Third-Quarter 2010 Real Estate Investment Outlook Report

A new report titled Third-Quarter 2010 Real Estate Investment Outlook: Investors Go On Offense, finding that Improving capital markets spark renewed interest across property types, has been released by National Real Estate Investor, Retail Traffic, and Marcus & Millichap. Earlier this year the groups invited private investors and developers of commercial real estate to participate in a survey to gather market opinions; the majority of respondents were private investors (36%); private partnerships (19%) or developers (16%) with an average of $35.8 million invested in commercial real estate. The full report can be read here. An excerpt:

The exclusive National Real Estate Investor/Marcus & Millichap Investor Sentiment Index shows that investor confidence has taken a major step forward in the past year. After bottoming out in 2009 with an index rating of 91, investor sentiment rose to 113 in the first quarter and 119 in the third quarter of this year. Although the index shows that sentiment is still well off the high of 148 that occurred in 2005, the positive trend over the past year is an encouraging sign that investor confidence is returning.

The index takes into account survey responses related to expected changes in property values for various real estate sectors, as well as plans to increase or decrease total real estate holdings. The baseline of 100 indicates neutral sentiment for the industry. The trajectory shows that investor sentiment reached its high in 2005, followed by a dip to a trough in 2008 and 2009, and is now showing signs of an upswing in 2010.

For more news and information visit Blumberg Capital Partners.

Keystone Crossings Office-Retail Complex Sold for $15M

PWA Real Estate LLC has entered into an agreement to purchase 8480-8520 Keystone Crossings, a three building office and retail property totaling 117,276 square feet in Indianapolis, Indiana for $15,500,000 according to IBJ.com. PWA acquired the properties from BPG Properties, Ltd. which originally purchased one of the buildings in the complex in 2005 as part of a six building portfolio transaction, with two buildings later developed as part of build-to-suit lease transactions for Fidelity Brokerage Services and Jared the Galleria of Jewelry. BPG was represented in the negotiations by Rebecca Wells, a senior vice president of Cassidy Turley's Indianapolis office.

"We were pleased to announce the sale of 8480-8530 Keystone Crossing," commented Christopher J. Locatell, vice president of BPG who is in charge of the firm's disposition activity. "Despite the challenging market conditions, the asset's strong occupancy, credit tenancy and diverse tenant mix attracted numerous bidders." The complex is currently 88% occupied by tenants including the General Casualty Company, GSA/SBA, 20/20 Institute and M/I Homes with no lease expirations during the next three years.

For more news and information visit Blumberg Capital Partners.

Bay Colony Corporate Center Sold for $185M

Lender Prudential Financial has entered into an agreement to sell Bay Colony Corporate Center in Waltham, MA for an aggregate purchase price of approximately $185 million to Boston Properties according to the Boston Herald. The purchase price consists of approximately $41.1 million of cash and the assumption of approximately $143.9 million of indebtedness. Prudential is selling the trophy property after seizing the site from former owner Eastern Real Estate last year. The closing is scheduled to occur in the fourth quarter of 2010 and is subject to customary closing conditions.

Bay Colony Corporate Center is a world-class office park located on 58 acres of forested land just minutes to downtown Boston. The four-building office park has approximately 1,000,000 square feet of Class A office space constructed between 1985 and 1998, with tenants including Cato BioVentures, Massachusetts Life Sciences Center, and Comerica Bank.

For more news and information visit Blumberg Capital Partners.

Energy Crossing I in Dallas Trades Hands

M&I Bank unloaded the deed for Energy Crossing I in Dallas, Texas to Lincoln Property Company, acting for a public pension fund. The sale price was undisclosed, but Lincoln acquired the building free and clear with Holliday Fenoglio Fowler and Stream Realty Partners representing the seller in the transaction according to CoStar.

The 239,166-square-foot office building at 15021 Katy Freeway, developed by Opus West, is currently 20% occupied and claims KBC Advanced Technologies Inc. and Electromagnetic Geoservices ASA as two of its long-term tenants. Energy Crossing I is a Class A, six-story office structure with a four-story, 900-space parking garage on 5.3 acres in the Energy Corridor submarket.

For more news and information visit Blumberg Capital Partners.

Tenants and the Recession

The National Bureau of Economic Research announced that the recession ended and economic recovery began in June 2009, but according to CRE service providers economic conditions for most American tenants are still in the pre-June 2009 cycle. CoStar has interviewed a group of real estate professionals taking a closer look at the divide between overall economic conditions and real estate needs, noting that it takes longer for businesses to see a need to expand into more space post-recession.

"Many mid-size and smaller companies are afraid of the possibility of a double dip recession. They are unconvinced that the recession is really over, despite the statements by several so-called economic pundits that the it "technically" ended in June 2009," said Howard Applebaum, president of Corporate America Realty & Advisors, a tenant rep firm in Rutherford, NJ. "Until we see greater access to financial liquidity and greater financial leverage for business and real estate borrowings, companies will remain conservative and avoid adding staff. What must be feared here is that without the capability of loosening the credit restrictions that banks have placed, it can lead to further staff reductions as companies that do not have access to "Wall Street" capital will burn through their cash holdings."

"Companies in the past two to three years have downsized and extended their leases; these companies do not have excess space," said Scott Abernethy, senior vice president of Cassidy Turley in Cincinnati, OH, noting that 90% of the companies they talk to are not hiring. "However, many firms with leases farther out in the future have excess space that they can't unload. If the economy improves, they feel they can backfill that excess."

"My feeling is true recovery will not occur until unemployment and sentiment/confidence returns,"said Kenneth W. Colwell, senior leasing and sales associate of Paragon Real Estate Group in San Francisco. "Only users who are recession-proof will expand or relocate, that includes medical and government, with startups looking for rock bottom subleases deals."

For more news and information visit Blumberg Capital Partners.

NAIOP CRE Annual Meeting in Orlando

NAIOP, the Commercial Real Estate Development Association, has announced that the Development '10: The Annual Meeting for Commercial Real Estate will be held October 27-29 at the Peabody Orlando in Orlando, Florida. With nearly 1,000 attendees expected at the event, three keynotes will be delivered to address the impact of the economic and political landscape on commercial real estate. Speakers will include:

Ed Gillespie, former Chair of the Republican National Committee and Counsel to President George W. Bush, will address the heated political situation leading up to the mid-term elections and how election results will impact a slowly recovering economy and future public policy.

Mark Vitner, Senior Economist with Wells Fargo, will present an economic forecast for 2011 and discuss where the economy stands in terms of long-term recovery.

Chris Lee, president of CEL & Associates, a noted real estate expert, will discuss the evolution of real estate cycles through history and illustrate new growth opportunities as a result of the current cycle.

For more news and information visit Blumberg Capital Partners.

GSA Signs 523,500 SF DIA Lease in Metro DC

Cassidy Turley announced that the U.S. General Services Administration (GSA) has awarded a 523,482 square foot lease for the Defense Intelligence Agency (DIA) to occupy Patriots Park in Reston, Virginia just outside of DC. Situated in two towers located at 12310 Sunrise Valley Drive, a brief drive out Interstate 66 from DC proper, DIA will enter into a 20-year lease at the property located near the Reston Town Center. The complex is currently undergoing a redevelopment by Boston Properties to meet the Department of Defense’s anti-terrorism/force protections standards. The pricing of the deal was not disclosed.

"Patriots Park is the logical choice for the DIA’s new facility," said Darian LeBlanc, senior managing director of government services for Cassidy Turley, which represented the GSA in the deal. "This selection allows them to consolidate multiple locations into a highly secure campus environment, central to all of Reston’s fantastic amenities and Metro’s Silver Line." DIA is headquartered at the Pentagon in Washington, D.C., with major operational activities at the Defense Intelligence Analysis Center (DIAC), Washington, D.C., the National Center for Medical Intelligence (NCMI), Frederick, Maryland, and the Missile and Space Intelligence Center (MSIC), Huntsville, Alabama.

For more news and information visit Blumberg Capital Partners.

Moody's/REAL Commercial Property Price Index for July Saw Prices Fall Further

The latest release of the Moody's/REAL Commercial Property Index showed a notable monthly decline in the All Property Type Aggregate Index as it decreased 3.1% in July. Nationwide, prices are currently 43.2% below their peak in October 2007 and are only 0.9% above the recession low recorded in October 2009. Moody's found the latest price drop unsurprising as it has "noted for several months that markets are likely to remain choppy for some time as property values slowly form a bottom in conjunction with a gradual recovery of the broader economy," said Moody's Managing Director Nick Levidy in a Wall Street Journal article.

According to CoStar, "sales transaction dollar volumes picked up for all property types during the second quarter of 2010 with significant increases in the office sector as well as multifamily... Generally, an increase in transaction volumes indicates a positive movement in prices; however, a significant proportion of distressed sales will add both volatility and noise to these indices and right now all we can say is that we are observing a shaky bottom." Neal Elkin, president of REAL, spoke with GlobeSt.com earlier this year and commented that "given a lot of the conflicting pressures on pricing in the asset classes, our view has been that bouncing along the bottom would be the most likely scenario. These types of gyrations—up a little bit, down a little bit, up a little bit—are consistent with that."

For more news and information visit Blumberg Capital Partners.

Florida Proposal To Allow Votes on Land Use

A new article from the Wall Street Journal titled "Florida Proposal Ruffles Builders" takes a closer look a new proposed legislation that would include voters in the decisions for land use, and the real estate community's reaction. Amendment 4, called "Hometown Democracy" by its supporters, would let the voters have a say on approving changes to a city's or county's comprehensive land use plan. Opponents say this would lead to gridlock at the polls and put a damper on plans by businesses to expand or relocate to Florida.

"Basically, the builders, together with the local commissions here, drove Florida over the cliff with reckless speculation," said Lesley Blackner, a Palm Beach-based environmental lawyer leading the drive. "What Amendment 4 does is give voters the check and balance" instead of "politicians who want to rubber stamp every development that comes their way."

"Even democrats are staying a fair distance away from it. It's gotten too much of an anti-business, anti-growth aspect to it,"said Florida pollster Tom Eldon. "It was a great idea when the economy was booming, but now that the economy is bad it's not safe ground."

"When you're no longer attracting business, the tax burden falls onto residents at a much higher rate," said Ryan Houck, who leads Citizens for Lower Taxes and a Stronger Economy, a political-action committee opposing the measure. "Businesses that might seek to come to Florida would find it incredibly difficult, costly, and uncertain. It would chase away business at a time when the state is hurting for tax revenue."

For more news and information visit Blumberg Capital Partners.

PricewaterhouseCoopers Real Estate Investor Survey Results

PricewaterhouseCoopers’ Korpacz Real Estate Investor Survey results were released today showing that the aerage overall cap rates decrease in 26 of the surveyed 31 markets. The current report provides overviews of 31 separate markets, including ten national markets — regional mall, power center, strip shopping center, CBD office, suburban office, flex/R&D, warehouse, apartment, net lease, and medical office buildings. The report highlights an improved lending environment with strong appetites from both debt and equity capital for quality real estate assets, with some surveyed investors noting a surprise at the speed at which debt availability has rebounded over the past year. “Many investors were waiting to pounce on the anticipated overflow of underwater and distressed-quality assets, but that scenario never quite materialized as expected,” Susan Smith, PwC’s real estate advisory practice director and survey author, said in a statement cited in the Denver Business Journal.

Key hilights specific to the office market and economy include:

As a whole, the office market continues to struggle. Although the overall vacancy rate for the national Central Business District (CBD) office market improved slightly, job growth and feeble tenant demand remain top concerns. Lackluster fundamentals are keeping investors and lenders focused on quality office properties and top-tier markets.

With the fragile economy continuing to hamper consumer spending, the retail sector is showing mixed reviews. While leasing activity remains sluggish in the national mall market during the second quarter of 2010, surveyed investors note that the dynamics of the leasing market are stabilizing.

For more news and information visit Blumberg Capital Partners.

Farragut Building Sold for $93.5M

Cassidy Turley arranged the sale of The Farragut Building in Washington, D.C. representing the seller, ING Clarion Partners, in the $93.5 million deal. The 146,648-square-foot, Class A office property sold to the Generali Group, a global insurance and financial products company. Falcon Real Estate Investment Co. LP assisted Generali in the sale. The Farragut Building is named for its location directly across 17th Street NW from Farragut Square and is currently 99% leased with science nonprofit The Heinz Center as its largest tenant, and other tenants including Consumer Specialty Products Association, McLarty Associates and Bessemer Trust.

"Pricing for office buildings is stabilizing, as cap rates gravitate toward historical levels," commented Jeff Kottmeier, Vice President, Director of Research at Cassidy Turley in a Citybizlist article. "Since the beginning of the year, $1.8 billion in office sales have taken place in the DC Metro area-40 percent ahead of this time last year."

For more news and information visit Blumberg Capital Partners.

Paramount Picks Up 1899 Pennsylvania for $149.4M

KanAm Grund Kapitalanlagegesellschaft mbH put 1899 Pennsylvania Ave. NW on the market back in July and this week found a buyer in NYC-based Paramount Group Inc. for about $149.4 million, according to Real Capital Analytics. The Frankfurt-based investment company bought a 95% stake in the building for $76 million in 2003 after DRI Development Services LLC bought and renovated the property in 2001. The building is currently 100% leased with tenants including Prognoz Corp. and the Science and Technology Policy Institute.

The 186,462-square-foot office building, located three blocks from the White House, was put on the market in hopes of fetching $150 million upon sale. Sources not authorized to discuss the deal put the final price at $151.1 million, or $812 per square foot, according to a Washington Business Journal article. The building was owned by a partnership between KanAm Grund Kapitalanlagegesellschaft mbH, Westwind Capital Partners and DRI Partners.

For more news and information visit Blumberg Capital Partners.

DiamondRock Acquires NYC Hilton for $68.4M

DiamondRock Hospitality announced that it's entered into an agreement to purchase the Hilton Garden Inn Chelsea New York City for $68.4 million. The Hilton Garden Inn is a 169-room hotel recently constructed and opened in 2007 on West 28th Street between 6th and 7th Avenues in New York City. The purchase price of $68.4 million represents a 12.9 multiple of the Hotel's 2010 full-year forecasted EBITDA of $5.3 million and better than a 7% capitalization rate on forecasted 2010 full-year net operating income of $4.8 million.

DiamondRock CEO Mark Brugger said in a Bloomberg BusinessWeek statement that the company wanted the hotel because the property has the "ability to charge essentially full-service room rates with a more profitable limited service cost structure as a result of its strong Hilton Garden Inn branding, access to Hilton Worldwide's powerful reservations system and traveler loyalty generated from the Hilton guest rewards program." DiamondRock retained the current hotel manager subject to a new, short-term management agreement.

For more news and information visit Blumberg Capital Partners.

Deka Immobilien Investment Picks Up Manhattan Tower for $123M

Germany's Deka Immobilien Investment GmbH has acquired 19 West 44th Street in Midtown Manhattan for $123.2 million from SL Green Realty. The 292,000 square-foot Class B office building on "Club Row" was previously purchased by SL Green in 2004 for $67 million. Since that purchase, SL Green made building improvements, including lobby and window upgrades and HVAC improvements; the new purchase price reflects a $422 per square foot value.

Commenting in an article about the sale and on current market conditions, Michael Knott, an analyst at real-estate research firm Green Street Advisors told the Wall Street Journal that "office leasing conditions are rolling along the bottom, not bouncing off of the bottom. This cycle is likely to see a very slow improvement … until companies become confident enough to start signing more paychecks."

For more news and information visit Blumberg Capital Partners.

Dallas' Davis Building Up for Sale

The Davis Building, a 20 story high-rise in downtown Dallas, has been put up for sale according to Dallas Business News. The property, owned by a partnership set up by Hamilton Properties, was financed with $32.6 million in CMBS debt that has been turned over to a special servicer; the owners have been unable to restructure or replace the financing. Marcus & Millichap Real Estate Investment Services will be marketing the property for sale. "It's the kind of quality asset that only comes to market once every decade or so," said Tom Huth of Omnium Management Co., who's been hired to oversee the Davis Building disposition. "The building is close to 90 percent leased and is doing very well."

Completed in 1925 at 1309 Main St. in Dallas, the property was the former home of the Republic National Bank, a high profile bank until the Savings and Loan crash of the '80's. The building was vacated in 1986 when the owners of the building planned to update the office building, and was later opened as a residential high-rise.

For more news and information visit Blumberg Capital Partners.

US Bank Opens New Overland Park Service Center

U.S. Bank CEO Richard Davis cut the ribbon today on a new service center in Overland Park, Kansas, a facility that will bring 1,300 new jobs to the area. The 24-hour call center at 12800 Foster Street, previously developed as the Capital One Home Loans headquarters building, is a 185,000 square foot office development leased to U.S. Bank; the bank expected to spend $21 million in improvements on the property when they entered into the agreement this past December.

Davis made it a point to note during the ceremony that the building, which currently houses 250 employees and expects to gain another 250 by the end of the year, is housing new jobs and not employees shifted from existing positions, spurring employment gains in the area. "We've been more impressed since we've got here than we were when we made the original decision," Davis said. "Your business community collaborated without any need for attribution. You told us there was unchecked opportunity for growth, so we can get as big as we need to be without worrying about tapping out the market. You delivered us some very positive incentives to be a part of this community, which will result in very good returns on your investment."

For more news and information visit Blumberg Capital Partners.

WTC Site Update: 5 New Skyscrapers, Tallest Building in US Underway

The annual update on the progress of rebuilding the World Trade Center in New York City was given today as over 200 international reporters listened on to the reports from Gov. David Paterson, Mayor Michael Bloomberg and developer Larry Silverstein of Silverstein Properties. "Though we have had delays," Paterson said, "and unfortunately we have had conflicts of opinion, we are on the road, we believe, to a very great success." One World Trade, formerly known as the Freedom Tower, and Four World Trade have structural steel rising above ground level, with One World Trade already at its 36th floor, and over a dozen trees have been planted in the memorial park.

CNN.com offers a brief overview of the future plans from Brookfield Properties which includes a virtual tour of the new facilities, touting 5 new skyscrapers, one of which will become the tallest building in the United States. The New York Times has also posted a gallery of 20 images with photographs from Fred R. Conrad that provide an intimate view of construction at the site of the World Trade Center. Four of the towers are expected to be completed by 2014.

For more news and information visit Blumberg Capital Partners.