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Sunday, December 23, 2007
Who's Holding the Cards in Retail? Tenants or Landlords?
Over the past year, we've watched retail vacancy rates slowly rise nationally at the same time record amounts of new retail space delivered or broke ground. Couple this with retailers pulling back on expansion plans, closing unprofitable locations or even going bankrupt, and the question many are starting to wonder is, just how strong is the retail market? Is it still a landlord's market? Or do retailers now hold all the cards?
For the answer, CoStar interviewed several 2006 CoStar Retail Power Brokers from across the nation. Not surprisingly, their mixed results vary somewhat regionally. However, the consensus is that it's not yet a retail tenant's market, but the tide is turning in that direction.
Pat McHenry, senior vice president of retail brokerage for CB Richard Ellis' Denver office and a 2006 CoStar Retail Leasing Power Broker, said she's seen a clear uptick in concessions to retail tenants over the past year.
"Development is still active enough that tenants have choices and as retailers in general pull back, the one's that are still expanding have more leverage. So it may not be a tenant's market, but it’s a lot less of a landlord's market than it was two years ago," said McHenry.
In Denver as in most areas, McHenry said retail conditions tend to be submarket specific. "Strong submarkets with good density and higher incomes that are supply constrained -- those submarkets are still landlord markets where there's a lot less wheeling and dealing going on. In the less desirable submarkets and those in outlying areas where developers are trying to go out in front of the market it’s a more competitive situation and is really starting to become a tenant's market -- that's where I'm seeing the most negotiating being done and concessions being given."
Another area McHenry is seeing tenants have more power is in trade areas hurt by store closures. "In certain trade areas you've got boxes that have opened up very close to each other, and they're competing. I have a situation like that now where I'm representing the tenant and they're getting a better deal because there are multiple options in the submarket."
Don't expect to see lower rent, however, McHenry cautions. "Landlords are working very hard to keep their face rates up and they're willing to give more tenant improvement allowances and free rent to try to maintain rental rates." Three years ago, free rent had "almost disappeared," McHenry said. Now she's seeing three to six months of free rent being given. And although the change hasn't been as dramatic with TI allowance, she estimates, she's seen a 20% to 25% increase in the amount of TI.
McHenry also said she is starting to see broker commission incentives, such as a higher percentage or dollar amount per-square-foot offered by some developers, particularly existing landlords, to get more exposure for their retail centers. McHenry points out, however, that broker incentives aren't seen as much in the retail industry because they're not very effective. "I think the broker incentives aren't as effective in the retail space because retailers' analysis of sites is a lot more complex than an office tenant, for example. So when brokers are looking at sites for their clients, they are more focused on fulfilling all the various needs than they are on an increased commission."
McHenry acknowledges that with national and regional credit tenants pulling back, landlords are opening up to local, less-credit worthy tenants. "I think landlords are more willing to do deals with lesser credit tenants. I'm not seeing them have a lot of leverage in negotiating terms, its just that some landlords are willing to take the risk of brushing off a not-so-great financial statement to take on a local tenant with a good concept."
"Landlords' responses to the current market are a mixed bag. I have some landlords that understand the marketplace and have increased responsiveness accordingly, grabbing deals when they show up. But then I have some institutional clients that continue to move slowly to get deals done and they're losing out on more deals as a result. I think the sales cycle is shortening up and those that don't respond quickly are being left out," McHenry stated.
With the caveat that there are certain retailers that won't benefit from more inventory because of prototype constraints, McHenry said she anticipates more vacancy in existing shopping centers, which will result in conditions that favor tenants over the next year. "It's going to be most prevalent for junior anchor tenants, but in general tenants that are willing to look at second generation space are going to have an easier time finding good deals and locations."
Also in Colorado, we talked to Chris Boston CCIM, an associate at Gibbons White and a specialist in the Boulder retail market. Boston said he's not witnessing landlords increasing concessions to retail tenants; in fact, he's seen a "firming up" of retail rents and competition for space in certain markets. Boston doesn't think it’s a "tenant's market" in his area and also doesn't think the market will turn to favor retail tenants in 2008.
source: costar.com
For the answer, CoStar interviewed several 2006 CoStar Retail Power Brokers from across the nation. Not surprisingly, their mixed results vary somewhat regionally. However, the consensus is that it's not yet a retail tenant's market, but the tide is turning in that direction.
Pat McHenry, senior vice president of retail brokerage for CB Richard Ellis' Denver office and a 2006 CoStar Retail Leasing Power Broker, said she's seen a clear uptick in concessions to retail tenants over the past year.
"Development is still active enough that tenants have choices and as retailers in general pull back, the one's that are still expanding have more leverage. So it may not be a tenant's market, but it’s a lot less of a landlord's market than it was two years ago," said McHenry.
In Denver as in most areas, McHenry said retail conditions tend to be submarket specific. "Strong submarkets with good density and higher incomes that are supply constrained -- those submarkets are still landlord markets where there's a lot less wheeling and dealing going on. In the less desirable submarkets and those in outlying areas where developers are trying to go out in front of the market it’s a more competitive situation and is really starting to become a tenant's market -- that's where I'm seeing the most negotiating being done and concessions being given."
Another area McHenry is seeing tenants have more power is in trade areas hurt by store closures. "In certain trade areas you've got boxes that have opened up very close to each other, and they're competing. I have a situation like that now where I'm representing the tenant and they're getting a better deal because there are multiple options in the submarket."
Don't expect to see lower rent, however, McHenry cautions. "Landlords are working very hard to keep their face rates up and they're willing to give more tenant improvement allowances and free rent to try to maintain rental rates." Three years ago, free rent had "almost disappeared," McHenry said. Now she's seeing three to six months of free rent being given. And although the change hasn't been as dramatic with TI allowance, she estimates, she's seen a 20% to 25% increase in the amount of TI.
McHenry also said she is starting to see broker commission incentives, such as a higher percentage or dollar amount per-square-foot offered by some developers, particularly existing landlords, to get more exposure for their retail centers. McHenry points out, however, that broker incentives aren't seen as much in the retail industry because they're not very effective. "I think the broker incentives aren't as effective in the retail space because retailers' analysis of sites is a lot more complex than an office tenant, for example. So when brokers are looking at sites for their clients, they are more focused on fulfilling all the various needs than they are on an increased commission."
McHenry acknowledges that with national and regional credit tenants pulling back, landlords are opening up to local, less-credit worthy tenants. "I think landlords are more willing to do deals with lesser credit tenants. I'm not seeing them have a lot of leverage in negotiating terms, its just that some landlords are willing to take the risk of brushing off a not-so-great financial statement to take on a local tenant with a good concept."
"Landlords' responses to the current market are a mixed bag. I have some landlords that understand the marketplace and have increased responsiveness accordingly, grabbing deals when they show up. But then I have some institutional clients that continue to move slowly to get deals done and they're losing out on more deals as a result. I think the sales cycle is shortening up and those that don't respond quickly are being left out," McHenry stated.
With the caveat that there are certain retailers that won't benefit from more inventory because of prototype constraints, McHenry said she anticipates more vacancy in existing shopping centers, which will result in conditions that favor tenants over the next year. "It's going to be most prevalent for junior anchor tenants, but in general tenants that are willing to look at second generation space are going to have an easier time finding good deals and locations."
Also in Colorado, we talked to Chris Boston CCIM, an associate at Gibbons White and a specialist in the Boulder retail market. Boston said he's not witnessing landlords increasing concessions to retail tenants; in fact, he's seen a "firming up" of retail rents and competition for space in certain markets. Boston doesn't think it’s a "tenant's market" in his area and also doesn't think the market will turn to favor retail tenants in 2008.
source: costar.com
Dirhams for Dollars: Diversifying Gulf State Investors Flock to U.S. Markets
Oil reserves don’t last forever, and Persian Gulf nations are looking to the future, scouring the U.S. and other global markets for investments to diversify their portfolios. At the same time, U.S. commercial real estate has become an increasingly brighter blip on the investment radar for Dubai, Qatar and other Mideast governments as the declining value of the dollar and a smaller pool of potential buyers thinned out by the credit crunch makes U.S. real estate investment more attractive.
The nations, most of them friendly toward the United States, recently have stepped up their infusions of oil wealth into Western private equity funds and investment banks hard hit by the credit meltdown. They haven’t yet plunged fully into direct investments into U.S. real estate assets but, like other foreign buyers interested in taking advantage of the weak U.S. dollar, they’re active in the market through limited partnerships and joint ventures.
"We've started to get calls from Mideastern investors as well as European investors who want to buy in core U.S. markets because of the credit crunch," Steven Collins, managing director, International Capital Markets, for Jones Lang LaSalle in Washington, D.C., told CoStar Advisor. "They're flush with cash and they're willing to accept more risk than U.S. institutional buyers."
A number of developments from the last few news cycles have underscored the growing role of Persian Gulf oil wealth:
# Maguire Properties Inc. (NYSE: MPG) is lining up financing from the Qatar Investment Authority, a $60 billion sovereign wealth fund run by the oil-rich Persian Gulf emirate, and a Century City, CA investment bank to orchestrate a potential management buyout of the troubled Southern California office REIT, according to media reports. Maguire, burdened by a heavy debt load and pressured by dissident shareholders, announced last week that it is exploring the sale of the company. President/CEO Rob Maguire said the buyout would allow him to keep local control of the Santa Monica, CA-based company.
# Three Mideast investment groups -- an affiliate of Abu Dhabi investment firm Mubadala Development Co., Olayan Group of Saudi Arabia, and an unnamed third party, reportedly a Mideast sovereign fund - are teaming up with Goldman Sachs and computer icon Michael Dell to provide a $1.4 billion cash infusion for Related Cos., one of the largest U.S. commercial developers.
# Irvine, CA-based developer Bixby Land Co. formed a joint venture with the real estate division of Investcorp, an international firm financed by capital largely sourced from Persian Gulf countries, to acquire office and R&D properties in the Silicon Valley. Investcorp opened an investment office in Los Angeles over the summer and also partnered with New York investment firm Broadway Partners recently to buy Investcorp’s U.S. headquarters at 280 Park Avenue, a 1.2-million-square-foot complex in midtown Manhattan, for $1.28 billion from Istithmar, a Dubai-based investment firm, according to CoStar Group information.
Emirates 'Awash in Money'
The Qatar Investment Authority and other United Arab Emirates entities are combing the financial industries in Japan, the U.S. and Europe for investment opportunities in institutions that have been hit hard by the subprime credit crisis. Last month, the Abu Dhabi’s sovereign investment fund said it would invest $7.5 billion in the largest U.S. bank, Citigroup, to help offset mortgage losses. Dubai-owned DIFC Investments recently announced it was interested in investing in U.S. real estate, oil and gas and telecom companies.
Increasingly, these nations are bypassing global financial institutions to make direct investments in U.S. real estate assets.
Qatar's potential investment in Maguire, one of Southern California's largest office landlords, is among the first visible signs that Persian Gulf capital is seeping into the Los Angeles real estate market, said Jack Kyser, senior vice president and chief economist with the Los Angeles County Economic Development Corp.
"These countries are literally awash in money, and they're looking to see what they should do with it," Kyser said. "There’s a familiarity with major markets, especially in Southern California. We’re an international business center and people will go where they have an understanding of the basics."
Dubai Speculators Invest Locally
The growing stream of Mideastern capital into the West will probably not turn into a flood soon, for one main reason: Emirate speculators need not go further than Dubai itself to double or triple their investments. Since the mid 1990s, Sheik Mohammed bin Rashid Al Maktoum, the ruler of Dubai and prime minister of the United Arab Emirates, has overseen the construction of a Manhattan in the desert. His projects include the Palm Islands, a series of artificial islands of residential and commercial development to be built over 10-15 years that constitute the largest land reclamation project in the world. Other projects include the luxury Burj al-Arab hotel and the $4 billion, 164-floor Burj Dubai, which is expected to be the tallest man-made structure in the world when completed late next year.
"If anything, our competition for Dubai money is Dubai," said Rand Sperry, co-founder of Sperry Van Ness International, who met with Dubai leaders last month to discuss investment in the U.S. and explore opening a brokerage office in the rapidly growing emirate. "They are focused on building Dubai, on bringing our [U.S.] money to them."
Many who have invested in Dubai office, residential and retail have doubled or tripled their stakes before the buildings reached occupancy, Sperry said.
"They're selling off the blueprint," he said. "The focus is so much on building their infrastructure and building their projects, they don’t realize the opportunity in the U.S. at the moment."
Based on figures released by the National Association of Realtors this week, some buyers are realizing the opportunity. So far this year, foreign investors have purchased $12.5 billion in U.S. office properties, with buyers from the Middle East and Germany accounting for half that volume, according to the NAR's Commercial Real Estate Outlook.
The global shopping spree for real estate and financial institutions poses challenges for some observers, especially major U.S. rating agencies who are concerned about how they are going to vet the credit of the Gulf nations because of the lack of transparency in the financial affairs of governments and monarchies such as Dubai and Qatar. Sure, these governments appear to have virtually unlimited cash reserves, but it’s difficult to know exactly what’s on their balance sheets.
Ports Debacle Sparks Marketing, PR Campaign
Moreover, both Mideast and U.S. investors are still wary following the doomed agreement last year by Dubai Ports World to take over operations at six major U.S. shipping ports. The plan set off a political firestorm in Congress, leading to a vote by the House Appropriations Committee to kill the pact. Critics on both sides of the aisle condemned the arrangement as a potential security threat.
The ports controversy was a setback to U.S. investment by Gulf nations who were shocked and angered by the donnybrook. However, investors from the emirates have regrouped, hiring American legal, lobbying and public relations firms in Washington, D.C. to help navigate U.S. markets and regulations -- and to counter what the Arabs believe are public misperceptions about the UAE in the wake of the 9/11 terrorist attacks.
Meanwhile, investment in deals across all product categories has resumed. In other transactions this year:
# Dubai-based Emaar Properties and Los Angeles-based John Laing Homes Luxury Division partnered up to purchase the site of the future Club View luxury condominium tower at 10250 Wilshire Blvd. in Los Angeles from Fifield Cos. for $95.8 million.
# Dubai-based Istithmar acquired Barney's New York, the luxury department store chain, for $942.3 million. Barney’s recently celebrated the opening of a new 60,000-square-foot store in downtown San Francisco's Union Square.
# In September, Dubai World announced that it signed definitive agreements to form a long-term strategy to invest about $5 billion in MGM Mirage, including a $2.7 billion stake in the landmark CityCenter development in Las Vegas, and up to $2.4 billion in purchases of MGM Mirage common stock. The companies will enter into a 50/50 joint venture in CityCenter and Dubai World will acquire a significant minority equity position in MGM Mirage.
The weak U.S. dollar has attracted foreign investment into the U.S. gaming industry, propping up Las Vegas real estate values, according to Fitch Ratings, which expects Dubai will increase its stake in MGM Mirage and that the inflow of foreign investment will continue through 2008.
JLL's Collins, for one, agrees.
"The emirates have so much money, it's frightening."
source: costar.com
The nations, most of them friendly toward the United States, recently have stepped up their infusions of oil wealth into Western private equity funds and investment banks hard hit by the credit meltdown. They haven’t yet plunged fully into direct investments into U.S. real estate assets but, like other foreign buyers interested in taking advantage of the weak U.S. dollar, they’re active in the market through limited partnerships and joint ventures.
"We've started to get calls from Mideastern investors as well as European investors who want to buy in core U.S. markets because of the credit crunch," Steven Collins, managing director, International Capital Markets, for Jones Lang LaSalle in Washington, D.C., told CoStar Advisor. "They're flush with cash and they're willing to accept more risk than U.S. institutional buyers."
A number of developments from the last few news cycles have underscored the growing role of Persian Gulf oil wealth:
# Maguire Properties Inc. (NYSE: MPG) is lining up financing from the Qatar Investment Authority, a $60 billion sovereign wealth fund run by the oil-rich Persian Gulf emirate, and a Century City, CA investment bank to orchestrate a potential management buyout of the troubled Southern California office REIT, according to media reports. Maguire, burdened by a heavy debt load and pressured by dissident shareholders, announced last week that it is exploring the sale of the company. President/CEO Rob Maguire said the buyout would allow him to keep local control of the Santa Monica, CA-based company.
# Three Mideast investment groups -- an affiliate of Abu Dhabi investment firm Mubadala Development Co., Olayan Group of Saudi Arabia, and an unnamed third party, reportedly a Mideast sovereign fund - are teaming up with Goldman Sachs and computer icon Michael Dell to provide a $1.4 billion cash infusion for Related Cos., one of the largest U.S. commercial developers.
# Irvine, CA-based developer Bixby Land Co. formed a joint venture with the real estate division of Investcorp, an international firm financed by capital largely sourced from Persian Gulf countries, to acquire office and R&D properties in the Silicon Valley. Investcorp opened an investment office in Los Angeles over the summer and also partnered with New York investment firm Broadway Partners recently to buy Investcorp’s U.S. headquarters at 280 Park Avenue, a 1.2-million-square-foot complex in midtown Manhattan, for $1.28 billion from Istithmar, a Dubai-based investment firm, according to CoStar Group information.
Emirates 'Awash in Money'
The Qatar Investment Authority and other United Arab Emirates entities are combing the financial industries in Japan, the U.S. and Europe for investment opportunities in institutions that have been hit hard by the subprime credit crisis. Last month, the Abu Dhabi’s sovereign investment fund said it would invest $7.5 billion in the largest U.S. bank, Citigroup, to help offset mortgage losses. Dubai-owned DIFC Investments recently announced it was interested in investing in U.S. real estate, oil and gas and telecom companies.
Increasingly, these nations are bypassing global financial institutions to make direct investments in U.S. real estate assets.
Qatar's potential investment in Maguire, one of Southern California's largest office landlords, is among the first visible signs that Persian Gulf capital is seeping into the Los Angeles real estate market, said Jack Kyser, senior vice president and chief economist with the Los Angeles County Economic Development Corp.
"These countries are literally awash in money, and they're looking to see what they should do with it," Kyser said. "There’s a familiarity with major markets, especially in Southern California. We’re an international business center and people will go where they have an understanding of the basics."
Dubai Speculators Invest Locally
The growing stream of Mideastern capital into the West will probably not turn into a flood soon, for one main reason: Emirate speculators need not go further than Dubai itself to double or triple their investments. Since the mid 1990s, Sheik Mohammed bin Rashid Al Maktoum, the ruler of Dubai and prime minister of the United Arab Emirates, has overseen the construction of a Manhattan in the desert. His projects include the Palm Islands, a series of artificial islands of residential and commercial development to be built over 10-15 years that constitute the largest land reclamation project in the world. Other projects include the luxury Burj al-Arab hotel and the $4 billion, 164-floor Burj Dubai, which is expected to be the tallest man-made structure in the world when completed late next year.
"If anything, our competition for Dubai money is Dubai," said Rand Sperry, co-founder of Sperry Van Ness International, who met with Dubai leaders last month to discuss investment in the U.S. and explore opening a brokerage office in the rapidly growing emirate. "They are focused on building Dubai, on bringing our [U.S.] money to them."
Many who have invested in Dubai office, residential and retail have doubled or tripled their stakes before the buildings reached occupancy, Sperry said.
"They're selling off the blueprint," he said. "The focus is so much on building their infrastructure and building their projects, they don’t realize the opportunity in the U.S. at the moment."
Based on figures released by the National Association of Realtors this week, some buyers are realizing the opportunity. So far this year, foreign investors have purchased $12.5 billion in U.S. office properties, with buyers from the Middle East and Germany accounting for half that volume, according to the NAR's Commercial Real Estate Outlook.
The global shopping spree for real estate and financial institutions poses challenges for some observers, especially major U.S. rating agencies who are concerned about how they are going to vet the credit of the Gulf nations because of the lack of transparency in the financial affairs of governments and monarchies such as Dubai and Qatar. Sure, these governments appear to have virtually unlimited cash reserves, but it’s difficult to know exactly what’s on their balance sheets.
Ports Debacle Sparks Marketing, PR Campaign
Moreover, both Mideast and U.S. investors are still wary following the doomed agreement last year by Dubai Ports World to take over operations at six major U.S. shipping ports. The plan set off a political firestorm in Congress, leading to a vote by the House Appropriations Committee to kill the pact. Critics on both sides of the aisle condemned the arrangement as a potential security threat.
The ports controversy was a setback to U.S. investment by Gulf nations who were shocked and angered by the donnybrook. However, investors from the emirates have regrouped, hiring American legal, lobbying and public relations firms in Washington, D.C. to help navigate U.S. markets and regulations -- and to counter what the Arabs believe are public misperceptions about the UAE in the wake of the 9/11 terrorist attacks.
Meanwhile, investment in deals across all product categories has resumed. In other transactions this year:
# Dubai-based Emaar Properties and Los Angeles-based John Laing Homes Luxury Division partnered up to purchase the site of the future Club View luxury condominium tower at 10250 Wilshire Blvd. in Los Angeles from Fifield Cos. for $95.8 million.
# Dubai-based Istithmar acquired Barney's New York, the luxury department store chain, for $942.3 million. Barney’s recently celebrated the opening of a new 60,000-square-foot store in downtown San Francisco's Union Square.
# In September, Dubai World announced that it signed definitive agreements to form a long-term strategy to invest about $5 billion in MGM Mirage, including a $2.7 billion stake in the landmark CityCenter development in Las Vegas, and up to $2.4 billion in purchases of MGM Mirage common stock. The companies will enter into a 50/50 joint venture in CityCenter and Dubai World will acquire a significant minority equity position in MGM Mirage.
The weak U.S. dollar has attracted foreign investment into the U.S. gaming industry, propping up Las Vegas real estate values, according to Fitch Ratings, which expects Dubai will increase its stake in MGM Mirage and that the inflow of foreign investment will continue through 2008.
JLL's Collins, for one, agrees.
"The emirates have so much money, it's frightening."
source: costar.com
Wells Buys Country Music Television HQ in Nashville
Wells Real Estate Funds has acquired the Country Music Television (CMT) headquarters building in Nashville for about $13.8 million, according to CB Richard Ellis, which negotiated the deal.
The deal for the distinctive four-level office building, perched atop a nine-level parking facility, rounds out to about $117 per square foot. Wells acquired the office portion and the top two parking levels of the property, and plans to market about 29,000 square feet for lease.
The building is at 330 Commerce St. in downtown Nashville, a few blocks off of the Cumberland River. CMT, a subsidiary of media conglomerate Viacom, occupies 75 percent of the 118,082-square-foot facility under a lease that expires in 2012.
Douglass Johnson and Don Albright of CB Richard Ellis represented the seller, Ferrari Partners LP, a manager and owner of residential, multifamily, commercial and developmental properties in Illinois and Tennessee. Atlanta-based Wells was self-represented.
source: costar.com
The deal for the distinctive four-level office building, perched atop a nine-level parking facility, rounds out to about $117 per square foot. Wells acquired the office portion and the top two parking levels of the property, and plans to market about 29,000 square feet for lease.
The building is at 330 Commerce St. in downtown Nashville, a few blocks off of the Cumberland River. CMT, a subsidiary of media conglomerate Viacom, occupies 75 percent of the 118,082-square-foot facility under a lease that expires in 2012.
Douglass Johnson and Don Albright of CB Richard Ellis represented the seller, Ferrari Partners LP, a manager and owner of residential, multifamily, commercial and developmental properties in Illinois and Tennessee. Atlanta-based Wells was self-represented.
source: costar.com
Paramount Deals Times Square Tower for $1 Billion
In the second billion-dollar property sale in Manhattan to close in the past week, Albert Behler's Paramount Group has dealt the 50-story Americas Tower in Times Square to Metro Fund LLC, a joint venture of World Trade Center developer Silverstein Properties and the California State Teachers' Retirement System (CalSTRS).
The 1 million-square-foot midtown trophy tower traded for about $1 billion, or $1,000 per square foot. It sits at 1177 Avenue of the Americas, between 45th and 46th streets, and is 97 percent leased to several prominent law firms including Dickstein, Shapiro, Movin & Oshinsky LLP, Kramer, Levin, Naftalis & Frankel LLP and Bracewell & Giuliani LLP.
Wayne Maggin of Eastdil Secured and Peter Spies of Goldman Sachs represented the Paramount Group in the sale, while CB Richard Ellis Investors represented CalSTRS. The Metro Fund venture handled the deal in-house.
"We leveraged our property management and leasing expertise, along with 1177’s reputation as a preferred address for leading financial and legal firms, to increase occupancy ... and more than double the property’s value in only five years of ownership," Behler said in a statement.
Paramount acquired the property in October 2002 for $409 million, according to CoStar information. Earlier this month, the New York-based property investment group announced the second of two recent property purchases from Deutsche Bank, agreeing to pay $500 million for the 30-story building at 31 W. 52nd St.
In May, Paramount bought the bank's North American headquarters building at 60 Wall St. for $1.2 billion.
The Americas Tower is the latest Manhattan trophy building to meet or exceed the $1,000-per-square-foot threshold, joining a list that includes 1414 Avenue of the Americas, 885 Third Ave. and 450 Park Ave. And just a day before the Americas Tower purchase was announced, SL Green said that it had closed on its $1.57 billion purchase of Citigroup's office complex in lower Manhattan, in a joint venture with Canadian investor SITQ.
Meanwhile, the Silverstein/CalSTRS venture has made its first purchase on the Island since last year, when it purchased 575 Lexington Ave. for $416 million and 99 Church St. for more than $170 million, according to CoStar information.
Please refer to CoStar COMPS #1452282 for more information on this transaction.
source: costar.com
The 1 million-square-foot midtown trophy tower traded for about $1 billion, or $1,000 per square foot. It sits at 1177 Avenue of the Americas, between 45th and 46th streets, and is 97 percent leased to several prominent law firms including Dickstein, Shapiro, Movin & Oshinsky LLP, Kramer, Levin, Naftalis & Frankel LLP and Bracewell & Giuliani LLP.
Wayne Maggin of Eastdil Secured and Peter Spies of Goldman Sachs represented the Paramount Group in the sale, while CB Richard Ellis Investors represented CalSTRS. The Metro Fund venture handled the deal in-house.
"We leveraged our property management and leasing expertise, along with 1177’s reputation as a preferred address for leading financial and legal firms, to increase occupancy ... and more than double the property’s value in only five years of ownership," Behler said in a statement.
Paramount acquired the property in October 2002 for $409 million, according to CoStar information. Earlier this month, the New York-based property investment group announced the second of two recent property purchases from Deutsche Bank, agreeing to pay $500 million for the 30-story building at 31 W. 52nd St.
In May, Paramount bought the bank's North American headquarters building at 60 Wall St. for $1.2 billion.
The Americas Tower is the latest Manhattan trophy building to meet or exceed the $1,000-per-square-foot threshold, joining a list that includes 1414 Avenue of the Americas, 885 Third Ave. and 450 Park Ave. And just a day before the Americas Tower purchase was announced, SL Green said that it had closed on its $1.57 billion purchase of Citigroup's office complex in lower Manhattan, in a joint venture with Canadian investor SITQ.
Meanwhile, the Silverstein/CalSTRS venture has made its first purchase on the Island since last year, when it purchased 575 Lexington Ave. for $416 million and 99 Church St. for more than $170 million, according to CoStar information.
Please refer to CoStar COMPS #1452282 for more information on this transaction.
source: costar.com
SL Green JV Closes on $1.6B Purchase of Citigroup Towers
SL Green Realty Corp. and Canadian real estate investor SITQ have closed on their joint venture purchase of Citigroup's Tribeca office complex in lower Manhattan, acquiring one of the Financial District's premier office complexes for $1.57 billion, or a little less than $600 per square foot.
News of the blockbuster deal broke earlier this month, at which time SL Green declined to identify the specific property. The city's largest office landlord sealed the deal for the 2.6 million-square-foot complex after Citigroup's negotiations stalled with San Francisco-based Shorenstein, which was reportedly close to making the purchase in November. (For prior coverage, please see Citigroup Sells Pair of NYC Office Buildings in $1.5 Billion Deal With SL Green.)
"This acquisition is a terrific investment for us - with attractive low-rate committed financing. In addition to normal rental income, our innovative joint venture structure with SITQ provides for fees and promotes that will enhance SL Green's returns," SL Green CEO Marc Holliday said in a statement.
Under the joint venture, SL Green has a 50.6% interest and SITQ has a 49.4% interest. The purchase is immediately accretive to SL Green’s earnings and was structured in a tax efficient manner in order to reinvest proceeds from the intended sale of 1250 Broadway, in accordance with 1031 guidelines.
Citigroup is leasing back the entire complex -- which it currently fully occupies -- for a 13-year term at $37.66 per square foot, triple-net, with annual escalations based on the NY & NJ CPI.
The complex was developed in the 1980s and consists of a 40-story high-rise tower and an adjacent 10-story building at 388 and 390 Greenwich St.
Richard Baxter, Yoron Cohen, Jonathan Caplan and Scott Latham of Cushman & Wakefield brokered the transaction. Westdeutsche ImmobilienBank AG provided mortgage financing.
Please refer to CoStar COMPS #1452670 for more information on this transaction.
source: costar.com
News of the blockbuster deal broke earlier this month, at which time SL Green declined to identify the specific property. The city's largest office landlord sealed the deal for the 2.6 million-square-foot complex after Citigroup's negotiations stalled with San Francisco-based Shorenstein, which was reportedly close to making the purchase in November. (For prior coverage, please see Citigroup Sells Pair of NYC Office Buildings in $1.5 Billion Deal With SL Green.)
"This acquisition is a terrific investment for us - with attractive low-rate committed financing. In addition to normal rental income, our innovative joint venture structure with SITQ provides for fees and promotes that will enhance SL Green's returns," SL Green CEO Marc Holliday said in a statement.
Under the joint venture, SL Green has a 50.6% interest and SITQ has a 49.4% interest. The purchase is immediately accretive to SL Green’s earnings and was structured in a tax efficient manner in order to reinvest proceeds from the intended sale of 1250 Broadway, in accordance with 1031 guidelines.
Citigroup is leasing back the entire complex -- which it currently fully occupies -- for a 13-year term at $37.66 per square foot, triple-net, with annual escalations based on the NY & NJ CPI.
The complex was developed in the 1980s and consists of a 40-story high-rise tower and an adjacent 10-story building at 388 and 390 Greenwich St.
Richard Baxter, Yoron Cohen, Jonathan Caplan and Scott Latham of Cushman & Wakefield brokered the transaction. Westdeutsche ImmobilienBank AG provided mortgage financing.
Please refer to CoStar COMPS #1452670 for more information on this transaction.
source: costar.com
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