Eurozone Worries Impact South Wales Market

Jones Lang LaSalle released its South Wales Report 2012 noting that "Eurozone worries" hit market confidence, leaving them to describe the 2011 market as disappointing. The performance of the Welsh property market over the next year is likely to be influenced by the market’s reaction to new policies. An excerpt from the report:

Commercial property markets mirror economic uncertainty

Sentiment has been on the slide for most of the last six months and this has impacted on UK property markets. Investors and occupiers have become more cautious according to the latest data. This has not been helped by a further squeeze on bank financing, particularly at the height of the Eurozone crisis last year. It was not a major surprise therefore, that in late 2011 IPD announced the first decline in UK commercial property values in over two years.

These subdued trends are set to continue in early 2012. For occupiers, decisions are likely to be delayed as long as the economic outlook is uncertain. Until a clear upturn commences, cost-cutting, not space expansion, will dominate. The short-term outlook for investment volumes is also weak, with activity propped up by equity buyers, such as private and sovereign wealth.

As the economy becomes more supportive, there will be a revival in occupier demand. With caution still the keynote, this will be driven by structural events or pre-lets in a market starved of quality supply. A recovery in risk appetite will also lift investment activity, notwithstanding ongoing shortages of debt finance. The thaw is expected to be gradual with core assets in safe havens, such as London offices, benefitting first – a trend we have seen to date.

For more news and information visit Blumberg Capital Partners.

KBS Closes on Plano, TX Office Complex

KBS Real Estate Investment Trust III announced this week that it had acquired Town Center Office Park, a 522,043-square-foot, three-building office complex in the Plano submarket of Dallas. While full terms of the deal were not disclosed, Citybizlist Dallas reported in February that KBS was under contract to buy the property for $113 million, plus closing costs, from North Dallas Town Center LP and Tennyson Development LP. The CBRE Dallas Investment team led by Gary Carr represented the seller in this transaction. Bill Rogalla, KBS Central Region Senior Vice President and Director of Acquisitions and Dispositions, handled the transaction on behalf of KBS.

The three buildings at Town Center Office Park -- the six-story, 156,757-square-foot Town Center One, the eight-story, 209,179-square-foot Town Center Two and the six-story, 156,107-square-foot Town Center Three -- were completed in 2001, 2002 and 2006, respectively, and are 87.5% leased to 51 tenants. According to commercialrealestatedirect.com, JPMorgan acquired the complex's first two buildings in 2004 for more than $66 million in a venture with CarrAmerica Realty and developed the third building a year later.

"North Dallas and specifically the communities of Plano and Frisco have consistently ranked at or near the top in the national job and population growth rankings," said Rogalla. "Town Center Office Park is located within one of the most prominent master planned communities in the DFW region and KBS is pleased to be in a position to increase its presence within this submarket."

For more news and information visit Blumberg Capital Partners.

JV Developing Major Life Sciences Project in Boston

Clarion Partners announced today that it had entered into a joint venture with National Development, Charles River Realty Investors and Alexandria Real Estate Equities to develop a major life sciences and biotechnology building in Boston, Massachusetts. Located in the Longwood Medical Area of Boston, the project, dubbed Longwood Center, will include 413,536 square feet of space over 11 floors, with flexible laboratory, office and retail space to support tenants.

The property will be anchored by Dana-Farber Cancer Institute, one of the world leaders in cancer research and care, which has already committed to lease approximately 154,000 square feet. The area is home to numerous renowned medical, research and academic organizations including: Harvard Medical School, Beth Israel Deaconess Medical Center, Brigham and Women's Hospital, Joslin Diabetes Center and Children's Hospital-Boston.

"This project truly represents the next chapter in leading edge global research and development," said Mark Weld, Managing Director and Portfolio Manager in Clarion's Boston office. "We are pleased join with our development partners and Dana-Farber in being an integral part of making this vision a reality."

For more news and information visit Blumberg Capital Partners.

Parc 55 Wyndham Sold for $235M

New York-based Blackstone Group successfully acquired Parc 55 Wyndham from Rockpoint Group for $235 million, or $231,984 per room, in a distress sale according to a CoStar report. No brokers were named in the deal and terms were undisclosed.

A Bloomberg report earlier this month noted that Blackstone, which owns the Hilton Worldwide chain, would hold 75% of Parc 55, and Boston-based Rockpoint Group,would own most of the rest after investing $10 million of new equity. The article went on to note that Archon Group, a unit of Goldman Sachs Group Inc., provided $152 million of debt financing to the new owners, according to one of the people.

Parc 55 Wyndham Union Square Hotel is nestled in the heart of San Francisco featuring 1,015 spacious guest rooms and 15 suites and more than 30,000 square feet of event space, plus three on-site restaurants.

For more news and information visit Blumberg Capital Partners.

Brandywine Sells Herndon Office Building for $91.1M

Brandywine Realty Trust announced this week that it had sold a 268,240 square foot office building located in Herndon, Virginia for $91.1 million, or $340 per square foot, to Wells Core Office Income REIT. Cassidy Turley marketed the property for sale on behalf of Brandywine.

"The sale of this property achieves our objective of maximizing value from our existing portfolio," stated Gerard H. Sweeney, President and Chief Executive Officer of Brandywine Realty Trust. "It strengthens our balance sheet by providing additional liquidity, provides additional capital for our investment activities and demonstrates our commitment to execute key components of our 2012 business plan."

Brandywine completed the development of this property known as South Lake at Dulles Corner in November 2008, with design work from Noritake Associates, and subsequently leased the entire building to Time Warner Cable Inc. according to a NASDAQ report. Last May, citybiz real estate reported that Brandywine was looking to sell some of its Northern Virginia assets so it could target commercial properties located within the Beltway and within the District.

For more news and information visit Blumberg Capital Partners.

Cole Acquires 8 Sylvan Way for $53M

Cole Real Estate Investments (Cole), on behalf of its HPFVI fund, announced this month that it had acquired 8 Sylvan Way, a 176,000 square-foot office property in Parsippany, NJ, for $53 million in an all-cash deal. The Hampshire Companies sold the property in a deal brokered by CBRE. The Hampshire Companies redeveloped the property in 2009, including a new design by the architectural firm HLW, and repositioned the property as one of Morris County's leading "trophy quality" office buildings according to an article from The Paramus Post.

"With the location of the property, long remaining lease term, scheduled rent increases and desirable corporate headquarters, this acquisition corresponds with our overall conservative, disciplined investment strategy," said Robert Micera, chief investment officer, office and industrial, for Cole. "The Morris County, New Jersey, office submarket boasts great fundamentals, considering its strong economic base and educated workforce, and we are pleased to add The Medicines Company headquarters to our growing portfolio of corporate real estate."

The property serves as The Medicines Company's global headquarters with approximately 12 years remaining on the current lease term, with two five-year renewal options. The Medicines Company is a global pharmaceutical company focused on advancing the treatment of critical care patients in a hospital setting.

For more news and information visit Blumberg Capital Partners.

Global Effects on US Recovery

Preliminary reports suggest Europe may be slipping back into recession. 
That's one major danger to the US recovery. 

China suffered a rare trade deficit earlier in the year caused by weak external and internal demand after 5 months of decreased purchasing activity, and now manufacturing sector declines.  
Europe's double dip which looms stronger, will be affected further if China, a major market for European exports, continues to stagnate and shrink.  

That combined with credit shortages in Europe, means the easing of the sovereign debt crisis earlier this year, following the European Central Bank's(ECB) massive aid package, may all be for naught if global recession puts more pressure on a banking system already teetering on crisis.  Defaults and shrinking credit will reintroduce huge sovereign risk to a Euro Zone out of options other than full restructuring with dramatic write off's.  
And with a further domino effect on country risk through out the continent. 

The effect on the US in the banking/financial  sectors and credit availability and exports sectors certainly will echo with bad news.  

That scenario is one that could de-rail a nascent and fragile real estate recovery in the US (below).  Always a precursor to more serious troubles.  

One North American zone (in a hazardous world economy Canada and the US continue to build closer ties and interconnections across industry, energy and resources) advantage is a better positioned corporate sector and more stabally perceived fundamentals and political systems.  
In a volatile risk and surprise filled world that's a major capital attractor. 

Next week's release by the ECB may shed some light on money supply and recent bank lending - but doesn't presage the future.  

More important to the North American zone outlook, are the upcoming corporate earnings reports. 

Banks are set to contract loan portfolios by $1 trillion. This de-leveraging, though needed, will put further strain on the refinancing markets. Bond yields in Italy and Spain edge up. The German offer of a financial boost to the Euro zone financial rescue Fund, the European Financial Stability Fund, may ease concerns temporarily.

But we expect continued problems in Europe, absent some good news on fundamentals soon.