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11/01/07
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Welcome to RENTV's new Real Estate Blog, a running commentary of notes, leads, inquiries and opinions, by us and by any others who submit items to us, about anything going on in the RENTV coverage areas concerning commercial real estate and other related topics. It is a venue for us to get out key bits of information that we hear about, without having to wait for the rest of the facts needed for a full article. And, it is also a great forum for any of you to communicate with the industry.
We welcome your emails with any feedback about anything you read in this blog, or with any choice news tips, comments about topics on RENTV, and/or your thoughts on other matters at least tangentially related to the commercial real estate industry. Send your emails to sbloom@rentv.com or allenw@rentv.com and let us know how to attribute your comments and you may become a RENTV real estate blog contributor. Let the real estate blogging begin!
11/21/07 -- One of the more ridiculous items we’ve been tracking, which was covered in a recent article by Mandy Jackson at the California Real Estate Journal, is the lopping off of 20 feet of recently built space from the top of the building Sunroad Enterprises is constructing at its Sunroad Centrum project in Kearny Mesa. Get this…Sunroad obtained a permit from the city allowing it to develop its first of three buildings to 12 stories and 180 feet, which they set out to do. But then the San Diego County Regional Airport Authority issued new airport land-use compatibility maps and in 2006 determined that since the building is in the bad weather approach for Montgomery Field, if it was over 160 feet it could become a problem for pilots landing at the busy municipal airport.
So, since Sunroad had gone as far as finishing the exterior of the building designed by Brian Paul & Associates, they had to carefully remove these materials, as well as remove all the mechanical equipment up there, which necessitated the reconfiguring of the HVAC, electrical, plumbing and elevator systems. Then, of course, they had to remove the frame. The plan was for the height to be reduced by November 15th and then, once they got a no-hazard notification for the new height, they can finish finishing the shorter building. Haven’t heard yet what the total cost of the height change is or how much of it is coming out of Sunroad’s pocket, or their insurer’s. [SBloom]
11/20/07 -- The LA Times, the WSJ Wednesday Plots & Ploys column as well as the online world were all aflutter last week over the dust-up at Maguire Properties. Century City-based investing firm JMB Capital Partners notified the SEC that it had taken a 5.2% stake in the REIT and at the same it sent a letter to Rob Maguire critical of the way the company is being managed and demanding Mr. Maguire form a committee to explore alternatives while putting two JMB folks on the board. One can only imagine how the iconic, 72-year-old, legendary developer, took this letter. JMB’s partners, Cyrus Hadidi and Jon Brooks, noted in their letter their concerns about high administrative expenses, Maguire’s leasing of the firm’s HQ space in an expensive building in Santa Monica owned by Maguire personally, and not acting on an option to purchase a building from Mr. Maguire, which then went up in value. These last two, they noted, point to conflict of interest issues.
Now one might first think “hey Mr. Hadidi and Mr. Brooks, you knew what you were getting into with Mr. Maguire, those elements you are picking at are just pieces of the overall puzzle that creates tremendous value in real estate assets.” Ah, but that is not what is going on here, these hedge fund guys took the stake because Maguire has done these things which, along with the stock being at a 29% discount to estimates of net asset values, create a target for them to attack. Of course, just their actions of taking the stake and sending the letter signals to the market that the company is now in play, which then usually sends the stock price up. Since at that point buying more shares gets more expensive we’ll find out whether these guys are really up for the battle with Maguire, or if another group, such as Scoggin Capital Management, which recently took a 7.8% stake, comes along to join the fray. If the share price jumps enough, these hedgers may jump as well, while pocketing a quick profit.
In light of so many REIT sales and break ups, rumors had been swirling for months that Maguire would go private in some way. These recent events may now just force the issue, although the market for the assets in a break-up is nothing like it was earlier when Blackstone did it. And if it comes to a battle for the real estate assets he wants to keep, I wouldn’t bet against Maguire. [SBloom]
11/19/07 -- The WSJ Property Report column by Jonathan Karp took an interesting look at the history and the current happenings with the many fabulous old theatre buildings on Broadway in Downtown Los Angeles. The 12 ornate, baroque and gothic theaters built here between 1910 and 1931, had fallen into hard times along with the area, but now could be poised for a complete rebirth as the cleansing wave of downtown’s renaissance continues to spread. Now housing churches, stores and flea markets, these romantic places, with names like the Tower, Palace and Orpheum, will soon be housing various live shows and other events. It could be very exciting not just for the owners, such as Steve Needleman (who owns the Orpheum) and Michael Delijani (who owns four theatres), but for the entire City since this stretch of street is now truly a diamond in the rough. [SBloom]
11/14/07 -- On West LA Tenant Moves: Here are some tidbits of info from the past month or so about tenants signing office leases around the Westside, brave souls that they are, given the dramatic rise in rental rates over the past year.
In Santa Monica, Pearson PLC slid a few blocks west on Ocean Park Blvd, out of one of the buildings at the Santa Monica Business Park, 3330 Ocean Park, to 2701 Ocean Park, down by Cloverfield. They are taking 15.5k sf for five years from the landlord, Broadreach Capital Partners, in a deal that we heard starts next month and is worth about $3.5 mil, or around $3.76/sf/mo. Sean Westgate from Staubach repped Pearson while the CB Richard Ellis team of Stan Gerlach and Bryan Dunne repped Broadreach.
On the other side of the 405, by Century City, at Santa Monica Blvd and Beverly Glen, the Consulte General of France (one of my new favorite countries with their new pro-US prez) moved into approximately 16k sf at 10390 Santa Monica Blvd, now owned by Dr. Lee’s Jamison Properties. Steve Kolsky and Mike Arnold of Newmark Knight Frank repped the tenant in the 13-year deal while Jamison was repped by Willa McNamara from Beitler Commercial.
Up in Brentwood, at the beautiful Landmark 1 office tower at 11755 Wilshire Blvd, the law offices of Dummit Faber Briegleb and Bucholtz extended its 18k sf lease for an additional five years. Kevin O'Connor of CBRE Investors represented the landlord, while Robert Chavez, from Guardian Commercial Realty, repped the tenant.
And lastly, you may seen in a recent LABJ column last month by Daniel Miller that Lieberman Research Worldwide, a market research firm, renewed its lease for about 55k sf for 10 years in Century City at 1900 Avenue of the Stars. Miller noted the asking rate was $3.50/sf/mo FSG, kind of a bargain compared with where rents have moved on the Westside.
The building had been owned by Shuwa way back when and is now owned by one of our local billionaires, John Anderson, via his Duesenberg Investment group. Darren Bell from Topa Management, another Anderson company, handled the landlord side of the deal while Mike Catalano, from Studley, repped the tenant. [SBloom]
11/2/07 -- Here’s a summary of some of the real estate highlights making headlines in SoCal over the past week, such as CB’s posting of higher-than-they-expected earnings this quarter, actually 24.5% higher than the previous frame, largely on the strength of investments sales and international leasing brokerage. This comes as the company has been internally very concerned about the revenue streams in the near future, especially after the stock got whacked a few weeks ago. Nonetheless…scoreboard: net income in the past quarter increased from $92.3 mil last year to $114.9 mil this year, with quarterly revenue now at $1.49 bil. Doesn’t sound so bad to me.
Maybe you caught this in the Sports Section of the LA Times this week by T.J. Simers, who reported that the NFL is actually entertaining the idea of putting a stadium in the City of Industry, in the San Gabriel Valley. Ed Roski Jr., the head of Majestic Realty and a key figure in the development of Staples Center, has 600 acres and a plan for a new stadium out by Majestic’s HQ, off the 60 Freeway amidst the millions of industrial square feet Majestic has built over the years. We’ll see how far this one goes, but I’ve heard of crazier ideas, and Roski does have the pull to make it happen.
Located in the OC, Buchanan Street Partners, the firm Robert Brunswick founded in Newport Beach and which has grown substantially over the past few years, was bought by TCW, the massive international financial firm, in a deal that hit the press this week, which you can read more about on the RENTV Main Page. Buchanan, which has developed a name for itself not only in its real estate investment success, but also for its athletic charity events, will remain an autonomous piece of TCW with its current team remaining in NB.
And it seems like one of the bigger real estate battles in the region of late may be sputtering out before the real finale. From the LA Times, we picked up on the article by Dave McKibben that the Anaheim vs. Disney housing battle, which was set for a referendum in June 2008, may be for naught. To fill you in on the basics, SunCal, the large residential developer, wanted to build 1500 condos and low income apartments on a 26-acre site within the Anaheim Resort District. Disney was fighting to prevent it based on a long-standing deal it had with the City, but the City basically stabbed Disney in the back by going along with the developers and housing advocates on the lame excuse that the area needs more housing. The honorable Mayor Pringle sided with Disney. Push came to shove over time so that a vote by the public, a huge waste in time and money, was determined to be the only way a decision could be made, and that was scheduled for next June, not so far in advance for the City’s residents to have already been deluged with mail pieces and phone calls. Well, now it appears that SunCal has sued the current property owner, the Frank Family Partnership, saying it reneged on the $46 mil deal to sell the land. The Frank Family says SunCal walked out by not putting up another extension deposit, and they have begun negotiating with other parties, potentially a hotel developer, which is where we should have been all along. [SBloom]
10/24/07 -- Here’s some news and notes we assembled over the past few weeks regarding leasing activity in the San Gabriel and the San Fernando Valleys.
The San Gabriel Valley, an area not usually known for its office occupants, soon will have a major new office user, as Newegg.com, the online consumer electronic retailer, is said to be doing some offline shopping for about 200k sf of office space. The company is being repped by the veteran CB Richard Ellis team of Nico Vilgiate and Todd Doney.
Over in the valley that is better known as “The Valley”, that being San Fernando, we have news of some tenants signing leases with the tenant rep assistance of Robert Chavez from Guardian Real Estate. In Encino, the law firm Hemar Rousso and Heald extended its 14.5k sf lease for an additional five years at 15910 Ventura Blvd. In the same building, the accounting firm Kirsch Kohn and Bridge extended its term for 10 years. Lisa Rediger represented the landlord, Douglas Emmett, in both transactions.
A couple miles to the west along Ventura Blvd, in Woodland Hills, the law firm of Dennison, Bennett and Press extended its penthouse lease at 21031 Ventura Blvd, called the Woodland Hills Financial Center, where it has been a tenant since 1990. Katharine Bernhisel of Arden Realty represented the Landlord.
And closer in to the center of the SFV, at the Sherman Oaks Galleria at the 405 and 101 Freeways, Imagi Studios, which released Mutant Ninja Turtles last year and has several new productions in the works, expanded and extended it existing sublease with Metrocities Mortgage to a nine-year term for 34k sf. Mr. Chavez repped Imagi and Metrocites, which is shedding space as a result of the mortgage meltdown. The company still has approximately 25k sf available for sublease in the ultra-tight Sherman Oaks market, and it is listed at $2.85/sf/mo FSG with a term that runs through 2015.
Speaking of the Sherman Oaks Galleria, another large deal we heard was about to sign there was the MPAA, the Motion Picture Association of America, which we heard was being repped by Mark Robinson from Studley in a lease of 92k sf of space with the landlord Douglas Emmett.
And lastly, with barely any big blocks of space available in the SFV, that puts LNR Warner Center’s new phase in a pretty good spot. With two new 250k sf buildings underway, creatively named D and E, with an expected opening of December of this year, LNR has just signed Countrywide, that’s right, Countrywide, to a lease for 15k sf on the ground floor. They join Intuit as the firms to pre-lease space here. Countrywide was repped by Steve Eyler from Travers, while the developer, LNR, was repped by John Sabourin from Studley. Software firm Intuit Inc committed to 170k sf here earlier this year in a 10-year lease valued at $70 mil, with occupancy planned for spring of next year. [SBloom]
10/19/07 -- On Wednesday, the same day as the ribbon-cutting ceremony for the new Nokia Theatre in downtown Los Angeles, the LA Headquarters Association held its Real Estate Connections 2007 program about Downtown Los Angeles, which was keynoted by KCET personality Huell Howser, whose humorous anecdotes and heart-felt comments about the benefits of a diverse and exciting downtown were by themselves well worth the price of admission. The event was held at the California Club, the long-time downtown institution located across from City National Plaza at 5th and Flower.
Although the theme of the event was about how did we get to where we are now and where are we going from here in downtown LA, it seemed that the panelists' most popular topic of discussion regarding development in the city was the lengthy and challenging entitlement process, and the ongoing disconnect between the City and the CRA.
A couple of the speakers in the first panel expressed frustration about how difficult and time-consuming it was to get the city to allow them to make simple streetscape improvements, such as adding trees and benches, even at the developers’ expense! Other examples shared by the panelists included having to wait two years for approval for outdoor seating at a new café and trying to get permission to serve alcohol at outdoor seating -- apparently the city was worried that if they allowed alcohol at patio seating then the homeless folks from skid row would wander over and start ordering $10 apple martinis.
Fortunately for the City, it was represented in the second panel by Councilwoman Jan Perry and Planning Director Gail Goldberg. Goldberg tried to appease the developers by conceding that the focus for the next year was all about streamlining the process and to make it more reliable and predictable. She asked that they give her one year to make things better. Hopefully we’ll be able to report in 2008/2009 about how thrilled developers are with the “new” LA approval process.
To let you know, the other speakers at the event were: James Atkins of Williams, Dame & Atkins; Kate Bartolo of Kate Bartolo & Associates; Yuval Bar-Zemer of Linear City; Beatrice Hsu of Related California; Oskay Brecher of The Moinian Group; and Rich Marr of Maram Holdings. The moderators for the two panels were John Adams of Gensler and Lynda Sybrandt of Deloitte Tax LLP. Other speakers included Edward Casey of Weston Benshoof Rochefort, Kathline King of Psomas and Daun Paul St. Amand of RTKL Associates. [AWolfsheimer]
10/17/07 - Transwestern and Delta Associates held a little industry shindig at the Walt Disney Hall during the final week of September, which took a look at the current economic climate and made some predictions for the coming year, based on their most recent report. The event included presentations by Transwestern’s West Region President George Garfield, CEO Larry Heard and Greg Leisch. Here are some of the conclusions from their latest research:
Economic Outlook: Sturdy
Payroll Job Growth: 84,000 per year for 2007 -09
Market Conditions: Healthy
Rent Growth -- Office: 4 -6% annual growth in 2008 -09 in LA; flat in OC; Industrial: 5 -7% growth in 2008, depending on product type
Investment Sales, Cap Rates: Likely to edge up over the next two years
Volume: 2007 should be the peak of this cycle
Industrial Market Pick: Inland Empire
Office Market Picks: Tri-Cities, West LA, Downtown
[SBloom]
10/12/07 - For our blog, RENTV asked Guy Johnson, President of Irvine-based Johnson Capital, “How have the capital markets in commercial real estate adjusted since Labor Day, especially with the rate cut, and how is that affecting purchase transactions?” We think you’ll want to read his response.
JOHNSON: The real estate market has had its share of bad news lately, with the failings in the sub-prime market and the fear of lack of liquidity in the marketplace. However, all in all, real estate acquisition makes sense if you believe in the fundamentals of the real estate market and sector that you're in.
For example, rates remain at near-historic lows relative to the last 50 years, and the long-term fixed rate for debt is still very attractive. As a result, while some sectors of the real estate market are requiring more documentation of income and more cash down, mortgage companies and banks are still actively doing deals, and money is available.
Also, we are starting to see positions softening. Whereas previously, sellers and borrowers held significantly stronger hands, these players are becoming more cooperative with buyers and lenders, and seem to be more willing to negotiate. The result is a greater focus on compromise between parties, and an acceptance that they are mutually dependent.
In the end, the economy drives value more than anything else. The credit implosion, for which it will take months to normalize, has masked the fact that the economy is weakening. This forces buyers and lenders to reevaluate property growth assumptions, as prices can fall. However, such price declines can lead to better values for the buyer, a potentially good thing for normalizing an overheated real estate market.
[Guy Johnson is President of Johnson Capital, one of the country’s largest real estate investment banking and commercial mortgage brokerage firms. Since its inception in 1987, the company has grown to 19 domestic offices and one international office and its aggregate transaction volume is over $25 bil.]
10/5/07 - On local job opportunities - In case you are a scholar in real estate who is looking for a new gig with the closest thing to a pro football team in SoCal (and this year that includes the Chargers), the USC Lusk Center for Real Estate is looking for a new Director.
From the email I received from the USC Lusk folks, USC is now accepting nominations and applications for Director of the USC Lusk Center for Real Estate. The Director holds the Lusk Chair in Real Estate and serves as the intellectual leader for real estate throughout USC and as liaison to the real estate industry community. Other notes from the email - the applicant should be a distinguished scholar who will conduct substantive research in areas that may include: real estate development, real estate finance, urban and regional economics, or other related areas. Applicants should hold a doctoral degree and have excellent research and teaching records. They should be experienced in industry outreach and have demonstrated management and leadership expertise.
If you are unfamiliar with the USC Lusk Center for Real Estate, we'll let you know that it advances real estate knowledge, informs business practice, and addresses timely issues that affect the real estate industry, the urban economy, and public policy. It conducts basic and applied real estate research, supports educational programs for students and executives, serves as a link between the academic and practitioner real estate communities, and supports university fundraising initiatives. The Lusk Center is widely recognized as one of the largest and most prominent academic real estate centers in the United States.
It is a university research center managed jointly by the School of Policy, Planning and Development (SPPD) and the Marshall School of Business. Established in the early 1980s with an endowment gift from the Lusk family, the Lusk Center serves as the focal point for real estate research and outreach at USC. [SBloom]
10/4/07 - On Westside leasing - Just received a good market report from Dick Schnell, Sr VP at Colliers International, which points out that rental rates in Santa Monica and Century City now range between $4.50 and $6.00/psf FSG. And if the new owner of the former EOP properties, Blackstone, gets their way, that rate could rise another 30%, since we've heard they are looking at rates of up to $8/sf/mo at buildings like 1999 Avenue of The Stars. From what we hear, they getting those numbers in a lease deal they have either just signed or about to sign.
Not sure if they'll be able to maintain that rate, although I suppose in Century City and places like Santa Monica they may be able to, but I have to tell you, I've been talking to many a leasing agent, both on the tenant side and landlord side, over the past few months, and from the So OC to North LA County, what I am hearing is that there are very very very few new prospects entering the market no matter what submarket you are talking about. Tours for blocks of space are way down and these are the deals that would be closing in a few months. And at rates of $6/sf or more, there is such a spread with top buildings in other SoCal markets, at just over $3/sf, that one has to figure some large users will soon be playing musical submarkets. [SBloom]
10/1/07 - Inland Empire retail - from one of CPN's emails last week, we picked up from reporter Barbra Murray that the British international retail firm Tesco uncovered plans to start its takeover of the US and that entails the opening of 48 new Fresh & Easy Neighborhood Markets across the Inland Empire. Okay, I won't touch the Fresh and Easy name...but it does sound like some other establishments that have longer histories in the IE. I'm sure you've seen the billboards along the 10 and 60 Freeways. Anyway, you gotta figure Ralphs is not too psyched. The U.K.-based company will both build and acquire structures to house an aggregate 480k sf of store space.
Murray added in her piece that Tesco is already in the midst of constructing an 820k sf distribution center in Riverside to accommodate the new stores. The markets will occupy 10k sf each of newly constructed space, or will open in converted facilities, such as former Albertson's grocery stores. Tesco designed the Fresh & Easy concept, which focuses on fresh and wholesome foods at low prices, specifically for its entrée into the U.S. retail market. The company will also bring new stores to Phoenix and Las Vegas later this year as part of its $2 bil launch of the brand over the next five years.
Retail property owners in the IE get your presentations ready. [SBloom]
9/27/07 - Westside lease: to update the status of the Google deal at Lantana Center we mentioned in this blog on September 20, we just heard today that the deal is on hold, for the time being, as Google has decided to hold off on signing new leases for now. Perhaps when the corporate mandate is lifted, the Maguire folks will be able to rekindle the lease, possibly at higher rates. [SBloom]
9/27/07 – I was going to call Columbia University's Real Estate Development Program advertising guy the other day but, you know what, I just couldn't do it after they invited the Iranian President to spread his lies to the fertile young minds in Manhattan. This, after the University does everything it can to keep any presence of the US military off its campus. In fact, I heard on the radio, on Bill Handel's show, that General Eisenhower was the last general to speak there, and he was the University President!
Looking at New York state schools? May I suggest you instead consider Cornell, my alma mater. It's located in Ithaca, which is much prettier than Harlem, and it has a much more diverse curriculum, as well as much more diversity of thought amongst the students and professors. Some actually like this country. [SBloom]
9/24/07 – How many newsletter and market reports do you get? Being media people, we're a magnet for almost every brokerage firm's glossy report and every individual broker's email newsletter. A great glossy covering San Francisco we just perused is The Retail Rap put out by BT Commercial's Terranomics Urban Retail Group, led by Rhonda Diaz. This colorful pub is stacked with facts about new store openings, new developments, sales and trends in such areas as Union Square, Market Street and the Financial District in San Francisco, as well as Silicon Valley. There is also a page devoted to restaurant news and notes. Highlights of the report include a rundown of retail and hotel sales, several of them exceeding prices of $1,200/sf, and an overview of retail rents on closed deals that range from $85 to $350/sf/yr NNN and asking rates that now reach up to $450/sf.
Diaz and crew give you a quick review of the recent major office building sales, at prices that range from $400/sf to the $813/sf that Glenborough paid for a 10-building portfolio they recently acquired. A section in the report talks about such things as: the plans by Wilson Meany Sullivan to convert the 342k sf Modern Art Tower on Montgomery into a five-star hotel/condo; the reincarnation of the 1.3 msf San Francisco Mart by new owner Adco, which plans to convert some space from furniture showroom into office and retail and rename it Market Square; and the plans by Lowe to build a 38-story, 248 unit condo-tower on the vacant site adjacent to the Transamerica Pyramid at 555 Washington in the North Financial District. [AWolfsheimer]
9/20/07 – In Westside leasing news, here's a tip on a big Westside lease getting signed, as we've been emailed that Google is in leases at Lantana Center, on W. Olympic Blvd, for all of the new 133k sf building with rights to the next 66k square footer. Maguire Properties is the owner/developer and Warren Wixen is repping Google. Rents, well, can you believe in the $6/sf/mo range with annual bumps? [SBloom]
9/17/07 - In a major retail sale, we just head that Sloan Capital purchased the 129k sf Two Rodeo Drive property in Beverly Hills for $275 mil, or over $2,000/sf! The very stylish retail property, located at the northeast corner of Rodeo Dr and Wilshire Blvd, was built in 1990 and has the look and feel of a small street in an upscale European shopping district. Some of the world-renowned fashion retailers at the center include Tiffany & Co, Versace, Jimmy Choo, Rene Caovilla, Damiani, Cole Haan and Jose Eber. The property was sold by Rodeo Owner Corp. Brokering this unique transaction was the Cushman & Wakfield team of Steve Algermissen, Andrew Harper and Ashley Morrison, on behalf of the buyer. From what we hear, the seller was repped by Strategic Real Estate Advisors and Falcon Real Estate. [AWolfsheimer]
9/14/07 – We'll let you know about some sizable leases that we heard are getting signed around in Downtown LA. In one deal, we hear Chubb, the big insurer, signed for about 90k sf at Thomas Properties' two-building City National Plaza, also known as Arco Plaza by the purists, who remember the name for the giant oil company that once occupied much of the 2 msf there.
As an aside, we think Thomas must be doing pretty well collecting money from Hollywood for location shoots lately. You can't help but recognize that distinctive plaza with its red sculpture and fountain as the backdrop for the finale to Heroes, one of the best TV shows from last year, as well as appearances in recent movies, I think it was the latest Bourne Identity movie where it doubled as a place in NYC.
In the other downtown LA deal, Latham has inked a massive lease for 292k sf at KPMG Tower on Grand Avenue. They will be moving from US Bank Tower (Library Tower) in what will be a Maguire to Maguire move since both buildings are owned by Maguire Properties, the REIT headed by Rob Maguire, which is downtown LA's largest Class A office landlord. [SBloom]
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