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Monthly Archives: July 2014

KBS REIT Pays $51M for Northland Ctr in MN

KBS Realty Advisors has acquired the 465,168-square-foot office complex at 3500 – 3600 American Blvd. W in Bloomington, MN from United Properties for $51 million, or about $110 per square foot.

The LEED-EB Silver-certified twin office towers were bu…

Cross-Border Acquisitions to the U.S. Increasing Globally; Activity Surges from Asian Insurance

All over the world, foreign investors of all types are competing aggressively for U.S. commercial properties.

“In the past, when we had these waves, it was one or two countries that [were] dominating,” says Dan Fasulo, Managing Director at Real Capital Analytics (RCA), a global data and analytics firm focused exclusively on commercial real estate transactions. “This time the capital is coming from all directions—east, west, north and south.”

The most active buyers in the last six months include Ontario Municipal Employees Retirement System, a Canadian pension fund, and Norges Bank Investment Management, a division of the central bank of Norway, data from Real Capital Analytics shows.

The countries currently leading in cross-border investments to the U.S. are Canada, Japan, Hong Kong, Singapore, Norway, China, and Germany.

U.S. cities leading in foreign investments consist largely of top markets that include New York, San Francisco, Houston, the District of Columbia, and Los Angeles.

The most favored property types for foreign investors are industrial, office, retail, multifamily, and hotel.

Recently, Asian insurance companies have increased their acquisitions of U.S. assets as loosened regulations and the growing strength of Asian insurance companies have made billions of dollars available.

Office Market Heats Up in San Francisco

Google’s $65 million purchase of 188 The Embarcadero in San Francisco is another sign that sales for office buildings in the city are headed for its strongest year since its 2007 market peak. According to Real Capital Analytics (RCA), a global data and analytics firm focused exclusively on commercial real estate transactions, Google’s latest acquisition brought San Francisco’s office sales through last week up to $3.67 billion, four times higher than the same period last year and headed for the highest annual tally since $8.97 billion in 2007.

“There’s seemingly insatiable demand in San Francisco,” says Ben Carlos Thypin, Director of Research Analysis at Real Capital Analytics. “Institutional investors are buying the highest-quality properties they can get their hands on.”

At about $738 per square foot, Google’s recent purchase is just shy of Blackstone’s recent acquisition of One Market Plaza at $823 per square foot, the highest since it sold the same property to Morgan Stanley for a record $1,001 per square foot in 2007, shows RCA data.

The Embarcadero building and One Market Plaza were part of large acquisition sold to Morgan Stanley by Blackstone in June 2007, a deal that was financed with commercial mortgage-backed securities. The default of a mezzanine loan led AREA Property Partners (now part of Ares) to take over the Embarcadero office, with USAA becoming co-owner, RCA data shows.

How much they paid is “not really clear” since it wasn’t a standard transaction, Thypin states.

Average cap rates for San Francisco office sales is at a record-low 5.1% as of June 30, compared with 6% for an index that tracks deals in six major U.S. cities, shows RCA data.

However, RCA Managing Director Dan Fasulo warns that fierce investor interest, and a reliance on technology companies whose growth projections proved false in the late 1990s Internet boom, may yet lead to a slowdown in demand and rents.

Record Priced Retail Property Sold in Seattle

Seattle shopping center Pacific Place was recently sold for $271 million at a record $774 per square foot. The 350,000 square-foot urban mall was purchased by a joint venture between investment management firm Madison Marquette and a foreign investment firm.

“That’s a big number for Seattle,” says Dan Fasulo, Managing Director of Real Capital Analytics (RCA), a global research firm exclusively focused on commercial real estate transactions. “This is a super unique asset, so there are only a handful of properties on the West Coast that would trade like this.”

The record deal is another indication of strong institutional investor appetite for the Seattle market, particularly among cross-border investors. Pine Street Development received 15 offers for Pacific Place.

The regional mall is 90% leased and anchored by Barnes & Noble and AMC Theatres. Tenants include Barneys New York, Kate Spade, Tiffany & Co. and Michael Kors. The seller, Pine Street Development, has announced that $14 million of Pacific Place’s proceeds will go to the United King County.

Italian Government Auctions Five Historical Assets, Accepts One Offer

The Italian government has been focused on maximizing the value of their commercial real estate market to its full potential. A two-year government program to sell historical assets that include islands, castles, and old military facilities recently put five properties up for auction, which resulted in only one accepted offer: €610,000 ($835,000) for a 19th-century former military hospital in the northeastern city of Trieste.

The winning bid was offered by Maiko Mario Martin, a developer of multifamily and mixed-use properties. Mr. Martin is considering converting the property into condo apartments or into a senior housing home.

Experts say demand for Italian properties is increasing, with Q1’14 volume in Italy totaling €4.5 billion, up 58% from the previous year, shows data from Real Capital Analytics (RCA), a global data and analytics firm focused exclusively on commercial real estate transactions.

Bidders were highly disappointed by the sales process, arguing that the offers represent current market values and criticizing the lack of transparency in the sales process, which did not include starting prices for the sales.

While offers were made for the other properties, an agency spokesman for the managing agency Agenzia de Demanio has stated that the bids were not high enough. The agency plans to sell a total of 40 properties by the end of the year, which they value to be €400,000 and up.