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Chambers Street to Buy Gramercy Property in $5.7B Stock Deal

by Nellie Day July 2, 2015

PRINCETON, N.J. and NEW YORK CITY — Chambers Street Properties (NYSE: CSG) has agreed to buy Gramercy Property Trust Inc. (NYSE: GPT) in an all-stock deal valued at about $5.7 billion. The merger will create the largest industrial and office net lease REIT, according to the firms. The Board of Trustees of Chambers Street and the Board of Directors of Gramercy have unanimously approved the merger agreement and the transaction. Per the agreement, Gramercy shareholders will receive 3.18 shares of Chambers Street for each share of Gramercy common stock they own. Upon closing, Chambers Street shareholders will own about 56 percent and Gramercy shareholders will own about 44 percent of the combined company. The stock-for-stock transaction is expected to be tax free to shareholders. The combined portfolio includes 288 properties and 52 million square feet of space in major markets throughout the U.S. and Europe. About 85 percent of the merged company’s real estate assets will be in target markets such as New York/New Jersey, Dallas, Baltimore/Washington, D.C., Los Angeles and South Florida. The portfolio will have an average lease term of more than seven years, with 43 percent of the tenants being investment grade. “This strategic combination is the …

July 2, 2015

FHFA Taking Steps to Ensure Fannie Mae, Freddie Mac Don’t Surpass Their $30B Financing Caps in 2015

by John Nelson July 2, 2015

After lending at a furious pace during the first quarter, Fannie Mae and Freddie Mac’s multifamily business divisions were in serious jeopardy of exceeding annual loan production of $30 billion apiece — the mandated cap for the agencies in 2015. Fannie Mae provided $10.4 billion of multifamily loans in the first quarter alone, while Freddie Mac nearly matched that total with $10 billion. Compared to the first quarter of 2014 when Fannie’s multifamily loan volume was $3.5 billion and Freddie’s was $3 billion, the agencies have posted a year-over-year growth of 197 percent and 233 percent, respectively. Due to the heavy deal volume already generated by the two government-sponsored enterprises (GSEs) this year, the consensus among capital markets experts was that the Federal Housing Finance Agency (FHFA) — which regulates their activity — would raise the cap. Instead, in early May the FHFA revised its list of exclusions, thereby expanding the types of multifamily properties that don’t count against the lending cap. The FHFA’s newly revised exclusions now include properties with units affordable to renters at 60 percent of area median income (AMI) in all markets, 80 percent of AMI in “high-cost” markets, 100 percent of AMI in “very high-cost” …

July 2, 2015

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AIG, Apollo Provide $725M Loan for Residential Skyscraper in New York City

by Haisten Willis July 1, 2015

NEW YORK CITY — AIG (NYSE: AIG) and Apollo Global Management (NYSE: APO) have provided a $725 million loan to developers JDS Development and Property Markets Group for the construction of a 90-story residential tower at the former site of the Steinway & Sons piano showroom. The 1,438-foot-tall tower at 111 W. 57th St., which will be one of the tallest residential buildings in the Western hemisphere, is scheduled for completion in 2018. The tower will be just 60 feet wide, and will include 60 condos ranging from two to five bedrooms. According to Crain’s New York Business, the entire property will cost $1 billion to construct. AIG is the senior lender, and Apollo is providing a mezzanine loan. Construction began on the site last year as a foundation was poured and an existing building was renovated. AIG’s debt on the project is approximately $400 million, while Apollo’s loan is $325 million, according to media sources. Kasowitz Benson Torres’s transactional real estate practice group represented JDS Development and Property Markets Group in closing the loan. “Opportunities like this are why we choose to become real estate lawyers — a skyline-altering project that the Kasowitz team worked on at every stage of …

July 1, 2015

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HCP, Brookdale Complete $847M Acquisition of Private Pay Seniors Housing Portfolio

by Haisten Willis July 1, 2015

BRENTWOOD, TENN. AND IRVINE, CALIF. — Brookdale Senior Living (NYSE: BKD) and HCP Inc. (NYSE: HCP) have arranged the closing of their previously announced portfolio acquisition of 35 private pay seniors housing communities, representing 5,025 units, for $847 million from Chartwell Retirement Residences. Brookdale has operated the portfolio since 2011 after its acquisition of Horizon Bay and will continue to manage the communities under a RIDEA joint venture structure with HCP and Brookdale owning 90 percent and 10 percent, respectively. The portfolio is currently 89 percent occupied with an average monthly rate of $3,425. It was acquired unencumbered by third party debt and is projected to generate a first-year cash yield of approximately 6.6 percent. Located in eight states including Florida, Texas and Colorado, the portfolio consists of 5,025 units and is comprised of 33 seniors housing properties representing 4,792 units, with a mix of 46 percent assisted living, 45 percent independent living, 5 percent memory care and 4 percent skilled nursing. The portfolio also includes leasehold interests in two communities, which are wholly owned by HCP, representing 233 units with purchase-option rights exercisable in 2017. “This portfolio acquisition provides attractive risk-adjusted returns for our shareholders, and also creates value for …

July 1, 2015

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Meridian Capital Arranges $100M Refinancing of Six-Property Hotel Portfolio

by John Nelson June 30, 2015

NEW YORK — Meridian Capital Group has arranged a $100 million bridge loan for the refinancing of a six-property hotel portfolio located in Florida, Texas, North Carolina and Minnesota. Meridian arranged the loan through an unnamed debt fund based in New York on behalf of the borrower, a Los Angeles-based private equity fund. The three-year initial loan term features a floating interest rate, interest-only payments for the full term and two one-year extension options. Seth Grossman and Sarah Kuebler of Meridian’s Carlsbad, Calif., office arranged the loan. Grossman and Kuebler also arranged the acquisition financing for the same portfolio in 2012. “Based largely on the sponsor’s strength, track-record, the improving market and specific hotel conditions, we were successful reaching our client’s objectives, says Grossman. “We refinanced their acquisition loan with an increase in loan proceeds while simultaneously lowering the interest rate several hundred basis points and maintaining ample flexibility for the portfolio going forward.” The portfolio comprises the following hotels: • DoubleTree Suites by Hilton Hotel Tampa Bay located at 3050 N. Rocky Point Drive W. in Tampa, Fla. • Embassy Suites Boca Raton located at 661 N.W. 53rd St. in Boca Raton, Fla. • Sheraton Suites Fort Lauderdale at …

June 30, 2015

Features Top Stories

Restaurants Rush to Meet Growing Demand for Fast Casual Concepts

by Jeff Shaw June 30, 2015

Don’t look now, but there could be a land rush taking place as fast casual restaurant chains expand across the United States. Fast casual restaurants, a blend of quick service and casual dining, are quickly growing in popularity as consumers gravitate toward higher-quality foods when grabbing a quick lunch or dinner. The fast casual concept offers customization in menu choices and freshly prepared dishes. Fast casual restaurants usually do not include a drive-thru window or table service. While there is no standard definition for fast casual, most in the industry agree on certain aspects of the category. “Fast casual is typically a non drive-thru restaurant where customers order at the counter and seat themselves,” says Michael Walters, vice president of Falcon Restaurant Advisors, a Dallas-based company that represents restaurant concepts and landlords on a national basis. “Fast casual restaurants also source most of their products locally, and avoid frozen foods wherever possible.” Walters says the restaurants are growing so fast because there is a high demand for them and, for now, a lack of supply of space for them to locate. The combined sales of fast casual restaurants in the United States grew by 10.5 percent in 2014, compared with …

June 30, 2015

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CPA:17 – Global Purchases Bon-Ton Department Store Portfolio for $88 Million

by Scott Reid June 29, 2015

NEW YORK — CPA:17 – Global, a non-traded managed REIT of New York-based W.P. Carey Inc. (NYSE: WPC), has purchased a portfolio of six Midwestern net lease properties leased to an affiliate of The Bon-Ton Stores Inc. (Bon-Ton) for approximately $88 million. Three of the department store properties are located in Milwaukee, Wis., and the remaining three are located in Green Bay, Wis.; Fargo, N.D.; and Joliet, Ill. Each of the facilities is leased to Bon-Ton for 20 years. “Bon-Ton has built a strong track record of tenancy with W. P. Carey since our first transaction 18 years ago,” says W.P. Carey Managing Director Gino Sabatini. “Given the criticality of these retail stores to Bon-Ton’s ongoing operations, an attractive yield on the investment and the inclusion of annual consumer price index adjustments, we believe the investment is a valuable addition to the CPA:17 – Global portfolio.” Bon-Ton operates department stores offering apparel and accessories for women, men and children, as well as cosmetics, home furnishings, footwear and other goods. The company operates 270 stores, including nine furniture galleries and four clearance centers in 26 states in the Northeast, Midwest and upper Great Plains. Each store in the transaction anchors a …

June 29, 2015

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Ashford Hospitality Trust to Sell 23-Hotel Portfolio

by Haisten Willis June 26, 2015

DALLAS — Ashford Hospitality Trust (NYSE: AHT) has announced its intent to list a portfolio of 23 select-service hotels for sale, as the company shifts its investment strategy toward predominantly upper upscale, full-service hotels. The 23-hotel portfolio for sale totals 4,308 rooms. The hotels are encumbered by approximately $190 million of long-term, fixed-rate debt and $187 million of maturing or floating-rate debt for total debt of approximately $377 million. The current trailing 12-month NOI for the portfolio is $44 million, and the trailing 12-month RevPAR for the portfolio is approximately $88. The company plans to use the proceeds from this sale toward acquiring hospitality properties more in line with its new focus on upscale hotels. “Beginning in November 2013, the Ashford Trust strategy has been evolving,” says Monty J. Bennett, chairman and CEO of Ashford Trust. “We feel that these changes are another step towards our goal with the Ashford group of companies of having very well-defined, distinct strategies within our investment platforms.” Ashford Hospitality Trust is a real estate investment trust focused on the hospitality sector. According to the company, its portfolio currently consists of 116 properties with over 25,000 rooms. The majority of its existing portfolio operates under …

June 26, 2015

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Equity Commonwealth to Sell Pair of Office Towers in Chicago for $376M

by John Nelson June 25, 2015

CHICAGO — Equity Commonwealth (NYSE: EQC) is under contract to sell two buildings in Chicago’s East Loop district, 111 E. Wacker Drive and 233 N. Michigan Ave., for a gross sales price of $376 million. The pair of office towers are together known as Illinois Center. The buyer is New York-based AmTrust Realty, according to Crain’s Chicago. As of March 31, 2015, the 2.1 million-square-foot campus was 73.5 percent leased. The office towers were constructed in 1970 and renovated in 2005. Equity Commonwealth is in a disposition mode. Earlier this month, the company sold two portfolios comprising 51 properties and 8.3 million square feet for a combined $793 million. Not including the sale of Illinois Center, Equity Commonwealth has sold $817 million of assets year-to-date. The company also has three office properties under contract to sell for roughly $35 million. Chicago-based Equity Commonwealth is a real estate investment trust (REIT) that owns roughly 100 office properties in the United States totaling 34 million square feet. In May 2014, when it was known as CommonWealth REIT, a new board of trustees and management team were appointed to lead Equity Commonwealth, including Sam Zell as board chairman. The REIT’s stock price closed …

June 25, 2015

Features Top Stories

Architecture Billings Index Returns to Positive Territory, Suggesting More Construction in Coming Months

by John Nelson June 25, 2015

WASHINGTON, D.C. — The Architecture Billings Index (ABI) has increased in May following its second monthly drop this year. The ABI posted a score of 51.9, up from a mark of 48.8 in April. The score reflects an increase in design activity, with any score above 50 indicating an increase in billings. The increase in design activity was led by a growing demand for new schools, hospitals, cultural facilities and municipal buildings. A barometer of future non-residential construction activity, the ABI reflects the roughly nine- to 12-month lead time between architecture billings and construction spending. The index is produced by The American Institute of Architects (AIA) Economics & Market Research Group. The score is tabulated based on a monthly survey sent to a panel of AIA member-owned architecture firms. “As has been the case for the past several years, while the design and construction industry has been in a recovery phase, we continue to receive mixed signals on business conditions in the marketplace,” says Kermit Baker, AIA’s chief economist. “Generally, the business climate is favorable, but there are still construction sectors and regions of the country that are struggling, producing the occasional backslide in the midst of what seems to …

June 25, 2015

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