Commercial Real Estate Finance

Posts Tagged ‘REIT’

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 »

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:

Pennsylvania Real Estate Investment Trust

PREIT (NYSE: PEI), a retail and shopping mall investor not far from Llenrock’s offices in Philadelphia, has a good understanding of the opportunities and unique challenges of their sector. Malls, community centers, and other retail assets comprise an enormous segment of America’s commercial real estate inventory, and there are plenty of attractive core and value-add investment opportunities within this market. But retail (like so many other asset classes) has been the victim of overbuilding–not to mention dampened consumer confidence, big-name bankruptcies, and competition from the mighty Internet.

Yes, there are still revenue-producing malls full of high-end tenants and wealthy clientele, and fully leased community shopping centers anchored by Internet-proof businesses like grocery stores, gyms, and popular eateries. But to find the gems in the retail sector, one must sift though a lot of fairly mediocre inventory.

For a major retail REIT, navigating and growing in this challenging sector requires a big-picture strategy and some very selective investments. PREIT seems to have both. In the last few months, the REIT has pared down its non-core assets, selling off properties like Orlando Fashion Square Mall, Paxton Towne Centre and the Phillipsburg Mall, all of these sales part of the company’s ”previously-announced plan to improve the quality of its portfolio by selling certain non-core assets” (according to various related press releases). 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.

Mensch of the Week:

Robert Squires

The Kislak Company

In a nation full of strip malls, parking lots, and general sprawl, it’s nice to know that “Main Street” is more than just a nostalgic buzzword thrown around by politicians pretending they’re not backed by large, multinational conglomerates. There are still towns (not just big cities) with bustling CBDs and local, independent businesses. These towns may be few and far between, and their mom-and-pop businesses more scarce, but they do exist.

Montclair, New Jersey, is one of these places. The small New Jersey community’s claims to fame include its association with HBO’s The Sopranos and its appearance at #9 on CNN Money‘s “Best Places for the Rich and Single.” As you can tell from the picture, Montclair has a distinctly “Main Street” image, with everything from brick sidewalks to quaintly horizontal traffic lights.

The latest issue of the Mid-Atlantic Real Estate Journal reports a recent, significant sale of unique CBD properties in Montclair and Hasbrouck Heights. The  three-property portfolio, marketed and represented by the Kislak Company’s Robert Squires, sold for about $5.3 million. According to Kislak’s press release, Mr. Squires helped the (unnamed) seller divest the following assets: Read the rest of this entry »

Week in Review for April 20 – 26:

- Thanks to looser regulations and increasing economic strength, China’s international CRE investment activity soars to $4 billion in 2012, reports CNBC. At their current pace, Chinese investors will invest $5 billion in foreign real estate in 2013. According to analysts from Jones Lang LaSalle (NYSE: JLL), this would make China one of the most important players in the international CRE market.

- One Chinese investor, Soho China, is in the process of buying a 40% stake in Manhattan’s General Motors Building for $3.4 billion. (That’s right, $3.4 billion will only buy a portion of this property…)

- High-end home goods retailer Williams-Sonoma increases its presence in South Brunswick, New Jersey by leasing 751,000 SF of under-construction industrial space to use for warehousing, distribution, and other purposes. The company already leases over a million SF feet next door to the future facility. Cushman & Wakefield represented the landlord in this deal.

- The U.S. Commerce Department announces first quarter economic growth of 2.5%, an improvement over most of last year. Still, this number falls short of analysts’ expectations. Over the course of its 4-year recovery, the economy’s rate of growth has averaged around 2%, says the LA Times.

- As the CMBS market recovers, NOIs for properties tied to these bonds rise closer to pre-Recession levels. After examining a sampling of 2007 vintage CMBS loans, CoStar Group reports that their properties’ NOIs in 2012 far exceed those of 2011.

- Philadelphia-based Brandywine Realty Trust (NYSE: BDN) releases the report for its first quarter, which includes the sale of $221 million in assets. The REIT, which previously focused on office properties, is currently involved in joint ventures with Toll Brothers (NYSE: TOL) and Campus Crest Communities (NYSE: CCG) to develop multifamily and student housing, respectively. Read the rest of this entry »

Sorry for all the ellipses in the title. I had all these extra dots lying around and had to get rid of them.

You’re lucky it wasn’t a surplus of semicolons.

Let me start over.

In a couple recent posts, I’ve pointed to certain asset classes–hospitality, retail, office, and especially single-family–as ways to gauge the overall economic recovery. Since these sectors saw a sharp decline in the 2008-09 economic fiasco, their improvement, however gradual, signals an overall improvement in the country’s employment growth, consumer confidence, and lending markets. The frenzy of multifamily activity in recent years has been a positive side effect of the recession, but certainly not a sign of general economic recovery.

I can add one more asset type to the above list of crucial property types: condos.

Since the recession began, the term “multifamily” has typically been used as short-hand for “multifamily rentals.” The abundance of high-end condo developments left under-leased, vacant, or even unfinished has left this property type on the fringe of the CRE recovery and impossible to finance.

One sure sign of a strengthening local economy is an increase in multifamily buyers. Nashville, Tennessee is one of the metros enjoying an uptick in this generally challenging sector. Read the rest of this entry »

 Week in Review for April 6 – 12:

- In Philadelphia, the Pennsylvania Gaming Control Board holds a hearing regarding a potential new casino for the city. The board hears testimony from developers, residents, architects, and union members. A number of different designs, brands, and locations have been proposed for the city’s second casino.

- Also in Philadelphia, co-developers PMC Property Group and Lubert Adler mull the sale of an in-progress multifamily development at 2040 Market Street, reports BizJournal’s Natalie Kostelni. The property, formerly an underperforming office building, is still under construction, but many suggest its prime location will fetch a record price even before its completion.

- CoStar group reports that some are concerned the CRE lending market is heating up too quickly. The article’s author, Mark Heschmeyer, describes a trend of relaxed lending standards that has emerged in the last couple of years. This discussion follows a recent Morgan Stanley (NYSE: MS)/Bank of America (NYSE: BAC) CMBS offering. The conduit’s loan-to-value (LTV) is rated as 98.8%, significantly higher than other recent offerings.

- In Flint and Genesee County, Michigan, RACER Trust struggles to repurpose and sell large plots of land formerly used by General Motors. RACER Trust was formed to divest some of GM’s industrial properties following the car maker’s bankruptcy.  Read the rest of this entry »

I’m starting my own REIT.

We’ll specialize in urban infill developments, with a particular focus on residential and mixed-use properties. It will be the most environmentally friendly REIT ever. While others may develop properties to achieve the LEED Platinum certification, my REIT will take greenness to a whole new level: our properties will be made out of plants!

If I call my company “Chia REIT,” will that get me in trouble with the people who do Chia pets?

Of course, energy efficiency and environmental impact have become important concerns in many commercial real estate sectors. Green development is not only appealing to potential tenants, but may offer some (long-term) economic benefits as well. It’s gotten to the point that residential developers are now specializing in luxury homes with absolutely no carbon footprint. Even drug store chain Walgreens has gotten in on this by developing its own net zero location.

The concept of “biophilia” adds a new dimension to a property’s place in the environment by merging man-made structures with natural elements like vegetation and abundant daylight. If you take a look at the image below, you’ll see a rather extreme example of what biophilic design can look like. While this approach may sound like something they invented at last year’s Burning Man, there are some practical benefits to buildings and cityscapes that incorporate elements of the natural world. In addition to its energy conservation, biophiles argue, these designs may have workplace productivity and psychological benefits–not to mention increased market value.      Read the rest of this entry »

Three years ago, Llenrock’s Andy Macalaster shared a ranking of the 10 Largest Private Equity Investors focused on real estate. This was in early 2010, when the commercial real estate market was taking its first tentative steps toward recovery. A lot has changed since then, so I thought it would be interesting to revisit this topic and see how our previous ranking compares to 2012′s. Based upon each company’s fundraising total in 2012, here are the Top 10 Private Equity Real Estate Firms of 2012:

10. LaSalle Investment Management (Capital raised: $5.86 billion. Last year’s rank: #7)

9. Westbrook Partners ($6.03 billion. Last year: #11)

8. Beacon Capital Partners ($6.58 billion. Last year: #6)

7. Lone Star Funds ($7.9 billion. Last year: #10)

6. The Carlyle Group ($9.64 billion. Last year: #8)

5. Colony Capital ($11.65 billion. Last year: #4) Read the rest of this entry »

Week in Review for March 9 – 15:

- Writing for The Atlantic Cities, Eric Jaffe discusses the cultural, demographic, and economic conditions reshaping American communities and real estate–and potentially diminishing the role of the suburb.

-  Three Philadelphia brokers form a new boutique brokerage firm, Rittenhouse Realty Advisors, which will focus on sales and advisory services in the multifamily sector. Two of the firm’s founders are former members of Marcus & Millichap.

- Los Angeles REIT Kilroy Realty Corp. (NYSE: KRC) resumes its redevelopment of Columbia Square in Hollywood, reports the Wall Street Journal. The REIT acquired the enormous office building last year for $65 million and plans to convert the property into a mixed-use building, including residential, office, and retail spaces.

- Also on the West Coast, investment groups from China and Singapore commit greater amounts of capital to trophy properties in San Francisco, reports CoStar Group.

-  In Buckhead, Georgia, Tishman Speyer returns the distressed One Alliance Center to special servicer Orix Capital. The 22-story office tower was constructed at the height of the real estate boom, but fell into distress in 2010 and has suffered from high vacancy ever since. Read the rest of this entry »

Our latest poll shows some skepticism toward the IPOs of single-family investment companies, but some think this trend will help the overall housing market:

See our previous polls here.