This is a company blog used by the New Jersey Jones Lang LaSalle Team to keep track of current events within the real estate sector. All items posted on this website are originally written by other authors from various sources. This is simply used as a searchable tracking system for news we found relevant to our business.
Studley Welcomes Former CoStar VP Steven Coutts by DeAnna Paul
Steven E. Coutts joined Studley to oversee national research operations for the company's 19 U.S. offices.
With more than 17 years of experience in real estate, research and information services, the newly appointed senior vice president will manage a department comprised of three primary specialties - business information, analytics and GIS services.
Coutts’ background includes two years as managing director at REIS Inc., where he represented clients such as Key Bank, Deutsche Bank and Goldman Sachs. Previously, he was a vice president with the Schultz Organization and the vice president of sales for CoStar Group Inc., managing a national sales team of more than 100 people.
Coutts is also the former president and founder of the Boston Commercial Real Estate Network, a former commercial broker with Ferris Real Estate in Boston, and co-owner of Coutts Capital, a New Jersey-based real estate investment company.
posted by Jones Lang LaSalle NJ News Blog at 9:57 AM
It's the little things that count, even (or especially) in the big picture.
After plunking down $505 million for the signature Verizon Building at 1095 Sixth Avenue in at the corner of 42nd Street in Manhattan and then pledging to spend at least $250 million to reskin and upgrade the building, Equity Office Properties has now added another increment to its plans: In a long-running deal that closed on June 6, Equity Office Properties has purchased 75% of the tenancy in common that owns the fivestory building at 124 West 42nd Street. The property is contiguous to the park that EOP acquired as part of their Verizon building acquisition last year. The giant office REIT's price tag for this decidedly non-trophy asset? $12.5 million.
A source close to the transaction suggests that Equity Office's interest is likely driven by the approximately 25,000 square feet of development rights that come with the deal. If the company wants to raze the building and transfer the development rights to the building they are now renovating; it's possible that EOP could add some high-voltage floorspace at the top of the 40-story building, which is being marketed for rents as high as $85 a square foot.
The tiny property has been in the hands of a tenancy in common structure, composed solely of members of the Kassover family, which has owned the building for some rour decades; it was once the headquarters of their electronics and appliance retail chain, VIM Electric Co., which was a major appliance seller from the 1930s to the 1970s. The remaining one-quarter interest in the asset is still owned by Phillip Kassover, one of the heirs of the appliance chain, who declined to participate in the sale to EOP. But EOP will have a chance to acquire that interest later this year: a New York State Supreme Court Justice has ordered the sale of the original Kassover property by a court appointed referee on September 12.
The acquisition was negotiated by Shobi Khan, EOP's senior vice president for acquisition and leasing in the New York area, and Neil Goldstein, an attorney with Robinson Brog Leinward Greene. The HI Group, a Chicago-based real estate investment bank, also participated in the deal.
The terms of the auction will most likely require bidders for the remaining 25% interest in the property to put up hard cash and close within 30 days of the sale.
Real estate sources believe EOP is also still negotiating with Verizon to buy a conference center the telecom giant sill owns on the site, and which wraps around 124 West 42nd and also extends from 42nd Street through to 41st Street.
A spokesperson for Equity Office declined to comment on the transaction.
posted by Jones Lang LaSalle NJ News Blog at 9:55 AM
Biotechs, Aisle 5 Thursday, June 8, 2006 By DUNSTAN PRIAL STAFF WRITER
With a projected $15 billion infusion of cash from the sale of its consumer unit, analysts expect Pfizer Inc. to go shopping for biotechnology companies.
"Fifteen billion buys you a lot of biotech," said Jason Napodano, an analyst with Zacks Independent Research in Chicago.
The bidding war for Pfizer's consumer group, which markets such popular products as Listerine, Sudafed and Rolaids, has heated up in recent days, with offers reportedly made by GlaxoSmithKline, Johnson & Johnson and a British company, Reckitt Benckiser.
London-based GlaxoSmithKline, whose consumer line includes Aquafresh toothpaste and Tums heartburn tablets, is the current high bidder, with an offer of at least $15 billion, according to Bloomberg News.
Pfizer's chief executive, Hank McKinnell, said in a television interview Wednesday that negotiations with each of the top bidders are expected to begin in earnest later this month and that a final decision probably will be made by the end of the third quarter.
McKinnell said spinning off the unit into a stand-alone company remains an option.
In February, when Pfizer announced its intention to sell the business, McKinnell said the transaction should generate at least $10 billion after taxes.
However it occurs, the sale will leave New York-based Pfizer, the largest drug company in the world, with a pile of cash to pursue acquisitions.
An emerging trend in the industry has seen the big pharmaceutical makers snapping up small biotechnology firms in an effort to gain a foothold in the burgeoning biotech field.
In April, Pfizer purchased Rinat Neuroscience Corp., a South San Francisco, Calif., company that develops treatments for diseases that affect the central nervous system. Terms were not disclosed.
Whitehouse Station-based Merck & Co. and Novartis, whose U.S. headquarters are in East Hanover, have also been busy acquiring and partnering with biotechs.
Analysts have said the strategy is especially important for Pfizer as it seeks to replace billions in lost revenues to generic competition as one after another of its blockbuster drugs loses patent exclusivity.
Seeking to address the shifting landscape, Pfizer is attempting to streamline its operations, both through a restructuring program announced last year and through the sale of its consumer products unit.
Napodano of Zacks Independent Research said profit margins are much higher for Pfizer's pharmaceuticals, which include the cholesterol fighter Lipitor, the world's biggest-selling drug, than for its consumer products such as mouthwash.
"Pfizer has been looking for ways to cut costs and raise profitability. A sale of its consumer goods unit would allow them to cut a significant amount of costs," he said.
As for New Brunswick-based Johnson & Johnson, picking up the consumer group and its nearly $4 billion in revenues would only enhance the company's stature among investors as a broadly diverse health care conglomerate, Napodano said.
He added that GlaxoSmithKline, the second-largest drug maker in the world, is likely seeking to enhance its presence in the United States by acquiring Pfizer's consumer business.
A Pfizer spokesman did not return a call seeking comment. GlaxoSmithKline spokesman Brian Jones declined comment, as did Jeff Leebaw, a spokesman for Johnson & Johnson. E-mail: prial@northjersey.com
Laureate Pharma’s $9 Million Expansion Martin C. Daks NJBIZ Staff 6/8/2006
Princeton’s Laureate Pharma today said it plans to invest up to $9 million to expand a biopharmaceutical manufacturing facility at its headquarters in Princeton. The contract manufacturing company says it will build a pilot production plant with expanded purification production capacity. The facility, which is expected to be completed by mid-2007, will be designed for process development, production and purification of early-phase products. It will feature bioprocess purification systems, analytical testing systems and other equipment.
posted by Jones Lang LaSalle NJ News Blog at 9:52 AM
Blackstone Group Accumulates $7B Pool By Barbara Jarvie
NEW YORK CITY-The Blackstone Group has closed on a fund that, according to the company, is the largest real estate opportunity fund ever raised. Blackstone Real Estate Partners V has capital commitments totaling $5.25 billion. When paired with an international fund, BREP International II, Blackstone has a pool of available capital aggregating more than $7 billion. The firm now lays claim to the world's largest pool of capital for real estate opportunity investing. Blackstone has raised a total of seven real estate funds since inception, five for general investing and two with a specific focus on Western Europe, with total capital of approximately $12.7 billion. "We have a solid pipeline of potential real estate investments both in Europe and North America and this new fund will give us the resources to take full advantage of those opportunities," Chad Pike, senior managing director and the London-based co-head of Blackstone's Real Estate group says.
Jonathan Gray, senior managing director and the New York City-based co-head of Blackstone's Real Estate group, says the fund closing is a "very significant vote of confidence from our investors in our group's ability to identify and complete profitable transactions." Earlier this week, the firm paired with Brookfield Properties in a nearly $9 billion deal for the Chicago-based Trizec. The joint venture will be financed with property and corporate debt, contributions of equity of $1.3 billion by Brookfield and institutional partners selected by it and the balance of the equity by Blackstone. Brookfield’s expected equity commitment, after syndication to institutional partners, is expected to be approximately $450 million. "Trizec represents a tremendous opportunity to further our investment in the US office market recovery," says Gray.
The Real Estate group has completed 10 public-to-private transactions including Wyndham, La Quinta, Meristar, NHP, Hospitality Europe and CarrAmerica in just the past two years. Over the past twelve years the group has completed more than 180 separate investments in North America and Europe with a total transaction value of approximately $50 billion. Park Hill Real Estate Group acted as placement agent in the raising of BREP V.
posted by Jones Lang LaSalle NJ News Blog at 9:51 AM
Company proposing golf course at river site By KARA L. RICHARDSON Staff Writer
BRIDGEWATER -- Standing on property Thursday that was one of New Jersey's earliest chemical facilities, township officials saw the land's possible future: a golf course and wildlife habitat.
Wyeth, a Madison-based pharmaceutical company, invited members of the Township Council and Planning Board to tour the American Cyanamid Corp. site, which closed in 1999. The land was once at least eight streets lined with industrial buildings. Now, all but one of the structures -- a warehouse -- have been razed.
"I can close my eyes and see thousands of people working," said Ray Bateman, who is serving as a Wyeth consultant on the project. When Bateman ran for a the state Assembly seat in the 1960s, he met with the union there. "It was like a city and now it's gone."
Wyeth bought American Cyanamid in 1994. After the company closed its Bridgewater plant, Wyeth inherited American Cyanamid's 200-acre contaminated site, which is south of Main Street and west of Interstate 287, and its cleanup.
In 2003, Wyeth went to county and township officials to propose an $8.5 million project at the site, which includes the 18-hole, links-style golf course, a 95-acre wildlife habitat along the Raritan River, tennis courts, a driving range and a recreational complex along Main Street. If township officials approve the project in 2007, Wyeth officials hope to finish the project by 2012. It has not been decided if a golf course is the best option for the property, Council President Allen Kurdyla said.
"Let's see what the whole plan will be and what will be best for Bridgewater," Kurdyla said. In the year ahead, Kurdyla said Bridgewater officials will review the cleanup findings of the Department of Environmental Protection and Environmental Protection Agency, and meet with other environmental and financial consultants. Much of the property is in a flood zone.
posted by Jones Lang LaSalle NJ News Blog at 9:51 AM
Only 24 percent of finance chiefs are more optimistic about the U.S. economy than they were last quarter; rising wages, falling consumer demand, and increased fuel costs top their lists of concerns. CFO Staff, CFO.com June 07, 2006
Chief financial officers are growing more pessimistic about the U.S. economy but still plan to increase capital spending and hiring this year. Their expansion plans will be in substantial jeopardy, however, if inflation, the federal funds rate, or the price of oil continues to rise.
Those are some of the findings of the June 2006 Duke University/CFO magazine Business Outlook survey, which asked finance chiefs from a broad range of public and private companies worldwide about their expectations for the economy. This latest quarterly survey was concluded June 1 and generated responses from 980 CFOs, including 584 from the United States, 215 from Asia, and 181 from Europe. (The survey of European CFOs was conducted jointly with Erasmus University RSM in the Netherlands; results cited here are for the U.S. businesses, unless stated otherwise.) Detailed results are available at www.cfosurvey.org.
The study's main findings:
• Only 24 percent of CFOs are more optimistic about the U.S. economy, compared with 42 percent last quarter;
• 49 percent are more optimistic about their own companies, however, suggesting the pressures facing the economy have yet to affect most firms directly;
• Rising wages, falling consumer demand, and increased fuel costs top CFOs' lists of concerns;
• Finance chiefs say their bottom lines will suffer if core inflation rises to 3.5 percent, the federal funds rate goes above 5.5 percent, or if the price of oil surpasses $75 a barrel;
• Companies will increase capital spending 7.5 percent over the next 12 months — an increase from last quarter, when CFOs predicted a rise of 6.5 percent;
• Earnings are expected to increase 10.4 percent over the coming 12 months;
• Corporate cash balances will grow another 2.1 percent.
Business optimism about the U.S. economy declined sharply. Only 24 percent of U.S. finance chiefs are more optimistic than they were last quarter, while 46 percent are less optimistic. At the same time, CFOs' optimism about their own firms remained fairly steady; 49 percent were more optimistic and 28 percent, more pessimistic.
"CFOs are telling us that we are moving closer to the danger zone for the U.S. economy but that their firms can ride it out for now," said John Graham, a professor of finance at Duke's Fuqua School of Business and director of the survey. "There are several risk factors that are near the tipping point, and if any of them worsens, it would heighten the risk of a corporate slowdown." Inflation and wages are also worrisome. U.S. companies expect to increase their prices by 3.1 percent over the next 12 months. This would put the U.S. economy dangerously close to 3.5 percent inflation, the level at which a majority of CFOs say their bottom lines would begin to suffer. Trouble may arrive even sooner as a result of oil prices; finance chiefs say prices above $75 per barrel will harm profits.
They have similar concerns about the federal funds rate. "CFOs don't want any more Fed hikes," said Campbell Harvey, founding director of the survey and a finance professor at Duke. "The CFOs have drawn a line in the sand. Rates above 5.5 percent will be damaging, and rates above 6 percent would cause substantial damage to their bottom lines. The Fed does not have much wiggle room left."
CFOs cited rising labor costs as their No. 1 concern for the first time in the history of the survey. The second highest-rated risk facing the corporate sector is waning consumer demand, followed closely by rising fuel costs, increasing interest rates, a shortage of skilled labor, and high health care costs. Asian corporate concerns are similar, but with more emphasis on consumer demand and fuel. European CFOs list high wages and salaries at the top of their concerns, followed by waning consumer demand.
"The risk posed by rising health-care costs has not gone away, but companies now have bigger worries," said Don Durfee, research editor at CFO magazine. "Rising wages and salaries are a problem because CFOs tell us that they can only pass along about 40 percent of increases in employment costs. Similarly, on average only about half of rising commodity prices show up in the final prices of the products that their companies sell. The companies have to eat the rest." Though they are concerned about the economy, U.S. corporations are still planning capital and workforce expansions. Capital spending is expected to increase 7.5 percent during the next 12 months, up from 6.5 percent last quarter and 5.7 percent six months ago.
Three companies in five expect to hire more employees this year, with the overall increase averaging 1.3 percent; only one in five expects to reduce employment. The employment picture is much worse in Europe, where domestic employment is expected to decline by 1.4 percent.
posted by Jones Lang LaSalle NJ News Blog at 9:49 AM
Global Industrial Markets Growing Fast By Sean Ryan Sean Ryan is associate editor of Real Estate New Jersey. (To read more on the industrial market, click here.)
SECAUCUS, NJ-As big as New Jersey's port area is, it's only the 16th largest in the world. The vast changes to the industrial markets in Asia and Europe are serving the big growth in the global market, said Walter Rakowich, president and COO of ProLogis, to an audience of approximately 300 at the RealShare Industrial East conference. Rakowich was the keynote speaker for the event, which is produced by Real Estate Media, publisher of Real Estate Forum and GlobeSt.com.
As globalization shifts manufacturing and helps to build an international middle class--China will have a 200-million person middle class in the next 10 years--industrial demands are changing just as rapidly. Rakowich points to Shenzhen, the fourth largest port in the world and a city of seven million people, which essentially didn't exist 20 years ago.
Around 80% of port traffic from Asia goes to the West Coast, mostly the port of Long Beach. It takes twice as long for ships to reach eastern ports, and larger ships can't fit through the Panama Canal. In Europe, the nationalized shipping models that the continent has the infrastructure built for might not be the most efficient means of transportation, thanks to unrestricted transport across the continent, he noted. The Rotterdam and Hamburg ports are the two largest; Marseilles might be on the list, but labor problems keep the port from all that its Mediterranean location promises.
A town hall panel spoke of some of the less recognized markets in North America. Jim Dieter, executive managing director for CB Richard Ellis and moderator of the panel, brought up Hagerstown, MD and Orange County, NY, as expansion areas for the northeastern market. Greg Thurman, president of Panattoni Development Co., mentioned Toronto, the second largest distribution market in North America, as being comparable to New Jersey in terms of problematic developing. "There's land, but a lot of it is wet, protected and you'll never get it zoned."
Similarly, John Thomas, managing director for ING Clarion Partners, attested that Calgary, Austin, and the region north of Mexico City were all "harder than New Jersey" for developers. Local developer Gus Milano, executive vice president, finance and leasing, for Hartz Mountain Industries, enjoys the tough development areas, because it leads to more opportunities. "We like land constrained situations. The barriers to entry are what create value."
Stanley Danzing, executive director for Cushman & Wakefield, is seeing some of the distributors who had left northern New Jersey coming back. After balking at land prices and development problems, they've reaccessed their situations and "the extra costs seem to be justified." Danzig does suggest that other ports--such as Houston and Savannah--are due for increases because the major ports are running out of room. "There's a limit to how much you can stretch the envelope in L.A. and Newark."
Dry Goods Manufacturer Inks $2.6M Deal with Daicolor-Pope to Acquire 2 Industrial Bldgs. Dry goods manufacturer ROL ROM Foods purchased two industrial buildings in Paterson from Daicolor-Pope Inc. The properties, which total 91,000 square feet, sold as a portfolio for $2.6 million, or approximately $29 per square foot.
The industrial facilities are at 33 6th Ave. and 25-29 Shady St. and were previously used for die manufacturing by the tenant, Pope Chemical. Both buildings were converted to warehouses to accommodate the new owner. ROL ROM Foods plans to relocate its Passaic operations and expand into its new space by the third quarter 2006.
James Costanzo of Colliers Houston & Co represented the seller. Rubin Realty Associates procured the buyer.
posted by Jones Lang LaSalle NJ News Blog at 9:48 AM
Croat Pliva expects binding offers soon - source Wed Jun 7, 2006 5:51 AM ET By Igor Ilic
ZAGREB, June 7 (Reuters) - Potential buyers of Croatian drugs maker Pliva will complete due diligence within the next few weeks, after which binding offers are expected, an industry source said on Wednesday.
Pliva, the largest east European pharmaceutical firm by sales, is weighing various strategic options after Icelandic generic drugs maker Actavis made a preliminary offer to buy the Zagreb-based firm earlier this year.
Pliva rejected Actavis's bid as too low and said it had other suitors knocking at its door, but did not name them.
"Several parties which expressed interest in Pliva will have completed due diligence in the next two to three weeks at most. Then we can expect binding offers," the source, who asked not to be named, told Reuters.
Pliva has hired Deutsche Bank to advise it in choosing the best option, which may include a merger or strategic partnership. Pliva operates in more than 30 countries and sees the generic business, including biotechnology, as its main earnings driver after failing in the proprietary field.
According to industry analysts, Pliva will find it hard to survive on its own in an increasingly consolidating pharmaceutical sector and some kind of a capital link with another company is expected by autumn.
Actavis first offered to take over Pliva for $1.6 billion or 570 kuna ($100.7) per share, but then hiked its offer to 630 kuna per share, which raised the overall amount to almost $2 billion. It is the only company which has publicly expressed interest in Pliva.
Pliva's shares were traded at 614 kuna in morning Zagreb trade, 1.07 percent higher from Tuesday's close.
The Financial Times reported last month that U.S. drug maker Barr Pharmaceuticals was also among the bidders, and that its offer was worth $2.1 billion.
Both Pliva and Barr declined any comment and Barr only said it was eyeing ways to enter the European market, where it has no presence yet.
"No formal offers, including that from Barr, have reached Pliva yet," the source said. Pliva's chief executive, Zeljko Covic, said last month that those interested in Pliva included pharmaceutical firms, but also financial investors.
Croatian media speculated that besides Actavis and Barr, the bidders included investment groups KKR&Co, Blackstone Group and Permira Holdings.
posted by Jones Lang LaSalle NJ News Blog at 9:48 AM
When a prospect says they’re not interested, do you say "Can I give you a call in six months or so?" Out of guilt, most prospects will say "yes" even though they have no intention of ever buying from you. Of course, you realize this, too. Six months later, you uneasily skip past the contact’s record along with all of the other names you regularly recycle each day. A better approach is to determine up front if these prospects will ever buy from you. Ask, "Mr. Prospect, under what circumstances would you ever see yourself considering another vendor?" Their answer may open the door for a potential opportunity down the road. If they won’t answer your question, write them off, move on and feel good that you got a final decision.
posted by Jones Lang LaSalle NJ News Blog at 9:47 AM
Jones Lang LaSalle Sets Course As Empire Builder to the World Ambitious global real estate services giant develops its project management smarts 6/12/2006 By Debra K. Rubin
Even with a balance sheet that screams success, a share value that hit an all-time high in April, and rosy predictions of a bright future, Colin Dyer, president and CEO of Chicago-based global real estate and project management megafirm Jones Lang LaSalle Inc. (JLL), still needs reassurance.
There is, of course, JLL’s first appearance in 2006 on Forbes magazine’s prestigious Platinum 400 list for high-performing public firms, and its selection by major real estate client Procter & Gamble as External Business Partner of the Year for "sustained and significant value creation." But even with those corporate ego boosts, Dyer probably can’t wait for results of the firm’s annual employee survey to see how motivated and engaged his 22,000-person worldwide work force is. "Our aim is to constantly reinforce our reputation," he says. "There is no room for complacency."
JLL’s growth in the U.S. and abroad is hardly complacency. A lot has changed since the real estate firm’s British parent was founded as an auction house in 1783. It took the eventual U.K. global developer, Jones Lang Wooten, another two centuries to link with its American partner, a onetime Texas commercial real estate firm that became a Chicago fixture as LaSalle Partners. But the firms’ 1999 merger—and the boom in real estate as a valuable asset and hot commmodity—fueled a powerhouse that operates in 430 cities across 50 countries and reported $1.4 billion in revenue in 2005 .
JLL’s real estate scope is huge and varied, from research and consulting to client-based property management and investment services. The firm’s investment arm, LaSalle Investment Management, now boasts more than $30 billion worth in managed real estate "assets," 25% more than in 2004.
JLL now is taking its expertise onto the jobsite, pushing more prominently into construction project management, where it hires and partners with industry firms—and competes against them. The firm this year is in the Top 10 of CM-for-fee firms, up from 15th place on ENR’s 2005 listing (see p. 41). It reports $181 million in total CM-for-fee and program management revenue for 2005, up from $116 million a year before.
While the numbers don’t bring JLL close to the industry’s top CM and program management players, its real estate tentacles position the firm for lots more project work. Potential clients are impressed with the firm’s professionalism and they love soup-to-nuts providers.
Flush with cash, JLL’s acquisitions are providing new geographic bases, market niches and additional expertise. The firm now claims to have 1,000 project management "professionals" on staff around the world. Its latest annual report says the Project & Development Services team in India has increased "four-fold" in the last two years. At least 700 PDS staffers are in the U.S. alone.
"CM-PM is a core competency for us," says Peter Belisle, Los Angeles-based PDS president for JLL’s Americas group. The veteran of two California contractors, Hathaway Dinwiddie Construction, San Francisco, and Snyder-Langston, Irvine, says PDS made up just 11% of JLL revenue last year, but the best is yet to come. "It is a high-growth business limited only by finding the right good people," says Belisle, a civil-structural engineer who joined JLL five years ago and gained his current job in January.
JLL’s PDS crew can take heart that they will play a key role in at least two of the "G5," the firm’s five growth strategies outlined by CEO Dyer in 2005. One is being "the best in every local market where we compete." The other is becoming a "global leader in outsourced corporate real estate services." Dyer sees the latter related to corporate America’s continued push to shed "peripheral things," he says. "Corporations are looking at core skills. What adds value?" Dyer says that, in managing real estate, JLL has "economies of scale and a huge knowledge base of best practice."
PDS professionals might also be heartened by their leader himself. Dyer, 53, is U.K.-born and initially educated as a mechanical engineer. He operated a forklift as a teenager and worked as an apprentice engineer "fixing pipes" in BP Chemicals plants in Britain and France, he says. He went on to a variety of business, management and entrepreneur roles in overseas banking, textiles and internet retail. Dyer joined JLL in his current role in 2004.
Collegiality
While real estate is a new specialty for Dyer, his knowledge of corporate and financial worlds, particularly overseas, could be more critical to his vision. "The strategies Colin has in place are fantastic and the people here are the best in the industry," says Mike Sivewright, Atlanta-based manager of PDS. Dyer sees "the quality of people we hire" as a JLL differentiator, as is the "high collegiality between our teams," he adds. JLL directors seemed to appreciate Dyer’s impact, adding a $2.25-million cash-stock bonus to his $750,000 salary for 2005, according to the firm’s proxy statement.
Others praise some key skills inherent in the company. "They start from a history of real estate and development," says Kathi Littman, a construction management consultant and former ENR Award of Excellence Winner who worked at JLL in the late 1990s. "They are strongly trained in risk analysis."
Despite JLL’s focus on strong internal development, some contractor veterans of JLL projects use terms such as "oversold and overextended" to describe the fast-growing firm’s project management capabilities. "There are some unqualified people running jobs," says one contractor executive who declines to be identified.
JLL already is seeing financial gains in its U.S.-based PDS work, in part fueling a 53% hike in first quarter 2006 revenue for the Americas group. The increase brings its revenue share closer to that of Europe, the traditional leader.
Strategic acquisitions in the U.S. have helped a lot. Most recent is JLL’s $150-million purchase of Boston-based developer-construction manager Spaulding & Slye, completed in January. The deal gives JLL its first base in the hot Boston real estate market and adds to its presence in Washington, D.C., with more than 500 new employees and new skills in CM, PM, development management and residential markets for the first time, says S&S principal Kyle Warwick. "All of a sudden, we became their local market strategy," he says.
S&S is the leasing agent, property manager and CM for NorthPoint, a planned $2-billion mixed-use "transit village" in Cambridge, Mass. The first phase is set for completion next year. "We’re still bullish even with interest rates going up," says Warwick. "They won’t impact us until they get above 8%."
JLL already had gained a foothold in the tough New York-area market by buying Quartararo & Associates, a Manhattan-based project/development management firm in 2004. It had only 55 employees and annual revenue of $12 million at the time, but strong links to such high-profile Big Apple clients as Time Warner.
"We were a little boutique company when corporate clients started changing procurement processes and not using local firms," says firm founder Ray Quartararo, now a JLL managing director of PDS. "I needed more horsepower." He says the link helped secure a big Madison Square Garden renovation contract, now delayed by politics over the redevelopment of the city’s Farley Post Office.
Quartararo says he now has 115 "project professionals" in New York, including an office manager who was his previous client contact at Time Warner. JLL is executing a $1-billion reconfiguration of the suburban New Jersey campus of drugmaker Novartis. The firm also serves as an "ad hoc" advisor to the Port Authority of New York and New Jersey at Ground Zero, "responsible for project specific issues and overall coordination on site," says Quartararo. "How will the multiple buildings planned there interact?"
JLL’s acquisition spree has invigorated the PDS unit, which already has a daunting mission in its four key areas of real estate activity. In addition to individual projects, the firm offers "multi-site program management" when clients expand or go through rebranding. Not all involve construction. "We did 6,500 sites for Cingular in 12 months," says Sivewright. JLL also is managing kitchen modifications for Starbucks stores across the U.S. and is helping Bank of America build 100 branches a year, he adds.
One Stop
Outsourced property management is the other big arena. In March, Sun Microsystems chose JLL to handle real estate services for its worldwide offices, labs and plants—comprising 17 million sq ft in 44 countries. The value of the five-year contract was not disclosed.
Cincinnati-based Procter & Gamble has outsourced the function to JLL since 2003, part of the manufacturer’s "journey" to shed non-core functions in 86 countries where it operates, says William Reeves, P&G director of employee and workplace services. "We wanted to maintain a single point of global accountability and have an opportunity to partner with a key strategic supplier."
JLL manages P&G’s entire collection of commercial, laboratory and R&D sites. Only manufacturing facilities are excluded. Reeves says JLL handles all construction jobs of $3.5 million and less. Larger projects are managed internally, but may include JLL services. The real estate firm inherited 600 P&G facilities management staffers in the deal. Reeves says there was some employee reluctance at first but claims JLL’s larger, global platform has provided them upward mobility. "We had some bumps, but overall it has worked out well," he notes.
JLL now is angling to provide more outsourcing support and "privatized" real estate advice to institutional and public sector clients, says Herman Bulls, JLL’s president of public institutions in Washington, D.C. The West Point graduate has positioned the firm well in offering services to military officials on everything from privatized housing to reuse of closing bases. "They’re taking a more strategic look at their sites now," he says. "It costs money to close down bases."
Serving owner interests is a JLL hallmark, but it can cause construction site angst. The firm took over as CM for the $150-million expansion of Atlanta’s High Museum of Art in 2003, after officials dismissed Bovis Lend Lease for undisclosed reasons. The job was already 20% under way, says Sivewright. Bovis could not be reached for comment. Work was finished last year, but with a budget boost.
"E&C firms can have inherent conflicts of interest that we don’t," says Sivewright. "I’ve struggled with how firms handle change orders. If a contractor is managing under a GMP, and there’s something missing in the numbers, inherently there are disputes over what comes out of whose risk."
JLL may find itself in another minefield, with its just-awarded contract for the $150-million revamp of Miami’s Orange Bowl, a stadium that first opened in 1937. The city is seeking changes that will expand the facility’s economic impact.
Troubled Waters
JLL was selected as program manager last month, after city officials ran into trouble with their original developer, Hammes Sports Development Inc., Madison, Wisc. Its contract was approved last year, but Miami then terminated it, claiming inconsistencies.
That action spurred Hammes to sue. Company President Robert Dunn says he had a "fully negotiated contract," which Miami officials decided they did not like. Miami City Manager Joe Arriola claims the city "will fight the suit all the way," but he concedes potential mistakes by city attorneys and a legal obligation to replace JLL if Hammes wins its court fight. But Dunn says, "I can’t say I would be overly excited to do business with the city."
Even without Miami, JLL has plenty on its plate. The firm is a development consultant to the booming nation of Dubai, particularly a light rail and monorail that will serve Palm Jumeira, said to be the world’s largest manmade island when completed. JLL is partnering with Parsons Brinckerhoff, New York City, to develop properties at light rail stations.
"They are creative and somewhat visionary, something many real estate people aren’t," says Paul F. Morris, managing principal of PB Placemaking, the PB unit involved in the venture. "While they don’t have all the knowledge, they have the appetite to reach beyond standard economic models. JLL knew that given the complexity of this assignment, they had to get it right."
posted by Jones Lang LaSalle NJ News Blog at 9:45 AM
Primedia is consolidating and relocating its headquarters from Fifth Avenue into roughly 135,000 feet at 261 Madison Ave. between 38th and 39th streets.
The media conglomerate, which publishes Sail, Motor Trend, Guns & Ammo and other niche publications, has 200,000 feet spread over Midtown.
"When you are in six locations, there are redundancies and loss factors all over the place," said Willem VanDooijeweert, Primedia real estate director. "Sixty thousand feet is a considerable savings."
Primedia is currently headquartered at 745 Fifth Ave. and has digs at 200 Madison, 1440 Broadway and 249 W. 17th St. It also has about 40,000 square feet in 261, and another 33,000 feet across the street in 260 Madison, both owned by The Sapir Organization, which is providing exterior signage as part of the new lease.
"It's a good match because of the existing relationship with the ownership," said David Falk of Newmark Knight Frank, who represented Primedia along with colleagues David Kaplansky and Scott Panzer.
Alex Sapir, who was just appointed president of the family company, handled the nine-month-long transaction himself. He ripped up the two current leases to accomplish the new, high-$30s deal plus build-out designed by the tenant. The space includes the third to sixth floors plus the ninth and tenth.
"We are thrilled to have the prestigious media company Primedia join our tenant roster," said Sapir.
Falk noted, "There is still pent-up demand for tenants looking for over 50,000 high-end feet in Midtown and Midtown South. But if someone has 20,000 feet on a mid-rise floor in a 'B' building, it's not like people are knocking down the door. There is demand in certain sectors and industries." Capiche?
posted by Jones Lang LaSalle NJ News Blog at 9:24 AM
The office building on top of Barney's at 660 Madison Ave. has been sold in an off-market transaction to Scott Lawlor's Broadway Partners for $220 million, or $863 a square foot.
The 255,000-square-foot building was purchased in November 2003 for $160 million by current sellers, the Brener Group of Beverly Hills, with Mermel & McClain, who have filled it with high-end high-rent-paying hedge funds. No comments all around.
posted by Jones Lang LaSalle NJ News Blog at 9:23 AM
REIT M&As Will Continue on Global Basis By John Salustri
NEW YORK CITY-Mergers of REITs--most recently marked by Trizec's $8.9-billion buyout by a joint venture of Blackstone and Brookfield--will continue apace. But mergers--especially the much touted go-private variety--are all nothing more than a normal part of market dynamics, far from the doom-and-gloom predictions many naysayers are making about the market. What's more, expect the trend to go global before valuations begin to return the public market to more favorable status.
In the Privatization/M&A Trend, Macerich president and CEO Arthur Coppola noted that despite the buzz of privatization, "55% of the mergers last year were public to public. REITs can go private or they can go public. It's a healthy market dynamic."
Not surprisingly, the panelists, all of whom have had made recent merger news, agreed. While private valuations are a current impetus, "you could wait for a correction or you could take advantage of the market," said ING Clarion Partners chairman and CEO Stephen Furnary. "I wouldn't get my resume out and start sending them to the private side."
Mitchell Hersh, president and CEO of Mack-Cali Realty, took a more-for-me approach. "Capital flows will continue into the public markets," he theorized. "And since there are fewer companies, I see it as a positive."
M&As figured as well in a mid-morning session spotlighting the Asian REIT market. All panelists--Nicholas McGrath, executive director of Allco (Singapore) Ltd.; David Kivell, who heads property securities for Macquarie; and Yuichi Hiromoto, executive director of Japan Retail Fund Investment Corp.--agreed that M&As would trend upward in coming months. But they all agreed as well that the bulk of this activity would focus on, "the small guys, as Kivell put it, those "sitting out there by themselves."
It's no surprise that the Asian trust market has grown exponentially in recent years and promises to continue, albeit at a more mature rate. Nareit vice president Bonnie Gottlieb kicked off the session explaining that Asian REITs constitute a third of the Nareit/FTSE Global Index. But a maturing market means less dynamic returns, and the historic double-digit returns from Asia may soften to still-respectable but lower single digits.
Hiromoto--who manages the only retail-focused J-REIT--sees single digits in Japan's future, as does McGrath. Kivell expressed hopes for low-double digits in Hong Kong and China.
The state of flux overcoming the Asian market is evident as well in the regulations and structures underpinning those returns. Some of those trends promise higher yields with the loosening of restrictions on development in Japan and Singapore. But the opportunity is loaded with pitfalls, and Kivell labeled such a move "bold for first-time investor without a local partner."
Kivell and McGrath, both representing countries where external management rules, predicting a growing embrace in internal management much as in the US. Hiromoto balked at the concept, expressing his favor of the "increased transparency and removal from the asset manager," that internal management ensures.
NEW YORK CITY-Vornado has accumulated a virtual Monopoly game board in the Penn Station district. The REIT currently holds the title to more than six million sf of assets in the area. "We’ve identified Penn Plaza as an opportunity," said Vornado’s Steve Roth. The firm is partnering with Related Cos. on the Farley Post Office/Moynihan Station redevelopment. That effort involves relocating the existing Madison Square Garden complex a block over. "The city will benefit enormously from the new world-class arena facility."
Roth points out that Vornado’s "objective as developers is to get our hands on the five and half million sf of development that go with the Madison Square Garden new development." He says the effort will create a Superblock from 31st to 33rd streets between Eighth and Seventh avenues aggregating approximately seven million sf. He says the new "scheme involves a new Penn Station with multiple-floor retail and a possible link to Macy’s. "We have a unique opportunity to make a grand entrance to Penn Station."
The chairman of the board and chief executive officer notes that the plan has "evolved" over time and still involves "lots of heavy lifting" with governmental entities. However, the long-term benefits will outweigh any challenges, the firm’s officials believe. "The most value for our shareholders will be the increasing value of our existing holdings in this district." Looking forward, he anticipates the properties could command as much as $200 per sf. "It’s impossible for them not to increase in value Our core business is on a great path. It will take multiple years to get to it, but it will come."
On the retail front, Vornado’s president and trustee Michael Fascitelli said the firm is still bullish on its investment in the Toys ‘R Us chain. "We like that investment. At it’s fundamental core, it’s about retail real estate. If we could find situations like this, we’d do it again." He said "a fortune" can be made by mining the real estate. He sees the deal as a win-win situation. "If the business succeeds, we win. If not, we feel we bought the real estate for less than we’d get it buying it separately."
Investors Will Sell Mixed-Use Building By Eric Peterson
FORT LEE, NJ-Le Cross House, a mixed-use building at 185-201 Bridge Plaza North, adjacent to the George Washington Bridge, has been listed for sale. Marcus & Millichap has picked up the exclusive to market the building for the ownership, a group of local investors.
The current ownership did not respond to a request for comment on the pending sale. The building consists of 130 residential condo units, of which 82 are currently for sale--the residential portion is undergoing a conversion. Also part of the building is a 44,000-sf office/retail component, as well as a 226-car parking garage.
"With apartment renovations, an investor is positioned for upside through achieving increases in rental income and by subsequent individual unit sell-offs," says Steven Siegel, a director in the Manhattan office of Marcus & Millichap’s National Retail Group, who’s heading the assignment with Jeffrey Gorodensky, a director in the firm’s National Multi-Housing Group’s New Jersey office.
"A lease-up of the current office vacancy could also dramatically increase an investor’s annual cash flow," adds Siegel. "In addition, by obtaining variances, the property offers potential upside through opportunities to place signage above the office/retail structure, open a portion of the parking garage for public use and convert the passageway from the rear parking deck into a retail space."
BASKING RIDGE, NJ-Everest Reinsurance has signed a 57,240-sf expansion at 477 Martinsville Rd., increasing its occupancy at Westgate Corporate Center to nearly 172,500 sf. The four-story, 230,500-sf 477 Martinsville Rd., also known as Westgate Corporate Center I, was built in 1990 and is part of a two-building, 280,000-sf corporate complex.
"The growth of Everest’s business necessitated the additional space," says Eric Deutsch, SVP in the New York City office of CB Richard Ellis, who with Jason Pollen, FVP in the New York office, and Ward Greer, FVP in the firm’s East Brunswick, NJ office represented Everest. "After reviewing the market, Everest was pleased to find that the building was able to accommodate its needs."
James Nugent of the Gale Co., Florham Park, NJ, represented the building’s owner, the State Teachers Retirement System of Ohio. Terms of the expansion were not released; space was listed on the Gale Co.’s web site as "negotiable."
Gramercy Takes Interest in Office Campus By Eric Peterson
BRIDGEWATER, NJ-Gramercy Capital Corp. has acquired a 49.75% equity interest, with a .25% interest to be acquired later, in 55 Corporate Dr., a three-building, 670,000-sf office campus here. The property is fully net leased through April 2023 to pharma giant Sanofi-aventis, which is using the site as its US headquarters.
The New York City-based Gramercy, a commercial real estate specialty finance company, bought the half-interest from the Gale Co. and Principal Real Estate Investors. As reported by GlobeSt.com, Gale and PREI, back by SL Green Realty Corp., bought the former AT&T campus from the telecom giant in May 2005 in a sale-leaseback transaction for a reported $125 million, and in November inked Sanofi-aventis to a full-complex lease after signing a lease termination agreement with AT&T. Sanofi-aventis’ move-in, a consolidation of three locations, is under way and scheduled to be completed by the end of this year.
According to details released by Gramercy Capital, the share is held as a tenancy-in-common interest, with the remaining 50% held as a TIC interest by SL Green. The new venture obtained a 10-year, $190 million mortgage from Goldman Sachs Mortgage Co., after having previously retired a $91 million first mortgage that Gramercy bought in March from Wachovia Bank. The effective interest rate is approximately 5.75%, according to Gramercy officials, and the company invested some $23 million of equity in the venture, including the purchase price, transaction costs and future funding requirements.
"We continue to use our relationship network and our strategic alliance with SL Green to source and structure off-market, net-lease investments that provide steady earnings, long-term appreciation potential and corporate finance benefits for the company," says Gramercy Capital’s Hugh Hall, whose company is externally managed by GKK Manager LLC, a majority-owned subsidiary of SL Green. "These investments generate significant organic equity for reinvestment in our lending and net lease investment activities."
Besides the existing 670,000 sf of building space, the 150-acre site has some flexibility in terms of expansion - it’s already approved for several hundred thousand sf of additional expansion. The site is in Central New Jersey’s Somerset County, near the confluence of Interstates 78 and 287 and Route 206.
Glaxo bids $15B for Pfizer unit Report: 2 more offers for Morris Plains operations BY SHANNON PETTYPIECE AND JULIA WERDIGIER BLOOMBERG NEWS
GlaxoSmithKline, the maker of Aquafresh toothpaste, offered more than $15 billion for Pfizer's Morris Plains-based consumer unit, one of at least three bids received by the company, people familiar with the negotiations said.
New Brunswick-based Johnson & Johnson and Reckitt Benckiser, a British company with offices in Parsippany, also are willing to pay more than $14 billion, the New York Times said Wednesday.
New York-based Pfizer plans to begin final talks by June 23 with the top bidders, said the people, who declined to be identified before a deal is announced.
Glaxo chief executive Jean-Pierre Garnier would add $3.9 billion in sales from brands, such as Listerine mouthwash and Rolaids tablets.
London-based Glaxo, the world's second-largest drugmaker after Pfizer, missed chances to buy nonprescription drug units of Roche Holding and Boots Group.
"I wouldn't be surprised here to see Pfizer accept one of those bids," said Jeffrey Malcom, who manages about 500,000 Pfizer shares at Horan Capital Management in Towson, Md.
"They said they wanted to get that asset out the door at $10 billion after tax, and at the $14 to $15 billion range it is certainly a generous price, and it looks like they may accept."
Pfizer will decide whether to sell the unit or spin it off to shareholders in the third quarter, CEO Henry McKinnell told CNBC in an interview Wednesday. Pfizer will spend the proceeds on its more profitable drug business.
''Over the next weeks and months we will be working with the highest bidders to try to decide by the end of the third quarter," McKinnell said.
While Pfizer has gotten ''numerous very strong bids," he said, spinning off the unit is still ''a very strong option."
The company concluded a second round of bidding Tuesday and will assess the offers and advise suitors whether it wants to move into final negotiations, two people familiar with the deal process said.
A spin-off is being given equal weight to a potential sale, one person familiar with the talks said. Pfizer told analysts at an April 19 meeting that any bidder would have to pay capital gains tax on the disposal. The company said it will make its final decision about the unit in the third quarter.
posted by Jones Lang LaSalle NJ News Blog at 9:18 AM
FRANKFURT, Germany (AP) -- BASF said Tuesday that it has received 89 percent of Engelhard Corp.'s outstanding shares and its $5 billion takeover of the company is moving forward.
The company said about 110.5 million shares had been tendered by Monday. Woodbridge-based Engelhard agreed to the takeover offer by BASF on May 30 after the German company sweetened its offer to $39 a share from the initial $37 it offered when it began the bid in January.
Engelhard's managers had rejected the original price per share as too low.
Germany-based BASF, which has its North American headquarters in Florham Park, said it would use the deal to create a global player in chemical products such as pigments and catalysts. Engelhard pigments are used to give color to products such as autos, plastics, paper and ink. Its catalysts are used to further chemical reactions in making a broad range of products, including petroleum and detergent.
"This is a special day for both BASF and Engelhard," BASF chairman Jurgen Hambrecht said. He said that by combining the two companies, BASF will "expand into other growth markets, such as specialty pigments. This will allow us to further strengthen BASF's profitable growth." BASF extended its offer for Engelhard shares until Thursday.
The company, which produces chemicals, plastics, crude oil and natural gas, employs 81,000 workers worldwide and last year posted sales of more than $55.3 billion.
Shares of BASF fell 0.9 percent to close at 62.16 euros ($80.47) in Frankfurt trading. Engelhard shares rose 3 cents to close at $38.97 Tuesday on the New York Stock Exchange. On the Net: http://www.basf.com
posted by Jones Lang LaSalle NJ News Blog at 4:48 PM
AFR Signals Potential Shift in Strategy Marita Thomas
JENKINTOWN, PA-Following chairman Lewis Ranieri’s promise to "not sit by idly as shares trade at current levels," American Financial Realty Trust canceled its planned REIT Week meetings. "We are greatly disappointed at the current stock price," Ranieri said at the opening of the company’s June 1 shareholders’ meeting. In the past 52 weeks, AFR stock ranged between a high of $16 a share and a low of $9.52 share.
"The status quo should not be tolerated by shareholders and will not be tolerated by [the board]," Ranieri said during the meeting and announced that a review was under way. He said there would be "more details in the weeks ahead," and repeated, "weeks." Among the factors being evaluated, he cited acquisitions, dispositions, capital structure and "other possible strategies," without commenting on a published report that AFR had engaged a financial advisor to consider a potential sale.
The following day, the locally based financial-specialty REIT emailed the National Association of Real Estate Investment Trusts, canceling its previously planned participation at NAREIT meetings in New York June 6-8. The email, as reported by BofA analysts, read in part: "As previously outlined to investors, the company is engaged in a continuing review of a variety of measures to enhance our financial performance, cash flow and shareholder returns.
Unfortunately, it is premature for us to discuss these matters in greater detail as this time, so we believe that our attendance at next week’s NAREIT meeting would not be productive." In his report, BofA analyst Ross Nussbaum said, "we believe this is a sign AFR may be pursuing a significant strategic event." Among the potential outcomes Nussbaum listed, "a major asset sale, joint venture formation and/or dividend cut." Nussbaum also said, "a company’s cancellation of NAREIT meetings does not necessarily mean a major strategic event is imminent."
An AFR spokesman tells GlobeSt.com he cannot comment, "beyond the statement we made about the cancellation." Shares of AFR closed at $10.48 on June 2, up 5.3% from the day before. The 52-week high of $16 a share was reached nearly a year ago on June 17, 2005. The 52-week low of $9.52 a share occurred on May 3, the day after an AFR first-quarter conference call in which Nicholas S. Schorsch, president and CEO, reported a net loss of $23.4 million for the quarter and lowered its 2006 FFO guidance by between $12.2 million and $15.2 million.
Trizec deal displays a slow market REIT leasing lags behind strong sales By Susan Diesenhouse Tribune staff reporter Published June 6, 2006
Chicago office buildings might be racking up record sale prices this year, but lackluster leasing that lags behind that of other major markets showed up Monday in the sale of Trizec Properties Inc.
New York-based Brookfield Properties Corp. and Blackstone Group, a private equity firm, said they are buying the Chicago-based REIT and its Canadian subsidiary in a deal valued at about $8.9 billion, including assumption of $4.1 billion in debt.
Trizec owns 61 office buildings, including four in Chicago, with 36 million square feet of space. Brookfield will assume ownership of Trizec's properties in New York, Washington, and downtown Los Angeles, while the four Chicago buildings will be taken over by Blackstone. The equity firm also will take over the Trizec properties in Houston, Atlanta and Dallas.
"Brookfield wants a competitive edge by adding properties in the strong markets of New York and Washington, and in resurgent downtown Los Angeles," said Morningstar Inc. senior equity analyst Arthur Oduma. "These markets outpace Chicago in terms of sales values, leasing activity and vacancy rates."
Executives on both sides of the transaction declined to comment.
Leasing performance varies widely across the country. For instance, vacancy rates in Brookfield's favored markets are 6.7 percent in Washington and 7.7 percent in New York, compared to about 18 percent in Chicago, according to Oduma. Brookfield is a major landlord in lower Manhattan.
Chicago's commercial property market "is a tale of two cities," said Tony Smaniotto, a senior vice president at CB Richard Ellis. "Sales are huge, but leasing isn't great."
Brokers expect about $4.5 billion in office sales this year in Chicago, compared to about $3.3 billion last year and $2.8 billion in 2004. The marquee deal of the year is expected to be the sale of the new tower at 1 S. Dearborn St., which is under agreement for $426 a square foot.
The bifurcation of the Chicago office market in part reflects the fact that each property is unique. A well-located tower that is fully leased to a creditworthy tenant at strong rental rates can command a high sale price because it has an assured income stream.
Meanwhile, the rising cost of construction means an existing tower would be very costly to replace. There is an enormous amount of capital searching for good investments, and real estate has become a favored asset class in recent years.
"We believe the portfolio was overvalued by about 40 percent of our fair value estimate," Oduma said.
Despite a rich price, Brookfield is investing a relatively small amount of its own cash, about $450 million, with institutional investors providing the rest, and it will collect management fees on the new properties, Oduma said. Furthermore, he said, while the price might seem high, it suits investors who are willing to settle for a modest 6 percent return rather than the 9 percent expected in the past.
Trizec's Chicago buildings are 2 N. LaSalle in the Central Loop and 10 S. Riverside Plaza, 120 S. Riverside Plaza and 550 W. Washington Blvd., all in the West Loop.
According to Jones Lang LaSalle Inc., the building on North LaSalle is 2 percent vacant, 10 S. Riverside Plaza is 14 percent vacant, 120 S. Riverside is fully leased, and 550 W. Washington is 37 percent vacant. The buildings total 2.4 million square feet.
While Chicago real estate fundamentals "aren't great," said Bruce Miller, a managing director at Jones Lang LaSalle, "we're starting to see positive absorption whetting investors' appetite."
"The Chicago [leasing] market is slowly getting better, although it's lagging the rest of the U.S.," said Raymond Torto, chief strategist at Torto Wheaton Research, a subsidiary of CB Richard Ellis. "The vacancy rate is coming down a little, but a lot of new supply, mostly Class A offices, is coming on the market."
Under the agreement, Brookfield will buy all outstanding shares of Trizec not owned by Trizec Canada for $29.01 a share in cash, an 18 percent premium over the stock's closing price Friday. Brookfield will acquire all the shares of Trizec Canada for $30.97 in cash, a 30 percent premium.
Monday, Trizec stock jumped $4.08, or 16.6 percent, to close at $28.68 on the New York Stock Exchange, giving it a market capitalization of about $4.5 billion.
"Trizec has an opportunity to liquefy its holdings at a premium to the public market capitalization," said Earl Webb, chief executive of investment for Jones Lang LaSalle. "They can trade these assets without coming under the influence of the broader stock market."
Trizec sold
Brookfield Properties Corp. will acquire Chicago-based Trizec Properties and its Canadian arm for $4.8 billion in a commercial property deal that creates one of North America's largest landlords.
Trizec Properties Inc.
What it does: A real estate investment trust that owns and manages 61 office properties totaling about 36 million square feet.
President and CEO: Timothy Callahan
Corporate headquarters: 10 S. Riverside Plaza
Office properties: Concentrated in Atlanta, Chicago*, Dallas, Houston, Los Angeles, New York and Washington
Prominent properties in Chicago: 10 and 120 South Riverside Plaza
* The four office buildings owned in Chicago will be taken by the private equity partner, Blackstone Group.
Equity Office Enters South Florida with $29.5M Acquisition by Alper Ozkan
Equity Office Properties Trust (NYSE:EOP), the big office REIT headquartered in Chicago, entered the South Florida market with its purchase of 1200 Corporate Place in Boca Raton for $29.5 million from 1200 Corporate Fee, LLC, an affiliate of New York-based Broadway Real Estate Partners, LLC.
Located at the intersection of Glades Road and Federal Highway in Boca Raton, the 128,959-square-foot, four-story suburban office building was built in 1984 in the West Palm Beach submarket and was 94.3% occupied at the time of sale. Major tenants include Smith Barney Citigroup, Blank Rome LLP, JP Morgan Trust Company, Sterling Financial, Raymond James & Associates, and Pan American Bank.
Christian Lee of CB Richard Ellis marketed the property on behalf of seller Broadway Partners, a private, New York-based real estate investment firm founded in 1999 by former Fortress Investment Group exec Scott Lawlor. Equity Office has retained Jones Lang LaSalle for the property’s leasing and management.
posted by Jones Lang LaSalle NJ News Blog at 4:26 PM
Mack-Cali Acquires Joint Venture Interests in Suburban Boston Office Portfolio Venture with a JP Morgan Fund and Gale International Acquires Seven-Building Portfolio for $53.6 Million
Cranford, New Jersey—June 5, 2006—Mack-Cali Realty Corporation (NYSE: CLI) today announced that in a joint venture with JPMorgan Chase's Special Situation Property Fund and Gale International it has acquired a stake in a seven-building class A office and office/r&d portfolio in the Boston suburbs. The properties, totaling 666,697 square feet, were purchased for $53.6 million.
The investment is Mack-Cali's first in the Boston market, extending its presence northward. The company already is a major office property owner in the Washington, D.C. to Connecticut corridor, with a dominant presence in its home state of New Jersey.
The properties are located in Andover, Bedford and Billerica, Massachusetts, in the Route 495 North submarket of Greater Boston, and are 58.8 percent leased to eight tenants. Tenants include Alliance Imaging, CGI, Eastman Kodak, GN NetTest, Navisite, Aastra Telecom, and EM4.
The Special Situation Property Fund owns 70 percent of the venture, with an entity of Mack-Cali and Gale International owning 30 percent. Of the Mack-Cali/Gale International entity, Mack-Cali owns 83.3 percent. The joint venture agreement includes a promoted structure allowing for the Mack-Cali and Gale International entity to achieve a 50 percent interest based on IRR thresholds. Mack-Cali and Gale International will provide management, leasing and construction services for the portfolio and will receive all fees associated with those services.
Mitchell E. Hersh, Mack-Cali president and chief executive officer, commented, "This transaction is a significant step forward for Mack-Cali. It extends our Northeast presence into the Boston area, an office market with considerable value-add potential. The investment was facilitated by the industry relationships obtained through our recent acquisition of The Gale Real Estate Services Company, a former affiliate of Gale International. We are especially pleased to have the opportunity to participate in a joint venture with JPMorgan, a firm for which we have a tremendous amount of respect."
With the completion of this transaction, Mack-Cali now owns or has interests in 304 properties totaling 34.3 million square feet, primarily located in the Northeast and Mid-Atlantic regions from Washington, D.C., north to Boston.
The following buildings were acquired in the transaction:
Address Type Square Feet
300 Federal Street, Andover Two-story office 119,970 600 Federal Street, Andover Two-story office 115,572 800 Federal Street, Andover Three-story office 158,655 3 Federal Street, Billerica Three-story office 90,000 8 Federal Street, Billerica Two-story office 80,000 7 Oak Park Drive, Bedford Two-story office/r&d 40,000 8 Oak Park Drive, Bedford Two-story office/r&d 62,500 Total 666,697
The transaction was arranged by Robert Maloney, chief investment officer for Gale International's Boston office. With the exception of the 8 Federal Street building, which was acquired from Berwind Properties in a transaction represented by JLL, the portfolio was acquired from William Callahan, a real estate developer based in Bedford, Mass. Meredith & Grew represented William Callahan in the transaction.
Financing for the transaction was provided by UBS Real Estate Investments, Inc., which was arranged through L.J. Melody's Boston office.
The venture will also invest approximately $4.4 million in the portfolio for building improvements.
Mack-Cali Realty Corporation is a fully-integrated, self-administered, self-managed real estate investment trust (REIT) providing management, leasing, development, construction and other tenant-related services for its class A real estate portfolio. Mack-Cali currently owns or has interests in 304 properties, primarily office and office/flex buildings located in the Northeast, totaling approximately 34.3 million square feet. The properties enable the Company to provide a full complement of real estate opportunities to its diverse base of approximately 2,400 tenants.
Additional information on Mack-Cali Realty Corporation is available on the Company's Web site at www.mack-cali.com.
posted by Jones Lang LaSalle NJ News Blog at 4:25 PM
United Wire closing Bergen plant Tuesday, June 6, 2006 By HUGH R. MORLEY STAFF WRITER
A Hasbrouck Heights wire hanger manufacturer has concluded that if you can't beat the Chinese, you should join them.
United Wire Hanger Corp. will close its Bergen County factory and lay off 81 people on June 30 because of competitive pressures from Chinese manufacturers.
The company will now get its plastic and wire hangers made under contract in China, said Vice President Joel Goldman. He added that the company will continue to sell its hangers in the U.S. with a staff of about 25 people.
The closing comes about three years after President Bush rejected a request by United and two other hanger makers to stem the flow of cheap Chinese hangers into the U.S. with a tariff.
"The company is remaining in business; it's just producing out of the country," Goldman said.
"We accept that this is the way it has to be regarding production in this country," he added. "It's very hard to compete with production in countries like China or India. It's a fact of life."
United informed the state Labor Department of the layoffs in an April 28 letter under a federal law that requires 60 days' notice.
The move comes about a year after United halved its workforce. At that time, the company said it would redirect its business toward supplying hangers for the uniform rental laundry market instead of dry cleaners, the company's main market at that time. The company earlier had laid off about 60 people.
In November 2002, United -- along with manufacturers in Florida and Alabama -- filed a complaint with federal trade authorities claiming that China had violated a law that came into effect when it joined the World Trade Organization.
The law banned China from exporting goods to the U.S. "in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers." The companies urged President Bush to slap a tariff of 20 percent to 30 percent on imported Chinese hangers. The U.S. International Trade Commission agreed. A company attorney said that while Chinese manufacturers could make hangers for 2½ to 4 cents apiece, American hangers cost 2 or 3 cents more.
But Bush was unconvinced by United's argument. In April 2003, he said the manufacturers should adjust to competition, adding that a tariff would push up the price of hangers for small, family-owned dry cleaning businesses.
E-mail: morley@northjersey.com
posted by Jones Lang LaSalle NJ News Blog at 4:24 PM
Newark’s Vanishing Vacancy Rate New tenants are heading to One Gateway. A flurry of office moves shows confidence in the future of the city Shankar P. NJBIZ Staff 6/5/2006
NEWARK - With Newark Mayor-elect Cory Booker preparing to take office next month, a new mood of optimism appears to be sweeping over downtown landlords and tenants in the state’s largest city. The upbeat sentiment has led to a series of deals in recent weeks that have left Newark Class A office space nearly filled to capacity.
Among the major moves:
• After three years of searching for a tenant, Advance Realty of Bedminster expects to sign a 12-year lease with Newark law firm Gibbons, Del Deo, Dolan, Griffinger and Vecchione for nearly 105,000 sq. ft. at One Gateway Center. The address is part of a four-building complex next to Newark Penn Station. Gibbons, Del Deo will relocate from its present home in the Legal Center about a block away.
• Also heading to One Gateway is Herrick, Feinstein, a New York City-based law firm that will move from Two Penn Plaza, leasing some 18,600 sq. ft.
• Grabbing the Two Penn Plaza space that Herrick, Feinstein vacates will be AEG, a Los Angeles-based sports and entertainment company that is developing a 20,000-seat stadium in Harrison for the professional soccer team formerly known as the MetroStars, now called Red Bull New York.
• Public Service Electric & Gas (PSE&G), which had been expected to give up 80,000 sq. ft. of space at 80 Park Plaza following the merger of its parent company with Chicago-based Exelon, will instead expand in the 1 million-sq.-ft. building. Meanwhile, Lehman Bros. is selling the property for a reported asking price of $135 million to $150 million.
• McCarter & English, which had planned to vacate its home at Four Gateway Center in February 2008, expects to sign a lease extension for an unspecified period beyond that date. Triggering the extension were permitting holdups that will delay availability of the $400 million Newark Riverfront Center that the state’s largest law firm had planned to relocate to.
"With the recent turn of events, the Newark office space market has not only stabilized, but has become very tight," says Robert Martie, senior vice president and regional managing director at Advance Realty.
The vacancy rate for Newark Class A office space was just 5.5% at the end of the first quarter, down from 6.9% a year ago, according to data compiled by Grubb & Ellis. By contrast, the vacancy rate for all classes of office space in northern and central New Jersey was 19.3% at the end of the first quarter, down from 20% in the year-ago period.
The apparent loser in the Newark office shuffle has been Matrix Development Group of Cranbury, the owner of the downtown Legal Center that Gibbons, Del Deo will vacate. Matrix is also developer of the Riverfront Center that is encountering slow going. That project includes a 14-story office tower, 500 residential units and a 150-room hotel.
Among the big winners is Advance Realty. Snatching Gibbons enables Advance to fill 135,000 sq. ft. vacant since the FBI moved out of the One Gateway Center property three years ago. The Gibbons name will go atop the building when the law firm moves in next January. "The whole economic package is attractive," says Russ Bershad, who chairs the real property and environmental department at Gibbons.
Also coming out ahead is The Olnick Organization of New York City, the owner of Four Gateway Center, which will now keep McCarter & English as a tenant beyond February 2008. While McCarter & English Chairman Drew Berry says his firm remains committed to the Matrix project, he left open the possibility of signing a new long-term lease at Four Gateway.
Berry might be forced to sign a long-term lease because landlords, who want to fill space for as much time as possible, can charge premiums of up to 300% for agreeing to short-term commitments. Berry says that if McCarter & English were faced with an unacceptable deal, he could consider office locations outside Newark.
At Matrix, first vice president Richard Johnson says he still goes by McCarter & English’s stated commitment to relocate its headquarters to Newark Riverfront Center. "We are working with them to find a way to facilitate their schedule," says Johnson. But even if McCarter drops out, he says, the market for Class A office space in Newark should be vibrant enough to allow Matrix to fill the new center.
E-mail to shankarp@njbiz.com
posted by Jones Lang LaSalle NJ News Blog at 4:24 PM
Shamrock-Hostmark Fund Buys 241-Room Hotel By Eric Peterson
Radisson Hotel PrincetonPRINCETON, NJ-Shamrock-Hostmark Hotel Fund LP has acquired the 241-room Radisson Hotel Princeton here. The fund is co-sponsored by Shamrock Holdings of California and the Schaumburg, IL-based Hostmark Hospitality, which will operate the property. The unnamed seller was represented in the transaction by Molinaro Koger.
The sale price was not disclosed. However, according to Mark Morris, SVP of the McLean, VA-based Molinaro Koger, who structured the transaction, "the property was obtained at a discount to our estimated replacement cost of $35 million."
And the property, located on an eight-acre site, won’t fly the Radisson flag much longer. What the new owner has in mind for the hotel, according to Morris, is an $8-million renovation that, among other things, will turn it into a Doubletree Hotel. "This was a strategic acquisition for Shamrock-Hostmark," Morris says. "It will be an asset to their growing hotel portfolio."
The acquisition is the second engineered by the Shamrock-Hostmark pairing, according to George Buchler, vice president of Shamrock-Hostmark Hotel Fund LP, the first pick-up being the Springhill Suites by Marriott at Miami International Airport. The partnership is also under contract to buy the Crowne Plaza Hotel at the airport in San Antonio.
"These assets are examples of the types of acquisitions the fund will continue to make over the coming months," Buchler says. "The fund intends to seek out hotels that would benefit from enhanced management and/or market repositioning through further investment."
Besides its 241 rooms, the Princeton property has more than 7,000 sf of meeting space, a fitness center, indoor swimming pool and restaurant. The location is near Dow Jones’ headquarters, Bristol-Myers Squibb and Princeton University.
posted by Jones Lang LaSalle NJ News Blog at 4:23 PM
The June 5 acquisition of Trizec Properties demonstrates that private investors still see upside potential in office-building rents
Are office buildings still a bargain, even after a big market gain? Some big investors seem to think so. On June 5, New York-based Brookfield Properties (BPO ) and New York buyout firm Blackstone Group teamed up to buy Chicago-based Trizec Properties (TRZ ), one of the nation's biggest office-building real estate investment trusts (REIT), and its sister company Trizec Canada. The purchase price was $8.9 billion, including acquired debt.
The price represents a 24% premium over the 10-day average price of Trizec on the New York Stock Exchange, suggesting that the buyers are confident that the market was undervaluing Trizec.
A real estate investment trust like Trizec pools investors' money and puts it into real estate, passing all the income back to the shareholders for tax purposes. Trizec adopted the structure in 2002.
EXPIRING LEASES. Ordinary stock market investors have been getting nervous about the value of office REITs because stock prices are historically high in relation to the rental income that they produce (see BW Online, 05/22/06, "Knowing REIT from Wrong").
So what do Brookfield and Blackstone see that the public shareholders don't? Analyst John Guinee of Stifel, Nicolaus & Co. in St. Louis says they're betting that they will be able to raise rents substantially as current leases expire. He says Trizec has a number of "below market" leases that are depressing its current income, but those leases will be expiring before long. The ability to raise rents is what's known in the industry as "upswing potential."
Another big attraction of Trizec is that it, like Brookfield, is heavily concentrated in New York, Washington, D.C., and Southern California, which are hot office markets. Blackstone, for its part, has raised enormous sums of money and is looking for places to deploy it, says Guinee. "They're flush with cash," he says. "They don't get paid if they return the cash to their investors."
The Trizec deal comes on the heels of another big acquisition. On May 2, General Electric (GE ) announced the completion of its $4.8 billion acquisition of Arden Realty. Trizec itself acquired $1.6 billion worth of Arden's properties in that deal.
RISING CONSTRUCTION COSTS. In a recent note before the Trizec deal, Standard & Poor's equity analysis group said it was neutral on office REITs at current prices. But S&P's Royal Shepard said: "Long term, we think fundamentals for office REITs are more positive. S&P's forecast of steady economic and employment growth through 2008 is likely, in our view, to increase demand for new space relative to supply, particularly in light of rising construction costs."
Even before the latest pop in its stock price because of the acquisition, Trizec was a great investment for its shareholders. Its wealthy Canadian chairman, Peter Munk, said in a news release that he was "extremely proud" that the company had delivered a total return to shareholders of 185% over the past three years.
Trizec will be dissolved in the deal. Of its 36 million square feet of office space, Brookfield will manage 18.5 million, Blackstone will manage 5.4 million, and another 12.1 million will be sold to Blackstone and others.
RISING CONFIDENCE. For now, the deal puts under one roof -- one very big roof -- such choice office properties as Brookfield's World Financial Center in New York City and BCE Place in Toronto with Trizec's Bank of America Plaza in Los Angeles, Renaissance Tower in Dallas, One Alliance Center in Atlanta, and 1200 K St. in Washington, D.C., among others.
Analysts say that it's likely that there will be more acquisitions in commercial real estate, especially office properties, as long as private investors remain more confident in the future of the business than public shareholders.
posted by Jones Lang LaSalle NJ News Blog at 4:22 PM
