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Real Estate Bisnow
The largest commercial real estate publication in the United States.
January 6, 2011 
TOP 11 OF 2011

Wednesday, we brought you six of the top happenings of 2011. And today, we continue the list with a special treat—this next deal wasn’t just the best of last year—it was record-breaking. (Like our pending record for world's longest sustained coverage of the world's longest staring contest.)
PrinREI’s Joe Wanniger, Trammell Crow’s Aaron Thielhorn, and Greenberg Traurig’s Kent Newsome
H&R REIT snapped up Hess Tower for $442.5M. That number itself is a Houston best, and at $524/SF, it shattered Houston’s previous price per SF record ($308). Above, we photographed PrinREI’s Joe Wanniger, Trammell Crow’s Aaron Thielhorn, and Greenberg Traurig’s Kent Newsome speaking at Bisnow’s Energy Corridor event in September 2010—all three were involved in Hess Tower (PrinREI and Trammell Crow owned the property and Kent was legal counsel in the Hess lease). Aaron tells us this asset was exactly what the investment market wants today: A new generation building with a long-term core single tenant. (Hess is locked in until 2026.) Aaron says a building like that trades more like a bond than traditional CRE.
Hess Tower
Aaron says it’s hard to compare this sale to other recent ones in the CBD since this is one of the first sales of new buildings with higher rents. He tells us not many investors can play at the magnitude of this deal, and most of the buyer pool was international. He believes the financing markets drove the valuation: Because debt is so reasonable today, buyers can pay more. It took quite a team to get this one done: CBRE’s Russell Ingrum, Gary Carr, Jack Fraker, Kevin Shannon, Darcy Stacom, William Shanahan, Bernard Branca, and Greg Greene represented the sellers.

Can you see your house from here? Grocery-anchored space was all the rage in 2011, and grocers raced to open new stores and increase market share. We snagged some stats from Read King’s Ewing King, who says 12 grocery stores opened in 2011, including five HEBs and four Jo V’s Smart Shops (another HEB concept). And he knows of 17 openings planned in the next few years, including six more HEBs, four Walmarts, and two Whole Foods. Currently, Walmart has 27.4% market share, Kroger has 26.2%, HEB has 17.7%, and Randalls has less than 6%.

HFF's Todd Marix
Camden purchased an 11-property portfolio from Verde last summer in the biggest multifamily deal in Texas this year. HFF’s Todd Marix (speaking at Bisnow’s Multifamily Summit in October) tells us portfolio sales returned in 2011 after a three-year hibernation. (Even the bears were saying, "get up already!") He tells us volume and scale of investment sales picked up a great deal: There were 56 transactions totaling 17,000 units in Houston in 2010. Through November 2011, Houston saw 74 transactions totaling 24,000 units.

Ed Cummins and Clint Duncan
While there wasn’t much construction in any other arena, 2011 was a year of groundbreakings for the multifamily sector. Transwestern’s Ed Cummons (above, we snapped him with colleague Clint Duncan) tells us there are 4,707 units in lease-up and 32 properties (8,119 units) under construction now. And 44 properties totaling nearly 14,000 units are proposed. The vast majority are high-end infill deals (especially in Montrose, the Galleria, and The Heights), although The Woodlands and Katy are seeing some cranes, too. A developer buddy told him it’s easier to get equity for new construction than acquisitions these days.

Investors flock to REITs
Investors flocked to REITs because of their dividend yield and strength against inflation. Trepp’s Susan Persin tells us REIT returns were down from 2009 and 2010, but still pulled in 7.3%, which compares pretty nicely to 2% returns by the S&P 500, 5.5% by Dow Jones, and negative returns for NASDAQ. Self-storage performed the best among REITs, with solid 37% returns. Residential REITs and regional malls were also strong last year. On the other end of the spectrum, hospitality REITs posted a negative 14% return as people feared that consumers and businesses would cut travel because of the economy.
There you have it, the best of 2011. Now get out there and work on the best of 2012! And then tell Catie Brubaker all about it, catie@bisnow.com.
Briarhollow (Dairy2)
Moody Rambin (NBelt3)
Bisnow Hotel HOU
Transwestern (Pulse2) HOU
Reznick Insights DFW
Bisnow DFW Health HOU
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