Legg Mason Acquiring Clarion Partners

Global asset manager Legg Mason Inc. announced that it has agreed to acquire a majority interest in Clarion Partners, the New York-based real estate firm that manages approximately $40 billion across the real estate risk/return spectrum. Under the terms of the deal, Legg Mason will acquire an 83% ownership stake in Clarion Partners for $585 million, and pay for its portion of certain co-investments on a dollar for dollar basis, estimated at $16 million. Clarion Partners was represented by Morgan Stanley, King & Spalding and Davis Polk & Wardwell LLP, and advised by Grail Partners. RBC Capital Markets and Azrack & Co. served as financial advisors to Legg Mason.

"Clarion Partners, with a focus on strong performance through market cycles, a positive growth profile and differentiated product offerings, brings an important alternative asset class to our portfolio of investment managers. Whether they seek growth, capital preservation or income, we are further able to offer our clients investments with attractive solutions. Most importantly, the experienced management team at Clarion Partners shares our passion for innovation, the creation of exceptional value through responsible investing principles and focus on excellence for clients. We welcome them to Legg Mason," said Joe Sullivan, Chairman and CEO of Legg Mason.

Clarion's previous majority partner, private equity firm Lightyear Capital, will sell its entire ownership stake in the transaction. Lightyear will continue to be "very active in the asset management space," said Mark Vassallo, managing partner of Lightyear Capital. Clarion will join Legg Mason as one of its independent investment management affiliates, and the management team (a significant number of which have signed long term contracts in conjunction with the transaction) will retain 17% of the outstanding equity in Clarion Partners. The deal is expected to close in the second quarter of 2016.

For more news and information visit Blumberg Partners.

Miller Global Buys Ocean Ridge Office Building

Miller Global Properties, a Denver-based real estate investment company, has purchased Ocean Ridge, a 75,000-square-foot office building in Carlsbad, CA for an undisclosed price. Louay Alsadek, Larry Cambra, Roger Carlson and Hunter Rowe of CBRE represented the seller, an unnamed institutional pension fund advisor, as well as Miller Global Properties. CBRE announced the sale, noting that the property was 77% leased at the time of sale.

"Ocean Ridge is the only LEED Gold multi-tenant office building in Carlsbad with subterranean parking," CBRE's Louay Alsadek said in a press release. "Combined with a credit tenant roster, an ideal location in proximity to I-5 and retail amenities along with expansive ocean views, Ocean Ridge is the foremost office investment in the entire submarket.

Located at 5796 Armada Drive, Ocean Ridge the three-story Class A property features ocean views adjacent to the Carlsbad Flower Fields and less than one mile from the ocean. Developed in the premier Carlsbad Ranch office district with direct access to I-5 from Palomar Airport Road, major tenants include Morgan Stanley, Charles Schwab, West Development and Meketa Investment Group.

For more news and information visit Blumberg Partners.

Colony Combines Entities

Colony Financial, Inc. and Colony Capital, LLC have completed their combination -- the former previously being a subsidiary of the latter -- to merge and form Colony Capital, Inc., becoming an internally-managed real estate and investment management company with more than 300 employees in 14 offices around the globe. The transaction was approved by an overwhelming majority of its shareholders at the Special Meeting on March 31, 2015. The transaction included the formation of an umbrella partnership real estate investment trust (UPREIT) with a subsidiary operating partnership that holds all the assets and directly or indirectly conducts substantially all the business of Colony Capital.

"This combination allows Colony Capital to expand its unique global culture and brand by utilizing its strong balance sheet to create bespoke investment products and platforms in real assets and at opportunistic points in cycles and geographies," said Executive Chairman Thomas Barrack, Jr. in a statement.

"The transaction is seamless for Colony's employees," added Chief Executive Officer Richard Saltzman. "It is business as usual with minimal integration logistics as everyone already works together as a team, albeit previously across separate legal entities."

Morgan Stanley & Co. acted as financial advisor to the Special Committee of the Board of Directors of Colony Capital in connection with the transaction. Wachtell, Lipton, Rosen & Katz acted as legal advisor to the Special Committee of the Board of Directors in connection with the transaction. Hogan Lovells acted as legal advisor to Colony Capital in connection with the transaction. Goldman, Sachs & Co. acted as financial advisor to Colony Capital, LLC in connection with the transaction. Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Colony Capital, LLC in connection with the transaction.

For more news and information visit Blumberg Capital Partners.

Washington Prime Acquires Glimcher in $4.3B Deal

Washington Prime Group Inc., a spinoff of Simon Property Group, announced this week that it had completed the acquisition of Ohio-based REIT Glimcher Realty Trust. The $4.3 billion acquisition was approved by shareholders of Glimcher Realty Trust in a special meeting on Sunday. According to a report from The Columbus Dispatch, the combined real-estate investment trust will be called WP Glimcher and will own and manage about 120 U.S. malls that contain about 68 million square feet of leasable space. Under the terms of the agreement, Glimcher shareholders will receive, for each Glimcher share, $10.40 in cash and 0.1989 of a share in WP Glimcher common stock.

"We are very pleased to have completed our acquisition of Glimcher so quickly, which will allow us to begin taking advantage of the strengths of the combined company, including a broad and diverse group of strong cash flowing assets and a strong platform in Columbus as a foundation for growth," said Mark Ordan, Executive Chairman of WP Glimcher. "We are focused on reducing leverage, including through joint ventures and possible asset sales, maintaining our investment grade rating, strengthening our asset base through development and redevelopment opportunities, and strategically acquiring new properties in both enclosed and open air large format shopping centers that have a long term place in their markets."

Citi is serving as financial advisor, and Wachtell, Lipton, Rosen & Katz is serving as legal advisor, to Washington Prime. Willkie Farr & Gallagher is serving as legal advisor to Washington Prime in connection with the sale of the two Glimcher properties to Simon. GreenOak Real Estate US and Morgan Stanley & Co. are serving as financial advisors, and Simpson Thacher & Bartlett is serving as legal advisor to Glimcher. WP Glimcher expects to issue fiscal year end 2014 earnings in late February, which will provide updated financial information and guidance for the newly combined company.

For more news and information visit Blumberg Capital Partners.

US Impacts European CMBS Rebound

A new article from the Wall Street Journal titled CMBS Make a Comeback in Europe examines how the commercial mortgage-backed securities market recovery in the United States is having an impact on the European market as some of the biggest US originators are ramping up European deals. While deal volume is still below pre-crisis levels, there have been seven new European CMBS issues this year worth €2.57 billion ($3.2 billion), according to data firm Trepp LLC, compared with €47.3 billion in the peak year of 2006. An excerpt follows:

In Europe, after a limited number of deals in 2012, the CMBS market slowly restarted in 2013, but was dominated by refinancing of multifamily portfolios. Last year, about €7.2 billion of CMBS was issued, but almost all of that was from the refinancing of three large German residential portfolios, according to Trepp.

"The predominance of German multifamily in new securitization at the beginning of 2013 was significant," said Patrizia Pirinoli, CMBS analyst at Goldstar Research Ltd. Most issues, she added "stemmed also from previous securitizations."

The recovery of Europe's CMBS market is partly due to work by a trade organization, the Commercial Real Estate Finance Council, which issued new guidelines for the securities in Europe, so-called CMBS 2.0. The guidelines are meant to guarantee to investors "more transparency, more access to the underlying documents," said Charles Roberts, a partner at Paul Hastings.

Many of the deals this year have been more complex than simple refinancing. Some have provided debt to borrowers to finance new acquisitions and others involved multiple loans. For example, Goldman Sachs completed two CMBS originations backed by loans on Italian portfolios owned respectively by Blackstone Group and Morgan Stanley.

Deutsche Bank has been a leading player in Europe this year. For example, in October, together with Crédit Agricole CIB, it sold a £750 million ($1.18 billion) CMBS issue to refinance the Westfield Stratford City shopping center in London. This year, Deutsche Bank also underwrote the first postcrisis multiborrower CMBS in Europe backed by two loans on retail and office buildings across the Netherlands.

Markus Kreuter, director for CRE origination at Deutsche Bank, confirmed that Deutsche Bank expects more deals and added France, Benelux and Spain among the markets that might see more CMBS activity next year. Italy is another market where, in the lights of Italian banks' negative results to the European Central Bank's stress tests, CMBS "is a product that can bring liquidity," said Mr. Kreuter.

For more news and information visit Blumberg Capital Partners.

Rockrose Buys Lincoln Square in $300M Deal

Rockrose Development Corp., one of New York's most pre-eminent and prolific developers, has purchased Lincoln Square, a 414,204-square-foot office building in Washington, D.C. The deal was brokered by The Singer & Bassuk Organization which helped obtain a $227 million loan from Morgan Stanley to fund the acquisition. Rockrose brokered the acquisition in-house, and Gerald Trainor, Kenneth Marks, and James Cardellicchio of Transwestern represented the seller, Ralph Dweck, according to a Citybizlist article.

"The East End is one of the greatest cultural destinations in the Washington area, with museums, galleries and theatres within walking distance, and 555 11th Street is at its epicenter," Rockrose President Justin Elghanayan said in a statement. "The building is also home to the Landmark Theatres' E Street Cinema, a destination for cineastes in search of the finest indie and art films."

Designed by Hartman-Cox architects and completed in 2001, the Class A Trophy building at 555 11th St. is a 13-story office property with street level retail totaling 406,929 rentable square feet. Lincoln Square boasts a three-story marble lobby atrium, three levels of underground parking, a fitness center and retailers such as Jos. A. Bank, Starbucks and a 35,000-square-foot Landmark Theatre. Latham & Watkins' new lease, which solidified its commitment to Lincoln Square with a 15-year extension through 2031, contends that ownership will carry out a capital improvement program involving base building upgrades to the restrooms, fitness center and main lobby.

For more news and information visit Blumberg Capital Partners.

Real Estate Investors Pushing New Construction

In a new article from the Wall Street Journal titled For Real-Estate Investors, It's Out With the Old, Eliot Brown explores how the global hunt for yield is rippling through the U.S. property market. With foreign investors and pension funds push up prices for top-quality, low-vacancy office buildings, several publicly traded real-estate investment trusts such as Boston Properties are piling into new projects offering better growth potential, even if it means more risk. An excerpt follows:

"Most of the REITs are pivoting to development or heavy redevelopment as an investment strategy," said Jed Reagan, an analyst at Green Street Advisors Inc. who follows office landlords. "There's so much aggressive capital out there that's looking for a home," he said.

Boston Properties' latest deal, for the buildings at 601 Lexington Ave. in Manhattan and 100 Federal St. and Atlantic Wharf in Boston, puts the company on track for more than $2 billion in property sales this year, up from $1.3 billion in 2013. At the same time, it had $3.5 billion of projects under development in the second quarter, including a San Francisco site that is to be the second-tallest tower west of the Mississippi River.

A year earlier the company developed $2.5 billion of projects, its highest level in at least a decade.

"We're certainly more bullish on development than buying buildings," Mr. Zuckerman said in an interview in his Midtown Manhattan office.

"Older buildings are trading at higher prices per square foot than where we can build," added Owen Thomas, the former Morgan Stanley executive who became Boston Properties' chief executive last year.

For more news and information visit Blumberg Capital Partners.

Blackstone To Sell Five Boston Towers for $2.1B

Oxford Properties Group, the property investment arm of the Ontario Municipal Employees Retirement System (OMERS), is leading a consortium of buyers that has agreed to buy five high-rise office towers in Boston, MA from Blackstone Group for about $2.1 billion. According to a Boston Globe article, Blackstone originally acquired the properties when it bought Equity Office Properties Trust, a landlord built by the Chicago real estate magnate Sam Zell, for $39 billion in 2007. Oxford Properties oversees about $20 billion of assets it manages for itself and on behalf of partners. Other bidders on the Boston portfolio reportedly include the Government of Singapore, and a joint venture of Norway's sovereign wealth fund and MetLife Inc.

As part of the agreement, Oxford would buy all of 100 High St. and 125 Summer St., according to a Wall Street Journal report. Oxford intends to partner with the asset management arm of J.P. Morgan Chase & Co. to buy three towers: 60 State St., 225 Franklin St. and One Memorial Dr. in neighboring Cambridge. The five-building portfolio totals almost 3.3 million square feet and are properties mostly in downtown Boston.

Blackstone Group is also selling its ownership stake in another Boston building in the portfolio, Rowes Wharf, to Morgan Stanley, which is its partner in the building.

For more news and information visit Blumberg Capital Partners.

Lloyds Sells Australian Property Loans to Blackstone, Morgan Stanley JV

In a statement on Wednesday, Lloyds Banking Group announced that it was selling a portfolio of Australian corporate real estate loans to AET SPV Management, a joint venture sponsored by Morgan Stanley Real Estate Investing and Blackstone, for £388 million (or $252.4 million) in cash. The distressed property loans are reportedly valued at £809 million ($526.3 million). A Zacks Investment Research summary of the deal reports that the portfolio comprises nearly 60-70 commercial property loans in Queensland, Melbourne and Canberra.

The proceeds from the portfolio, which recorded losses of £183 million in 2011, will be used to pay down Lloyd's debt. The loans were acquired by Lloyds when it purchased HBOS in 2008, including the Bank of Scotland and its international unit, BOS International.

Dave Smith, Chief Executive of Lloyds International, said in a statement: "This transaction further de-risks the Australian business, and results in a cumulative 92% reduction of our real estate non-performing loan portfolio." British taxpayers hold a 40% stake in Lloyds.

According to a Bloomberg article, European banks are trying to sell real estate assets as they seek to meet stricter capital rules. Lloyds, which has cut more than 30,000 jobs since its 20 billion-pound taxpayer rescue in 2008, last month raised its asset-reduction plan for the year by 5 billion pounds to at least 30 billion pounds and expects to meet its 2014 target a year early.

With the acquisition, Blackstone will add to its already sizable real estate portfolio, which includes Hilton Worldwide, reported the New York Times. Last year, the firm acquired roughly 600 malls across the United States for $9.4 billion from the heavily indebted Australian company Centro Properties.

For more news and information visit Blumberg Capital Partners.

Normandy Closes $140M Loan Portfolio

Normandy Real Estate Partners announced this week that it had closed on a $140 million loan from Morgan Stanley. John Campanella, senior managing director, and Paul Spellman, associate vice president with Cassidy Turley, negotiated this transaction on behalf of Normandy. The 10-building portfolio totals 787,425 square feet and is based in Northern Virginia and suburban Maryland, with six properties concentrated in the Westfields International Corporate Center in Chantilly, VA.

"This successful transaction exhibits the strength of our vertically integrated platform as we have leased approximately 500,000 sf over the past three years, bringing occupancy to 93 percent," said Gavin Evans, Principal, Normandy Real Estate Partners. "This financing fully retires the original acquisition debt on the portfolio and allows us to further build on our vision and strategic plan for the Northern Virginia market."

"We continue to see strong lender interest in quality assets owned by well capitalized sponsors like Normandy", said John Campanella, Senior Managing Director, Cassidy Turley.

For more news and information visit Blumberg Capital Partners.

Real Estate Delinquencies in US Top 10%

According to a new report from Morgan Stanley, delinquencies on commercial loans packaged and sold off as bonds topped the 10% mark last month for the first time in the United States. Morgan Stanley analysts said that payments that were more than 30 days late jumped 26 basis points to 10.15% in April. Delinquency rates for loans bundled into securities during the bubble years, when property values peaked amid lax underwriting, have reached 10.37% for 2006 deals and 13.26% for those in 2007.

"The bottom line is that loan performance is not yet exhibiting significant improvement," according to the analysts led by Richard Parkus in New York. "Many market participants have come to believe that credit deterioration is more or less over, and were caught off guard by April’s rise."

"Loans originated after 2005 had weaker loan characteristics," Parkus said in a telephone interview with Bloomberg. "On top of that, they were done at the peak of the cycle so they didn't benefit from any price appreciation prior to the crisis."

For more news and information visit Blumberg Capital Partners.