General Growth Properties Inc. (GGP) agreed to buy the Crown Building on Manhattan’s Fifth Avenue in partnership with New York landlord Jeffrey Sutton to build its presence in the world’s most-expensive retail district, two people with knowledge of the negotiations said.
The partners agreed to pay about $1.75 billion for the 390,000-square-foot (36,200-square-meter) tower at 730 Fifth Ave., at the southwest corner of 57th Street, one of the people said. Both people asked not to be identified because the negotiations are private.
At about $4,490, the price per square foot sets a world record for an entire office building, according to Ben Thypin, director of market analysis at Real Capital Analytics Inc., a New York-based real estate research firm. Much of the tower’s value is in its roughly 50,000 square feet of retail space.
The property is part of Fifth Avenue’s “golden mile,” from about 49th Street to the edge of Central Park at 59th Street, home of Apple Inc.’s “cube” store, Jacques Gordon, global strategist for LaSalle Investment Management, said in an interview. The building’s retail tenants include jewelers Bulgari SpA and K. Mikimoto & Co.
The bidding for Atlanta-based Gables Residential and its $3 billion Class-A Sun Belt portfolio with management and development capabilities is headed to the wire, with final bids due this week, according to a recent report from Real Estate Alert.
The report also identified a group of finalists, including current owner New York-based Clarion Partners; Denver-based REIT Aimco; a joint venture between Charleston, S.C.-based Greystar and Newport Beach, Calif.-based Pimco; pension fund CalPERS and Boston-based GID Investments of Boston; and a team of DRA Advisors of New York and the Abu Dhabi Investment Authority.
“Most of the buyers are similar to the old Clarion joint venture—a real estate manager plus an institutional investor,” said Ben Thypin, director of market analysis at New York-based Real Capital Analytics.
The Korean Teachers Credit Union and TIAA-CREF are staking a claim on Manhattan’s Socony-Mobil building in the first investment of a $1 billion joint venture.
The partners last week acquired a $175 million loan on the landmark office tower across the street from the Chrysler Building, according to Suzan Amato, head of managed accounts and joint ventures in global real estate at New York-based TIAA-CREF. The financing was part of David Werner’s $900 million purchase of the property this year.
Asian investors, seeking higher returns and a safe haven for cash, are the source of some of the global flood of money into Manhattan real estate that’s pushing office-building values to records. While China has been the top Asian buyer in New York, investors from Korea andSoutheast Asia are poised for more deals as the relatively shallow real estate markets in their home countries become saturated, according to Amato.
“Asian countries are on a rapid growth trajectory,” she said. “This is a very fertile area for us.”
South Korea is the fourth most-active Asian equity investor in Manhattan property, behind China,Singapore and Australia, according to Real Capital Analytics Inc., a real estate research company.
Rather than buying equity interests in buildings, TIAA-CREF and KTCU are seeking to invest in mortgages backed by office towers, retail properties, warehouses and apartments in major U.S. cities. The venture between the two companies, which manage teachers’ savings in their respective countries, is 51 percent owned by TIAA-CREF and 49 percent held by Seoul-based KTCU.
“In the Korean investment environment, where interest rates remain low at about 2 percent, we believe this is a good opportunity to diversify the portfolio through investments in prime assets in theUnited States with strong fundamentals and steady income streams,” Sung-Seok Kang, head of global investments at KTCU, said in an e-mail. “We plan to expand this relationship further into other investment types.”
The Socony-Mobil investment is a mezzanine loan, which is junior to a first mortgage and pays a higher yield to compensate for the risk. Such investors typically have the right to seize the borrower’s equity in the event of default. KTCU last year underwrote $50 million in mezzanine debt on the Seagram Building, another New York landmark.
Mezzanine lending is a complex approach to property investment that not all foreign investors are comfortable with, said Ben Thypin, an analyst at New York-based Real Capital. Koreans typically prefer a direct ownership stake in a property because it gives them more control of the asset, he said.
Read More: http://www.bloomberg.com/news/2014-12-12/manhattan-towers-lure-koreans-in-1-billion-joint-venture.html
The commercial mortgage backed securities (CMBS) market is expected to end 2014 on solid footing, with loan delinquency rates falling and new issuance likely to surpass last year’s level, according to market observers.
The CMBS delinquency rate fell to 5.8 percent in November, its lowest level in five years, Trepp, LLC reported. As of Dec. 1, delinquencies have fallen 163 basis points, down from 7.4 percent in December 2013, according to Trepp.
“The CMBS market is heading into year-end with a lot of momentum,” said Manus Clancy, Trepp senior managing director. Increased volume, falling delinquency levels, a drop in the Treasury 10-year note yield and lower energy costs have produced a scenario in which “the wind is fully at the market’s back,” he said.
Trepp research associate Joe McBride said new CMBS issuance in 2014 should be just shy of $100 billion, in line with initial estimates for the year. CMBS issuance totaled approximately $86 billion in 2013. McBride noted that a number of factors have weighed on the CMBS market this year, including the interest rate concerns, lending standards, and the upcoming maturation of CMBS loans issued between 2005 and 2007.
While those concerns will likely persist, McBride said, early estimates point to 2015 CMBS issuance volume matching 2014 levels.
CMBS Lenders in Competitive Position for 2015
“CMBS lenders are certainly in a good competitive position for 2015,” said Sam Chandan, chief economist of Chandan Economics and a professor of real estate development at the University of Pennsylvania’s Wharton School. “I think that will allow them to capture a larger share of the market than they did in 2014.”
Ben Thypin, director of market analysis at Real Capital Analytics, said that while new CMBS issuance of about $100 billion in 2014 is still a far cry from the $230 billion raised in 2007 prior to the financial crisis, he noted that “we’re heading in the right direction.”
As for the large number of maturing CMBS loans that come due in 2015, 2016 and 2017, “the capital is certainly out there to refinance these loans,” Thypin said.
“We’re already starting to see new CMBS loans refinance old CMBS loans, often through the same relationship. So, so far, so good,” he added.
Read More: https://www.reit.com/news/articles/cmbs-market-boosted-positive-fundamentals-2014-comes-close
Let the consolidation games continue. Like all of the major commercial real estate services firms, CBRE Group Inc. continues to enhance its offerings through the procurement of smaller firms, and IVI International Inc. is the company’s latest acquisition. White Plains, N.Y.-based IVI brings to the table a four-decade-long history of providing integrated construction risk management and due diligence services to clients around the world.
“Owners and users of property are increasingly looking for a one-stop shop for their real estate services. CBRE can already provide a one-stop shop, but the acquisition of IVI will improve their already strong competencies in consulting and valuation services, in addition to eliminating a competitor,” Ben Thypin, director of market analysis with real estate research and consulting firm Real Capital Analytics, told Commercial Property Executive.
Read More: http://www.cpexecutive.com/business-specialties/investment/cbre-expands-valuation-biz-with-acquisition-of-ivi-international/1004109165.html
For some time now, commercial real estate observers have speculated about the endgame for Equity Office Properties in the Bay Area.
EOP's owner, Blackstone Group LP, was selling off assets in chunks — a building here, an office campus there. And while rumors swirled of more, and larger, sale offerings, news that Hudson Pacific Properties had agreed to buy the entire South Bay and Peninsula portfolio still came as stunning news.
That's partly because the $3.5 billion transaction was off market, executives said on a Monday morning conference call, keeping the deal very much below the radar.
The direct deal suited both the buyer and seller's goals: Blackstone wanted a counterpart that would let it maintain some exposure in a top office market. And Hudson Pacific, which long coveted a position in the Bay Area, would partially finance the deal by issuing Blackstone shares — making the giant private equity firm a 48 percent owner.
"When we sat around and said, 'We want to continue to play in Northern California, how do we do this,' what we did is pick up the phone and call Victor (Coleman, Hudson's CEO) and say, 'How can we work out a transaction?'" Jonathan D. Gray, head of global real estate for Blackstone, said on the call.
"We did not market these assets," he had said a few beats earlier. "There's plenty of liquidity in the market for high-quality office in Northern California."
The transaction is likely the largest office sale in the country since 2007, said Ben Thypin, director of market analysis for Real Capital Analytics, a research firm. It comes as the region's office market drives forward as one of the hottest in the U.S., drawing investors from around the world. Blackstone didn't want to cut its upside potential in that environment, apparently.
Multifamily REITs have lots of money from eager Wall Street investors, but it’s hard to find good opportunities to buy properties in core markets. Apartment REITs have been net sellers overall in 2014, though by a very small margin.
“They are looking to optimize their portfolios,” says Ben Thypin, director of market analysis for Real Capital Analytics (RCA), based in New York City. “A common strategy has been to shed non-core and build their assets in core markets.”
Read More: http://nreionline.com/reits/reits-struggle-buy-apartments
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.