Source: CoStar | By: Mark Heschmeyer

The single-borrower market for commercial mortgage-backed securities is off to a strong start this year due largely to a major real estate investment trust merger as investors turn to more secure deals.

Brookfield Asset Management completed the $11.4 billion acquisition of Forest City Realty Trust in December. The purchase consisted of 6.3 million square feet of high-quality office space, 2.2 million square feet of retail space, 18,500 multifamily units, and five large-scale development projects.

Now this month, lenders on that deal have dominated the market, rolling up $2.43 billion of those loans into three bond offerings. Those three deals along with a fourth single-borrower deal has pushed the January single-borrower total so far to $3.07 billion.

That’s ahead of the pace at this time last year of $2.29 billion. Last year’s activity through the same time included nine smaller deals.

Two other single-borrower deals are in the pipeline for issuance, which should keep the pace ahead of last year.

As the commercial mortgage bond market has shown in the past two years, there is a shift toward single-asset, or single-borrower, deals.

Single-borrower bond offerings have become popular with investors partly because on an overall basis, institutional borrowers with higher quality assets are a large part of the sector. That means the bonds historically have lower default rates.

In addition, single-borrower deals have a higher percentage of financing with loan-to-value ratios greater than 60 percent, which is an enticement for borrowers. Such deals also offer borrowers longer terms with more extension options.

Multiple lenders on the Brookfield and Forest City deal contributed loans to the three offerings this year. Citigroup, Barclays Bank, Bank of America, and Deutsche Bank contributed office loans to two deals.

The collateral for the CAMB 2019-LIFE bond offering is a $1.17 billion mortgage loan secured by eight life science properties totaling 1.3 million square feet of Class A office and laboratory space on the campus of the Massachusetts Institute of Technology. The capital includes debt of $130 million subordinate to, and held outside, properties that were initially developed by Forest City.

The collateral for NYT 2019-NYT bond offering is a $515 million loan on the office and retail condominiums of the New York Times Building in Manhattan. The office condominium consists of floors 28 through 50, while the ground-floor retail condominium is 738,385 square feet.

The third bond offering this month tied to the merger is a $745.86 million pool of mortgages offered through Freddie Mac. Wells Fargo contributed to loans secured by 23 multifamily properties.

Source: CoStar / By: Molly Armbrister

Link to article: http://product.costar.com/home/news/shared/842689853

Google’s $1 billion acquisition of the Britannia Shoreline Technology Park in its hometown of Mountain View, California, gives the search engine giant the record for the two most expensive U.S. office deals this year, coming on the heels of its $2.4 billion purchase of the Chelsea Market retail and office building in New York.

The company, part of Alphabet Inc., occupies about 92 percent of the Britannia Shoreline, a 795,000-square-foot, 11-building office campus at 2011-2091 Stierlin Court, a few blocks from Google’s headquarters known as the Googleplex. The campus, in the heart of Silicon Valley, is a past home to business networking website LinkedIn and currently houses offices of Alexza Pharmaceuticals.

Google purchased the property for about $1,275 a square foot from Irvine, California-based real estate investment trust HCP Inc., which expected to make a profit of $700 million upon closing, according to a filing with the Securities and Exchange Commission.

Google’s spending on just two deals this year of about $3.4 billion, which its search engine shows is roughly the gross domestic product of the East African nation of Burundi, reflects the dominance of technology companies in U.S. real estate over the past decade. The tech industry accounts for about one-fifth of all office leasing completed across the country this year, according to brokerage CBRE Group Inc.

HCP, which is focused more on life science and medical offices and less on tech and traditional offices, said it plans to use the proceeds to repay debt and fund acquisition and development activity.

“At the time that we purchased it, there were more life-science tenants within the campus,” HCP Chief Financial Officer Peter Scott told investors on a conference call last month. “Over time, Google has taken over more and more of the space.”

He added that “it became more of a non-core suburban office asset for us that was a great piece of real estate to own, but to get the pricing that we got and to be able to recycle that capital into more of the core markets that we’re in, made sense to us.”

The company acquired the property about 11 years ago as part of its $3 billion purchase of European property investor Slough Estates USA. Slough had purchased the Shoreline property for about $200 million in 2005 from Equity Office, according to news reports.

Google does not have plans to move any employees or redevelop the property, according to someone familiar with the property but unauthorized to speak publicly about it.

Chelsea Market Deal

The sale is the second-largest office deal in the country by dollar volume in 2018, behind Google’s purchase earlier this year of New York City’s Chelsea Market for $2.4 billion as it plots its expansion in that city.

Chelsea Market, a former Nabisco factory, is home to a food hall and retail center on the ground floor with offices above. The 1.2 million-square-foot property sits across the street from the company’s Manhattan beachhead at 111 Eighth Ave., a 2.9 million-square-foot office building that takes up a full city block.

Google has not revealed its plans for the property, which is occupied by companies including Major League Baseball, but the site is entitled for an additional 300,000 square feet, or about eight stories. The company reportedly has plans for a major expansion in New York City by adding about 12,000 workers for a total of roughly 20,000, according to news reports.

Google and other technology giants have been gobbling up real estate in their backyards in Silicon Valley and across the country. Google has made two major leasing moves in the past few months, signing a lease for 300,000 square feet in San Francisco’s Landmark at One Market building this month and moving into 319,000 square feet in a renovated historic airplane hangar once owned by Howard Hughes in Los Angeles in October.

Google has also been amassing properties in downtown San Jose, California, for the development of a massive mixed-use project near the city’s Diridon Station, a major transit hub.

Meanwhile, the world’s biggest online retailer, Amazon, recently completed its year-long search for a major real estate expansion with plans to open major office hubs in the Queens borough of New York and in Arlington, Virginia.

Social media website provider Facebook has been busy expanding its headquarters in Menlo Park, California, which will total 1.4 million square feet upon the completion of the project’s third phase, and cloud-based software maker Salesforce recently said it has signed a lease for the entire office portion of a proposed tower at 542 Howard St. in downtown San Francisco.

Streaming entertainment service Netflix has expanded by more than 700,000 square feet in Los Angeles in the past few months. And Apple is on the hunt for another major campus somewhere in the country.

“With unemployment at 4 percent or lower in each of these markets, tech companies of all sizes are in a war for talent and must do their utmost to hold on to and recruit employees — and that means the best salaries, the best incentives, the best space and the best location,” said Robert Sammons, senior director of Northern California research for brokerage Cushman & Wakefield, in a statement. “That last point has generally meant an urban or even suburban location that is mixed-use, walkable, bikeable and near mass transit.”

Calco Commercial alone has leased and sold 334,290+/- square feet of industrial, flex, office and land in Q3 2018 comprising 19 transactions. Following are the notable Q3 2018 transactions: 155 De Haro Street, San Francisco (24,480 +/- sf – industrial/flex lease), 2150 Geneva Avenue, Daly City (162,000+/- sf – paved lot/lease), 800 Airport Boulevard, Burlingame (42,839+/- sf commercial building/sale), and 800 Cesar Chavez, San Francisco (54,027+/- sf commercial building/sale). Calco Commercial is a leading industrial & commercial real estate firm with decades of experience in Landlord /Owner representation, and repositioning assets into net leased properties with in-place income streams. Let us help make the most of your real estate properties and investments.

Calco Commercial recently completed a lease transaction at the 30 Tanforan Industrial Park in South San Francisco. Calco represented the Chariot, the Tenant, who will be occupying 51,524+/- square feet of building area and a total of 215,289+/- square feet (4.49 acres) of land. Chariot, a division of Ford Smart Mobility, is focused on transit solution by providing transportation options for commuters, enterprises and charters. Chariot operates across the Bay Area and is now offered in cities ranging from Austin to London.

Source: CoStar
By: Randyl Drummer
Date: October 18, 2018
Link to article: ProLogis

Prologis, the world’s largest warehouse and logistics property company, has begun to consider its leasing options should space suddenly come available as a result of recent bankruptcies by retailers or the consequences of a trade war with China.

So far, San Francisco-based Prologis has yet to find any “measurable impact” from trade issues or retailer bankruptcies this year, Prologis Chief Executive Hamid Moghadam told investors during the company’s third-quarter earnings conference. In the latest sign of struggles among retailers, Sears Holdings Corp. filed for Chapter 11 bankruptcy this week and announced another 142 closings of Sears and Kmart stores.

“If we search real hard, we can point to one or two companies who backed out of lease negotiations in the U.S., but the impact of those isolated cases was negligible in the context of our overall leasing volume,” Moghadam said.

“I can think of 20 other reasons why tenants stopped negotiating or dropped out of a negotiation, and certainly the trade stuff has not yet in any way translated to any action on the ground that we can tell,” Moghadam added.

The company isn’t waiting for any trade war to start before monitoring possible effects on customers. Prologis is already making sure it’s aware of how long it would take to fill space should customers start vacating.

The fact that the largest company of its kind is concerned enough to seek signs of effects of tariffs and bankruptcies reflects the cautious nature of corporations at this point in the extended economic expansion since the recession.

The company has found that “there are plenty of other customers that are waiting in line for quality space and are frustrated by the shortage of suitable options,” Moghadam said.

The Trump Administration has levied tariffs on a total of $250 billion of imported goods from China, which has retaliated by announcing tariffs on $110 billion of U.S. exports.

About 25 percent of the most recent round of tariffs enacted in September is on consumer goods, unlike earlier announcements that mostly targeted materials and intermediate goods, according to Peterson Institute for International Economic, a Washington D.C.-based think tank.

Prologis has said that while a protracted trade war could increase the likelihood of a global downturn, about three-quarters of its U.S. customers are focused on local and regional business activity, including e-commerce delivery, rather than international trade.

Prologis now expects companies to take 260 million square feet of industrial space in the U.S. this year, 15 percent more than 2017, even as newly built space falls an estimated 10 million square feet short of tenant demand. As a result of the tight market, Prologis has been able to keep more than 80 percent of its tenants when their leases expire, despite imposing average rent hikes of more than 11.5 percent.

Not all companies in that industry can operate with that level of efficiency, meaning that Prologis could have a better chance of withstanding any downturn than smaller rivals.

“The markets are really strong and that’s why we’re getting these increases,” Moghadam said. “And not every discussion with every tenant starts out with the intention of them staying. In fact, many of them when they hear about the new rent get a little spooked.”

He said many tenants come back to Prologis and renew after shopping the market and failing to find lower rents.

Among the major commercial property types, only apartment and industrial real estate investment trusts have gained ground in their stock prices since the beginning of the year, according to National Association of Real Estate Investment Trust data.

Matt Kopsky, an analyst for Edward Jones, noted that about 30 percent of new Prologis leasing activity is related to space needed to fill online orders, with Amazon the company’s largest tenant at about 3 percent of total revenue from rents across its portfolio. The company also has demand from overseas to help insulate it from any downturn.

“Despite increasing competition from new construction and trade-tariff concerns, we think demand will remain robust,” Kopsky said. “Increased global trade is also a significant factor, particularly overseas, since Prologis leases space to third-party logistics firms providing warehouse and distribution to multinational corporations.”

According to Bisnow, “tech and life sciences companies made up 67.1% of total office leasing activity in Silicon Valley and 64.6% in San Francisco for 2017 through midyear 2018.” With nearly daily headlines of Facebook and other tech giants snapping up huge swaths of space in San Francisco and its surrounds, it is no surprise that the Bay Area’s tech leasing activity is approximately 40% higher than the nation.

Tech, media, and e-commerce firms, both large and small, understand that in order to be competitive and attract talent, they need a physical presence in the Bay Area. San Francisco Bay Area continues to hold the title for most tech jobs in the United States. Real estate professionals project that tech will continue to expand in Silicon Valley, although solutions to issues such as affordable housing/cost of living will need to be explored to retain the skilled labor force necessary for start-ups and big tech.

Source: Costar
By: Randyl Drummer
Link: Starwood Capital

Investment firm Starwood Capital Group has sold 33 prime office properties totaling 3.3 million square feet in San Diego; Portland, Oregon; and Raleigh, North Carolina, to a Singapore-based developer in its first foray into U.S. real estate investment, according to sources familiar with the deal.

Starwood Capital had been quietly shopping the portfolio with New York brokerage Eastdil Secured and accepted an offer from Ascendas-Singbridge Group, a developer and investor jointly owned by Singapore state-owned real estate companies Temasek Holdings and JTC Corp., said the sources, who are not authorized to publicly discuss the transaction.

In a brief release that did not mention Starwood, Ascendas-Singbridge said Friday it plans to expand within the U.S. and is opening an office in San Francisco to provide support for asset management, business development and other related services.

Ascendas-Singbridge manages more than $14.6 billion in global assets, predominantly in Asia and Australia. According to its website, Miguel Ko, the current executive director and group chief executive of Ascendas-Singbridge, is the former chairman and president of Starwood Hotels & Resorts, Asia Pacific Division.

The discussions come as the group and parent company Temasek also aim to buy into the lucrative North American shared workspace market as part of a $45 million investment in Breather, a flexible workspace provider.

Sources in Los Angeles, San Diego and Portland said the portfolio includes most of Starwood Capital’s office holdings in San Diego and the Portland suburb of Beaverton, Oregon, plus properties in North Carolina.

The portfolio includes a heavy concentration of office and flex properties in the Rancho Bernardo and Sorrento Mesa areas of San Diego, home to many technology and life science companies, a source said.

Starwood acquired 12 San Diego buildings in 2014 totaling more than 1 million square feet in Rancho Bernardo and Sorrento Mesa from Los Angeles-based developer Kilroy Realty Corp. for $295 million, according to CoStar data. The properties, mostly built between 2000 and 2006, include six office buildings and a flex building at an office park in Rancho Bernardo known as Innovation Corporate Center, a source said.

The San Diego properties being sold also include the three-story, 318,000-square-foot Pacific Corporate Center at 10020 Pacific Mesa Blvd., occupied by medical device maker Becton, Dickinson and Co., and several buildings at Sorrento Mesa’s The Campus at Sorrento Gateway, the source said.

The bulk of Starwood’s current Portland portfolio is comprised of office and flex buildings in Beaverton acquired from Glendale, California-based PS Business Parks Inc. Starwood purchased 25 low-rise buildings, ranging from 16,500 to 65,500 square feet each from PS in October 2014 for $164.1 million, according to CoStar data. Most were built in the 1980s and 1990s.

Eastdil and Ascendas-Singbridge did not immediately return calls or emails requesting comment on the transaction. Starwood Capital didn’t immediately comment.

The portfolio purchase is the first major real estate investment in North America for Ascendas-Singbridge, which has properties in 28 cities in Australia, China, India, Indonesia, Singapore and South Korea. The group, under its subsidiary Ascendas, manages three Singapore exchange-listed funds, including Ascendas Real Estate Investment Trust, Ascendas India Trust and Ascendas Hospitality Trust. Ascendas-Singbridge also manages several private real estate funds.

Ascendas REIT just last month announced its first push beyond Australia and Asia into Europe, which includes a plan to buy 12 logistics properties in the United Kingdom. Ascendas-Singbridge Group Chief Investment Officer He Jihong said in a statement the move “fits well with Ascendas-Singbridge Group’s plans to widen our international presence.”

Ascendas-Singbridge and Temasek are also aiming to indirectly enter the shared workspace business through their investment in Breather, a flexible workspace provider specializing in leases of less than a year. Breather, launched in Montreal by entrepreneurs Caterina Rizzi and Julien Smith in 2013, announced in June it had raised $45 million from Ascendas-Singbridge, Temasek, Menlo Ventures, Canadian pension fund Caisse de dépôt et placement du Québec, and others to expand into more markets and provide “longer duration bookings.”

Source: CoStar
By: John Doherty
Link: Amazon HQ2

After Amazon gave his county a painful snub in January, David Iannucci is stuck exactly where 19 communities may find themselves in coming months: trying to market sites that online retailer Amazon rejected for its new $5 billion second headquarters.

Iannucci, head of economic development for Maryland’s Prince George’s County, said he’s been in talks with “several dozen” companies since the world’s largest retailer rejected the county’s bid for its second headquarters, known as HQ2. Many of those companies are looking to move from nearby Washington, D.C., including tech and cybersecurity firms. Those companies aren’t promising to bring 50,000 jobs, like Amazon, though. More like 300 to 400 apiece. And here’s the real peril for other losing cities: After eight months, Iannucci still has no takers, just talkers.

Even so, he said the process has improved the county’s pitch in those talks: “This process reinforced our knowledge of our strengths. We see that there are things we could focus on and promote. That won’t stop.”

For cities from Boston to Atlanta, the effort to woo Amazon has led officials to come up with development plans for long-fallow areas they can quickly turn around and pitch as facility sites for other companies if they meet the same fate. In Newark and Denver, officials say they are positioned to attract other companies should Amazon reject them, Atlanta’s mayor is urging steps that could position the city to find other companies after a rejection, and Boston already has an alternative in place.

To a greater and lesser extent, the 20 finalist cities are beginning to grapple with an irrefutable truth: All but one will lose this commercial real estate beauty pageant. Most of the sites proposed as HQ2 homes are too large to quickly market to another company other than Seattle-based Amazon because the list of U.S. corporations needing that kind of space can be counted on one hand.

In some cases, the process of applying itself was edifying: Officials in finalist cities Newark and Denver both say the process raised their profile as legitimate hosts for corporate headquarters. They hope that could pay off down the line, even if Amazon passes them over.

“There is a lot of excitement in the development world about the possibilities for Amazon,” said Richard Dunn. He’s vice president of operations at Paramount Assets, an investment firm that owns about 40 properties in downtown Newark.

“Even making that list of the 20 basically tells the tale about the resurgence of Newark,” he says. “Now if Newark wasn’t in a resurgence stage, if it wasn’t for its renaissance, obviously Amazon wouldn’t be looking at Newark.”

Whether or not Amazon picks it, the proposal process has elevated the city’s profile not only nationally but internationally in a tangible way, local officials said, and they intend to build on that momentum.

“We’ve seen a huge uptick in the number of inquiries that are coming into our office,” said Aisha Glover, president and chief executive of the Newark Community Economic Development Council. “And then, just kind of anecdotally speaking to brokers around the city, they’ve been saying how the quality of the inquiries has changed. For them, the uptick in inquiries hasn’t been so dramatic, but the types of firms that been inquiring with them.”

The same goes for Denver. Sam Bailey, who, as vice president of the Metro Denver Economic Development Corp., is managing the state’s bid for Amazon’s second headquarters. He said there’s now a burgeoning pipeline of 31 active prospects for space that represents more than 12,000 jobs and about $1.5 billion in capital expenditures from entrepreneurs to Fortune 500 companies. Denver winning a spot on Amazon’s short list has been noted about 30 percent to 40 percent of the time in those discussions, Bailey said.

“We always looked at this as if we don’t win HQ2, we’re going to make the most of this opportunity to showcase to the world everything that is going on in our region,” Bailey said. It will put Denver on the minds of future executives looking for new corporate digs, he said. “The experience, the notoriety, the visibility – we could’ve spent millions of dollars and never have gotten the exposure we’ve had,” Bailey added.

Other finalists aren’t so sure. Austin, Texas, another member of the 20-region shortlist, has endured a long local debate about what inviting the corporate giant into their city might do to it: raise rents, increase traffic, mess up the balance of the artsy city’s culture.

“I don’t know that we want to be” Amazon’s second home, Austin Mayor Steve Adler admitted this past March.

A poll conducted by Elon University and American City Business Journals found 13 percent of Austin locals don’t want their city to host Amazon’s second headquarters, second only to Denver, at a whopping 17 percent.

The full details of what Austin has offered to Amazon are between the city and the online retail giant, but if the mayor’s comments are any indication, Amazon was left wanting. On the day of Amazon’s shortlist announcement, Austin Mayor Steve Adler reiterated the reluctance of city leaders to extend tax breaks and other incentives in order to lure Amazon HQ2.

In other cases, the competition itself sparked questions about economic development. How far was a city willing to go to land a whale like Amazon: Would it offer free land, reduced taxes or no taxes?

Atlanta Mayor Keisha Lance Bottoms last month urged the City Council to support proposed incentives to make a site leaders see as critical to downtown Atlanta more appealing to developers.

Known as the Gulch, the site is a former railyard that covers 30 football fields worth of land near CNN Center and Mercedes-Benz Stadium, and has lain fallow for decades. While the city hasn’t officially confirmed it is the site for its bid for Amazon’s headquarters, several council members said they believe the incentives push is designed to help in the city’s bid to land HQ2.

With or without Amazon, Bottoms said the city has a “once in a lifetime” opportunity to redevelop the Gulch and stressed that developer CIM would assume all financial risks of the $3.5 billion development. She added that the redevelopment of the Gulch “will ultimately generate tens of millions of dollars a year in tax revenues” and create thousands of jobs. The mayor’s push for incentives so late in the Amazon selection process would leave the city in a stronger position to find alternative companies to occupy the site should it not be selected as home to HQ2, city leaders said.

Other cities are also not making the HQ2 battle their only priority.

In Boston, the primary site for a possible new headquarters is at Suffolk Downs, a 161-acre former horse-racing track that straddles Boston and the northern suburb of Revere. Long under-used, the site has been the subject of several redevelopment efforts over the years.

In 2017, Boston investment firm HYM Investments paid $155 million for the site. It was offered up as an HQ2 contender, but some preliminary plans have also called for a massive mixed-use project with apartments, for-sale homes and office and retail space.

Whatever happens, according to HYM, the firm will keep shopping the site.

That day-after thinking is starting to pervade most planners in HQ2 finalist cities. And Iannucci, of Prince George’s County, thinks that’s the right attitude.

His bid didn’t make it, but bids in nearby Washington, D.C., Montgomery County, Maryland and Northern Virginia did. Any of those sites, if picked, could have a spill-over effect – jobs, housing demand – for Prince George’s.

“We stand by ready to help [those finalists] any way we can,” he says.

Still, as 19 other cities will discover it hurts to be told no.

“Amazon was wrong about their conclusion about our workforce,” said Iannucci, a former Maryland state Secretary of Commerce. “We have feelings about that to this day.”

Contributing to this article are CoStar News Reporters Kyle Hagerty, Linda Moss, Jennifer Waters and Tony Wilbert.

According to the The Registry and the San Francisco Business Times, Amazon’s real estate presence in San Francisco continues to grow by nearly doubling its leased area at the 525 Market Street building.

Amazon currently leases approximately 176,000 square feet in San Francisco’s third largest office building, where the e-commerce leader will be expanding into an additional 143,000 square feet. Per The Registry article, “Amazon has been actively expanding its presence across the entire Bay Area region” as the company continues its search for the secondary HQ location.