is separately owned and not part of the offering. The complex is at the intersection of the Dallas North Tollway and LBJ Freeway, roughly 10 miles north of downtown Dallas. This is the latest in a series of offerings by TIAA Real Estate Account, an open-end vehicle set up in 1995 that had $9.3 billion of net assets as of last May, according to the most recently available data. Last year, the fund listed about a half-dozen office properties valued at some $200 million. But it does not appear that any of those buildi... http://www.realert.com/headlines.php?hid=143644 Colliers Pinkard, Holliday Fenoglio Fowler and Jones Lang LaSalle are each aiming to bulk up their New York investment-sales teams, leading some to speculate that another round of musical chairs may be in the offing for top brokers. The last big shift occurred from 2002 to 2004, when no fewer than nine leading brokers changed firms. It was touched off when CB Richard Ellis raided Cushman amp; Wakefield, hiring away Darcy Stacom and Bill Shanahan. Cushman then turned around and hired CB brokers Scott Latham and Jon Caplan. In 2003, CB merged with Insignia/ESG, absorbing Richard Baxter, Ron Cohen, Woody Heller and Nat Rockett. Soon after the merger closed, Baxter, Cohen and Rockett jumped to Cushman, while Heller moved over to Studley. A year later, Rockett left for Jones Lang. This time around, speculation is centering on Cushman's team of Baxter, Cohen, Latham and Caplan. The buzz is that Colliers, Holliday and Jones Lang each recently contacted the four brokers, who primarily focus on Class-A and -B office listings in Manhattan. The quartet's five-year contracts with Cushman expired in 2008, leaving individual members or the entire team free to jump from the brokerage's well-established platform if an enticing offer comes along. Recruitment of the team would be a game-changer for Colliers or Holliday, neither of which has a major investment-sales presence in Manhattan. And it would lift Jones Lang into the territory of the current Big 3 - CB, Cushman and Eastdil Secured. The four Cushman brokers have handled a number... http://www.realert.com/headlines.php?hid=143522 Special servicer J.E. Robert Cos. has struck bargain-basement sales agreements for four Lightstone Group malls in foreclosure proceedings. Two separate buyers will pay a total of $32.3 million for the properties - less than one-third of Lightstone's roughly $100 million acquisition price in 2004. Meanwhile, two other troubled Lightstone properties - Macon Mall in Macon, Ga., and Burlington Mall in Burlington, N.C. - are also expected to trade at sharp discounts to Lightstone's acquisition prices. The four-mall portfolio attracted almost 40 bids from more than a dozen investors, who submitted offers on one or multiple malls. The demand reflected slight improvement in the sector's outlook from a year ago, when some investors wondered whether malls in secondary and tertiary markets would trade at any price. However, the Lightstone offerings don't seem to presage a flurry of distressed mall listings. Special servicers generally remain more interested in trying to improve leasing and management than in offering properties at fire-sale prices. Lightstone, a New York investment firm headed by David Lichtenstein, defaulted on a $72.8 million securitized mortgage on the four-mall portfolio last year. J.E. Robert began foreclosure proceedings, and Jones Lang LaSalle was appointed receiver in January. Jones Lang subsequently put the properties up for sale. An unidentified buyer has agreed to pay $21.3 million for three of the properties: the 508,000-square-foot Shenango Valley Mall in Hermitage,... http://www.realert.com/headlines.php?hid=143410 With many opportunistic real estate investors on the sidelines, brokers are increasingly pitching empty or mostly vacant office properties to end-users. Companies looking to relocate can be enticed by the drop in property values, brokers said. Also, businesses can qualify for low-cost government loans and tax incentives that make acquisitions more affordable. Companies can now take over larger and higher-quality space while paying prices that are significantly below the replacement cost, said Guy Ponticiello, a Jones Lang LaSalle broker who has seen an upswing in interest from end-users. He is marketing a vacant office/data center complex in suburban Memphis that is drawing interest from potential occupants. The seller, Harrah's Entertainment, spent roughly $50 million buying and renovating the 285,000-square-foot complex before deciding to consolidate its operations in Las Vegas. The complex, in Cordova, Tenn., will be auctioned online next week. Last month, Ponticiello brokered the $2 million online sale of a two-building complex in Dayton, Ohio, to a joint venture between a private investor and United Food and Commercial Workers International Union. The union will occupy one building, while the private investor leases the other. Brokers are also marketing buildings to existing tenants. In some instances, occupants have been willing to buy multi-tenant properties and become the landlord of the space they don't use. For example, an unidentified occupant has agreed to buy Union Square 1amp;2, a... http://www.realert.com/headlines.php?hid=143316 Murray Hill Properties is making headway in its effort to recapitalize an overleveraged Manhattan office building, as it continues to seek a partner for another building in the city. The New York fund shop has lined up a tentative offer from an unidentified investor to inject $42 million of equity into One Park Avenue, market players said. Murray Hill is also trying to raise another $21 million from others. The new investors would take over Blackacre Capital's 90 ownership stake, with Murray Hill retaining its 10 interest and role as operating partner. Meanwhile, Murray Hill continues to look for an investor willing to kick $38 million of equity into the building at 1412 Broadway. Under the recap, the investor would take over Principal Real Estate Investors' 92.5 stake. Murray Hill would retain the remaining interest. Murray Hill, which is headed by Norman Sturner and Neil Siderow, is among many New York owners seeking to recapitalize properties acquired at the top of the market. Others include Swig Equities and a George Comfort amp; Sons partnership. The properties are being squeezed by heavy debt loads and, in some cases, sagging cashflow. Murray Hill and New York-based Blackacre acquired One Park Avenue in 2007 from an SL Green partnership for $550 million. The deal was financed with a $483 million debt package, including a $375 million senior mortgage that was securitized. The securitized loan was transferred to special servicer LNR Partners in August because tenant Segal Co. plans at yearend to vacate 158,... http://www.realert.com/headlines.php?hid=143185 Hawkeye Partners has begun informally talking to institutional investors about plans for its second seed-capital fund, which could seek to raise more than $1 billion of equity. The Austin, Texas, shop has an unusual strategy - a cross between a fund-of-funds operator and a private equity investor. It takes equity stakes in quot;emergingquot; investment managers that are seeking to oversee pools of institutional capital for the first time. It also allocates capital to the managers to invest via separate accounts and encourages the managers to set up commingled quot;sidecarquot; funds, capitalized in part by Hawkeye's institutional investors, that would co-invest with the separate accounts. The only other real estate player pursuing the same strategy is Goldman Sachs, which raised $708 million of equity in 2007 for a seed-capital fund called Goldman Sachs Real Estate Partners. That was $8 million bigger than Hawkeye's first vehicle, Hawkeye Partners Scout Fund 1, which was launched the same year. Hawkeye hasn't yet set a target size for the follow-up fund. But investors said the sponsor envisions raising $1 billion to $1.2 billion that would be invested with about six emerging managers. The buzz is a number of Hawkeye's previous investors have indicated a willingness to sign up. With so many institutional investors still on the sidelines, Hawkeye could have its pick of investments. A formal marketing effort is expected early next year. The company declined to comment on its plans. Hawkeye was formed in 2004 by Claudia... http://www.realert.com/headlines.php?hid=143085 After two years of marketing, Bond Cos. and Abraham Group have pulled the plug on a planned $350 million vehicle targeting quot;greenquot; real estate opportunities. The duo lined up about $140 million of tentative commitments, including pledges from a Goldman Sachs fund of funds and a client of Cleveland-based consultant Courtland Partners. But Courtland wanted the fund to have at least $200 million of equity, and the sponsors were unable to reach that threshold. The vehicle, Bond Cos. Sustainability Fund, initially was designed to develop and redevelop properties in urban markets. As the downturn worsened, the focus switched to properties that could be renovated or repositioned to maximize energy consumption, minimize waste output and reduce greenhouse-gas emissions and water use. The conservation features were aimed at reducing expenses and qualifying for tax breaks, thereby increasing property values. The return goal was 13.5. The broad investor pullback over the past year no doubt hurt the ability of Chicago-based Bond and Washington-based Abraham to raise capital. Placement agent Wetherly Capital apparently stopped reaching out to potential U.S. backers about a year ago, shortly after the financial markets fell into disarray. A separate, unidentified placement agent apparently solicited capital from European investors, with limited success. The marketing effort was also hurt by the departure early last year of chief investment officer Stephen Grant, considered a quot;key personquot; for the fund. Grant joined fund shop Fowler... http://www.realert.com/headlines.php?hid=142975 Broadstone Real Estate, which initially raised equity from wealthy individuals for a private REIT that invests in triple-net-lease properties, is now reaching out to institutional investors. The Rochester, N.Y., company lined up $42 million of initial capital, which it leveraged into $84 million of acquisitions since the beginning of last year. Now it wants to increase the REIT's equity to $500 million, which would translate into $1 billion of total investment power. Last month, it began soliciting family offices, fund of funds and small institutions. The vehicle, Broadstone Net Lease, is shooting for a 10-11 return, primarily through the acquisition of retail and medical-office buildings that are triple-net leased to a single tenant for 15-20 years. It will consider properties valued at up to $10 million, although most purchases will have price tags of $2 million or less. The goal would be to spend the new war chest over five years. Some other fund operators that make core investments in net-lease properties have also started soliciting institutional investors, in the hope that they will be more interested in conservative investments after suffering losses in the market downturn. For example, AEI Fund Management of St. Paul, Minn., recently began seeking $300 million for its first institutional-backed fund targeting core net-leased properties, after sponsoring 34 similar vehicles backed by wealthy individuals. Broadstone, which declined to comment, is offering investors a 7 quarterly dividend. It... http://www.realert.com/headlines.php?hid=142843 With few funds in a capital-raising mode, placement agents have shifted their focus to advising fund operators and their limited partners on how to navigate the troubled real estate market. Industry pros said 2009 will be remembered as the toughest year in recent memory for placement agents, with the bear market forcing the downsizing of operations. The survivors are being asked to defend their industry's past practices to the SEC, even as they struggle to keep their businesses afloat. quot;The people who remain are the ones who have been able to transition the business to advisory services in a much tougher environment,quot; said one market veteran (see list of placement agents on Pages 9-10). With their main line of business - soliciting capital for new funds - largely dead for now, placement agents are assisting fund operators on interactions with their limited partners, such as gaining approval for extensions on investment deadlines. They are also helping fund operators figure out how to retire debt and to line up equity for sidecar and co-investment vehicles that would bolster troubled assets. Placement agents are increasingly sitting on fund advisory boards, attending annual meetings of fund investors and advising limited partners on the potential sale of fund stakes on the secondary market. Such activities currently account for more than half of the business for Morgan Stanley's private capital markets group, according to managing director Robert Weaver, who heads the operation. Said Thomas... http://www.realert.com/headlines.php?hid=142778 Troubled developer Kent Swig is trying to drum up an equity partner for a Lower Manhattan office building that lost its lead tenant last year. A Swig partnership has approached several investors about injecting equity into the 868,000-square-foot building at 110 William Street, according to people familiar with the discussions. There's talk that Swig's company, Swig Equities, is also willing to include other properties in a recapitalization. New York-based Swig, which has faced multiple lawsuits over defaulted loans, didn't return calls seeking comment. The William Street building is up-to-date on its loan payments, but its cashflow has fallen below the level needed to service the debt, putting the Swig partnership in a cash squeeze. The loan was put on a servicer watch list in March. Swig told the servicer, KeyCorp Real Estate, that it was trying to fill vacant space, renew leases and limit spending for tenant improvements. In 2004, Swig teamed up with Longwing Real Estate Ventures, the U.S. real estate arm of Dubai's royal family, to buy the property from Trizec Properties of Chicago for $164.5 million. Swig and Longwing refinanced the property in 2007 via Lehman Brothers, which provided a $156 million loan. Lehman securitized the five-year, interest-only mortgage via a $3.2 billion pooled deal (LB Commercial Mortgage Trust, 2007-C3). The building was 99 occupied at the refinancing, but is now just 84.5 filled. Last September, American Home Mortgage vacated 101,000 sf. The building's net... http://www.realert.com/headlines.php?hid=142652 Morgan Stanley is preparing to turn the keys to Crescent Real Estate Equities over to a Barclays syndicate and walk away from its disastrously timed $6.5 billion takeover of the REIT. Morgan Stanley owes the syndicate $2.5 billion, including $2 billion to Barclays itself. In August, Barclays granted a three-month extension on its portion of the debt, giving Morgan Stanley a last-ditch opportunity to address the overleveraged investment. But with the extension's Nov. 2 deadline looming, Morgan Stanley has decided to throw in the towel. It is working with Barclays on an orderly transfer of the portfolio in what will be one of the largest defaults so far in the market crash, according to people familiar with the matter. Morgan Stanley declined comment. Barclays isn't expected to quickly liquidate Crescent's holdings, a mix of office buildings, resort developments and residential land. The bank evidently plans to manage all or most of the portfolio for now, in the hope that property values will rebound. But as a bank, Barclays is unlikely to hold the properties long term. A spokesperson did not return calls seeking comment. Barclays is currently assessing the value of the properties. The most-challenging holdings are the residential parcels and resort developments - two asset classes that have been hammered in the current recession. Morgan Stanley's property arm, Morgan Stanley Real Estate, acquired Crescent in August 2007, near the peak of the real estate market. The REIT, based in Fort Worth, Texas, owned full or... http://www.realert.com/headlines.php?hid=142545 Townsend Group, the big real estate consultant, has lined up $500 million of commitments from its long roster of clients for a $5 billion club fund sponsored by Brookfield Asset Management. The Townsend pool is the only block of U.S. money in the fund, which Brookfield is expected to close within a few weeks. Toronto-based Brookfield is kicking in $1 billion itself. Two sovereign wealth funds, China Investment Corp. and Future Fund Australia, are also supplying $1 billion each. And three players are each contributing $500 million: Canadian Pension Plan, Public Sector Pension of Canada and Government of Singapore. Brookfield set a $500 million minimum for participants - a level too large for nearly all U.S. institutional investors since the market turned down. So Townsend pooled money from about a dozen unidentified clients to reach the threshold. The Cleveland firm serves as consultant to roughly 85 pension funds, endowments, foundations, foreign investors and funds of funds. Those clients have real estate allocations in excess of $130 billion. The Brookfield fund, called Global Real Estate Investor Consortium, will seek a 25-plus return by making huge investments - each involving at least $500 million of equity - in distressed debt and properties globally. It can recapitalize or reposition properties, as well as restructure debt or companies. Most of its deals, at least initially, are expected to involve debt restructuring. The vehicle's terms permit any of the seven limited partners,... http://www.realert.com/headlines.php?hid=142463 After sitting on the sidelines for several years, Kaufman Organization plans to spend up to $750 million on Manhattan properties over the next two years. The New York firm, which dates to 1909, has tapped Fred Leffel to oversee the acquisition platform, called Kaufman New Ventures. Leffel joined Kaufman in July after an eight-year stint as a senior vice president at Savills. Thanks to the sharp market downturn, Kaufman thinks it will be able to garner value-added or opportunistic returns by acquiring office, multi-family, retail and mixed-use properties that need minimal renovation or have vacancy rates that are slightly above average. The company will also consider buying distressed senior debt with an eye toward taking control of the collateral, and providing quot;rescuequot; equity to struggling owners in exchange for majority stakes. But it will bypass development deals, hotels, industrial properties and residential condominiums. So far it has bid on a handful of offerings, including a note on a Manhattan office building. Kaufman New Ventures plans to invest its own capital and, in some transactions, team up with wealthy individuals and funds. Including leverage and capital from partners, Kaufman expects to spend $500 million to $750 million over two years. On individual transactions, equity could represent 40-100 of the purchase price, depending on the availability of leverage. Kaufman owns some 4 million square feet of office properties and, to a lesser extent, apartment buildings. It manages... http://www.realert.com/headlines.php?hid=142315 Buyout specialist GI Partners plans to use up to one-quarter of its new $2 billion fund to acquire distressed hotels and hotel mortgages - its first foray into the sector. The Menlo Park, Calif., shop has told investors it will primarily target high-end hotels and resorts in the U.S. It could also buy hotel companies. With leverage, the roughly $500 million equity allocation would provide up to $1.25 billion of investment power. GI began marketing the vehicle, GI Partners Fund 3, in 2007. It is expected to hold a final close next month, bringing the total equity to about $2 billion. The fund, which seeks a 20-plus return, has already plowed about 20 of its equity into three investments. It took a stake in Ladder Capital, a startup finance company in New York headed by former UBS real estate chief Brian Harris. It acquired Care Aspirations, a healthcare company in London. And it bought a 75 stake in FlatIron Crossing Mall in Broomfield, Colo., from Macerich Co., as well as options to buy 1.25 million shares in the Los Angeles REIT. While real estate has been a focus for GI since its formation in 2001, the buyout firm also invests in other sectors. In 2001, it formed a $526 million joint venture backed by Calpers and CB Richard Ellis Investors that invested heavily in vacant properties that had been built for companies burned by the dot-com implosion. GI managed the entity, dubbed GI Partners Fund, but didn't hold an equity stake. GI followed that up in 2006 with the $1.45 billion GI Partners... http://www.realert.com/headlines.php?hid=142208 More than one-quarter of high-yield funds capitalized by U.S. institutional investors managed to post positive returns in the first quarter, a sign that the sector may be close to hitting bottom. A review of 123 high-yield funds by Real Estate Alert found that 35 ended up in positive territory from January through March (see list on Pages 11-14). That was up from only a handful of funds in the fourth quarter. The sample, roughly one-quarter of active funds, is believed to be representative of the sector's overall performance. Debt funds performed relatively well, with 11 of 20 edging into the black for the quarter. To be sure, most funds remained in the red. What's more, many of the vehicles that reported first-quarter gains are still underwater since inception. And many funds are still expected to recognize losses in upcoming quarters. But the broad trend suggests that following hefty writedowns in the second half of last year, the worst may be over for the sector. It's important to remember that quarterly returns can be misleading because funds have investment horizons of at least five years. Writedowns don't always reflect realized losses, and valuations could still rebound. Also, comparisons of the results of individual funds can be dicey because all vehicles didn't start investing at the same point. For example, a fully invested fund that takes a big writedown is in much worse shape than one that has invested only a small portion of its equity. And the returns of funds t... http://www.realert.com/headlines.php?hid=142017 Holliday Fenoglio Fowler has hired away CB Richard Ellis' multi-family investment-sales team in Houston. The nine-member team is led by Craig LaFollette, who headed the Houston apartment team since 1997 as an executive vice president. He was also a member of CB's institutional-clients group, which represents national apartment investment funds. Also making the move were two other senior executives who each spent more than 20 years at CB: Todd Stewart and Todd Marix. Both were senior vice presidents and members of the major accounts group, as well as part of the Houston sales team. LaFollette, Marix and Stewart were named senior managing directors of HFF. They started Monday. Rounding out the team are Tre Banks and Chris Curry, who were sales associates at CB, and four support staffers. For HFF, which routinely ranks as the top office broker in Houston, the hirings represent a chance to push into the apartment sector in a big way. Although HFF's seven-broker Houston operation has handled multi-family listings, it previously had no dedicated apartment brokers. During the go-go years from 2005 to 2007, CB ranked first or second each year in Real Estate Alert's ranking of the most-active brokers of large Houston apartment properties. In both 2005 and 2006, apartment sales in Houston topped $1 billion, according to the newsletter's Deal Database, which tracks transactions of at least $25 million. Houston's apartment market has cooled in the past year. Fannie Mae, which along with Freddie Mac is the... http://www.realert.com/headlines.php?hid=141900 California State Teachers plans to take aggressive steps in the coming months to shore up its $13 billion real estate portfolio, whose value has plunged 43 since last summer. Under a series of measures expected to be formally approved tomorrow, the $118.8 billion pension system will adopt a more hands-on approach. It will work more closely with investment managers and joint-venture partners to work out troubled properties. It will also consider dropping some investment managers and assuming the oversight of distressed investments itself. CalSTRS, the nation's No. 2 public pension system, also will push for fee concessions from fund operators and operating partners, and could reduce its use of consultants to cut expenses. And it will seek to deleverage its portfolio and renegotiate the terms of mortgages on struggling properties. The initiative, part of a broader business plan aimed at addressing the system's troubled investments, follows similar moves by Calpers, the largest U.S. pension system, which has also suffered heavy real estate losses. Calpers has said it will increase cash reserves in order to pay off maturing loans and plow more equity into struggling properties. CalSTRS has hired five staffers over the past year to improve its ability to manage its portfolio. It now has 15 employees devoted to real estate and could add another recruit over the next year. The pension system is asking its consultants to work with staff in quot;reviewing, analyzing and managing the most immediate challenges confronting... http://www.realert.com/headlines.php?hid=141793 Citigroup, one of the nation's biggest commercial real estate lenders, has selected three brokerages to oversee the sale of distressed properties. Cushman amp; Wakefield, Grubb amp; Ellis and NAI Global last week executed contracts naming them as the bank's preferred vendors. The firms are expected to help Citi evaluate its distressed commercial real estate assets and market properties once they enter the foreclosure process. Citi's institutional-sized offerings are likely to be divided mostly between New York-based Cushman, which has had a longstanding relationship with the bank, and Grubb, which is based in Santa Ana, Calif. NAI, of Princeton, N.J., will likely handle mostly sales of small commercial properties - its specialty. The contracts are a bright spot for the three firms, which could stand to get a significant volume of sales assignments. At the end of the first quarter, Citi had $23.7 billion of commercial real estate loans, ranking 10th among U.S. banks, according to Foresight Analytics of Oakland. That consisted of $12.9 billion of commercial mortgages, $7.6 billion of multi-family mortgages, $2.7 billion of construction and land loans, and $431 million of unsecured loans. Some $475 million of the portfolio was nonperforming - equal to 2 of the total. That's a relatively low nonperforming ratio among giant banks. Figures on foreclosed properties held by Citi were unavailable. The bank declined to comment. Citi's decision to rely on a select group of brokerages, rather... http://www.realert.com/headlines.php?hid=141688 The owner of a heavily leveraged office building at 119 West 40th Street in Midtown Manhattan is facing a cash squeeze that could put the property in play. The ownership group, led by investor Leon Charney, hasn't achieved the increases in rents and occupancy that it projected when it bought the property two years ago for $182 million. Now the group has almost burned through a reserve account set up to cover its mortgage payments, putting it at risk of default. When the group purchased the 334,000-square-foot building - at the top of the real estate market - generous debt financing was readily available. Lenders were willing to value properties based on projected increases in rents and occupancy levels, rather than in-place levels. That inflated the amount of proceeds borrowers received. What's more, lenders often provided additional financing to cover expenses for upgrades. As a result, buyers were often able to borrow most - or even all - of the purchase price. The Charney group, for example, lined up $182.3 million of fixed-rate financing: a $160 million senior mortgage that RBS securitized and a $22.3 million mezzanine loan from RBS and Wachovia. The mezzanine loan was sold in early 2008 at a discount, for $16.8 million, to a fund operated by Wien amp; Malkin of New York. At acquisition, the Class-B property seemed to have plenty of upside. The occupancy rate was just 68 and rents averaged $21.95/sf, well below the average 92 occupancy rate and $56/sf average asking rent for comparable buildings at the time. The senior... http://www.realert.com/headlines.php?hid=141581 A syndicate organized by Deutsche Bank has bought a $95 million mezzanine loan on a Midtown Manhattan office condominium from SL Green at a discount of about 33, in the latest sign of how far values have dropped even for core properties. The 561,000-square-foot condominium, at 1166 Avenue of the Americas, is controlled by Edward J. Minksoff Equities, which is believed to be part of the Deutsche syndicate. The deal, which closed a couple of weeks ago, was brokered by Eastdil Secured. Some market players suggested that the sale pegs the condo's value at roughly $275 million - the $65 million that the Deutsche syndicate paid for the mezzanine loan, plus the $210 million balance on the condo's senior mortgage. That valuation works out to $490/sf. By comparison, Minskoff paid $725/sf, or $135.5 million, at yearend 2006 for a separate 187,000-sf office condo in the fully leased building. As part of the new transaction, the Deutsche syndicate also assumed SL Green's 8 equity stake in the condo, although the estimated value of that stake is currently close to zero given the heavy leverage. SL Green assumed the equity stake and the mezzanine loan in 2007 via its $4.5 billion takeover of Reckson Associates Realty of Uniondale, N.Y. The remaining equity stakes in the condo are held by Minskoff (55) and developer Louis Cappelli (37). The condo covers floors 7-21 in the 44-story building. It is leased until 2020 to J.P. Morgan, which has subleased much of the space to Marsh amp; McLennan. The 1.6 million-sf... http://www.realert.com/headlines.php?hid=141495 Sterling Equities has dismissed two dozen employees after dramatically lowering projections for its acquisition activity over the next couple of years. Among the 24 employees let go by the New York firm last week were four senior vice presidents who oversaw acquisitions and dispositions: Robert Watman, Mel Mayers, Jeffrey Smith and David Ash. Watman, Mayers and Smith were longtime Sterling employees, each joining the company between 1997 and 2000. Watman and Mayers handled East Coast deals, while Smith worked on investments in the Midwest and South. Ash, who was responsible for West Coast transactions, came to Sterling last October after spending eight years with Eastdil Secured. All four were granted severance packages. Sterling employed about 200 people before the staff cuts. Meanwhile, investors in Sterling's latest value-added real estate fund are expected to grant swift approval to the firm's request for a two-year extension of the vehicle's investment period. By giving Sterling American Property Fund 5 extra time to put its remaining capital to work, its limited partners are effectively delaying the firm's sixth fund until 2011. Sterling and its investors agreed to the game plan at the fund shop's annual meeting two weeks ago. The firm, which wouldn't comment on the plan, is expected to formally request the extension shortly. Fund 5 has so far invested only about $370 million of its $610 million of committed capital. The New York firm - led by Richard Wilpon, Michael Katz and Thomas Osterman - had... http://www.realert.com/headlines.php?hid=141378 The senior lenders on a heavily overleveraged California office portfolio have agreed to let four investors convert their mezzanine debt into equity as part of a restructuring that will significantly dilute the $100 million investment of a Calpers-Hines joint venture. The Calpers team originally held the $100 million junior slice of debt on the 4.6 million-square-foot portfolio. It converted that debt to equity and took over the 33 properties in December, after owner Cabi Developers was unable to make payments on its $1.3 billion debt package. Now the Calpers joint venture is largely being squeezed out. Under the restructuring, BlackRock Realty Advisors, Gramercy Capital, KBS Realty Advisors and Square Mile Capital will convert the remaining roughly $500 million of mezzanine debt into equity. Hines, the Houston-based developer and fund operator, is expected to retain the management rights to the properties. But the Calpers-Hines team will lose most of its equity stake in the portfolio. It's believed Calpers put up the bulk of the original $100 million mezzanine-debt investment. The restructuring was precipitated by a looming deadline for the debt package, which would have come due in full next month if certain performance tests weren't met. Specifically, the portfolio couldn't exceed a prescribed loan-to-value ratio - but it was already over the level because of a sharp drop in the properties' revenues. The holders of the roughly $700 million senior loan - New York Life and German lenders... http://www.realert.com/headlines.php?hid=141297 UBS is quietly gauging interest in the 50 stake it owns in its Midtown Manhattan headquarters. There appears to be no formal listing for its interest in the 1 million-square-foot building, at 299 Park Avenue. But UBS and its advisor, CB Richard Ellis, are trying to determine how much the bank's share of the property would command. CB declined to comment. Underwriting the property could be difficult with the market still in decline. One local player pegged the building's value at about $600/sf, which would place a $300 million price tag on the UBS stake. But such calculations are little more than guesswork, given the lack of transactions in the city over the past year. UBS might not proceed with an offering if initial feelers don't drum up enough interest. Indeed, that outcome wouldn't be a surprise, given the dismal sales market. For example, Cushman amp; Wakefield, working on behalf of a Goldman Sachs partnership, recently spoke to a few prospective bidders for the 412,000-sf office building at 417 Fifth Avenue. But when it became clear bids weren't going to approach Goldman's strike price, the marketing effort was halted. UBS owns its building in partnership with Fisher Brothers Realty, a long-established New York firm whose stake is apparently not in play. It's unclear if Fisher Brothers would be a potential buyer of the UBS stake, which was structured to be a shade under 50. Fisher Brothers developed the 43-story tower, which stretches between East 48th and East 49th Streets, in 1967 for... http://www.realert.com/headlines.php?hid=141197 Murray Hill Properties plans to shift tactics for its next fund to better position itself to exploit growing distress among Manhattan office owners. The New York company will seek to raise $500 million of equity - five times more than last time - in order to gain the flexibility to close deals on its own. That's a big switch, because Murray Hill has traditionally served as operating partner, putting up only a minority stake and bringing in equity partners. The company, founded by Norman Sturner and Neil Siderow in 1973, has been able to line up an impressive list of partners, including Brooklyn investor David Werner, German syndicator Jamestown and fund operators Carlyle Group, ING Clarion Partners and Westbrook Partners. But as the market weakened in recent months, many investors have moved to the sidelines, making it more difficult for Murray Hill to proceed with the co-investment strategy. Earlier this year, the company was unable to line up a partner for its planned $555 million purchase of the 921,000-square-foot office building at 485 Lexington Avenue in Midtown Manhattan. The missed opportunity convinced Murray Hill it had to change its blueprint for acquisitions and adopt a more flexible, go-it-alone approach. The company, which has thrived by focusing almost exclusively on Manhattan office properties, figures to have plenty of opportunities if it can reach its equity goal for the fund, now in the early planning stages. Local brokers predict that as many as 30 overleveraged,... http://www.realert.com/headlines.php?hid=141089 Mark Walsh is leading a team of Lehman Brothers executives who are close to taking over management of the bankrupt company's property funds, a move that would mark the return of one of Wall Street's biggest real estate dealmakers. The largest limited partners in three funds with $7.2 billion of total equity signed off on transferring the management rights to the Walsh group after considering counteroffers from other fund operators, including AREA Property Partners of New York. It's unclear if the group will also be named operating partner of Lehman's two mezzanine-debt funds, which have $2.3 billion of total equity. The transfer is still subject to a vote by all of the funds' limited partners, who are expected to approve the hand off. The Walsh team plans to relinquish the right to draw down $1.6 billion of uninvested capital from investors and focus on harvesting existing investments. It will also slash management fees. The fund's largest limited partners evidently were swayed by the team's familiarity with the assets and the fact that the group offered to manage them for less than the other bidders. Lehman declined to comment. As head of Lehman's global real estate group, Walsh financed dozens of major property transactions during the real estate boom, supplying both equity and debt. He built a reputation as one of Wall Street's savviest and most aggressive real estate operators. But Lehman's mammoth $33 billion real estate portfolio was hammered by the downturn, contributing to the company's... http://www.realert.com/headlines.php?hid=140969 A division of Caisse de Depot et Placement du Quebec is offering a stake in a portfolio of Fairmont hotels in the U.S. and Canada that is valued at about $2 billion. The pension fund manager prefers to sell roughly half of its 93 interest in the 10 luxury properties to one or more investors. But it is open to other options. For example, it would consider the sale of different stake sizes. And it would be willing to sell its full interests in the portfolio's two U.S. hotels - the 415-room Fairmont in Washington, D.C., and the leasehold interest in the 450-room Fairmont Olympic in Seattle. However, Caisse intends to retain significant stakes in the Canadian properties. The package contains some of Canada's most prestigious hotels, including the 618-room Fairmont Le Chateau Frontenac in Quebec City, where Caisse is headquartered. Two properties - the 556-room Hotel Vancouver and the 489-room Fairmont Waterfront - are in Vancouver, which is slated to host the 2010 Winter Olympics. Caisse assumed the majority stake in the portfolio via its C$2.5 billion ($2.4 billion) takeover of Toronto REIT Legacy Hotels in September 2007. At the time, Caisse intended to sell half of its stake to Lehman Brothers, but that deal fell by the wayside when the investment bank's financial woes widened. Now Caisse is looking to bring in new equity partners, handing the listing to CB Richard Ellis. Curtis Gallagher, the Toronto-based CB broker handling the assignment, declined to elaborate on specifics of the offering. But he described the... http://www.realert.com/headlines.php?hid=140855 A heavily leveraged mortgage on a 2,990-unit apartment portfolio has been transferred to special servicing, raising questions about whether the owner will be forced to sell or recapitalize the complexes. The portfolio, which contains 20 properties in seven states, is controlled by veteran real estate operator Richard Nathan. His firm, National Commercial Ventures of Long Beach, Calif., assembled the Class-B buildings in 2006 through several acquisitions with the goal of upgrading them and raising rents. Even though the properties at the time were appraised at only $218 million, Nathan's firm lined up $248 million of mortgage financing from Credit Suisse. The extra proceeds represented reserves aimed at funding $5,000 of improvements per unit and at covering loan payments while renovations disrupted rent cashflows. Since then, the real estate downturn has thrown Nathan's game plan into jeopardy. The $179.8 million senior portion of the 5-year debt package, which Credit Suisse securitized, was transferred to special servicer Midland Loan Services on April 17, according to a servicer report that became available last week. The report said that the fixed-rate loan, which is still up-to-date on its payments, was at risk quot;of imminent default.quot; That terminology is sometimes used to mean the servicer thinks default is inevitable, though not necessarily imminent. No additional information was supplied. It's unclear whether National Commercial has nearly exhausted its loan reserves or how far along it is on ... http://www.realert.com/headlines.php?hid=140752 A RREEF fund is looking to recapitalize at least one troubled project in a bid to salvage its deteriorating development portfolio. As with other investors that plowed capital into construction as the market was peaking, the $1.3 billion RREEF America 3 took a beating over the past year. And no segment of the fund's portfolio was harder hit than its development projects. In the fourth quarter, the open-end fund wrote down the value of its development portfolio by 39, or $342 million. The bulk of the writedowns - $312 million - stemmed from three projects, in Silicon Valley, Manhattan and Austin, Texas. A planned $750 million mixed-use development in Sunnyvale, Calif., has ground to a halt since the financial downturn accelerated last fall. RREEF's operating partner says another $450 million of equity or debt is needed to complete the project, which will include retail, hotel, office and residential space. RREEF, which has put up virtually all of the equity so far, told investors this month it would seek to bring in a partner. Given the tough market conditions, that might not be an easy task, according to market players familiar with the project. Wachovia, the project's main lender, has granted RREEF a 90-day extension on the debt while it looks for new capital. The two other development projects, Domain in Austin and Riverside South in New York, are also sputtering. The Domain mixed-use project is slated to be developed in phases. Riverside South is a 50-acre mixed-use development whose focal point... http://www.realert.com/headlines.php?hid=140651 Calpers, whose investments in residential land have gotten clobbered, has built up a sizable nest egg that should spare it from having to dump those holdings at fire-sale prices. Because Calpers is one of the nation's largest owners of land slated for residential development, investors have been closely watching the pension system as a potential source of distressed assets. Owners of raw and partially developed land are particularly vulnerable to a debt squeeze because those properties don't produce income. But thanks to its sheer bulk, Calpers could be the rare land player that can ride out the storm. Since last August, the pension system has more than tripled its cash reserves, to $12.4 billion on March 31 from $3.7 billion, by limiting new investments. That extra cash gives Calpers the means to pay down maturing loans or even plow more equity into faltering projects. To be sure, there are plenty of other demands on that cash. Calpers has seen its asset base plunge by 29 since the beginning of 2008, to $178.4 billion, because of broad-based investment losses. Calpers faces commitment obligations this year across the spectrum of its investments. Real estate accounts for only about 11 of those assets - and residential land investments less than one-fifth of that. What's more, the system's board is eager to make back some of those losses by making fresh investments, whether in stocks, real estate or elsewhere. Still, Calpers spokesman Clark McKinley said the system doesn't want to sell its distressed land holdings and belie... http://www.realert.com/headlines.php?hid=140587 There's widespread agreement that the sharp market downturn will cause significant consolidation in the brokerage arena, but the absence of natural merger partners may slow the process. Rumors about possible mergers have swept the industry in recent weeks. The drumbeat got so loud that Cushman amp; Wakefield and Jones Lang LaSalle last week separately sent out internal memos to their workforces aimed at quelling speculation about imminent deals. But brokerage executives privately say that mergers or bankruptcies become more likely with each passing month. Most brokerages have seen property-sales volume drop by 60-80 since the start of 2008. And the hope that a flood of distressed properties would fuel activity has dimmed for now. quot;The question becomes, how long can you sustain an 80 drop in businessquot; said a top executive at a national brokerage. The tough times have spurred firms to informally discuss possible mergers with rivals. quot;In this market people are considering things they never would have thought about before,quot; said a senior managing director at one national brokerage. Given the level of distress, just about every brokerage is seeking to explore possible alliances, though the discussions often go nowhere. Said one senior executive at a major brokerage: quot;Everyone talks to everyone. It doesn't mean a deal is coming.quot; Much of the speculation has centered around Cushman, which has endured hundreds of layoffs and had to be shored up by its Italian parent after posting a $26 million l... http://www.realert.com/headlines.php?hid=140503 Fund operators are increasingly looking at this year as a wipeout for raising equity. In the past few weeks, at least five sponsors decided to halt marketing campaigns after lining up less equity than originally targeted. The moves came after the sponsors spent months unsuccessfully trying to coax investors to convert soft commitments to firm pledges. The operators that fell shy of their equity goals include Capri Capital, John Buck Co. and Square Mile Capital. And they may be just the tip of the iceberg. Fund pros think that as many as 100 of the roughly 240 vehicles now being marketed will struggle to raise any money this year. That would lead even more operators to cancel, postpone or downsize vehicles. The equity-raising world has essentially had two shifts since September, when the collapse of Lehman Brothers roiled financial markets. Initially, dozens of operators canceled, delayed or shrank vehicles. At that point, the consensus was that conditions would improve by early this year. But in the past few weeks, a second shift has occurred. Fund operators are now admitting it's close to impossible to get investors to commit capital, using words like quot;brutalquot; and quot;bloodbathquot; to describe the atmosphere. While sponsors recognized that beaten-down investors wouldn't have the wherewithal to re-enter the market, some now admit they underestimated how reluctant even well-capitalized investors would be to get back in the game. Those investors remain scared of getting burned in a real estate market that... http://www.realert.com/headlines.php?hid=140370 Lowe Enterprises Investment is the latest big-name fund operator to be sidelined by the hostile climate for soliciting equity. The Los Angeles shop recently shelved two property funds after trying to raise capital for a year. Lowe had hoped to line up $300 million apiece for Lowe Real Estate Income and Growth Partners 2 and Lowe Hospitality Investment Partners 2. The plan was to have first equity closes for each vehicle this spring, with at least $100 million. But because investors pulled back after suffering big losses in their investment portfolios, Lowe was unable to convert preliminary interest into firm commitments. Meanwhile, market players predict Lowe won't be able to close a high-yield-debt vehicle on schedule. Lowe lined up $80 million last May for the first equity close of the club fund, called Lowe Structured Investment Fund. It hoped to raise another $70 million by next month. Lowe is now expected to ask lead investor Wisconsin Investment for permission to extend its marketing deadline. More than 100 real estate funds have been canceled, put on hold or downsized since the credit crisis began. Although initially striking lesser-known players, the commitment freeze has spread to established names, including CB Richard Ellis Investors, Credit Suisse, Morgan Stanley and Stockbridge Capital Partners. Lowe last week informed prospective investors in the two property funds that marketing efforts have been shelved, at least until later this year. Outsiders are skeptical that the efforts can be resu... http://www.realert.com/headlines.php?hid=140301 Markdowns by two Beacon Capital Partners funds may provide the best indication to date of how far Class-A office values have fallen. The $2 billion Beacon Capital Strategic Partners 4 fund, which acquired most of its properties in 2006, took a 36.9 writedown last year, according to investors. Properties held by the $4 billion Beacon Capital Strategic Partners 5, which primarily made its purchases in 2007, suffered a 51.2 reduction in value last year. To be sure, those declines are unrealized. Beacon isn't under pressure to sell its properties, so it still has hope that values will rebound before its investments are harvested. Nevertheless, with the paucity of property sales leaving valuations unclear, the writedowns taken by the prominent fund operator provide a reasonable yardstick of how far property prices have fallen since the bull market was peaking in 2006 and 2007. Of course, a number of factors play into measures of valuation changes, including exactly when properties were purchased and how much leverage was used. But the 37-51 markdown range for the Beacon funds is somewhat greater than previous indicators. Beacon, which declined to comment, focuses on a handful of major markets. The largest properties owned by the two funds are the 1.9 million-sf building at 1211 Sixth Avenue in Midtown Manhattan, the 1.5 million-sf Columbia Center complex in Seattle, the 1.1 million-sf building at 32 Old Slip in Lower Manhattan, the 1.1 million-sf Washington Mutual Tower in Seattle, a 50 stake in the 1.1... http://www.realert.com/headlines.php?hid=140139 The nation's largest public pension systems significantly pulled back on equity commitments to real estate investments last year. Pledges to funds, separate accounts and joint ventures plummeted to $16.7 billion, down more than 50 from a revised $35.8 billion in 2007, according to Real Estate Alert's annual survey of the 50 largest systems (see tables on Pages 6-13). That ended a 3-year run of increases and was the lowest total since 2004, when $9.9 billion was pledged. The survey found that the tide turned sharply in the fourth quarter. Commitments were relatively strong through the first nine months, totaling more than $17 billion. Although that was down from the pace during the peak years of 2006 and 2007, it nonetheless suggested that pensions remained reasonably bullish about real estate. But the bottom dropped out following the sharp September plunge in the stock and bond markets. Nearly all major players, including Calpers, California State Teachers and New York Common Fund, steered clear of new commitments. In fact, there was actually a net decline in commitments because Pennsylvania Public School Employees and New Jersey State Investment withdrew a combined $1.2 billion of pledges - more than double the amount of new commitments. That was the first quarterly net decline in commitments in the survey's 12-year history. The pullback has continued in the first quarter, with only one notable commitment disclosed so far - New York Common's $300 million pledge for a multi-manager account. The plunge in... http://www.realert.com/headlines.php?hid=140037 Even though they invest conservatively, core funds and separate accounts are also taking their lumps in the market meltdown. Many core funds posted double-digit declines during the disastrous fourth quarter, according to fund reports that have started reaching investors. Among them: Prudential Real Estate Investors' PRISA 2 fund (down 17.8) and PRISA 1 fund (down 14.7); ING Clarion Partners' Lion Properties Fund (down 15.8) and Lion Industrial Trust (down 11.7); BlackRock Realty Advisors' Granite Fund (down 16.8); RREEF's RREEF America 2 (down 12.8); and Cornerstone Real Estate Advisors' Patriot Fund (down 10.9). Separate accounts, which also pursue conservative investments, fared somewhat better, especially if they use little or no leverage. Core funds by definition are the most conservative in the industry. They gravitate toward trophy assets and other high-end properties, and use significantly less leverage than value-added or opportunistic vehicles. As a result, their return targets - generally 6-8 - are much lower than those pursued by higher-risk funds. Still, core vehicles couldn't escape the carnage of the fourth quarter, when the economy nosedived. All investors are being hurt by quot;significant weakening in underlying property fundamentals,quot; one consultant noted. To be sure, core vehicles are suffering much less than value-added and opportunistic funds, which have been battered by losses on high-risk investments such as condominium conversions, development projects ... http://www.realert.com/headlines.php?hid=139935 The pace of commercial-property sales in the first quarter was every bit as dismal as it seemed. A paltry $3.7 billion of large properties changed hands nationwide from January through March, accelerating the downturn in volume that started in the second half of 2007. The total fell from the already-depressed levels of $12 billion in the fourth quarter and $25.2 billion in the year-earlier period, according to Real Estate Alert's Deal Database (see list of largest deals on Page 5). The paucity of deals reinforced widespread predictions that 2009 will be a lost year. Brokerages report that offering pipelines are all but dry. Spooked by falling price expectations, many prospective sellers have either pulled listings or decided not to proceed with offerings. While there could be a spike by yearend if sales of distressed properties pick up, even that is expected to be minimal. quot;We're looking at the middle of next year before we're in any kind of upswing,quot; said the acquisitions chief of one real estate fund. Overall, sales of office, retail, multi-family, hotel and industrial properties were down 85 from a year ago and 94 from $58.9 billion in the first quarter of 2007, when the market was peaking, according to the Deal Database, which tracks sales of $25 million or more. Office properties accounted for almost two-thirds of the total, or $2.3 billion. Retail sales ranked second, at $645.3 million, followed by hotel ($431.7 million), multi-family ($229.9 million) and industrial ($43 million).... http://www.realert.com/headlines.php?hid=139830 In what could be the first of a wave of offerings by squeezed office owners, a Goldman Sachs partnership is selectively shopping the building at 417 Fifth Avenue in Midtown Manhattan. A Goldman fund and operating partner Joseph Moinian, who jointly acquired the 412,000-square-foot property two years ago for $250 million, are willing to move it at a loss to get out of the investment, according to people familiar with the matter. The partnership is quietly talking to a coterie of potential buyers via Cushman amp; Wakefield, which declined to comment. Brokers say similar decisions loom for the owners of about 30 Class-A properties in Midtown Manhattan that were acquired as the market was peaking in 2006 or 2007. Though most of the investors don't have mortgages that mature before 2011, they quot;can see the writing on the wall,quot; said one veteran broker. In other words: Owners, worried that values may fall further, would rather walk away with some of their equity - if possible. Goldman, operating via one of its Whitehall Street Real Estate funds, teamed up with Moinian to buy 417 Fifth from GE Pension Trust and local fund shop Murray Hill Properties in July 2007, near the peak of the market. The team put down $95 million of equity and assumed a $125 million mortgage from Barclays Bank that matures in September 2010. Credit Suisse provided a $30 million mezzanine loan. The building's value is now estimated at no more than $200 million, indicating that the Goldman team has lost more than half of its... http://www.realert.com/headlines.php?hid=139741 Cracks are starting to show in the real estate fund juggernaut. For the first time in at least a decade, the number of active or planned high-yield funds has started to decline. Operators are being forced to lower their equity goals for new vehicles as investors pull back. And crumbling property values have led to big writedowns on investments made when the bull market was peaking. Faced with an increasingly depressed environment, fund sponsors have started to shift gears. Many are increasing their emphasis on investments in distressed assets, especially debt plays. Some are reducing their fees or looking outside of the U.S. in a bid to attract capital. And the largest operators may have to reduce sizes in their next round of funds. Those are some of the findings of Real Estate Alert's annual review of high-yield real estate funds. Operators acknowledged that more pain lies ahead, because property values likely still have further to fall. But they also said the sharp economic downturn is setting the stage for lucrative investment opportunities down the road. The review identified 466 active or planned closed-end vehicles, down from a peak of 520 in September, according to a running tally maintained by the newsletter. That reflects the sea change that occurred last fall when Lehman Brothers failed, accelerating the already sharp downturn in the financial markets. More than 50 planned funds were canceled or put on hold since September - accounting for the bulk of the 65 vehicles in... http://www.realert.com/headlines.php?hid=139725 After years of strong performance, the real estate fund industry is taking some lumps. The number of high-yield funds is declining for the first time in at least a decade. Real Estate Alert's annual fund review has identified 466 active or planned closed-end vehicles, down from a peak of 520 in September. More than 50 planned funds were canceled or put on hold in the past six months. The economic downturn has caused investors to pull back, forcing operators to lower their equity goals for new vehicles. Meanwhile, crumbling property values have led to big writedowns on investments made when the bull market was peaking. Fund sponsors have reacted by increasing their focus on investments in distressed debt. Some are reducing fees in a bid to attract capital. The fund review is in a 40-page special report accompanying this week's issue. It includes a master list of funds, a breakdown of vehicles by type, and lists of canceled, postponed and downsized funds. http://www.realert.com/headlines.php?hid=139621 CB Richard Ellis Investors has suspended the marketing campaign for its latest European fund after failing to attract enough capital for a first equity close. The move comes as the sharp downturn in the European property market has caused investors to pull back from new fund commitments. CB's marketing effort was hurt by the poor performance of two predecessor European vehicles, as well as several shifts in the new fund's investment strategy. More than 60 U.S. and European funds have been canceled or postponed amid widespread economic turmoil. As CB re-evaluates its approach to Europe, the Los Angeles shop's fund-raising efforts will now focus on two planned open-end funds that would target high-yield debt investments in the U.S. CB spent nine months trying to raise amp;8364;1.5 billion ($1.9 billion) of equity for the suspended value-added fund, which would have targeted underperforming properties, developments, redevelopments and preferred-equity investments in Germany, the U.K. and oher Western European countries. The marketing campaign for the vehicle, CB Richard Ellis Strategic Partners Europe Fund 4, was recently suspended after CB failed to raise enough capital for a first equity close. CB hasn't decided whether to revamp the offering. If it does, the marketing campaign isn't likely to resume before next year. Some potential backers shied away partly because they were frustrated with CB for changing its mind several times before finally deciding that the fund would include U.K. investments in its portfolio. Original plans... http://www.realert.com/headlines.php?hid=139527 Morgan Stanley will miss its $10 billion fund-raising goal by a wide margin when it wraps up marketing for its latest global real estate vehicle. The bank lined up $6 billion of equity for Morgan Stanley Real Estate Fund 7 Global over the last 10 months. With only one month remaining before the scheduled final close, it appears the fund will fall shy of the goal by $3 billion or more. Like most of its peers, Morgan Stanley has found it increasingly difficult to solicit capital since the stock and bond markets derailed in September. In fact, its in-house placement-agent unit has brought in less than $1 billion of commitments since then. It hasn't helped that the predecessor vehicle took heavy writedowns last year. The $8 billion Morgan Stanley Real Estate Fund 6 International, which launched in 2007 and became fully invested last month, took a 20.2 markdown in the second quarter. The third-quarter markdown is unavailable, but investors indicated it was of comparable size. The fourth-quarter tally will be reported to investors in about a month. Some of the vehicle's assets may turn out to be total losses - particularly in Asia, where about half its equity was placed. Morgan Stanley operated separate U.S. and international funds before combining the strategies in the global fund, which seeks a roughly 17 return. The vehicle is scouring Europe, Asia and the U.S. for nonstrategic assets being offered by governments and corporations. It also is looking at distressed debt, recapitalizations of... http://www.realert.com/headlines.php?hid=139406 Principal Global is exploring the possibility of selling properties in order to honor redemption requests from investors in its open-end fund. The advisor is talking to brokers across the country about listing $1 billion to $2 billion of its holdings. Principal evidently is in the early stages of discussions, and still hasn't awarded any listings. Principal, the asset-management arm of insurer Principal Financial, has acquired properties since 1982 via Principal U.S. Property Account, which had 149 investments valued at $6.9 billion at yearend. The portfolio has large concentrations of office (41), multi-family (21), retail (20) and industrial (16) properties. Principal also operates closed-ends funds, which are not affected by plans for the open-end vehicle. The fund posted an 11 decline in the fourth quarter, as property values sagged. In September it delayed the repayment of redemption requests, saying they would be honored on a pro-rata basis as cash became available. Late last year, Principal laid off acquisitions staffers and closed its Chicago office, signaling that it doesn't intend to be an active buyer in the near term. Many operators of open-end funds are being forced to consider property sales in the face of heightened redemption requests. Investors squeezed by losses on a variety of investments have stepped up requests for refunds. Dispositions can be a costly way to raise cash, given the plunge in property values. For example, the open-end Lion Properties Fund, operated by ING Clarion Partners,... http://www.realert.com/headlines.php?hid=139321 CB Richard Ellis dethroned Eastdil Secured last year as the nation's most active brokerage across the five major property types, but the victory came amid plunging sales activity and an increasingly gloomy outlook for 2009. Brokers, who held out a glimmer of hope in the fourth quarter that things would pick up in 2009, now think the year might be a complete washout. After seeing overall sales volume drop by 66 in 2008, to $82.8 billion, brokers expect another substantial drop in activity this year. CB brokered $17.7 billion of transactions in 2008, capturing Real Estate Alert's third annual composite broker ranking. While CB's volume dropped 60, that was less than the overall market decline. So the brokerage's market share climbed, to 27.5 from 21 in 2007. Eastdil's volume fell 85 - the largest decline in the ranking. Eastdil brokered $9.9 billion of transactions, down from $67.2 billion in 2007. Its market share slumped to 15.5, from 33.2. Rounding out the Top 5 were Cushman amp; Wakefield (11.5 market share), Holliday Fenoglio Fowler (7.9) and Jones Lang LaSalle (5.2). No other brokerage weighed in with a market share above 3.6, according to Real Estate Alert's Deal Database, which tracks transactions of at least $25 million. As recently as late last year, brokers held out hope that the investment-sales market would stabilize in 2009. They expected a rising tide of recapitalizations by distressed owners needing to refinance maturing debt. They also believed that properties with long-term... http://www.realert.com/headlines.php?hid=139193 It looks like John Hancock Tower in Boston is headed to market. The investors that control $472 million of mezzanine loans on the trophy office building are launching foreclosure proceedings against owner Broadway Partners, paving the way for the heavily overleveraged property to be put up for sale. Eastdil Secured has the inside track on the listing. The foreclosure proceedings, which will test the workout of a property with multiple mezzanine investors, are being spearheaded by Normandy Real Estate Partners of Morristown, N.J. The fund operator has bought out the positions of some other investors in the mezzanine-loan syndicate, according to people familiar with the matter. It's unclear which investors remain in the mix, but the original lineup also included BlackRock Realty, Five Mile Capital, John Buck Co., Lehman Brothers, Petra Capital and RBS Greenwich. New York-based Broadway is believed to be cooperating with the legal maneuvering, which indicates it won't seek to block a sale. But people familiar with the matter cautioned that an offering wouldn't necessarily result in a sale to a third party. It's possible, for example, that the loan group might arrange a workout that keeps Broadway in the mix. Or, if the sale price isn't high enough to pay off all the mezzanine holders, the junior surviving investor would apparently have the option of matching the winning offer from a third party. In the meantime, Broadway is continuing to manage the 1.8 million-square-foot... http://www.realert.com/headlines.php?hid=139082 After watching the sales of large shopping centers and malls plunge last year, retail specialists can take solace only from the fact that their sector seems likely to hit bottom before other segments of the commercial real estate market. Because the effects of the recession are socking retail properties especially fast, industry professionals hope falling prices might start leveling off sometime this year - a prerequisite to any rebound in sales. They see few other potential bright spots in the near term following a 68 decline last year in combined shopping-center and mall sales, to $8.6 billion from $27.2 billion in 2007. Cashflows from retail properties plunged as major retail chains, such as Starbucks and Circuit City, closed stores or demanded rent abatements and other concessions to stay afloat. That trend seems destined to continue as more retailers suffer from declining business. The retail vacancy rate is projected to hit 10.2 this year, up from 8.5 at the end of 2008, according to Marcus amp; Millichap. Against that backdrop, sellers will be forced to drop their prices, said Jack Minter, a managing director of Jones Lang LaSalle. quot;I think that [seller] expectations will shrink quicker with retail than with other product types,quot; he said. quot;They can't tell anybody 'There's nothing wrong here.' quot; Some $6.7 billion of shopping centers changed hands last year, down from a record high of $21.6 billion in 2007, according to Real Estate Alert's Deal Database, which tracks deals of $25 million or more.... http://www.realert.com/headlines.php?hid=138975 Coming off a year that saw a sharp drop in office-property sales, market pros expect activity to decline further in 2009, with transactions mostly involving buildings with assumable financing, forced sales or recapitalizations of overleveraged properties. Buyers and sellers have little confidence in the office sector because lenders have retreated to the sidelines, it does not appear that prices have hit bottom and the recession is worsening. That has made it hard to determine valuations, creating a wide gap in the expectations of buyers and sellers. In such an environment, few owners are voluntarily selling. Last year, the sale of large office properties plunged by 69, to $42.5 billion from a record high of $137.7 billion in 2007, according to Real Estate Alert's Deal Database, which tracks deals of $25 million or more. CB Richard Ellis dethroned Eastdil Secured as the most active office broker (see article on Page 6). The sector has been largely stagnant since the credit crunch started emerging in mid-2007. The biggest obstacle to office-property sales is a lack of available financing at affordable rates. quot;We need capital dedicated to new lending,quot; one Washington broker said. Added a veteran fund operator: quot;Without credit or financing, it's impossible to jumpstart the market. We could be locked up for quite a while.quot; As was the case last year, most sales likely will involve assumable financing in 2009. Trades figure to be dominated by core properties with high occupancy rates and established... http://www.realert.com/headlines.php?hid=138778 An ING Clarion Partners fund has sold three underperforming office buildings for 45 less than it paid - reflecting how the market downturn is punishing sellers. A CB Richard Ellis Investors fund acquired the portfolio for $198 million. CB Strategic Partners U.S. Value Fund 5 allocated about $71 million for the 418-square-foot building at 500 North Brand Boulevard in Glendale, Calif., about $66 million for the 248,000-sf Esperante at 222 Lakeview Avenue in West Palm Beach, Fla., and about $61 million for the 422,000-sf Metropolitan Center at One Meadowlands Plaza in East Rutherford, N.J. ING's open-end Lion Properties Fund, which had acquired the properties in 2005 and 2006 for a total of $363.3 million, didn't return calls seeking comment on why it accepted such a hefty discount. But many open-end funds have been forced to raise cash to meet heavy redemption requests from their investors. The steep drop in value that ING saw is a bad omen for owners that have to sell or recapitalize noncore properties this year. ING briefly shopped each of the three properties early last year - 500 North Brand via Eastdil Secured, Esperante via DTZ Rockwood and Metropolitan Center via Cushman amp; Wakefield. ING had hoped to sell 500 North Brand and Esperante for slightly more than the purchase prices and Metropolitan Center for about the purchase price, even though occupancy levels for the buildings averaged only about 80, below the level for surrounding properties. But as the sales market deteriorated and the buildings' occupancy levels... http://www.realert.com/headlines.php?hid=138596 Cash-strapped ProLogis is setting the stage to offer up to one-quarter of its giant portfolio of distribution centers in order to reduce its debt load. The Denver REIT has identified some 150 million square feet in its 548 million-sf portfolio that it is willing to sell, though how much will actually end up being marketed is unclear. Almost two-thirds of the company's properties are in North America, with the others in Europe and Asia. Some of the properties are owned via joint ventures. ProLogis has already tapped Eastdil Secured to find a single buyer for up to 35 million sf of U.S. properties valued at roughly $1 billion. At that price, the initial annual yield would be 10. If Eastdil is unable to line up a single buyer, ProLogis plans to divide the portfolio into regional packages and list them with several major brokerages. The properties are mostly in secondary and tertiary markets. ProLogis could finalize some disposition decisions this week. If it decides to pursue additional sales, the properties would be divided into multiple portfolios, based on specific joint ventures, and likely be divvied up among several brokerages. Investors said ProLogis quietly shopped a large portfolio earlier this year, talking to a select group of possible buyers, but didn't strike a deal. So now the REIT is expected to try a broader marketing strategy. It's unlikely that ProLogis would find single buyers for each portfolio, because the tight credit markets and the downturn in property val... http://www.realert.com/headlines.php?hid=138472 CB Richard Ellis disheartened its rivals two weeks ago by announcing it had landed a contract to market foreclosed properties for the FDIC, but now the agency has clarified that the arrangement is nonexclusive. CB announced the day before Thanksgiving that it had been selected as quot;a primary advisorquot; to the FDIC and would be quot;responsible for the management and marketing of residential and commercial [foreclosed real estate] throughout all 50 states.quot; Press reports initially suggested that the contract was exclusive, and that was how many rival brokerages interpreted the announcement. Given the expectation that hundreds of banks could fail before the financial crisis subsides, the contract was seen as a big victory for CB. With advisory work on distressed properties likely to be a main source of business for brokerages over the next few years, CB's selection seemed to take one of the potentially richest contracts off the table. But after being peppered with questions from industry players about the agreement, the FDIC this week clarified that it might still appoint additional quot;primary advisorsquot; for the handling of foreclosed properties. quot;It's not an exclusive contract,quot; said spokesman David Barr. With the announcement, the contract quot;came across as exclusive, but it's not.quot; The FDIC currently controls about 2,500 foreclosed properties from 23 failed banks. As of now, CB will call the shots in marketing those properties, which have an estimated value of $650 million. However, the FDIC could add other primary advisors if... http://www.realert.com/headlines.php?hid=138367 Several high-yield property funds launched by well-known operators in 2006 or 2007 posted poor 1-year net returns through midyear, and the list of weak performers is expected to swell as the fallout continues from the financial meltdown. Funds that posted oversized negative returns include Fidelity Investments' Fidelity Real Estate Growth 3 (down 62.6), CIM Group's Fund 3 (down 47), UrbanAmerica's Fund 2 (down 42), Colony Capital's Colony Investors 8 (down 35) and Morgan Stanley's Morgan Stanley Real Estate Fund 6 International (down 20.2), according to investors. The return figures are based on the amount of committed capital that the fund operators have drawn down. To be sure, some of the funds have invested only a portion of their total equity so far, so it's too soon to say that they will fail to hit their return goals. And it's not unusual for funds to post negative returns in their first full year of operation. Nevertheless, some of the declines are much deeper than usual, reflecting the severe pain being inflicted by the market downturn. Two factors hurt fund returns early in their cycles. For one thing, investments in the development or redevelopment of properties may not provide a stable flow of income for several years. Also, funds generally charge management and other fees before actually investing pledged capital, which drags down initial yields. But fund returns have also been hurt by eroding property values, which have forced some operators to write down the value of assets - in some... http://www.realert.com/headlines.php?hid=138263 CB Richard Ellis and Grubb amp; Ellis have joined the ranks of big brokerages making organizational changes to chase after an expected flood of work dealing with distressed assets. Both firms are forming teams to advise banks, insurance companies, government agencies and other clients that need help appraising, managing, selling or refinancing distressed properties and loans. The changes at CB and Grubb follow similar moves at Jones Lang LaSalle and Cushman amp; Wakefield. The national brokerages are staffing the new distressed-asset teams by reassigning existing executives. Little if any new hiring is expected, at least initially. Most of the major investment-sales brokerages have been mulling restructurings for months. The announcement by Jones Lang two weeks ago presaged a rush by firms to highlight their advisory services for distressed assets. quot;If you can't offer these services to people, your clients are going to go somewhere else,quot; said an executive at a top brokerage. CB has set up a quot;restructuring servicesquot; group, headed by Spencer Levy, senior managing director of capital markets. Levy will provide a single point of contact for a three-pronged approach to distressed assets: underwriting, asset management and disposition. The group will have the ability to manage and sell both distressed properties and loans. An early assignment for the group is selling some of the foreclosed land and residential assets of the failed IndyMac Federal Bank. Levy said the group will start modestly and... http://www.realert.com/headlines.php?hid=138158 Cousins Properties has backed out of talks to pay about $700 million for Greenway Plaza in Houston, in yet another example of a transaction derailed by the credit squeeze. The 4.3 million-square-foot office complex didn't have assumable financing, and Atlanta-based Cousins was unable to line up $500 million-plus of debt to complete the transaction, market players said. The owner, Morgan Stanley Real Estate, has decided to retain the property. Greenway Plaza was the largest property that Morgan Stanley inherited last year via its takeover of Crescent Real Estate Equities of Fort Worth, Texas. Cousins and Morgan Stanley's broker, Holliday Fenoglio Fowler, declined to comment. The sale of large office properties stalled across most of the nation late last year as the market downturn dried up financing and pushed down valuations. But until recently, large Houston properties were bucking the trend, especially when assumable financing was available. For a time, investors remained bullish about the city, which benefitted from the robust energy sector. But the Houston sales market has now also faltered amid the deepening financial crisis, the sharp decline in oil and gas prices and the aftereffects of Hurricane Ike, which battered the city. Greenway Plaza is the second large Houston office property pulled from the market in two months. A partnership between J.P. Morgan Asset Management and Morgan Stanley opted to retain the Post Oak Central office complex after a proposed $243 million sale to CB Richard Ellis Invest... http://www.realert.com/headlines.php?hid=138056 The financial crisis has significantly reduced the asset sizes of public pension systems, forcing many to curb or scrap real estate commitments for the foreseeable future. Plunging stock and bond values have caused some systems to shrink in size by 20 or more this year, with much of the decline coming in recent weeks. For example, Calpers, the nation's largest pension system, now has $190 billion of assets, down 21 from the end of June. Calpers took an especially sharp blow because it has been heavily invested in stocks globally. Many other systems have suffered asset declines of 10-20 this year. Allocations for investments in specific sectors - including real estate - are tied to a pension system's asset size. As the asset base shrinks, so does the capacity for new commitments. The problem in some cases is being magnified for real estate, because stock and bond prices have fallen faster. That means the proportion of real estate investments has grown, causing systems to reach or exceed their real estate allocations. At the same time, the soft property market has slowed real estate funds from liquidating investments. That is limiting profit distributions to pension systems, further curbing their capacity for new investments. The impact of declining assets was seen earlier this year. Commitments to real estate funds, separate accounts and joint ventures by the biggest public pensions fell by nearly 30 in the first half, partly because of asset declines. Some pensions remain under their... http://www.realert.com/headlines.php?hid=137933 The steady stream of property-broker cutbacks is likely to continue, and even speed up, in coming months. As the volume of property sales plummets, brokers are being forced to reassess staffing levels. quot;I think everyone's waking up to what their third-quarter numbers are,quot; said one senior executive at a national firm. quot;And they know the fourth quarter's going to be even worse.quot; The big three brokerages - CB Richard Ellis, Cushman amp; Wakefield and Eastdil Secured - are generally not filling vacant positions. CB, Cushman and DTZ Rockwood have also undertaken layoffs. As recently as two months ago, most brokerages were expecting cutbacks to remain minimal because it appeared that property sales had stabilized. But the Wall Street meltdown caused many pending transactions to fall out of contract. A number of offerings were either put on hold until next year or pulled outright. With projected sales figures evaporating, major firms appear to have adopted the view that a new round of cuts must be made, either now or in 2009. Some firms that had planned to selectively beef up staff this year have backed away from the strategy. For example, Jones Lang LaSalle wanted to continue acquiring regional brokerages and specialty practices this year, but now that idea seems to be on hold. The brokerage announced last month that it would cut 60-80 positions in the U.K., but so far has made no layoffs in the U.S. DTZ Rockwood last week closed its three-member Chicago office and laid off a handful of brokers at its New York... http://www.realert.com/headlines.php?hid=137843 GE Real Estate is looking for a joint-venture partner to commit up to $220 million of equity for a majority stake in an industrial portfolio. The package, valued at about $675 million, encompasses 129 properties and 165 acres suitable for development. GE prefers to sell an 80 stake and to continue to manage the properties. The partnership could invest in more properties down the line. GE would also consider selling the holdings outright, either as a portfolio or in groups of properties based on location. GE has given the listing to CB Richard Ellis, which declined to comment. GE, which bought most of the properties last year, evidently wants to bring in a partner to shed risk in the face of prolonged credit-market turmoil. The Norwalk, Conn., company has already arranged $301 million of debt, with an average rate of 5.68, on the portfolio from a number of lenders. If it brings in a partner, GE might be willing to supply additional debt to the joint venture, reducing the amount of cash that the partner would have to put up, according to market players. GE has provided seller financing on several other deals over the past year or so. The best estimate is that a partner would have to pay $200 million to $220 million. The portfolio encompasses 12 million square feet of mostly light-industrial facilities in 14 U.S. markets. The properties, which average 134,000 sf, are 86 occupied by more than 400 tenants. GE's joint venture would shoot for initial returns in the low teens. But yields could be boosted by leasing the...