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January 7, 2011
 
 
ATLANTIC STATION CLOSES

Our friends at Realty Appreciation are developing a $127 million commercial and residential "incubator.” Get the details on the Urban Living Laboratory here, and see ad at right.

 

We've been expecting it for weeks. And now Atlanta's mini-city is finally trading hands to a collection of high-powered institutional investors.

 

CBRE Investors confirmed it purchased the 534K SF BB&T tower, in Atlantic Station, 271 17th Street. Sources previously told us the price was around $75M, or $138/SF, and includes a 14.25-acre pad site for another office tower. CBRE, in conjunction with North American Properties, also purchased the retail village of Atlantic Station— 586K SF—which sources say traded for $110M. This is the largest purchase of a mixed-use project in Atlanta in years and a sign that investor hunger for institutional-quality assets is growing. Most recently, Parkway Properties paid one of the highest per SF prices in the southeast for 3344 Peachtree, a Class-A trophy tower in tony Buckhead. It's also been a long, bumpy road to the sale, one that included a high-profile lawsuit against the sellers of Atlantic Station, AIG Global Real Estate, by its co-owner and original developer, Jacoby Development, which alleged AIG hatched a plot of squeeze down Jacoby's ownership interest in another Atlantic Station tower. The parties settled amicably in November.


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SIZE DOESN'T MATTER
 
Thirty-year industry vet, Greg Vorwaller, joined C&W from CBRE almost two months ago, marking the first time someone in his role has been based in Chicago, where Bisnow's Maureen Wilkey met with him. Now he has the opportunity to rebuild a team for the perennial No. 3. Greg says he made the move for the challenge— Cushman has consistently been behind market average in the recent cycle on transaction volume. His new strategy is to gain strength in an advisory role and to develop finance and investment banking departments in cities not already serviced by subsidiary Cushman & Wakefield Sonnenblick Goldman (those could include Chicago, Dallas, Houston, and Miami). Spreading the word that Cushman is a player in the capital markets practice will be key in the coming year. Greg hopes the impending closing of the $1B John Hancock Center in Boston will get the name out there.

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SIZE MATTERS
 
The bigger they are, the harder they fall. That could also mean the higher they bounce. New Costar data shows the 10 biggest metro office markets have recovered pricing faster from peak to trough than the rest of the country. As of Q4, pricing on the 10 largest markets now stands on average 21% below the market peak, while office pricing in the rest of the country is at 32% off peak. That's a far cry from the fall in Q1, when landlords in the Top 10 metros saw pricing fall 46% from the peak compared to 33% in the rest of the country. “Because of the flight to safety, everybody wants to invest money, but they want to invest it at the lowest risk,” says CoStar's Chris Macke. Chris tells our Atlanta reporter Jarred Schenke a dearth of trophy assets for sale in the Top 10 markets is also driving up pricing on what comes available.

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REITs GOTTA WORK FOR IT
 
The days of massive REIT returns are over; hello, astute property management. Our Houston reporter Catie Brubaker got the skinny from Weingarten COO Johnny Hendrix who says the retail REIT is looking at opportunities where it can come into the capital stack, take advantage of returns, and help the owner along the way. For example, it recently acquired Stoneridge Towne Centre (pictured below) in Moreno Valley, Calif., getting a preferred return on $10M of equity. Johnny says the situation is a win for everyone: The lender got better security, the owner renegotiated its mortgage (and generated cash flow), and Weingarten got a preferred return.
 
This year Weingarten bought $173M in assets, and although no 2011 goal has been announced, Johnny tells us we can expect about the same. Weingarten likes to cluster properties in major metros to better manage them—look for buys in Fort Lauderdale, Atlanta, Houston, Los Angeles, Raleigh, and the Pacific NW. And DC, watch out: It’s not in your market yet but hopes to enter in 2011. (Our resolutions seem trite by comparison.) However, most of its development activity will focus on expanding its current properties with supermarkets and discount stores. One more observation: REITs have an advantage over private markets because of better access to equity. And Johnny, for one, doesn’t believe the days of making money through leverage are over—the low cost of debt and depressed cap rates are leading people to use leverage.

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WHAT'S A WHEEGO?

 

Yesterday, while out minding our own business covering real estate stories, we ran into Earthlink (formerly Mindspring) co-founder Mike McQuary, who just can't get electricity out of his blood. He invited us to his office in downtown Atlanta, where he is now CEO of Wheego Electric Cars Inc, the latest to enter the all-electric car fray. “An electric car was half automotive and half technology. And I understood the technology business from my Mindspring days,” Mike tells us. He founded Wheego in ‘07, rounded up investment interest (including an initial $5M hit to produce the first prototypes) and developed his lithium-battery powered vehicle. Fast forward to 2011. The EPA just gave approval to Wheego to sell its full-speed (up to 70 mph) car later this month with the list price at $32,995 fully loaded. The first 100 cars will hits stores at the end of this month. And if we need to tie this back to commercial real estate . . . look for them in a parking garage near you soon.


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MEET OUR NATIONAL SPONSOR:
ARGUS SOFTWARE

 

We’re thrilled to call ARGUS Software a national Bisnow sponsor. It's a leading global provider of software and solutions for analysis and management of commercial real estate investments (making them a perfect fit for our CRE pubs). Above, Americas chief administrative officer and managing director Pius Leung, CFO Lyn Garland, and prez & CEO Mark Kingston. With customers on five continents, ARGUS continues to innovate, recently launching its next generation platform, ARGUS Enterprise, and will have a new release of ARGUS Valuation - DCF this month. With a freshly renovated HQ in Houston, ARGUS is looking forward to a great 2011. Find more info on its software here.


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THEY’RE BACK

 

DC is the country’s hotbed of CRE activity nowadays, and the region’s first groundbreaking of the year was … condos? DC’s King of Condos Jim Abdo and Abdo Development broke ground in Arlington, VA, on Gaslight Square, a 117-unit, three-building community that will take up a full city block. The $82M development of $600k to $1.5M residences will deliver in 2012. That’s it; there isn’t any retail space going in, and the underwriting doesn’t rely on apartments as a fallback, which would have forced Abdo to chip away at the luxury it wanted to achieve, Jim says. The kicker is the three-building design allows private-elevator entrances for all units, windows in the front and back, outdoor space (terraces, balconies, rooftops), and no common corridors to drive up condo dues. It also helps buyers get financing, which often calls for the pre-sale of 50% of a building. Abdo’s in for $12M of sponsor equity in the deal, United Bank put in a $48M loan, and Federal Capital threw in $22M of mezz debt.


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Q&A with
Jones Lang LaSalle’s Thierry Delvaux
 

In April, Thierry Delvaux joined JLL’s international desk, along with four other execs, each with 10 to 15 years of experience living and working in overseas CRE markets. He updated us on BRIC and made the case for Germany joining those countries as targets for US corporations.

Bisnow: In a global recession, what drives US corporations abroad?

Thierry: There’s a strong link between corporate growth and population. The BRIC countries and Germany combine to form 42% of the global population. Think about how many Facebook subscriptions that represents. GDP growth in India grew 5.6% in 2009, and in China it hit almost 9%. The Chinese have purchasing power, and in India, corporations are adding sales offices to serve its 1.2 billion people. That’s in addition to the offices for outsourced HR, IT, and financial services. The Russian economy contracted 9% at its worst but this year is forecasted for 4% expansion. And demand for office space there is up 31% over this time last year. In Brazil, manufacturing and distribution is growing fast.

Bisnow: Where does Germany come in?

Thierry: Germany, France, and the UK are Europe’s largest and most transparent countries for business. Germany was always a key European destination, and it remained resilient during the global recession. Its Kurzarbeit scheme compensated as much as 67% of an employee’s earnings if an employer had to cut wages or hours. It also has a high-quality workforce and retained a strong manufacturing sector. Most important, it’s the European economy that has room to grow.

Bisnow: So what kinds of US-based corporations are crossing borders?

Thierry: The vast majority, 40%, are high tech like Yahoo, Amazon, and LinkedIn. New York’s financial sector is keeping us busy, though mostly with dispositions. The life sciences/bio tech industry saw a lot of M&A activity this year, like, for instance Abbott Laboratories’ acquisition of Piramal Healthcare ,Solutions Business in India. Education is also a big push as large US universities open campuses abroad. Construction is about to start on a 700k SF campus outside Shanghai that we worked on.


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HELP FOR HAITI

 

While others were trimming trees and opening gifts, Capponi Group president Michael Capponi was handing out gifts to people in Haiti. In fact, since Jan. 12, 2010 earthquake, he’s been donating his time and money. With the support of United Way and Project Medishare, Michael tells Bisnow South Florida reporter Natalie Keith he set up a tent community in Belvil, a section of Port-au-Prince. The Capponi Group accepted a donated parcel of beachfront property in Jacmel (home to about 40,000) and has development plans aimed a jumpstarting tourism in the area. Plans include teaching the locals how to rent jet skis and run other tourism-related businesses. The Capponi Group accepts donations through the United Way of Dade County/Belvil. Those who wish to contact the firm should e-mail lena@capponigroup.com.

 

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