January 26th, 2012 :: Posted by CRE Console
On the heals of Sears Holdings announcing their 79 store closing list, Delhaize (dba Food Lion, Bloom and Bottom Dollar) has released a list of 126 stores which they intend to close.
View Delhaize Store Closing Map in a full screen map
On average these stores aren’t as well located as many of the Sears and Kmart locations, but many still represent great opportunities (see where Boyle Investments recently announced they were back filling a Food Lion box in Donelson Tennessee).
Here again, these store closures do represent another great buying opportunity in 2012.
Posted in CRE Trends, Useful Graphics | No Comments »
January 6th, 2012 :: Posted by CRE Console
In Wednesday’s Wall Street Journal, there was an article on GGP’s plan to spin off 30 of its weaker malls and create a new publicly traded company, Rouse Properties Inc.
General Growth executives tout the separation as a means for General Growth to focus its resources on its remaining 137 best-performing malls. The spinoff, to be called Rouse Properties Inc., then can concentrate on buying and rehabilitating so-called B malls, which mostly are lower-productivity malls in secondary and tertiary markets.[...]
“Rouse is being created to be a B-mall consolidator,” Mr. Mathrani said in a December interview at General Growth’s Chicago headquarters. “They can actually be a viable, strong B-mall company. We’re putting assets into this business that are good assets.”
GGP did something similar with much of their non-mall portfolio in 2010, creating Howard Hughes Corporation. The HHC IPO debuted at $30.00 per share and currently trades at $46.21 a gain of 20%+. GGP on their other hand, is only up 5% since HCC’s IPO.
But how will Rouse perform? According to PwC’s most recent Real Estate Investor Survey, Class B+ Malls are trading at cap rates of 7.75% or about 175 bps above their Class A+ counterparts. That’s more than a 20% discount.
The question yet to be answered is, Is GGP trading at a discount because these assets are currently in their portfolio?
Will this discount be passed along to Rouse, causing GGP’s stock to pop, but not Rouse’s? Or will something similar to what happened for the HHC IPO and Rouse will be the one to pop?
Posted in CRE Trends, Industry Commentary | 2 Comments »
January 3rd, 2012 :: Posted by CRE Console
PricewaterhouseCoopers has released the results of their 4th Quarter 2011 Real Estate Investor Survey.
One of the most popular features of this report is the cap rate trend section. This issue reported the largest decline in Net Lease cap rates (recording a drop of 54 basis points). Larger declines were also seen in Regional Mall (down 27 bps) and Apartment (down 18 bps) cap rates.
 Titled, Buying Beyond Core Remains Tricky, the report notes that “buying opportunities beyond the core markets remain tricky due to a protracted recovery outlook for both the U.S. and many secondary markets.
It goes on to say:
Surveyed investors cite that commercial real estate continues to offer attractive yields compared to alternative investment vehicles. In the office sector, investors are bullish regarding their prospects for tenant retention and expect office rent growth in many markets in the coming year.
“Despite a sluggish U.S. economic outlook, the majority of surveyed investors view commercial real estate as favorably priced and a good play,” said Mitch Roschelle, partner, U.S. real estate advisory practice leader, PwC. “The bullishness on the part of investors in the office sector comes as more office tenants are staying put and prospects for rent growth are improving. Looking ahead to 2012, our report suggests that investing in U.S. commercial real estate is an attractive play and will gain increasing global attention due to its hard asset nature and current income-producing characteristic, along with its total return potential.”
Highlights from the survey include:
NATIONAL HIGHLIGHTS
Investors continue to search for buying opportunities involving commercial real estate despite a slowdown in the pace of the industry’s recovery and a sluggish outlook for the U.S. economy.
Commercial real estate continues to offer attractive yields compared to alternative investment vehicles.
The majority of investors view commercial real estate as “favorably priced and a good play.”
While most investment strategies are focused on core markets, a growing number of investors are searching for tactical acquisitions in secondary markets.
OVERALL CAP RATE ANALYSIS
The average overall cap rate decreased in 22 Survey markets this quarter.
This quarter, the national net lease market reported the largest decline in its average overall cap rate.
The Pacific region apartment market reported another strong quarterly decline.
VALUATION ISSUE
As the industry’s recovery gains momentum, the need to provide additional inducements to tenants typically subsides.
The ability for owners to retain tenants has improved over the past year.
Many tenants are content to remain in existing spaces upon lease expiration due to the costs associated with relocating.
As it relates to specific asset classes and locations:
NATIONAL REGIONAL MALL MARKET
Individual mall performances are highly bifurcated.
Many dominant malls with luxury department stores and upper-tier tenants are doing well.
NATIONAL POWER CENTER MARKET
Many big-box merchants continue to look for ways to improve profits.
Some big-box retailers are reducing brick-and-mortar footprints and competing more aggressively on-line.
NATIONAL STRIP SHOPPING CENTER MARKET
The West and Southeast regions of the country are top location picks for shopping center investments.
Some investors like “fortress” locations where development is limited.
NATIONAL CBD OFFICE MARKET
Investor sentiment has waned somewhat over the past several months.
A growing number of investors are looking at secondary office markets for higher-than-core yields.
NATIONAL SUBURBAN OFFICE MARKET
Cash flow assumptions this quarter reflect a wait-and-see investment attitude.
Some investors are avoiding this property type right now.
NATIONAL FLEX/R&D MARKET
Sales activity decelerated a bit in the third quarter of 2011.
The average overall cap rate appears to have stabilized.
NATIONAL WAREHOUSE MARKET
The U.S. industrial vacancy rate is receding at a slow rate.
Many investors believe that market conditions do not support speculative development at this time.
NATIONAL APARTMENT MARKET
A shift from home ownership to renting has helped decrease vacancy in the U.S. apartment market.
While single-asset sales remain dominant, multiproperty deals are becoming more prevalent.
NATIONAL NET LEASE MARKET
Investors face mounting challenges as new supply remains constrained by a shortage of development.
A few investors expect the upcoming months to be very quiet with little or no sales activity.
NATIONAL MEDICAL OFFICE BUILDINGS (MOB) MARKET
Steady fundamentals have attracted a wider array of buyers to this once niche market.
Private money still represents nearly half of the capital entering the MOB market.
NATIONAL DEVELOPMENT LAND
Some investors believe that investment activity has picked up greatly compared to a year ago.
Certain investors note that sales activity is occurring at the expense of those with shallow pockets.
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December 29th, 2011 :: Posted by CRE Console
One of the biggest news stories following the Christmas holiday was the release of a list of 79 stores Sears Holdings intends to close in 2012.
While this may mean trouble for existing Sears and Kmart landlords, it spells opportunity for buyers and other big box tenants looking for deals in 2012, as many of these locations are still pretty desirable.
CRE Console has put together a map of these store closings using batchgeo.com to assist you in your quest for deal making in the new year.
Curious to see if any locations are closing in your city? Simply query the city name in the search box below and the map will automatically zoom in on the closest stores which are expected to close.
View Sears/Kmart Store Closings in a full screen map
The red pins represent Kmart; blue for Sears Full-Line; green for Sears Hardlines; and yellow for Grand/Essentials.
The hardest hit state so far is Florida, with 11 store closings planned.
Happy New Year to all our readers! Thank you for a successful 2011 and we look forward to working with more of you in 2012.
A full list of these stores can be found here on SearsHoldings.com.
Posted in Helpful Sites & Tips, Industry Commentary | 1 Comment »
December 12th, 2011 :: Posted by CRE Console
 PricewaterhouseCoopers and The Urban Land Institute recently released their annual Emerging Trends in Real Estate report.
As the theme for basically all of 2011, they note the demand for trophy assets in 24-hr gateway markets.
But they also note that this once insatiable appetite for trophy deals in these markets has started to wane:
If not yet a new bubble, investors may need to dial back to prevent creating one. Capitalization rates fall to pre-crash 2006–2007 levels; they “reach absurd numbers” on core assets “with crazy values.” Low interest rates perversely “encourage investors into taking greater risk since they can’t make money in bonds or money markets.”
NCREIF cap rate to 10-Year Treasury spreads have hovered just under 400 bps for much of 2011.
But many investors are beginning to be concerned about a price bubble in trophy assets in gateway markets.
Brokers and deal makers pull their hair out. Transaction activity pauses in a handful of major markets like New York City and Washington, D.C., where hard-won, bidding-war acquisitions now look “priced to disappoint.” After “underwriting aggressive rent spikes in a recovery, we need to wait for recovery to actually happen before buying again.”
“No one priced risk adequately,”one interviewee says. “Everybody became too optimistic too quickly.” Some buyers will step up activity and poke around in secondary markets or off locations in primary cities, hunting for higher-cap-rate bargains.
What is expected in 2012?
For 2012, U.S. real estate players must resign themselves to a slowing, grind-it-out recovery following a period of mostly sporadic growth, confined largely to “wealth island” real estate markets—the primary 24-hour gateways located along global pathways. A handful of cities also should continue to benefit from expansion in locally based technology and energy-related industries.
Cities of note in the report include Austin, Denver, Raleigh-Durham and San Jose for tech-related demand; and Houston and Dallas for energy-related demand.
What asset types hold the most opportunity?
Multifamily. Not just Class A trophy product – even Class B and C product is in strong demand. So much so that people don’t look at you funny when you say the word “develop”.
Buy class A, value-enhance class B, develop from scratch, purchase in infill areas, acquire in gateway cities, or hold in lower-growth markets. ‘Even buy class C and upgrade, spend a little more, hold a little longer—demand will be there.’
Fortress Malls, Infill Shopping Centers. It is all about location and tenant mix here. Greenfield Lifestyle Centers are on the outs, but trophy, infill malls are getting attention.
Location and retailer quality gain importance in the shopping center world, fighting against e-commerce incursions. Aptly named fortress malls, near upscale suburban neighborhoods and strategic highway intersections.
Coastal Port Industrial Space. Global trade has buoyed demand for efficient big-box warehouse space in larger shipping markets and investors are taking notice.
Global trade will power export activity around the nation’s primary seaboard ports, where traditional big-box warehouse distribution assets rebound after experiencing uncomfortably high vacancies. All eyes focus on which East Coast cities can position themselves to capture Pacific container-ship traffic slated to come through a widened Panama Canal in 2014.
Trophy and Medical Offices. We’ve all taken notice of the blockbuster Trophy office sales, but medical office is also a hot commodity right now.
‘The tenants are recession proof,’ and ‘the health care act will help spur demand as more hospital procedures move into doctors’ offices.’ Over the longer term, a bulging senior citizen population promises to expand needs for various outpatient facilities and clinics
[Download the full report here]
Posted in Industry Commentary | 1 Comment »
November 29th, 2011 :: Posted by CRE Console
Not sure how I missed this one, but C-III Capital Partners continues to make strong moves in acquiring CRE service business lines.
From an October 17th, 2011 press release:
Grubb & Ellis Company (NYSE: GBE), a leading real estate services and investment firm, announced today that it has entered into exclusive negotiations with a subsidiary of C-III Capital Partners LLC, an affiliate of Island Capital Group LLC, which has partnered with an affiliate of Colony Capital LLC regarding a strategic transaction with the company.
A C-III affiliate also has agreed to invest $10 million in Grubb & Ellis through the expansion of the company’s existing $18 million credit facility with Colony Capital and purchase $4 million of Colony’s existing facility, which will establish both C-III and Colony Capital as significant stakeholders in Grubb & Ellis.
In August, we questioned why C-III Capital didn’t jump on Grubb & Ellis back then:
Why NAI Global and not G&E or C&W???
I’m not knocking the brand, NAI has some great brokers and an impressive footprint. But, it was interesting to see that Farkas elected to buy NAI Global over Grubb & Ellis or Cushman & Wakefield, both of which have widely been known to be up for grabs. Arguably, both have a stronger network of investment sales brokers through which to funnel C-III Capital and Centerline’s listing opportunities.
Additionally, Grubb & Ellis was looking to unload Daymark Realty Advisors (aka G&E’s former TIC sponsor business line they inherited through their merger with Triple Net Properties).
Farkas’ Island Capital Group already owns a fund management business, which could have folded Daymark’s asset management business line into it.
It could have been that Colony Capital’s $18 million loan threw a kink in that whole deal, so he settled on NAI Global, instead. I have no inside information; this is pure speculation…
It looks like C-III Capital has now ponied up $10M of the $18M credit facility Colony Capital has provided to G&E, so there was less of a kink, and more of a team effort.
Who is next on Farkas’ target list?
Posted in Industry Commentary | No Comments »
November 10th, 2011 :: Posted by CRE Console
Posted in CRE Trends, Industry Commentary | 1 Comment »
November 8th, 2011 :: Posted by CRE Console
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November 3rd, 2011 :: Posted by CRE Console
Moody’s/REAL Commercial Property Price Index (CPPI) rose 2.4 percent during the month of August and is now 15.3% above its April 2011 lows.
From the Moody’s report:
The share of distressed transactions included within this month’s CPPI was 21.7%, down 5.9% from last month and the lowest level since January 2010. Prices for distressed transactions were down by 3.5% from the last month and are 6.9% above their post peak low set in August 2010. The reduced share of distressed transactions helped drive this month’s overall price increase.
Looking forward, we do not envision significant price increases over the next year. While distressed transactions should be at or near their high water mark for this cycle, there is less CMBS loan origination to help support acquisition pricing, especially beyond the portfolio lender sweet spot of trophy properties and top tier markets.
This builds on similar sentiment from last month’s report:
Price increases in the near term are likely to be earned the old fashioned way, by rent growth, rather than through higher leverage or financial engineering. Continued economic uncertainty will take a toll on the assumptions utilized by buyers in making their investment decisions. Slow job growth will crimp expectations for the absorption of vacant space and for rent increases, which in turn will constrain near term price increases.
Moody’s also noted the the slowing pricing increases on their Six-City Trophy index and lower distressed asset sale volume in the overall index:
August saw a slight increase of 0.8%. The flattening out of prices for the six-city series and the CPPI are consistent with reports from Real Capital Analytics that cap rates have flattened out for all sectors but multi-family.
Distressed assets recorded a decrease of 3.5%. Transaction volume for distressed sales comprised 21.7% of this month’s observations, the lowest percentage since January 2010.
As prices for both the six-city series and the broad middle market (non-major assets and non-distressed assets) were comparatively flat for August, the bulk of the improvement in CPPI came from a reduced share of distressed transactions.
[Download the full report]
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September 29th, 2011 :: Posted by CRE Console
Sure enough, as soon as I comment on a slow down in transaction volume, there is an avalanche of new blockbuster deals. Just to note a few of the biggest recently announced:
Blackstone’s Purchase of Equity One Portfolio Signals Confidence in Retail
National Real Estate Investor – Sep 29, 2011
On Sept. 26, Equity One Inc., a North Miami Beach, Fla.-based REIT, announced that it entered an agreement to sell 36 shopping centers in Southeastern U.S. to Blackstone Real Estate Partners VII for $473.1 million. The centers total approximately 3.9 million square feet of space and are located in Georgia, Florida, North Carolina, South Carolina, Alabama, Tennessee and Maryland.
Buyer pays $217.5 million for 200 W. Madison
ChicagoRealEstateDaily.com – September 28, 2011
A pension fund said Wednesday that it paid $217.5 million for the 45-story office building at 200 W. Madison St., one of several big downtown office sales this year.
Cupertino City Center sold for reported $120M
Silicon Valley / San Jose Business Journal – September 28, 2011
American Realty Advisors has acquired Cupertino City Center I & II, a 300,000-plus square foot office complex that is leased out to Apple Inc. in a deal reported to be worth at least $120 million.
Bell Partners sells Cotswold, SouthPark retail properties
Charlotte Business Journal – September 26, 2011
Bell Partners Inc. says it has sold the Cotswold Village and Terraces at SouthPark retail centers to Developers Diversified Realty Corp. for a combined $85 million. Cotswold Village, one of Charlotte’s oldest and most well-known shopping centers, accounted for the bulk of the transaction, selling for $74 million, while Terraces sold for $11 million. Both were owned by affiliates of Bell Partners.
Ivy Realty Pays $42M for Stake in One East Broward Blvd
South Florida’s Citybiz Real Estate – September 28, 2011
Ivy Realty has acquired One East Broward Boulevard, a 19-story, 340,000-square-foot Class A office building located at the gateway to Fort Lauderdale’s downtown. The purchase marks the company’s fourth acquisition in the South Florida market over the past year.
These deals alone add up to $1 billion of transaction volume, all being either office or retail assets (eg. not multifamily.) This pick up in commercial real estate sales volume could signal a strong Q4, after what many will admit was a relatively weak Q3.
Posted in CRE Trends, Industry Commentary | 1 Comment »
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General Growth to spin off 30 non-core malls
In Wednesday’s Wall Street Journal, there was an article on GGP’s plan to spin off 30 of its weaker malls and create a new publicly traded company, Rouse Properties Inc.
GGP did something similar with much of their non-mall portfolio in 2010, creating Howard Hughes Corporation. The HHC IPO debuted at $30.00 per share and currently trades at $46.21 a gain of 20%+. GGP on their other hand, is only up 5% since HCC’s IPO.
But how will Rouse perform? According to PwC’s most recent Real Estate Investor Survey, Class B+ Malls are trading at cap rates of 7.75% or about 175 bps above their Class A+ counterparts. That’s more than a 20% discount.
The question yet to be answered is, Is GGP trading at a discount because these assets are currently in their portfolio?
Will this discount be passed along to Rouse, causing GGP’s stock to pop, but not Rouse’s? Or will something similar to what happened for the HHC IPO and Rouse will be the one to pop?
Posted in CRE Trends, Industry Commentary | 2 Comments »