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Category: industrial real estate (107)

Sep
14

National CRE News: Singapore Group Opens Office in San Francisco-Acquires US Portfolio

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.”

Aug
24

CRE News: Amazon Nearly Doubles San Francisco Footprint

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.

Aug
03

National CRE News: Amazon’s Pillpack Deal Could Increase Industrial Property Demand

Amazon’s pending purchase of online pharmacy PillPack has the potential to create a need for specialized warehouse space to ship prescription drugs and even lead to small retail clinics, adding demand to an already surging industrial property market.

The move by the online retailer could have significant implications for industrial property sales, which outperformed other major commercial sectors across the U.S. in the second quarter as Amazon and other companies pump up their supply chains for e-commerce delivery, according to CoStar data.

“If you really read between the lines here, and kind of analyze this, Amazon wants to be part of every single transaction that happens in our lives,” said Gregory Healy, senior vice president of chain and logistics at Colliers International.

Amazon, the world’s largest retailer, bought PillPack in late June for an estimated $1 billion. PillPack holds pharmacy licenses in all 50 states and ships medications from its primary drug distribution center in Manchester, NH, to customers who take multiple daily prescriptions. The company is targeting a major market: On its website, PillPack says 40 million adults take more than five prescriptions each day.

If Amazon incorporates PillPack’s approximately 1 million customers into its Prime membership business, which has 100 million subscribers, the company would need drug distribution centers near large cities cleared to handle medicines, said Santo Leo, founder and CEO of MailMyPrescriptions.com in Boca Raton, FL.

Those could be small centers dotted across the country or a handful of larger ones. In either case, they will have to meet far more specialized state and federal requirements because the goods being handled are medicine, Leo said.

Though Amazon already owns or leases about 100 million square feet of distribution space, “you can’t just rip a warehouse out and put a pharmacy there,” said Leo, whose mail-order pharmacy is licensed to dispense prescription drugs in more than 40 states. “You need to design these from scratch. You need more power, more data, more security measures. Traditional big, bulky, automated facilities are just not designed for pharmaceuticals.”

Pharmaceutical warehouses must have processes in place for temperature control, security, documentation and the ability to address product recalls, said Carmine Catizone, executive director of the National Association of Boards of Pharmacy, which accredits wholesale pharmaceutical warehouses. Each state also has different licensing requirements.

The company may need new buildings for an online pharmacy, the analysts said. Though Amazon is opening fulfillment centers at a dizzying rate — eight so far in 2018 — it has a host of controls to ensure each center operates at maximum capacity and has little extra space, the company said in its 2017 annual report.

Amazon declined to comment on its plans for specialized PillPack warehouse space. Amazon hasn’t made any public statements about its PillPack strategy since shortly after the purchase, which is expected to close by the end of the year.

Amazon’s PillPack purchase follows its joint venture with Berkshire Hathaway Inc. and JPMorgan Chase to improve the U.S. health care system and cut costs. PillPack is part of that strategy, said Leo, who predicted Amazon would move quickly to grow PillPack to place pressure on health-care competitors.

“How do you keep people out of the doctor’s office or hospital lab? Make sure people take their prescriptions,” he said.

Healy said the purchase could have implications for any brick-and-mortar plans Amazon has as well, noting the trend toward small, walk-in clinics across the country. It’s estimated there are now almost 3,000 such clinics, according to Accenture. He also speculated that Amazon could add pharmacy services to its Whole Foods stores.

“It will probably net a greater industrial space for Amazon, but I would think there would be some sort of new retail model,” he said. “There could be something else down the pipeline, perhaps a new form of retail.”

Source: CoStar News
By: Rob Smith
Date: August 2, 2018
Link: Amazon

Jul
27

Tech CRE News: Will Facebook Stock Plunge Hurt Bay Area?

Source: San Francisco Chronicle
By: Roland Li
Date: July 26, 2018

Facebook’s recent share plunge was one for the stock-books as the $119 billion decrease officially became the largest drop on Wall Street, even surpassing Intel’s $90 billion one-day drop in 2000. Facebook is one of the Bay Area’s largest employers and drives a local economies–what does this severe decrease in stock value mean for the Bay? According to the The Chronicle, the plunge will not “hurt the Bay Area economy.” Coupled with their “$42.3 billion cash reserve,” and with a planned 20,000+/- jobs being added to the security team, Facebook will continue to “boost the local economy.”

Other economists worry that the drop in price could indicate a pending correction in the market. However, with Amazon’s massive increase in Q2 earnings, it may be too early to predict if Facebook is suffering from an overall market dip, or its own public relation woes.

According to Gary Schlossberg, a senior economist at Wells Fargo and quoted in the Chronicle article, the market has experienced a “mild deterioration in some of the fundamentals driving the market. The question is: how much will U.S. growth slow and with it earnings growth? A lot of strength in earnings has to do with corporate tax cuts. We need to see how aggressively the Fed will move interest rates. There could be a gradual turn toward ad less friendly environment for the stock market.”

Time will tell.

Jul
20

National CRE News: Distressed Assets Market Heats Up

Source: CoStar News
By: Mark Heschemeyer
Date: July 19, 2018
Link: Distressed

The deal announced this week that private equity firm Stone Point Capital plans to buy Sabal Capital Partners, a small-balance, multifamily lender and loan servicer, is only the latest maneuvering in the shifting landscape for special servicing of commercial real estate loans. More deals are likely as a projected rise in interest rates may boost distress in the market.

Special servicers control the fate of billions in distressed loans and thus the fate of billions in commercial properties. And right now, that is a lucrative market flooded with capital but with fewer investment opportunities capable of providing the higher returns expected from private equity investors.

The jockeying for position is not only indicative of billions of private equity money flowing into distressed assets but also shows where the market is heading.

Driven in part by retail weakness, the volume of loans in commercial mortgage bonds on servicers’ “watch lists” has been on a gradual upswing since last November, according to Morningstar Credit Ratings data. Loans are put on a watch list because of issues such as declining occupancy or net incomes at the properties backing the loans. The rise in volume is considered a reliable indicator of future distress.

The maneuvering is not done, with a prize still to be had. One of the three largest commercial loan special servicers in the market, Rialto Capital Advisors, is still in play. Its owner, homebuilder Lennar Corp., has hired financial advisers to determine Rialto’s strategic alternatives as Lennar shifts to concentrating purely on residential building.

Three of Rialto’s larger competitors are owned by bank holding companies, PNC Financial Services Group owns Midland Loan Services, the largest special servicer in the market; and the second- and fifth-largest are Wells Fargo and KeyBank.

Notably, Wells Fargo is one of the two financial advisers Lennar hired to consider what to do with Rialto. The other adviser is Deutsche Bank.

The fourth-largest special servicer, CWCapital Asset Management, was acquired six months ago by Japanese multinational holding conglomerate SoftBank Group.

Distressed property purchasing is one of the country’s hottest investment categories and the primary target of new investment dollars. At a time when core property prices have hit new peaks, yield-hungry investors are aggressively sourcing new investment opportunities that offer more compelling returns.

Private equity funds raised $14.7 billion alone for value-add and opportunistic commercial real estate last quarter, according to private equity data provider Preqin.

About 75 percent of the new investment money being raised in the market is targeting value-add and opportunistic real estate, the categories that distressed assets fall into, said Chris Lee, vice chairman of CBRE Capital Markets Group based in Miami.

Lee directed one of the largest distressed deals of this year. CBRE, in conjunction with Ten-X, arranged the sale of a foreclosed upon leasehold interest in 110 E. Broward in Fort Lauderdale in January for $41.06 million. Stockbridge Capital Group acquired the 24-story office tower and an adjacent two-story office and retail pavilion. LNR Partners was the seller as special servicer for owner CMBS trust.

“There is no lack of demand for distressed properties,” Lee said of private equity firms. “There is a lot of hidden, and not so hidden, value in these properties.”

At the time of the sale, 110 E. Broward was only 42 percent leased at the time, representing a value-add opportunity by the lease-up of 198,803 square feet of vacant space in a market where the competitive set vacancy is just 8 percent.

In this environment, banks and servicers have had little trouble liquidating the distressed assets. So, the problem for Lee and other brokers is finding inventory right now to sell. The amount of distressed assets in the market at the moment is at post-2008 recession lows as the recovery is now approaching 10 years running.

The amount of foreclosed commercial properties on bank books had shrunk to just $4.7 billion in the first quarter from $31.2 billion seven years ago, according to Federal Deposit Insurance Corp. data.

The amount of specially serviced loans in commercial mortgage-backed securities has fallen by $70 billion in that time, down to about $23 billion.

The diverging trends of money coming in and assets available for liquidation has created a lot of jockeying among special servicers for the dwindling supply of deals. Wells Fargo Bank, PNC’s Midland Loan Services, Rialto Capital and KeyBank have grown their market share in the past two years at the expense of CWCapital Asset Management and other smaller servicers.

Of those loan balances assigned, the amount of distressed loans being actively serviced is small, about 2.4 percent. At year-end 2017, Rialto’s active special-servicing portfolio contained 364 loans and 481 real estate owned properties with a combined unpaid loan balance of $1.98 billion, according to Morningstar Credit Ratings.

In advance of any decision from Lennar about Rialto’s fate, the special servicer has also been particularly active in the past two months growing its special servicing assignments.

Another arm of Rialto has been one of the most active buyers of B-piece commercial mortgage bond offerings. That affiliate has underwritten and purchased over $6.1 billion in face value of such bonds in 88 different securitizations.

B-piece buyers generally purchase the lowest-rated and the very bottom of the bond classes — the unrated class. Any losses to the bond trust come out of the lowest-rated bonds first.

Because of that, B-piece buyers have the right to play an active role in making decisions on important issues that can affect the value of the loan or the collateral. That includes such issues as identifying what collateral goes into the offering and having first-purchase options on defaulted loans or, in this case, appointing new special servicers.

In the past two months, the Rialto affiliate has removed the existing special servicer on 11 different commercial mortgage bond offerings in which it has invested and replaced them with Rialto Capital, according to bond rating agency announcements. Rialto has taken assignments away from Midland Loan Services and CWCapital.

Such removal and replacing of special servicers is not unusual. CWCapital has also won such assignments in the past two months. However, the number of such switches involving Rialto has been much higher than for the others.

Executives from neither Rialto nor Lennar responded to requests for comments for this story.

Jul
02

Calco Commercial News: 260 Shipley Street & 969 Folsom Street – SOLD

Calco Commercial has recently sold both the 260 Shipley Street & 969 Folsom Street buildings. 260 Shipley Street is a two-story 3,750+/- square foot commercial building located in the SOMA with second floor office & ground floor warehouse. The property features skylights, private conference room, and a kitchenette in the office area and a drive-in roll-up entry for the warehouse.

969 Folsom Street is a 8,150+/- square foot commercial building located next door to 260 Shipley Street in the SOMA. 969 Folsom Street features 7,300+/- square feet of warehouse area with one drive-in loading door and 850+/- square feet of office with open and private areas and a kitchenette.

Calco Commercial specializes in the leasing and selling of commercial, office, industrial and NNN properties in and around San Francisco. If you have any questions about how to best re-position your asset in the Bay Area market, are a Tenant looking for space or have general market questions, call our office at 415.970.0000 and we can provide expert service.

Jun
29

SF CRE News: GOOGLE’s Office Footprint expands in San Francisco

With office vacancy rates looming shy of 5% in the South Financial District Submarket, Google has just leased approximately 57,000+/- square feet at 2 Harrison Street in the Hills Plaza. According to The San Francisco Chronicle, Google now occupies “400,000 square feet” at the Hills Plaza complex, with a total of “1 Million square feet of leased and owned” properties in San Francisco.

San Francisco office rents are currently averaging $61.51 per square foot according to Costar, and with tech giants like Google snapping up large swaths of office space, vacancy will continue to decrease, possibly forcing rents up for the rest of the office market.

Jun
07

SF CRE News: 1986 Cap On Office Developments May Be Revised

Supervisors Aaron Peskin and Mayor Mark Farrell behind an ordinance that would allocate square footage from office space conversions back into the pool of space that can be developed for office. According to the San Francisco Chronicle, the ordinance would add approximately “1.3 million square feet” of potential office space under the cap.

In addition to adding some relief to the tight office market, the ordinance also hopes to green-light two “high-profile projects to move forward: Kilroy Realty’s Flower Mart, which will consist of 2 million square feet of offices on top of the flower vendors, and Tishman Speyer’s 598 Brannan St., which would include a 38,000-square-foot public park, 91 affordable housing units and 72,000 square feet of industrial space.”

May
08

National CRE News: Office Marketplace Slated for Stable Growth into 2020

Source: CoStar
By: Randyl Drummer
Link: Office Market 2020

Office completions are expected to peak this year and begin trending lower amid signs of a slowdown in U.S. office demand, a declining working-age population and an extended economic recovery entering the late stages.

That slowdown in construction is a good thing for office investors as it should keep supply in check and help extend the stable growth seen in office rents and sale prices.

Total office space under construction fell 7% in the first quarter of 2018 to 141 million square feet, down from 152 million square feet during the first quarter a year ago. The drop in construction occurred even as the national office occupancy rate continued to cruise in the first three months of the year at just under 90 percent, according to data presented at CoStar’s First-Quarter 2018 U.S. Office Review and Forecast.

“It’s been a remarkable cycle, especially lately, with very little movement in occupancy over the past year,” said CoStar Managing Consultant Paul Leonard, who presented the first-quarter office market analysis along with CoStar Portfolio Strategy Managing Director Hans Nordby.

With demand largely in check with supply in most metros, the national office market remains in a period of stability, Leonard said. While, annual rent growth has fallen well below the market peak of 5.6 percent, average office rents continue to increase at a healthy 2.1 percent clip.

“We’re expecting very little rise in vacancy over the next few years, maybe one or two tenths of a percentage point through 2019,” added Leonard. “That’s why we’re continuing to see good rent growth even though demand growth is beginning to slow.”

While new construction is trending lower, office deliveries are expected to peak in 2018 as several large build-to-suit projects, such as Apple’s mega campus in Cupertino, CA, reach completion. Office construction levels are expected to slow considerably in 2019 and 2020, Leonard added.

“Construction starts are down year-over-year and have been basically flat for two years,” Leonard said. “Uncertainty in the remaining length of the cycle, coupled with diminished rent growth, will give enough developers pause, slowing the supply trend overall.”

Despite the decrease in office construction activity, the level of speculative construction, which involves new development without a tenant commitment, is continuing to ramp up.

This is partly due to several high-profile built-to-suit projects reaching completion, resulting in a slow increase over the past year in the amount of space available for lease as a percentage of total office space under construction, Leonard said.

While the increase in speculative activity bears watching and certain markets, such as San Francisco, continue to see elevated office construction levels, the decline in new construction activity overall is good news for the market, Nordby said.

“The total amount of office space which is under construction is trending downward before the market hits the wall,” Nordby added.