Philip Blumberg Blog

DOD Renews 220K SF Arlington Lease

The US General Services Administration has renewed its lease at 3100 Clarendon Boulevard in Arlington, Virginia this week, keeping the Department of Defense in the offices its occupied for the past 11 years. The 221,084 square foot lease extends the tenancy through 2018. "We are very pleased that the Department of Defense has chosen to remain in our Arlington property," said Ken Mulrane of Piedmont Office Realty Trust, owner of the property.

Brian Connolly, Robert VeShancey and Marcy Owens Test of Jones Lang LaSalle, along with Ken Mulrane of Piedmont Realty Trust, represented Piedmont in the lease. Henry Chapman of CB Richard Ellis represented the tenant according to CoStar Group.

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MI Developments Sells Iowa Property to GRS

MI Developments secured the sale of its 196,000 square foot building at 2700 N. Broadway in Red Oak, Iowa to Greenbrier Rail Services, one of the largest railcar service networks in North America. Greenbrier will be relocating its American Hydraulics business unit to the new property to accomodate company growth. Binswanger represented MI Developments in the transaction, no sale price was disclosed.

"The transaction will impact the local economy and is a real morale booster for the town," remarked George Maher, the Executive Director of the Red Oak Industrial Foundation, "which lost 700 jobs as a result of closings." Greenbrier is expected to bring 135 jobs to Red Oak.

For more news and information, visit Blumberg Capital Partners.

USPS Cuts Expenses, Auctions Chicago Office for $40M

International Property Developers North America Inc. placed the winning $40 million bid for Chicago’s former Main Post Office Building, relieving the United States Postal Service of a property that cost about $2 million a year to maintain according to a report by the General Accountability Office. USPS reported a net loss of $2.4 billion in the third quarter and put the property up for auction to help cut expenses reports the New York Times.

The 14-story, 77-year-old building used to be the largest postal processing center in the world and is listed on the National Register of Historic Places. Spanning several city blocks and located at 433 W. Van Buren, the building is completely vacant after closing in 1995, but has since been used as a filming location for the bank scene in the latest Batman movie. Billed by Auctioneers Rick Levin & Associates as a "restoration opportunity of a lifetime" the property boasts about 2.7 million square feet of space. International Property Developers North America Inc., a global company whose principals chose not to be identified, signed the contract behind closed doors and have not revealed their development plans for the property. A local news video profiling the property is available here.

For more news and information, visit Blumberg Capital Partners.

Carillon Point Lands $65M Loan

Newmark Realty Capital, Inc. has arranged financing in the amount of $64,700,000 for Carillon Point, a 26 acre mixed-use property located in Kirkland, Washington, according to a Commercial Property Executive article. Michael Taylor of Newmark secured the financing for the owners with John Hancock Life Insurance Company. The loan has a fixed rate, a 20 year term and is amortized over 25 years. Mr. Taylor had arranged the original financing on the property in 2001, a debt replaced by the new fixed-rate loan.

Carillon Point includes 445,000 square feet of Class A office space, the boutique 100 room Woodmark Hotel and a 200 slip marina. The land has been owned by the same family since World War II and was developed to its current use between 1989 and 1991. "Carillon Point is one of the premier properties in the regions, and there was extremely low leverage on it, but the biggest challenge was its size," Taylor told CPE. "In this market, few lenders are making loans over $25 million, and for loans over $50 million, there are even fewer. For this property, we had lenders compete for it, but it was less than a handful; three years ago there would have been dozens."

For more news and information, visit Blumberg Capital Partners.

What a "Jobless" Economic Recovery Means for Real Estate

As many experts start to see a diminishing threat to our economy due to a large-scale recession or depression, the commercial real estate sector is sorting through the ashes and starting to look down the road for signs of life. According to the National Real Estate Investor Online, one indicator that should give us a sense of optimism is a recent slowing trend in the growth available office sublease space, which now sits at 113.1 million square feet nationally. However, if recovery follows the pattern of the last two economic cycles, employment might lag behind. "It's easily a nine- to 12-month gap between the economy turning, jobs being created and space being [in demand]," stated Hessam Nadji, managing director of research services for Marcus & Millichap. He estimates for the sector to achieve net absorption of space, it will require two quarters of job growth.

A telling indicator in the commercial real estate finance sector will be the successful ventures of Developers Diversified Realty and Vornado Realty Trust which have ambitions to raise CMBS funds through the Term Asset-Backed Security Loan Facility program. "Those deals, once they go through in the fall, will signal the return of the securitization market to the best-quality assets and best-quality net operating incomes," says Nadji. "It's a very limited signal. It's not going to affect the broad commercial real estate market, especially assets averaging $10 million to $20 million in value, which make up most of the market. But it's a start."

For more news and information, visit Blumerg Capital Partners.

Tishman Speyer Seeks Debt Restructuring for DC Portfolio

Tishman Speyer, owner of landmark office towers like Chicago's Chrysler Building and New York's Rockefeller Center, announced it will negotiate the terms of about $570 million in loans for various Washington, DC properties. GlobeSt.com reported a partnership led by Tishman Speyer would seek to purchase back some of the debt on the 21 office portfolio that was acquired in 2006 from Carr America for $2.6 billion. According to the Washington Post, Rick Matthews, a Tishman spokesman, said: "We have confidence in the long-term value of the portfolio. We are working with our lenders to achieve a reasonable resolution to the current situation."

Washington Business Journal has a full list of the properties in the portfolio. They include International Square and Presidential Plaza. The original deal was financed in 2006 with primary lending from Lehman Brothers. 

For more news and information visit Blumberg Capital Partners.

Silicon Valley Office Vacancies Highest Since 2003

California's Silicon Valley took its lumps after the tech bubble burst. Now, according to the Mercury News, the high-tech hub is feeling the force of the nation's recession and, like in most areas, its sagging commercial real estate market is proof recovery is not yet in hand. CB Richard Ellis recently issued a report stating there are 12.6 million square feet of empty office space in the valley and 39 completely vacant office buildings. That includes four six-story office buildings with 427,000 square feet of space in San Jose developed by Legacy Partners and the still-empty Moffett Towers in Sunnyvale.

Local real estate agents still have reason to be optimistic after surviving similarly lean times less than a decade ago. "We were the epicenter in 2003, but this was much more of a global recession which hit us on so many fronts," Phil Mahoney of Cornish and Carey said. As the economy rebounds, agents expect businesses will initiate expansions that have been put on hold. "We're not really oversupplied if we have any normal kind of recovery." During the tech bust, "companies just evaporated," said Mike Field of the Sobrato Organization. "This time, companies have contracted but they haven't evaporated."

For more news and information visit Blumberg Capital Partners.

2 New Tenants for Chicago-area Bolingbrook Corporate Center II

Chicago-based Bridge Development Partners LLC announced two recent leases at its Chicago suburbs office park dubbed Bolingbrook Corporate Center II, according to GlobeSt.com. Jacobson Co., a firm specializing in 3rd party logistics, will be occupying 96,000 square feet, with 5,000 square feet devoted to office space. Anthony Pricco, a spokesperson for Bridge, told GlobeSt.com: "For Jacobson, they were looking for space quickly to service their customer, and they have a building down the street so this location works for them." Honeywell International leased 119,000 square feet and Bridge will pay for the build-out of 14,000 square feet of office in the Honeywell space. Andy Sexson of Colliers Bennett & Kahnweiler and Kevin O'Donnell of O'Donnell Commercial Real Estate Inc. represented Honeywell, and Vern Schultz and Peter Bourke of Colliers Bennett & Kahnweiler represented Bridge in the lease transaction.

ReJournals.com reported Bridge partnered with McMorgan & Co. to acquire the property in 2007. The firms transformed the single-tenant property into a multi-tenant facility with 30-foot clear ceiling height, 28 docks and two drive-in doors. About 70,000 square feet remains available for lease in the building, at asking lease rates around $3.95 per square foot net. The available space is currently undergoing the build out of 2,000 square feet of office.

For more news and information visit Blumberg Capital Partners.

NAR Observes Slowed Decline in Commercial Real Estate

The commercial real estate decline, driven by falling production, fewer jobs, and negative return on investment, appears to be slowing, according to a new report from the National Association of Realtors. Lawrence Yun, NAR chief economist, noted the pace of decline moderated, but the leading indicator has fallen sharply and quickly from the peak, suggesting much lower business opportunities for commercial real estate practitioners engaged in leasing, sales and property management. "The reduction in commercial real estate activity is expected at least through the first quarter of 2010. Any meaningful recovery is not likely to occur before the second half of next year."

"I'm encouraged that we're seeing -- albeit one observation -- a stabilization in the decline in prices, coupled with a growing volume of transactions," said Neal Elkin, president of Real Estate Analytics in a Reuters article. "The money is coming in from the sidelines." The report does continue to explain that the activity last quarter was at its slowest in 15 years, and that weakness would persist into 2010, but finds encouragement in recent actions by the Federal Reserve to improve some flow of capital into commercial lending.

For more news and information, visit Blumberg Capital Partners.

Fed and Treasury Approve TALF Extension

The Federal Reserve Board and the Treasury Department have approved an extension to the Term Asset-Backed Securities Loan Facility (TALF) and have indicated that they do not anticipate any further additions to the types of collateral that are eligible for the facility. To promote the flow of credit to businesses and facilitate the financing of commercial properties, the Board approved extending TALF loans against newly issued ABS and legacy CMBS through March 31, 2010, adding that because new CMBS deals can take a "significant amount of time to arrange", it approved TALF lending against newly issued CMBS through June 30, 2010.

"The extension of TALF is probably a little less generous than anticipated, as many had hoped for longer than a three to six month extension," said Mike Feroli, a senior economist at JPMorgan Chase in a Forbes article, going on to note that Congress had originally requested that TALF be extended through the end of 2010.

Between this year and 2011, $814 billion in commercial real estate loans are expected to mature, according to the research firm Foresight Analytics. The Board has said it will continue to monitor financial conditions and consider in the future whether "unusual and exigent circumstances" warrant a further extension of the TALF to help promote financial stability and economic growth.

For more news and information, visit Blumberg Capital Partners.