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Avison Young’s Jedd Nero: Today’s Retail Real Estate Market Is a Blank Canvas

by Taylor Williams

LAS VEGAS — With more than 30 years of experience representing tenants and landlords in retail negotiations, Jedd Nero, principal and executive managing director at Avison Young’s New York office, has worked with household-name retailers such as Hershey’s, Hugo Boss and Verizon Wireless. Nero was one of about 37,000 retail professionals who attended ICSC RECon in Las Vegas in late May. As the crowd jostled through the Las Vegas Convention Center in search of their next networking opportunity, Northeast Real Estate Business found time to chat with Nero. His insights into the rapidly changing landscape of retail real estate are detailed below. Northeast Real Estate Business: Since the beginning of the year, we’ve seen a rash of store closures nationally. In terms of the volume of these closures, what has precipitated that? Is it just online shopping or are there other factors at work? Jedd Nero: I think it’s a combination of several factors. I think we can all agree that the country is over-malled. There are about 1,200 malls in the country. By the time everything is said and done, there will probably be about 900 left. Class C and D malls have been affected the most. Certainly online …

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Company NewsTop Stories

Data Center Merger: Digital Realty to Acquire DuPont Fabros in $7.6B Deal

by Taylor Williams

SAN FRANCISCO AND WASHINGTON, D.C. — Data center REIT Digital Realty Trust Inc., (NYSE: DLR) has entered into an agreement to acquire competitor DuPont Fabros Technology Inc. (NYSE: DFT) in an all-stock merger with an enterprise value of $7.6 billion. The deal’s enterprise value includes $1.6 billion of assumed debt that is expected to be refinanced with a combination of investment-grade corporate bonds, among other securities. The merger is expected to close during the third or fourth quarter. Under the terms of the agreement, DuPont Fabros’ shareholders will receive 0.545 shares of Digital Realty stock for each share of DuPont Fabros stock. The merger is expected to generate as much as $18 million in overhead savings per year. “We are excited to execute two of the strategic objectives embodied in our corporate vision — diversifying our customer base and expanding our geographic presence,” says A. William Stein, CEO of San Francisco-based Digital Realty. “We believe this combination will enhance our ability to create significant long-term value for both sets of shareholders.” According to the company’s annual report, Digital Realty’s portfolio consists of 145 properties totaling roughly 23 million square feet across 33 global metropolitan areas. As of June 1, 2017, …

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District of ColumbiaLoansMultifamilySoutheastTop Stories

CapitalSource Provides $100M Construction Loan for Multifamily Property in Washington, D.C.

by Kristin Harlow

WASHINGTON, D.C. — CapitalSource has provided a $100 million loan for the construction of Portals Residential Phase V Building, located in downtown Washington. The 373-unit multifamily property will be 13 stories tall. Units will range in size from 506 square feet to 3,400 square feet. Portals Residential Phase V Building is part of the final phase of a 3 million-square-foot development project that includes the Mandarin Oriental Hotel and three Class A office buildings. The building design includes a sky terrace level with multiple living and meeting rooms, and an infinity pool overlooking the Jefferson Memorial and Tidal Basin National Parks. The rooftop area includes a 1,100-foot walkway around the entire building. Other property amenities include a fitness facility, enclosed garden, dog grooming rooms, interior lounges and meeting rooms. The borrower is an affiliate of Republic Properties Corp., part of the Republic Family of Companies and a full-service real estate development and management firm. Parse Capital provided mezzanine financing, while CBRE brokered the loan transaction. CapitalSource, a division of Pacific Western Bank, provides commercial loans to small and middle-market businesses. Los Angeles-based Pacific Western Bank maintains over $21 billion in assets. — Kristin Hiller

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Mixed-UseTop StoriesWashingtonWestern

Gramor Secures Construction Financing for Phase I Component of $1.5B Waterfront Vancouver Project

by John Nelson

VANCOUVER, WASH. — Gramor Development Inc., a privately held firm based in Oregon, has secured a round of construction financing for Phase I of its $1.5 billion mixed-use project along the Columbia River in Vancouver. Known as The Waterfront Vancouver, the project will span 20 city blocks and 32 acres and feature residential, office, retail and restaurant space, as well as a Hotel Indigo. U.S. Bank provided a $42.5 million construction loan to Gramor Development for Block 6 Office and Block 6 Residential — a seven-story office building and a six-story, 63-unit apartment building. The street level of both assets will house the Shops at Waterfront Way, which will include retail and restaurants. Committed tenants include M.J. Murdock Charitable Trust at Block 6 Office and Cascade Sotheby’s International Realty and MidiCi The Neapolitan Pizza Co. at Block 6 Residential. The project team for Block 6 includes architect Ankrom Moison and general contractor Robertson & Olson. “Gramor is a driving force in revitalizing Vancouver’s waterfront and the local community,” says Ann Young, senior vice president, and Oregon market manager of U.S. Bank. “U.S. Bank is excited to be part of the project and to help bring this vibrant and unique development …

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FeaturesOfficeTop Stories

NAIOP Forecasts Solid Office Space Demand for All of 2017 as Business, Consumer Confidence Rise

by Kristin Harlow

HERNDON, VA. — A new forecast released by the NAIOP Research Foundation calls for approximately 39.7 million square feet of net absorption of office space in 2017. That is about 10 million square feet per quarter — similar to the 41.4 million square feet absorbed in 2016. Greater than expected hiring in the office-using sectors of the economy led to 14.8 million square feet of positive net absorption in the fourth quarter of 2016, well above the 7.8 million square feet that had been projected. The annualized growth rate in office-using jobs was 2.52 percent in the first quarter of 2017, compared with 1.58 percent growth in overall nonfarm payroll employment, according to the Bureau of Labor Statistics. If growth in office-using employment continues at such a pace, the need for office space will expand rapidly and thus cause actual absorption to come in near or above the 39.7 million square feet of total absorption projected for all of 2017. However, prior experience suggests that growth in the number of office-using jobs will likely decelerate as it moves closer to the overall employment growth average over the long term, according to NAIOP. The forecast is also driven, in part, by …

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LoansMassachusettsNortheastOfficeTop Stories

Oxford Properties Provides $180M Loan for Refinancing of Mixed-Use Asset in Boston

by Nellie Day

BOSTON — Oxford Properties Group has provided a $180 million loan for the refinancing of One Congress Street and the Government Center Garage in Boston. The 11-story, mixed-use asset includes a 1,960-space parking garage with 202,854 square feet of office space and 23,212 square feet of retail space. The borrower was a joint venture between National Real Estate Advisors LLC and its Boston-based development partner, The HYM Investment Group LLC. HFF worked on behalf of the borrower to arrange the short-term, floating-rate loan. The property is centered among many of Boston’s most popular neighborhoods and destinations, including the Financial District, TD Garden, Faneuil Hall Market District, the Rose Fitzgerald Kennedy Greenway, North End, West End and Beacon Hill. The development draws a diverse set of parkers, ranging from commuters to event attendees to residents seeking overnight parking. This location also offers immediate access to entrance ramps for Interstate 93, as well as two on-site subway lines (MBTA Green Line and Orange Line), providing connectivity to greater Boston. The property is also the site of Bulfinch Crossing, a 2.9 million-square-foot mixed-use development project that will consist of residential, office, hotel and retail uses. Led by the borrower, the Bulfinch Crossing project …

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CaliforniaMultifamilyStudent HousingTop StoriesWestern

Mapletree Investments Acquires $1.6B Student Housing, Multifamily Portfolio from Kayne Anderson

by Katie Sloan

LOS ANGELES — Singapore-based Mapletree Investments Pte Ltd. has acquired a portfolio of eight student housing communities and four multifamily properties from Los Angeles-based Kayne Anderson Real Estate Advisors for $1.6 billion. The student housing portion of the portfolio consists of 3,611 beds in the United States and 140 beds in Canada. Properties include: WaHu — an 825-bed community located near the University of Minnesota in Minneapolis The District at Campus West — a 659-bed community located near Colorado State University in Fort Collins, Colo. SkyVue — a 627-bed community located near the University of Pittsburgh in Pennsylvania 4th Street Commons — a 562-bed community located near Florida International University in Miami 930 NoMo — a 430-bed community located near the College of Charleston in Charleston, S.C. Todd — a 351-bed community located near the University of Missouri in Columbia, Mo. 700 on Washington — a 157-bed community located near the University of Minnesota in Minneapolis Parc Cite — a 140-bed community located near McGill University in Montreal, Canada The eight student housing properties are located an average of 0.2 miles away from campus, and have occupancies above 90 percent. The four multifamily properties total 1,388 units, and include: Mint Urban …

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FeaturesTop Stories

Underwhelming Job Growth in May Raises Question on Fed’s Next Move

by Taylor Williams

Are the below-average monthly job gains recorded in May due to a labor shortage, or is there weakness emerging in the employment market? That’s the crucial question in the wake of the latest job figures released by the Bureau of Labor Statistics (BLS), which showed employers added 138,000 nonfarm payroll jobs in May, well below the 12-month average of 181,000 positions. Meanwhile, the unemployment rate fell from 4.4 percent in April to 4.3 percent in May. “Most evidence points toward the former, and that should keep the Fed on track to lift rates two additional times in 2017, even if it waits until September,” says Steve Hovland, director of research for Irvine, California-based HomeUnion, an online real estate management firm that specializes in helping investors acquire and manage single-family home rentals. “Job openings remain near record-high levels, indicative of a skills gap rather than hesitant employers. Furthermore, the stock markets regularly flirt with record highs, job growth has been positive for the longest post-war stretch and home prices have soared,” adds Hovland. Members of the Federal Open Market Committee (FOMC) will need to weigh whether the lowest unemployment rate in 16 years is sufficient to justify a rate hike despite …

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FeaturesRetailTop Stories

Retailers Need ‘Wow’ Factor to Stay Competitive, Says CEO of Lee & Associates

by Kristin Harlow

LAS VEGAS — Amid a throng of more than 37,000 convention-goers at RECon — the world’s largest retail real estate trade show — Heartland Real Estate Business sat down with veteran Chicago broker Rick Scardino and CEO Jeff Rinkov of Lee & Associates on the show floor of the Las Vegas Convention Center in late May. Scardino, a principal with the Chicago office, spearheads the retail division at Lee & Associates of Illinois. Rinkov serves as CEO and chairman of the board. The two discussed the overall health of the retail market in the Windy City and beyond, the emergence of “grocerants” and the driving factors behind the recent rash of retail bankruptcies and store closures. What follows is an edited version of that conversation. Heartland Real Estate Business: Does the old saying that the grocery sector is recession-proof because everyone needs to eat still hold true? Rick Scardino: I just hate painting anything with a broad brush. I don’t think anything is recession-proof. I grew up with family retail and the restaurant business. Sometimes people move from one category to another, they’ll go from an Aldi when things are tighter to a Jewel. HREB: Who do you think is …

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HospitalityTop Stories

Summit Hotel Properties to Acquire Five-Hotel Portfolio for $163M

by Taylor Williams

AUSTIN, TEXAS — Summit Hotel Properties Inc. (NYSE: INN) has agreed to acquire a portfolio of five hotels totaling 812 guestrooms across four markets from Xenia Hotels & Resorts Inc. (NYSE: XHR). The purchase price is approximately $163 million, or $201,000 per room. The purchase, which will be made through an undisclosed Summit affiliate, is expected to close within the next 30 days. The portfolio includes the 203-room Courtyard Fort Worth Downtown/Blackstone; 123-room Courtyard Kansas City Country Club Plaza; 182-room Courtyard Pittsburgh Downtown; 116-room Hampton Inn & Suites Baltimore Inner Harbor; and 188-room Residence Inn Baltimore Downtown/Inner Harbor. As of April 2017, the average evenue per available room (RevPar) across the portfolio was $115.52. The year-to-date RevPar industry average for April 2017 was $78.26, a 3 percent increase from average RevPar of $76.02 in April 2016, according to hospitality research firm STR. “This transaction will represent the continued execution of our strategy of acquiring premium-branded hotels with efficient operating models,” says Daniel Hansen, Summit’s chairman, president and CEO. “All five of these hotels are in prime locations in strong markets and exhibit many of the upside characteristics that are important to our investment criteria.” Coming on the heels of Xenia’s …

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