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January 12, 2012  
 
 
 
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B IS FOR
"BETTER THAN CLASS A"

It's coming! Meet us in Tysons Corner.

 
Trophies dominate headlines, but Class A yield compression has created a frenzy around Class-B buildings. Marcus & Millichap regional head David Feldman asks, with some cap rates as high as 9%, why not?
 

Click here or the picture above to hear David's thoughts in motion. (Readers: We're trying to look cool by doing more video in 2012. In fact, we're even dropping that outdated term and trying to look "epic.")

“Our focus in 2012 is sales transactions between $1M and $10M,” Dave (above with colleague Dean Zang) tells us. According to CoStar, there were 528 local deals in that range last year, with similar volume anticipated this year. Re-awakened debt markets are fueling the trend, and activity is centered around multifamily, single-tenant net lease, and retail properties. Buyers need four things to be successful, he says: Real estate experience, capital, vision, and a willingness to take risk. (We're not sure how the power tie doesn't get in there, but you know how arbitrary these lists are.)
1023 14th St SE
Among their recent deals: 1023 14th St. SE, above, a 12-unit apartment complex that traded for $1.3M. The payoff can be big—cap rates for a well-located, multi-tenanted Class B building hover around 7.5%, and Class C building caps can reach double digits. Every property has a story, which ultimately impacts pricing, says David. Historically speaking, around 80% of commercial sales in a given year are below $20M. Buyers are typically private parties or high net-worth individuals. While each buyer has a favorite asset type, “they just want to be in DC,” he says.

Bisnow
Breaking News:
Study Reveals Big Green Line Growth
Robert Charles Lesser & Co., Shyam Kannan, Capitol Riverfront BID, Michael Stevens
Judging by the results of a study released this afternoon by the Capitol Riverfront BID and Robert Charles Lesser & Co., the Green Line got its name from the color of cash. "Over the past 20 years, the Green Line corridor between the Petworth and Navy Yard Stations added more 18 to 34-year-old households than the RB Corridor, not to mention the Orange and Red Lines in NW DC combined," says RCLC principal Shyam Kannan, snapped hours ago with Capitol Riverfront BID executive director Michael Stevens. That suggests it's the region's new economic spine, he says—46% of the District's net job growth during that time period came from the Green Line corridor.
 
Eric Siegal, Harriet Tregoning

Also on hand: Capitol Riverfront BID chair Eric Siegal and DC planning director Harriet Tregoning. Shyam forecasts the area will capture 20% of the city's residentail, retail, and office growth over the next two decades, as well as 19,000 permanent jobs. The bulk of new development in the corridor during that time frame will likely take place on the Riverfront, he says, potentially generating $2.32B in new tax revenue.


Bisnow
Takoma Park JV
 
Takoma Central
This morning Federal Capital Partners announced a JV with Level 2 Development and SGA Cos to develop Takoma Central, located at 235-255 Carroll St. NW near the Takoma Metro station. Construction is already under way on the $36M project's first phase, and work starts on the second phase later this year. When it delivers in Q4 2013, 156 apartments will stand atop 8,000 SF of ground-floor retail. FCP's rationale: Takoma Park has high barriers to entry and little new apartment supply projected for the near future.

Bisnow
Homer Building Closes
 
Homer Building
Mitsui Fudosan's deal to purchase Clarion Partners' 80% stake in the Homer Building for $315M officially closed last night, giving minority owner Akridge a new partner. They've worked together before, most recently on 700 6th St. Eastdil brokered the sale.

Bisnow
Monday Adds 15k SF
 
Monday Properties, Rosslyn portfolio
Yesterday Monday Properties announced it inked four new leases worth 15k SF in its Rosslyn portfolio. The lucky tenants: divorce lawyer Betty Thompson (5,500 SF at 1101 Wilson), dentist Greg LaVecchia (4,000 SF at 1515 Wilson), security firm McKellar Corp. (3,700 SF at 1401 Wilson), and consulting company Miami Business Services (2,000 SF at 1401 Wilson). When combined, they're a big boon to the person who needs a divorce, bodyguard, and dentist, a common need if the reason you're getting divorced is your spouse insulted your bridge work and is coming back for more. John Wharton and Scott Egarian repped the landlord in-house; last we heard, the portfolio was 92.5% occupied.

Bisnow
This Morning In Dallas
 
Real Estate Roundtable CEO Jeff DeBoer kicked off our Hotel Investment Summit this morning in Dallas, telling the 225 on hand about Washington policy issues this year that could affect the hospitality industry and its investors. We held the conference at the mammoth Hilton Anatole: 1,600 rooms, developed by Trammell Crow himself in the '70s, and named after his favorite restaurant in Copenhagen. It's still owned by Crow Holdings, the family's investment vehicle, whose hotel investment chief was among our speakers. That's why we'll never be an iconic hotel developer: We would call our hotel the Hilton Guapo's.
 
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