http://www.realert.com Real Estate Alert en-us Copyright 2000-2007 Harrison Scott Publications. All Rights Reserved. Thu, 11 Mar 2010 03:38:14 -0700 60 http://www.realert.com/headlines.php?hid=68849 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=68631 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=68430 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=68455 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=68112 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=67900 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=67926 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=67736 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=67329 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=67442 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=67047 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=66890 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=66916 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=66495 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=66589 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=66612 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=65936 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=65752 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. Theres talk that Swigs 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, didnt 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 Dubais 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 buildings net... http://www.realert.com/headlines.php?hid=65731 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=65710 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=65170 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=64980 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=64829 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=64720 Lenders GE Real Estate and Transwestern Investment are weighing their options on a portfolio of Dallas-area office properties that is underwater. Fund operator Equastone acquired the 2.9 million-square-foot portfolio for $382 million in July 2007, near the top of the market. It financed the deal with a $300 million senior loan from GE and a $31.9 million mezzanine loan from the seller, Crescent Real Estate Equities, which flipped the credit to Transwestern soon after. The market downturn has pushed the portfolio's value below the senior loan's balance, according to estimates by local pros, putting Equastone in a squeeze. The senior and mezzanine loans are scheduled to mature next summer, although it's unclear if there are extension options. Transwestern, a Chicago-based fund operator, has been quietly contemplating maneuvers to take over the Class-A portfolio, according to people familiar with the matter. But such a move would likely need the support of GE. Transwestern, which holds the investment via its $427 million Mezzanine Realty Partners 3 fund, would likely ask GE to kick in some equity to help lease up the buildings, the sources said. But if estimates of the portfolio's current value are right, Transwestern's mezzanine position would also be in jeopardy, reducing its leverage to strike a deal. GE could ultimately push to take over the portfolio itself. Transwestern and GE declined comment, and a call to Equastone wasn't returned. The portfolio encompasses 13 buildings, plus parcels. Equastone acquired it via ... http://www.realert.com/headlines.php?hid=64617 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=64399 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=64252 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=64084 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=63910 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=63932 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=61368 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=61388 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=56379 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=52897 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=47690 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=47039 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=46915 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=45871 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=45109 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=45088 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=44883 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=44765 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=28895 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=28788 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=28704 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=28604 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=28521 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=28533 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=28428 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=28442 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=28194 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=28179 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=27936 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=27802 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=27659 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=27537 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=27285 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=27097 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=27082 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=27069 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=27056 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=27042 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=27025 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=27010 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... http://www.realert.com/headlines.php?hid=26994 CB Richard Ellis Investors has walked away from a deal to pay roughly $243 million for the Post Oak Central office complex in Houston's Galleria district. Some market players said that storm damage from Hurricane Ike, which struck during the due-diligence period, dissuaded the fund operator from buying the 1.3 million-square-foot complex. But others said CB exited because of the financial-market turmoil. The seller, a joint venture between J.P. Morgan Asset Management and Morgan Stanley Real Estate, is now expected to take the property off the market, rather than turn to the other bidders. Holliday Fenoglio Fowler had the listing. Damage from Hurricane Ike appears to have delayed or scotched several deals in Houston, one of the few markets to see office sales grow this year. Properties under contract when the storm struck have had to be re-evaluated to sort out insurance claims and appease lenders. The storm delayed the same J.P. Morgan partnership for almost two weeks from completing the $135 million sale of the 502,000-sf building at One BriarLake Plaza to Behringer Harvard of Dallas. Meanwhile, the hurricane also forced Piedmont Office Realty to call for a one-week extension of the bidding deadline for the 313,000-square-foot office property at 1430 Enclave Parkway. It's unknown whether a winner has been selected for that property. HFF also represented the J.P. Morgan partnership and Piedmont on those deals. J.P. Morgan holds a 76 stake in Post Oak Central. Morgan Stanley inherited its ... http://www.realert.com/headlines.php?hid=24876 Cabi Developers has missed a big principal payment on a $1.3 billion debt package backed by a Southern California office portfolio and is negotiating with its lenders about a possible workout. Cabi, which bought the portfolio for $1.5 billion at the top of the market last year from GE Real Estate's Arden Realty, made only one-third of a $150 million principal payment due on Sept. 9. On Monday, Cabi's lenders signed a quot;standstill agreement,quot; under which they agreed not to take action against the borrower for 30 days while negotiations continue. Cabi, the U.S. property arm of Mexican developer GICSA, is seeking to extend the term of the debt package. It has also been seeking to bring in an equity partner and to sell some properties to raise cash. Wachovia arranged the three-year, floating-rate debt package, which called for Cabi to pay down the principal by $150 million in September and by another $150 million next August. Wachovia subsequently sold off some of the senior portion of the package to New York Life and three German banks. Wachovia also sold off some of the mezzanine debt to five firms: a Hines-Calpers joint venture, BlackRock Realty Advisors, Square Mile Capital, KBS Realty Advisors and Gramercy Capital. Wachovia retained some of the senior debt, as well as the senior mezzanine tranche. The workout is being complicated by the large number of lenders involved and unclear rules concerning changes to the loan terms. One player familiar with the talks said that the mezzanine lenders are pushing for a... http://www.realert.com/headlines.php?hid=24717 The financial mess is making it harder for operators of high-yield U.S. property funds to solicit investors, causing some sponsors to fall shy of their equity goals. Constrained by declining values in their stock and bond holdings, and wary of shaky property markets, institutional investors are dragging their feet on new commitments to equity funds. quot;There are some pensions that won't even schedule meetings,quot; said a marketing specialist for a veteran West Coast fund operator now shopping a value-added fund. To the degree that capital is being allocated, institutional investors are showing an increased preference for debt funds, which they view as offering more-attractive investment opportunities amid the credit crunch. The slowdown in fund raising has prompted some operators to extend marketing campaigns. During the bull market, managers reached their equity goals at a rapid pace, usually within a year. But now, the time needed for fund raising is reverting closer to the historical norm of roughly 18 months. And in some cases, operators are seeking permission from investors to take longer. In the past few weeks, a handful of U.S. property funds have closed shy of original expectations. For example, Legacy Partners closed its third core-plus fund with $451 million of equity, after telling investors as recently as April that it was on track to reach $500 million. And ING Clarion Partners' third value-added fund ended up with $202 million, well short of the $350 million maximum goal. Compare that with the recent... http://www.realert.com/headlines.php?hid=24550 Operators of funds that target distressed assets find themselves facing a formidable new competitor for investments: the U.S. government. Congress this week was moving toward approval of a new agency, proposed by Treasury Secretary Henry Paulson, that would be given an astronomical $700 billion to buy distressed mortgage-related assets from lenders. Details were still sketchy about how the agency would bid on assets. But it presumably would offer above-market prices in order to entice lenders to dispose of underwater residential and commercial mortgages, as well as securities backed by mortgages, without taking catastrophic hits to their capital bases. And the agency would likely hold the acquired assets for some time - perhaps years - in order to prop up valuations and avoid fire sales. At first blush, that development seems to be bad news for the roughly 40 active real estate funds and joint ventures that are in various stages of raising $40 billion of equity in order to spend a projected $130 billion on distressed commercial mortgages, properties and related securities. With the U.S. government positioned to soak up hundreds of billions of dollars of assets, those vehicles now face the likelihood of having to pay higher prices for a smaller potential pool of investments. And while the agency would eventually sell off most of its assets at discounts to face amount, many sales might not occur within the typical three- or four-year investment window of active funds. But fund operators... http://www.realert.com/headlines.php?hid=24381 The seemingly endless cascade of dire financial news over the weekend, capped by the bankruptcy filing of Lehman Brothers, signals that real estate prices could still fall significantly further. While the collapse of Lehman was foreshadowed, the shotgun marriage of Merrill Lynch and revelation of the extent of AIG's woes shocked market participants, causing them to re-evaluate the depth of the financial crisis and its ramifications. There was widespread sentiment that the widening financial woes will drag down the economy and force real estate owners to assign more-realistic values to their properties. For one thing, with no rebound in sight, sellers will likely be more willing to lower their price expectations. Also, following Lehman's demise, institutions will be pressured to take bigger haircuts on their valuations. Finally, the end of Lehman and Merrill, on top of Bear Stearns, means that three major lenders have been removed from the market, further dampening the outlook for prices. The upshot: The real estate bear market appears to have a long way to run. Many investors had hoped that the credit crunch would begin to ease by the middle of next year. But now, following the weekend's monumental developments and the recent rescue of Fannie Mae and Freddie Mac, there is a growing consensus that it could last significantly longer. quot;Real estate is cyclical, and most things work on a pendulum,quot; said one high-yield investor. quot;It swung dramatically to one side, and now it is... http://www.realert.com/headlines.php?hid=24255 Continuing an effort to reduce its heavy debt load, Broadway Partners has agreed to sell one Los Angeles office building to Jamison Partners and to swap its interest in another for Blackstone Group's stake in a third property. Broadway will sell the 472,000-square-foot building at 1000 Wilshire Boulevard to Jamison for about $142 million, or $300/sf. Separately, Broadway will swap its 65 stake in the 493,000-sf building at 1888 Century Park East for Blackstone's 20 interest in the 775,000-sf property at 10 Universal City Plaza in Universal City, northwest of Los Angeles. Blackstone will also give Broadway an unspecified amount of cash. As a result of the exchange, Broadway will fully own 10 Universal City Plaza, and Blackstone will fully own 1888 Century Park East. Earlier this year, Broadway put its 80 stake in 10 Universal City Plaza up for sale via Eastdil Secured. But Broadway found soft demand for the stake, which it valued at about $340 million. The buzz is that Broadway is huddling with Eastdil to decide whether to proceed with an offering of full ownership of the building. There had been talk over the past year that Broadway was also considering the sale of its 65 stake in 1888 Century Park East. In 2006, that stake was valued at $151 million, according to Fitch, which rates a securitization that includes a loan on the property. A company spokesman declined to comment on the pending transactions or Broadway's plans. Broadway has been aggressively marketing... http://www.realert.com/headlines.php?hid=24118 Real estate commitments by public pension funds slowed in the first half because of shrinking asset bases and a reduction in the turnover of investments. The 50 largest pension systems pledged $12.8 billion of equity to new real estate separate accounts, joint ventures and commingled funds from January through June, according to preliminary data compiled by Real Estate Alert. That puts the sector on pace for about $26 billion of commitments this year, down 29 from the record $36.2 billion last year. The first-half decrease will probably end up being smaller, however, because a few pension systems delay announcing commitments for several months. Some market players expect commitments to continue to slow because of the impact of the downturn in the stock, bond and property markets. For one thing, real estate funds have slowed down the pace of liquidating their property investments because of the soft market, which in turn has limited profit distributions to their limited partners, including pension systems. That has reduced the amount of fresh capital pension systems have available for investment. Perhaps even more important, declines in the stock and bond markets have decreased or slowed the growth of the asset bases of pension funds. As asset sizes decline, the proportion of real estate investments grow - even if the actual investment level doesn't change. That has caused some pension systems to reach or exceed their real estate allocations, curbing their ability to make commitments. Some pensions are trying to free... http://www.realert.com/headlines.php?hid=23979 CB Richard Ellis was by far the most-active broker of the five major types of properties during the first half, in what is shaping up as the slowest year for sales since 2003. CB brokered $10 billion of properties from January through June, more than double the total of defending champ Eastdil Secured, which handled $4.9 billion. Cushman amp; Wakefield was third, with $4.4 billion (see ranking on Page 9). Sales of office, retail, multi-family, hotel and industrial properties fell a hefty 66 from a year earlier, to $47.4 billion, according to Real Estate Alert's Deal Database, which tracks sales of at least $25 million. The bear market spread across all sectors. Office sales, which soared the most last year as the real estate market was peaking, plunged 72 in the first half, followed by hotel (down 68), retail (64), industrial (63) and multi-family (44) transactions. Business at nearly every full-service brokerage fell by at least 50, with defending champ Eastdil suffering the biggest drop-off - a whopping 89 (see article on Page 8). CB, Cushman, fourth-ranked Holliday Fenoglio Fowler and seventh-ranked Jones Lang LaSalle posted declines ranging from 57 to 61. Sales started to slow dramatically in last year's fourth-quarter, as the availability of credit dried up and property values wobbled. From September to April, the market was stagnant, with only a smattering of deals closing. Transactions began to tick up in the second quarter, as the gap in the price expectations of buyers and sellers... http://www.realert.com/headlines.php?hid=23834 CB Richard Ellis edged out Apartment Realty Advisors in the ranking of multi-family brokers for the first half of the year, as sales in the sector plummeted by 44. Some $11.4 billion of apartment properties changed hands from January through June, down from $20.4 billion a year earlier, according to Real Estate Alert's Deal Database, which tracks sales of $25 million or more (see ranking on Page 4). Market players attributed the slowdown, which started in the second half of last year, to two main factors: the tight credit market and the stubborn gap in the pricing expectations of buyers and sellers. As a result, the big portfolios that boosted sales totals in recent years have fallen out of fashion, with one-off transactions now dominating the action. After three straight years of extraordinary activity - with annual volumes ranging from $39.9 billion to a record $51.8 billion in 2007 - volume this year is on pace to be dramatically lower. Real estate pros view the wild swing as extreme at both ends. quot;I don't think the market of the last two or three years was normal,quot; said the head of one national brokerage's multi-family team. quot;And I don't think this market is normal. It's a very disrupted market.quot; Despite the slowdown, there is still a steady supply of listings, and capital remains plentiful. But debt is harder to come by and more expensive. Private lenders have pulled back sharply, leaving Fannie Mae and Freddie Mac as the dominant suppliers of loans. An even bigger factor is the failure of buyers and... http://www.realert.com/headlines.php?hid=23678 Sales of large retail properties plunged by 64 in the first half as the credit crunch and a sagging economy drove buyers to the sidelines. Some $5.1 billion of malls and shopping centers traded hands from January to June, down from $14.1 billion a year earlier, according to Real Estate Alert's Deal Database, which tracks deals of $25 million and up (see tables on Pages 6-7). With market players holding out little hope for a significant rebound by yearend, volume seems destined to fall well shy of the record $24.8 billion of retail sales in 2007. quot;I think it is going to be more of the samequot; in the second half, said the head of the national retail platform of a major brokerage. quot;I see no reason for the market to turn until well into 2009.quot; Shopping centers, which account for the bulk of retail sales, posted a 72 drop in volume, to $3.6 billion from $13 billion in last year's first half. Mall sales bucked the trend, posting a 30 increase, to $1.5 billion from $1.1 billion. But $442 million of that total stemmed from an off-market transaction in which Wilmorite exercised an option to buy stakes in three malls. Brokered mall transactions fell by 19, to $606.4 million from $748.2 million. Eastdil Secured led the way in the ranking of shopping-center brokers, closing $676.5 million of transactions. Defending champ CB Richard Ellis was a distant second, with $399.3 million. Next came Grubb amp; Ellis ($95.1 million) and Holliday Fenoglio Fowler ($60.8 million). Boutique brokerage Fox Propert... http://www.realert.com/headlines.php?hid=23545 The volume of office-property sales plunged 72 in the first half from the same period in 2007, making it a near-certainty that this year's market will be the slowest since 2004. According to Real Estate Alert's Deal Database, nearly $23.6 billion of U.S. properties valued at $25 million or more changed hands during the first six months of the year, far off the $83.8 billion of a year ago. The sharp decline reflects owners' reluctance to offer office properties in a market characterized by the lingering credit crisis and falling real estate values. Even if the second half of this year outpaces the first half, the market will be hard pressed to reach $60 billion, meaning that this year's volume will likely end up the slowest since 2004 ($56 billion). From 2004 to 2007, annual office-property sales volume averaged about $92 billion. Most of the larger deals completed in the first half were made possible because buyers were able to assume financing from sellers. Brokers acknowledge that at some point those types of deals will run out. At that point, if financing remains scarce, market activity will slow further. quot;Other than assets [with assumable loans], we will have to wait for liquidity to come back, which means we will have to wait until the lending institutions have balance sheets once again,quot; said a senior executive of a brokerage firm. Brokers acknowledge that this year's activity would have fallen short of the remarkable 2007 volume even if the credit markets had remained healthy. To be sure, last year's all-time... http://www.realert.com/headlines.php?hid=23393 Manulife Financial has signed a letter of intent to buy Mellon Bank Center in Los Angeles from funds operated by BlackRock Realty Advisors and Tishman Speyer for about $308 million. The 701,000-square-foot building, at 400 South Hope Street, is nearly fully occupied. At the $440/sf price tag, Manulife's initial annual yield would be about 5. The yield could rise to 6.5 if two below-market leases are replaced when they expire in 2010 and 2012. If it completes the acquisition, Toronto-based Manulife will assume a $171.5 million mortgage with a 5.32 coupon. The interest-only loan matures in 2012. Cushman amp; Wakefield is advising the sellers - the core-plus BlackRock Diamond Property Fund and the value-added Tishman Real Estate Venture 6. At one point, there was talk in the market that the open-end BlackRock fund was thinking about buying out the 33 stake held by the $1.1 billion Tishman fund. But the two partners ultimately agreed to sell the building outright. The funds acquired the property in 2005 for $245.6 million from the retirement plan of the main tenant, law firm O'Melveny amp; Myers, which is leasing 348,000 sf until 2015 at $19/sf. One other major tenant has a long-term lease: Capital Group (111,000 sf until 2018 at $22.94/sf). The two large tenants with leases that roll over in the near term are Mellon Financial (107,000 sf at $26.41/sf until 2012) and McKinsey amp; Co. (83,000 sf at $12/sf until 2010). New leases could currently command about $38/sf. Mellon is viewed as certain to renew. McKins... http://www.realert.com/headlines.php?hid=23246 Nippon Life Insurance is weighing whether to sell its roughly 49 interest in an office and retail complex in San Francisco's Financial District. The property, called Post Montgomery Center, consists of the 676,000-square-foot office building at One Montgomery Street and the attached 88,000-sf Crocker Galleria. Nippon's stake, held via affiliate NLI Properties West, could be worth north of $225 million. The buzz is that Nippon's advisor, Eastdil Secured, has started sounding out a small number of prospective buyers to gauge demand. A formal marketing campaign evidently hasn't started. Eastdil did not return calls seeking comment. Nippon's partner in the property, Prudential Real Estate Investors, apparently has no plans to shop its interest. It's unknown if Pru has a right to match any bids for Nippon's stake. One Montgomery Street, which was built in 1982, was originally known as Crocker Bank Tower. The 38-story red granite building is fully occupied, but brokerage Charles Schwab will vacate 69,000 sf on upper floors in January. That space has asking rents of up to $76/sf. Other tenants include the National Association of Securities Dealers (20,000 sf until 2016) and First Albany (20,000 sf until 2015). Crocker Galleria, which was built in 1983, is home to more than 50 high-end shops and restaurants, including Polo Ralph Lauren, San Francisco Soap Co. and John Walker amp; Co. The three-story property, at 165 Sutter Street, is about 96 occupied. Market rents for the space range up to $60/sf on a... http://www.realert.com/headlines.php?hid=23097 Carlton Group and Prudential Real Estate Investors have pledged $400 million of equity for a joint venture that will make high-yield-debt investments - the latest in a string of vehicles formed to capitalize on illiquid debt markets. The joint venture, CSV Capital of New York, will use roughly two-thirds of its capital to originate mezzanine loans and provide preferred equity on high-quality office, retail and multi-family properties. The remaining capital is earmarked for the purchase of performing loans at a discount from lenders under pressure to sell. Carlton has tapped former Citigroup executive Kenneth Spears to oversee the initiative. Spears, a managing director, worked at Citi and its predecessors for two decades. Spears, who was a director and originator in Citi's commercial real estate group, was laid off last October during a wave of cutbacks stemming from the credit crunch. Carlton has also hired a former Bear Stearns director, Dax Scharfstein, as managing director and general counsel. Other members of the joint venture's team include vice president Martin Whelan, who was previously a transaction manager at Credit Suisse's real state finance unit, and Dinesh Sakhrani, previously an associate at Bear. The vehicle, which will use leverage sparingly, is shooting for a return of roughly 15. It will focus on the origination of loans ranging from $20 million to $50 million. Loan purchases will typically range from $25 million to $50 million, with a $150 million ceiling for portfolio acquisitions. The venture will... http://www.realert.com/headlines.php?hid=22942 In an offering that could attract bids of about $400 million, a Calpers joint venture is marketing its 49 stake in the upscale retail space and garage at Time Warner Center in Manhattan. Calpers and its partner, MacFarlane Partners of San Francisco, are shopping the investment primarily to offshore investors. Foreign players have stepped up purchases of trophy U.S. properties to take advantage of falling prices, the sagging dollar and reduced competition from American investors that have moved to the sidelines amid the credit crunch. DTZ Rockwood has the listing. The 2.8 million-square-foot Time Warner Center includes 343,000 sf of premier retail space and a 504-space garage. The high-end retail outlets produce whopping in-line sales of $1,500/sf. The mixed-use Time Warner Center, at Columbus Circle, was completed in 2004 by Related Cos. and Apollo Real Estate Advisors, both of New York. They sold the 49 stake in the retail and parking component to the Calpers joint venture in 2005 for an undisclosed price. Related and Apollo have maintained ownership of the rest of the complex. The property's value has soared over the past several years. The retail space and garage, which had been appraised at $455 million in mid-2004, are now valued at roughly $800 million. The retail space, called Shops at Columbus Circle, is in a seven-story glass atrium that connects the complex's two 80-story towers. The underground three-level garage is leased to Central Parking. The retail space is fully occupied by more than... http://www.realert.com/headlines.php?hid=22787 Eastdil Secured plans to trim its staff by about 10 in response to a sharp reduction in brokerage activity. The company will likely eliminate about 25 jobs from its roster of roughly 250 employees through layoffs and attrition, according to people familiar with its plans. Some of the firm's 53 senior managing directors, managing directors and directors are likely to be affected. The staff reduction, which is expected to begin in the next couple of months, would bring the company's staff size back to about the level of 2006. The cutbacks will be overseen by the brokerage's executive committee - chairman Benjamin Lambert, chief executive Roy March, president Michael Van Konynenburg and senior managing director Jay Borzi. Eastdil did not return a call seeking comment. Eastdil has closed about $6 billion of deals thus far this year and has perhaps as much as $4 billion under contract, according to people close to the firm. That's a far cry from the record-shattering pace set last year. Eastdil handled $45.9 billion of large commercial and multi-family sales in the first half of last year and $67.3 billion for the full year, ranking first by a large margin, according Real Estate Alert's Deal Database, which tracks transactions of $25 million or more. The credit crunch has taken an especially heavy toll on large transactions - the bread and butter of Eastdil's business. The brokerage hit home runs last year by handling the flips and re-flips of portfolios emanating from Blackstone Group's $39 billion purchase... http://www.realert.com/headlines.php?hid=22629 A Colony Capital partnership is taking another shot at selling the 383-room Fairmont Copley Plaza in Boston. The landmark hotel is hitting the block at a time when few other luxury properties are up for grabs. Copley Plaza could attract bids of roughly $500,000/room, or $192 million, based on comparable sales. CB Richard Ellis has the listing this time around. It's unclear when marketing will begin. Los Angeles-based Colony and its partner, Kingdom Hotel Investments of Dubai, shopped the hotel and two other properties nearly two years ago via Eastdil Secured after taking over Fairmont Hotels amp; Resorts, now a unit of Fairmont Raffles Hotels International. The partnership sought to retain long-term management rights to the properties. Strategic Hotels amp; Resorts paid $360 million for one of the properties - the Fairmont Scottsdale Princess in Scottsdale, Ariz. But no deals were struck for Copley Plaza and Raffles L'Ermitage in Beverly Hills. Fairmont likely still plans to retain management rights to Copley Plaza, a condition that might make it easier for potential buyers to secure financing in the midst of the credit crunch. Lenders favor branded properties with-in place management agreements over those without such contracts. Copley Plaza is likely to draw interest from offshore buyers who, seeking to exploit the falling U.S. dollar, are scoping out trophy hotels in core markets. Almost all of the investors currently courting the 640-unit Helmsley Park Lane in Manhattan, valued at roughly $800 million, are foreign... http://www.realert.com/headlines.php?hid=22475 A portfolio of office buildings occupied by the federal government has hit the market, with bids expected to top $600 million. The 2.2 million-square-foot package represents the entire U.S. holdings of Record Realty, an Australian REIT controlled by Allco Finance of Sydney. As previously reported, another REIT controlled by Allco, Rubicon America, is also shopping a large portfolio of U.S. office properties leased to government agencies. Record Realty prefers to sell its 22 properties as a package. At a $600 million-plus price tag, the buyer's initial annual yield would be less than 7, based on $42 million of net operating income. Jones Lang LaSalle has the listing. In a plus for bidders, the portfolio has assumable financing that totals more than 80 of the estimated value. Included is a $284 million securitized loan on nine of the properties. That 6.2 interest-only mortgage matures in May 2012. The portfolio is 97 leased to more than a dozen federal agencies, including the Social Security Administration, the Food and Drug Administration and the Drug Enforcement Agency. The average remaining lease term is 9.5 years. Nineteen of the properties were built explicitly for government agencies, and many serve as national or regional headquarters. Most were either built or renovated in the past eight years. There are five properties in West Virginia and two each in California, Texas, Pennsylvania and New York. The rest of the portfolio consists of single properties in Oregon, Colorado, Kansas, Louisiana,... http://www.realert.com/headlines.php?hid=22320 Carr Properties has won the bidding for the neighboring office buildings at 800 K Street NW and 801 Eye Street NW in Washington. Locally based Carr, which is headed by developer Oliver Carr and controlled by a J.P. Morgan Asset Management fund, bid about $305 million, or $402 per square foot, for the properties, which encompass 758,000 sf, according to market players. The initial annual yield is roughly 6. Holliday Fenoglio Fowler marketed the buildings as a package. Carr is expected to assume a $145 million interest-only loan with a 5.77 coupon. The loan's term could not be learned. The seller, a joint venture between local players Akridge Cos. and advisory firm Seaton Benkowski amp; Partners, apparently offered additional seller financing. But it's unclear whether Carr will go that route. Akridge and Seaton bought the complex, known as Techworld Plaza, in 2002 for $162.3 million from a Lehman Brothers entity called National Government Properties. The duo has spent $3 million on upgrades to common areas, as well as the replacement of the roof at 801 Eye. The buildings, constructed in 1989 and 1991, have a 90 average occupancy rate. Federal government agencies lease more than 500,000 sf. The 298,000-sf building at 801 Eye is 99 leased. The federal government occupies much of the space under long-term leases, although a 105,000-sf lease to the Department of Homeland Security expires in September. Other tenants include the Department of Veterans Affairs, which recently renewed its... http://www.realert.com/headlines.php?hid=22163 Multi-family brokerage Hendricks amp; Partners, which has traditionally focused on California, the Southwest and Midwest, plans to make a major push into the East Coast. The Phoenix firm expects to open 20 offices over the next two years. First up will be an outpost in Orlando, which will be launched this month under the direction of Hal Warren, a former senior director of Cushman amp; Wakefield in Florida, and Cole Whitaker, the former acquisitions director of apartment investor Capreit of Rockville, Md. Also on tap are offices in Jacksonville, Tampa, Charlotte, Atlanta, Nashville, Philadelphia, Pittsburgh, New York and Boston, as well as in select secondary markets. The timing of the expansion might seem unusual, given that most brokerages are downsizing or have only modest growth plans amid the real estate downturn. But Hendricks thinks it can exploit the turmoil. quot;We're a debt-free, private firm with a lot of cash, and we've got the nation's largest research group,quot; said chief executive Don Hendricks. quot;We're looking to knock their socks off.quot; Hendricks doesn't plan to conduct formal recruiting, but rather will rely on brokers from rival firms to come knocking. Already, the firm's chief executive said, he is fielding calls from brokers unhappy with the dwindling support their multi-family sales teams are seeing because of cutbacks. Hendricks, which was founded in 1995, ranked sixth last year in investment-sales volume for multi-family properties, according to Real Estate Alert's Deal Database, which tracks transactions of... http://www.realert.com/headlines.php?hid=22000 An ING Clarion Partners fund is selectively shopping an office building in the Los Angeles suburb of Glendale, even as another property on the same street got pulled from the market because of lackluster bids. The open-end Lion Properties Fund is looking to turn only a small profit on the 419,000-square-foot building, at 500 North Brand Boulevard. It has asked Eastdil Secured to market the property to a small group of investors, with a target price of about $147 million, or $350/sf. The core vehicle bought the building two years ago from a GE Asset Management partnership for $139.8 million, or $334/sf. The new listing comes as Morgan Stanley Real Estate, acting on behalf of an unidentified pension system, asked CB Richard Ellis to stop marketing the 298,000-sf building at 550 North Brand. Morgan Stanley was hoping for bids of about $125 million, but offers apparently came in at about $110 million. The stops and starts reflect the inconsistency of the property-sales market, which has struggled mightily since the credit crunch hit last summer. While sales are down significantly in Los Angeles, the market has fared better than many others. Some $1.4 billion of properties have sold or gone under contract so far this year, according to Real Estate Alert's Deal Database. That ranks third, after New York and Washington. Still, the shortage of financing has led to a gap between the pricing expectations of buyers and sellers. That has led sellers to be tentative with disposition... http://www.realert.com/headlines.php?hid=21847 Becoming the latest player seeking to capitalize on illiquidity in the credit markets, Goldman Sachs is planning to raise $2.5 billion of equity for a high-yield-debt fund. Goldman is shooting to close the vehicle by midyear. Goldman itself will contribute an unusually large proportion of the capital for a sponsor - between one-third and one-half of the total. With leverage, the vehicle would have more than $8 billion of investment power. The fund, Goldman Sachs Real Estate Mezzanine Partners, will seek a 13-15 return by investing in mezzanine loans, B-notes, high-yield senior loans, real estate corporate debt and commercial mortgage-backed securities in North America. It will buy or originate loans, and will also bid for loan portfolios. While the fund is believed to be the first that Goldman is dedicating to debt investments, the investment bank has a long track record of making high-yield debt plays. Since 1997, Goldman's existing mezzanine platform, including Dallas-based Archon Capital, has invested $4.5 billion of equity in real estate mezzanine investments in the U.S. and Canada. Goldman is telling investors that it hopes to profit from the freeze-up in the debt markets, which has driven up yields. The fund's income will primarily come from interest income, closing fees, prepayment penalties and exit fees. The fund will try to generate additional income by purchasing participating loans at a discount to face value. Goldman would profit if the loans are repaid at the face amount. It... http://www.realert.com/headlines.php?hid=21686 An investment vehicle seeking to reduce its debt load is shopping two office portfolios, valued at up to $700 million, that are almost fully leased to the federal government. The larger portfolio consists of 13 office buildings and a distribution center that encompass 3.1 million square feet and are spread out over almost a dozen states. The other package contains three office buildings, with 506,000 sf, in three states. Bids must be made on an entire portfolio. CB Richard Ellis has the listing. The seller is an Australian investment vehicle called Rubicon America Trust, which was set up in 2004 to invest in U.S. properties. Last October, the vehicle's parent, Rubicon Holdings, was bought out by another Australian company, Allco Finance. The offered properties make up roughly half of Rubicon's holdings. The company amassed more than 30 U.S. properties as the real estate bull market was at full throttle. In late February, Rubicon announced plans to sell properties valued between $560 million to $746 million in order to reduce its debt. It recently sold one of the properties - One Riverview Square in Miami - to Eaton Vance of Boston for $49.6 million. CB also brokered that deal (see New Deals on Page 8). The others are listed via the two portfolios. The 17 properties being offered are 99 occupied. Various government agencies lease 93 of the space, including the FBI, U.S. Army Corp of Engineers, Drug Enforcement Administration and Department of Homeland Security. The weighted average lease duration is more... http://www.realert.com/headlines.php?hid=21522 AIMCO, which put $2 billion-plus of apartment properties up for sale earlier this year, has found buyers for close to $1 billion of the complexes, but has pulled most of the remaining listings after getting disappointing bids. The pulled properties were mostly in weaker secondary and tertiary markets in Arizona, Florida and the upper Midwest. The REIT had hoped to sell them at capitalization rates of 6.5 or less, but buyers were pushing for returns above 7. Now, AIMCO is marketing about $1 billion of apartment complexes, mostly properties not offered in the first go-round. The complexes are being packaged in a series of smaller, regional portfolios, including the option for one-off sales, in the hope that they will command better bids than the pulled properties. The newly launched offerings are focused in markets less affected by price adjustments: select Texas cities like Houston, as well as New Jersey, Colorado and stronger Midwest cities such as Indianapolis and Nashville. CB Richard Ellis has landed the bulk of the new properties listed, as it did in January for the first batch of offerings. Cushman amp; Wakefield and Eastdil Secured also have big chunks. Denver-based AIMCO is believed to be still looking to sell up to $3 billion of apartment complexes in total this year. The REIT will use some of the proceeds to buy back its stock. The biggest single portion of AIMCO's original offerings this year was some 60-plus properties in the Sunbelt states with an estimated value of up to $1 billion. They were... http://www.realert.com/headlines.php?hid=21368 Despite the credit crunch, public pension systems set another record last year for equity commitments to commercial real estate vehicles. The nation's 50 largest systems pledged $36.2 billion to new real estate separate accounts, joint ventures and commingled funds, according to a Real Estate Alert survey (see tables on Pages 14-26). That was up 24 from a revised $29.2 billion for the same funds in 2006 - the previous record - and marked the third consecutive year that commitments exceeded $20 billion. The vast majority of the commitments, 83 by dollar amount, were made to commingled funds. Likewise, the overwhelming majority of the pledged capital, 96, went to high-yield vehicles. The 11th annual survey also found that the systems' real estate advisors have been quickly putting the commitments of recent years to work. The real estate holdings of the Top 50 systems soared by a net 33 last year, to $144.3 billion from a revised $108.7 billion in 2006. Real estate as a percentage of total assets climbed to 6.3, from 4.9. The credit crunch and resulting downturn in the property markets are likely to take some of the steam out of commitments this year, market players said. But while a new record is not expected to be set again, the level of commitments will probably remain high by historical standards. Some systems may increase their target allocations for real estate in order to gain more investment flexibility, especially if their overall asset size flattens because of floundering stock or bond investments. Global and... http://www.realert.com/headlines.php?hid=21216 International and global funds tend to charge higher fees than vehicles that invest solely in the U.S., a review by Real Estate Alert found. International funds operated by Blackstone Group and Goldman Sachs have the most aggressive incentive fees, according to the review, which compared the fee structures of roughly 100 closed-end vehicles that are now raising equity (see partial list on Pages 6-7). The review tracked how quickly a fund operator would reach a cumulative 20 share of distributed profits. Blackstone and Goldman would hit that quot;crossoverquot; point once their vehicles achieved only a 10.7 internal rate of return. Indeed, most international and global funds have crossover IRR's of less than 15. Among them are Grosvenor Vega China Retail Fund (12), Starwood Capital Hospitality Fund 2 (12), Carlyle Latin America Partners (13.3), Lone Star Fund 6 (13.3), Dune Real Estate Fund 2 (13.5) and Morgan Stanley Real Estate Fund 7 Global (13.5). Conversely, most funds that invest their money only in the U.S. have crossover IRR's that are higher than 15, including CB Richard Ellis Investors Strategic Partners Opportunity Fund 5 (23) and BlackRock Realty Advisors' Carbon Capital 3 (23.7). A small number of fund operators, in particular those investing in high-yield debt, can never achieve a 20 split of profits. Among them are Mesa West Real Estate Income Fund 2 and TriSail Capital Partners 3. Why do operators of international funds (which invest only outside the U.S.) and global vehicles (which invest... http://www.realert.com/headlines.php?hid=21065 A J.P. Morgan Investment Management partnership is marketing a fully occupied Washington office complex valued at more than $300 million. The 424,000-square-foot Terrell Place should appeal to core players because few leases expire before 2016. Bidding could reach $750/sf, or $318 million. At that price, the buyer's initial annual yield would be about 5. The three-building complex is expected to attract high-net-worth individuals and U.S. and foreign institutional players. Because of the current difficulty of lining up debt, some bidders might plan to pay cash and line up a mortgage later. The partnership has given the listing to Eastdil Secured, which declined to comment. The site was formerly occupied by a Hecht's Department Store, which was constructed in 1924. In 2003, an advisory client of J.P. Morgan, acting in partnership with CarrAmerica, completed a $150 million redevelopment of the site, renaming it after Mary Church Terrell, a civil rights activist who in the early 1950s organized boycotts of several segregated restaurants in Washington, including one at the Hecht's store. In 2006, a Blackstone Group fund inherited CarrAmerica's 30 stake when it bought the Washington REIT. Blackstone included the stake in a $2.4 billion portfolio that it sold later that year to a joint venture between Lehman Brothers and a fund operated by New York-based Tishman Speyer. The property consists of connected 11-, 9- and 5-story buildings. There are entrances at 575 Seventh Street NW and 650 F... http://www.realert.com/headlines.php?hid=20911 A Tishman Speyer fund is marketing a Los Angeles office tower with assumable financing that should appeal to core and core-plus players. The 701,000-square-foot Mellon Bank Center could attract bids of up to $340 million, or $485/sf. At that price, the buyer's initial annual yield would be about 5. The return could rise to 6.5 if two large below-market leases are replaced at higher rents when they expire in 2010 and 2012. Tishman has given the listing to Cushman amp; Wakefield, which declined to comment. The fully occupied property has a $171.5 million interest-only mortgage, with a 5.32 coupon, that matures in 2012. That should boast the marketing campaign, because large loans have been hard to come by amid the credit crunch. The 26-story building, at 400 South Hope Street, was constructed in 1982. Tishman Real Estate Venture 6, a $1.1 billion value-added vehicle, acquired it in 2005 for $245.6 million from the retirement plan of the main tenant, law firm O'Melveny amp; Myers. Cushman also handled that sale. Tishman has made minor improvements, focusing on the lobby. O'Melveny amp; Myers leases 348,000 sf until 2015 at $19/sf. One other major tenant has a long-term lease: Capital Group (111,000 sf until 2018 at $22.94/sf). The two large tenants with leases that roll over in the near term are Mellon Financial (107,000 sf at $26.41/sf until 2012) and McKinsey amp; Co. (83,000 sf at $12/sf until 2010). New leases could command about $38/sf. Mellon is viewed as certain to renew its lease. McKinsey, which... http://www.realert.com/headlines.php?hid=20752 While the credit crunch is forcing changes in marketing and investment strategies, it is showing no sign of slowing the rapid growth of high-yield real estate funds. The number of active and planned vehicles has soared by 23, to 473, from 384 a year ago, according to Real Estate Alert's annual review. That marked the sixth straight year of growth since the review started in 2002. The funds are seeking to raise an aggregate $318 billion of equity, up 35 from the $236 billion sought a year ago The sponsors are already more than halfway there, having lined up at least $169 billion of commitments. If they reach the ultimate goal, the vehicles would have a whopping $908 billion of buying power when leveraged. Many operators have stepped up their focus on distressed assets. For an in-depth report on the review, as well as a master list of funds and a breakdown by type, turn to the 48-page pullout section. V http://www.realert.com/headlines.php?hid=20598 Veteran investor Thomas Barrack, who made a fortune in the early 1990s by scooping up distressed assets at fire-sale prices, is getting ready to call the bottom of the current downturn. Barrack's Colony Capital is quietly lining up equity in order to start buying distressed debt and property companies around midyear, when he expects the value of such assets to be near their low point, according to people familiar with the situation. Barrack evidently reached his conclusion about the timing a few weeks ago. The buzz is that he made some phone calls to longtime Colony backers and, without distributing any formal marketing materials or even establishing a name for an investment fund, quickly rounded up more than $1 billion of commitments Los Angeles-based Colony will accept additional equity, but hasn't set a firm goal. Instead, it will focus on investors who can move quickly and commit to having their capital ready to be drawn down within a few months, according to market sources. The fund is expected to close by the end of June. The vehicle will invest in distressed debt across all property types, as well as in operating companies with strong real estate components. Investors apparently jumped on board quickly because Barrack has a long-standing reputation for accurately calling market cycles. In the early 1990s, he was among the first investors to see the potential opportunities resulting from the massive liquidation of Samp;L assets, making a bundle for Colony in the process. In October 2005, he was featured in a Fort... http://www.realert.com/headlines.php?hid=20442 Cannon Commercial, which was the high bidder for Galleria Towers in Dallas, has reduced its offer - a move that could scuttle the deal. Los Angeles-based Cannon last month agreed to pay more than $300 million for the 1.4 million-square-foot office complex. But during final negotiations with seller Fortis Property of Brooklyn, Cannon sought to reduce the price by about 10, according to market players. Fortis appears to be unwilling to lower its price and is now expected to turn to back-up bidders. The company's broker, Jones Lang LaSalle, declined comment. Cannon's president, Kam Mateen, said last week he remained in talks with Fortis and held out the possibility of still reaching a deal. Mateen added that general concerns about the economy drove Cannon to reduce its initial bid. He declined to specify the original offer or how much it was cut. Difficulties in the loan market did not play a direct role in the negotiations. Cannon had been approved to assume two loans on Galleria Towers, Mateen said. Fortis recently renewed and expanded some leases at higher rents, pushing the occupancy rate to 99 from 98 and increasing the net operating income. The major tenants include FedEx Kinko's, Merrill Lynch, Highland Capital Management and Ryan amp; Co. Fortis listed the trophy complex and two others in the Dallas area last year. KBS Realty Advisors, acting on behalf of an unidentified institutional client, has agreed to pay about $75 million for the 351,000-sf J.P. Morgan International Plaza 3... http://www.realert.com/headlines.php?hid=20298 Cabi Developers may soon look to sell part of a Southern California office portfolio that it bought last year at the top of the market from GE Real Estate's Arden Realty. Area brokers said that Cabi, the Miami arm of Mexican developer GICSA, is interested in selling more than $150 million of buildings from the 33-property portfolio, which it bought for $1.5 billion. The buzz is that Cabi is evaluating various properties for possible offerings, including ones in West Los Angeles, Culver City, Calabasas and Ventura County. Cabi used heavy leverage to complete the transaction, borrowing about $1.3 billion. Since then the credit crunch has driven down property values, putting some investors that bought at the top of the market underwater. Multiple market players said that Cabi is facing a $150 million principal payment on its loan in September and another one in August 2009. The loan was arranged by Wachovia, which has sold some pieces. Junior portions are now held by a Hines-Calpers venture, Square Mile Capital, Gramercy Capital and others. Rich Mayo, a Los Angeles-based principal who oversees Cabi's West Coast portfolio, confirmed that the company was thinking about offering some properties. But he said that Cabi was not under any pressure to sell, and he denied that Cabi has a large principal payment due this year. Market sources said that given the deep pockets of Cabi's parent, the company was unlikely to default on its debt or accept fire-sale prices for any of its properties. quot;They'll try to get out of... http://www.realert.com/headlines.php?hid=20159 Fueled by its dominating performance in the office sector, Eastdil Secured last year easily defended its title as the nation's most-active brokerage across the five major property types. Eastdil brokered $67.3 billion of large properties last year, including several blockbuster office portfolios. That enabled it to far outdistance the $44 billion of sales by CB Richard Ellis, which was runner-up again in Real Estate Alert's second annual composite broker ranking (see ranking on Page 7). But with the credit crunch expected to curb giant portfolio sales, CB figures to give Eastdil a stronger challenge this year. Rounding out the Top 5 were Cushman amp; Wakefield ($21.9 billion), Holliday Fenoglio Fowler ($14.8 billion) and Jones Lang LaSalle ($8.4 billion). The figures are based on transactions of $25 million and more, as tracked by Real Estate Alert's Deal Database. Overall, $235.6 billion of properties changed hands last year, including nonbrokered transactions, up 21 from $195.4 billion in 2006. While data for all five properties types have been tallied for only two years, there's little doubt that the figures for 2006 and 2007 were successive records. However, the sharp downturn in the credit market is expected to cause a big decrease in sales this year - perhaps approaching 50, according to forecasts by brokers. Eastdil's powerful performance was driven by its office activity. As previously reported, Eastdil handily won the office ranking with $54.2 billion of volume, some $28.9 billion more than runner-up... http://www.realert.com/headlines.php?hid=20042 CB Richard Ellis retained its crown last year as the most-active broker of multi-family properties, as sales in the sector fell from the stratospheric levels of 2005 and 2006. CB brokered $11 billion of large transactions, more than twice as much as runner-up Apartment Realty Advisors. But CB's volume was down 40, from $18.2 billion in 2006. CB's market share fell to a still-dominant 32.1 from 41.2 (see ranking and list of top deals on Page 7). While Apartment Realty finished second for the third year in a row, it narrowed the gap with CB. Apartment Realty's volume declined by a relatively modest 5, to $4.6 billion. That left it $6.3 billion behind CB - versus a deficit of $13.3 billion the year before, according to Real Estate Alert's Deal Database, which tracks transactions of $25 million or more. Cushman amp; Wakefield retained third place, with $3.4 billion of sales, down just 1. Marcus amp; Millichap moved up one place, to fourth. It bucked the trend by posting a healthy increase in volume -19, to $2.7 billion. Eastdil Secured slipped one spot, to fifth place, with $1.8 billion of sales, up 4. Overall, $39.9 billion of large apartment properties, including unbrokered transactions, changed hands last year. Even though that was down sharply from the supercharged totals of the two previous years - a record $51.8 billion in 2005 and $50.1 billion in 2006 - activity was still heavy by historical measures. Indeed, market players have been saying that the extraordinary volume of 2005... http://www.realert.com/headlines.php?hid=19902 CB Richard Ellis dethroned Eastdil Secured as the top broker of shopping centers last year as sales volume shattered the previous record, despite the impact of the credit crunch. Meanwhile, Eastdil retained its crown as the most-active broker of malls, although activity in that sector declined (see rankings and list of top deals on Pages 9-12). Overall, shopping-center sales were so strong that a record was also set for combined retail sales. Some $24.8 billion of shopping centers and malls traded last year, up 23 from $20.1 billion in 2007. The previous record was $22.5 billion, set in 2005, according to Real Estate Alert's Deal Database, which tracks transactions of $25 million or more. Shopping centers accounted for the lion's share of retail activity. Some $20.7 billion of the properties changed hands, up 39 from $14.9 billion in 2006. The previous record was $17.8 billion, in 2005. By contrast, mall sales slumped by 23, to $4 billion from $5.2 billion. Activity was well below the peak of $8.4 billion in 2003. While a disproportionate amount of activity usually occurs in the second half of the year, the opposite was true in 2007. Some $14.7 billion of trades - or 59 of the total - took place from January through June, when real estate prices peaked. Sales slowed in the second half as the availability of financing dried up, pushing down prices. Most market players expect the slowdown to continue this year. quot;I would say that the market moving forward has been described as choppy, and I suspect that it will... http://www.realert.com/headlines.php?hid=19766 Eastdil Secured was by far the most-active broker of large office properties last year, when giant portfolio offerings and subsequent flips fueled the biggest sales volume in commercial real estate history. The record $135.7 billion of activity came despite a sharp downturn in the fourth quarter as the credit crunch enveloped the market. quot;We witnessed a 40 transaction increase year over record year, even though [the credit crunch] effectively cut down the calendar by almost a full quarter,quot; said Douglas Harmon, a New York-based senior managing director of Eastdil. The slowdown is expected to take a heavy toll on activity this year. Brokers generally think volume will plunge by more than 50. That would snap a five-year string of dramatic growth, with annual increases of 10, 65, 42, 22 and 40 since 2002. If the projections are accurate, this will be the slowest year since 2004, when $56.1 billion of volume traded, according to Real Estate Alert's Deal Database, which tracks transactions of $25 million or more. Even without the credit crunch, the market would be hard-pressed to match last year's tsunami of multi-billion deals and flips. Almost a quarter of last year's total volume stemmed from just one transaction: Blackstone Group's $39.9 billion takeover of Chicago-based Equity Office Properties in February. Blackstone flipped a large portion of Equity Office's portfolio to multiple players. Many of those buyers, in turn, re-flipped some of the properties they acquired. In all, more than $30 bill... http://www.realert.com/headlines.php?hid=19631 Bank of America beat out defending champ Morgan Stanley for the title of most-active advisor on U.S. real estate mergers and acquisitions last year as volume shattered records, according to Real Estate Alert's 12th annual survey. Mergers were negotiated at an unprecedented rate as the market peaked in the first half of last year, but activity dried up in the second half and is likely to be minimal this year. A whopping $167.4 billion of Mamp;A transactions closed last year. That figure, which seems unlikely to be matched for years, was more than double the previous record of $63.9 billion set in 2006 and more than the combined total of the six previous years. Three mega-mergers accounted for more than half of the volume: the record $39.9 billion takeover of Equity Office Properties by Blackstone Group, the $26.2 billion purchase of Hilton Hotels by Blackstone, and the $22.2 billion acquisition of Archstone-Smith by Tishman Speyer and Lehman Brothers. But virtually all of last year's activity was announced by mid-July. As the credit crunch enveloped the market later in the year, Mamp;A negotiations ground to a halt, and they show little sign of picking up. Just one transaction is now pending: Gramercy Capital's $3.4 billion acquisition of American Financial Realty, which is scheduled to close in March. As in other recent years, the market in 2007 was fueled by high-leverage deals. But mergers specialists said it will be hard to raise debt for such transactions for the foreseeable future. What's more, the scarcity... http://www.realert.com/headlines.php?hid=27254 Faced with an urgent need to raise capital in order to pay off maturing debt, developer Harry Macklowe has retained CB Richard Ellis to advise him on the possible sale or recapitalization of the GM Building in Midtown Manhattan. Macklowe has to move fast because some $6.9 billion of high-leverage debt and preferred equity on eight other Manhattan office properties comes due next month. The credit crunch has driven down the value of the properties, making it difficult to roll over the loans. Macklowe used the $6.9 billion package to buy the portfolio last February from Blackstone Group for $7 billion, pledging the GM Building as part of the collateral. Fortress Investment, which holds $900 million of the preferred equity, is in a position to put a claim on Macklowe's assets if the New York developer can't repay on time. Several market players confirmed that Macklowe had hired CB as his advisor. The buzz was that CB might be working in concert with an investment bank. CB and Macklowe declined to comment. The GM Building has been a grand-slam investment for Macklowe. He bought the 2 million-square-foot trophy in 2003 from Conseco Insurance and Donald Trump for $1.45 billion, putting up just $50 million of equity. At the time, some rivals whispered that he had grossly overpaid for the property. But the prices of Manhattan office properties subsequently soared. The GM Building's value is now estimated at $3 billion to $3.5 billion. Macklowe doubled down last February by acquiring the portfolio... http://www.realert.com/headlines.php?hid=19386 Blackstone Group is preparing to shop some of the suburban Boston office buildings it assumed last February via its $39 billion takeover of Equity Office Properties. The fund operator flipped the bulk of Equity Office's massive portfolio in a series of transactions within a few months of the takeover. But it retained almost all of the 11.9 million sf of Boston-area properties, with the plan of selling them on a one-off basis down the road. Now Blackstone is moving ahead by lining up brokers for a number of properties in Burlington, including 10 buildings at New England Executive Park that are listed with Eastdil Secured. The Class-A buildings, which encompass roughly 1 million square feet, could fetch north of $250/sf, or $250 million. Two other Burlington properties have been listed with Cushman amp; Wakefield: the Class-A building at 25 Mall Road and the Class-B building at 77 South Bedford Street. The 278,000-sf Mall Road building, considered one of the best in the area, could fetch around $300/sf, or $83 million. The 145,000-sf property on South Bedford Street could attract bids of about $200/sf, or $29 million. Due to ongoing woes in the debt markets, Blackstone has yet to give the nod to officially start marketing the properties. But sales campaigns could be launched within a few months. The buildings at New England Executive Park will likely be offered as a package. The properties are more than 90 occupied. Average rents range from $19.81/sf to $25.28/sf. Equity Office, a Chicago RE...