Commercial Real Estate Finance

Let’s head to Europe for today’s Top 10. We say a lot about REITs, asset managers, and institutional investors based here in the States, but don’t usually talk about the major players in Europe’s institutional investment sector. Time to change that. From I&P Real Estate, here is a ranking of Europe’s Top 10 Institutional Investors in Real Estate:

After each institution, I’ve included the value of its real estate assets under management, in millions of euros.

10. Ilmarinen Mutual Pension Insurance Co., Finland (3,600)

9. Alecta, Sweden (3,787)

8. Migros-Pensionskasse, Switzerland (3,977)

7. BT, United Kingdom (4,435)

6. AMF, Sweden (4,762)

5. ING Insurance Benelux, Netherlands (5,343)

4. BPF Bouw, Netherlands (5,635) Read the rest of this entry »

Week in Review for May 18 – 24:

• In a follow-up to last week’s “25 REITs Most Likely to Sell You a Property in 2013,” CoStar Group‘s Mark Heschmeyer lists the 25 REITS Most Likely to BUY Your Property this year. A variety of asset classes are represented on this list, including office, medical office, senior living, shopping center and standalone retail, student housing, industrial, and data centers. Few multifamily investors appear on this list.

• Search engine giant Yahoo! (NASDAQ: YHOO) leases about 176,000 SF at 229 W. 43rd St. in Manhattan’s Times Square, reports CoStar. The company is merging its other downtown offices in this building, which is majority-owned by Blackstone Group (NYSE: BX).

• Two development teams, South Beach ACE and Portman-CMC, vie for the opportunity to redevelop the famous Miami Beach Convention Center. Miami Beach commissioners will consider the financial and design details of the competitors’ proposals. The redevelopment project es expected to cost over $1 billion.

• In Philadelphia, Councilwoman Maria Quinones Sanchez pushes for the establishment of a land bank, a city organization that would consolidate and efficiently sell off the city’s abundant vacant land. Proponents of this measure say the more efficient system would bring much-needed revenue to the city, whose school system continues to suffer from severe under-funding.

• In a sign of increased investor confidence, the CMBS market sees an uptick in single-asset CMBS demand. The assets backing these securities include regional shopping malls and trophy office buildings. The single-asset CMBS market all but vanished during the financial crisis but has grown significantly since last year. Read the rest of this entry »

Has multifamily peaked? Our readers seem to think so…

See our previous polls here.

Be warned. I have a bad pun coming up two paragraphs from now.

The automotive sector, which in recent years has been associated with bankruptcies, plant closures, and outsourcing, is once again proving an asset to some local economies. On Monday, Philadelphia Business Journal reported that Subaru of America was shopping for a new headquarters. Philadelphia’s increasingly popular Navy Yard business park is one of the locations under consideration, writes BizJournal’s Natalie Kostelni.

Does Philly have good enough “carma” to attract Subaru? The American subsidiary of Subaru (TYO: 9632) is seeking a replacement for its current headquarters, a seven-story building in nearby Cherry Hill, NJ. The Navy Yard is certainly a strong contender, having already attracted companies such as GlaxoSmithKline and Urban Outfitters, which established headquarters there. 

What market characteristics will attract a new corporate resident and its economic, employment, and real estate benefits? Obviously, location, community, economic conditions, tax climate, and workforce are all factors that bear on this decision. Ultimately, whichever city offers the best incentives will win Subaru’s presence.  Read the rest of this entry »

This will probably be our last retail-focused Top 10 for a while–it’s time to look at some other asset classes. Since we already counted down the Retail Markets with the Highest Quoted Rents, let’s look at which retail markets are seeing the most improvement in their rents. Once again from Colliers’ 2013 Retail Outlook for North America (PDF), here are the Top 10 Retail Markets for Rent Growth:

10. Dallas/Ft. Worth, TX (1.83%)

9. San Jose/South Bay, CA (1.87%)

8. Omaha, NE (2.06%)

7. Houston, TX (2.18%)

6. Boston, MA (2.51%)

5. Boise, ID (2.65%)

4. Westchester County, NY (3.04%)

3. Miami-Dade County, FL (6.51%) Read the rest of this entry »

Mensch 

Noun, informal. A decent, upright, mature and responsible person. 

Schlemiel 

Noun, slang. An awkward, clumsy, or unlucky person whose endeavors tend to fail; a loser.

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Mensch of the Week:

Todd Schuster, Ares Commercial Real Estate

Ares Commercial Real Estate (NYSE: ACRE) has been busy. The mortgage REIT, which focuses on mid-market multifamily loans, recently announced the acquisition of AREA Property Partners in a move that quadruples the company’s capital to $8 billion, according to Commercial Property Executive. Last week, ACRE bought EF&A Funding (better known as Alliant Capital LLC) for almost $63 million while also announcing a new co-CEO, Todd Schuster.

Mr. Schuster is a board member with both ACRE and an Alliant Capital affiliate, which makes him ideal to lead the unification of these these two companies. This appointment is also an extremely high-profile one and likely pleasing to investors. Read the rest of this entry »

Why do cats love to curl up in boxes? Every time I leave an empty box on the floor, my cat is inside it within minutes. If the box is too small, she’ll still try her best. (If no boxes are available, she’ll go with suitcases, desks, important paperwork and that keyboard you were trying to type on.)

That’s just one type of “self-storage.” Since we talk about commercial real estate, though, I want to talk about self-storage property investment. Specifically, I want to look at the “Big Four” (which is to say, the only four) of the publicly traded self-storage REITs: CubeSmart (NYSE: CUBE), Extra Space Storage (NYSE: EXR), Public Storage (NYSE: PSA), and of course Sovran Self-Storage (a/k/a Uncle Bob’s) (NYSE: SSS).

The REITs recently released their first quarter reports, and it looks like the recent trend of exceptional growth has continued into 2013. Here’s a breakdown from Inside Self Storage (check out their article for a more in-depth discussion of Q1 results):

• CubeSmart reported FFO [funds from operations] per share of $0.20, a 25 percent year-over-year increase. Same-store net operating income (NOI) at its 328 facilities grew 7.6 percent year over year. …The same-store physical occupancy was 85.7 percent as of March 31.
  
• Extra Space Storage: Same-store revenue increased 7.5 percent and NOI rose 10.8 percent compared to the same period in 2012. FFO was 46 cents per diluted share, resulting in 39.4 percent growth compared to the first quarter the previous year. … Same-store occupancy grew by 290 basis points to 88.6 percent…
• Public Storage: Revenue for same-store facilities increased 5.4 percent, or $21.1 million…
• Sovran Self Storage: Total revenue increased 17 percent over the previous year’s first quarter, while property operating costs increased 14.9 percent, resulting in an NOI increase of 18.1 percent. 

A great way to start the year.

If you look at CoStar’s recent article, 25 REITs Most Likely to Sell You a Property in 2013, you’ll see all the major asset classes represented: hospitality, office, retail, industrial, and even multifamily and healthcare. But self-storage is conspicuously absent. It seems the consensus is that this market and asset class have room to grow. The value of storage facilities is yet to peak. Read the rest of this entry »

Rina Cutler, Philadelphia’s Deputy Mayor of Transportation and Utilities, discusses the growth of the city’s real estate market, resurgent neighborhoods, and the latest innovations in urban planning. (This is Part II of Llenrock’s latest video interview. Visit our YouTube channel to see the rest of her fascinating interview!)

Read the rest of this entry »

Once again, we’re excited to feature a guest post from our friends at Integra Realty Resources! From their own commercial real estate blog, IRR on Real Estate, here is IRR Senior Analyst Robin Brady to discuss strategies to navigate the complex, post-recession real estate market. Many thanks to IRR and Robin Brady for the contribution!

Risky Business: 3 Pain Points for Commercial Real Estate Developers

Over the last couple years, the development market has returned to fundamentals. The wounds of the downturn are still fresh, and investors, developers, and banks are more cautious, putting their money behind only what looks like a sure thing. As a result, we’re seeing more tenant-driven development and less speculative development. For example, in the Boise area, we have seen two significant projects break ground in the last year: Eighth and Main (a high-rise office building) and Village at Meridian (a retail lifestyle center). Both projects were over 75 percent pre-leased prior to going vertical. We’re also seeing a lot of owner-user product being developed, such as automotive dealerships.

Speculative, capital-driven projects that don’t fit an existing market need are just one risk that developers should avoid. As more developers return to fundamentals, here are three ways projects can go wrong and how to avoid them.

1. Misreading the market. Never assume that there’s more demand for your proposal than there actually is or act as if the trends from the last couple years will last indefinitely. Pursue projects driven by a market need rather than one pushed forward by capital in search of a return. Before starting a project, know exactly what you’re going to build based on your target market. Know who the users (buyers or tenants) will be, what rent or price level they can pay, and what design features they want. Know your competition, not just vacancy rates but also how much new product is coming to market. And, while this might sound self-serving, do a market study to get a critical, objective look at your project’s potential absorption rates and rent levels to get a clear sense of the project’s feasibility. Read the rest of this entry »

Week in Review for May 11 – 17:

- CoStar Group releases a list of 25 REITs “Most Likely to Sell You a Property in 2013.” The list includes many well-known public REITs, and just about every major asset class is represented, including multifamily and healthcare properties.

- Post Brothers, an up-and-coming multifamily developer in Philadelphia, begins listing apartments for its latest development, a conversion of a former industrial property on the outskirts of Center City.

- In developing this property, Post Brothers had a tense stand-off with the city’s labor unions in response to their use of non-union workers.

- JW Pepper & Son acquires a 43,000 -SF office building in the Stone Ridge Corporate Center in Exton, PA, a suburb of Philadelphia. They acquired the property for $5.1 million ($118/SF), reports CoStar.

- In Los Angeles, Hines REIT sells the One Wilshire building, an office and retail property, to GI Partners for $437.5 million, as well as one other property for $112.5 million.  Read the rest of this entry »