The property was developed in 2009 by Evergreen Realty Partners. Reportedly, the property cost approximately $52 million to develop.
Mid-America has been on a recent buying spree:
It recently purchased a pair of properties for $65.6 million. In early August, Mid-America purchased The Hue, a 208-unit apartment community in downtown Raleigh, N.C., for $33.6 million. A few days later, the company announced it had purchased Verandas at Sam Ridley, a 336-unit apartment community in Smyrna, Tenn., for $32 million.
We recently reported that Eastdil Secured was marketing Towne Center at Atlantic Station on behalf of its owner, AIG Global Real Estate.
This week, North American Properties was selected as the winning bidder for the property and now has the deal under a formal sales agreement.
North American Properties has been awarded the right to acquire a central piece of Atlantic Station, essentially placing the Cincinnati developer and real estate investment company in the lead position to buy a 586,000-square foot shopping and restaurant district within the landmark Midtown development.
Beleaguered American International Group Inc. (AIG) is selling off pieces of Atlantic Station, including Town Center at Atlantic Station, a district that includes Publix, the Regal 16 Cinemas, LA Fitness, trendy clothing retailer H&M and restaurants such as Rosa Mexicana and Dolce Entocea e Ristorante.
North American Properties is best known in Atlanta for Camp Creek MarketPlace, a 1.3 million-square-foot retail project at I-285 and Camp Creek Parkway.
This asset is one of several within the Atlantic Station development currently on the market. Others include the 25-story office tower, 271 Seventh Street and two mid-rise apartment deals, Icon and Park District, both developed by Lane Company. Eastdil Secured is also marketing these assets on behalf of AIG and Wachovia.
In addition to these deals, Starwood Property now controls the Atlantic Residences, through their ownership of the $164 million mortgage secured by the 46-story condo tower This mortgage was acquired last year, as part of Starwood’s $4.5 billion Corus Bancshares loan portfolio partnership with the FDIC.
We’ve been hard at work implementing our newest feature, CRE Console’s automated client reporting application. This feature saves investment brokers time and money by automatically creating investor reports. Instead of scrambling to update activity reports for their clients, all CRE Console users need do is email a link, our software takes care of the rest.
The report is branded with your company logo and includes the depiction of interest levels by investor type and geography. Users can choose whether or not to include any part of this report, including the maps, charts and/or visitor names.
This type of reporting function is the first of its kind for the commercial real estate industry and helps to advance accuracy and transparency for all users of our service.
How would this reporting functionality help you? Is there other information it should include?
We recently stumbled across an interesting website, Blytic.com. It is an interesting concept, if you’re not familiar with the site.
Blytic is a privately funded Boston area startup offering a novel new service for accessing/managing real-time time-series data as well as for analysis authoring and publishing.
First, Blytic acts as an real-time archive for time series data, providing users with “at-your-fingertips” access to quickly search and navigate the current library of over 20 thousand data series, as well as allowing users to upload and manage their own library of data series.
Then, after users have found one or more data series interesting, they may choose to create an analysis based on that series by mixing and matching other data series or data series derivatives as well as adding annotations and other embellishments in a dynamic chart visualization then adding their own textual description and title.
Finally, users can choose to publish their analysis so that others may read and discuss it.
For instance, we found this chart from MIT Center for Real Estate depicting the Moody’s/REAL National Commercial Property Index.
This is a great resource for any active blogger who likes to use graphics and backup their topic with objective research. There are many instances when we spend more time gathering data and formating charts, than writing subject matter.
One of the reasons CalculatedRiskBlog.com became so overwhelmingly popular is that a graphical illustration of the trend being discussed is included in just about every post.
Blytic is certianly more robust, as it allows users to create new graphics, but the concept is somewhat similar to Google’s Public Data utility.
While we only stumbled upon it today, we’ve seen two drawbacks so far. First, you’ll need Microsoft Silverlight to view the interactive charting functions. This is not a deal killer, but Silverlight is not as widely used as dynamic Flash-based charting utilities, such as which Google Public Data uses.
Secondly, on some charts, the Blytic logo can be a bit distracting due to its size. We are all for building brand awareness and appreciate their desire to build it, but the size of the Blytic logo can be a bit overwhelming at times.
Overall, Blytic is an awesome concept, and one which we look forward to using.
Here are a couple more examples of charts which peaked our interest.
This is not a new feature, but is one we have not discussed in detail on our blog. The topic of creating a set of indices came up during a back-and-forth with Marketwi.se.
Tracking investor interest by geography is a standard feature which comes with every CRE Console listing. We certainly aren’t the first to offer this feature, but we are one of the few service providers who do.
Below are two examples of this feature. Let’s use these two graphics and see if we can identify any underlying themes.
Tennessee Land Development Deal
Maryland Value-Add Office Deal
Obviously, geography does matter, as each listing garnered more investor interest from its respective region.
Another reoccurring theme, which some industry participants may or may not be aware of: due to the shear concentration of commercial real estate investors in California, Florida, Illinois, New York and Texas, these states will usually generate some of the strongest interest levels.
No matter where the listing is located, these states consistently appear in top 10 rankings for investor interest.
We extend a question to our readers, “With this new information, how would you leverage this information to effectively market, and ultimately, sell your properties? “
The topic of cap rates and treasury spreads morphed into a discussion on the value of technical indicators. From there, it shifted to investor psychology.
Marketwi.se’s last post, “We Are All Just Monkey’s” was a combination of pricing, technical indicators, market efficiency (or lack thereof) and overall investor psychology. One of John’s closing comments reminded us of a recent study by MIT’s Real Estate Research Institute. (We suggest reading John’s post prior to this one, to put the study into proper context.)
We’ll start with Reeder’s comment:
[T]he investor could have booked a small loss on his deal if he had sold it when the market first started falling. Instead the investor chose to wait things out and in the process lost the entire investment.
It’s kind of odd that in real estate it is most common to see the following things:
* Small gains
* Large gains
* Huge losses
I’ve left out the possibility of small losses because when compared against the other three potential scenarios, small losses are a lot less common.
Most likely, this observation was a product of experience, rather than spending countless hours gathering empirical evidence; but the observation is actually more than a result of a single person’s gut instinct.
Way back in 2001, David Genesove and Christopher Mayer were the first to rigorously demonstrate the existence of loss aversion in real estate. At that time, the study was based on the housing market.
This year, Sheharyar Bokhari & David Geltner, members of MIT’s Real Estate Research Institute, published a paper titled Loss Aversion and Anchoring in Commercial Real Estate Pricing: Empirical Evidence and Price Index Implications. (Access the entire study for free on PREA.org.) In this paper, Bokhari and Geltner set out to revisit the Genesove & Mayer study, only this time, cover the commercial real estate sector.
Prior to its completion, “some economists questioned whether behavioral phenomena would play as large a role in a more purely ‘business setting’, and among agents who are experienced professionals in dealing in the market, and therefore whether loss aversion or anchoring would be [as] significant in commercial real estate” as it was in residential.
The study’s findings?
We find that loss aversion plays a significant role in the behavior of investors in commercial real estate. We thus extend the Genesove-Mayer findings to the commercial property market where the participants are “professionals” operating in a more purely business environment (compared to homeowners)[...]
A comment by Joshua accurately noted that institutional investors have access to the most timely and in-depth industry research, but mom-and-pops don’t. So, this must mean that the institutional investor segment should be the least susceptible to the economic pitfalls of loss aversion…. right? Not so, according to Bokhari & Geltner:
Interestingly, we find that the strength of loss aversion behavior among commercial property market participants is actually greater among “institutional” investors (REITs, pension funds, foreign investors) than among smaller private investors (RCA’s “private in-state” category). Contrary to what one might expect and some previous studies have found in other fields, loss aversion pricing appears to be greater among sellers who have more experience in the commercial property market as indicated by their number of deals in the RCA database
In his most recent Professor’s Comment’s newsletter, Dr. David Geltner included an intriguing projection: “the CPPI may not regain its 2007 peak value of 192 again until the decade of the 2030s or beyond.”
Note the graph below; it assumes the in approximate long-run equilibrium in 2000, and that nominal property prices grow sustainably (1% to 2% below CPI).
Geltner’s takeaway?
This is clearly a very simple, indeed simplistic, model. It could be wrong. But it helped me to call pretty well when and where the (at least temporary) bottom of the 2007-09 down-market would land. And it fits the 40-year, three-cycles-worth of history remarkably well. It presents the sobering prospect that the CPPI may not regain its 2007 peak value of 192 again until the decade of the 2030s or beyond, on a sustainable basis.
The simple model allows us to see when and to what degree bubbles occurred in the commercial property market, including both positive and negative bubbles.
The latter are the periods just following the collapse of the two previous market cycles, in the 1970s and 1980s, when the commercial property market fell below long-run equilibrium (sustainable) pricing, leading to losses that according to economic equilibrium theory were greater than necessary, but then resulting in sustained periods of super-normal investment profitability (without yet going into the next positive bubble).
The simple model in Figure 3 suggests that, so far, we have avoided going into a negative bubble in the bursting of the 2004-07 bubble. This in part no doubt thanks to government and industry policies and assistance, and in part thanks to lenders and creditors well remembering the experience of the last negative bubble in the early 1990s.
So far, “pretend and extend” has kept the U.S. commercial property market out of a negative bubble. But can it (or even should it) keep on doing that?… Can we get a solid recovery, soon enough, without dipping into the negative bubble? From 30,000 feet, this is a very interesting question.
While technical indicators are used frequently to analyze stock investments, it is a technique seldom (if ever) used in commercial real estate. When Marketwi.se used it to analyze Cap Rate to Treasury spreads, it turned the conversation on its ear.
We were fascinated by this approach and include their chart below for your viewing pleasure:
In every debate on commercial property values, it never fails that someone will chime in with some over used real estate cliche like “all real estate is local” or “location, location, location”. But when someone executes this level of analysis, it deems a thoughtful response.
That said, our initial reaction was more theoretical than analytical. A moving average is an indicator primarily used in technical analysis . And, during the bubble, technical analysis and underwriting was what drove prices higher.
Value enhancement became all about financial engineering (i.e. mezzanine debt, capital stacks and waterfalls) and trading (betting cap rates would continue to fall and price momentum was sustainable).
Once the momentum trade was complete, there was another technical sign: a head and shoulders…..
One thing to note: the shoulders are actually taller than the head due to Blackstone’s $39 billion privatization of Equity Office in February 2007, and Blackstone’s $26 billion privatization of Hilton Hotels in October 2007. These events were truly the culmination of the top of the market.
Notice the extended period of time it took to establish this technical signal. It took about 11 months for the head and shoulders indicator to form. This is really a function of CRE being less liquid and transparent than publicly traded securities.
The comment which we could have our next debate on is whether or not technical indicators is an appropriate investment approach for commercial real estate at all. We go back to the Marketwi.se post:
So how do you figure out which way the herd is going to go, and how do you get there first? I guess my thesis is that there is no need to view long term trends. Look at the four quarter trailing trend. When the data point moves aggressively above or below that trendline, evaluate your portfolio strategy.
Here is where we would be apprehensive about using a technical approach. The largest problem with this approach is not that it is a bad idea (it is quite possibly one of freshest takes we’ve seen in years); it is simply that it is not feasible.
Consider Moody’s/REAL CPPI. When they release update to the index, the data is two months old. For instance, they just released their May findings and it is the end of July!
It would be nearly impossible to execute an effective investment strategy rooted in technical analysis. By the time you recognize the data has moved above or below the trendline, it is simply too late.
All that said, we certainly understand Marketwi.se isn’t suggesting making investment decisions based solely on technical analysis, but our question would be, “Do you use it at all?”
Real estate has returned to the hands of real estate professionals, not financial arbitrageurs and most real estate opportunities in the US involve hand-to-hand combat on restructurings or intensive value-added implementation. In either of those two circumstances, the process is slow and low. It is an era of what real estate is supposed to be – singles and doubles.
While Barrack was talking more about current market conditions, the core of this statement is that successful real estate investing requires a long-term, fundamentally-rooted approach.
In the end, we were truly in enthralled by Marketwi.se’s analysis and look forward to many more fresh ideas.
The Moody’s/REAL All Property Type Aggregate Index registered a 3.6% increase in CRE prices in May. This means back-to-back months of price increases. With this increase the CPPI is now 8.6% since its October 2009 low. Prices are down 6.3% from this time last year and 33.0% lower than they were in May 2008.
You may read the report below, or download it in its entirety at REALIndices.com.
REAlert.com reports that Wachovia has engaged Eastdil Secured to shop a couple of defaulted mortgages secured by two stabilized apartment complexes in Atlanta.
One of the loans, with an unpaid balance of $27.6 million, is secured by the 242-unit Icon apartments, while the other, with a principal balance of $26.6 million, is backed by the 231-unit Park District complex.
Market players expect the loans to fetch about $47 million combined, a discount of a little more than 10% of face value. Wachovia, which was acquired by Wells Fargo a year and a half ago, has tapped affiliate Eastdil Secured to market the loans, which can be purchased together or separately.
The two garden-style complexes were built by Lane Co. of Atlanta as part of Atlantic Station, a 138-acre mixed-use development that AIG Global Real Estate began in 2002. Lane defaulted on the mortgages when they matured last December. A successful bidder would likely foreclose, though Lane could be retained to manage the apartments on a fee basis. Both properties are 90% occupied, and 20% of the units are classified as affordable housing.
This is not the first project in Atlantic Station to go REO. Starwood Property now controls the Atlantic Residences, through their ownership of the $164 million mortgage secured by the 46-story condo tower This mortgage was acquired last year, as part of Starwood’s $4.5 billion Corus Bancshares loan portfolio partnership with the FDIC.
In April, the Atlanta Business Chronicle reported that Eastdil was marketing Towne Center at Atlantic Station, a 586,000 square foot chunk of the retail component of project.
In June, we reported that Bank of America listed Times Square at Craig Ranch in McKinney, Texas, with CBRE. 
The topic of cap rates and treasury spreads morphed into a discussion on the value of technical indicators. From there, it shifted to investor psychology.
Update: Atlantic Station Under Contract
We recently reported that Eastdil Secured was marketing Towne Center at Atlantic Station on behalf of its owner, AIG Global Real Estate.
This week, North American Properties was selected as the winning bidder for the property and now has the deal under a formal sales agreement.
This asset is one of several within the Atlantic Station development currently on the market. Others include the 25-story office tower, 271 Seventh Street and two mid-rise apartment deals, Icon and Park District, both developed by Lane Company. Eastdil Secured is also marketing these assets on behalf of AIG and Wachovia.
In addition to these deals, Starwood Property now controls the Atlantic Residences, through their ownership of the $164 million mortgage secured by the 46-story condo tower This mortgage was acquired last year, as part of Starwood’s $4.5 billion Corus Bancshares loan portfolio partnership with the FDIC.
[Atlanta Business Chronicle]
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