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.
Bidding wars: A crowd of buyers is chasing a small number of properties for sale, causing cap rates to dive.
Shopping center deals seem to be coming fast and furious this year. In Dallas a nontraded REIT sponsored by Cincinnati-based Phillips Edison & Co. acquired the 70,500-square-foot Northpark Village; in the Cleveland suburb of Beachwood, Devonshire REIT, of Whitehouse, Ohio, bought the 249,900-square-foot Pavilion Shopping Center; and in Fort Lauderdale, Fla., Marcus & Millichap announced that a Brazilian buyer had acquired the 32,700-square-foot Plaza Del Mar shopping center.
It is odd, therefore, that observers are showing concern about the lack of properties — at least the A-quality ones — available for sale despite a huge amount of liquidity in the marketplace and buyers that are ready to pounce. “There is still not as much attractive product as the market wants,” said Ben Thypin, director of market analysis at Real Capital Analytics. Indeed, the volume of transactions involving commercial-mortgage-backed securities, usually the most common financing method for retail properties, was running behind 2013 levels — though Thypin also points out that there is usually a flurry of deals in the fourth quarter, meaning that those numbers can still change radically.
“There is a ton of liquidity, there’s just not a ton of product trading,” said Jimmy Board, a Houston-based senior vice president at Jones Lang LaSalle. “I’m surprised the CMBS market slowed down. Wells Fargo, for example, issued a report saying the bank was behind [the] 2013 numbers by $500 million in overall CMBS. In the past CMBS was the biggest part of the retail lending market.”
CMBS financing accounted for 48.26 percent of retail deals last year. So far this year, that has slipped to 47.7 percent, according to Real Capital Analytics.
Read More: http://www.icsc.org/sct/shopping-centers-today/october-2014/bidding-wars (paywall)
Many struggling shopping malls are trying to find salvation by going small—in their purchasers, sales prices and, in some cases, size.
As the nation's largest mall owners sell off or give up their most-troubled properties—dogged by deteriorating neighborhoods, newer rivals and online sales—smaller real-estate companies are snapping them up at discount prices and trying to find ways to pull them out their death spirals. Sometimes, that involves demolition.
It is a high-risk turnaround game that is gaining favor among local companies and small specialists that are gambling they know local markets well enough to succeed where the big guns failed.
According to Real Capital Analytics, 48 of the 201 U.S. malls that traded hands since early 2010 were sold out of "troubled" situations, most often involving delinquent mortgages. In most cases, the value of those properties fell so sharply that they were sold for much less than was owed on them. In the past year, malls with defaulted mortgages were sold at prices amounting to an average of 63% of their mortgage balances, according to Real Capital.
"These mall transactions show that investors now are interested in higher risk but potentially higher yielding retail investments in the U.S.," said Ben Carlos Thypin, Real Capital's director of market analysis.
Read More: http://online.wsj.com/article/SB10000872396390444230504577615932347574446.html
A July report on retail real estate put out by Real Capital Analytics (RCA) notes that sales of retail properties worth $2.5 million or more amounted to just over $2 billion during the month, less than half of June's total and 20% lower than a year earlier. But there were a few deals which made real estate investors take notice.
The largest retail property sale closing in July was the buyout of a partner in a 123,000 square-foot retail condominium at 717 Fifth Avenue in Midtown Manhattan. Jeff Sutton, joint-venture partner with SL Green at the property, had owned 39.08% of the property and SL Green owned 60.92%. After this latest transaction, SL Green has 10.92% and Sutton has 89.08%, according to Ben Carlos Thypin, director of market analysis at RCA. The property was valued at well over $600 million, according to the RCA report.
Read More: http://www.worldpropertychannel.com/north-america-commercial-news/real-capital-analytics-rca-717-fifth-avenue-jeff-sutton-sl-green-ben-carlos-thypin-john-hancock-tower-armani-dolce-gabbana-escada-prudential-real-estate-investors-deutsche-bank-jv-northstar-realty-finance-corp-6017.php
Vornado Realty Trust (VNO) said it agreed to buy retail space on New York’s Fifth Avenue, the world’s priciest shopping corridor, for about $707 million, and plans to sell $428 million of properties across the U.S. and Canada.
The purchase at 666 Fifth Ave. in Manhattan will be funded with debt along with proceeds from asset sales, New York-based Vornado said yesterday in a statement. The company will get net proceeds of about $144 million from the sale of assets including the Washington Design Center, the Boston Design Center and the L.A. Mart, and a further $186 million from an agreement to sell an office building in Washington, it said separately.
The Fifth Avenue purchase should exceed the record of $10,755 a square foot for New York store space, set by SL Green Realty Corp. (SLG) and Jeffrey Sutton when they bought a 12,700- square-foot (1,180-square-meter) Times Square building last year, said Ben Thypin, director of market analysis at Real Capital Analytics Inc.
Vornado’s 114,000-square-foot purchase also includes about 75,000 square feet that are part of the office portion of the building, which it’s acquiring under a long-term lease, according to the company’s statement. The company didn’t disclose the price breakdown for the retail and office portions.
Read More: http://www.bloomberg.com/news/2012-07-05/vornado-to-buy-retail-stores-at-666-fifth-ave-for-710-million.html
Just five years ago, the commercial real estate market was thriving. The delinquency rate on mortgage loans was at a record low, and the volume of new mortgages being sold to investors was at a record high.
Now the first of the mortgages that were securitized in 2007 have started to come due, and it is becoming clear just how bad many of the loans were. The time when investors were most eager to buy turns out to have been the worst time to do so.
Commercial mortgages — unlike residential ones — are seldom issued for periods of longer than 10 years, and often for as little as five. Many require no principal repayments during that period but call for the entire amount to be repaid in a balloon payment at the end of the loan. So it can be at maturity when the bad news arrives.
“Only 28 percent of the loans from 2007 due to mature in 2012 managed to pay off in full,” said Manus Clancy, the senior managing director at Trepp L.L.C., which monitors the commercial mortgage market.
Other loans in those securitizations were for seven or 10 years, so new waves of losses may arrive in 2014 and again in 2017.
Perhaps no loan that was securitized in 2007 illustrates the craziness of the market at the time better than one for a group of apartment buildings in Manhattan. The owner of the buildings was already under investigation for the tactics he had been using to raise rents, but that fact was not mentioned in the prospectus for the securitization. What was disclosed was the supreme optimism involved in underwriting the loan. The 36 apartment houses, owned by a group run by Joel S. Wiener, had produced cash flow of $5.4 million in 2006, but they secured a loan of $204 million, on which annual interest payments of $12.7 million would be required.
The loan went into default in early 2009, but Pinnacle continued to run the apartments. In November, the securitization sold the loan for $116.7 million. Ben Carlos Thypin, the director of market analysis at Real Capital Analytics, calculates that after all fees are considered, “the net loss to bondholders was 49 percent of the original loan balance.”
Read More: http://www.nytimes.com/2012/07/06/business/bad-mortgage-loans-burn-investors-and-tenants-high-and-low-finance.html?ref=business
Schnitzer West LLC has put up for sale its luxury retail shopping center in downtown Bellevue.
The Shops at the Bravern opened in the fall of 2009, in the dark aftermath of the financial crisis, with the only Neiman Marcus department store in the Northwest as the anchor tenant. The Bravern’s other retailers include luxury goods sellers such as Louis Vuitton, Hermes and Jimmy Choo.
Vacant spaces are less of an issue with a newer property, according to Ben Thypin, director of market analysis at New York research firm Real Capital Analytics Inc. Investors are also more interested in secondary markets, such as Bellevue and Seattle, because prices have increased sharply in primary markets, such as New York, Washington, D.C., and San Francisco, Thypin said.
He noted the April sale of the nearby Bellevue Galleria mixed-use project, which was fully leased at the time. Thor Equities LLC bought the 12-year-old property for $87.5 million, or $429 a square foot. Thor Equities specializes in well-located but underperforming properties.
Even though the Shops at the Bravern are newer than the retail shops at the Bellevue Galleria, Thypin anticipates they could sell for less per square foot because the new owner would bear the cost of building out the 14 vacant spaces for the new tenants. If that is correct, the price tag for the Shops at the Bravern would fall below the range of $133 million.
Read More: http://www.bizjournals.com/seattle/print-edition/2011/11/04/buyers-circling-luxury-retail-center.html?page=all
Ben Carlos Thypin, senior market analyst at Real Capital Analytics, attributes those high prices largely to the value investors place on dependable long-term returns.
The trend of the largest chains absorbing local and regional operators has enhanced the drugstore subsector’s appeal to investors, he says. Major chains with excellent credit ratings now occupy the majority of U.S. drugstores.
“Whether you are investing in a fund that buys these properties or buying one directly, you are basically buying a corporate bond,” explains Thypin. “You don’t have to do any management; you just sit back and collect your return.”
Read More: http://nreionline.com/finance/news/drugstores_low_risk_investors_1019/
“If Colony hands over the keys, that would indicate the firm doesn’t think Xanadu is most productive use of their resources despite the significant amount of capital they’ve already committed,” said Ben Thypin, an analyst at Real Capital Analytics Inc. in New York. “That shows it’s uncertain as to when Xanadu will produce income, much less become profitable.”
Read More: http://www.bloomberg.com/news/2010-08-05/barrack-s-colony-capital-may-lose-control-over-xanadu-mall-in-new-jersey.html
Companies purposefully letting properties go into foreclosure, which is known as strategic default, is a growing trend throughout the country, said Ben Thypin, a senior market analyst for Real Capital Analytics, a real estate research and consulting firm.
"People are trying to work it out if they can," he said. "If neither side is willing to give enough, is willing to compromise enough, the borrower feels they have no choice."
Thypin, who runs the distressed assets research group, said that companies don't want to continue making payments because they are based on a value that is no longer realistic.
Read more: http://www.thesunnews.com/2010/05/15/1475551/debt-ditched-by-design.html#ixzz1OL2BnlFU
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.