Philip Blumberg Blog

A&B Properties Acquires Boulder Property for $30.8M

Alexander & Baldwin (A&B) Properties, based in Honolulu, Hawaii, completed the purchase of the Meadows on the Parkway Shopping Center in Boulder, Colorado this month for $30.8 million according to a CoStar article. The Meadows, totalling 216,400 square feet of space, features seven retail buildings and one office building and is situated one mile away from the University of Colorado.

Norbert Buelsing, president of A&B Properties, commented that "the addition to our portfolio of Meadows -- a large, centrally-located shopping center anchored by key national tenants including Safeway, Michael's and Rite Aid -- reflects A&B's strategic objective of acquiring properties in prime markets with excellent potential for appreciation and growth." Built in 1989, the Meadows was 83% occupied at the time of sale.

For more news and information visit Blumberg Capital Partners.

Deutsche Bank to Build New Core Banking System Based on SAP

Deutsche Bank announced this week that it will be restructuring its core banking system and that the changes will be based on SAP for Banking solutions. The financial details of the software solution change has not been released, but letters of intent have been signed by the bank. SAP, a leading provider of business software, hopes to boost efficiency and profitability while helping DB accelerate time to market for new products and services.

"IT is a business driver and catalyst. It ought to be flexible, cost-efficient and scalable in order to support business growth", said Hermann-Josef Lamberti, Deutsche Bank's Chief Operating Officer. "We are looking forward to shaping the industry and setting new standards to manage processes and services even more consistently and efficiently with a new core banking system. SAP's solution portfolio offers the core banking functionality to improve our effectiveness at all levels."

For more news and information visit Blumberg Capital Partners.

CoStar Sees Good News For the Office Market and Beyond

CoStar Group has reported a gain in gross leased space from 60 million sq. ft. in the first quarter of 2009 to an estimated 90 million in the fourth quarter across the U.S.  Andrew C. Florance, founder and CEO of CoStar is quoted as saying:  "This is simply the most important news in the office market in the last 18 months and that has set the potential for recovery in the office markets."

The lease absorption rate increase was not universal across the country, however.  New York City, for example, has posted a gain of 1.6 million sq. ft.; Philadelphia, 900,000 sq. ft.  By way of comparison, we have regions such as Orange County, CA with a net loss of 1 million sq. ft., while the city of Detroit alone shrunk by 1.6 million sq. ft.

Property and Portfolio Research (PPR), a subsidiary of CoStar, suggests:  "While the economy appears to be stabilizing, it will take a while for this to flow through to the office market," (Josh Scoville, Director of Strategic Research at Property & Portfolio Research).  In addition, they anticipate a continued drop in office leasing prices due to property becoming devalued as a result of landlords' previously higher loan overhead.  As the properties owners slide further into distress, real estate will likely be snatched up at much more favorable rates, passing the savings on to lessees.

For more news and information visit Blumberg Capital Partners.

FDIC and Bank of England Team Up for Troubled Institutions

The Federal Deposit Insurance Corporation (FDIC) and the Bank of England have announced an agreement to a memorandum of understanding expanding their cooperation as resolution authorities in resolving troubled deposit-taking financial institutions with activities in both countries according to a Bank of England press release.

"The recent financial crisis demonstrates that greater international coordination among resolution authorities as well as resolution processes capable of resolving the largest, most complex financial institutions are necessary to protect the public," said FDIC Chairman Sheila Bair. "This MOU is an invaluable step forward toward implementing the recommendations of the Basel Committee's Cross Border Resolution Group, which the FDIC co-chaired. It is also a further step in support of the continuing work of the Financial Stability Board's Crisis Management Working Group, chaired by Paul Tucker of the Bank of England."

The Bank of England's Governor Mervyn King continued, "The Bank of England has in consequence become a resolution authority in the United Kingdom and, as such, it makes good sense to develop close relationships with other resolution authorities so that the toolkit and powers now available to us can be applied effectively to large and complex cross-border banks. The MOU should also help to enhance coordination with other regulatory authorities in the United States and United Kingdom."

For more news and information visit Blumberg Capital Partners.

WSJ Asks: Has the CRE Market Hit Bottom?

This hotly debated question has proponents on either side, according to Wall Street Journal.  Those who feel it has, such as Green Street Advisors, point toward increasing interest by foreign investors in U.S. properties, HSBC Alternative Investments Ltd., for one and domestic investors becoming more active once again.  Those opposed, such as  CBRE Econometrics Advisors, point to the NCREIF value index, which indicates a decline in the drop of prices but not a halt.  Much of the debate revolves around whether the more traditional means for tracking the markets' performance are able to keep pace with our current volatile environment.

"If you asked anyone what would a property have traded for today versus what it would have traded for six months ago, the answer is clearly more today," claims Green Street, supporting their side of the argument.

"We forecast that we're about two thirds of the way through," says CBRE-EA. Real Capital Analytics has meanwhile reported $54.4 billion in property transactions last year compared to $557.8 billion in 2007.

For more news and information visit Blumberg Capital Partners.

$4.1M Office Purchase in Puget Sound Area

Longwell Company has purchased The Connor Building, a 10,000 sq. ft. office building in downtown Bellevue, Washington. The $4.1 million transaction was between Longwell (represented by Executive Real Estate) and sellers, William and Marilyn Connor (represented by Grubb & Ellis Investment Group).

Longwell CEO, Dr. Stanley Xu has indicated plans to develop an apartment building in place of the current business building. The company currently manages roughly 2,200 apartment units between locations in the Puget Sound and Dallas areas.

For more news and information visit Blumberg Capital Partners.

Revision Likely in Major Projected Development

Wall Street Journal reports a trend by major development lenders to seek reformed financing. Citing the joint involvement of Bank of America and CBRE Investors in Atlatnta's "Streets of Buckhead" project (Ben Carter, developer), who invested a combined $330 million. Mr. Carter is said to be seeking an additional $200 million in funds and a restructuring of the financial outlook of the project. "We're trying to zero in on picking the right party,"Mr. Carter said. The completion date has been pushed back to spring 2001.

Mr. Carter's website describes this future property as: "Upon completion, The Streets of Buckhead will proudly feature nearly 600,000 square feet of retail and restaurant space, dedicated to iconic, internationally celebrated luxury and lifestyle brands like Oscar de la Renta, Hermes, Etro, Bottega Veneta, Domenico Vacca, Loro Piana, and Vilebrequin; stylish restaurants, including Japonais and La Goulue Bistro; and luxury residential units."

For more news and information visit Blumberg Capital Partners.

Foreign Investors Still Focused on US Real Estate

The Association of Foreign Investors in Real Estate (AFIRE) released the findings of its 18th annual foreign investment survey this week confirming the ongoing interest from offshore capital in United States' markets. The survey, conducted at the end of 2009 and soliciting feedback from the association's nearly 200 members -- whose respondents own more than $842 billion of real estate globally including $304 billion in the US -- showed that, despite lack of placement opportunites last year, foreign investors are still committed to investing in America's real estate.

"Although foreign investors expressed every intent to resume investing in 2009, like everyone else, their plans were sidelined by a paralyzed marketplace with no precedent and limited investment opportunities," said AFIRE’s newly elected chairman Werner Sohier. "However, new money is becoming available and the AFIRE survey points to an increased focus and interest in a few select markets for 2010, especially London and in the US, where prospects appear to be brightening." Survey respondents firmly select Washington, D.C. and New York for the best investment opportunities, receiving much stronger scores than third‐place San Francisco. This year, Boston makes a significant climb into fourth place, and Los Angeles falls one spot into fifth place.

For more news and information visit Blumberg Capital Partners.

HFF Secures $65M Refinancing for Dallas Skyscraper

Holliday Fenoglio Fowler's Dallas office announced yesterday that it had secured a $65 million refinancing deal for the office tower at 1700 Pacific in downtown Dallas. The property, a 49-story Class A office tower, has over 1.3 million square feet of office space with tenants including Akin Gump Strauss Hauer and Penson Worldwide. The Dallas Business Journal reported that the announcement of the refinancing "comes days after it was announced that Elm Place tower in downtown Dallas is closing. Elm Place, the 19th largest office building in the area with more than a million square feet of office space, will eventually shut its doors, leaving the Central Business District with a gaping hole to fill."

Working exclusively on behalf of Berkeley Investments (owned by Jon Hamilton and the Hamilton family), HFF placed the five-year fixed-rate loan with ING Investment Management.

For more news and information visit Blumberg Capital Partners.

Industry Expects CRE Market to Get Worse in NYC

The New York Times published an article titled "Further Slide Seen in Commercial Real Estate" observing that there are currently more than 180 major office space buildings in Manhattan worth $12.5 billion that are in trouble -- either with a history of problems making mortgage payments or already facing foreclosure and bankruptcy -- and those they spoke to in the industry about the immediate future of real estate didn't expect those figures to improve. With vacancies on the rise and rents falling lower to retain and attract tenants, building owners must also struggle to maintain the value of their investments.

"We're projecting the biggest value losses in the nation," explained Aaron Jodka, a senior real estate economist at Property and Portfolio Research. Jodka went on to predict that by 2011 the value of New York metropolitan area office buildings will decline by 58% from its late 2007 peak, noting that the market is already down 40% from that high.

"I have been in the business for 12 years. I have never seen it this bad," said Peter Von Der Ahe, vice president of investments for the brokerage Marcus & Millichap. "It hasn't hit bottom."

"Rents probably won't start to recover until job growth is created and some of that available space is absorbed," said Richard Persichetti, director of New York research for Grubb & Ellis.

For more news and information visit Blumberg Capital Partners.