Commercial-Property Players Find Their Pressures Growing

As Crisis Spreads, Market Seizes Up; Capital Preservation

For the commercial-real-estate players that were in hot water before the capital-markets crisis of the past two weeks, the temperature is rising.

Retail giant Centro Properties Group, New York developer Macklowe Properties, office-building investor Broadway Real Estate Partners LLC and others are now facing an even rougher ride in the wake of Lehman Brothers Holdings Inc.'s bankruptcy, the collapse of American International Group Inc. and the buyout of Merrill Lynch & Co. by Bank of America Corp.

After these and other market crises, cash-flow projections for properties are being scaled back in anticipation of a greater economic slowdown. The sales market -- long considered the last hope of many distressed players -- has virtually ground to a halt.

Even creditors that were willing to make real-estate loans before the upheaval are pulling back, having witnessed the spectacle of some of the biggest names in finance and banking vanishing in a period of days. . . . more

Lehman, Merrill Assets Expected To Be Sold

With the credit markets seized, the avalanche of bad news surrounding investment banking giants Lehman Brothers and Merrill Lynch and insurance provider AIG has caused a state of panic in the commercial real estate industry.

Merrill was exposed to about $18 billion between whole loans, conduits and direct real estate investments. Lehman, meanwhile, continues to hold $32.6 billion in commercial real estate between whole loans and CMBS bonds. About 11 percent of its portfolio is devoted to retail. AIG’s exposure is harder to pin down. The company built up a $60 billion position in the credit default swaps market—some of which is tied to CMBS. The company also has $16 billion in international real estate assets.

The question now is, with Lehman in bankruptcy, Merrill Lynch in the process of being acquired by Bank of America and AIG sold off in parts by the government, what’s going to happen to all those holdings?

In the case of Lehman and Merrill Lynch, their commercial real estate assets will likely end up on the auction block, according to David Akeman, director in the capital markets group of Stan Johnson Company, a Tulsa, Okla.-based commercial real estate investment firm. Before filing for bankruptcy last week, Lehman had planned to spin off its commercial real estate portfolio into a stand-alone, publicly-traded entity, Real Estate Investments Global, which would allow the bank to avoid a forced fire sale. But after its September 14 bankruptcy filing, Lehman will not likely be allowed to spin off one of its divisions, says Adam B. Weissburg, partner with Cox Castle Nicholson LLP, a Los Angeles-based real estate law firm. . . . more

NJ: Rockaway Plaza Sells for $16.1mm

ROCKAWAY, NJ-Rockaway Plaza, a 104,549-sf shopping center at 295 Route 46 here, has a new owner. The seller, identified only as a regional development company, sold the property for just more than $16.1 million, or about $154 per sf.

The buyer was similarly not identified, but described as a regional investment group. The property was originally listed with an asking price of $18 million, and then reduced to $17 million before subsequently trading for the $16.1-million number.

Brokers from Marcus & Millichap’s New Jersey office in Elmwood Park represented both sides in the transaction. Senior associate Seth Pollack and investment specialist Michael Kestin represented the seller; investment specialist Kevin McCrann spoke for the buyer.

Situated on a seven-acre lot, Rockaway Plaza is anchored by Ace Hardware, Drug Fair, Kiddie Academy and Party Fair. A number of regional and local tenants round out the roster, and the center itself recently underwent a renovation. . . . more

After Lehman, Banks Jettison Commercial Real Estate Debt

The bankruptcy of Lehman Brothers Holdings Inc. is adding pressure on banks and other financial institutions to sell off their holdings of commercial real-estate debt, as they try to stay out ahead of the Wall Street firm's expected liquidation of its $30 billion portfolio.

The likely rush to sell is driving down the already battered market, forcing financial firms to take additional losses on the estimated $150 billion worth of commercial real-estate debt on their books as the once relatively resilient pocket of the property sector now comes under heavy fire.

"As a result of Lehman's bankruptcy, other financial institutions will feel more pressure to sell assets at deeper discounts sought by investors," said Spencer Garfield, a managing director of Hudson Realty Capital, a New York-based real-estate fund manager.

Goldman Sachs Group Inc. on Tuesday said it had reduced its portfolio of commercial mortgages and securities by about $2 billion to $14.7 billion as of the end of its third quarter, which ended Aug. 29, taking a $325 million loss.

"It sure doesn't feel like the real-estate markets are improving anytime soon, and we will reduce that class going forward even if we think they are good assets," said Goldman Sachs Chief Financial Officer David Viniar. "Those assets are marked where they can be sold."

. . . more

How Lehman Hurts Commercial Real Estate

I’m still trying to get my head around the implications that Lehman’s collapse has on the commercial real estate sector. As I see it, there are a handful of ways this is negative or potentially negative for the sector. If you’ve got any feedback or disagreements, let me know in the comments section.

I. Values: Lehman’s sitting on $32.6 billion in commercial real estate investments in the form of loans and equities. It was a big investor in commercial mortgage-backed securities. What’s it going to do with that? Will it still roll those holdings into the bank it talked about last week? Or will it try to sell this stuff on the market. Right now, investors are so skittish about any kind of securitized debt, Lehman may have to sell at deep losses. That, in turn, will force other holders of CMBS bonds to “mark to market” based on Lehman’s precedent. So we’re looking at a real potential drop in perceived values of CMBS bonds. That could also have effects on determining the value of actual real estate. If the CMBS valuations are to be believed, it would imply deep discounts on actual property values. The industry, I think, had been hoping that the correction in prices would be something like 10 to 15 percent. Now it’s looking like it may be a steeper drop than that.

A perceived drop in values of real estate is also going to hurt retail REITs. The correction in REIT stock prices had settled in at a 10 percent to 20 percent drop from 52-week highs. Now it’s looking like REITs are going head lower again. . . . more

74 Bank, Retail Properties Gain Buyer Interest

NEW YORK CITY-Locally based Carlton Advisory Services Inc. is conducting the sealed bid auction of Gramercy Capital Corp.'s 74 properties it acquired earlier this year from its $3.3-billion purchase of Jenkintown, PA-based American Financial Realty Trust, as GlobeSt.com earlier reported. Howard Michaels, chairman of the firm, tells GlobeSt.com that the properties are being marketed predominantly on an individual basis.

The sale of the outstanding bank branch and retail property assets have a set bid date of Oct. 13, 2008. Gramercy tells GlobeSt.com that they decline to comment at this time. The portfolio is geographically diverse; it includes assets in 19 states, although most of the assets are located on the east coast with particular concentrations in Florida, Alabama, Pennsylvania, Georgia and Virginia. Most of the portfolio’s properties are primarily vacant former bank branches, although 12 are cash flowing assets and are fully or partially leased to existing bank tenants.

Michaels tells GlobeSt.com that Carlton will consider selling the 12 cash flowing properties as a block to an investor. In addition, he says, "we would consider selling the portfolio to one or two buyers." Carlton executives, Thomas McCarthy, managing director, John MacConnell, vice president, and Sandy Myer are handling the sale for Carlton.

"Buyers have definitely shown a ton of interest," Michaels tells GlobeSt.com. "These are good retail investment properties all located in prime areas." He continues to say that "these assets are former and current bank branches that are all located in high visibility areas. Retailers, such as restaurants, fast food, regional banks, clothing stores, would love to purchase these properties, especially since they can buy the properties at a good price."

Michaels says that the properties, which total 275,000 sf, excluding the six land only assets, range in value from $200,000 to $3 million. As for why Gramercy intended to sell the assets, Michaels says that due to the size of the portfolio that the New York City-based firm bought from American Financial Realty Trust, "these assets are non-core assets and represent the last remaining vacant properties that are not accretive to Gramercy." Furthermore, he notes, "these assets will sell for very good prices."

Source: GlobeSt.

MA: Washington Square Plaza Fetches $10.3M

Hudson Retail Center Gets $220 PSF

A private partnership has acquired Washington Square Plaza in Hudson, MA, from local investors for $10.3 million, or about $220 per square foot.

The 46,512-square-foot shopping center is in the Concord/Maynard submarket on Route 85, Hudson’s primary means of access to Interstates 290 and 495. Anchored by CVS, this shopping center is 98% occupied.

The Jones Lang LaSalle team of James Koury and Nathaniel Heald represented the seller and procured the buyer.

Source: CoStar

Aviation Plaza Sells for $92M

LINDEN, NJ-Aviation Plaza, a 642,500-sf power center along Route 1 and 9 in this Union County community, has been sold for just less than $92.4 million. Because Home Depot owns its own building, the transaction actually covers about 443,100 sf of that total space, so the trade factors out to just more than $208 per sf.

Milbrook Properties of Manhasset, NY now owns the six-year-old asset, picking it up from Aviation Tower LLC. Aviation Plaza was acquired as part of a 1031 exchange, reports Jeffrey Dunne, who with CB Richard Ellis’ New York Institutional Group colleague Todd Newman arranged the sale. In conjunction with Jim Gunning of CBRE Melody, the brokers also picked up financing for Milbrook of an undisclosed amount from Principal Real Estate Investors.

"This is the third 1031 sale that we’ve completed for Milbrook over the past 18 months," Dunne tells GlobeSt.com. "They are buying great real estate with Aviation Plaza, and they should fare very well with this investment. It’s an outstanding collection of best-in-class tenants."

The CBRE duo had previously arranged the sale of the property in June 2003 to Aviation Tower LLC, a group headed by Morristown-based SSR Realty Advisors, now known as BlackRock Realty Advisors. That particular deal came with a $54.5-million price tag, minus the Home Depot space, with Aviation Tower LLC buying the then one-year-old center from original developer Starwood Ceruzzi.

This past February, meanwhile, the original center was expanded with an additional, separately-owned pad site supporting a bank, theater and restaurant. The CBRE brokers subsequently arranged the sale of that expansion to as well Aviation Tower LLC for an undisclosed price.

Aviation Plaza takes its name from the 39-acre site it occupies within the former Linden Airport, a defunct general aviation facility. Besides the self-owned Home Depot store, the center is anchored by a ShopRite supermarket, Target, AMC Theaters, Marshalls, Staples, Old Navy and A.C. Moore. About 80% of the center’s tenant space is given over to national chains.

For new owner Milbrook, the acquisition comes as it celebrates its 75th anniversary as a business. The four-generation, family-owned company now has a portfolio of 80 retail, office and multifamily properties along the East Coast.

Source: GlobeSt.

Gramercy Capital Corp. To Auction 74 Properties

NEW YORK CITY-As some of the last few conference calls have indicated, locally based Gramercy Capital Corp. is looking to sell the properties it acquired from American Financial Realty Trust earlier this year. The firm is auctioning off the 74 properties it inherited from the $3.3-billion purchase of the Jenkintown, PA-based company, and New York City-based Carlton Group Ltd. is conducting the auction.

Gramercy tells GlobeSt.com that they "decline to comment at this time;" however an anonymous industry source, not involved in the deal, confirms that "the auction is happening," and it is really more of a "cleaning-up process" that the company intended to do all along. Carlton Group did not respond to GlobeSt.com queries by deadline.

The properties consist of 68 bank branches and six pieces of land. According to the anonymous industry source, the value of the properties range anywhere from $100,000 to $2 million each. As a result of the acquisition of AFR, Gramercy added approximately 29.2 million sf of commercial real estate in 38 states and the District of Columbia to its $4.2 billion of debt investments, commercial real estate securities investments, net lease properties and other assets.

Source: GlobeSt.

Brokers Search the Depths

Has the slowdown in retail real estate sales hit bottom?

Not yet, say wavering observers who predict that won’t occur now until the second quarter of 2009 when cap rates on retail properties will fall between 8 percent and 10 percent.

In the second quarter of 2008, significant retail sales transactions amounted to only $5 billion, according to New York City-based Real Capital Analytics. That represented a 63 percent drop from the second quarter of 2007. More alarming was the fact that the figure was a 30 percent drop from the first quarter of this year, when properties worth $7 billion traded hands, says Real Capital Analytics’ July report.

The slowdown continues in part because there is still not enough financing available for new acquisitions, cited Robert Bach, senior vice president and chief economist with Grubb & Ellis, a Santa Ana, Calif.-based commercial real estate services firm. With no new commercial mortgage-backed securities issuances in either July or August, year-to-date volume remains at just $12 billion, according to Commercial Mortgage Alert, an industry newsletter, down 93.6 percent compared to the same period in 2007.

Wall Street now accounts for just 1 percent of acquisition financing for commercial properties, according to Real Capital Analytics. From January 2006 through June 2007 it accounted for 33 percent of the market. At the same time, major banks slashed their lending volumes by 18 percent, finance/management companies by 4 percent and regional savings banks by 2 percent.

Over the last 12 months, average cap rates on strip centers moved up 40 basis points, to 7.0 percent, reports Real Capital Analytics. Cap rates on lifestyle centers went up 80 basis points, to 7.3 percent, and on power centers 50 basis points, to 7.0 percent. However, with buyers forced to put more equity into each transaction because of troubles in the credit markets and a grim prognosis on the state of the economy, the increases have not been enough to break the impasse in the sales sector.

When investment sales in the retail real estate sector first came to a halt, in the fall of 2007, market observers said they would rebound in the first quarter of this year. The forecast was then amended to the second half of this year, after the ICSC RECon convention in Las Vegas. Today, sellers have dug in their heels on pricing and buyers anxiously wait for the market to bottom out.

The lack of readily available financing is forcing some buyers to walk away from deals even when they are happy with the valuation, says Joseph C. French, national director of retail properties, at Sperry Van Ness, an Irvine, Calif.-based investment brokerage firm. But in the past few months, the lack of available credit has taken a back seat to another concern for prospective investors—the dire state of the retail sector.

This year, ICSC expects store closings to reach a 14-year high. Retailers are entering bankruptcy and announcing store closings almost daily. Now, retail acquisitions seem very risky, so buyers want to make sure they are getting good value for their money, says Gary Bringhurst, CEO of DBSI, a Boise, Idaho-based real estate investment firm.

“The slow-down in the retail sector has caused many buyers to stop purchasing retail centers altogether. This, [along] with financing, has contributed to the escalating cap rates,” says Bringhurst. He notes a reasonable cap rate for a well-anchored center in a core market today could be more than 8 percent.

Sellers, however, have not yet reached the point where they are willing to accept the notion that cap rates will only continue to rise, says Bernie Haddigan, national director of the retail group with Marcus & Millichap Real Estate Investment Services, an Encino, Calif.-based brokerage firm. He estimates it will not be before the second quarter of 2009 when the bid-ask gap will finally close and cap rates will stabilize at a level that’s more in-line with market fundamentals—somewhere around 8 percent for class-A assets and upwards of 9 percent for class-B and class-C properties.

The change, says Arthur M. Milston, managing director in the New York City office of Savills a global real estate services provider, will put short-term investors looking for “financial engineering” out of the market for good. But it will bring the marketplace back to a healthier place, where people who purchase retail properties do so for the value of the real estate and not for a quick speculative gain.

DBSI plans to spend $1 billion on commercial real estate acquisitions this year, including retail. But the firm will only consider class-A and class-B centers built since the late 1980s with occupancies above 80 percent in markets with either stabilized or positive space absorption trends.

“Cap rates of 3 percent and 4 percent [do not make] a healthy market,” says Stephannie Mower, executive vice president and managing director of national investment services with PM Realty Group, a Houston-based real estate services firm. “It’s a happy market, but it’s not a healthy market and now it’s going to be a market where buyers and sellers can trade with confidence as opposed to playing a game of musical chairs.”

Source: Retail Traffic

Lehman May Be Selling Real Estate Holdings

According to press reports, citing anonymous sources, Lehman Brothers Holdings Inc. may be in talks to unload as much as $40 billion in commercial real estate assets. The portfolio was valued at $52 billion in November of last year.

Possible buyers include Blackstone, Black Rock, Colony Capital and J.E. Roberts Cos., according to the Financial Times.

In addition, the publication noted rumors that Lehman would absorb future losses from the portfolio up to $5 billion after the sale.

The troubled firm has written down approximately $8 billion due to credit problems to date. As reported previously by CPN, Lehman Bros. has a net loss of $2.8 billion for the second quarter, ended May 31, 2008, compared to net income of $489 million for the first fiscal quarter of this year, and $1.8 billion for the second quarter of fiscal 2007.

The firm also said at that time that it reduced exposure to residential mortgages, commercial mortgages and real estate investments by 20 percent in each asset class.

Lehman made major news in an attempt to shore up investor confidence in June, when it replaced CFO Erin Callan and president & CEO Joseph Gregory. Bart McDade became president & COO, while the firm’s co-chief administrative officer, Ian Lowitt, became CFO.

Lehman was a huge player in both commercial mortgage securitization, as well as a direct real estate investor. Lehman and Tishman Speyer took apartment REIT Archstone Smith private in a $22 billion transaction last October. Overall, Barron’s reports that Lehman has from $65 billion to $70 billion in real estate exposure. That has fallen from $87 billion on Feb. 29.

No one involved, including Lehman Bros, would comment on the possible talks now taking place.

Source: Commercial Property News

MA: CGI Acquires Marketplace Center for $6.3M

Newton Centre Retail Trades for $417 PSF

Brookline, MA-based investors CGI Cos. acquired the Marketplace Center in Newton Centre, MA from a private trust for $6.29 million or $417.00 per square foot.

The 15,072-square-foot retail building at 714-724 Beacon St. was built in 1920 in the Newton/Brookline submarket. Tenants include West Coast Video, Kitchen Views and the United States Post Office.

Richard Cohen, CPM represented CGI. Craig Barker of Boston Real Estate Advisors represented the seller.

Source: CoStar

M&A's Take a Breather

The credit markets may still be tight for those looking for financing, but for anyone not yet ready to jump in, this is the perfect time to do one’s homework.

Chris Sciortino, a director of the investment banking unit of Robert W. Baird, said during a conference call last week that he expects it will be a year or two before the markets begin to loosen up and prospects for mergers and acquisitions start to improve. While there’s not an abundance of capital for investment yet, there’s still plenty of interest in the consumer sector among strategic and private equity firms.

“When [investors] jump in will depend on consumer spending,” he said. He noted prospective buyers are being conservative because the consumer still seems to be pulling back. Still, investors are watching to determine when is the right time to make investments in the sector.

One key change will be that “more equity will be used in transactions, and less leverage used,” he said, noting the contrast from the past few years when relatively abundant liquidity allowed firms to leverage up on their acquisitions.

Another change is that firms will be focused more on high-quality concepts with prospects for vigorous growth. That’s a change from just before the subprime debacle a year ago when the “strength of the debt market” drove firms to consider even acquisitions where there was great cash flow and modest growth, but poor execution.

As the concerns over consumer spending grew, the pipeline for initial public offerings also shut down, Sciortino said. However, he expects the IPO market for the consumer sector to come back as well, once the current cycle reverses.

Many private equity firms “use the public market as a liquidity event for their portfolio,” he explained. Metropark USA Inc., the lifestyle retailer founded in 2004 by chairman Orval Madden, who also founded teen retailer Hot Topic Inc. in 1988, is looking to go public in 2008.

“Our speculation is that’s a possibility, [but] by no means do we expect [an IPO] will be easy to get done in what we’re seeing in the environment today,” Sciortino said of the proposed timing for the Metropark IPO.

The director said it is “highly likely” the market will see other IPO filings once there is a positive change in the momentum in consumer trends. He noted specifically that high-growth retailers, or those that indicate earnings growth of 20 percent or more, will get rewarded by their ability to access the IPO market, giving their owners a measurement of liquidity for those businesses.

Source: WWD

Fitchburg , MA: $6M Lands Wallace Plaza Center

FITCHBURG, MA-The Wallace Plaza Center is changing hands again after a 5-year tenure under Kent Realty Fitchburg LLC. The 127,460-sf retail property is being purchased for $6 million by Peace & Grace Realty LLC. The seller was represented by Thomas R. Blakely, CCIM and president of TRB & Associates. The buyer was represented by David Lenger of Keller Williams Realty.

TRB had repped the previous owners in 2003 for the sale to Kent and was brought on exclusively for this transaction by the seller. In a statement, Blakely explains that this deal in the current market is "a very complicated transaction that involved a loan assumption with Wells Fargo." Currently, the center is anchored by Market Basket and Big Lots with 24,260 sf of climate-controlled storage space. The building sold for $6.75 million in 2003 while fully-leased. Under the current deal, 17,000 sf of the total 65,000 sf is empty.

Lenger tells GlobeSt.com, the new owners--a group of four friends who remain undisclosed--will add "new signage" and "significant capital improvements." The building will get a facelift as the group will put "about a quarter-million dollars in, resurface the parking lot" and modernize the façade. Lenger remarks that the building has "tremendous upside potential" for profit in a good buyers market.

Retail centers are a solid value and recently, numerous properties have been changing hands. Two separate Walgreens-anchored retail centers went for $11 million in Danvers. Similarly, the former landmark harness racing track turned retail plaza--Roosevelt Raceway Center--was corralled for just over $103 million down in Westbury, NY.

Source: GlobeSt.

Brockton, MA Walgreens Trades for $9.4M

UBS Sells Retail Bldg. for $715

PSFNew York-based Splendido Real Estate, Inc. acquired the Walgreens at 880 N. Montello St. in Brockton, MA from institutional investor UBS Real Estate Investments, Inc., for $9.45 million, or $715 per square foot.

The 13,204-square-foot retail building was built in 1925 in the Route 24 submarket.

The property was not on the market at the time of sale. Splendido Real Estate, Inc. approached UBS Real Estate Investments, Inc. directly and exercised its 1031 exchange option in the transaction.

Source: CoStar

NRDC Completes Hudson’s Bay Co. Acquisition

SCARBOROUGH, ONTARIO-New York City-based NRDC Equity Partners has completed its acquisition of Canada’s Hudson’s Bay Co., consolidating the ownership of Lord & Taylor, Fortunoff and Creative Design Studios into one company, and paving the way for Lord & Taylor to enter Canada.

Plans call for Lord & Taylor to open 10 to 15 stores throughout Canada, filling a void between the Bay department stores and the upscale Holt Renfrew chain. The overall strategy, according to the announcement, is creating a greater focus on the Bay by offering better brands and service.

“By acquiring Hudson's Bay Co. along with previous acquisitions Lord & Taylor and Fortunoff, we will have an unprecedented opportunity to recreate the retail landscape in North America,” said Richard Baker, president of NRDC and now CEO of Hudson’s Bay in a statement. “Enormous potential exists by upgrading the offerings at both the Bay and Zellers and by bringing Lord & Taylor, Fortunoff & CDS into the mix.” In addition, Fortunoff will open jewelry and home furnishings departments within the Bay, and the Zellers mass merchandise chain will roll out a new, 125,000-square-foot prototype, as well as see a greater focus on branded apparel and customer service.

NRDC acquired Lord & Taylor in 2006, and Fortunoff earlier this year. Previously a minority owner in Hudson’s Bay, NRDC Equity Partners invested $500 million into the new company. The combined company, now called Hudson’s Bay Trading Co., has more than US$8 billion in sales, and 55-million sf of stores in the US and Canada.

Hudson's Bay Co., established in 1670, is North America's oldest continually operating company, operating more than 580 stores under the Bay, Zellers, Home Outfitters and Fields banners. Fortunoff operates 23 jewelry and home furnishing stores in the New York City metro area. Lord & Taylor operates 47 stores in nine states and the District of Columbia. Creative Design Studios was formed in October of 2007 as a stand-alone company to develop and manufacture designer-driven brands for regional department stores and to invest in American design talent.

Source: GlobeSt.com

Centro Clears Minor Hurdle With First Asset Sale

As it continues to wrestle with a mountain of debt, Centro Properties Group, a poster-child of the credit crunch, on Tuesday announced the sale of the first piece of its 106.5-million-square-foot U.S. portfolio for $714 million to an unnamed private real estate investment advisor.

Though the deal itself represents just a small portion of the Melbourne-based listed property trust's portfolio--29 of its more than 665 centers in the U.S.--it has broader implications for the company and for the U.S. retail real estate investment market. The assets were all from Centro America Fund--one of Centro Properties Group's many funds under management.

For one, Centro sold the properties--covering 5.1 million square feet in 15 states--to a private real estate advisor rather than to a public or private retail REIT. (Some reports indicate that New York City-based DRA Advisors LLC closed the deal.) Jason Lail, senior real estate analyst with SNL Financial, a Charlottesville, Va.-based research firm, thinks that despite the deal's relatively small size, it is at least reflective of "Centro really pushing hard to get their balance sheet into shape."

The deal also sheds a little light on retail real estate pricing in the current climate. Retail real estate investment sales volume has dropped considerably because of the credit crunch. In May, the most recent month for which statistics are available, investment sales of retail properties totaled $1.3 billion, down 70 percent compared to the same period a year ago, reports Real Capital Analytics. Prices have dropped as well and the bid/ask gap between buyers and sellers means there is little consensus on where property values should be. Some estimates are that prices are down 5 percent to 10 percent for prime assets and up to 20 percent for lower quality assets, according to Bernie Haddigan, national director of the retail group with the brokerage firm Marcus & Millichap Real Estate Investment Service.

In Centro's case, the company estimated the sale price represents a 10 percent discount to what the company had originally paid for the assets, indicating that the properties are probably some of the firm’s best assets, Haddigan says.

The pricing “seems about right,” agrees Merrie Frankel, vice president and senior credit officer with Moody’s Investors Service, a New York City-based credit rating agency. The 10 percent discount is in line with what should be expected from a company in Centro’s position. Frankel added that Centro has direct ownership of just 46.65 percent of the Centro America Fund. Centro’s net proceeds from the sale are projected to bring in approximately $250 million.

However, some real estate watchers caution that too much should not be read into the deal. Suzanne Mulvee, senior real estate economist with Property & Portfolio Research, a Boston-based real estate research and portfolio strategy firm, says there could be deeper discounts on retail properties if credit tightens and real estate fundamentals continue to slip.

“People that are selling today are stressed sellers, not necessarily distressed sellers,” Mulvee says. “More distressed properties may come to market later.”

The deal is expected to close in late September/early October, subject to approval from Centro’s lenders. Centro declined to comment on the transaction. The company has been able to obtain a series of extensions on nearly $4 billion of debt to both U.S. and Australian lenders that it is supposed to pay back by December 15. More on Centro's debt

Overall, Centro's shareholders took the news in stride. The company's shares on the Australian Stock Exchange closed Wednesday at A$0.26 per share, up slightly from A$0.24 per share the day prior.

Source: Retail Traffic

Walgreens Plaza Goes for $11M

DANVERS, MA-Danvers Realty LLC is selling a Walgreens-anchored plaza here for approximately $11.1 million. The property at 107 High St. totals 21,487-sf property of retail space, filled in by Walgreens at 14,937 sf with the remaining 6,550 sf going to a full-service, Beverly National Bank. The buyer of the property could not be disclosed at this time.

"We are pleased to be able to work once again with the seller for whom we originally arranged financing several years ago when it completed a 1031 tax-deferred exchange and purchased this first-class asset," says Casimir Broblewski, managing director of Fantini & Gorga, in a statement. F&G brokered the deal with the help of ICA Realty, which managed the 1031 exchange.

The property is located by the intersection of Route 128 just north of Salem. The suburban Boston location provides a mix of rental and single-family homes in a range of high density areas, ideal for a retail strip mall's client base. Walgreens, located across the US, is a popular brand and has moved in the market well, recently in Florida and nearby Stoughton, MA where Linear Retail Group purchased a Walgreens-anchored plaza for $12.6 million.

Walgreens is a Chicago-based pharmacy that has retail stores throughout the US.

Source: GlobeSt.

Upscale Cross Keys for sale - North Baltimore shops' owner acts to pare heavy debt

Facing financial pressure, the owner of the Village of Cross Keys shops is seeking a buyer for the upscale North Baltimore retail center at a challenging time.

Chicago-based General Growth Properties is looking to sell or find equity partners for several of its 200 properties throughout the nation as it faces looming debt and mortgages that need to be refinanced in the coming months, analysts said.

The company told The Wall Street Journal in April that it was trying to pay off $27 billion in debt and was approaching pension funds and life insurance firms as partners.

"They have a lot of debt coming in the next several months," said David Fick, a retail analyst for Stifel Nicolaus in Baltimore. "It's a very challenging time. Their entire focus right now is de-leveraging the company and reducing debt - selling off assets and pieces of the company."

David Keating, a spokesman for General Growth Properties Inc., declined to discuss any sale of Cross Keys. But merchants said they were told during a meeting in the spring that the four-decade-old retail center was on the market.

Analysts and real estate experts said Cross Keys is a good candidate for sale because it's so distinct from the rest of General Growth's portfolio of mostly large suburban malls, such as Towson Town Center and The Mall in Columbia.

Although the center is profitable thanks to a loyal shopping base, it also faces marketing challenges that some believe could be better met by a local owner who would be more vested in the property.

But the market for any real estate transaction is tough right now.

"There are still buyers out there," Fick said. "Financing is the key issue. There is not much mortgage money for any kind of financial real estate."

Banks have heightened their scrutiny and many are requiring upfront equity or cash toward a loan, something that wasn't required a couple of years ago, Fick and other real estate experts said.

Banks are gauging not only a company's present financial condition, but also its vulnerability in a weakening economy, such as, for instance, whether a mall is in danger of losing tenants from store closings.

"Loans are really hard to come by," said Pete Culliney, director of research for Real Capital Analytics, a New York firm that tracks commercial real estate trends.

"We were in a big up cycle that lasted several years. Financing became so cheap and easy. Now if you want to buy something and say you want bankers to put up 90 percent of the value, they'll laugh at you," Culliney said.

Phillips Edison & Co., a Baltimore firm that buys and refurbishes distressed shopping centers, said some sellers are trying to ask for the same premium prices they got a couple of years ago when the market was more robust.

"It's a little dysfunctional where people think they can get the same prices," said Steve Black, director for Phillips' Southeast business. "We have a number of properties we're buying right now. We're taking this time to buy better properties."

Culliney said mall property values have remained fairly stable. Malls that are empty and not making money may go for a lower price. But for malls doing well, many owners are willing to pull the property off the market rather than take a lower asking price, he said.

"They want to get the value," he said.

Fick said Cross Keys is profitable and is more stable than some General Growth properties, like Harborplace in downtown Baltimore, which turns over tenants frequently. But he said there's not necessarily any "upside" or growth potential for the property.

"I would expect a local buyer would be the best for this - somebody who really knows the asset," Fick said. "It's probably an asset best served by someone will be involved here physically on a regular basis."

Some people point to nearby Belvedere Square, which experienced a resurgence after it was bought by Struever Bros. Eccles & Rouse and three other developers and renovated.

Cross Keys was opened in 1965 by the Rouse Co. as a self-contained space for upscale living, working and shopping surrounded by a hotel and residential community. But it's barely visible from any main thoroughfare, and visitors have to enter through a gated complex to reach it. Many of the stores face inward so it's hard to tell what's there.

The original businesses were independent and exclusive, but over the years national chains, such as Williams-Sonoma, Chico's and J. Jill Group, have taken over several spaces. Some people said it lost some of its uniqueness.

The center has lost some key tenants over the years, leading to less foot traffic. In 1994, the upscale Nan Duskin apparel chain closed after it failed to emerge from Chapter 11 bankruptcy.

The Village Food Center, a popular grocery store, deli and cafe, also closed that year after the owners decided to retire. Many merchants said the grocer helped drive daily traffic.

The Bibelot bookstore closed in 2003 after the owners declared bankruptcy.

But the shopping center still has many viable merchants, some of which have been there since the mall opened.

Betty Cooke and William Steinmetz, who run The Store Ltd., were asked by Rouse to be a part of the center. Steinmetz said the business has many loyal customers but the center needs a plan to drive more traffic and open up more independent businesses. He's hoping a local owner will make a difference.

"I'd like an owner who is sincere in the desire to make it more like it was - a very special place to be," Steinmetz said.

But Carol Ripken, a co-manager at Barston's Child's Play toy store, said she's not convinced new owners will make a difference. She'd like to see a kid-friendly restaurant and other amenities to drive more foot traffic to the mall. But complaints made by merchants for years, including to General Growth, have received little response," she said.

"Nothing ever changes," Ripken said. "A new owner has done nothing for us."

Source: Baltimore Sun

Lightstone Buys $456M Retail Outlet Interest

BALTIMORE-Lakewood, NJ-based Lightstone Value Plus REIT is taking a minority interest position in 20 factory outlets as well as receiving rights to four development projects in a $456-million deal. The REIT acquired the package from Arbor Mortgage, an affiliate of Arbor Mortgage REIT--a structure that puts Lightstone REIT on the same co-investor footing with Lightstone Group in the deal. Lightstone REIT did not return a call to GlobeSt.com.

To finance the transaction, Lightstone Value Plus REIT is advancing $91.2 million in cash and shares of its operating partnership, with an additional pro rata share of existing mortgage debt that has an interest rate of 5.5%. The interest in the properties, which are located in 15 states, varies from 22.5% to 25%. Retailer Prime Outlets manages the centers, which total nearly 7.3-million sf and have an occupancy rate of 93.4%.

The acquisition is expected to deliver a steady cash flow to Lightstone, Stephen Hamrick, president of Lightstone Value Plus REIT, says in a prepared statement. "We're fortunate to have the opportunity to invest in a niche industry leader with a portfolio of nationally recognized factory outlet shopping centers," he says, adding that "Prime's successful execution on the opportunities within its development pipeline should create attractive future investment opportunities for the REIT."

Source: Globe St.

Apollo Closes $758M Investment Fund

NEW YORK CITY-Locally based Apollo Real Estate Advisors has closed Apollo Value Enhancement Fund VII LP, with a total of $758 million. The flexible investment strategy of Apollo's Value Enhancement Funds is to focus on existing, income-producing US properties which present opportunities to increase value.

Apollo Value Enhancement Fund VII will continue Apollo's value-added strategy of investing in real estate assets primarily in major markets in the US. The fund will seek to create a diversified portfolio across major property types, according to Steven Wolf, Apollo, a partner who oversees the firm's Value Enhancement Funds. The fund was formed in August 2007, Wolf tells GlobeSt.com, and the initial target was $750 million, which Apollo achieved.

Fund investments include 500 1st St. NW in Washington, DC, a 129,000-sf office building. The nine-story building, which also has two underground parking levels, is located on 1st St. NW and East Street NW, just two blocks from Union Station and four blocks from the US Capitol. Apollo plans approximately $7 million in building improvements in conjunction with the lease renewal of the current tenant, the US General Services Administration on behalf of the Department of Justice, which currently has a 10-year lease, Wolf says in a prepared statement.

Apollo Value Enhancement Fund VII also purchased the 500-room Hilton Dallas Lincoln Centre, as GlobeSt.com recently reported, for $102 million from Ashford Hospitality Trust Inc. The $72-million sale was been bundled with a $30-million cap-ex plan for the 3.2-acre hotel component of the landmark 1.6-million-sf office complex. The 20-story glass curtained hotel tower is located prominently within Lincoln Centre, a premier class A complex in North Dallas encompassing 1.6 million sf.

"We are very gratified with the response from our investors to the new Value Enhancement Fund," Wolf said. "We continue to see compelling opportunities where our team can apply its deep real estate expertise to add value in the current environment." Wolf said Apollo plans approximately $30 million in hotel renovations that will include renovated guest rooms and bathrooms; the construction of 13,000 sf of additional ballroom, meeting and pre-function space; and the reconfiguration and rebranding of the existing food and beverage outlets.

Apollo acquired the Value Enhancement Funds in 2004. Since the inception of the first fund in 1993, Value Enhancement Fund I through VI have invested in more than 140 transactions with an aggregate value of $5.9 billion. According to the company's website, its investment approach uses a bottom-up real estate analysis but considers factors such as the macroeconomic environment, the direction of the business cycle and local real estate market conditions. The firm, which pursues assets that are held by a variety of holder-types, notes that its objective it to create a balanced portfolio of opportunistic assets as far as geographical spread and asset class is concerned.

Source: Globe St.

Lightstone Buys $456M Retail Outlet Interest

BALTIMORE-Lakewood, NJ-based Lightstone Value Plus REIT is taking a minority interest position in 20 factory outlets as well as receiving rights to four development projects in a $456-million deal. The REIT acquired the package from Arbor Mortgage, an affiliate of Arbor Mortgage REIT--a structure that puts Lightstone REIT on the same co-investor footing with Lightstone Group in the deal. Lightstone REIT did not return a call to GlobeSt.com.

To finance the transaction, Lightstone Value Plus REIT is advancing $91.2 million in cash and shares of its operating partnership, with an additional pro rata share of existing mortgage debt that has an interest rate of 5.5%. The interest in the properties, which are located in 15 states, varies from 22.5% to 25%. Retailer Prime Outlets manages the centers, which total nearly 7.3-million sf and have an occupancy rate of 93.4%.

The acquisition is expected to deliver a steady cash flow to Lightstone, Stephen Hamrick, president of Lightstone Value Plus REIT, says in a prepared statement. "We're fortunate to have the opportunity to invest in a niche industry leader with a portfolio of nationally recognized factory outlet shopping centers," he says, adding that "Prime's successful execution on the opportunities within its development pipeline should create attractive future investment opportunities for the REIT."

Source: GlobeSt.

Manhattan Retail Site Commands $525M

NEW YORK CITY-The Carlyle Group and Stanley Chera’s Crown Acquisitions have completed the acquisition of a controlling interest in the retail portion of 666 Fifth Ave. from the building’s owner, Kushner Cos., for $525 million. The 90,000 sf retail property is positioned on Fifth Avenue between 52nd and 53rd streets and offers 200 feet of uninterrupted retail frontage on Fifth Avenue.

Prior to closing, in a transaction arranged by Crown Acquisitions, Abercrombie & Fitch leased 20,000 sf of newly available space at 666 Fifth Ave., to join existing retailers the NBA Store and Hickey Freeman. "This is a landmark building in Manhattan’s prime retail shopping district," says Robert Stuckey, head of Carlyle’s US Real Estate Team, in a prepared statement. "Locations with high national and international foot traffic such as Manhattan’s Gold Coast present unparalleled exposure and brand placement to their retail tenants."

Carlton Advisory Services arranged the venture between Carlyle, Crown and Kushner as well as the lending syndicate, which included Barclays and SL Green. The joint venture was represented by counsel, Simpson Thacher and Bartlett LLP and Fried, Frank, Harris, Shriver & Jacobson LLP.

Carlyle’s investment in this property--which Kushner purchased for a record $1.8 billion in late 2006, early 2007--comes from Carlyle Realty Partners V, a $3 billion opportunistic real estate investment fund that invests in office, hotel, industrial, retail, residential and senior living sectors. Carlyle sources were unable to answer GlobeSt.com queries by deadline.

Carlyle has been busy this week. As GlobeSt.com recently reported, the Carlyle Group, Extell Development Co. and RREEF secured a $613 million construction loan for the development of two luxury residential buildings at Riverside South on Manhattan’s Upper West Side. Carlyle’s investment in the Riverside South development comes from Carlyle Realty Partners IV, a $950 million opportunistic real estate investment fund launched in 2004.

Source: GlobeSt.

NJ: AMC Sells 156,000-SF Shopping Center for $28M

EDISON, NJ-AMC Delancey has sold its Edison Commons shopping center at 1715-1779 Lincoln Hwy. for nearly $28.4 million. The buyer is a subsidiary of MCC Realty Investments LLC.

Michael Wachs, executive vice president and CIO for Philadelphia-based AMC, tells GlobeSt.com that AMC purchased the property with the intention of redeveloping and repositioning it once National Wholesale Liquidators, which was on a short-term lease, left the space they were in.

"The goal was always to reposition the center by taking advantage of that space and finding the right use for it," says Wachs. "But Michael McCarthy, who’s with MCC, contacted us and said they were interested in the center. Given our change in focus, it was a good opportunity for us. It made it easy for us to make the decision not to go ahead with the redevelopment."

According to Wachs, MCC was brought into the deal through the new tenant for the National Wholesale Liquidators space—an Asian grocery store that Wachs declined to name. The grocery company had worked with McCarthy on a space on the West coast, and MCC became interested in Edison Commons when the grocer drew their attention to the property.

The 156,000-sf Edison Commons was one of two projects purchased by AMC through a $5.2 million investment fund the company formed in 2003. The other investment was a portfolio of industrial and warehouse buildings near Harrisburg, which sold in 2007.

AMC now plans to shift its focus to the senior living industry, which Wachs says the company views as a good investment. "We’ve been active in pretty much every sector, multifamily, retail, office, industrial," he says, "and we’ve found that cap rates and returns have been dropping over the past several years. We’ve been doing a lot more development lately, and we found ourselves partnered with a group that does independent senior living facilities. With this application of senior housing, we found something that we think is a great investment. There’s a long-term need for it, and as a real estate investment company, it really plays to our strengths."

Source: GlobeSt.

Bank of America to cut 7,500 jobs after Countrywide deal

Bank of America said Thursday it will cut about 7,500 jobs after it closes its acquisition of mortgage lender Countrywide Financial Corp. The job cuts amount to about 12.5 percent of the combined companies' mortgage, home equity and insurance businesses, after the purchase is completed next week. The Charlotte-based bank said the cuts will take place over the next two years in locations across the country "in instances where the two companies have significant overlap." The company will begin notifying affected employees in the third quarter.

Bank of America expects to close the deal July 1, having received the go-ahead from Countrywide shareholders on Wednesday. The all-stock deal, valued in January at about $4 billion, is now worth around $2.8 billion, reflecting a decline in Bank of America's stock price over the last six months. Earlier this month, the Federal Reserve cleared the way for the acquisition, which would give Bank of America control of 20 percent to 25 percent of the home loan market.
Countrywide had been the nation's largest mortgage originator before a spike in bad loans ravished its business. The deepening housing slump and lingering credit crisis have since fueled deep losses. Countrywide lost about $1.6 billion in the last six months of 2007 and another $893 million in the first quarter of this year. It also faces numerous investigations and lawsuits related to its lending practices. This includes a pair of lawsuits brought Wednesday in California and Illinois. Both cases accuse Countrywide of systematically deceiving borrowers in order to get them to take on risky loans they couldn't really afford, and name Chairman and CEO Angelo Mozilo as a defendant. The states both seek unspecified damages and for Countrywide to pay restitution to borrowers who lost their homes or loans.

Investors have worried that further deterioration in the mortgage market as home loan delinquencies and defaults rise could make it harder for Bank of America to manage Countrywide's loans. That could lead to costly write-downs, hurting Bank of America's profits.
Bank of America is expected to report its second quarter earnings July 21. Bank of America shares tumbled $1.80, or 6.8 percent, to $24.81 Thursday. Countrywide shares fell 16 cents, or 3.5 percent, to $4.42.

Source: Boston.com

Retail Not Part of Jones Lang LaSalle/Staubach Deal

Jones Lang LaSalle Inc.'s proposed $613 million acquisition of Addison, Texas-based real estate advisory firm the Staubach Co., which would create the second largest commercial real estate brokerage firm in the world, won't boost the Chicago-based global real estate giant's retail division.

The deal, which has been rumored for weeks, was finally announced late Monday night. But the planned merger does not include Staubach Retail or Cypress Equities, Staubach's retail development division.

“It’s not going to impact us at all,” says Greg Maloney, CEO and president of Jones Lang LaSalle Retail, its Atlanta-based third-party property manager.

Jones Lang LaSalle had considered buying both Staubach Retail and Cypress Equities, which are independently owned and operate under licensing agreements with Staubach, but decided that their existing structures would make the deal more difficult, Maloney says. Staubach Retail and Cypress Equities will continue to operate under long-term licensing agreements with Staubach and Roger Staubach will remain on the board of directors of both firms.

The deal will result in Jones Lang LaSalle commanding a combined $186 billion in investment sales and leasing volume, second only to New York-based CB Richard Ellis with $264.2 billion, according to National Real Estate Investor.

According to the terms of the deal, Jones Lang LaSalle has agreed to pay $613 million for Staubach, plus $114 million in earn-out payments over the next four-and-a-half-years if certain performance measures are met. The deal will give Jones Lang LaSalle a stronger tenant representation platform and raise the U.S. share of the company’s business to 37 percent from 29 percent, according to Vance Edelson, an analyst with Morgan Stanley.

Also, as a result of the acquisition, Staubach will end its eight-year-old alliance with DTZ, a global real estate advisor. The London-based firm partnered with Staubach to bolster its North American presence, but in recent years has built a direct base through acquisitions of U.S.-based firms such as DTZ Rockwood, DTZ Barnicke and DTZ FHO Partners. Following the announcement of the Jones Lang/Staubach deal, DTZ said it had served Staubach with a notice of termination of partnership. It also is cutting ties with Staubach Retail, despite it not being part of the acquisition. However, Clay Smith, president of Staubach Retail, says losing the alliance with DTZ won't affect the firm too much since the brokerage was largely focused on providing corporate real estate services to multi-national corporations.

“We are a retail company run by retail people," Smith says. "We are not focused on corporate users of real estate."

Jones Lang LaSalle wouldn't rule out pursuing Staubach Retail in the future, Maloney says. However, being part of Jones Lang LaSalle would interfere with the Staubach's core business model, which is focused on tenant representation, according to Smith.

The departure from its exclusive focus on tenants, which has been a legacy for the Staubach brand, is among the challenges facing the Jones Lang LaSalle / Staubach union, Edelson notes. In a June 17 report, he wrote that Staubach’s “'No conflicts of interest’ approach’ could be jeopardized as part of a larger organization serving both sides.”

Jones Lang LaSalle's stock closed Tuesday at $66.19 per share, up 1.56 percent since the beginning of the day Monday.

Source: Retail Traffic

Restoration Hardware Shareholders Approve Buyout

Restoration Hardware Inc. said its shareholders approved selling the company to the private-equity group Catterton Partners for about $179 million. The company said Thursday that more than 99% of the votes cast at the meeting were in favor of the deal. Catterton Partners will buy the outstanding shares of the company for about $4.50 per share in cash. Restoration Hardware said the deal should be completed next week. The retailer said it also reached a preliminary agreement for the settlement of a shareholder complaint filed in a California state court against the company, its directors, Catterton Partners and certain shareholders participating in the acquisition. Under terms of the settlement, the suit will be dismissed with prejudice and the company will establish a fund of $3.7 million to be paid to shareholders when the acquisition deal closes. The company said it settled the case to "expedite the closing" of the acquisition.

Source: Chain Store Age

Bag'n Baggage Sold to Gart Capital Partners and Colorado Baggage

In a transaction in which Clear Thinking Group LLC served as advisor to the seller, Texas-based luggage retailer Bag'n Baggage has been sold to a new company formed by specialty retailer Colorado Baggage Company and Gart Capital Partners (GCP). By combining Bag'n Baggage's 34 stores in 12 states and Colorado Baggage's 10 locations in Colorado, the newly created Colorado Bag'n Baggage will emerge as one of the nation's largest specialty retailers of luxury luggage, business cases, women's lifestyle bags, and business and travel accessories. The new Denver-based company will be led by Colorado Baggage's management team, including president and CEO Peter Paradise and COO Tom Nelson.

"The combination of Colorado Baggage with Bag'n Baggage appears to be a natural strategic fit," said Adam Cook, managing director of Hillsborough, N.J.-based Clear Thinking Group. "By leveraging the specialty retail, finance and real estate background of Gart Capital Partners and the luggage retailing expertise of Colorado Baggage, this new entity should have a bright future."

Clear Thinking Group was retained by Bag'n Baggage Ltd. in April to assist on the sale of the company just before the chain filed for Chapter 11 Bankruptcy Protection in Texas' Northern U.S. District Court in Dallas in early May.

"This is exactly the type of partnership we like to pursue," commented Chris Brown of GCP. "Colorado Bag'n Baggage brings together two family-owned businesses in a specialty niche of retail with exciting potential for growth and development -- three of the criteria we find attractive when considering partnership opportunities."

Both retailers have catered to the elite traveler for more than 30 years -- Colorado Baggage was launched in 1977 by Peter and Susan Paradise, while Bag'n Baggage was founded in 1973 in Dallas. Stores are primarily located in premier shopping malls. According to Paradise, management's immediate plans are to focus on "a concentrated and cohesive strategy" to increase sales of the stores' prominent brands, which include Tumi, Hartmann, Rimowa, Victorinox, Bosca, Kipling, Eagle Creek, Brics, Briggs and Riley, and Lodis.

"This is an exciting partnership for us because it gives us the opportunity to better streamline and manage inventory with our new partners while allowing us to concentrate on what we do best -- understanding our clients so that we can customize our products to fit their individual travel needs," said Paradise.

Source: Plain Vanilla Shell

Cole Realty Advisors Acquires 119,598 SF Retail Bldg for $19.4M

Cole Realty Advisors purchased 25 Shelley Road, a freestanding retail building in Haverhill from Realty Partners Northeast for $19.4M, or about $162 per square foot.

The single-story, 119,598-square-foot, retail building was built in 2007 and sits on 9.54 acres of land in the Lawrence/Andover Submarket.

BJ’s Wholesale Club currently operates this property under a 20-year, double-net lease. BJ’s is a leading wholesale club chain operating in the eastern United States from Maine to Miami and in the State of Ohio.

Richard Liljedahl of Net Lease Capital Advisors represented both the buyer and the seller.

Source: GlobeSt.

Linear, Principal Make $12.6M Retail Buy

STOUGHTON, MA-A Walgreens-anchored shopping plaza here is part of a two-building package being acquired by Linear Retail Properties of Burlington and Principal Financial Group. The $12.6 million deal includes the 26,000-sf strip center on Route 138 in Stoughton and a 5,500-sf Lenscrafters at 870 Providence Highway in nearby Dedham. Accommodating the sellers, Linear/Principal has agreed to delay closing on the assets until early 2009, prompting the two sides to strike a master-lease arrangement until the deal is consummated. "We effectively have full control of the properties," explains Linear President William Beckeman, whose $300-million fund is focused on convenience-oriented retail throughout New England. The latest purchases brings the number of assets acquired since the fund was launched in 2003 to 48, an assemblage valued at $220 million. Besides a free-standing Walgreens, the Stoughton plaza houses a 2,200-sf Eastern Bank branch, plus a Hertz Car Rental, pizza shop and Starbucks. Linear/Principal will pay $9.1 million for that center, which Linear partner Aubrey Cannuscio terms "a prototypical Linear Retail" investment. "The property offers a strong pharmacy anchor at a key intersection and some additional shop space that, together, offer bullet-proof cash flow and long-term upside," he says. The fund is paying $3.25 million for 870 Providence Highway, which is located at the junction of Enterprise Dr., the prime entrance to Gateway Center, a 650,000-sf entertainment/retail complex that broke ground this spring. Cannuscio calls the latter asset a "strategic buy" for other reasons, including his firm’s previous purchase of an abutting complex, leased to a bridal shop, guitar store and Mattress Giant branch. "Together, these properties offer operational efficiencies as well as long-term redevelopment potential on a very prominent retail center," he says. Unmotivated sellers and the lingering credit crunch have made it challenging to find opportunities this year versus last, says Beckeman. But while terming the first quarter as "dead," he notes that Linear/Principal has five buildings under contract to date in 2008, the same number secured at this time in 2007. As the mid-year point approaches, Beckeman says more properties are finally making their way to market. "It seems to be freeing up a little bit," he reports. In the meantime, the fund’s managers have proactively pursued properties such as the Dedham and Stoughton centers. Seller John DeMatteo says the owners "were not eager" to harvest their assets, but says "Linear Retail countered our reluctance by offering a good price and a deferred closing that allowed the timing of a transaction to work for us." The deal was brokered by Kevin Shaughnessy of Collaborative Retail Strategies of Charlestown. Linear also says KeyPoint Partners of Burlington will provide property management services for both assets. Source: GlobeSt.

CEO Interview: Simon Property Group

DAVID SIMON'S COMPANY owns or co-owns nearly 400 shopping malls, stretching from Camarillo, Calif., to Catania, Sicily. But just steps from its Indianapolis headquarters is one of the company gems: Circle Centre. The mall's 60-foot-high arched, windowed ceiling allows visitors to bathe in natural light, making the atmosphere cheery even if shoppers can't find the perfect pair of jeans. And Circle Centre, built in 1995, was a big step toward reinvigorating a dreary downtown Indy.

But the mall and other gems aren't sparkling as brightly as usual. Consumers are holding on to their wallets as fears of a recession mount. Mall traffic has stalled, and some stores are even going under. All that has taken a toll on the value of Simon Property Group (SPG: 100.65, +1.65, +1.66%), the largest U.S. real estate investment trust, or REIT. Its stock has fallen about 12 percent since early 2007.

For more SmartMoney Magazine features, turn to the June issue.Still, to his critics, Simon, 46, can point out that the stock has returned nearly 700 percent, including dividends, to investors since he became the boss in 1995. Despite weak retail sales generally, Simon's sales and earnings (called "funds from operations," in REIT parlance) were both up 10 percent last year, and the company expects more gains in 2008. Simon makes its money by charging rent to retailers that lease mall space. Those leases typically last seven years, giving the company some breathing room in a consumer downturn. "We don't have to sell the goods," he says.

Under David Simon, son and nephew of the company's cofounders, the company has been on its own shopping spree. It now owns around $50 billion worth of real estate, up from $2 billion at its 1993 initial public offering. And more deals likely are on the way. Simon talked with contributing editor Evelyn Ellison Twitchell about the current retail malaise, the company's growth prospects and his own shopping habits.

People are cutting back on their shopping. How's that affecting the malls?

We're anticipating this year to have a somewhat higher level of store closings. What we're seeing is that some of the better retailers have tried a concept, and it's not producing the results they want. So they're shutting down the concept. Talbots tried Talbots Kids, and they're shutting down that chain. Pacific Sunwear has this concept that they want to shutter. Now, those retailers have leases, so we're going to get paid to let them out.

But you're still charging retailers more to be tenants?

In recent years, as leases have come up for renewal, we've been able to increase rates $7 to $10 per square foot, about 20 percent, which has obviously generated increased cash flow. That is going to be a little bit tougher to achieve, and the spread might not be as great. But I still think it's something we'll be able to do.

Okay, you're making the retailers pay more, so that helps your profits. Why has your stock suffered?

REITs had a huge run-up last year associated with mergers-and-acquisitions activity. There was a big move toward privatization and a lot of capital coming in. That's subsided. Now the momentum guys are out, and the capital markets are a little shaky. It's had an adjustment on valuation. But we strongly believe that the value of our assets is actually greater than our stock price.

How else does the economy affect you?

If the consumer slows down, will we have some potential cash-flow impact? The answer is yes. I think it will be de minimis. Remember, we're in the real estate business. We are somewhat — I know it's hard to believe — but we are somewhat insulated. These times are also when we can do some of our best transactions. When the economy was slipping into recession in 2001, we did one of the best deals that we've done in terms of buying a high-quality portfolio [of malls] at a very attractive price [from] Rodamco. So we're gearing up.

Are you looking at specific properties or whole companies?

We'll do both because we've always done both. There are some companies that have a little more pressure on them financially than we do, because of the way we have financed our growth. So we look at it as an opportunity.

You say you also can expand your business by actually demolishing department stores in your existing malls?

What you're seeing is, you probably don't need four or five anchor department stores; you may need two or three. That enables us to capture one of the stores, chop it up and bring in other smaller retailers, bookstores, restaurants, theaters, to broaden the appeal to the consumer.
What about building malls abroad?

In the U.S., clearly, there's a lot of retail space — about 20 square feet per capita. When you look at other markets, it's 2 to 3 square feet per capita. As we think about the future, we'd like to see more of our business going international. We're building five centers in China now. In Japan we've been successful with our premium-outlet-mall product. And we would hope over time to be bigger in Europe.

What about online shopping? I'm assuming you're not a fan of Amazon.com.

It is something that we've got to be very focused on. What I'm most concerned about is that it's not a level playing field. The dot-com-only stores don't collect sales tax, so they have an immediate advantage over our retailers. Ultimately, though, we believe if we produce the right kind of product and atmosphere, the physical shopping environment is here to stay and will continue to prosper.

So we haven't kissed our mall goodbye, as some predicted?

Yeah, Time magazine wrote that in 1998. I hope that's not on your cover. The mall's been bad-mouthed for almost two decades now. Yet if you look at not just us but other prominent companies in our space, we've all been able to grow our cash flow. Sales have gone up. So the question is, is our real estate good? At the end of the day, retailers come and go, but the mall continues to thrive and will continue to evolve. I think our results speak for themselves.

You seem like someone who has been successful at getting what you want. What do you want right now?

We have a market value of real estate of around $45 billion to $50 billion. I would like to see us become more global, and maybe that $50 billion goes to $100 billion. You've got to do it in a way that accretes to shareholders, but we would certainly like to see a bigger, broader platform. And we want to be excellent, excellent operators. So when people walk into our centers, they see a certain standard of excellence. If we had to emulate a brand, it would be the Four Seasons of the mall business.

So what's your ultimate shopping experience?

Keeping my wife happy! Otherwise, I want a clean product, a fresh product and a diversity of tenants. If I'm a shopper and have those, then I'm happy.

Source: SmartMoney.com

Regency Sells Seven Centers for $108M

JACKSONVILLE, FL-Regency Centers has sold seven centers in the Mid Atlantic for $108.1 million to Spectrum Partners and Angelo Gordon. Regency owned the centers as part of its partnership with Australia-based Macquarie CountryWide. The centers are located in Delaware, Maryland, Pennsylvania, and Virginia. Tenants include a variety of different anchors, Barry Argalas, Regency’s senior vice president of acquisitions and dispositions, told GlobeSt.com.
Regency and Macquarie put the properties on the market last year as part of their capital-recycling program, along with a portfolio of seven Southeast centers that it sold to DLC Management Corp. in November for $104 million. “It took a lot longer to get this one done,” Argalas says.

Part of the reason for the delay was that Mid-Atlantic portfolio is made up more of value-added, under-performing centers, while the Southeast properties were core assets, Argalas says. Additionally, when the centers went to market before the credit crunch, portfolios were more attractive to buyers. Now, one-off deals are more common. Regency will use the proceeds to fund its development pipeline, which includes about 50 projects. The company currently owns about 450 centers across the country, 163 of which are in the Macquarie JV, which began in 2001. Regency was represented by Bill Kent and Gary Lawrence out of C.B. Richard Ellis’ Washington DC office. The centers sold at a 7.75% cap rate.

Source: GlobeSt.

Commercial Property Markets Remain in a Lull

As the industry makes its way through the second quarter of 2008, the outlook for the U.S. retail property market remains muddled, according to the first quarter report from Reis, Inc., a New York City-based provider of commercial real estate information. Transaction volume during the first quarter continued its downward slide, but pricing for the assets that did trade hands remained relatively stable. Where the market will go from here will depend largely on the performance of the credit markets in the next few quarters, said Sam Chandan, chief economist of Reis, during the company’s first quarter presentation on May 28.

After months of little activity in the investment sales sector, the volume of retail transactions in the first quarter amounted to only $7 billion, an 81 percent decline from $37 billion during the same period in 2007. Portfolio sales, which made up the bulk of activity in 2006 and 2007, have been virtually non-existent this year, coming off a high of $208 billion for the entire commercial sector in 2007. The change has been due to the decreased appeal of properties in secondary markets, which makes it harder to get rid of sub-par portfolio assets, and the difficulty of getting enough credit to finance such transactions, according to Chandan.

With credit markets still in a funk, the easiest loans to obtain are those under $25 million, since they can be financed by regional banks, instead of Wall Street players, according to Gary E. Mozer, managing director and principal with George Smith Partners, a Los Angeles-based real estate investment banking firm.

At the same time, the price depreciation in the retail sector for the properties trading hands has been relatively modest. The price per square foot during the first quarter was down just 2.8 percent from the high of more than $180 in the second quarter of 2007. In contrast, apartment prices were down more than 13 percent. However, part of the reason that prices have remained stable is because only the best assets in large markets are trading hands. Had lower quality properties been trading, it's likely the price drop would have been more severe, according to Chandan.

Currently, cap rates for retail properties range from just under 6.4 percent to approximately 9.5 percent on lesser quality centers, with Las Vegas, San Diego, Orange County, Los Angeles and Chicago registering the lowest cap rates in the country. In the past 12 months, cap rates for retail properties averaged about 7.2 percent.

However, Chandan cautioned the industry against taking the current transaction statistics out of context. While transaction volume may be down and cap rates up compared to the fever pitch of the past three years, they are roughly in line with the levels experienced in 2004. “Last year’s transaction levels are far above the normal rate for the market,” he noted.

At the same time, Chandan remains worried about the availability of debt for commercial properties in the coming months. In recent weeks, the freeze in the credit markets has eased—LIBOR spreads over Treasury have narrowed to 75 basis points from 198 basis points on March 20 and spreads over swaps on AAA-rated notes have come down as well, to 142 basis points from 325 basis points. But similar drops have occurred twice already since the onset of the credit crunch last summer, in November 2007 and in February 2008, only to blow back open again after further credit problems arose.

If the spreads widen once again, the difficulty of re-financing existing properties will likely lead to distressed property sales in the commercial sector, Chandan notes. Reis estimates that CMBS issuance will range from $32 billion to $35 billion this year, compared to $230 billion in 2007, taking away a significant source of financing for real estate owners. Traditional lenders have not been able to pick up the slack. Currently, many of the country’s leading financial institutions are over-leveraged and don’t have the capacity to extend credit to commercial owners, Chandan says.

In the first quarter of 2008, the delinquency rate on loans in the commercial property sector stood at 3.7 percent, according to Reis, the highest level since 1994. But if the owners who bought their properties in 2005, 2006 and early 2007 counting on easy availability of credit and rapidly rising cash flows won’t be able to refinance, that number will rise, leading to a negative price bubble, Chandan cautions.

“There is material downward risk for the market later this year,” he says, predicting further cap rate increases in the weaker markets.

Source: Retail Traffic

Bid/Ask Gap Continues to Vex Investors

For months, a yawning gap between buyers’ and sellers’ expectations combined with a drop in available financing for highly-leveraged buyers has led to a massive drop in investment sales volume on retail real estate properties. In early months of this year, year-over-year volume dropped by as much as 85 percent.

Many in the industry had been looking to ICSC’s RECon as possibly easing that impasse. The logic? With more than 40,000 pros getting a chance to sit face-to-face for the first time since the credit crisis broke, perhaps buyers and sellers would come to a better understanding of fair valuations. But based on the sorts of conversations and dealmaking occurring, it doesn’t seem that the convention will ultimately serve as that panacea. Anecdotally, full service brokerage firms like CBRE and Jones Lang LaSalle are reporting that while leasing activity remained robust at the conference, there wasn’t nearly as much activity on the investment side.

“Transactions are still off 80 percent,” says Paul Andrews, CFO for Washington, D.C.-based developer, owner and manager Madison Marquette. “The stuff that’s trading is at least 5 to 10 percent off its peak. And there’s another tranche that’s not trading at all. I think it may take two, three or four years for all this to work its way through the system.”

The deals getting done are also different from the sorts of deals that were happening 12 months ago, according to Mehran Foroughi, senior vice president of Sperry Van Ness, an Irvine, Calif.-based commercial real estate firm.

“The way Southern California is changing, in the past few years, geographically, there was not much difference between properties located in Los Angeles and properties located in San Bernardino,” Foroughi says. “Today, there is. San Diego used to be the hottest market, [you could sell anything], but now people are looking at the location and the tenants. The cap rates on C properties are spreading. People are looking at the residential sector and all the foreclosures in [high growth areas] and all the speculators are scared.”

As a result, there’s no agreement in the market at the appropriate pricing for retail real estate. “We don’t have statistics today to tell you what a good cap rate is,” Foroughi says. “Up until a year ago, we pretty much knew what the cap rates were. But now you have to look at every property individually. We closed a deal recently in Laguna Beach at 5.2 percent because it’s what we call a ’sexy’ property. But in today’s market, there is at least half a cap to one cap difference between what the sellers expect and what the buyers expect.”

A major problem remains financing. Banks lending volumes are way down. And commercial-mortgage backed securities (CMBS) issuance remains at a standstill. Gary E. Mozer, managing director and principal of George Smith Partners, a Los Angeles-based real estate investment banking firm, confirmed that view. Of deals worth $25 million or more, the firm did about $20 billion in volume in 2008 down 83 percent from the $116 billion in volume during the same quarter in 2007. “Wall Street, through which we did two-thirds of our deals, is gone for all intents and purposes,” Mozer says. “Larger deals are hard to do, though we are still able to transact the deals under $25 million because the regional banks pick up a lot of that volume.”

Source: Retail Traffic

Markland Acquires 47 Citibank Branches in $100M Sale-Leaseback

An Irish investment group, which market sources have pegged as Markland Holdings Ltd., has acquired 47 Citibank branches in the New York City metropolitan area for $100 million.

The portfolio includes a 156,300-square-foot combination of bank branches and offices, and is leased to Citigroup Global Markets Inc. for 15 years. The properties range in size from 2,000 to 8,000 square feet and are located in Manhattan, The Bronx, Brooklyn, Queens and Staten Island, as well as Westchester, Suffolk (pictured) and Nassau counties.

“These were triple-net leases with annual increases, and investors want safety, security and good credit,” Ken Zakin, senior managing director with Newmark Knight Frank’s capital group, told CPN. “We don’t see a lot of high-quality net lease product in the New York metropolitan region. The dispersion of risk across the portfolio was also very attractive.”

That said, the portfolio garnered a lot of interest from different investment groups, including international buyers, 1031 and net lease investors, New York-based investors and unsuccessful bidders in Citigroup’s last disposition of 23 New York metropolitan assets in June 2007.

Borja Sierra, executive managing director of Savills Granite, said that the deal also reinforces how offshore investors are still eyeing large-scale deals in the United States. Savills Granite represented the buyer, while Newmark Knight Frank represented Citigroup in the transaction.

The portfolio disposition is the latest in Citigroup’s efforts to sell off its real estate assets and redeploy its capital into its operating business.

Source: Commercial Property News

Chatam Management Co. JV Buys Four-Building Retail/Medical Complex

Chatam Management Co. LLC and Lakeview Center Associates LLC acquired Lakeview Center, a four-building complex at 249-251 W. Main St. in Branford, CT, for $8.35 million, or approximately, $119 per square foot. The sellers were Stephen Yardan and Edward Steinlauf.

Lakeview Center is a 70,281-square-foot shopping center comprised of a retail building, two medical office buildings, and daycare and services property. The complex totals 10.7 acres.

Louis Zuckerman and Jeff Kravet of GVA Williams in Stamford, CT, represented both parties in the transaction. The seller had held the property for more than 20 years.

Source: CoStar

Abbey Road Turns to Boston for $10M Buy

BOSTON-Two of the most famous names in roadways have come together again, as Abbey Road Advisors grabs its second stake on Newbury Street, Boston’s internationally known shopping Mecca. The Westport, CT-based firm acquired 131 Newbury St. for $6.2 million in a dual-building buy from local florist Winston Flowers.

"We think Newbury Street and Back Bay retail is still a very solid place to invest real estate dollars," Abbey Road principal Alan Bates tells GlobeSt.com. The group last summer paid $9.5 million for the nearby 123 Newbury St. between Clarendon and Dartmouth Streets, the same block as 131 Newbury St.

In the just-completed round, Abbey Road Advisors affiliate Abbey Road Back Bay LLC also took over Winston’s 569 Boylston St., around the corner from 131 Newbury Street, for $3.8 million, seeding the purchases with a $7.2 million mortgage from TD Banknorth. Abbey Road has been active in the Back Bay since 2005 when it purchased the 13-story, 230,000-sf Boylston St. office/retail building for $55 million, an asset the firm and its partner sold for $95 million in early 2007.

While such an impressive outcome could be difficult to replicate, Bates says his firm is enthused by the two new investments, concurring with other observers that Newbury Street has a global cache and the mettle to withstand harsh economic times. "We’ve had good experiences there, and we think it’s still a good market to be in," he says. The Winston deal was an off-market transaction brought to Abbey Road by Dartmouth Co. broker Sam Hawkey, whom Abbey Road has dealt with since 399 Boylston St. The broker "really knows what we are looking for," Bates said, noting that Hawkey also negotiated the 123 Newbury St. deal.

Hawkey has now been appointed leasing agent for both properties. The Winston Flowers buildings total nearly 14,000 sf, with 569 Boylston St. featuring a mix of retail and office space and 131 Newbury St., split between retail and six apartments on the upper floors. As part of the sale, Winston Flowers will consolidate its operations at 131 Newbury St., and Bates says the goal is to put a restaurant in its place at 569 Boylston St.. Bates also announced the hiring of Steven Heims of Boylston Development Corp. as property manager of the buildings.

Sales of Newbury Street properties have been a regular occurrence of late, with dozens changing hands last year in transactions eclipsing $200 million. And while that pace will be difficult to match in 2008, buildings on the boulevard continue to trade, including 125 Newbury St.. Also located between Clarendon and Dartmouth Streets, that asset sold for $6.8 million to an Irish investment group, as reported by GlobeSt.com. And as reported by GlobeSt.com two months ago, 234 Newbury St. sold for $5.7 million, and sources indicate that at least two more properties are presently on the block.

Source: GlobeSt.

Sale-Leasebacks Pick up With Slower Economy

NEW YORK CITY-"I would say that we will be better off next year than we are now," said Bruce McDonald, president and cofounder of Net Lease Capital Advisors, during Real Estate Media's sixth annual RealShare Net Lease conference. As moderator of the "Town Hall Meeting: State of the Net Lease Market," McDonald focused on how the credit crunch's hit pulled reins in on a market that had been moving at a gallop, and asked panelists what their outlook is now and for next year.

"We will see a return to fundamentals with strong tenants and strong locations," said Andrew Kroll, a director of the investment banking group at SunTrust Equity Funding. "We should see some improvement."

Robert Micera, SVP and national head of net lease investments at First Industrial Realty Trust, agreed with McDonald and Kroll, noting that "the slower the economy, the more sale-leasebacks pick up, so I think you will see more opportunities going forward." Micera said that cap rates will creep up and those who have resources will get things done. "I don't think we are in a recession," he said. "There is a ton of money sitting on the sidelines and it will be back."

Larissa Belova, a VP at Lexington Realty Trust, said that this has been a liquidity crisis and disagreed with the other panelists regarding next year's forecast, saying that "looking ahead one year from now, I still don't thing we are going to be smiling. I think we will be the same."

When looking at the current market, as it is now, Kroll said that from a debt perspective, he is seeing stress on the CTL market given the credit turmoil. "We are seeing some opportunity, but also see a lot of risk." He did note, however, that "we are better than we were back in December because there is more certainty," adding that he is seeing some movement in the CMBS market.

Micera agreed with Kroll, noting that it is not as bad as December. "We are a lot more selective. We aren't out of the woods yet, but I do see a light at the end of the tunnel." Micera noted that fundamentals are much more important. "We see a change in the capital markets and I think spreads have begun to come in on the CMBS side."

Belova concurred with Micera in that her firm is focusing on fundamentals at the moment and taking its time. She continues that "although we see opportunities out there, lenders are more picky right now, so we are going with the flow and are waiting." Belova explained that the firm is inundated with sale-leaseback activity right now. "Things are also strong in the build-to-suit markets."

Micera also thinks that there will be more sale-leaseback opportunities in terms of supply. "I think you will see more secondary and tertiary supply." He explained that on the demand side, "REITS, pension funds and institutional players are in the game."

Randy Blankstein, president of Boulder Net Lease Funds, said that he sees change happening in the last quarter of the year, but not in the near future. He explains that "key data points investors should look at are the number of properties that have been on the market for three months."

Belova explained that "we are hoping to be buying a lot more this year. Opportunity for us is 20-year sale-leasebacks when debt comes due." She also said that foreign money is still out there on trophy assets. She did agree with Micera that institutional players and pension funds are definitely in the game right now.

Source: GlobeSt.

Investment Sales Crater After Record 2007

BOSTON-After starting with a bang, the 2008 investment sales pace in Greater Boston fizzled, dramatically, and is limping along heading towards midyear, according to a report from Colliers Meredith & Grew. Even when not including the $4.2-billion purchase of Equity Office Properties assets by Blackstone in early 2007, Q1 transaction volume paled in comparison to the start of last year, particularly for super-sized trades.

"It was harder to finance the bigger deals," says CMG research director and SVP Mary Sullivan Kelly, whose firm estimates total sales at $1.16 billion for all property types, including industrial, multifamily, office and retail. That is $450 million below the 2007 Q1 results when discounting the Blackstone/EOP activity. Particularly in the suburbs, transactions were generally under $20 million, Kelly tells GlobeSt.com.

The $477-million purchase of a 49% interest in 53 and 75 State St. from RREEF by majority owner Brookfield Financial Partners made up the lion’s share of Boston office building sales in Q1, relays CMG. Brookfield, in a deal first reported by GlobeSt.com, took full control of the two office towers in January after Rreef’s share was shopped to other investors for much of 2007. Five other office building sales pushed the total to just $507 million for Boston, well below the $850 million traded in Q1 2007, minus Blackstone/EOP. Among the early 2008 sales was the acquisition of 4 Liberty Sq. to locally-based Synergy and 285 Summer St. to New York City-based Aegean Capital.

The pace was even slower in Cambridge, where a $24.5-million sale/leaseback involving New Boston Fund, as the buyer, was the only quarterly completion compared to $140 million in Q1 2007. Suburban volume plunged from $800 million to $177 million. Among the largest deals was the sale of Rivertech Park in Billerica for $45 million, this time with New Boston Fund on the seller side, as reported by GlobeSt.com.

A flight to quality has been one result of the disrupted marketplace, says CMG, with investors targeting core communities and higher-end assets, partly from lenders aiming to “cherry pick” deals. The dearth of commercial mortgage backed securities money has severely curtailed debt availability, and CMG says banks and insurance companies are being rigid in their underwriting assumptions. According to sources, several promising deals have been slowed, or quashed completely, in recent weeks, some of which reportedly collapsed due to lender intransigence.

Most experts had anticipated a torpid beginning for investment sales, says Kelly, and she concurs that the immediate future remains cloudy. On the bright side, however, Kelly notes that CMBS spreads have started to drop, possibly signaling that the capital freeze may be thawing. "We’ll take any good news we can get," Kelly says, adding that real estate denizens can be comforted, realizing that an 8.7% vacancy rate and average rents back into the $50 per sf range are impressive fundamentals for Boston, particularly with only limited new inventory underway. "It shows that when the market gets its footing back, we are going to be in a good place."

Source: GlobeSt.

Morgan Stanley Fund Gets Additional $2.5B

NEW YORK CITY-Morgan Stanley Real Estate revealed that it has successfully completed the closing of the third offering for its Special Situations Fund III, raising an additional $2.5 billion of equity commitments, 63% of which came from investors located outside of the US. With this closing, Morgan Stanley Real Estate has raised a total of $5.9 billion for Special Situations from institutional investors, High Net Worth individual investors and Morgan Stanley, with the latter representing 23% of total commitments.

Special Situations, structured as an open-ended fund, primarily seeks to make non-controlling investments in an array of real estate securities in growth/emerging, developed and distressed markets around the world. As of the end of 2007, Special Situations committed approximately $4.8 billion of equity, with 62 closed investments in China, Australia, India, Russia, Poland, Brazil, Mexico, the US, Japan and Western Europe, among other areas. The Fund's investment professionals form a core group with extensive collaborative experience, maintaining a team presence in each of the regions where it has invested.

Willem de Geus, managing director and global portfolio manager of Special Situations, says that investors continue to be attracted to the global opportunistic real estate strategy of the fund despite recent turbulence in the global capital markets. "The heavy emphasis on the high growth emerging economies--China, India, Russia, Poland, Mexico and Brazil--the flexibility to invest across the capital structure of real estate companies, and the ability to invest in developments and recurring income-producing assets in all real estate sectors is what makes this fund attractive in the marketplace."

John Carrafiell, joint global head of Morgan Stanley Real Estate Investing and president of Special Situations says that "this substantial additional capital raise for Special Situations is significant, particularly given the current challenging fundraising environment. It demonstrates strong investor support for the Fund's strategy, underscoring the global breadth of Morgan Stanley Real Estate's platform and the team's ability to source attractive opportunities in a volatile market."

Tim Morris, managing director and CIO of Special Situations says that "with the completion of this successful follow-on equity raise, Special Situations is in an enhanced position with ample liquidity to continue to pursue its flexible mandate and will access investment opportunities now available due to the significant deleveraging occurring globally. Special Situations will continue to provide dynamic real estate companies in the emerging markets with pre-IPO capital, as well as increase its allocation to distressed opportunities, focusing on the debt markets particularly in the developed economies."

Special Situations Fund III, which had an initial closing in August 2006, is the third in a series of successful real estate funds. Special Situations Fund I, which is fully liquidated, launched in 1997 and invested primarily in the US and Asia. Special Situations Fund II launched in 2000 and invested solely in Europe.

Source: GlobeSt.

Bid/Ask Gap Brings Investment Sales to a Halt

Real estate brokers had hoped the steep decline in investment sales of retail properties in the last quarter of 2007 was a temporary setback. Now it's well into the second quarter of 2008 and little has changed.

In February, the volume of investment sales in the retail sector was a paltry $1.1 billion, according to data recently released by Real Capital Analytics, an 88 percent drop from a year ago. The figure was also down from January 2008, by 55 percent. At the same time, the ratio of new listings to closings rose, to 4-to-1 in February, from 2-to-1 the previous month. And as there were few deals under contract in March, the figures aren't likely to improve.

The credit crunch caused the initial drop-off. Highly leveraged buyers that previously dominated the market can no longer get financing and have exited the scene.

But there's more at work. A rift has emerged between buyers and sellers. Sellers have moderated their expectations to some degree, as evidenced by rising cap rates, especially on class-B and class-C assets. The problem, industry observers note, is that not enough of them have done so. Special services firms and institutional sellers understand that they might have to accept discounts. But almost every private investor with a property on offer has to be counseled about the changes that have taken place in the market since last summer, says Stephannie Mower, executive vice president and managing director of investment services with PM Realty Group, a Houston-based real estate services firm.

A lack of clarity on appropriate pricing levels might be partly to blame. Real Capital Analytics reports that from June of 2007 to March 2008, average cap rates on retail properties moved by 30 basis points, to 6.9 percent. But the firm's managing director Dan Fasulo has told our sister publication the National Real Estate Investor the numbers are skewed because they are limited to price increases on the best assets, the only kind that has been trading hands in the past few months.

Faced with a lack of reliable statistics, sellers still expect to see cap rates in the 5 percent and low 6 percent on freestanding single-tenant properties, says Jim Koury, managing director of retail investment sales with Jones Lang LaSalle, a Chicago-based commercial real estate services firm, while buyers tend to look closer to 6.5 percent and 7 percent. With multi-tenant shopping centers, sellers tend to be as much as 50 basis points off the average 7 percent cap rate.

That has affected transaction volume. When private investors find out they'll have to accept a discount, in about 20 percent of cases, they decide not to go through with the sale, according to Mower. "Many of them bought these assets in the past five years and still expect to get an unbelievable return on their investment," she says.

Stonemar Properties, a New York City-based real estate investment firm that plans to buy up to $150 million worth of centers this year, is under contract for only one acquisition so far, a 180,000-square-foot property in Northeastern United States that features a $29.5 million price tag and a cap rate in the mid-7 percent. The slow start to the year has been due both to the difficulty of finding appropriately priced assets and the reluctance on the part of many sellers to bring their properties to market during a down period, says Jonathan Gould, CEO of Stonemar.

"I think sellers' expectations have lowered, but they have not lowered enough," Gould notes. "But there is a lot less wheeling and dealing going on in general. The number of properties available for sale is down substantially compared to last year."

Meanwhile, with so few deals in progress, even experienced brokers can find themselves at a loss how to value new offerings. In more than 20 percent of transactions, the listing price is lowered by an average of 5 percent, says Mower.

In one listing handled by brokerage firm Sperry Van Ness, a Wal-Mart-anchored shopping center in a tertiary market in the Midwest remained on offer for almost 60 days without getting much interest, recalls Joseph French, national director of retail properties with the firm. With cap rates for similar properties averaging 7 percent in the past six months, the firm's brokers figured a 9 percent rate would guarantee a flood of bidders. Sperry Van Ness ended up having to raise the rate to 10 percent to generate offers.

"In a different market, we would have sold that very quickly and probably at a different cap rate," French says. "But what's happened is buyers have more options and they are more cautious. If they don't get one property, they just go to the next."

Sellers should expect cap rates to climb another 25 basis points to 50 basis points before the market hits bottom, according to Koury. Mower predicts that prices will drop another 5 percent to 10 percent.

Source: Retail Traffic

NJ: Gottesman Buys 52,000-SF MXD Old Mill Plaza

SEA GIRT, NJ-Gottesman Real Estate Partners has acquired Old Mill Plaza, a 52,000-sf retail and professional office complex at 2100 Route 35 here for an undisclosed price. That location is at the signalized intersection of Ocean Road and Route 35 in eastern Monmouth County.

The seller was the New York-based Sitt Asset Management, and the deal was brokered by Bill Lenaz of R.J. Brunelli & Co. of Old Bridge, NJ and Greg Nowell and Chris Santoro of the Sitar Co., Iselin, NJ. Gottesman has hired CB Richard Ellis to manage the property.

“This acquisition is ripe for the kind of improvement that comes with a hands-on, long-term approach,” says Joel Brudner, EVP of the Livingston-based Gottesman. “We intend to reposition the center to match its triple-A location,” he says, noting that upgrades will focus on aesthetics and building systems.

Old Mill Plaza is currently 77% occupied, including a stand-alone office building at its rear that houses the headquarters of the engineering firm Birdsall Services Group. Other tenants include Century 21 Real Estate, Shore Spine & Sport, Ralph’s Ices, Wings Gym, Weight Watchers and Old Mill Travel, among others.

The acquisition is the third for Gottesman Real Estate Partners since the firm was founded this past August by Andy Gottesman, son of a co-founder of the Gottesman real estate empire in New Jersey and New York. In October, the firm bought the 204,000-sf flex building at 2 Cranberry Rd. in Parsippany and in March added the two-building, 100,000-sf office complex at 19 Roszel Rd. in Princeton.

Source: GlobeSt.

Linear Straight Out on Retail Buying Spree

READING, MA-A multi-tenanted shopping plaza fronting busy Route 28 has been purchased by Linear Retail Properties. The 20,000-sf asset at 345 Main St. and a separate center acquired in Warwick, RI, brings to 46 the number of New England retail assets Linear has secured for a $300-million investment fund backed by Principal Financial Group.

Linear hopes to deploy $80 million in 2008, according to principal Aubrey Cannuscio. Despite the credit crunch that has slowed property sales dramatically in the region, $16 million has been spent year-to-date, including $3.9 million for the Reading property and $1.6 million for 1138 Post Rd. in Warwick. Negotiations are underway on another two deals, Cannuscio confirms while declining to identify those properties.

The fund gives Burlington-based Linear the ability to make far larger purchases than the latest two. There are several substantial assets already in the $225 million spent since the campaign began five years ago, but Cannuscio says the latest buys are strategically important for the fund, calling them “straight-forward investments” that allow a cash flow and potential upside via a planned retrofit of 345 Main St. The off-market deal was brokered by Frank Normandin of Summit Realty Partners, who correctly sensed the center would be attractive to Linear, says Cannuscio.

A vacant space fronting Route 28 has recently been leased by a successful natural foods store, bringing 345 Main St. to full occupancy. Other tenants include a Sherwin-Williams outlet, another recent arrival. There is also a liquor store whose owners, Busa Liquors, sold 345 Main St. to Linear. The most lasting denizen of the plaza is Café Capri, a popular local pizza shop and restaurant situated at the rear of the property.

“It’s tired today, but I think it’s going to look like a new property in six months,” says Cannuscio. Modern signage, façade improvements and enhanced landscaping will be part of the restoration, relays Cannuscio, whose firm recently completed a similar overhaul at the Burlington Marketplace on Mall Road in nearby Burlington. Strong visibility along the four-lane Route 28 and a local connection aided by Café Capri are among the positives of 345 Main St., reports Cannuscio, who also notes the property’s accessibility to nearby Walkers Brook Drive. That roadway has seen an explosion of retail development in the past two years with more on the way. “We like what’s going on there,” Cannuscio says.

Linear is also enthused about the Rhode Island property, a two-tenant complex located on Route One less than two miles north of T.F. Green Airport. Harold Lavine of Bessette Realty in Lincoln, RI, was the sole broker in that sale. An Aaron’s Furniture Store shares the 10,000-sf plaza with Asian restaurant Lemongrass, similar to Café Capri by being a well-known local eatery. In unveiling the latest purchases, Linear named Colliers Meredith & Grew as property manager for 345 Main St. and Keypoint Partners to manage 1138 Post Rd.

Source: GlobeSt.

Wash DC: Saul Centers adds to portfolio

Real estate investment trust Saul Centers Inc., which owns dozens of neighborhood shopping centers, mostly in the Washington and Baltimore areas, is adding properties in Great Falls, Alexandria and Bethany Beach, Del., to its portfolio.

The Bethesda-based company has acquired the 89,000-square-foot Great Falls Center, anchored by a Safeway and a CVS, a 115,000-square-foot BJ's Wholesale Club in Alexandria, and the 22,000-square-foot Marketplace at Sea Colony in Bethany Beach.

Saul said it paid a total of $60.6 million for the three properties, including the assumption of $10.3 million in mortgage debt.

Saul (NYSE: BFS) had $150.1 million in 2007 revenue, up 9 percent from the previous year. The company now owns 51 community and neighborhood shopping centers with 8.1 million square feet of leasable space.

Source: BizJournals

Westport firm completes purchase of Norwalk strip mall for $16.8M

NORWALK - A Westport-based real estate development firm finalized a $16.8 million deal yesterday to purchase a third piece of property on Westport Avenue.

Timpany Norwalk Real Estate LLC, a subsidiary of Paragon Realty Group of Westport, bought the 2.4-acre parcel at 420-444 Westport Ave. from SH Realty, also of Westport. The property is occupied by a nearly 52,000-square-foot shopping plaza housing Staples, Blockbuster video, Hollywood Tans, Payless Shoe Source, GNC vitamin store and a nail salon.

No plans have been announced for the parcel, but the acquisition brings together three pieces of land on the busy road. In October, Paragon purchased properties at 508 and 490 Westport Ave. occupied by the 45,000-square-foot Ski Market and Total Tennis and Fitness stores and a 10,600-square-foot office building.

Paragon representatives were not available last night. But they said in October that the Route 1 corridor is an attractive location.

"It's very accessible, and we have parking. We really like the Westport Avenue corridor," Paragon chief executive John Nelson said.

The sale provides a boon to the city, which collected nearly $84,000 on the sale in conveyance taxes at a time when home sales are slumping.

Conveyance taxes are levied on real estate transactions, assessed as a percentage of sale price at closing. Norwalk charges 0.5 percent, or $5 per $1,000, of a sale price in conveyance taxes, twice the amount most other municipalities are allowed to charge.

Before 2003, cities and towns collected $1.10 on every $1,000 of a home or business sale. But with state aid dwindling, the General Assembly raised that to $2.50 and allowed 18 communities with enterprise zones, including Norwalk and Stamford, to raise the tax to as much as $5 per $1,000.

Norwalk residents pay the maximum, and Stamford charges $3.50 per $1,000. The increases were supposed to have expired, but lawmakers have repeatedly extended them.

Last month, a state legislative committee voted to prolong the tax for two more years with the potential of exempting financially strapped homeowners.

Norwalk budgeted about $5.8 million in revenue from the tax in the current year but could receive $5.1 million to $5.4 million, City Finance Director Thomas Hamilton said.

In the process to draft the next fiscal year's budget, Hamilton adjusted his original $5.25 million conveyance tax revenue projection downward by $275,000 to $4.975 million to account for the housing slump.

"This past quarter is probably the slowest I've seen in the past seven years I've been here," Town Clerk Andrew Garfunkel said of the number of land sales filed.

But a string of commercial sales over the past fiscal year have compensated for a downturn in conveyance taxes and land record filing fees tied to the housing market slump, he said.

In other recent commercial transactions, Stamford-based F.D. Rich and Co.'s February purchase of 28 addresses along Washington and South Main streets for $24.6 million in South Norwalk brought in $111,820 to the city, coming close to the No. 3 spot for the highest conveyance tax payments over the past fiscal year.

Source: The Stamford Advocate

Boston: Newbury Street Asset Trades for $5.7M

BOSTON-Another long-held property on Newbury Street has changed hands, but this time, the buyers are denizens of the neighborhood. Salon owner Serge Safar and son Sacha Safar have paid $5.7 million for 267-269 Newbury St., a diverse commercial asset a few blocks from their Safar Salon at 234 Newbury St.

The former home of Davio’s Restaurant and current address of the trendy Croma eatery is a small multi-level property that has residential on the upper floors. “It’s a nice building,” says one local commercial real estate expert who cites a wider berth than similar structures on the street, plus a well-maintained façade and the substantial fit out spent on the Croma space. The building was sold by P&F Realty Trust, an entity controlled by a local family that had owned 267-269 Newbury St. as far back as the 1960s, according to real estate records. Representatives of the sellers did not return phone calls by press deadline.

Serge Safar’s presence in the district also dates back decades, with his firm having been incorporated in 1974. How long Safar Salon has been at 234 Newbury St. is unclear, with calls to the ownership were also not returned. One observer, however, terms the operation “an institution” on the internationally known retail strip. The salon advertises a variety of services on its website, including hair styling, makeup and skin treatments.

The source familiar with Safar Salon says it does not appear the owners are planning to relocate to 267-269 Newbury St., which is between Fairfield and Gloucester Sts. near the Massachusetts Ave. end of the strip. The investment could be a pure real estate play, suggests the source. A flood of domestic and overseas real estate investors have flocked into Newbury Street during the past 18 months, with more than $200 million of properties trading in 2007 alone, but Serge Safar and his clan are hardly newcomers to the ownership route. Among other buildings, family members control 118, 132 and 291 Newbury St., while 18 months ago Gaston Safar paid $2.7 million for 34-26 Gloucester St.

Source: Boston Business Journal

Private Investor Pays $19M for Shopping Center

EAST HARTFORD, CT-Brokerage firm Sperry Van Ness has brokered the sale of the School Street Square shopping center here in a deal valued at $19.2 million. An affiliate of Trumbull, CT-based Woodgreen Management, Woodgreen East Hartford LP, sold the property to Abe Brach, a New York City private investor.

The 147,258-sf shopping center was 98.7% occupied at the close of escrow. The property, which sits on 14 acres, was built in 1965 and was expanded by 30,000 sf in 1990.

The largest tenants at School Street Square are: Big Y World Class Market, which leases 62,300 sf; Rite Aid, which maintains an 11,700-sf location; Fashion Bug, which leases 10,000 sf and Blockbuster, which leases 6,400 sf. Joseph C. French Jr., national director of retail for Sperry Van Ness, and his team working out of its White Plains office, represented Woodgreen in the transaction. Sperry Van Ness says that two-thirds of the property’s tenants have leased space at the center for more than 10 years.

Commenting on the deal, French says, "in a declining market with money sources disappearing, we were able to achieve a price that exceeded our seller's expectations." The investor bested approximately 20 other offers submitted for the property.

Source: GlobeSt.

Mixed Use Development Planned for Framingham, MA Landmark

FRAMINGHAM, MA-A legendary lodging property here dating back to the 1950s has been sold to a Northeastern-focused hospitality company that reportedly hopes to redevelop the site for retail and an expanded inn. The 63-room Monticello Motel—which boasts of such celebrity guests as Diana Ross and Frank Sinatra as part of its legacy—is now owned by Jamsan Hotel Management Co. after that Lexington-based group paid $3.7 million to M Hotels LLC.

“It’s a very strategic piece of real estate,” says Thomas Blakely, president of TRB Associates and the broker who marketed the asset on behalf of the sellers. The 3.1-acre property that straddles the border of Framingham and Natick is one of the remaining properties along retail-choked Route 9 that has not been redeveloped in the past two decades. Situated on the eastbound side, the Monticello is in the heart of Framingham’s so-called “Golden Mile,” notes Blakely, with neighbors including the Natick Mall, Shopper’s World and Wal Mart. Other modern additions include a large Jordan’s Furniture property next door, plus national players including Bed Bath and Beyond and Tweeter.

While confirming that the buyers hope to create retail on the property, Blakely declined to discuss specifics of Jamsan’s plan, or even to confirm that they were the winning bidders for a spirited competition to acquire the site. Industry reports, however, maintain that Jamsan did persevere and will seek to nearly double the lodging footprint to approximately 120 to 125 units as part of its strategy. Efforts to contact Jamsan officials to discuss the matter were unsuccessful by press deadline due to difficulties with the firm’s telephone system. Also unavailable was Paul Carter of the Carter Group, who provided consulting services to the buyer.

In business since 1995, Jamsan now has 18 hotels, all in New England and mostly in tertiary communities such as Concord, Keene and Nashua, NH; Windsor Locks, CT; and Brattleboro, VT. In Massachusetts, Jamsan has existing hotels in Auburn and Greenfield. Although Blakely would not identify the buyers or unveil their proposal for repositioning the Monticello, he says his firm has been appointed leasing agents for the retail portion. Blakely could not say whether the Monticello would be reflagged and whether any portion of the existing property will be incorporated into the design, but did praise the redevelopment’s concept. “It’s going to be really amazing,” he tells GlobeSt.com.

Whatever the future holds for the Monticello, Blakely concurs that the property’s history is well-regarded. Originally constructed to service the adjacent Monticello Theatre, the motel in its heyday housed such guests as Ross and Sinatra and their collective entourages. Seller M Hotels acquired the property in late 2006 for $3.1 million and did undertake a capital improvements program during its brief stewardship.

Source: GlobeSt.

247,000-SF Power Retail Center Trades Hands

SOUTH BRUNSWICK, NJ-Heritage Square, a 247,000-sf power retail center, has been sold just a year after its completion. In a deal brokered by Metro Commercial, Pineville Brunswick Development Associates LP, an affiliate of the Valley Forge, PA-based Pineville Properties, has traded the property to an unidentified buyer described only as a Northern New Jersey-based entity.

The seller was represented by Paul Rumley and Kurt Rumley of Metro Commercial’s Mt. Laurel, NJ office. Further details of the transaction, including the sale price, were not released.

“The property was a very secure investment opportunity that matched the buyer’s investment criteria,” says Paul Rumley. “It is positioned for the future as it is situated in an area that is experiencing rapid commercial and residential growth.”

Located at 5 Stouts Ln. at the intersection of Route 1, Heritage Square’s development traces to early 2004, with actual construction starting in early 2006 and the property delivered to market a year ago. Its anchor line-up was effectively set in mid-2006, consisting of Target for 120,000 sf, Best Buy for 30,000 sf, Staples for 20,400 sf and PetSmart for 15,000 sf.

Source: GlobeSt

Taurus Buys Canadian Retail

BOSTON-Locally based Taurus Investment Holdings spent much of last year buying retail properties in its own back yard, but the real estate investment firm is demonstrating an ability to operate outside the area, as exemplified via the $42.9 million purchase of a 160,000 sf shopping center in suburban Ontario. Affiliate Taurus Canada Investments Ltd. secured the Cookstown Outlet Mall in Innisfil, completing its second Ontario acquisition in the past four months.

“We are really committed to the Canadian market,” Taurus president and CEO Peter Merrigan tells GlobeSt.com. “It's doing better than the US right now and we think conditions are going to remain fairly stable.” Taurus has been in Canada since 2000 and now has nine projects in its portfolio. The firm is mulling fresh opportunities throughout the country, says Merrigan, but all investments made to date are in Ontario, including 111 Peter St., a 250,000-sf office building purchased in late 2007.

Located one hour north of Toronto at the confluence of Highways 89 and 400, Cookstown Outlet Mall is comprised of an enclosed shopping center and 125 undeveloped acres that can accommodate additional density. Cookstown is one of the highest profile and most successful outlet centers in Ontario, reports Taurus, a distinction enabled by the roster of top retailers such as Adidas, Levis, Liz Claiborne, Nine West, Samsonite and Tommy Hilfiger.

Despite Cookstown’s solid performance to date, Merrigan expresses hope returns can be improved through construction of another 160,000 sf on the vacant land and physical improvements to the existing space, plus a focused property management strategy.

Taurus made news in Boston last year by aggressively pursuing commercial properties in the Back Bay, especially on tony Newbury Street. Teamed primarily with Anglo Irish Bank Corp., Taurus now owns 21 buildings on the street, and Merrigan says the firm is eager to increase its inventory. “We’ll look at anything that comes available,” he says of the bid to create a critical mass on the internationally known shopping strip, which last year eclipsed $200 million of commercial sales. “It’s going well,” Merrigan says of the campaign to upgrade the Newbury Street assets and boost occupancy.

While still targeting Boston, Taurus is rapidly expanding its global platform, with deals being chased throughout Europe and both North and South America. Taurus is busy in Argentina, for example, and recently established a beachhead in Lima, Peru.

Source: GlobeSt.

Lowe’s Ground Lease Trades for $13M

WHITEHALL, PA-A 14.3-acre ground lease for a 166,609-sf Lowe’s Home Improvement Center has traded here for $13.2 million. The cap rate was 6.05%. Brad Nathanson, a senior associate and director of Marcus & Millichap’s National Retail Group in Philadelphia, and Jordan Muchnick, an investment specialist also in the firm’s Philadelphia office, represented the seller and the buyer.

According to Nathanson, the buyer was a regional entity; the seller was a national shopping center developer. The legal owner of the property before the trade was Whitehall Newman Associates. The new owner plans to leverage the site’s main selling points, Nathanson tells GlobeSt.com: a rare infill location in this submarket that can accommodate 166,609 sf and that is occupied by a creditworthy tenant. There were between 10 to 20 bidders for the property.

Located at 2650 MacArthur Rd., the property is situated on Route 45, a six-lane highway that is Lehigh Valley’s main retail corridor. “It is difficult to find available acreage of that size on that particular stretch,” he says. Also, “there are few creditworthy big box ground leases that aren’t owned by the tenant themselves.” Lowe's has signed a 20-year triple net ground lease for the space. Originally the property had been a Levitz Furniture store that was vacant when the developer acquired it. Lowe's opened its doors in October, Nathanson says.

Source: GlobeSt.

Pension Fund Pays $91M; $190-PSF for The Loop Methuen

A warranty deed recorded in Essex County, Massachusetts has confirmed the $91 million sale of The Loop in Methuen, MA to Core Fund Loop Property LLC, an affiliate of Dallas-based fund manager, Invesco Realty Advisors with an address registered to Ohio Police & Fire Pension Fund ("Ohio P&F). The 480,000-square-foot regional shopping center was acquired from Loop Methuen Associates Inc., also an affiliate of Invesco.

The last transaction of The Loop occurred in April 2002, when Wilder Companies sold it to Loop Association for $54.5 million. Loop Association was an affiliate of fund manager, Lend Lease Real Estate Investments, which at the time, managed the Ohio P&F fund. In 2003, Lend Lease announced its intention to exit the equity real estate investment management business in the U.S. and in turn, Ohio P&F assigned Invesco as the new manager of its fund.

The Wilder Companies has continued to manage The Loop throughout the transactions; the company completed the redevelopment of the 46-acre property in 2000. The Loop was once the site of the enclosed Methuen Mall. Now an open-air power center / lifestyle center; The Loop Methuen is home to Loews Theatres, Borders, Marshalls, Old Navy, Home Depot, Stop & Shop, Gap, Starbucks, Bath & Body Works, Ann Taylor LOFT, Olympia Sports, Macaroni Grill, and more.

"The Loop" is a format Wilder is trying to carry across other developments - it already operates The Loop Kissimmee in the Orlando area, and is under development on The Loop in Punta Gorda, FL and The Loop in Northborough, MA.

Source: GlobeSt.

154,611-SF Retail Trades in Suburban MD

GLEN BURNIE, MD-A retail trade here has closed with assumable debt that is reminiscent of happier credit market days. The building, called Ordnance Plaza, is a 154,611-sf center, shadow-anchored by a 122,711-sf Costco store and a 121,200-sf Home Depot store. The seller was an affiliate of Cohen Commercial Properties; the buyer, a private New York City investor. Helen Putterman, president of CCIRE and Vera Thomas, senior managing director, represented the seller and brought in the buyer as well.

"The center’s tenancy, location and assumable debt made it a very attractive purchase," says Putterman. Specifically, she continues, the ability to close with 15% equity and a mortgage in place for nine years at a fixed rate created a high cash on cash return that enabled the seller to entertain a high number of competitive offers and the buyer to capture an exceptional return on his equity.

“There were numerous buyers who saw great value in owning Ordnance Plaza,” Thomas says. “The buyer was chosen amongst over a dozen candidates because of his 1031 requirement.”

Other national and regional tenants at the property include Sports Authority, PetsMart, Sears, Staples, McDonalds and Planet Fitness. The center was purchased from an affiliate of the original developer, Price REIT in 2002. At the time there were 40,000 sf vacant in the complex, which the former owner fully leased.

According to the property’s marketing materials Ordnance Plaza is benefiting from a more heavily trafficked Ordnance Road due to the completion of Route 10, which now allows the center to draw more heavily from the Baltimore area. Also, the center is bordered by two office parks that generate increased traffic.

Source: GlobeSt.

Cedar Closes on $18M Kimco Assets

NEW CUMBERLAND, PA-Cedar Shopping Centers Inc., a Port Washington, NY-based shopping center REIT which also has an office here, has closed on four Pennsylvania supermarket-anchored properties in which Kimco Realty Corp. owns a 75% interest. The properties are located in Williamsport, Halifax, New Cumberland and Newport.

The two firms entered into joint ventures in 2002 and 2003, which included the option that either would be entitled to certain preferred returns on contributed equity. Cedar paid to Kimco $17.5 million for the four properties, funding the transaction from its revolving credit facility.

Valued at approximately $52.9 million, their current debt is approximately $27.3 million. The acquisition is expected to be accretive to the company's FFO on an annual basis in the amount of approximately $0.015 per share/OP Unit--approximately $0.005 to its net income per share.

According to Leo Ullman, Cedar's CEO, one of the advantages of the deal’s structure is that it eliminates the continuance of a preferred return structure, in effect replacing it with much cheaper debt, “while permitting our company to benefit from future growth of these fine supermarket-anchored properties, which continue to evidence strong results.” Ullman also notes that the 484,500-sf portfolio dovetails with the company’s development strategy as two of the properties are already included in its revealed pipeline allowing the company to improve its return on investment as full owners of the assets.

Source: GlobeSt.

UBS Affiliate Sells Bank Branches for $135M

NEW YORK CITY-GlobeSt.com exclusively learns that John K.C. Hyslip and Net Lease Capital Advisors have acquired 114 Citizens Bank branch buildings for $135 million. The seller of the properties, which are located in Michigan, Vermont, Illinois, Rhode Island, Connecticut, New Hampshire, and New York, is UBS affiliate CRE Master JV Holdings LLC.

Net Lease Capital Advisors is a Boston-based real estate investment and advisory firm providing advanced tax solutions for property owners. John K.C. Hyslip, as the equity investor--with the Net Lease Capital Advisor's team--obtained a mezzanine loan to complete the transaction. President Ted Morandin of Morprop Advisors LLC, who acted as an advisor to all parties, could not speak for UBS' motivations in selling the facilities. The branches total 372,780 sf.

Hyslip tells GlobeSt.com that he sold "$250 million of assets in 2006 and 2007 at premium prices in what might have been the strongest seller market ever. I am reinvesting that capital now in what is a very different, perhaps one might say, lender's market." He adds that "obtaining a mezzanine loan today is a great challenge. The rental bumps were CPI or 1.5%, the lesser. You can't finance uncertain cash flows. So, we obtained an insurance policy structured to make up any difference should CPI fall short of 1.5% per year. Just after going to contract, the parent company, Royal Bank of Scotland, completed its consolidation of, Citizens Financial Group, resulting in credit enhancement." He continues that the insurance company guaranteeing the cash flow and tenant's parent, RBS, are both rates "AA" by Standard & Poor's. "We successfully created a credit strip as necessary collateral for the mezzanine loan."

Hyslip tells GlobeSt.com that the facilities will continues to operate as they have been. "We are excited to establish the kind of relationship with Citizens Financial Group that we have with Sovereign Bank."

Source: GlobeSt

ING Clarion Cements $25M Retail Purchase

PORTSMOUTH, NH-A popular grocery-anchored shopping plaza here in New Hampshire’s seacoast region has a new owner, as Durgin Square sells for $24.8 million. The 135,000-sf retail center was acquired by ING Clarion from Durgin Square LP.

“The center is home to a strong rent roll and is situated in one of New England’s most desirable markets for both retailers and owners,” says Cushman & Wakefield senior director Geoff Millerd, a member of the firm’s Capital Markets Group that peddled the asset on behalf of Durgin Square LP and also procured the buyer. Millerd was joined in handling the deal by C&W Capital Markets Group chief Robert Griffin Jr. and broker Michael d’Hemecourt.

A retail sales specialist, Millerd describes Durgin Square as “the dominant grocery-anchored shopping center” in Portsmouth’s vibrant retail market, a sector that has been evolving for 20 years near the border of mall-laden Newington. National firms who helped give Durgin Square an occupancy rate of 97% at the time of its sale include AC Moore, Aspen Dental, Boston Market, Mattress Discounters, Petco and TJ Maxx.

Situated on a 16-acre parcel, Durgin Square has access from three light-controlled intersections on Woodbury Avenue, a main thoroughfare that generates daily traffic exceeding 25,000 vehicles. The asset also abuts the Spaulding Turnpike, which has an average daily count of 62,000 vehicles and provides access to Interstate 95, connecting shoppers from Maine on the other side of the Piscataqua River.

Millerd is familiar with the Portsmouth area, having two years ago sold another major grocery anchored center across Woodbury Avenue that features a Kmart. “It’s a very strong retail market,” Millerd tells GlobeSt.com. Durgin Square has been a consistent performer almost since its opening in 1993, he adds, with occupancy typically running at or near 100%. The only availability presently is a 3,500-sf block of space, he notes.

The credit crunch has dampened commercial property sales thus far in 2008, but Millerd says the competitive bidding process for Durgin Square exemplifies that capital is still interested in pursuing prime retail opportunities. “It is a challenging environment, but for the right kind of assets, there is plenty of equity out there,” he says, enabling the seller of Durgin Square to meet its targeted pricing goals after drawing a bevy of institutional investors to the table.

Source: GlobeSt

Madison Marquette acquires 770 M Street

WASHINGTON,DC (January 22, 2008) – Madison Marquette announced today that the company acquired 770 M. Street in Washington, D.C.’s revitalizing Southeast neighborhood. The property, known locally as “The Blue Castle,” is located several blocks from the new Nationals Major League Baseball stadium that will debut this spring.

“Development is thriving in and around the new stadium and we believe 770 M Street will play a critical role in connecting the stadium with Barracks Row and the Capitol Hill community,” said David Brainerd, Managing Director of Investment of Madison Marquette.

The approximately 100,000 square foot building is designated as a historic structure. It was originally built in the late 1800s as a car barn for the trolley line. Madison Marquette has experience transforming structures with historic designations. The company recently redeveloped 4500 Wisconsin Avenue, N.W. by preserving the building’s historic art-deco façade while constructing ground-floor retail with residential condominiums above it. The company then secured the city’s first Best Buy and The Container Store as anchor tenants. Madison Marquette has also redeveloped historic structures in San Francisco, Los Angeles and other cities nationally.

“We want to work closely with city officials and the community to identify the ideal vision for 770 M,” said Brainerd.

In Washington, D.C., Madison Marquette is also bidding in partnership with Archstone Smith to become the master redeveloper of Poplar Point. Its team is currently one of three finalists for the project.

“Revitalization is occurring throughout the city and we believe our brand of redevelopment can have a tremendous positive impact,” said Brainerd. The company’s investment capabilities were bolstered last year when it raised a half-billion dollar private equity fund focused on developing and redeveloping retail real estate in growing metropolitan markets throughout the United States.

Source: Madison Marquette