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Monthly Archives: September 2013

Retail Investors Unphased by Interest Spikes

The recent rise in interest rates for US retail properties has not phased investors, who saw $3.5 billion in finalized sales in July 2013, a 58% increase from July 2012. (Data from global commercial real estate research firm, Real Capital Analytics (RCA).)

One major indicator that the retail sector is not going anywhere but up is the $1.64 billion sale made on September 13th by Australian REIT The Westfield Group, who sold a 90% stake to seven non-core regional malls to the Starwood Group.

(Details of this transaction can be obtained through RCA’s Property Trade Search.)

“Obviously they think these assets are attractively priced,” says RCA Managing Director Dan Fasulo. “The retail sector is witnessing an influx of capital and there has been downward pressure on cap rates, even in the context of higher interest rates. Part of it is due to the fact that we are closing the spread between retail and other sectors, like apartment and office. I don’t foresee cap rates rising any time soon, until retail starts to trade at parity with some other sectors.”

RCA data shows that the average cap rate on retail sales in July 2013 was at 7.1%. During the first half of 2013, retail prices rose by 8.9%, with the most activity in previously distressed markets such as Las Vegas, Atlanta and Tampa.

(To learn more about distressed markets, try RCA’s Troubled Asset Search.)

Retail Investors Unphased by Interest Spikes

The recent rise in interest rates for US retail properties has not phased investors, who saw $3.5 billion in finalized sales in July 2013, a 58% increase from July 2012. (Data from global commercial real estate research firm, Real Capital Analytics (RCA).)

One major indicator that the retail sector is not going anywhere but up is the $1.64 billion sale made on September 13th by Australian REIT The Westfield Group, who sold a 90% stake to seven non-core regional malls to the Starwood Group.

(Details of this transaction can be obtained through RCA’s Property Trade Search.)

“Obviously they think these assets are attractively priced,” says RCA Managing Director Dan Fasulo. “The retail sector is witnessing an influx of capital and there has been downward pressure on cap rates, even in the context of higher interest rates. Part of it is due to the fact that we are closing the spread between retail and other sectors, like apartment and office. I don’t foresee cap rates rising any time soon, until retail starts to trade at parity with some other sectors.”

RCA data shows that the average cap rate on retail sales in July 2013 was at 7.1%. During the first half of 2013, retail prices rose by 8.9%, with the most activity in previously distressed markets such as Las Vegas, Atlanta and Tampa.

(To learn more about distressed markets, try RCA’s Troubled Asset Search.)

Blackstone Plans to Raise $1.25 Billion in IPOs

As demand for US lodging rebounds and stock prices near record highs, private-equity firms are taking full advantage by speeding up hotel sales. As the largest buyout firm, Blackstone Group leads the way by selling stakes of Hilton Worldwide Holdings, Inc. and Extended Stay America, Inc. in IPOs. Blackstone has recently filed to take Hilton Worldwide public for $1.25 billion.

According to Real Capital Analytics, institutional investors have made a total of $3.44 billion in sales from hotels, a marked difference from the $1.68 billion they made during the first half of 2012. Many of the hotels sold in 2013 were purchased at distressed prices from 2009 to 2010. Meanwhile, prices during the first half of this year rose slowly at 21% to $3.43 billion.

A detailed report about the US Hotel market, including market transactions, investment activity and the top players/buyers, can be downloaded through RCA’s Trends & Trades tool.

Blackstone Plans to Raise $1.25 Billion in IPOs

As demand for US lodging rebounds and stock prices near record highs, private-equity firms are taking full advantage by speeding up hotel sales. As the largest buyout firm, Blackstone Group leads the way by selling stakes of Hilton Worldwide Holdings, Inc. and Extended Stay America, Inc. in IPOs. Blackstone has recently filed to take Hilton Worldwide public for $1.25 billion.

According to Real Capital Analytics, institutional investors have made a total of $3.44 billion in sales from hotels, a marked difference from the $1.68 billion they made during the first half of 2012. Many of the hotels sold in 2013 were purchased at distressed prices from 2009 to 2010. Meanwhile, prices during the first half of this year rose slowly at 21% to $3.43 billion.

A detailed report about the US Hotel market, including market transactions, investment activity and the top players/buyers, can be downloaded through RCA’s Trends & Trades tool.

Michael Tabor to Auction 450 Park Avenue, Valued at $600 Million

British gambling and horse-racing millionaire, Michael Tabor, will auction Manhattan skyscraper 450 Park Avenue, which is currently valued at $600 Million. Mr. Tabor purchased the office tower in 2007 for $509 Million through a family trust. The building is expected to hit the market as early as next week.

High-quality office towers with long-term tenants and retail properties, particularly along the shopping corridors popular with tourists and luxury goods buyers, have seen rising occupancy and rents. Foreign investors in particular have sought out these trophy assets as haven investments, pouring $1.96 billion into Manhattan properties during the first half of 2013, according to Real Capital Analytics, a global research firm focused on exclusively on commercial real estate.

Detailed information regarding this property, such as transaction history and property attributes, is available on RCA’s Property Trade Search.

Michael Tabor to Auction 450 Park Avenue, Valued at $600 Million

British gambling and horse-racing millionaire, Michael Tabor, will auction Manhattan skyscraper 450 Park Avenue, which is currently valued at $600 Million. Mr. Tabor purchased the office tower in 2007 for $509 Million through a family trust. The building is expected to hit the market as early as next week.

High-quality office towers with long-term tenants and retail properties, particularly along the shopping corridors popular with tourists and luxury goods buyers, have seen rising occupancy and rents. Foreign investors in particular have sought out these trophy assets as haven investments, pouring $1.96 billion into Manhattan properties during the first half of 2013, according to Real Capital Analytics, a global research firm focused on exclusively on commercial real estate.

Detailed information regarding this property, such as transaction history and property attributes, is available on RCA’s Property Trade Search.

Norway Wealth Fund Buys Stake in Times Square Tower for $684M

On September 6, 2013, Norway’s sovereign wealth fund, The Norwegian Government Pension Fund Global, signed an acquisition agreement to acquire a 45% interest in Times Square Tower from Boston Properties for $684 million, according to Real Capital Analytics (RCA), a global research firm focused exclusively on commercial real estate. The entire building is valued at $1.52 billion, according to RCA.

“This is certainly the type of property that foreign sovereign wealth is looking for,” says Dan Fasulo, Managing Director at RCA. “Given their need for transparency, partnering with a REIT sounds like a perfect fit.”

To learn more about this transaction, see RCA’s Property Trade Search.

Chicago Investors Look Beyond Modern Class A Industrial Sites

Chicago — While the economic recovery has helped drive new industrial projects, many submarkets in the metropolitan area have still not seen the start of new construction. In effect, this has opened opportunities for potential sellers as investors look for deals beyond the most modern class A space.

According to Real Capital Analytics, a global commercial real estate research firm, volume of industrial investments in H1’13 was $838 million, 10% higher than the $763.4 million in H1’12. Transactions increased by 24% during this same time period, moving from 102 in H1’12 to 126 in H1’13.

NYC Surpasses Rivals London and Japan in Foreign Investments

With $1.96 billion poured into Manhattan in H1’13, the Big Apple surged way ahead of its biggest rivals, London & Tokyo, in overseas investment activity. And with the flurry of foreign investments that went to the Americas during this period, it is no surprise that much of NYC’s transactions were also overseas based, often from sovereign wealth funds. While NYC’s major-metro status has historically generated interest from international investors, strong changes in the capital sources and investor strategies defined recent months.

A major source of Manhattan investments came from Asia, where activity rose from under $200 million in 2010 to $1.36 billion in 2012, according to Real Capital Analytics (RCA), a global research firm focused exclusively on commercial real estate.

A key player from Asia is business magnate Zhang Xin, the CEO of development company SOHO China, who has spent more money on Manhattan real estate than any international investor in the last three years.

Still, activity from Asia has no means been limited to China. The National Pension Service of South Korea, which owns stakes in 230 Park Avenue and 300 Park Avenue, spent nearly $950 million on Manhattan real estate in the past three years.

Other active investors in NYC real estate include those from Canada, Norway and the Middle East. Caisse de Depot, a manager of public pension funds in Quebec, spent more than $1.25 billion in NYC in the past three years, primarily through its subsidiary Ivanhoé Cambridge. In November 2012, Ivanhoé partnered with the California-based Swig Company to buy the Times Square office tower at 1411 Broadway. Ivanhoé has also reportedly been linked in a deal to buy a stake in another Midtown office building, 1211 Sixth Avenue.

According to RCA, there has been no major NYC deal from Australia since 2011, when the government-backed investment fund Australian Future Fund Board of Guardians purchased a 49.99% stake in a Midtown office tower, 685 Third Avenue, for $100.3 million from TIAA-CREF.

But investment from German companies much less common. In 2012, German investors placed just $817.34 million into Manhattan, down from $1.88 billion in 2007. The German funded syndicate, Jamestown, has invested approximately $800 million in Manhattan real estate over the past three years, a small fraction of the $5.8 billion invested globally during the same period.

Chicago Investors Look Beyond Modern Class A Industrial Sites

Chicago — While the economic recovery has helped drive new industrial projects, many submarkets in the metropolitan area have still not seen the start of new construction. In effect, this has opened opportunities for potential sellers as investors look for deals beyond the most modern class A space.

According to Real Capital Analytics, a global commercial real estate research firm, volume of industrial investments in H1’13 was $838 million, 10% higher than the $763.4 million in H1’12. Transactions increased by 24% during this same time period, moving from 102 in H1’12 to 126 in H1’13.

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