Real Estate Sifter

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CPE Radio offers a spectrum of opinions, information and insights.

July 27, 2010
By Barbra Murray, Contributing Writer

Leasing in Manhattan’s office market continues to pick up, and Healthfirst is one of the latest to sign a deal for a substantial amount of space. The nonprofit managed care organization has just committed to approximately 172,600 square feet at 100 Church Street, a 1-million-square-foot tower owned by Manhattan’s largest office landlord, SL Green Realty Corp.

Under a 20-year lease agreement, Healthfirst will maintain its headquarters on four floors at the 21-story building at 100 Church Street, downtown. The property has been in SL Green’s portfolio since January of this year when the REIT became sole owner on the heels of a foreclosure of the senior mezzanine loan on the building.

Real estate services firm Newmark Knight Frank represented SL Green in the lease transaction–which will close pending customary review and the green light from the property’s lender–while Jones Lang LaSalle stood in for Healthfirst. Terms of the agreement have not been disclosed, however, available office space at 100 Church Street is presently being marketed at $36 per-square-foot.

There have been some dramatic changes in leasing activity in Manhattan over the last couple of months. The second quarter marked the strongest quarter for new lease deals since the third quarter of 2006, according to a report by real estate services firm Cushman & Wakefield. Additionally, the vacancy rate dropped from 11.6 percent in the first quarter to 10.8 percent in the second quarter, marking the market’s first decline in the vacancy rate in three years. The list of major office deals in the second quarter includes Tiffany’s signing of a 15-year lease agreement for its relocation to 260,000 square feet at 200 Fifth Avenue in Manhattan’s Flatiron District, and law firm Proskauer’s commitment in May to 400,000 square feet at 11 Times Square in Midtown, the largest office lease in the submarket this year.

The smell of recovery is growing stronger.

July 27, 2010
By Allison Landa, News Editor

Wilson Commercial said Tuesday that it had inked leasing assignments for 13 retail centers totaling more than 2 million square feet in the first six months of 2010.

Those assignments include three new developments, five redevelopment projects and five existing centers. The company also completed 32 leases totaling 600,000 square feet during the first half of the year.

The largest assignments include the 487,370-square-foot Commons at Quartz Hill in Lancaster, California, the 218,503-square-foot Crossroads at 395 in Victorville, California and the 224,783-square-foot Granada Village in Granada Hills, California.

“During this challenging economic climate, landlords understand the importance of retaining a firm who has the experience and knowledge to improve occupancy at their center,” Wilson president Chris Wilson said. “We have a deep understanding of the landlord and tenant side of the business, enabling us to deliver results in this ongoing challenging market.”

Wilson currently oversees leasing at 90 retail properties totaling 8.3 million square feet in Southern and Central California.

Colin Dyer has served as president & CEO of Jones Lang LaSalle Inc. since September 2004, overseeing a global real estate services firm that comprises more than 30,000 employees in 60 countries. The London-based executive recently spoke with CPE senior editor Paul Rosta about company strategy, the global economic outlook and real estate trends. (A profile of Peter Roberts, the firm’s CEO for the Americas, appears in the July issue of Commercial Property Executive.)

Q: What will be the main elements of Jones Lang LaSalle’s global strategy for the next several years? In particular, which of your service lines appear to be especially well positioned for growth?

A: If you can have a “good” recession, we’ve had one. We did a very astute acquisition of the Staubach organization before the recession, and we were able to integrate the two businesses. We continue to be able to pick up on the momentum that we had during 2006, 2007 and 2008. So we start the 2010-2015 period with a lot of confidence and a lot of momentum.
Obviously, the agenda is growth. We see a lot of opportunity for LaSalle (Investment Management) to grow its investment management business worldwide. … We see growth opportunities for our corporate services business. For us, it’s a very appetizing strategic menu for the next couple of years.

Q: Generally speaking, what do you expect to account for the majority of Jones Lang LaSalle’s growth globally over the next few years?
A: Our principal driver is organic growth. We have set the entire business (plan) by that agenda. If you have a business that’s focused on organic profit growth, you’ve got the right sort of mindset across the organization. Selectively … as our confidence in the business and economic recovery is strengthened, we will be looking at acquisition growth.
Clearly, the economies that are internationally in better shape are the BRIC (Brazil, Russia, India and China) economies. We’re in a very fortunate position of having been in these countries for 15 and 20 years, such as Russia and China. That gives us a very good position in these economies.

Q: By all accounts, the global economic cycle is in a time of transition, if not turmoil. Which concerns should be foremost for real estate executives around the world?

A: The good news is, the depths of the recession are behind us and economies are growing. Although things are moving forward, there will be periods where individual countries or individual businesses will go backward for a while.
You can’t drive a business forward by looking in the rearview mirror. We are moving the business forward—we are committed to a growth plan. … We are just getting on with life, and that’s what I believe the rest of the business world has to do.
To my mind, there’s a great opportunity for real estate. Gradually, over a period of time, transparency in all markets is improving. … By transparency, (we mean) honesty in dealing with people, (simple, understandable business structures), legal guidelines, and visibility in pricing and returns.

Q: On another front, what operational and strategic challenges are on your mind these days?

A: (In running) an advisory business, an investment management business, there is a whole raft of continual improvements. The challenge is in technology, in training people, in hiring the best people, in joining up businesses between countries.
All of these are challenges that any business wanting to grow can address. We at Jones Lang LaSalle have always chosen a comprehensive approach to the demands of growing a business. Because as a business we are very collaborative, we’ve deployed methods for moving all these agendas forward.
The big challenges of developing all those areas of a business are ones that we are (approaching) on an increasingly worldwide basis. To me, the challenges are managing a very broad-based business going forward in the most efficient possible way, making sure that the best practices are spread. We are increasingly finding ways of connecting up our businesses, client needs and business systems around the world.

July 26, 2010
By Barbra Murray, Contributing Editor

On schedule to open its doors in 2012, the Courtyard Charleston/Summerville in South Carolina will break new ground for Marriott International Inc. as the Bethesda, Md.-based hospitality company’s first green hotel prototype. All Courtyard-brand Marriott properties adhering to the prototype, a pre-approved model developed in conjunction with the U.S. Green Building Council (USGBC) in 2009, will achieve LEED certification when USGBC gives the final green light.

The Courtyard Charleston/Summerville will be part of the initial phase of The Parks of Berkley, a 5,000-acre master planned community. A joint venture involving Blanchard & Calhoun Commercial and MeadWestvaco is behind the development of the hotel. Employing the model for new developments puts Marriott ahead of the game in securing LEED certification for its properties. With the new prototype’s USGBC pre-approval status, Marriott will be able to expedite its plan to expand its portfolio of LEED-certified hotels to 300 by 2015.

Use of the prototype will not only accelerate the greening of Marriott’s portfolio, it will lower property owners’ development costs by approximately $100,000, reduce the design timeline by six months and ultimately save as much as 25 percent in energy and water usage.

The prototype, however, is not just a first for Marriott. It is also the first in the hotel industry to obtain USGBC’s pre-approval as part of the non-profit organization’s LEED Volume program. Marriott intends to expand beyond the Courtyard-brand prototype by creating similar models for its hotel properties carrying the Residence Inn by Marriott, TownePlace Suites by Marriott, SpringHill Suites by Marriott and Fairfield Inn by Marriott flags.

July 26, 2010
By Allison Landa, News Editor

Courtesy Flickr Creative Commons user taberandrew

Grubb & Ellis Healthcare REIT II, Inc. has entered into a $25 million secured revolving credit facility with Bank of America, N.A.

The credit facility, which matures on July 19, 2012, may be extended at the option of Grubb & Ellis for an additional year upon certain conditions. It bears interest at a rate equal to LIBOR plus 3.75 percent or 5 percent, whichever is greater.

“This credit facility further strengthens our ability to execute our business plan and more rapidly expand the portfolio of Grubb & Ellis Healthcare REIT II,” Grubb & Ellis chairman and chief executive officer Jeff Hanson said when announcing the news. “Particularly for a new REIT like ours, now is an exceptional time in the market cycle to acquire assets and Bank of America is supporting this effort.”

The credit facility may be used for funding property acquisitions as well as for other general corporate purposes.

Grubb & Ellis Healthcare REIT II seeks to raise up to approximately $3 billion in equity along with acquiring a diversified portfolio of real estate assets, focusing primarily on medical office buildings and other healthcare-related facilities.

The digital version of CPE’s August edition is live, with interviews with Ed Padilla and Mark Burkhardt, along with all the news and information pertinent to your business. To read more, click here.

July 26, 2010
By Barbra Murray, Contributing Editor

The federal government and government contractors like ASM Research Inc. continue to liven up the market in suburban Washington, D.C. The technology solutions provider has just signed a new lease for approximately 91,400 square feet of premier space at the 410,000-square-foot Centerpointe office complex in Fairfax, Va.

Located about 20 miles west of the District, Centerpointe sits on Legato Road at the intersection of I-66 and Route 50, and consists of Centerpointe I and Centerpointe II, twin structures that were developed in 1987 and 1989, respectively. Los Angeles-headquartered Thomas Properties Group Inc. has owned the two-building office park since 2007. ASM will make its home at Centerpointe II, consolidating employees from two Fairfax locations. The company’s current offices total 80,000 square feet, so ASM is actually absorbing 20,000 square feet in the market.

Real estate services firm CB Richard Ellis represented Thomas Properties Group in the lease transaction, while Newmark Knight Frank stood in for the tenant. Laurence D. Bank, managing principal with Newmark Knight Frank, told CPE, “It was a combination of location, quality of the building and the economics that led to the selection of Centerpointe.”

While the Northern Virginia office market has not escaped the ravages of the economic downturn, it is reaping the rewards of federal government expansion. According to a second quarter report by CB Richard Ellis, growth among the federal government and government contractors resulted in an increase in net absorption during the second quarter. Additionally, the office vacancy rate in Northern Virginia decreased from 14.4 percent to 14.2 percent, quarter-over-quarter.

While stabilization is afoot, it is still a tenants’ market. “We don’t see that changing for a couple of years,” Bank said. “When we’re getting an overall vacancy rate of 5 to 10 percent, that is more of a landlords’ market.”