Philip Blumberg Blog

1450 Brickell in Miami Ready for Storms

Brickell Avenue in Miami, commonly referred to as "Wall Street of the South," saw a new tower completed this past March that was built with hurricane season in mind. The Wall Street Journal spoke with Alan Ojeda, the developer of 1450 Brickell Avenue, a 33 story office building that he's dubbed as the first fully hurricane-protected high-rise in the state. Mr. Ojeda says that the $240 million property was built to withstand a Category 5 hurricane "without significant damage", due in part to debris-resistant windows that cost $100 per foot. The 580,000 square foot tower is currently roughly 50% leased with tenants including Bilzin, Sumberg, Baena, Price & Axelrod LLP, H.I.G. Capital, and Rilea Group.

Miami's city building code requires that the first 30 feet of a building to be protected from large debris, but Mr. Ojeda extended this measure to cover the glass for the entire surface of the building, windows that cost roughly 50% more than normal window installations. The property also includes a second generator to cover the electrical system in the event of a power failure. Mr. Ojeda built the new tower with the 2005 hurricane season in mind, recalling a walk down Brickell after a storm and seeing broken glass well above 30 feet on office buildings. "We said, instead of doing the first 30 feet … let's do the whole building," explained Mr. Ojeda.

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$1.4B CMBS Movements in the Works

The Wall Street Journal took a look into looming commercial mortgage backed securities (CMBS) offerings and reported that J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc. are expected to launch funds totaling $1.4 billion in the coming weeks, indicating new signs of life in the sector. Though bank representatives declined comment, J.P. Morgan is at the helm of a $650 million offering backed by Vornado Realty Trust properties, which will then use the proceeds to pay back existing debts for the company. Goldman and Citigroup are also leading a $750 million CMBS issue, part of which envelops a $100 million that Citigroup is extending to Flagship Partners LLC, which is expected to use the funds to refinance debt on 660 Madison Avenue in New York. It's also expected that J.P. Morgan Chase and Deutsche Bank AG will team up for a $2 billion offering in the coming months for Centerbridge Partners LP to finance their purchase of Extended Stay Inc. for $3.9 billion.

These high-dollar deals are encouraging for the CMBS sector, but analysts still see tough times ahead as Fitch Ratings forecasts that eight CMBS loans worth more than $20 million each are expected to default next month when they come due. Fitch also noted that of the 772 fixed-rate CMBS loans due by December, 93 loans are already in special servicing. The Wall Street Journal noted that Wall Street sold $230 billion of CMBS in 2007, setting a record for the market, but only reported $1.4 billion in new issues in 2009. This it's expected that the total new issues could reach $10 billion.

For more news and information visit Blumberg Capital Partners.

Renasant Bank Acquires Crescent Bank, $1B in Assets

Crescent Bank and Trust Company of Jasper, Georgia was closed on July 23 by the Georgia Department of Banking & Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC entered into a purchase and assumption agreement with Renasant Bank to assume all of the deposits of Crescent Bank and Trust Company, in which Renasant acquired approximately $1.0 billion in assets, including approximately $600 million of loans and other real estate and approximately $50 million of investment securities, and assumed approximately $900 million in deposits.

"We expect the impact of the acquisition of Crescent Bank, including the accompanying capital raise, to be immediately accretive to the Company's earnings per share and tangible book value per share. Furthermore, the additional capital provided through the common stock issuance will enhance our already strong capital ratios and provide support for future growth," said Renasant Chairman and Chief Executive Officer, E. Robinson McGraw in a statement.

According to the FDIC, the estimated cost to the Deposit Insurance Fund (DIF) will be $242.4 million. Renasant Bank's acquisition was the least costly resolution for the FDIC's DIF compared to other transactions. Crescent Bank and Trust Company is the 98th FDIC-insured institution to fail in the nation this year, and the tenth in Georgia. The last FDIC-insured institution closed in the state was First National Bank, Savannah, on June 25, 2010.

For more news and information visit Blumberg Capital Partners.

Rep. Walt Minnick Introducing New Bill for CRE Sector

The U.S. Chamber of Commerce hosted a forum on the state of U.S. real estate on Wednesday dubbed "NCF The State of Real Estate: Taking an Appraisal" which heard Rep. Walt Minnick (D., Idaho) commenting on his new proposal that would shore up the troubled commercial real estate industry. As noted in a Wall Street Journal article, Minnick will introduce a proposal that would authorize the Treasury to provide anywhere from $15 to $25 billion in guarantees on new loans in the commercial real estate sector.

"We anticipate that they will support our plan based on preliminary discussions we've had with [Treasury] staff," Minnick told reporters at the forum. The temporary program, with co-sponsors from both parties and senators currently working on companion legislation, aims to halt the slide in CRE prices with the Treasury guaranteeing bonds backed by small-balance loans financing strip malls, office parks and other commercial properties, primarily targeted to help banks with $10 billion or less in assets. The proposal includes a 2% point fee for the Treasury to cover the cost of the program. "I don't think we are putting any taxpayer money at risk," Minnick said. "We are not injecting any taxpayer money into any financial institution."

For more news and information visit Blumberg Capital Partners.

National Nuclear Security Administration Project Secures $697M in Financing

The new National Security Campus for the National Nuclear Security Administration (NNSA) in Kansas City, Missouri has secured $697 million in financing for its new $4.76 billion project. CGA Capital Corporation and its affiliates, assisted by by a team of attorneys from Ballard Spahr LLP, closed the highly structured, lease-backed financing that will clear the way for construction to begin on the new facility.

The campus, cited as one of the largest commercial projects in the U.S. in a Citybizlist Baltimore article, will serve as a primary producer of nonnuclear mechanical, electronic, and engineered materials for the U.S. nuclear weapons arsenal and other national security missions upon completion. Designed to be a LEED Gold-Rated Green campus, the new facility will include nearly 1.5 million square feet of manufacturing spaces, laboratories, office space, and warehouses. The property will be developed and leased by CenterPoint Zimmer LLC (an entity formed between CenterPoint Properties and Zimmer Real Estate Services), of Oak Brook, Illinois, which in turn will lease it for 20 years to the U.S. General Services Administration.

"It was extremely gratifying to see all the complex elements of this deal come together successfully," said W. Kyle Gore of CGA. "This new facility is truly state of the art, from the way it will be designed and built to its financing structure. It is also a vital part of America's national security effort. Our team is proud to have been part of that, and equally proud to have worked on behalf of such a great developer client as CenterPoint Properties."

For more news and information visit Blumberg Capital Partners.

Whirlpool To Build New $85M Office Campus

Whirlpool Corp. has announced that it will build a new three-building office campus in Benton Harbor, Michigan in an effort to consolidate its over 4,000 employees into a new headquarters. The project, expected to take around 5 years to complete, will reportedly cost $85 million. "This initiative is a good business decision as the new campus and related changes are expected to increase productivity and energy efficiency, and reduce operating costs," said Jeff Fettig, Whirlpool chairman and chief executive officer, in a CoStar article.

Whirlpool will relinquish its leases in Hilltop North, Box Factory, Multimedia Center, and the former Transamerica site. The Michigan Economic Growth Authority is expected to improve a package of tax incentives for the new project. The build of the complex, contingent on approval of all state and local incentives, is expected to begin in the next few weeks.

For more news and information visit Blumberg Capital Partners.

Moody's CPPI Shows U.S. CRE Prices Up 3.6% in May

The Moodys/REAL Commercial Property Price Index (CPPI) report has been released showing the second straight monthly increase in the U.S. commercial property market. May saw a 3.6% price increase, on the heels of April's 1.7% upturn. Commercial real estate prices in the U.S. are currently 38.9% below their peak in October 2007, but they have come back 8.6% from their October 2009 low according to the New York Times.

"We expect commercial real estate prices to remain choppy in the coming months," said Moody's Managing Director Nick Levidy in a release Monday. "The positive news of increasing prices over the past two months is tempered by low transaction volumes, forecasts for slowing macroeconomic growth and the rising risk of a double dip recession."

"With real estate transactions increasing, more investors will receive distributions, which will in turn lead to increased activity in the fund-raising market," Andrew Moylan, a manager in Preqin's real estate data division, said in a statement. "This will take time, however, and it seems likely that there will be several more quarters of slow fund-raising to come."

For more news and information visit Blumberg Capital Partners.

CBRE Investors Buys Oakland City Center Portfolio for $360M

Oakland City Center, a 1.6-million-square-foot office and retail center across from City Hall in Oakland, CA, traded hands this week in a $360 million portfolio purchase according to the Oakland Tribune, making it the largest property sale in the East Bay this year. CB Richard Ellis Investors purchased a portfolio of seven office buildings and a parking garage located within Oakland City Center on behalf of the CBRE Strategic Partners U.S. Value 5 fund from a partnership of Shorenstein Development Co. and the State Teachers Retirement System of Ohio. The purchase includes the office buildings known as 1111 Broadway, 555 12th Street, 1300 Clay Street, 505 14th Street and City Square, along with retail shops in City Square, and the City Center Garage, assets that are currently 91% leased.

"This shows big institutional investors have a lot of confidence in downtown Oakland," said Ken Meyersieck, senior vice president with Colliers International, a commercial realty brokerage. "They see that this market has a lot of viability."

"City Center has got it all," said Bill Nork, a senior vice president with Cornish & Carey, in a San Jose Mercury News article. "It has nice buildings, Class A offices, good retail, good parking, and it's right on top of the BART station."

For more news and information visit Blumberg Capital Partners.

CoStar Forecast Indicates Office Market Has Bottomed Out

CoStar released a report today in its The State of the U.S. Office Market: Mid-Year 2010 Review & Forecast indicating a stabilization in the U.S. office markets. "As we anticipated two quarters ago, it now appears we have hit the bottom of the market in terms of vacancy and that is critical here in this business," said Andrew Florance, CEO of CoStar. "The fact that we are clearly showing some sort of bottom and we don't have a significant increase in vacancy this quarter is very positive news."

The report marks that office vacancy rates have peaked with some markets showing an increase in the average rental rate. Markets in the south and southwest, including Atlanta, Dallas/Fort Worth and Phoenix, currently have the highest office vacancies of 17% or higher, but this also reflects a vacancy rate decline in the second quarter. New York and Minneapolis are also reporting single-digit vacancies post second quarter. Of the twenty largest office markets inspected, eight posted positive net absorption, three had little to no change, and nine posted negative absorption.

For more news and information visit Blumberg Capital Partners.

General Growth Properties Secures $500M Equity Investment

General Growth Properties Inc. has landed a $500 million equity investment from the Teachers Retirement System of Texas to help finance its exit from bankruptcy by October according to a Wall Street Journal report. GGP also announced today that it plans to emerge from Chapter 11 bankruptcy protection as two separate entities, with some key properties in Maryland going to each one. The agreement with the Teachers Retirement System, subject to bankruptcy court approval, will be in the equity of reorganized GGP only and will not include any interest in the newly formed company to be spun-off to GGP shareholders.

General Growth owns or manages more than 200 malls in 43 states and, with more than $27 billion in debt, was the largest real estate bankruptcy in U.S. history by 2009. GGP’s initial investment agreements with Brookfield Asset Management, Fairholme Funds and Pershing Square Capital Management, which will reportedly provide sufficient capital for the company to emerge from Chapter 11, include a backstop provision for $1.5 billion of debt and $500 million of equity required for emergence.

For more news and information visit Blumberg Capital Partners.