commercial real estate | Calco Commercial, Inc.

Category: commercial real estate (161)

Feb

Calco Commercial Top 2016 Transactions

Calco Commercial completed over 70 lease and sale transactions in 2016 totaling over 650,000+/- square feet of industrial, commercial, office and flex spaces in San Francisco and the Peninsula Areas. We are a leading industrial & commercial real estate firm, and consistently complete more transactions in the industrial market than any other firm in San Francisco. We have decades of experience in Landlord /Owner representation, helping Tenants find spaces to fit their needs, and assisting Buyers with net investment properties and trades. Calco Commercial is a full service firm that can help make the most of your real estate properties and investments.

If you would like to discuss your real estate options, or would simply like more information related to current market conditions, please call our office a 415.970.0000, or directly contact one of our professionals.

Feb

National CRE News: NGKF to go public in IPO slated for this year

Source: CoStar News
By: Mark Heschmeyer
Date Posted: February 10, 2017

BGC Partners Inc. (NASDAQ: BGCP) will be the first to test the IPO market this year for a major commercial real estate firm after it submitted a confidential draft registration statement to the U.S. Securities and Exchange Commission to spin off Newmark Grubb Knight Frank (NGKF) as a separate public company.

Under the plan for a proposed initial public offering, BGC would offer Class A common stock in a newly formed subsidiary that will hold BGC’s real estate services business.

The number of Class A shares to be offered and the price range for the proposed offering have not yet been determined.

In the filing, BGC said it may choose to distribute the shares that BGC will hold of the newly formed subsidiary to BGC’s stockholders in a tax-free spin-off after a certain period following the expected offering. Very little else about the proposed public offering was disclosed in its announcement.

NGKF is a full-service commercial real estate platform that comprises BGC’s real estate services segment and includes such other operations, including Newmark Cornish & Carey, ARA, Landauer Valuation & Advisory, and Excess Space Retail Services Inc. Together with its affiliates and London-based partner Knight Frank, NGKF has more than 12,800 employees across more than 370 offices and manages 250 million square feet.

In its most recent quarterly report, BGC partners reported that real estate services segment generated approximately 44% of its revenues for the three months ended September 30, 2016. Real Estate brokerage revenues were $233.7 million, up 4% year-over-year, which included growth in real estate capital markets of 17%, partially offset by decreased leasing and other services revenue of 3%.

In that filing, BGC said it believes that BGC’s assets and businesses are worth considerably more than what is reflected in its current share price.

“As we have previously stated, we are actively working on ways to unlock substantial value for our investors,” the company said then.

BGC has been growing its real estate business with notable new hires, including atop investment sales team in New England in late 2015 and landing a top-producing Los Angeles office investment sales team, eight star brokers in Southern California and a pair of elite Chicago tenant rep brokers early last year.

In making the announcement, BGC seems to have beaten rival Cushman & Wakefield to the punch in going public. Cushman & Wakefield has been rumored to be eyeing an IPO this year as well.

Link to article: Real Estate Services IPO

Feb

Yellen states reasons for another interest rate hike, but does not give definite date

On Tuesday, February 14, 2017, Federal Reserve Chair Janet Yellen testifed before the Senate regarding current economic trends, bank lending, and possible changes to Dodd-Frank. According to Bisnow, Yellen stated that due to “solid job growth, rising inflation, and healthy wages” that she may “recommend another rate hike” but did not provide specific timing of an increase. The Fed will be exploring the rate hike discussion at its upcoming meeting in March at which a clear timeline may emerge, however, as the article notes Yellen clarified that any future rate hikes would be steered by “economic trends alone” and not on “speculation on fiscal stimulus”.

In regards to bank lending, Yellen indicated that “commercial and industrial loans have surpassed” the number of loans made during the “2008 peak”. Although U.S. institutional lending had decreased, according to the article, capital for commercial projects has been buoyed by “foreign investment and rising interest from institutional investors.” Further, “commercial and industrial loans have been on the rise…increasing by an average rate of 10.6% a month over the last five years.”

Dec

National CRE News: Fred’s Pharmacy Buys 865 Rite Aid Stores

Source: CoStar News
By: Mark Heschmeyer
Date Posted: December 20, 2016

Fred’s Inc. (NASDAQ: FRED) has signed an agreement with Walgreens Boots Alliance Inc. (NASDAQ: WBA) and Rite Aid Corp. (NYSE: RAD) to purchase 865 stores and certain assets related to store operations located across the eastern and western United States for $950 million in cash.

Closing of the transaction is expected to take several months after Walgreens Boots Alliance’s proposed acquisition of Rite Aid is completed. The deal is also subject to approval by the Federal Trade Commission as well as customary regulatory approvals and closing conditions.

The pending $17.2 billion merger between Walgreens and Rite Aid first proposed in the fall of last year has lingered while the FTC analyzed its competitive impact. This past October, Walgreens Boots Alliance and Rite Aid announced an extension of their end date for the merger agreement to Jan. 27, 2017.

Walgreens executives continue to signal their confidence in closing the merger and have always expected that they would have to sell from 500 to 1,000 stores to help seal federal approval.

Shareholder approval is not required.

The store divestiture to Fred’s Pharmacy, if approved, is targeted to close during the first half of 2017 and will position Fred’s as the third-largest drugstore chain in the U.S. and create a new national competitor. Memphis-based Fred’s Pharmacy currently operates 647 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern US.

In connection with this transaction, the company said it has received financing commitments from BofA Merrill Lynch and Regions Bank to fund the purchase price, transaction-related costs, ongoing business operations and anticipated capital investments.

“This will be a transformative event for Fred’s Pharmacy that will accelerate our health care growth strategy,” said Fred’s Pharmacy CEO Michael K. Bloom, “We have been working for several months on integration plans to ensure a seamless transition.”

Fred’s appointed Michael Bloom as its new CEO last summer. One of his first moves was to hire Chris McDonald as vice president for real estate. McDonald previously was senior category manager at CVS and has extensive real estate experience from her time at Chase Bank and Walgreens.

In aggregate, the 865 stores are generally representative of Rite Aid’s pre-divesture store performance with respect to both sales and EBITDA. Fred’s Pharmacy expects that the acquired stores would be accretive to earnings and generate substantial cash flow.

Fred’s Pharmacy said it expects to keep certain store and certain field and regional team members, contingent on consummation of the transaction. Post-acquisition, the company will operate the acquired stores and will retain the Rite Aid banner through a 24-month transition.

A.T. Kearney served as a strategic advisor to the CEO and board and provided financial and operational diligence related to the transaction.

Link to article: Walgreens Rite Aid Merger

Dec

How Soon is Now: Fed Follows Through on Rate Increase

Federal Reserve Chairwoman Janet Yellen indicated in November that a raise to the U.S. interest rate could be happening “relatively soon.” The “soon” came just a month later with the announcement by the Federal Reserve yesterday that the rate will increase by an initial 0.25%. However, as reported by the Wall Street Journal, the rate could increase by as much as 0.75% over “three quarter-point moves” in 2017.

Financial analysts are suggesting that the move to increase the rate is a signal by the Fed of its optimism about the strength of the economy and “pointed to a strengthening labor market nearing full employment and inflation moving more rapidly towards targeted levels,” according to the article. This latest increase by the Fed is only one of two in the last decade.

But what the increase to the interest mean for commercial real estate? According to Bisnow, rate hikes usually lead the way to “higher borrowing costs…impacting profitability and future acquisitions.” However, as the article points out, this particular increase was long in the making and investors, REITS and property owners have anticipated this increase and have planned/priced accordingly. Therefore, the impact of the first .25% jump “may not have as great an impact” on commercial real estate activities as the effect that “comes from long-term rates.”

Nov

National CRE News: Real Estate Lending to Small Businesses in 8-Year Decline

Source: CoStar News
By: Mark Heschmeyer
Date Posted: November 16, 2016

One group of business owners hasn’t benefitted from the rebound in property prices. Once a real estate mainstay, owner/user purchases of commercial properties by small businesses have declined over the first three quarters of this year, reversing four straight years of increasing sales, CoStar Comps data shows.

Through the first three quarters of this year, owner/user purchases of office, industrial and retail properties ranged from $150,000 to $1.5 million and totaled $8.79 billion. That is down 11% for the same period last year.

By way of comparison, owner/user purchases of properties of more than $1.5 million are ahead of last year’s pace: $20.76 billion for the first three quarters of this year vs. $19.7 billion for the same period last year, which marked a post-recession high.

Higher property prices may be to blame. Property prices in the small business category have been skyrocketing from a low in 2012 of $51.46 per square foot. At the end of September 2016, the average price per square foot for this category had climbed 28% to $66.08 per square foot, fast approaching the 2009 average price peak of nearly $69 per square foot.

By property type, office properties sold in the $150,000 to $1.5 million price range bought by owner/users climbed from an average of $91.12 per square foot in 2012 to $98.61 per square foot at the end of the third quarter of 2016.

Retail prices for such properties bottomed in 2013 at $85.41 per square square foot and are now selling for more than office properties at an average of $99 per square foot.

Prices for industrial properties in the same price range have climbed from an average of $32 per square foot to $42 per square foot for the same period.

At the same time, banks have been cutting back on their real estate lending to small businesses.

Bank lending to small businesses secured by non-residential properties peaked in June 2008. Banks had more than 1.2 million such loans ranging from $100,000 to $1 million on their books at that time totaling $346.6 billion, according to data from the Federal Deposit Insurance Corp. That total had fallen 22% to $271.3 billion at the end of June 2016, the latest data available.

As an interesting side note though, banks make up five of the largest six sellers of properties to small business owner/users in the last two years. Wells Fargo accounted for about $37 million in such sales; PNC Financial Services, $26 million; Fifth Third Bank, $18.5 million; SunTrust Banks, $16.4 million; and Bank of America, $13.5 million, according to CoStar data.

Meanwhile, capital outlays by small businesses has been trending down, according to the National Federation of Independent Businesses, a small business trade group. The percentage of owners surveyed monthly making an outlay peaked for this recovery in July 2015 at 61% and held close to that through January 2016 but has faded since, according to NFIB’s October data.

The percent of owners planning capital outlays in the next three to six months was 27%, an historically weak number. Seasonally adjusted, the net percent expecting better business conditions fell 7 percentage points to a net negative 7%, which means that now, more owners expect that conditions will worsen. Only 9% of small business owners thought that now is a good time to expand.

Link to full article: CoStar-Small Business Lending Decline

Oct

Calco Q3 2016 Industrial Report

Vacancy Remains under 3%; Rents up 3.85%

The San Francisco industrial market ended Q3 2016 with vacancies increasing slightly to 2.8% from Q2 vacancies of 2.7%. Although the vacancy rate reflects a net negative absorption of 16,706 square feet, vacancies remain south of 3% . Reported rents for the same time period have increased by nearly 4%. Sublease vacancy also decreased modestly in Q3 2016 to 200,217 square feet from 173,183 square feet reported in Q2. Conversely, industrial sales activity is up in Q2 2016 with total sale revenues equalling $131,278,489, and averaging $215.42 per square foot, compared to $100,718,100 in revenue, and $204.17 average per square foot in Q1 2016. Year-over-year sales are lower than 2015, but investors are seeing higher CAP rates averaging 5.62% in 2016 compared to 4.47% during the first half of 2015.

San Francisco’s Industrial Bayshore Corridor Area

The San Francisco industrial leasing activity, as reported by CoStar, for Q3 2016 decreased slightly, however other firms, including Calco Commercial, have reported steady leasing activity with positive absorption rates. Calco Commercial leased several notable industrial properties in Q3 including: 2045 McKinnon Avenue (25,251+/- sf), 650 Potrero Avenue (21,650+/- sf) and 201 Toland (32,580+/- sf land). Calco Commercial leased 61,680+/- square feet in Q2 compared to 125,253+/- square feet in Q3. Due to the continued lack of quality product coupled with no new construction, and the redevelopment of industrial properties into other uses (i.e. residential & office) demand for industrial space persists. For these reasons, now is the time to consider leasing, subleasing, selling or re-positioning your asset.

Calco Commercial is a leading industrial & commercial real estate firm. We have completed more transactions in the industrial market than any other firm in San Francisco. We have decades of experience in Landlord /Owner representation, and repositioning assets into net leased properties with in-place income streams. Calco Commercial is a full service firm that can help make the most of your real estate properties and investments.

Click here to download the full report: Calco Q3 2016 Industrial Report

Sep

San Francisco CRE News: Blackstone Investing Millions in Bay Area Industrial

According to The Registry, Blackstone is in the process of acquiring approximately 12 million square feet of properties with a $1.5 Billion price tag. Most of the properties being purchases are located in California, with a focus on Bay Area industrial product.

Sep

Week In Review: Bay Area & National CRE News

San Francisco Commercial Real Estate News:

Investors continue to pay record-setting prices to acquire San Francisco commercial buildings. The San Francisco Business Times reported earlier this week that One Front Street has sold for $521 million, equating to $800 per square foot.

Meanwhile, according to The Registry, 55 Hawthorne is slated to hit the San Francisco commercial market. The 143,000+/- square foot building is expected to earn $120-$125 million.

And in industrial news, the San Francisco investing continues–The Potrero Power Plant site is reportedly under contract between Associate Capital & NRG Engery. The San Francisco Business Times has reported that Associate Capital sees the industrial, but waterfront, property as “an unprecedented opportunity for infill development.”

San Francisco Tech CRE News:

As the Mission Bay Area continues to attract new tenants, start-ups and tech elites like UBER, a pillar in the tech world is also considering new digs south of the Bay Bridge: ADOBE. According to the San Francisco Business Times, Adobe Systems is eyeing 200,000+/- square feet in the 100 Hooper development–although no paper has been inked to date.

National CRE News:

And across the Atlantic, an investment fund has been created to target US multifamily properties. CoStar News has reported that Hansalnvest, based in Germany, has created a $500 million fund to invest in US Apartments. On the East Coast, Acadia Realty (based in New York) has created a $520 million fund targeting value-add retail investments, while San Francisco based Farallon Capital Management has raised $400 million to invest in commercial properties across the nation.

Sep

National CRE News: CRE Price Growth Remains Strong

Source: CoStar News
By: Randyl Drummer
Date Posted: September 1, 2016

CoStar News has reported that U.S. Commercial Real Estate pricing remains strong as the real estate market heads into Q3. Due to a combination of low interest rates and the continual supply of capital, investments in CRE persisted, sparking growth in pricing.

According to CoStar’s Commercial Repeat Sale Indices (CCRSI), the “value-weighted U.S. Composite Index increased…10.1% from the prior 12-month period, propelling the index 25% above its pre-recession peak level.” However, CoStar projects a moderation in future price growth to a slight decline in deal activity.