A Chicago landlord is selling a vintage downtown apartment building for $74 million, more than twice what it paid for the property in 2012.
Waterton Associates LLC is selling the Seneca, a 254-unit building in Streeterville, to Emmes Asset Management, a New York-based real estate investor, according to an Emmes representative. Emmes is paying $74 million for the 16-story building at 200 E. Chestnut St., said the company representative, who asked not to be identified and declined to discuss the transaction.
The sale, which is expected to close by year-end, will generate a big return for Waterton, which bought the Seneca for $35.6 million in March 2012, when it was a hotel-apartment building. The Chicago-based firm spent about $6 million renovating the property and converting it to a pure apartment building.
A Waterton spokesman declined to comment. An executive in the Chicago office of HFF, the brokerage hire to sell the property, also declined to comment.
The sale provides yet another illustration of how investors who bought downtown apartments a few years ago are reaping huge gains by selling today. Amid high occupancies and rents and low interest rates, investors are paying record prices for apartments in Chicago. They're betting that the good times will continue even as competition heats up amid a building boom that will add thousands of units to the downtown market over the next couple years.
The Seneca is the first Chicago acquisition for Emmes, which owns a couple of shopping centers in Peoria. The firm is one of several from New York that are taking a closer look at real estate in Chicago, where prices are still attractive relative to coastal cities like its hometown and San Francisco. New York-based Georgetown Co., for instance, recently paid $215 million for K2, a 496-unit apartment building in the Fulton River District.
“New York and San Francisco are too crazy,” said Ben Thypin, director of market analysis at Real Capital Analytics, a Chicago-based research firm. Investors “want a market that is liquid and a reliable store of value, and Chicago's playing that role right now.”
Read More: http://www.chicagobusiness.com/realestate/20141126/CRED03/141129860/streeterville-apartments-to-fetch-74-million
Chicago-based real estate investment manager Heitman LLC has agreed to pay just over $700 million for a trophy tower in River North, in what would be one of the largest office deals in the city's history.
A Heitman fund has a preliminary deal to buy the 46-story tower at 353 N. Clark St. for nearly $600 per square foot, according to people familiar with the deal. If completed as expected, the sale of the nearly 1.2 million-square-foot tower will rank as the fourth-highest price paid for a Chicago office tower, and the second-highest per square foot.
The high-rise is a block east of the 60-story office tower at 300 N. LaSalle St., which sold in July for a city-record $850 million.
The price for 353 N. Clark St. is more than 80 percent higher than New York-based seller Tishman Speyer Properties L.P. paid four years ago, amid the recession. Tishman bought the building from a venture of Mesirow Financial, one of its developers, for $385 million in 2010.
A spokesman for Tishman and a spokeswoman for Heitman declined to comment. Bruce Miller, a managing director at Chicago-based Jones Lang LaSalle Inc. who is brokering the sale, did not return calls.
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As office building prices have risen, investment returns have fallen. In six major metro markets including Chicago, first-year rates of return for buyers of trophy towers fell to 4.1 percent during the third quarter, the lowest ever recorded, according to Real Capital Analytics. But Chicago has remained a bargain on price per square foot when compared with the hottest coastal markets.
“Over the past two years we've seen much of the action move to places like Chicago, Seattle, Austin and Denver,” said Ben Thypin, director of market analysis at Real Capital Analytics. “Pricing has become so crazy in New York and San Francisco, you can get a higher return for a similar amount of risk in a place like Chicago. Chicago seems to have more room to run yield-wise.”
Read More: http://www.chicagobusiness.com/realestate/20141111/CRED03/141119938/river-north-office-tower-selling-for-700-million
When the Normandale Lake Office Park in Bloomington sold for about $265.2 million in 2012, it was the second-largest office property sale in the Twin Cities market’s history. But the price a MetLife-led contingent paid for the five-building property this week will surpass that — and set a new high water mark for the metro in the process.
New York-based MetLife, Allstate Insurance Co. and Allstate Life Insurance Co. this week acquired the five-building, 1.7-million-square-foot office complex on the southwest quadrant of Highway 100 and Interstate 494 in Bloomington, the partners confirmed in a statement.
The “real estate submarket here is very strong, thanks to a diverse economy and a strong corporate business base,” Betsy Clark, managing director of MetLife Real Estate Investors, said in a prepared statement. “MetLife invests in real estate with a long-term perspective, and Normandale Lake fits right into this strategy.”
The previous owner was Equity Group Investments, the Chicago-based firm founded by Sam Zell decades ago. Zell’s group paid about $156 per square foot for the suburban office park in 2012, Finance & Commerce reported at the time.
While the latest sales price for the park wasn’t disclosed this week, parties to the transaction openly called it the largest in Twin Cities history. The current record, according to data from New York-based Real Capital Analytics, is $277.9 million paid for the IDS Center in August 2006.
“The park really has its own brand that stands for the best in class,” said Tom O’Brien, executive director for Cushman & Wakefield/NorthMarq and part of the team that sold the building.
Hennepin County values Equity Group’s holdings on the 23-acre Normandale Lake property at just under $264 million, according to property tax records.
Several factors will have driven the price up since it was last sold in 2012, brokers and real estate analysts said Thursday. For one, the five buildings are now 93 percent leased, up from 83 percent when Zell’s group bought them.
Longtime tenants include Tata Consultancy Services, Prime Therapeutics and Oracle Corp. In the past year, tenants including the Larkin Hoffman Daly & Lindgren law firm, Emerson Process Management and HQ Global Workplaces have signed new leases, renewed or expanded existing ones.
Also helping raise the price is the fact that the local market is stronger now than it was two years ago.
“The appetite for assets in markets like Minneapolis has increased pretty dramatically,” O’Brien said in an interview. “The focus on suburban office is different than it was two years ago.”
Some of the biggest local office sales since 2012 have occurred in the suburbs, including the $123 million sale of Cargill’s Excelsior Crossing buildings in Hopkins and the $75 million sale of the 601 Tower at Carlson in Minnetonka. The largest office sale of 2014 occurred when a German group paid $164.5 million for the 50 South Tenth building in downtown Minneapolis.
Ben Thypin, Real Capital’s director of market analysis, said MetLife and Allstate are among several buyers looking to secondary markets rather than staying in competitive coastal markets.
“They’re getting priced out of these markets and they’re looking at others that have a compelling demographic story and a compelling economy, but they can get a higher yield for lower prices per square foot,” he said.
Read more: http://finance-commerce.com/2014/11/normandale-lake-sale-is-largest-in-metro-history/#ixzz3IQRjig7n
While new technology is constantly transforming existing industries, certain sectors are just a little less eager and slower to adapt than others.
In the real estate industry, some property managers were long resistant to change, even though their jobs revolve around keeping track of intricate data, such as lease dates, vacancies and leasable square footage. Often, they seek to turn the flood of information into trend charts and easy-to-follow patterns. Until recently, much of this record keeping was handled through Excel and, even more shockingly, on paper (one step above the caveman’s drawing)! Now, real estate professionals are finally getting some serious new tech tools, complete with apps and customized interfaces, to handle the management process.
Most management companies handle lease tracking through biweekly meetings between asset managers and brokers. Together, the teams review a lengthy list of executed leases over time, letters of intent, prospects, dead deals, tour schedules and steps within the negotiation process. All of this information is manually generated and, of course, subject to human error. There are two companies that dominate the digitalization of this process: Hightower and View the Space. Both automate tracking, cutting out human mistakes and making the end result more easily digestible. And all of the information is available in pre-made charts, generated automatically by the service.
Several industry professionals explained to Commercial Observer that their transition to one of these services began with View the Space, which specializes in only video tours of properties. From there, they found Hightower, and ultimately settled on its service instead.
“I got involved because of a competitor,” explained Mike Moran, managing principal at Cassidy Turley. “I was trying to understand the technology after they had presented their product, so I looked at other options to understand the space. I came across Hightower, gave them a call, and got onto the demo. I realized they were at the forefront of the industry and technology.”
Another industry source, who asked not to be named, praised Hightower for infusing new life into his leasing business. “We realized we could see [in] real time what was going on with our leasing—when a deal has been executed, or if someone is touring the space. If someone knows a tenant that we have done a deal with at another property on the East Coast, and they’re touring a West Coast property, historically we wouldn’t have known about this, but now we get a notification on that. We can also tell if a deal takes certain brokers longer, we can see how many tours one broker is generating compared to another. We are working with Hightower to see if we do a broker event, what is the turnaround ratio from that event? None of that was possible before without a bunch of Excel spreadsheets that one would have to build.” (It should be noted that Thrive Capital, an affiliate of Kushner Companies which owns Commercial Observer, is an investor in Hightower.)
For Elizabeth Bueno, associate director of commercial leasing at Two Trees Management, the pile of paperwork and constant Excel updates led to the firm signing with Hightower. “When we first started looking for something, it was first on the paperwork side to eliminate it. We started looking into Salesforce and then Hightower. Hightower is a little newer and it is geared toward specifically commercial.”
View the Space, on the other hand, has a different perspective. View the Space allows “the larger owners to understand their data in more impactful ways,” said Nick Romito, chief executive officer and co-founder of View the Space, pointing to the larger size of their company as a point in its favor. “It allows them to understand the analytics at both the portolio level and individual unit.”
While both services offer the same tools, Hightower specializes in customization over View the Space. “The flexibility of Hightower and the willingness for them to jump on any situation we have, any need and request we have, it is so open book with them in a really positive way,” explained Mr. Moran.
Ms. Bueno agreed, “We chose Hightower because they are willing to work with us to try to tailor what we are looking for because we aren’t just looking for the back-end lease information…They were willing to work with us the most.”
As the commercial real estate industry increasingly turns to Hightower for its management needs, Brandon Weber, CEO of Hightower, is prepared to take on the constant challenges of customization, which make his company stand out of the pack.
“We built our platform from the ground up to be flexible,” Mr. Weber said. “There is flexibility built into the software itself: you can run analysis through different lenses. We know every customer who signs up for Hightower will have certain, customized needs, whether it is a set of custom reports that are missing and critical, or if there is a set of key performance indicators. We customize along those lines. One of the differentiations we have heard is that we make good on our promises. We are in the business of making large landlords and brokerage firms successful.”
At the tail end of October, Hightower launched Hightower 360, which allows its software to further streamline the leasing process. It is the “expansion of Hightower’s initial leasing platform to also include current tenant racking and inventory management for the first end-to-end asset management solution on web and mobile,” the company said in a statement.
Though Hightower is quickly gaining fans, both the CEO and experts in the field understand they are going against a long-standing tradition of paper and Excel record keeping.
“Half the battle is to design wonderful software, the other half is train, onboard, and nurture the customer as we shift a 25-year-old workflow,” explained Mr. Weber. Mr. Moran noted agents on their team were quick to adopt the technology, using it directly through the mobile application, rather than the web tool.
As they work against tradition, these companies focus primarily on major commercial leasing clients. For smaller managers and residential owners, the transition to technology of this sort may still be off in the horizon. Ben Carlos Thypin, a managing partner at Progress Group, which owns and manages multifamily and commercial properties in New York City and other markets throughout the country, said: “I think the main thing to consider with these new technologies and changing from the old ways is that the margins on managing smaller buildings are smaller. Management can be very costly for a small owner. If these technologies, in the end, are going to decrease the cost of management, it would be silly not to adopt them, but if they are going to increase the cost of management in the short run, that will decrease adoption by some traditional small-scale owners.” Currently, Mr. Thypin primarily uses Excel as the company works to evaluate new technologies.
And for those companies that have successfully adopted Hightower, many employees have taken it all the way, going from paper and Excel, to active-phone application usage. One executive found that younger brokers and West Coast brokers use the phone app almost exclusively, whereas older brokers and East Coast brokers tend to use the desktop service.
Read More: http://commercialobserver.com/2014/11/hightower-mighty-real-estate-leasing-catches-up-with-the-21st-century/
By most standards, the office market in Washington has lagged behind when compared with those in other major cities. Federal-government budget cuts and corporate contractions have meant rising office vacancies and stalling rents, for instance.
But those factors haven’t kept the prices paid for office buildings from climbing.
Last week’s deal involving PNC Place, a 12-story office building, is a case in point.
The property sold for $392 million, or $1,075 a square foot. That was the highest price ever paid, on a square-foot basis, for an office building in Washington, according to commercial-real-estate brokers.
Prices throughout the region have been rising fast. In the first half of this year, buyers of office buildings paid an average of $367.91 a square foot, up 29% over the same period last year, according to real-estate data firm CoStar Group.
The buyers of PNC Place, giant retirement-plan provider TIAA-CREF and Norges Bank Investment Management, the world’s largest sovereign-wealth fund, declined requests for an interview to discuss the transaction.
. . .
Ben Thypin, director of market analysis at real-estate data firm Real Capital Analytics, says foreign buyers have been especially aggressive. In the first three quarters of this year, foreigners have invested $10.63 billion in office buildings in central business districts in U.S. cities—a 69% increase over the same time last year, according to Real Capital Analytics. “If you’re a large fund, you can’t make small deals,” said Mr. Thypin. “You need to place a lot of capital in big chunks. These Class A office buildings are large....They’re perceived as good stores of value. You’re not going to make home-run returns on these, but you’re not going to be losing money, either.”
For the second straight quarter, apartment sales showed robust growth as the transaction market continues to dust off a mediocre 2013. Apartment sales hit $27.5 billion in the third quarter, a 28 percent increase compared to the third quarter of 2013, according to a report from New York-based research firm Real Capital Analytics (RCA). The quarter’s performance was driven by a staggering $22 billion in sales of individual properties, one of the highest quarterly figures on record. Three of those trades occurred in New York.“In New York, there has been bunch of big trades of large older buildings that are undergoing condo conversion or at least renovation,” says Ben Thypin, director of market analysis at RCA.
In the third quarter, portfolio sales actually dipped almost $500 million compared to the third quarter of 2013.
“We’ve had so many portfolios sell over the past few years that it’s unlikely any of them are going to be resold during the next few years,” Thypin says. “There are only so many portfolios out there.”
Read More: http://www.multifamilyexecutive.com/business-finance/apartment-sales-jump-28-in-the-third-quarter_o
Cap rates hit historic lows in the third quarter—falling 40 basis points (bps) to 5.9 percent, according to New York-based Real Capital Analytics (RCA). The previous low over the past decade was 6.1 percent, which occurred in the fourth quarter of 2012.
The cap rate for mid- and high-rise properties in major metros fell to 3.6 percent, which was almost 20 bps below the rates seen during the condo conversion craze of the mid 2000’s. Garden property cap rates fell 40 bps to 6.1 percent. Overall, mid- and high-rise properties fell 25 bps to 5 percent.
Not surprisingly, the decline in cap rates was the result of larger economic forces.
“A 25 basis points dip in mortgage rates and the weight of capital were primarily responsible for the cap rate compression,” RCA said in the report.
These low cap rates have raised the fear of a bubble, but RCA thinks this cap rate climate differs from the one that industry faced in 2007.
“The spreads between rates and treasuries are still pretty wide and the outlook for NOI is pretty good right now,” says Ben Thypin, director of market analysis at RCA. “I think the market would prefer that base rates increase sooner rather than later so we can absorb it over time instead of in a few years from now when pricing is higher and the outlook for NOI growth is less certain.”
Read More: http://www.multifamilyexecutive.com/business-finance/cap-rates-hit-record-lows-in-3q_o
Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.