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Reis Predicts Slow, Steady Improvement for U.S. Office Sector

by Katie Sloan July 28, 2015

NEW YORK CITY — The U.S. office sector is poised for continued growth in the second half of 2015, though stagnant vacancy has slightly tempered previously high expectations, according to the latest Reis analysis based on second-quarter data. “Occupied stock rose by 8.4 million square feet, outpacing new completions of 8.3 million square feet in the second quarter,” reports Victor Calanog, chief economist and senior vice president at New York-based Reis. “While this was not sufficient to nudge vacancies downward, it still does provide evidence of a slow simmer in terms of leasing activity. Employers are hiring, albeit slowly, and are leasing up space at the same plodding pace.” Vacancy rates in the office sector, which remained at 16.6 percent in the first and second quarters of 2015, vary by location. In central business districts (CBDs), the vacancy rate stood at 13.3 percent in the second quarter as opposed to 18.3 percent in suburban areas. The report notes that this is a reversal from the 1990s, when CBD vacancy rates were higher than those in suburbs as employers sought lower crime rates and better school systems. Another struggle for suburban areas is large inventory. From 1990 to 2010, more than …

July 28, 2015

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Summit Hotel Properties Buys Two Residence Inn by Marriott Hotels for $56.8M

by Nellie Day July 27, 2015

BALTIMORE, M.D. AND BRANCHBURG, N.J. — Summit Hotel Properties (NYSE: INN) has acquired two Residence Inn by Marriott hotels for a total of $56.8 million. The acquisition includes the 141-guestroom Residence Inn in Hunt Valley, just outside Baltimore, and the 141-guestroom Residence Inn in Branchburg, N.J. “We are very happy to announce the addition of these Residence Inn hotels to our portfolio,” says Daniel Hansen, president and CEO of Austin, Texas-based Summit Hotel Properties, a publicly traded REIT. “We remain very positive on the current state of the lodging cycle and see these two acquisitions as solid contributors to our long-term growth plan. Both of these acquisitions are located in strong markets that fit well with our growth strategy and portfolio of premium select-service assets.” Summit plans to spend about $1.5 million on capital improvements at the Hunt Valley property, which is situated just 18 miles outside of downtown Baltimore. Notable employers in the area include PayPal, eBay, McCormick Spice Co., Men’s Warehouse and Johns Hopkins University. The company will spend an additional $1.1 million on capital improvements at the Branchburg property, which is located about an hour outside of New York City. Notable employers in the area include Johnson …

July 27, 2015

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Columbia Property Trust To Acquire Office Portion of Historic New York Times Building for $516M

by Jonathan Mehall July 24, 2015

NEW YORK CITY — Columbia Property Trust Inc. (NYSE: CXP) has signed a definitive agreement to acquire the commercial condominium unit in the historic New York Times Building from affiliates of Blackstone Real Estate Partners VI LP for $516 million. The 16-story, 481,110-square-foot, Class A building is located at 229 W. 43rd St. in the Times Square submarket of Manhattan. The acquisition is expected to be funded with a $300 million six-month bridge loan and short-term borrowings under Columbia’s $500 million unsecured credit facility, which is expected to increase the company’s leverage to approximately 39 percent of gross real estate assets (as of June 30, adjusted for recent dispositions). Currently 98 percent leased, the commercial unit of 229 W. 43rd St. is expected to have first-year in-place net operating income of approximately $22.3 million. “Acquiring this iconic property with such strong tenancy and below-market rents at attractive pricing compared with other New York transactions enables us to increase exposure in what will be our second largest market, while spreading out lease maturities and capital commitments,” says Nelson Mills, president and CEO of Atlanta-based Columbia Property Trust. The acquisition is expected to close within 30 days, subject to customary closing conditions. …

July 24, 2015

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Ownership Group Unveils Plans for $500M Mixed-Use Development in Downtown L.A.

by John Nelson July 23, 2015

LOS ANGELES — An ownership group led by Hankey Investment Co. and Jamison Services Inc. has unveiled plans for Circa, a $500 million mixed-use development in downtown Los Angeles. Spanning 1.6 million square feet, Circa will be located at 1200 S. Figueroa St. and tie together the South Park and Sports and Entertainment districts, including STAPLES Center, LA Live and the Los Angeles Convention Center. Circa will include two 35-story residential towers located on top of a 100-foot high platform, which will serve as a two-acre amenity deck for residents. The deck will feature a lounge pool with private cabanas, spas and a sun deck. Other amenities include a fitness center, barbecue stations, two dog parks, fire pits, an indoor bar, pool table, outdoor bar, two business center, private chef’s kitchen and dining room and a library/wine bar. The two towers will feature 648 one- and two-bedroom units, as well as several penthouse units. The project will also include 48,000 square feet of retail space, roughly 1,770 parking spaces and 15,000 square feet of digital signage. In addition to the digital signage, there will also be a combined 12,500 square feet of traditional signage facing Flower Street and on the …

July 23, 2015

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DTZ: U.S. Industrial Absorption in 2015 Is ‘Poised to Set Another Record’

by Jeff Shaw July 23, 2015

The industrial sector is booming nationally and on pace to show even stronger absorption and lower vacancy numbers than 2014’s banner year, according to commercial real estate services firm DTZ, which released its U.S. Industrial Trends Report at the halfway mark of 2015. “Midway through 2015, demand for industrial space is poised to set another record,” according to the report. Absorption in the 60 major metros tracked by DTZ was 46.1 million square feet in the second quarter for a total of 86.5 million square feet through the first half of the year. That’s a 22 percent increase from the first half of 2014, and has driven industrial vacancy to a cyclical low of 7.3 percent. “The industrial boom is occurring in nearly every region in the U.S.,” according to the report. “In fact, only 17 percent of the national market did not absorb industrial space in the second quarter.” The boom isn’t just occurring among large industrial buildings in the sector either. The report notes that smaller industrial buildings between 10,000 and 50,000 square feet “are seeing rental appreciation exceed that of larger buildings in all of the top markets — sometimes by more than double.” With high absorption …

July 23, 2015

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Piedmont Agrees to Sell High-Profile Aon Center in Chicago for $712M

by Haisten Willis July 22, 2015

CHICAGO — Piedmont Office Realty Trust Inc. (NYSE: PDM) has entered into a binding agreement to sell its largest asset, Aon Center, located at 200 E. Randolph St. in downtown Chicago, for $712 million, or $260 per square foot. The buyer is the 601W Cos., a private real estate investment company. The sale is expected to close early in the fourth quarter. Constructed in 1972, Aon Center is a 2.7 million-square-foot, 83-story office tower that is currently 86 percent leased. Situated on 3.5 acres in Chicago’s East Loop, Aon Center offers views of the city, Lake Michigan and Millennium Park. Last week, Piedmont announced that the Kraft Heinz Co., a global food and beverage giant, will relocate its Chicago headquarters from Northfield, Ill., to five floors of the building. “The successful sale of Aon Center will be the culmination of Piedmont’s long-term strategy of transforming the asset into one of Chicago’s most prestigious office towers,” says Piedmont president and CEO Donald Miller. “We have been fortunate to attract a number of distinguished tenants to Aon Center such as KPMG, Microsoft, United Health Group, Integrys, the Federal Home Loan Bank of Chicago and, most recently, Kraft Heinz. Additionally, we have also …

July 22, 2015

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SL Green to Acquire $230M Interest in Manhattan Office and Retail Building

by Scott Reid July 21, 2015

NEW YORK — SL Green Realty Corp. (NYSE: SLG) has entered into a definitive agreement to acquire a 90 percent interest in The SoHo Building, an office and retail property in Manhattan, for approximately $230 million. The investment stake is based on the property’s gross asset valuation of $255 million. Located at 110 Greene St., the 13-story SoHo Building is one of the tallest buildings in the SoHo historic district. Retail space at the building, situated along Greene and Mercer streets, offers tenants high visibility on two of the strongest performing retail streets in Manhattan. The seller is a joint venture controlled by the family of the late real estate entrepreneur Tony Goldman. “This transaction presents SL Green with a unique opportunity to acquire and further enhance the property into one of the most compelling multi-use assets in downtown New York,” says SL Green Managing Director Brett Herschenfeld. “The property is truly fitting of its iconic name.” SL Green plans to complete improvements to the property as it reintroduces it to the marketplace. The transaction is expected to close in the third quarter, subject to customary closing conditions. The purchase increases SL Green’s office footprint in SoHo. SL Green’s retail …

July 21, 2015

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After May’s Big Drop in CMBS Delinquencies, Rate Rises Slightly in June, Says Trepp

by Jeff Shaw July 21, 2015

NEW YORK — The U.S. CMBS loan delinquency rate across the five major property types rose by five basis points in June, reports New York-based research firm Trepp LLC. Still, the delinquency rate is 60 basis points lower than it was a year ago. The rate of CMBS loans at least 30 days delinquent inched up to 5.45 percent in June from 5.40 percent in May. By comparison, the delinquency rate registered 6.05 percent in June 2014. The cause for the rise in the delinquency rate in June was $1.4 billion in newly delinquent loans, fueled by several that are each nearly $100 million, according to Trepp research analyst Sean Barrie. The newly delinquent loans include $97.9 million for 390 Park Ave. in New York City and two identical $99.75 million loans for the NGP Rubicon GSA Pool, which covers industrial and office buildings in multiple markets. The $1.4 billion in new delinquencies was partially balanced by $1.1 billion in previously delinquent CMBS loans that were paid off either at par or with a loss, says Barrie. By property type, the multifamily and retail sectors each saw an increase of 11 basis points in the delinquency rate — to 8.73 …

July 21, 2015

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Great Atlantic & Pacific Tea Company Files for Bankruptcy, Agrees to Sell 120 Stores

by Nellie Day July 20, 2015

MONTVALE, N.J. — The Great Atlantic & Pacific Tea Company (A&P) has filed for Chapter 11 bankruptcy and agreed to sell about 120 of its stores for $600 million. The company operates 296 supermarket and liquor stores under the brand names of A&P, Best Cellars, Food Basics, the Food Emporium, Pathmark, Superfresh and Waldbaum’s. The stores are situated throughout the East Coast, including New York, New Jersey, Pennsylvania, Delaware, Massachusetts, Maryland and Connecticut. A&P will operate as business as usual throughout the court-supervised sale process. The company will soon close 25 stores, however, due to ongoing operating losses. “After careful consideration of all alternatives, we have concluded that a sale process implemented through Chapter 11 is the best way for A&P to preserve as many jobs as possible, and maximize value for all stakeholders,” says Paul Hertz, A&P’s president and CEO. “While the decision to close some stores is always difficult, these actions will enable the company to refocus its efforts to ensure the vast majority of A&P stores continue operating under new owners as a result of the court-supervised process.” The Great Atlantic & Pacific Tea Company was founded in Montvale in 1859. It was initially a small chain …

July 20, 2015

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NorthStar Healthcare Income Acquires Interest in $1.1 Billion Seniors Housing Investment

by Jeff Shaw July 17, 2015

NEW YORK CITY — NorthStar Healthcare Income Inc. (NorthStar Healthcare) — through a joint venture with Formation Capital LLC and Safanad Management Ltd. — has closed the acquisition of the U.S.-based operations of Extendicare International Inc., including a portfolio of 158 seniors housing and care facilities for a total cost of approximately $1.1 billion. New York-based NorthStar Healthcare, a public, non-traded real estate investment trust, acquired a 36.67 percent interest in the portfolio, while affiliates of Safanad and Formation collectively acquired the remaining 63.33 percent interest. In connection with the acquisition, NorthStar Healthcare also originated a $75 million mezzanine loan to partially finance the transaction, which bears interest at a fixed rate of 10 percent per year and has a term of 67 months. Among highlights of the acquisition: The portfolio consists of 152 skilled nursing facilities and six assisted living facilities with over 15,000 beds located across 12 states, with the largest concentrations in Indiana, Kentucky, Ohio, Michigan and Wisconsin. The facilities are leased to five third-party operators pursuant to long-term net leases. The overall resident occupancy was approximately 83 percent as of March 31. In addition to the mezzanine loan, the joint venture financed the acquisition with a …

July 17, 2015

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