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Monthly Archives: August 2013

All Eyes on New Orleans in 2013

Eight years after Hurricane Katrina flooded 80% of the city and displaced 400,000 residents, New Orleans has become one of the fastest-growing U.S. commercial real estate markets. Luxury housing, retail and office projects are under way in a construction boom after the inflow of $120.5 billion in federal money. Tourism spending is at a record, fueling hotel demand, as visitors flock to the home of Jazz Fest and Mardi Gras.

This year through May, commercial real estate transactions in the Big Easy totaled $424.7 million, up 41% from the $301.1 million in all of 2012, according to Real Capital Analytics, a global research firm focused exclusively on the commercial real estate market. New Orleans was the only U.S. market among 55 tracked by the research firm in which sales have surpassed last year’s total.

Sean Cummings, Executive Officer of Ekistics Inc, has developed 18 New Orleans projects, including condominiums, hotels and luxury lofts with floor-to-ceiling windows at a former rice-processing plant in a gentrifying neighborhood. Up next: a residential complex planned for a weed-choked lot currently home to an abandoned school bus.

“New Orleans was once unappealing to many investors because it was thought of as a giant bar,” said Cummings, the 48-year-old chief executive officer of Ekistics Inc. and a native of the city. Today, “more and more people choose the city for its quality of life. New Orleans has a lot to offer. It’s sexy, it’s vibrant, it’s full of life.”

All Eyes on New Orleans in 2013

Eight years after Hurricane Katrina flooded 80% of the city and displaced 400,000 residents, New Orleans has become one of the fastest-growing U.S. commercial real estate markets. Luxury housing, retail and office projects are under way in a construction boom after the inflow of $120.5 billion in federal money. Tourism spending is at a record, fueling hotel demand, as visitors flock to the home of Jazz Fest and Mardi Gras.

This year through May, commercial real estate transactions in the Big Easy totaled $424.7 million, up 41% from the $301.1 million in all of 2012, according to Real Capital Analytics, a global research firm focused exclusively on the commercial real estate market. New Orleans was the only U.S. market among 55 tracked by the research firm in which sales have surpassed last year’s total.

Sean Cummings, Executive Officer of Ekistics Inc, has developed 18 New Orleans projects, including condominiums, hotels and luxury lofts with floor-to-ceiling windows at a former rice-processing plant in a gentrifying neighborhood. Up next: a residential complex planned for a weed-choked lot currently home to an abandoned school bus.

“New Orleans was once unappealing to many investors because it was thought of as a giant bar,” said Cummings, the 48-year-old chief executive officer of Ekistics Inc. and a native of the city. Today, “more and more people choose the city for its quality of life. New Orleans has a lot to offer. It’s sexy, it’s vibrant, it’s full of life.”

UPDATE: Blackstone selling stake to London’s Broadgate for $2.7 Billion (£1.7 Billion)

Blackstone Group LP (BX), the largest investment manager of private-equity real estate funds, is selling their 50% stake in London’s Broadgate Complex for over $2.66 billion (£1.7 billion)in a private deal. Two sources, who asked not to be identified, said that a sovereign-wealth fund is under contract to acquire the interest, but declined to identify the buyer. They also tell reporters that this will be one of Europe’s largest office deals.

Although it was largely speculated that Norway’s government-wealth fund was in talks to buy the stake, the sources claim that they are not the buyer.

Blackstone purchased the stake for $3.3 billion (£2.1 billion) in 2009 under agreement that they would not sell the stake for three years.

“You have to assume that anyone that bought major property in 2009 or 2010 is well into the money,” says Dan Fasulo, Managing Director of Real Capital Analytics (RCA), a research firm focused exclusively on the global commercial real estate market. “Blackstone and others that took the risk of making large acquisitions at that time are going to be richly rewarded.”

Update: (Aug 22, 2013) GIC Pte, a Singapore sovereign-wealth fund, is the buyer of Blackstone’s 50% stake to London’s Broadgate.

Blackstone selling stake to London’s Broadgate for $2.7 Billion (£1.7 Billion)

Blackstone Group LP (BX), the largest investment manager of private-equity real estate funds, is selling their 50% stake in London’s Broadgate Complex for over $2.66 billion (£1.7 billion)in a private deal. Two sources, who asked not to be identified, said that a sovereign-wealth fund is under contract to acquire the interest, but declined to identify the buyer. They also tell reporters that this will be one of Europe’s largest office deals.

Although it was largely speculated that Norway’s government-wealth fund was in talks to buy the stake, the sources claim that they are not the buyer.

Blackstone purchased the stake for $3.3 billion (£2.1 billion) in 2009 under agreement that they would not sell the stake for three years.

“You have to assume that anyone that bought major property in 2009 or 2010 is well into the money,” says Dan Fasulo, Managing Director of Real Capital Analytics (RCA), a research firm focused exclusively on the global commercial real estate market. “Blackstone and others that took the risk of making large acquisitions at that time are going to be richly rewarded.”

Update: (Aug 22, 2013) GIC Pte, a Singapore sovereign-wealth fund, is the buyer of Blackstone’s 50% stake to London’s Broadgate.

Blackstone selling stake to London’s Broadgate for $2.7 Billion (£1.7 Billion)

Blackstone Group LP (BX), the largest investment manager of private-equity real estate funds, is selling their 50% stake in London’s Broadgate Complex for over $2.66 billion (£1.7 billion)in a private deal. Two sources, who asked not to be identified, said that a sovereign-wealth fund is under contract to acquire the interest, but declined to identify the buyer. They also tell reporters that this will be one of Europe’s largest office deals.

Although it was largely speculated that Norway’s government-wealth fund was in talks to buy the stake, the sources claim that they are not the buyer.

Blackstone purchased the stake for $3.3 billion (£2.1 billion) in 2009 under agreement that they would not sell the stake for three years.

“You have to assume that anyone that bought major property in 2009 or 2010 is well into the money,” says Dan Fasulo, Managing Director of Real Capital Analytics (RCA), a research firm focused exclusively on the global commercial real estate market. “Blackstone and others that took the risk of making large acquisitions at that time are going to be richly rewarded.”

Update: (Aug 22, 2013) GIC Pte, a Singapore sovereign-wealth fund, is the buyer of Blackstone’s 50% stake to London’s Broadgate.

Wells Fargo to buy $1.6 Portfolio from ING

Wells Fargo is purchasing $1.6 billion (29 US loans) from ING’s Real Estate portfolio, outbidding Bank of America, Capital One and TD Bank.

As previously reported by Mortgage Observer Weekly, ING plans to sell a portfolio of $2.5 billion U.S. loans and ultimately withdraw from the US commercial real estate market.

A unit of ING provided a four-year $100 million loan on the 245,500 square-foot Metropolitan Tower in 2011, according to Real Capital Analytics, a global commercial real estate research company focused exclusively on commercial real estate. The 76-story New York skyscraper designed by architect Frank Gehry, is financed with a $539 million loan provided by a syndication of six led by Hypothekenbank, according to data from Real Capital Analytics.

RCA Joined IRR in a Presentation Summarizing Overall US Performance in H1’13

Real Capital Analytics (RCA) recently joined with Integra Realty Resources (IRR) to present an overall summary of performance in the U.S. from January to June of 2013—including a comparison of the U.S. to other countries— on Thursday, August 16th, in Midtown Manhattan.

“We’ve had a good first half, transaction activity was up about 25% over 2012,” said Bob White, President of RCA. “It’s going to be tough to match that in the second half of the year. The activity at the end of 2012 because of the capital gains tax year pushed a lot of activity to early 2013. Now, we’re seeing a slowing in the rate of acceleration but I don’t think that’s evidence of any impact of rising interest rates; we haven’t seen the market respond to the run up of rates in May and June. A handful of deals fell through but that actually made investors eager to get deals done, in order to lock in rates.”

Sector wise, there were several noteworthy shifts, White said. “We’re seeing dynamic changes among property types. Apartments and major office towers were sort of perfectly priced, and now we’re seeing a plateau. Office is starting to outperform CBDs, retail has had the biggest pop in volume and price appreciation while unflagged hotels have seen the most activity this year.”

“So riskier investments are coming back,” White declared. “Meanwhile, industrial has been a laggard. Prices are up about 8% over last year, that’s about 17% off peak. Apartments are at peak, CBD’s are at or above peak and suburban markets are about 30% off.

“Things that were close to the top of value and considered risk averse have peaked and those that were farther from peak are heading to that level,” he noted. “That’s a sea change, that investors are embracing risk. Before, all we heard was ‘core market’ and ‘buy risk averse.’ ”

White had other surprises to report. “We’re seeing suburban office outperform CBDs for the first time and unanchored shopping centers are up 12% in price; that’s strong.”

In terms of investor type, those leading the pack and those falling behind were literally all over the map, he said. “Private investors have returned, they tend to be able to smell the opportunities first. They were the most impacted by the credit crunch so now that it’s easier to finance properties, they’re back in the market. We’re also seeing the ‘1031 market’ kick in. Public REIT’s should be bigger buyers than they’ve been. We are seeing some IPOs that could be game changers, whether it’s the Empire State Building or Blackstone throwing out Brixmor, La Quinta or Hilton. It all will happen in the next six months, and those are just the ones we know about, so keep your eyes on the sector.” Of institutions, he said, “they’re deploying the most capital. Some of them reported record fund-raising levels in the second quarter, so the inflow is good.”

Less surprising, perhaps, but worth noting, is the strong performance of the U.S. against the rest of the world. “The US looks like a bastion of stability compared to Europe and Asia,” White asserted. “And we’re seeing a lot of foreign capital flows. Australia is coming in as well as new markets from Asia, including Korea, Malaysia, China and Hong Kong.”

Market by market, in terms of pricing, he reports, “The Northeast has been the stellar performer, with Manhattan and Washington DC driving the recovery. The West Coast was lagging, with Southern California and Las Vegas dragging the region down. The story of the day is the Southwest, with Phoenix’ recovery, and I think a big story is the Southeast, where parts of Florida are rebounding and Atlanta has finally popped through. The Midwest has lagged but Chicago has done ok.”

Wells Fargo to buy $1.6 Portfolio from ING

Wells Fargo is purchasing $1.6 billion (29 US loans) from ING’s Real Estate portfolio, outbidding Bank of America, Capital One and TD Bank.

As previously reported by Mortgage Observer Weekly, ING plans to sell a portfolio of $2.5 billion U.S. loans and ultimately withdraw from the US commercial real estate market.

A unit of ING provided a four-year $100 million loan on the 245,500 square-foot Metropolitan Tower in 2011, according to Real Capital Analytics, a global commercial real estate research company focused exclusively on commercial real estate. The 76-story New York skyscraper designed by architect Frank Gehry, is financed with a $539 million loan provided by a syndication of six led by Hypothekenbank, according to data from Real Capital Analytics.

RCA Joined IRR in a Presentation Summarizing Overall US Performance in H1’13

Real Capital Analytics (RCA) recently joined with Integra Realty Resources (IRR) to present an overall summary of performance in the U.S. from January to June of 2013—including a comparison of the U.S. to other countries— on Thursday, August 16th, in Midtown Manhattan.

“We’ve had a good first half, transaction activity was up about 25% over 2012,” said Bob White, President of RCA. “It’s going to be tough to match that in the second half of the year. The activity at the end of 2012 because of the capital gains tax year pushed a lot of activity to early 2013. Now, we’re seeing a slowing in the rate of acceleration but I don’t think that’s evidence of any impact of rising interest rates; we haven’t seen the market respond to the run up of rates in May and June. A handful of deals fell through but that actually made investors eager to get deals done, in order to lock in rates.”

Sector wise, there were several noteworthy shifts, White said. “We’re seeing dynamic changes among property types. Apartments and major office towers were sort of perfectly priced, and now we’re seeing a plateau. Office is starting to outperform CBDs, retail has had the biggest pop in volume and price appreciation while unflagged hotels have seen the most activity this year.”

“So riskier investments are coming back,” White declared. “Meanwhile, industrial has been a laggard. Prices are up about 8% over last year, that’s about 17% off peak. Apartments are at peak, CBD’s are at or above peak and suburban markets are about 30% off.

“Things that were close to the top of value and considered risk averse have peaked and those that were farther from peak are heading to that level,” he noted. “That’s a sea change, that investors are embracing risk. Before, all we heard was ‘core market’ and ‘buy risk averse.’ ”

White had other surprises to report. “We’re seeing suburban office outperform CBDs for the first time and unanchored shopping centers are up 12% in price; that’s strong.”

In terms of investor type, those leading the pack and those falling behind were literally all over the map, he said. “Private investors have returned, they tend to be able to smell the opportunities first. They were the most impacted by the credit crunch so now that it’s easier to finance properties, they’re back in the market. We’re also seeing the ‘1031 market’ kick in. Public REIT’s should be bigger buyers than they’ve been. We are seeing some IPOs that could be game changers, whether it’s the Empire State Building or Blackstone throwing out Brixmor, La Quinta or Hilton. It all will happen in the next six months, and those are just the ones we know about, so keep your eyes on the sector.” Of institutions, he said, “they’re deploying the most capital. Some of them reported record fund-raising levels in the second quarter, so the inflow is good.”

Less surprising, perhaps, but worth noting, is the strong performance of the U.S. against the rest of the world. “The US looks like a bastion of stability compared to Europe and Asia,” White asserted. “And we’re seeing a lot of foreign capital flows. Australia is coming in as well as new markets from Asia, including Korea, Malaysia, China and Hong Kong.”

Market by market, in terms of pricing, he reports, “The Northeast has been the stellar performer, with Manhattan and Washington DC driving the recovery. The West Coast was lagging, with Southern California and Las Vegas dragging the region down. The story of the day is the Southwest, with Phoenix’ recovery, and I think a big story is the Southeast, where parts of Florida are rebounding and Atlanta has finally popped through. The Midwest has lagged but Chicago has done ok.”

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