Invesco Buys San Francisco Office Tower from Hines

Invesco Real Estate closed this week on the purchase of 101 Second Street in San Francisco, a 26-story office tower at Second and Mission streets, from a subsidiary of the Hines U.S. Core Office Fund LP. While financial terms of the deal or a definitive sales price were not disclosed, a source familiar with the deal told Bloomberg that the building traded hands for $291 million, which, at $750 a square foot, would make it San Francisco's most expensive deal for a stabilized office property in the past year. The sales price is nearly 10% higher than the price tag that the seller was targeting, according to market sources.

"It was a very competitive process but an asset we think makes a lot of sense to own long-term as this location and quality is rarely found in San Francisco," Greg Kraus, a managing director at Atlanta-based Invesco, said in an e-mail. He declined to comment on the price. 101 Second Street is roughly 90% leased, with major tenants including Reed Smith LLP, Ziff Davis Media Inc., Nexant Inc. and wealth management firm Aspiriant.

Hines, in partnership with Sumitomo Real Estate of Japan, originally acquired the property along with its companion building at 55 Second Street for $282 million from a Cousins Properties partnership in 2004. According to a San Francisco Business Times article, the two buildings were developed together, and are two of the strongest assets in a portfolio that is being recapitalized. While Hines has retained Eastdil Secured to market 55 Second Street, some speculate that the strength of the 101 Second Street transaction may allow Hines to hold on to the second property.

"I would be very careful of buying anything above what it costs to build," said Ken Rosen of the the Fisher Center for Real Estate and Urban Economics at UC Berkeley, who suggested that area pricing had become a bit inflated. "It makes me uncomfortable that we are seeing that again in San Francisco. It's a mistake. You can't rely on interest rates staying low forever. There is no question in my mind that by 2017 we will have moved back to a 4 or 5 percent treasury bond. Maybe it won't happen as quickly as I think, maybe it will happen sooner. So if you are buying something based on 2.6 treasury, it's a mistake. You have to look at replacement costs."

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DC's Thurman Arnold Building Sold for $505M

Manulife Financial Corp. moved forward with the sale of the Thurman Arnold building at 555 12th St. NW in Washington, DC as MetLife and a Norwegian pension fund manager have teamed up to pay roughly $505 million for the property. Manulife originally announced last May that it was seeking buyers for the building, having lost the law firm Arnold & Porter LLP as its anchor tenant. Manulife retained Eastdil Secured to market the 12-story building, which was assessed at $203.8 million, according to a Washington Business Journal article. The sale on the property — now assessed at $579.8 million, according DC's Office of Tax and Revenue — closed Wednesday morning as MetLife and Norges Bank Investment Management secured the property.

The 18-year-old Thurman Arnold Building encompasses a full city block in the East End, at the corner of F and 12th streets. The property is roughly 94% leased, but Arnold & Porter will be moving out of the 447,772 square feet it occupies when its lease ends in 2015. The building is named after the iconoclastic DC lawyer Thurman Arnold who cofounded Arnold & Porter along with Paul A. Porter and Abe Fortas.

For more news and information visit Blumberg Capital Partners.

China Greenland Investing $2B in London Skyline

Greenland Holding Group Co., a major Chinese state-owned real-estate developer, announced plans this week to invest £1.2 billion ($2 billion) in two real estate projects in London, marking its entry into the U.K. market. Greenland signed an agreement to buy developer Minerva's Ram Brewery, a historic seven acre site in Wandsworth claimed to be the UK's oldest working brewery until it closed in 2006, according to a City A.M. article. Minerva was acquired by clients of Ares Management and Delancey in 2011, who sold the property this month to Greenland for £600m. The brewery site has outline planning consent for 661 new homes, including a 36-story tower providing 166 units and 9,500 square metres of space for new shops and restaurants.

Paul Goswell, managing director of Delancey, said: "Since acquiring Minerva two years ago, we have worked hard to comprehensively redesign the original scheme which culminated in planning consent being secured last December. Our strategy had been to implement the scheme ourselves, possibly with a partner, but that changed when Greenland made their unsolicited proposal."

Greenland president and chairman Zhang Yuliang, who flew to London for the signing of the Ram Brewery deal, said: "London is the global financial centre as well as the most open and diversified city that enjoys the most mature economic development, making it the first option for our investment in Europe. Due to the active trading in London local real estate market in the last two years, the average residential price rose by 10% in 2013, and the increase in demand is expected to continue in 2014. There have been more and more individual investors who favor the UK market, thanks to the stable return on assets, high quality assets and sound market liquidity."

Guy Grainger, UK CEO of Jones Lang LaSalle, which aligned Minerva with Greenland, described the project as a landmark transaction for the London residential market. "This deal emphasizes the strong relationships currently being created between the UK and China, and further highlights London as the No 1 destination for international capital," he added.

Greenland will also build apartments on a 3,700-square-meter site in the city's financial district of Canary Wharf. Greenland said it plans to build London's tallest luxury residential housing project at the site. More details on that project will be announced at the end of the month, the company said.

For more news and information visit Blumberg Capital Partners.

Prudential JV Sells Seattle Tower for $150M

Heitman America Real Estate Trust, a Chicago-based real estate investment management firm, purchased 1800 9th Avenue in Seattle, Washington for $150.38 million, or about $476 per square foot. Heitman acquired the property from The Prudential Realty Group and Talon Private Capital, a joint venture that originally purchased the 312,700-square-foot office tower in December 2011 from Regence BlueShield in a sale-leaseback transaction for $76.5 million. Prudential and Talon were represented by Stuart Williams and Laura Ford of Jones Lang LaSalle, while Heitman handled the acquisition in-house, according to a CoStar report.

Also known as the Regence Building, 1800 9th Avenue was originally designed by LMN Architects and built in 1990 in the Seattle CBD submarket of King County, in close proximity to the Convention Center Metro Station and I-5. Talon Capital hired Foushée & Associates to redevelop the 15-story, 315,837-square-foot office building, with modifications including a new main lobby, an updated fitness center, new 4th floor exterior deck, and new HVAC controls. According to reports the building was 97% leased at the time of sale, with Amazon.com occupying more than half of the building.

For more news and information visit Blumberg Capital Partners.

Parkway Acquires Bank Of America Center In Orlando for $52.5M

Parkway Properties, Inc., an Orlando, Florida-based real estate investment trust, announced this week that it had acquired its co-investor's 70% interest in the Bank of America Center, located in Orlando, Florida, that was previously owned by Parkway Properties Office Fund II, L.P. Parkway takes full ownership of the asset for $52.5 million, or about $178 per square foot, which values the property at $75 million, according to a CoStar report. The acquisition was funded using approximately $28.8 million of cash and the assumption of $23.7 million of in-place mortgage indebtedness that is secured by the property.

"We remain committed to building a high-quality portfolio of assets located in targeted submarkets throughout the Sunbelt. The Bank of America Center is our headquarters location and is a landmark asset in the Orlando CBD. It is a core-plus investment that has a solid base of high-quality, credit tenants with the opportunity to add value through leasing the remaining vacancy at the building," said James Heistand, Parkway Properties' President and Chief Executive Officer.

The Bank of America Center at 390 N. Orange Ave. is a 28-story, 421,069 square foot Class A office tower originally constructed in 1988 with design by Morris Architects. Also known as Barnett Bank Center and NationsBank at duPont Centre, the property was 87.4% occupied in October 2013, with Parkway expected it to generate an initial full-year cash net operating income yield of approximately 6.3%.

For more news and information visit Blumberg Capital Partners.

NorthMarq Acquires Cushman & Wakefield – Commerce

A division of NorthMarq, the Minneapolis-based holding company previously known as Marquette Real Estate Group, acquired Cushman & Wakefield – Commerce based in Salt Lake City, Utah under the name Cushman & Wakefield/NorthMarq (CWN). Cushman & Wakefield – Commerce was an independently owned and operated Cushman & Wakefield Alliance firm that was the sixth-largest commercial real estate company in the Puget Sound region, according to a Puget Sound Business Journal article. The terms of the private deal, which officially closed in December 31st, were not disclosed, but the new company did announce that their combined offices have annual revenues of more than $100 million, and manage more than 50 million sq. ft. of commercial real estate assets, administered by nearly 750 employees.

"This new relationship makes both firms stronger. We will broaden the capabilities we offer clients, leverage best practices from both companies, and provide expanded opportunities for our employees," said Jeff Eaton, president of CWN. "In addition, because both of our firms are part of the Cushman & Wakefield global organization, we are already well-aligned operationally."

"We are excited about the opportunities to grow our business through this new partnership. The combined platform and service offerings through CWN will help our professionals better serve their clients in this ever-changing market. This is a great fit for us, as both firms share similar cultural values to provide great support to employees, offer exceptional service to clients and serve our respective local communities," said Mike Lawson, president of Commerce Real Estate Solutions.

Lawson and Commerce executives Bill D'Evelyn and Rodney Gibson will join a newly formed executive committee that will manage both companies. That committee, led by Jeff Eaton, will also include Mike Ohmes, Lisa Dongoske and Clint Miller from CWN.

For more news and information visit Blumberg Capital Partners.

Office Vacancy Rates Continue to Decline

A new report from Cassidy Turley, expected to be released in full on January 13, examines the U.S. vacancy rates through the fourth quarter of 2013 and the early news is promising. According to the company, vacancy rates continued to decline in most metropolitan statistical areas in Q4, with rents rising in over half of the country. Further, the report reveals that vacancy is now 220 basis points lower than its recessionary-peak of 17.3%.

"Office vacancy is clearly tightening, but at a rate that is much slower than past recoveries," said Kevin Thorpe, Chief Economist at Cassidy Turley. "Steady job growth and lack of new development has vacancy falling in 70% of the country, but the office sector is still adjusting to the new era of tenant downsizing and space efficiency. Rent growth is still being powered by energy-driven and tech-driven markets, but the rent recovery is clearly beginning to roll into more pockets of the country. Supply/demand fundamentals suggest the majority of the country will be pushing office rents upward by this same time next year."

The top 10 U.S. markets in terms of 2013 rent growth were:

San Francisco, with 11.8% rent growth;
New York, at 9.5%;
Denver, with 7.8%;
San Jose/Silicon Valley, with 7.3%;
Austin, with 7.0%;
Dallas, with 5.6%;
Salt Lake City, with 5.5%;
San Mateo County, at 4.9%;
Oakland-East Bay at 4.4%; and
San Diego, with 4.3% rent growth

For more news and information visit Blumberg Capital Partners.