Chinese money dominates US investment sales market

China has dominated the North American investment sales market in the past 12 months, investing over $1.6 billion in US properties, according to a new report from DTZ.

North American investors dominated the U.S. market, acquiring nearly $76 billion of assets in the year to Q2 2014 and representing 84 percent of market activity and, on the sell side, reaching net sales of close to $4 billion.

However, a steady decline in North American net investment contrasted with net positive activity from non-North American capital.

“Nearly half (47 percent or $9.2 billion) of non-North American investment came from internationally sourced capital, including some U.S.-headquartered fund managers who raised capital in multiple jurisdictions,ˮ noted Ed Wlodarczyk, DTZ’s Head of Capital Markets, Americas.

“More than a quarter (27 percent) of the capital targeting the main eight cities originated from Asia Pacific. China represented the biggest investor by source with close to $1.6 billion invested, reflecting a similar trend in Europe.

“European capital represented a further $3.3 billion of investment, with Norway acquiring office properties in Washington, D.C. and San Francisco,” he added.

The DTZ investment market update for the United States, covers volumes on a national level in deals greater than $20 million. The analysis focuses on the top eight U.S. markets where activity reached $89 billion in the period, a 23 percent increase over the previous 12 months. In most cities, cap rates are now close to their 10-year low: at 4.3 percent, San Francisco now has the lowest cap rate and close to a ten-year low of 3.7 percent.

DTZ observed similar trends in New York, Boston and Washington, D.C., while Chicago, Houston and Dallas showed more scope for further compression.

JOHN WICKES

JOHN WICKES

“Despite a small, seven percent quarter-on-quarter fall in activity to $59 billion, the US market continues its upward trend, reaching a new post-crisis record of $267 billion, representing a 33% increase on the same period a year ago,” said John Wickes, Head of Americas Research at DTZ.

“In the eight key U.S. cities we monitor, volumes rose by 38 percent over the quarter, pushing volumes over the past year to 23% higher than the same period a year ago.”

The strongest growth was recorded in Boston, San Francisco and Los Angeles; Manhattan, while still attracting the highest volume of capital, was down three percent, which has caused investors to look to other major centers.

Unlisted funds remained the most dominant investors on the buy side, with $39 billion invested in the past twelve months, and also were heavy sellers.

Listed companies were also acquisitive, at $13 billion invested over the same period.

Chines money

China represented the biggest investor by source with close to $1.6 billion invested.

Of property types, office investments have been by far the major source of activity, representing two-thirds of investment, a level typical for the major cities monitored.

Since the beginning of 2009, the office sector has typically represented 70 percent of all deals over $20 million.

Retail was the next largest segment, with $16 billion invested, representing 18% of investment activity. Industrial assets represented a further 12 percent or $10 billion of investment.

The strong weight of capital has pushed office cap rates to near ten-year lows.

NIGEL ALMOND

NIGEL ALMOND

“Looking ahead, we see US volumes and prices rising further. With a new record of nearly USD $150 billion of new capital targeting the US markets, investors will need to move up the risk curve to achieve the same returns,” said Nigel Almond, Head of Capital Markets Research at DTZ.

“Relative value, as measured by our Fair Value Index remains good for the moment, due to low government bond yields. Time might be running out for investors to take advantage, as bond yields are expected to increase in the next few years.”

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Elghanyan, Ratner, Guggenheim join big-name crowdfunding supporters

Real estate crowdfunding platform, Fundrise announced a number of new investors have joined the company’s first-round Series A including Guggenheim Partners, Rockrose president Justin Elghanayan and James Ratner, chairman and CEO of Forest City Commercial Group, bringing its total raise to $38 million.

“These investments from top players in the real estate and financial industries provide further confirmation of real estate crowdfunding as a viable and effective investment tool,” said Ben Miller, co-founder of Fundrise.

Additional new investors in the company include Debbie Ratner Salzberg of Forest City, Terrence Rohan of Index Ventures, Onyx Equities co-founder Jon Schultz, Michael Gerwiz of Potomac Investment Properties, Artemis Real Estate Partners CEO Debbie Harmon, and Haniel Lynn of Corporate Executive Board.

“The continued high-level investment in the company enables us to further expand our platform throughout the United States, and reach everyone from retail to high net worth and institutional investors,” noted Fundrise co-founder Dan Miller. Fundrise has raised more capital in a first-round Series A than any other equity crowdfunding company.

Previously announced investors include Renren Inc., Silverstein Properties CEO Marty Burger and CIO Tal Kerret, as well as Ackman-Ziff Real Estate Group, LoopNet founder Rich Boyle, Berman Enterprises, The Collaborative Fund, and Rising Realty Partners President Chris Rising.

JUSTIN ELGHANYAN

JUSTIN ELGHANYAN

“I have been extremely impressed with the Fundrise team and its ability to bring world-class real estate to investors throughout the United States,” stated Justin Elghanayan, President of Rockrose Development. “Crowdfunding has proven to be successful across multiple sectors, and real estate is poised to lead the next wave of growth in this industry.”

The first company to successfully crowdfund equity investment for real estate online, Fundrise can help anyone build a real estate portfolio and access high-yield real estate opportunities through an online experience.
The site has allowed lenders to invest in specific properties for as little as $100 per share, and as much as $10 million, and earn favorable returns (historically 12 to 14 percent).
Fundrise also gives residents the ability to invest in local real estate projects, opening up new possibilities for economic growth.

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East Midtown steering group gets underway

The East Midtown Steering Committee, a planning group co-chaired by Manhattan Borough President Gale A. Brewer and City Councilmember Daniel R. Garodnick to set the framework for a new greater East Midtown area, has finalized the group’s membership and held its first formal session yesterday (Tuesday).

A facilitation team will be led by John Shapiro, chair of the Graduate Center for Planning and the Environment at Pratt Institute.

The team will also include Geoffrey Wiener, formerly the assistant vice president of Facilities Planning at Columbia University; David Burney, former Commissioner of the NYC Department of Design and Construction (DDC) from 2004 to 2014; and Jonathan Martin, who was the facilitator for the South Street Seaport Working Group, the first pre-ULURP planning group created by Borough President Brewer.

Said Brewer, “I believe robust community participation is necessary with any significant rezoning and this experienced facilitation team will help us get the plan right for East Midtown.”

“We now have the right pieces in place to advance the conversation about a new East Midtown rezoning plan,” added Garodnick. “We are ready to roll up our sleeves and get to work.”

Dan Garodnick

Dan Garodnick

Created at the direction of Mayor Bill de Blasio, the East Midtown Steering Committee will help define future policy changes and make recommendations to the Department of City Planning on the rezoning of the greater East Midtown area.

In addition, a rotating representative from Build Up NYC, a coalition of construction and building management labor groups, will join the Steering Committee.

The Steering Committee’s agenda and discussions will be reported back to Community Board 5 and 6’s monthly Full Board meetings.

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$228M construction loan for Flatotel conversion

Meridian Capital Group negotiated $228.5 million in construction financing for the condominium conversion of the former Flatotel in New York City to residential and commercial condos on behalf of a partnership between Chetrit Group and Clipper Equity.

The two-year, non-recourse, interest-only loan features a floating LIBOR-based interest rate and a one-year extension option.

Rendering of 135 W52

Rendering of 135 W52

Meridian executive vice president Aaron Birnbaum, and vice president Emanuel Westfried negotiated the transaction. Source said the lender was Deutsche Bank.

The Chetrit Group and Clipper Equity team plans to convert the asset into a five-floor boutique office condominium and a 37-floor luxury residential condominium.

A 55,000 s/f office condo component will be located on floors two through seven and approximately 109 residential condominiums will span floors eight through 47.

The total project cost is presently estimated at $300 million. Sales have commenced and have exceeded $2,000 per square foot.The property is located at 135 West 52nd Street, between Sixth Avenue and Seventh Avenue.

The Chetrit Group and Clipper Equity team acquired the property in 2013 from a venture between Rockpoint Group, Atlas Capital and Procaccianti Group.

Both parties have significant experience with conversion and development projects in the New York metro area including the Empire Hotel, Hotel Chelsea, BellTel Lofts and Columbus Square projects. “Meridian initially placed the acquisition financing last year and worked with the sponsor on refinancing with a construction loan,ˮ explained Westfield.

“The project has enjoyed a significant level of pre-sales and construction is well underway and being funded with equity, making this an attractive opportunity for lenders.”

The broker said Meridian was able to identify several capital sources interested in financing the transaction on a non-recourse basis.

“We ultimately chose to move forward with the lender that provided superior economic terms coupled with the flexibility that will enable the borrower to best execute their business plan,” he added.

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Weil, Gotshal signs 400,000 s/f renewal at GM Building

GM Building

GM Building

International law Firm Weil, Gotshal & Manges LLP announced today (Tuesday) that it has signed a 15-year lease extension starting in 2019 for approximately 400,000 s/f of office space, occupying approximately 10 floors, at The General Motors Building, at 767 Fifth Avenue in New York.

“The General Motors Building has been our home since the building opened in 1968,” said Weil executive partner Barry M. Wolf.

“The building has been part of our identity, growth and success over the years. We are extremely pleased to have come to this agreement with Boston Properties that offers attractive and competitive terms for both landlord and tenant.”

The General Motors Building is at the southeast corner of Central Park and occupies an entire city block between Fifth and Madison Avenues and 58th and 59th Streets.

The 59-story iconic building is one of the most highly sought after office locations in the world. It was designed as General Motors’ headquarters location by architect Edward Durell Stone and constructed to the highest specifications exceeding most of the design and infrastructure standards of today’s newest speculative office buildings.

LEWIS MILLER

LEWIS MILLER

“In keeping with our pioneering spirit and culture, we were among the first major law firms to locate in this part of town,” Barry Wolf continued. “We are thrilled to be extending our lease here.”

Weil was represented in the transaction by Lewis Miller, Robert Flippin, Robert Alexander, Greg Maurer-Hollaender and Ryan Alexander of commercial real estate broker CBRE, and by Weil real estate partners Michael Bond and Philip Rosen and associate Caryn Stafford.

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Microsoft makes its New York retail debut with 677 Fifth Avenue flagship

By Holly Dutton

Software giant Microsoft announced it will open its first retail store in New York City on a tony stretch of Fifth Avenue.

The company signed a lease to open a flagship store at 677 Fifth Avenue, near 53rd Street, according to the company’s blog, where David Porter, corporate vice president of worldwide retail stores at Microsoft, announced the news in a post.

Miscrosoft's Fifth Avenue store will open next year.

Miscrosoft’s Fifth Avenue store will open next year.

“As our first flagship store, it will serve as the centerpiece of our Microsoft Stores experience,” wrote Porter. “This is a goal we’ve had since day one — we were only waiting for the right location. And now we have it. Our Fifth Avenue location will be much more than just a Microsoft store.”

Luxury fashion brand Fendi formerly occupied the space at 677 Fifth Avenue, a posh shopping corridor that boasts some of the most expensive retail rents psf in the city. The clothing retailer left the space last year to move to a spot on Madison Avenue.

It was reported in August that Microsoft had been eyeing the 8,700 s/f space that was marketed by Cushman & Wakefield. According to a recent market report from the company, average asking rent in the area is $2,749 psf. Cushman and Wakefield’s Andrew Kahn, Jesse Hutcher and Jonathan Scibilia represented the landlord 677 Fifth Avenue Corp, in the lease while CBRE‘s Richard Hodos represented Microsoft.

RICHARD HODOS

RICHARD HODOS

The store will have “experiential space” as well as retail, according to the company. It is expected to open sometime in 2015.

“While we build out the Fifth Avenue location, we will continue to open more stores — in fact, we’re opening 10 more locations in time for this holiday season,” said Porter. “But our New York flagship store – five years in the making – will be worth the wait.”

The company’s first retail store opened in October of 2009 in Scottsdale, Arizona. Since then, the Mircosoft has been aggressive in furthering its retail reach, opening 104 retail store locations in the United States, Canada, and Puerto Rico.

“When we opened the first Microsoft retail store back on Oct. 22, 2009, our intention was simple: deliver outstanding choice, value and service for everyone who walks into our stores,” said Porter. “Microsoft Stores were designed to create a meaningful, direct connection to our customers and give them the best place to experience and purchase Microsoft technology.”

Rival company Apple has about 254 stores in the United States, according to the company. Apple’s iconic “cube” store is just blocks away at 767 Fifth Avenue.

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$1.5B Queens development tempts Durst out of Manhattan

By Holly Dutton

The Durst Organization announced yesterday (Tuesday) that it is investing $1.5 billion in a massive housing development in Queens called Hallett’s Peninsula.

In a joint venture with Lincoln Equities Group, the firm plans to build 2,404 units, including 483 affordable units along an undeveloped waterfront area of Astoria.

The project will also include a supermarket, retail, an extended and rebuilt waterfront esplanade, and renovated playgrounds and parkland, according to a press release from Durst.

“This project will transform an isolated and neglected stretch of the Queens waterfront and transform into a vibrant community with housing, parks, retail, waterfront access and improved transportation,” said Jonathan (Jody) Durst, president of The Durst Organization.

JODY DURST

JODY DURST

“This is our family’s first major development outside of Manhattan and is demonstrative of our growth as residential developers and owners; we could not be more excited about this project, this community and our partners.”

In the works for years, the project was approved by the City Council last October.

The seven acre former industrial site will have 2.5 million s/f and include eight residential buildings.

Four of the buildings will be market rate, two will be 80/20 buildings, and two will be affordable buildings.

The two affordable buildings will be developed in partnership with the Jonathan Rose companies.

The site will also include 65,000 s/f of retail and community use facilities, a designed site reserved for the construction of a k-8 public school, and an additional lot for the New York City Housing Authority (NYCHA).

“We began this project seven years ago and have worked hand-in-hand with the community every step of the way,” said Joel Bergstein, president of Lincoln Equities Group.

Rendering of the Hallets Point development.

Rendering of the Hallets Point development.

“This new joint venture with The Durst Organization will enable us to realize our vision for Halletts. We will bring a much needed supermarket and affordable housing to Astoria as well as reinvigorating and reconnecting the peninsular to surrounding neighborhood through infrastructure improvements and retail development.”

The nearby Astoria Cove housing development was just approved on Monday by the City Planning Commission. The plan for that project, developed by a group of investors including Queens-based Alma Realty, includes five mixed-use building with 1,700 apartments in 2.2 million square feet of new development.

The project will still need final approval by the City Council to proceed.

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In GM Building, Weil Gotshal Hops on the Downsizing Bandwagon

New York law firm Weil, Gotshal & Manges LLP has been a tenant at the iconic General Motors Building since it opened in 1968 at the southeast corner of Central Park.

Now Weil, whose marquee bankruptcy practice also advised the automaker and longtime client during its Chapter 11 restructuring, is shrinking its footprint in the Big Apple.

On Tuesday the firm announced it has signed a 15-year lease extension starting in 2019 for approximately 400,000 square feet in the GM Building—a 20% reduction in space compared to the current lease. The shift will give back about three floors and, according to a firm spokeswoman, be accompanied by a “complete gut renovation” to make the space “more efficient and in-line with how we work today.”

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