MIAMI RETAIL HOW NEW YORK MANAGERS ARE SEIZING ON VALUE IN EMERGING MIAMI MARKETS P24

URBAN REPOSITIONING HINES AND BROOKFIELD SEE OPPORTUNITY IN OUTDATED URBAN ASSETS P10

SMALL SPACES MORE APARTMENT OWNERS LIKE THE PROSPECTS FOR MICRO APARTMENTS P16 MATCHMAKING FOR THE MIDDLE-MARKET THE FUTURE FOR MID-SIZE MARKETS LOOKS UNCERTAIN

JUNE 2015 t
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WELCOME TO REAL ESTATE FUND MANAGER

s we closed the second edition of Real Estate Fund Manager, we spent THIS ISSUE some time refl ecting on how far we’ve come over the past two months and how much more we’re hoping to do with this new publication. We’re planning our fi rst breakfast seminar, to be held later this month, and are working on ways to augment our data. 04 Matchmaking for the middle market A major theme in this issue is how small and mid-sized fund man- A Mid-sized funds are confronting an agers are navigating today’s market. In our lead story, Jessica Pothering talks with fund managers about why the M&A market might be a better platform for uncertain future. growth. She also sits down with an industrial manager to talk about the ways a ANALYSIS smaller fund can gain traction in today’s market. 13 Following the crowd Commercial real estate crowdfunding WE'RE PLANNING OUR FIRST BREAKFAST SEMINAR, platforms are becoming more TO BE HELD ON JUNE 15 AT THE LAMBS CLUB IN mainstream 16 Small is beautiful NEW YORK, AND ARE WORKING ON WAYS TO Apartment owners are taking it smaller AUGMENT OUR DATA with emerging micro apartment sector KNOWLEDGE CENTER 08 Connectivity matters Reliable internet connectivity is becoming Additionally, Sherry Hsieh has an extremely insightful piece on the crowd- a distinguishing factor for landlords funding market and Danielle Balbi has takes an equally in-depth look at the emerging market for micro-apartments. 11 Crescent seeks sunbelt partners As always, please feel free to reach out and let me know what you’re thinking Crescent Communities is looking for about how we’re doing so far. And if you’d like to attend our breakfast seminar partners to invest in Sunbelt deals – the topic is where allocators are directing their dollars – let me know. It will be held on June 15 at the Lambs Club in New York. INVESTMENT TRENDS 24 Emerging Miami markets boom A number of New York managers are working to redevelop two of Miami’s emerging retail markets Q&A 26 Jon Pickard, Pickard Chilton Better designs make for a better tenant base, says Pickard Chilton’s Jon Pickard DATA Samantha Rowan, Editor 29 New Real Estate Private Equity Funds [email protected]/212 268-4944 Th e latest fi rms launching or holding closings for private equity fund launches.

JUNE 2015 04 ANALYSIS: MID-SIZE MARKETS

MATCHMAKING FOR THE MIDDLE-MARKET HOW MID-SIZE FUNDS CONFRONT AN UNCERTAIN FUTURE. JESSICA POTHERING REPORTS

JUNE 2015 ANALYSIS: MID-SIZE MARKETS 05

oday’s capital raising environment may 2015 than 2014 in spite of the same number not feel like a significant change from reporting that attractive investment opportu- the recovery years for small and mid- nities are much harder to find. The projection size fund managers, in spite of investors’ is for investor allocations to continue concen- thirst for real estate. Many went into trating around the ends of the barbell, among Tsurvival mode after the financial crash, managers who have the heft or the intense hoping to weather the storm long enough to see focus to effectively put capital to work. As for demand for real estate return, and moreover, the mid-market generalists, they will have to demand for funds as investment vehicles. This rely on large global allocators or old-fashioned demand has rebounded, but the increasing con- syndications. centration of real estate capital among a small Or they will take the approach of Giller’s number of global fund managers continues to former company, Clairvue Capital Partners, and put pressure on many of the industry’s non- actively look for a partner that can help them global players. edge closer to the “global” side of the bar. A quick recap of recent private real estate fundraising data shows why: more than 450 Growing numbers managers are in the market trying to raise Giller launched Clairvue with partners Brendan capital from institutional investors, yet more MacDonald and Josh Cleveland in 2010 with than half of this is committed to the minority of a $250m fund seeded by Goldman Sachs funds raising $1bn or more, according to intelli- Asset Management funds to recapitalize and gence providers Preqin. restructure real estate platforms. The invest- Meanwhile, investors are increasingly ment management firm started at a time when focused on partnering with a small number of credit markets were still fairly closed and real fund managers – no more than one or two in a estate debt maturities of more than a trillion majority of cases. Industry experts often speak dollars loomed. It opted to cast the net wide, of a “barbell” in real estate investor allocations: being agnostic to geographic market, vehicle large funds with global reach on the one end; structures or real estate asset classes. Within boutique, niche funds on the other. Mid-size two years, Clairvue had completely committed and regionally-focused generalist fund manag- its first fund and had initiated fundraising for ers most often find themselves along the bar, a second $500m fund. In that time, it had also struggling to compete for capital. added a New York office to its home base in San “Institutional capital is flowing to smaller Francisco and was doing deals across the US managers with niche strategies at one end, and Europe. and larger global managers at the other end," Giller explained that by the following year, explained Jeff Giller, head of StepStone Real Clairvue had reached a number of milestones Estate. “The mid-sized allocaters in the $200m to successfully, had achieved a moderate amount $750m size-range are increasingly being left out.” of growth and needed to begin considering how During the recovery years, many of these its future growth potential looked. fund management firms simply disappeared, “We looked at how the institutional real either failing outright or being rescued by larger estate world was evolving and it was clear that players. Two prominent examples at the peak the pendulum was swinging in favor of large of fund consolidation in recent years included global management platforms, which were BlackRock’s acquisition of MGPA, an Asia-fo- amassing the majority of the capital. Also, the cused investment manager, and Ares Manage- structural cost burdens in the new regulatory ment’s purchase of AREA Property partners. environment were difficult to bear. It became Both deals took place in 2013 and were touted clear that scaling through organic growth was in the press as supporting BlackRock and Ares’ going to be a long road,” he said. respective real estate expansion ambitions. Cer- “Considering our future, we felt that as a tainly they were, but industry experts quietly globally-oriented investment manager, we acknowledged at the time that both MGPA and would benefit heavily from the infrastructure, Ares needed buyers. resources and intellectual capital of a larger, more developed platform. So we started con- Uncertain future sidering the option of entering into a strategic Today the tide has shifted. The pace of consol- relationships or potentially selling the business, idation has slowed and many of these mid-size in order to expand” he added. firms are back on solid footing. But the future is Last year, Clairvue’s partners sold their uncertain, as competition for real estate prod- business to private equity firm StepStone, and ucts intensifies, making deal flow increasingly they and Clarivue’s nearly $400m in assets difficult to secure. Indeed, Preqin’s 2015 Global under management became the foundation of Real Estate Report cited that two-thirds of fund StepStone’s new real estate group. Closing in on managers are looking to invest more capital in his first year anniversary with StepStone, Giller

JUNE 2015 06 ANALYSIS: MID-SIZE MARKETS remarked that being part of a larger platform had an enormous impact on what his team has achieved. They have expanded the products and services on offer to include co-investments and separate accounts and have launched an advisory group that has advised on close to $2.5bn in investment deals in the US, WE LOOKED AT HOW THE INSTITUTIONAL REAL ESTATE WORLD WAS Europe, Asia and the Middle East. They are building a London-based real estate team out EVOLVING POST-CRISIS AND IT WAS CLEAR THAT THE PENDULUM WAS of StepStone’s existing London office and are reportedly approaching the first close on a new SWINGING IN FAVOR OF LARGE GLOBAL MANAGEMENT PLATFORMS, co-mingled fund, though Giller declined to comment on fundraising activities. WHICH WERE AMASSING THE MAJORITY OF THE CAPITAL “We are just operating on a different scale. The doors that are open and the resources at JEFF GILLER, STEPSTONE our disposal are much broader,” Giller observed. Advisors to real estate funds have observed SL Green looked at its retail channel as a way to the new company, which now has a global real a number of similar negotiations happening expand into another asset class. It started out by estate investment platform with $26bn in assets quietly. While the private nature of these solici- doing individual joint venture deals with Stone- under management. TH Real Estate operates as tations and talks makes it impossible to quantify henge,” – an established multifamily owner in a separate entity, raising and investing capital how many are in the works, several advisors the city – “which seems to have led them to the though a variety of strategies, but TIAA is one have noticed an uptick in activity in the past 18 partnership,” one source explained. of its biggest investors. months with more expected over the next 18 The source added that the partnership gives The year since the venture launched has months. SL Green a more direct link to Stonehenge’s been busy, according to Tom Garbutt, head of Jahn Brodwin, senior managing director for management team and an ability to direct the TIAA-CREF global real estate and chairman of FTI Consulting’s real estate group, remarked strategy, rather than continuing to work on a TH Real Estate. As of April, TH Real Estate had that many of the negotiations happening look deal by deal basis. made 67 acquisitions worth more than $3.7bn similar to the Clairvue-StepStone deal: at the Meanwhile, for Stonehenge, having a stra- and had raised $1.3bn in new equity mandates same time that a small or mid-size real estate tegic relationship with a public company gives on top of $3.6bn in recommitments. firm is looking for a larger group with which them both a permanent source of capital and “We have been very active in the US, Europe to partner, an existing fund manager or other more leverage when raising capital from other and Asia and have been able to accomplish that investment management firm is looking at investors. global footprint we wanted. Getting to those how to expand into a new part of the market. Increasingly, institutional investors are also opportunities was more difficult on both sides “They’re looking to hire or buy a skill set with adopting this strategy of buying a platform before the joint venture,” Garbutt explained. some amount of critical mass and fold that or part of a platform as a way of building up His colleague Mike Sales, managing director of into their platform to complements their other their real estate portfolios while maintaining the Europe division, added that the partnership activities,” he said. more control than simply investing in funds or came at the right time, with the trend towards through separate accounts. bigger, global real estate investment platforms Joint partnerships “In the current environment, it’s all about showing no signs of slowing down. Interestingly, not all of these agreements are growth,” stated Ken Muller, partner with law taking the “go global” approach, like StepStone firm Morrison Foerster. “Demand for real estate Going global and Clairvue. Rather, firms that have established is exceeding supply and a number of high qual- For Muller, these agreements between fund a strong presence in a particular geographic ity managers are going to market with funds managers and institutional or global partners market or asset class are finding joint ventures that are getting oversubscribed. That capital has reflects a shift in how “local” in the local busi- and partnerships that achieve the same results. to go somewhere. Investors are putting equity ness of real estate is defined. With capital mov- In December, SL Green Realty Corp, which into alternative platforms because they’re trying ing easily from one part of the world to another, owns more than 25 million square feet of com- to put money to work.” investors want investment managers who can mercial property in New York City, announced That seemed to be financial services firm access a wider range of markets, supply and its acquisition of a 50% stake of Stonehenge TIAA-CREF’s approach when it announced a opportunities. Partners’ multifamily portfolio. Brodwin, whose joint venture with European real estate invest- “The broader trend is globalization over the firm was an advisor on the deal, declined to ment management firm Henderson Global last 15 years. There are so many new entrants comment on the firms’ strategies. Other New Investors last May. The two companies formed into the market in the US and outside that York real estate players witnessed the deal as the TIAA Henderson Real Estate where TIAA was the pool of available international capital has logical progression of SL Green’s strategy: the the majority owner. At the time, Henderson, expanded dramatically,” he explained. “Now that public REIT was initially a Class B-office inves- which had $22m in assets under management, the global economy is doing better and inves- tor, eventually moving into the Class A space mostly in Europe had been looking for a partner tors are more active, real estate has increasingly and then building a more pronounced retail for many of the same reasons Clairvue was. become a global business.” † strategy as it accumulated more retail space For TIAA, the focus was on building a global through its office acquisitions. real estate platform; partnering with Henderson “With the amount of retail that is built into afforded a strong jump-off point from Europe Jessica Pothering Launch editor, REFM high-end multifamily properties in New York, into Asia. In April, TIAA assumed 100% of

JUNE 2015 OVER A HALF BILLION CLOSED TRANSACTIONS ON THE WEST COAST YTD 2015

DEBT & EQUITY FINANCE – CLOSED TRANSACTIONS YTD

SAN FRANCISCO COMMERCIAL PORTFOLIO DEBT RAISED: $66,000,000

ORANGE COUNTY COMMERCIAL PORTFOLIO LOS ANGELES HOSPITALITY DEBT RAISED: $164,000,000 DEBT RAISED: $123,000,000

LOS ANGELES MULTIFAMILY PORTFOLIO REPURCHASE FACILITY FOR BRIDGE LENDER DEBT RAISED: $80,000,000 DEBT RAISED: $50,000,000

COMMERCIAL LOAN AND REO SALES – CLOSED TRANSACTIONS YTD

CLOSED REO SALE: BRITANNIA CLOSED LOAN SALE: OCEAN BLUE $33,000,000 $31,345,000

For additional information, please contact: www.missioncap.com

New York, NY Palm Beach Gardens, FL Austin, TX Newport Beach, CA Raleigh-Durham, NC 212 925 6692 561 622 7022 512 327 0101 949 706 3001 919 228 6306 08 KNOWLEDGE CENTRE

COMMUNICATIONS STRONG INTERNET CONNECTIVITY INCREASES TENANT INTEREST

As internet connectivity becomes Levels of certification The building, which has a Plat- important benchmark for TAMI increasingly important for fund Wired Certification – similar to inum certification, was able to tenants as their businesses tends to managers to woo and retain ten- LEED certification that examines increase occupancy from 72% to be more bandwith-intensive.” ants, New York-based WiredScore energy efficiency and environ- 98% and raise the rents per square WiredScore experiences contin- – which provides a standardized mental sustainability – evaluates a foot from $34 to the low $50s in ued growth nationally and inter- rating to evaluate, identify and building’s connectivity. Scoring on part on the strength of its connec- nationally, but its primary focus is certify the speed and reliability of a rating system of 100 points – Cer- tivity, Barendrecht added. After on gateway markets. In addition to internet connections in commercial tified (45-62), Silver (63-76), Gold acquiring The Plant for $95.5m in previous mentioned factors, each buildings – is set to expand its ser- (77-89) and Platinum (90-100) – vices from its home base into other points are allocated based on the metros. following three factors: building “There’s a major gap between connectivity (the choice and quality internet connectivity in buildings of service providers), infrastructure and the clear, accurate relay of that (physical internet infrastructure, information to tenants,” said Arie including number of entry points, Barendrecht, CEO and co-founder designated utility spaces) and read- of WiredScore. “We want to make iness (the willingness of a building that information as useful and to improve its connectivity). WE WANT TO MAKE INFORMATION AS USEFUL transparent as possible for tenants, Furthermore, ensuring certified owners, brokers, leasing agents and internet connectivity in buildings is AS POSSIBLE FOR TENANTS, OWNERS, BROKERS, asset managers.” extremely important to large own- Tenants are becoming increas- ers such as real estate investment LEASING AGENTS AND ASSET MANAGERS ingly interested in knowing the trusts. “[REITs] are particularly internet speed and capacity of a excited about our services because ARIE BARENDRECHT, WIREDSCORE potential site prior to signing leases we help them benchmark their tel- because of its importance to the ecom infrastructure across a large functionality of a business, said Bob portfolio. They know how well 2012, East End Partners struck a city has its own sets of variables Stella, a principal at tenant rep- their portfolios are doing, but they deal to sell it in February for $165m. affecting internet connectivity. resentative specialist Cresa Part- have no idea how property A or B is Marc Gitto, a director at East For example, New York faces chal- ners. The service that WiredScore doing in terms of internet connec- End Capital, said the New York- lenges such as population density provides is a step forward from tivity,” said Barendrecht. based fund manager has always and the old age of infrastructure, what happens now, with tenants The firm’s clients include SL emphasized the importance of whereas Los Angeles is too diffuse consulting a third-party IT service Green Realty Corp, Empire State Internet connectivity given its focus for good access. “Our certification to evaluate a building’s connectivity Realty Trust, Washington Real on TAMI (technology, advertising, is extremely recognizable in New before moving in. “Conceptually I Estate Investment Trust, New York media, information) tenants. York and in other major US mar- can see how it [WiredScore] works, REIT, Columbia Property Trust, The company has been working kets. By the end of 2015, we believe and how a certified building will be Brandywine and Hines. Buildings with WiredScore for two years and we will have a sizable presence in an advantage for landlords and ten- leveraging Wired Certification has other certified buildings via the every major city in the US,” Baren- ants,” he said, noting that he has not include the Empire State Building, service. “As dependence on Inter- drecht continued. WiredScore is worked with the company. which secured LinkedIn, and 51 net connectivity increases, we have concentrating on expanding to Growingly, landlords are prior- Astor Place, which houses The IBM noticed tenants becoming more markets in Boston, San Francisco, itizing redundancy. “It’s a new con- Watson group. aware and focused on the services Los Angeles, Washington DC, Seat- cept to buildings; you can leverage A case in point is The Plant, a their office buildings provide,” said tle, Chicago, Philadelphia, Dallas primary and secondary connection technology tenant-focused build- Gitto. “WiredScore is becoming an and Atlanta. so that if one goes out, you have ing owned by East End Partners at access to the secondary,” Barendre- 321 West 44th Street. The owners cht said. “You want to know there’s spent about $7m to redevelop more than Verizon or TimeWarner the property, which was once a KEY FACTS – COMPANY SNAPSHOT Cable. A good building has five recording studio, with the aim of or more internet providers; some drawing in technology tenants strong regional players include who would require strong, reliable Launched in 2013 as WiredNYC in partnership with New York City Lighttower [Fiber Networks], Level connectivity. “East End Capital Economic Development Corps, WiredScore is now operating as a 3, Towerstream and Vaya. [Hav- reinvented the building, including a private company. It has since certified more than 325 properties ing] more providers means better total redevelopment of its telecom totaling over 155m square feet of office space in 30 cities, compiling services and access to the right infrastructure, adding a new com- information on internet connectivity in buildings to the WiredScore provider, as well as enhanced cost munal green, roof deck, and fiber database. effectiveness.” backbone,” Barendrecht said.

JUNE 2015 KNOWLEDGE CENTRE 09

REFURBISHMENT SECONDARY MARKETS SET TO DOMINATE RETAIL CALIFORNIA MANAGER LOOKS FOR 'SCRAPPY' INVESTMENT LANDSCAPE

PROPERTY BARGAINS The retail sectors in a number of Whole Foods are rumored to be look- secondary markets are shaping ing to expand into the Tampa market up to be the ones for fund man- Family-owned Interstate Equities Corp wants to acquire shabby agers to watch in the coming year, apartment buildings from private, generational owners with the aim according to a new report from of turning around the long-neglected properties. The company uses brokerage firm Sperry Van Ness. its connections in the local brokerage and family office communities The Boston-based brokerage to find these diamonds in the rough, said Marshall Boyd, president. firm identified Charlotte, Las “We are looking for shag carpet and pink tile,” he said. “Our niche is Vegas, Nashville, Northern Vir- very well-located, scrappy deals.” ginia, Orange County, Orlando, The company, which focuses on the San Francisco Bay Area and San Antonio and Tampa as the coastal Southern California, started out as a syndicator in the 1980s secondary markets with the most but has evolved its strategy into institutional funds. Its investors potential. Manhattan and Miami include pension funds, family offices and endowments who like the also present substantial oppor- company’s strategy of investing in deals of $5 to $80m with a sweet tunities, said Solomon Poretsky, spot of $6m to $12m of equity. vice-president of organizational The California apartment market is highly fragmented, with development. “We are looking at momentum. Supermarkets look many families owning 5,000 to 15,000 units. “It’s pretty staggering growth potential in these markets, to Charlotte, Nashville, San Anto- to understand how fragmented the industry is,” said director Peter where investors are going to expe- nio, and Tampa for expansion. Casey. This fragmentation, however, benefits Interstate Equities as rience cap rate compression,” he For example, after Trader Joe’s the company is able to bring an institutional approach and institu- said. “When investors are willing 2014 entry into the Tampa retail tional capital to its transactions. to pay a lower cap rate, they are market, which was followed by “We do rely on the relationships we have created as a firm, which saying ‘Jeez, this market is better a St Petersburg location in early includes brokerages that we have worked with for decades who right now so I’ll pay a little more 2015, organic and specialty gro- appreciate that we’re linear and move quickly on deals that we like,” for the property today because I cers such as Whole Foods, Sprouts said Boyd. “This has served us very well in terms of in-bound deal know I’ll make money’.” he added. Farmers Market and Earth Fare are flow because we are often the only institutional capital bidding on a Several of these cities have rumored to be on the lookout for deal and the only buyer who will sell again in a few years.” never been on the firm’s radar as locations in the area. Interstate Equities recently splashed out on Citra Apartments, a markets to watch, Poretsky added. Poretsky also pointed out 34-unit apartment that is in walking distance of downtown Burbank. “Charlotte is in an interesting Tysons Corner in Northern The 1958 property has never been renovated and its rents are well place because it’s such a financial Virginia, adding that the firm is below market. Plans include filling in the out-of-date swimming center. The industry’s real bread- bullish on the Washington DC pool, adding new flooring, painting and supplying new appliances, and-butter jobs are there.” Las submarket in anticipation of the according to Boyd. “The deal is two blocks from the house that our Vegas, meanwhile, is being driven boost in conjunction with the founder grew up in – he went to Burbank High School – and this by e-retailers such as Zappos and extension of the DC Metro’s Sil- means that we’re investing in ground zero of what we know as a firm tech companies that are making ver Line that opened in July. By and as a family,” he added. their homes there. Zappos, led 2018, the Silver Line will complete The company’s acquisition process has a simple first step – how by CEO Tony Hsieh, has invested Phase 2 and be extended further to good the location of a property is, which Boyd said was an easy about $350m in the city’s down- include the Reston Town Center assessment for Citra Apartments. Step two is evaluating the issues town market as part of a broader and link up with Dulles Interna- with an asset, which can include below market rents and updating plan to create a live-work-play tional Airport. units. Often, the company will look at properties that are seeing environment there. A broader US economic recov- rents that haven’t been raised in four or five years. ery that produced three million Interstate Equities is an opportunistic buyer and can bide its time Retail remains on top jobs in 2014 – the strongest year in a slow market and move quickly when deals crop up. It has the In markets such as Miami and New since 1999 – and fueled a dip in capacity to do as much as $200m of deals in a year, Boyd continued. York, high-end retail is leading the the unemployment rate to 5.6% – The company holds its deals for about five years and finances acqui- way. “Retail that has an omnichan- the lowest since 2008 – is part of sitions via Fannie Mae and JPMorgan Chase, which Boyd said offers nel aspect, meaning that it has to the reasons behind the surge. “The a fantastic product for its niche. “[The bank] can offer us a 30-year be integrated with the Internet, rate at which businesses are hiring term loan that is fixed-rate for seven years and floats for 23,” he said. are doing well in these markets,” is trending toward normal levels,” “A loan like that is almost unheard of in the institutional investment Poretsky said. Poretsky said, noting that spend- community.” Additionally, grocery- and ing on debt service dropped to less The company uses leverage of about 60% on its deals, down from pharmacy-anchored properties, than 10% of personal disposable about 75% 10 years ago. which prove most resilient against income in the fourth quarter and the impact of e-commerce, are the cost of gas and heating also a telltale sign of upward growth dropped.

JUNE 2015 10 KNOWLEDGE CENTRE

ULI CONFERENCE HINES, BROOKFIELD TALK REPOSITIONINGS OF TROUBLED URBAN ASSETS

A number of fund managers that than $40m. “One of the problems It also pays to be patient, Queen to get the higher end tenants would include Hines, Brookfield Prop- was that it was a 700,000-square- added. “For every earnings call we drive the office leasing upstairs, erty Group and TMG Partners foot building in the middle of the had with analysts during our reno- and it did.” are seeing real opportunity – and city with no parking,” according to vation of Brookfield Place in Lower After sharing success and real returns – in repositioning John Mooz, senior managing direc- Manhattan, the questions always horror stories, all of the pan- outdated, under-maintained urban tor at Hines. “So we put in 300 of office buildings. This segment of the most beautiful parking spaces properties is challenging but can you’d ever seen, which instantly got also provide attractive returns for rid of 200,000 square feet of [net patient investors, according to pan- rentable area]. Eighteen months elists at the Urban Land Institute’s later, we sold it for $102m.” Spring Meeting on 13-14 May in Location is an important aspect Houston. of any re-positioning strategy, “We look for properties that Mooz explained, adding that Hines are big and ugly,” Matt Field, chief looks for properties like 919 Milam FOR A LONG TIME, NOBODY REALLY KNEW WHAT investment officer of TMG Part- that are in central locations near ners, a San Francisco-based devel- major sources of transportation. TO DO WITH THESE MID-CENTURY MODERN OFFICE opment company. “There are a lot Additionally, markets with high of different reasons to [reposition barriers to entry make new con- BUILDINGS, BUT NOW, PEOPLE ARE STARTING TO these properties] that have nose- struction difficult and re-position- dived, and it comes with the price ing older buildings an attractive HAVE SOME IDEAS. of brain damage sometimes, but alternative. “We look for properties the end result is bringing a unique with great locations and good JOHN MOOZ, HINES and much better products back to bones and layer the rest on from the market.” there,” Mooz said. “For a long time, Sara Queen, executive nobody really knew what to do started with how much space we elists agreed that despite many vice-president of asset manage- with these mid-century modern had leased,” she explained, empha- challenges, renovating an urban ment at Brookfield Property, said office buildings, but now, people sizing the importance of getting office building can provide great the company keeps a close eye on are starting to have some ideas.” the right type of tenants for the returns and an even greater sense budgets for these projects. “It’s all The ability to attract and retain building and the location. “We of accomplishment. “I could never about the return,” she said. “For tenants is also important in ren- spent $250m on re-positioning the pick a favorite [property] – it’s like every incremental dollar spent, we ovating buildings. Many tenants retail spaces on the ground floor asking me which kid I like best,” consider the return we’re getting today are looking for unique, less to make it attractive in response to Mooz continued. “You love them out of it.” corporate office experiences, and the area’s changing demographics. all. It’s amazing how much you do A case in point is Hines’ re-posi- if investors are able to check those It would have been quicker to lease become attached to each of the tioning of 919 Milam Street in Hou- boxes, Mooz explained, tenants low-end retail, and we could have buildings over time, taking them ston, a building that the company will want to lease space in their made more on a per-square-foot from one place to a very different purchased in 2005 for a little more buildings. basis, but we knew that taking time place in the end.”

FUND STRATEGY declined to comment on recent growth. A notice of a securities offering was ini- EXCLUSIVE: TCI REAL ESTATE tially filed for the TCI Real Estate Partners Fund I on 8 August 2014, with 10 investors FUND SURPASSES $1BN having already allocated to the new vehicle. The California State Teachers’ Retirement Strategy on track to hit $1.3bn, says Preqin System was reported in December to have made a $200m in TCI’s new Delaware-dom- A real estate fund managed by The Children’s iciled real estate fund. Investment Fund (TCI) has surpassed $1bn. A minimum $25m investment is required The TCI Real Estate Partners Fund I to allocate to the fund. reached $1bn on its second close at the end of TCI has experienced strong growth January after raising $691m last July, Preqin recently, with Companies House documents told HFMWeek, a sister publication of REFM. showing its overall assets increasing from It also recently helped seed an independ- Preqin said that the fund is expecting to $3.7bn on 31 August 2013 to $4.4bn on the ent fund for charity Unicef, which launched reach $1.3bn, but a spokesperson for TCI same date a year later. on 16 April, with a $55m investment.

JUNE 2015 KNOWLEDGE CENTRE 11

REITs PARTNERSHIP BDO STUDY: REIT SECTOR SET TO EXPAND DEALPOINT MERRILL, SPERRY VAN NESS ROLL OUT INVESTMENT PLATFORM The real estate investment trust self-storage sectors.” industry is experiencing a big Additionally, if interest rates resurgence after a period of lower rise this year as anticipated, addi- DealPoint Merrill has joined forces with Sperry Van Ness Inter- activity, and as a result, REITs are tional risks could be presented national Corporation to form SVN DealPoint Merrill Realty Part- rapidly expanding. This trend, for REITs, La Malfa said, as the ners, a private equity platform that aims to acquire co-investment coupled with the possibility of BDO study found that 99% of assets that are fundamentally sound, but undervalued, in order to rising interest rates, is leading to REITs cited rising interest rates maximize returns and reinvest profits. a greater risk of lower returns and as a top concern. “REITs with “The timing for [this] couldn't be better,” Kevin Maggiacomo, operating performance within un-hedged variable-rate debt president and CEO of Sperry Van Ness, told REFM. “Economi- the REIT space, said Anthony La will most immediately feel the cally, the US appears well-poised to sustain about a 3% growth Malfa, partner in real estate and impact of any rate increases as rate in 2015, which is only the second year in the past decade with hospitality services at BDO USA. the additional debt costs will flow growth at that pace. With that, the timing of our partnership will Greater demand for REITs, directly to the bottom line and produce better investment returns, providing the financial where- particularly in US gateway mar- require additional cash outlays,” withal to support greater deal opportunities nationwide.” kets, is driving merging and he stated. Through the partnership, the companies will invest in assets acquisition activity, as well as REITs with significant amounts with reasonable leverage to enhance returns and realize additional new partnerships between pub- of debt coming due will also see capital growth through management, financing or sales activity, licly traded REITs and local real borrowing costs increasing faster according to David Frank, CEO and co-founder of DealPoint estate developers and managers. than rental rates, resulting in Merrill. The partners hope to achieve a targeted annual rate of “Although every transaction is lower income and greater cash return in the range of 20%-40% with an approximate three to five preceded by a period of detailed outlays if rates rise, he added. year holding period on assets, depending on market conditions, due diligence, there is always a To prepare, REITs are encour- he explained. risk that these partnerships won’t aged to use caution in their The partners are also seeking to geographically diversify. “We come together as seamlessly as investment strategy. “Proper due prefer to acquire properties in the Sunbelt and in income tax- anticipated,” La Malfa added. diligence is always an important free states, since they have historically outperformed the US in “This could lead to poor operat- first step,” La Malfa said, adding economic and demographic growth,” Maggiacomo said, “[We will ing performance and diminished that REITs should also remain invest] nationally with an emphasis on primary and secondary return to investors.” focused on their debt maturity markets.” Indeed, a recent BDO research tables and restructure debt so The partnership likes supply constrained markets with steady report found that 97% of REITs that it isn’t maturing in the same growth, limited future competition, long-term fundamentals and are concerned about M&A and time frame. “Properly hedging any demand generators, such as public infrastructure, new employ- joint venture activity, up 10% variable-rate debt will limit the ment and housing and retail expenditures, Frank said. compared to this time last year. impact an interest rate increase Maggiacomo added: “The questions [we ask are]: does the asset Despite these concerns, improve- may have, as borrowing costs will fit within our 'box' of experience? Can we achieve 'economies of ment in the economy has led be fixed and pre-determined over scale' by clustering our acquisitions in geographic locations where many investors to believe that this the life of the debt.” we have in-depth expertise and market knowledge? In this man- activity will continue throughout That said, it is a positive market ner, we maximize our time and returns for our investors, so that's 2015, La Malfa continued. “As the overall with strong fundamentals, the goal.” economy began to emerge from and by exercising the right strat- SVN DealPoint plans to invest in properties that are difficult the recession, the stage was set egy to avoid risk, REITs should to re-produce and contain value-add potential with below market almost perfectly for REITs,” he be able to weather any challenges rents in recovering markets, Maggiacomo stated. stated. that come their way, La Malfa said. “Some of the telltale signs are an asking price below replace- “With some notable excep- “Over the next couple of years, it ment cost, a higher vacancy rate than comparable properties for tions, most equity REITs were is expected that there will be a no obvious reason or a hard-to-remedy reason, or a seller for able to weather the recession period of continued expansion whom real estate is not part of his or her core business,” Frank rather well and had accumulated through property acquisitions added. large cash balances. Combined and mergers, followed by a period The assets will then be repositioned and brought back to mar- with the overall improvement in of portfolio re-structuring and ket in order to quickly maximize value and return on investment the economy and significantly re-positioning,” he said. “The out- capital, he said. The partners are seeking to raise approximately below-average interest rates, the look remains positive for REITs $100 million this year to invest in properties using this strate- environment was ripe for expan- as most seem to display strong gy.“Our future plans are to build upon our core competences to sion activity. We would anticipate financial fundamentals that will a re-eminent co-investment platform across a broad spectrum of this activity to continue through carry them through anticipated geographic locations and product types,” Frank said. the remainder of 2015, especially interest rate increases and associ- in the multi-family, retail, and ated market shifts.”

JUNE 2015 12 KNOWLEDGE CENTRE

INVESTMENTS CRESCENT COMMUNITIES SEEKS INVESTMENT PARTNERS FOR SUNBELT DEALS

Crescent Communities, a Char- field believes the firm will be able in NoDa, a North Charlotte neigh- Crescent’s upcoming projects lotte-based investment manage- to line up a partner over the next borhood, Crescent Central Station are, coincidentally, in every one of ment company, is seeking outside two to three months. “We have in Orlando and its Bryson Project the states in which the firm invests, partners for the first time as it historically financed projects with in Austin. which include Colorado, Arizona, aims to capitalize on what it sees our own capital balance sheet, and With the Sunbelt predicted to Texas, Georgia, Tennessee, North/ as tremendous growth in several sometimes with limited partners. produce 50% of the US population South Carolina and Florida. markets in the Sunbelt. “We would But with our increased volume, prefer to co-invest with a single we are open to capitalizing with institutional partner who can con- a third party partner,” he added. tribute up to $200m for multiple “By working with partners, we projects. We value relationships could further accelerate our and we think it would be more growth and take advantage of the advantageous to have repeated tremendous market opportunities ventures,” said Todd Mansfield, we are seeing.” president and CEO. The company’s multifamily The Sunbelt is seeing younger projects typically range from YOU HAVE MILLENNIALS COMING TO THESE CITIES professionals migrate away from 250 to 350 units, with deal sizes Gateway cities to strong secondary between $40m to $75m. Crescent AND YOU SEE A SIGNIFICANT PORTION OF THE markets. “You have Millennials aims to have economically priced coming to these cities and you see properties that offer a live-work- DEMOGRAPHIC CHANGING. A LOT OF THESE CITIES a significant portion of the demo- play lifestyle, including walkability, graphic changing. A lot of these proximity to transit and access to ARE BECOMING MORE AUTHENTIC cities are becoming more authen- daily needs such as gym, grocery tic – it’s vibrant, it’s diverse and it’s and entertainments. Once the TODD MANSFIELD, CRESCENT COMMUNITIES got a texture of its own,” Mansfield company lines up a partner, it will said, noting that the economies of have the capacity to increase its these submarkets are also quite pipeline to 12 projects. in 2020, according to the Cen- Crescent owns and controls all diverse. “In Austin you have a For example, the 450-unit sus Bureau, Mansfield sees both of the sites. Some of the commu- very strong tech market; Charlotte luxury apartment community in demand and room for new home nities will start construction at the finance; Orlando tourism and Charlotte’s Uptown Stonewall cor- construction. “In the past 25 years beginning of August, continuing related industries; and Nashville ridor is adjacent to the city’s Lynx the industry averaged 1.5 million through to Q2 and Q3 of next year. education and healthcare.” Blue Line light rail service and will new homes built, but in the past Mansfield added the company With a construction pipeline include a Whole Foods Market, five years, we have only produced is watching Washington DC of 10 mixed-use multifamily parking peck, retail space and two 500,000 to 700,000 new homes. As and Virginia carefully, with the communities scheduled for the hotels. Other transit-oriented pro- a whole, we are way below produc- intention of expanding into those next five to six quarters, Mans- jects include a mixed-use project tion,” he added. markets.

ACQUISITION snatching up Class A office product. “Foreign [properties] will be sold later in the year,” the capital is coming into Boston from virtually broker added. OXFORD STRIKES DEAL FOR every corner of the planet, and while you’re Beacon Capital acquired 745 Atlantic still seeing domestic capital competing for Avenue in 2012 as part of a $1.71bn portfolio DOWNTOWN BOSTON OFFICE those transactions, there is a lot of foreign acquisition of 14 US properties from Aus- activity, with core office being the dominant tralia-based Charter Hall Office REIT, which Oxford Properties Group has acquired sector,” one local broker told REFM. was exiting the US commercial real estate 745 Atlantic Avenue, an 11-storey, While Boston has experienced a lull in market, according to published reports. The 174,231-square-foot office building in large sales as some investors increasingly building has 8,000 square feet of retail space, Downtown Boston, for $114.5m, equating to look at smaller deals outside of the city 166,000 square feet of office space, and a approximately $657 per square foot. Beacon center due to strong competition and high 152-stall parking garage. It is fully occupied Capital Partners was the seller. The acquisi- prices, many are bullish that large transac- by tenants including WeWork and Cam- tion is the company’s fourth in the city. tions are still in store for the remainder of bridge Consultants. The deal demonstrates the ongoing trend 2015. “A lot of the big [deals] closed ear- Calls to Oxford Properties Group and of strong foreign investment in Downtown lier this year, but it seems outside of the Beacon Capital Partners were not returned Boston, with many overseas investors realm of possibility that none of these big at the time of going to press.

JUNE 2015 ANALYSIS: CROWDFUNDING 13

hen tracking headlines about the number of real estate crowdfunding platforms starting up, it seems like a coup is underway. Th e past 18-24 months has seen a wave of these new ventures being FOLLOWING Wlaunched, and industry players estimate that there are currently 150 in various stages of growth. But beyond the “new launch” numbers, there is much debate about the signifi cance and viability of these platforms to put real estate capital to work. Some argue that based on transaction volume, these platforms are a tech fad, not a game-changer. THE CROWD Indeed, although transaction activity is growing quickly – 156% in 2014 over 2013, according to a CROWDFUNDING REPRESENTS A NEW SOURCE OF CAPITAL. BY SHERRY HSIEH Massolution report – it still comprises a small share of total real estate investment globally: last year,

JUNE 2015 14 ANALYSIS: CROWDFUNDING

Timeline

1933 2009 2012 2012 2013 2015 Securities Act Kickstarter JOBS Act passed Commercial real Title II of JOBS Act goes into effect Title III rulings are Passed launched The Jumpstart Our estate crowdfunding Title II enables private startup compa- set for October The Securities Kickstarter, an Business Startups platforms launched nies and other small business to raise Rulings on Title Act prohibited online platform Act is signed into Fundrise, Realty- company via social media and other III, which governs general solicita- that funds cre- law. Title II and Title Wealth and a number websites after laws that prohibited the participation tions for raising ative projects, III of the law are seen of other commercial public advertising for investments is of retail investors, capital for pri- is launched. as the most signifi- real estate crowd- stripped away. Only accredited investors are expected to vate companies. cant for crowdfund- funding platforms are with more than $1m of net worth or an in- be adopted in ing market. launched. come of $200,000/year can participate. October.

transaction volume through crowdfunding shift their strategies to expand reach and the size platforms amounted to just over $1bn, with deal of deals they can take on. Fundrise is a prime sizes ranging from under $10,000 to $25m. example. When Fundrise, one of the fi rst and Th is growth is just the beginning of what now largest crowd-funding platforms, launched could be a major source of new capital for its fi rst fund in 2010, it took 18 months to the commercial real estate market. “We have raise $325,000 from 175 online investors – the extraordinary retail demand from individual average time it takes traditional fund managers investors as the most tech-savvy generation is today to raise new $500m funds. Th is is because entering their peak investment years. Th is is the at that time, companies such as Fundrise could perfect environment for crowdfunding,” said only raise small amounts of capital without full Will Silverman, executive managing director of registration under the SEC. capital transactions group Savills Studley. When a new provision called Rule 506(c) Most crowdfunding platforms have not yet of Regulation D was added to the JOBS Act, it done deals of more than $1m because they don’t expanded companies’ online fundraising poten- have the ability to bring that kind of money, tial by giving them the option of raising capital noted Darryl Steinhause, partner at law fi rm from accredited investors. Th is is commonly DLA Piper. “In a $50m transaction, they may referred to as Title II Crowdfunding Rule. only raise only $60,000,” he added. “Th is is not “We do most of our deals through Regu- going to change what Blackstone does; this is lation D now, because it’s simple, quick and going to change the guy who needs $400,000 or low-cost,” said Dan Miller, co-founder and $1.5m.” president of Fundrise, noting that under the old Th is likely explains why large fund managers method – Regulation A – companies had to fi le have not yet taken signifi cant strides into the a minimum of six months ahead of time. Now, sector. “Crowdfunding connects two groups of crowdfunding companies simply have to prove people who previously had a hard time of fi nd- that their investors are “accredited” – that they ing each other: people who need capital and pri- earn more than $200,000 annually or have a net vate investors who did not have access to those worth of more than $1m. Attorneys, account- opportunities,” observed Jay Zagoren, a partner ants and fi nancial advisors can provide this at law fi rm Dechert. verifi cation quickly and easily with a letter. Although crowdfunding platforms largely Pending regulatory changes are set to fi nance investments of a smaller size, Zagoren broaden the fundraising horizon even more. added that once they break through the $5m Title III, scheduled to be fi nalized in October transaction threshold, they could start catching with roll-out in early 2016, will allow for solic- attention from investors in a more signifi cant itation to non-accredited investors. Title IV or way. Silverman believes that the sector has JOBS Act, Title II “Regulation D” Investment Solicitation Provisions the potential to emerge quickly. “If the private REITs are able to raise billions from investors in Solicitation Eligible Investors average check sizes of $25,000 to $55,000, I don’t see why crowdfunding can’t do the same with a Rule 506(b) Marketed directly to known investors Up to 35 non-accredited investors; without “general solicitation or gener- unlimited accredited investors more tech-savvy generation,” he reasoned. al advertising” Evolving regulation Rule 506(c) Marketed over the Internet; TV, Only accredited investors Th at day may not be far off , given the versatility advertisements and solicitation on social media permitted of these platforms and their ability to quickly

JUNE 2015 ANALYSIS: CROWDFUNDING 15

“Regulation A+,” approved in March with roll- out in July, will raise the existing Regulation A fundraising cap, $5m, to $20m (Tier 1) or $50m (Tier 2) and simplify the reporting process by eliminating state securities law compliance. But overall, the industry responded unenthu- siastically, particularly to Title III. “Title III is dead in the water,” said Jason Fritton, co-founder MY CONCERN AS AN INDIVIDUAL INVESTOR WOULD BE WHETHER and CEO at Patch of Land. “Currently Reg A+ is our best option for participation by unaccred- THESE PLATFORMS HAVE SUFFICIENT TRAINING AND EXPERIENCE TO ited investors into private offerings.” UNDERWRITE AND MANAGE THE DEALS THEY ARE OFFERING Bigger and more diverse Growth-focused platforms such as Patch of JAKE KELLEY, JLL REAL ESTATE INVESTMENT BANKING GROUP Land and Realty Mogul are joining forces with institutional investors, private equity funds, hedge funds, and family offices, who take the and equity, and commercial and residential real platforms don’t have track records as profes- lion’s share of an asset, with crowd-funded cap- estate. PeerStreet, a platform that models itself sional investors or investment managers. My ital taking a slice off the debt or equity base of on LendingClub, which went public in a $1bn concern as an individual investor would be the capital stack. IPO, describes itself as a 100% debt-based mar- whether these platforms have sufficient training Going a step further, companies such as Fun- ketplace for non-bank real estate loans. Asse- and experience to underwrite and manage the drise and Acquire Real Estate expand through a tAvenue, also a peer-to-peer lending platform, deals they are offering,” said Jake Kelley, senior pre-funding model, first using their own capital works closely with brokers and aims to become vice-president in JLL’s Real Estate Investment to close a transaction then syndicating the deal the standard technology platform for that Banking group. to its online investors. “We have been able to industry, according to CEO David Manshoory. Silverman, like many others, believes that grow quickly because pre-funding deals elimi- Meanwhile, two others have gone the niche there will be a shakeout in the sector that will nate the big question of ‘Will we get our money route. Hotel Innvestor focuses on raising equity leave the standouts and the specialists. “There when we need it?’” Miller explained. Fundrise’s and debt for hotel projects, while Miami-based are too many platforms right now and it’s incon- average deal size is now $3m, compared to $1m EarlyShares targets Latin American investors ceivable that all are doing spectacular diligence,” last year, which it has achieved by shifting to a with an appetite for US retail shopping centers. he said. “Over the long term, we’ll be left with pre-funding model. Steven Bettinger, CEO of the niche players with good underwriting and Acquire, added that this approach simplifies Real estate v technology good platforms. It will become be big, be special deals because it allows borrowers, or sponsors, Steinhause and others observe, however, that or be gone.” to work with only one limited partner. it can be hard to tell whether some of these Crowd-fund managers are aware of this Fundrise is also moving toward a model platforms are in fact more tech than real estate. skepticism. For RealtyShares’ founder and CEO, through which it can provide bridge equity, a PeerStreet’s founder and CEO Brewster John- Nav Athwal, whose company closed $10m in step that Silverman believes is a game-changer son likes to point out, for example, that the venture capital funding in April, the platforms for the financing market. “Bridge equity of this company’s co-founder was director of mar- without credibility will weed themselves out: size hasn’t been done since Lehman Brothers,” keting at Google for 10 years and co-founded “There are good platforms and bad platforms. he said. Google Analytics. The good platforms will get VC money and What’s more, much like the traditional fund “Many of these groups are coming at this grow [their platforms], and the bad ones won’t.” space, crowd-based funds are diversifying, business from technology [backgrounds] and Miller agrees, acknowledging that many of giving investors differentiated options in debt even the real estate folks on some of these the platforms that appeared in 2013 did not have deep real estate background in real estate Crowdfunding Platforms development. “There will be a downturn and out of that will come a few platforms that can Initiation Dollar Volume Average Deal Size prove the capital and underwriting,” he said. AssetAvenue Debt 06/2014 Undisclosed; Largest deal size to $3.4m For now, the industry is booming, with expo- Partnership with NAR date $14.5m nential growth. With new regulations and rapid technology advancement on the horizon, fund Fundrise Debt/Equity 08/2012 +$55m; Largest deal size to date $1.5m $6m managers should be prepared that at least some of online platforms will be able to grow signifi- Hotel Innvestor Debt/ 09/2014 Pro Forma $12m; Largest deal size +/- $5m cantly in the coming years, particularly the ones Equity Hotel-focused to date $10m that attract institutional investors. As Kelley Patch of Land Debt $230,000 sees it: “It would be foolish not to pay some PeerStreet Debt 11/2014 Undisclosed; Largest deal size to $550,000 attention to CRE crowdfunding. It’s a revolution date $2.3m and it’s happening.” † Realty Mogul Debt/ 03/2013 $75m; Largest deal size to date $3.6 $1.5m Equity Sherry Hsieh Reporter Patch of Land 10/2013 $23m; Largest deal to date $1.9m $232,000 [email protected]

JUNE 2015 16 ANALYSIS: MICRO-APARTMENTS

SMALL IS BEAUTIFUL MICRO-APARTMENTS FIND THEIR PLACE IN THE MARKET. DANIELLE BALBI REPORTS

icro-apartments – small urban ments. “It may be a niche now, but it won’t be like San Francisco [also] have a huge problem rental units designed for young in 10 years.” with finding entry-level housing for the [80 mil- professionals – are evolving from a The burgeoning micro-apartment market lion-strong] Millennial generation, which is as sub-segment of the apartment mar- has primarily taken root in San Francisco and big as the generation of the Baby Boomers. A ket into their own asset class, driven New York, which have strong job growth and solution will need to be found for the cities that Mby cities that are in dire need of little housing affordability. Indeed, average rents they are flocking to,” adds Kennedy. practical, well-located and affordable housing. range from $3,000 to $3,500 per month in both The idea of micro-apartments isn’t new, with “Micro-apartments are simply a market cities. What’s more, studios in New York hit a the sector tracing its roots back to 1972 via response to an acute problem that is evident, median of $2,351 per month – only $1,000 less Tokyo’s Nakagin Capsule Tower. The idea for especially in a place like San Francisco where than the city’s average of $3,375 – according to these tiny spaces was conceived during “Metab- rents have gone up 40% in five years, and where Bloomberg. olism,” a Japanese architectural movement job production outpaces housing production The more affordable Brooklyn isn’t trailing of the sixties and seventies. Kisho Kurokawa by 10 to 1,” explains Patrick Kennedy, owner of far behind, and Queens is already feeling the designed the 140-unit, 13-story tower for single Panoramic Interests, a California-based devel- rent surge in its Long Island City, Astoria, Sun- office workers wanting to live in convenience opment firm that specializes in micro-apart- nyside and Woodside neighborhoods. “Cities and simplicity.

JUNE 2015 ANALYSIS: MICRO-APARTMENTS 17

The plan was for the 10-square-meter rooms to be renewed every 25 years, but more than 40 years later, the tower stands in disrepair. Now largely occupied by offices, artist studios and part-time residents, Nakagin only houses roughly 20 full-time residents who are debating whether to demolish or repair the property. Afi- cionados of the building started a crowdfunding movement to gain majority voting power by purchasing as many capsules as possible in the building to save it from destruction, according to published reports. “The concept of micro-apartments is really for younger people who are just starting out. Buildings function similarly to college dorms – [small private] rooms with a lot of common areas, like lounges and gyms,” says Ken Weis- senberg, a tax partner and co-chair of the Real Estate Services Group at EisnerAmper. “It makes it affordable. If you look at the price of apartments [in New York City] compared to starting salaries, if someone wants a little pri- vacy it’s going to be above their means.” Financing Kennedy’s Panoramic Interests has specialized in the creation of small living spaces for the last 25 years – before real estate brokers even coined the term micro-apartments. Although the firm has financed many of its projects through friends and family, it has also worked with traditional lenders. Washington Capital pro- vided a first mortgage construction loan and TDA Inc provided mezzanine debt for The Panoramic, a mixed-use micro-apartment project in San Francisco’s SoMa market. Both Washington Capital and TDA primarily rep- resent Taft-Hartley pension funds and other institutional investors. On the permanent loan side, it’s really CMBS lenders that are exceptionally interested in financing micro-apartments, said John Man- ning, managing director of Northwest Real Estate Investment Banking at JLL. “From what we’ve seen, speaking broadly, most life insur- ance companies or larger life insurance compa- nies are not there yet, or open to it but at very conservative level,” he adds. As for equity, he noted that private capital is taking the lead, and eventually, institutional equity and REITs will enter the space. “This is our first micro-unit investment… MICRO-APARTMENTS ARE SIMPLY A MARKET RESPONSE TO AN it frankly took a great deal of comfort with the sponsor and developer, who had done other ACUTE PROBLEM, ESPECIALLY IN A PLACE LIKE SAN FRANCISCO college housing and smaller footprint pro- jects – everything is based on the team you’re WHERE RENTS HAVE GONE UP 40% IN FIVE YEARS, AND WHERE JOB investing in,” explained Rob Perkins director of investments at TDA, who provided a mezzanine PRODUCTION OUTPACES HOUSING PRODUCTION BY 10 TO 1 loan for the project. “When we got involved this transaction was already have pre-leased [under PATRICK KENNEDY, PANORAMIC INTERESTS a 10-year lease] so that takes a fair amount of

JUNE 2015 18 ANALYSIS: MICRO-APARTMENTS

particularly New York and San Francisco – that developers are looking for a way to make pro- jects work. Th ey are either going to be charging more per square foot, or putting more units in each building." Simon Baron Development Group, a New York City-based real estate development fi rm, is working on a micro-apartment project in the Long Island City neighborhood of Queens. “We have to cater the market that’s there, but isn’t being addressed. Most college graduates aren’t making $100,000 a year to aff ord a studio apartment in New York City,” says president Matt Baron, emphasizing that there is a serious need for rents that individuals making $40,000 to $50,000 can aff ord on their own. Th e units in Simon Baron’s LIC project range

Pictures: Interests Panoramic from roughly 150-200 square feet, all including kitchens and bathrooms. “Th e subset is not to risk away…and then you have the depths of the tion,” Williams says, adding that some develop- entertain: there are no kids, no televisions. It’s market, especially in San Francisco which is ers may be able to make the most of space by for people who are looking for a more commu- short of housing.” Perkins also added that TDA creating more living units in areas that could nal space to socialize,” explains Baron, high- was comfortable with the transaction because not be used for more traditional residential lighting the importance of amenities and shared of its location – a denser market that benefi ts apartments. spaces in the properties themselves. Units will from the presence of students and young tech Th e fi rm does not work in the micro-apart- likely be rented for 20-30% below market value. employees. ment space, but mostly because an opportunity Despite growing interest, micro-apartments has yet to arise, said Williams. “We could [work Growing demand are still not a proven product type, and market in the space] quite honestly, just not a lot of Major cities such as Los Angeles, Boston, and players agree that it will take a few years until these units are out there and we have yet to see Washington DC will soon follow the trend. the asset type becomes as investable as more an opportunity that’s presented itself.” Pembrook Capital Management, a commercial traditional multifamily properties. Manning also Market players already invested in the space real estate investment manager that provides noted that investment strategies for the emerg- remain optimistic. “Fund managers are cautious fi nancing through the capital stack, recently ing asset class are similar to other multifamily individuals and don’t want to throw hundreds closed a $6.25m mezzanine loan for the devel- investments, coming in diff erent forms including of millions of dollars into [an asset] that hasn’t opment of a 123-unit micro-apartment project merchant builders and build-to-core holders. been vetted for a long period of time. I don’t in downtown Portland, Oregon. Th e develop- To date, there are no funds dedicated spe- blame them for their trepidation, but I am cer- ment, Tess O’Brien Apartments, features two cifi cally to micro-apartments. “It’s early in the tain that in fi ve or 10 years these [micro-apart- six-story buildings totaling 40,604 square feet, marketplace to think about [setting up a fund] ments] will be part of many apartment inves- and in typical micro-apartment fashion off ers a because until there is a product that is widely tors’ portfolios,” adds Kennedy. number of amenities, such as a private garden available and people see how it does economi- with a fi re pit and barbecue, indoor bike park- cally, it’s somewhat risky,” explains Weissenberg. Positive points ing, a gym, laundry, a dog wash station and a “Yes, the demand is high and the fi rst several Th ose already involved in micro-apartments community room with a kitchen and seating. will fi ll out fairly quickly, but what if there is a point to its potential. “I would say [there are] Although there are concerns over high turn- high turnover?” slightly higher returns because you’re getting over, Kennedy says that there will always be a Other market players, however, point to this more rent per square foot – although this is demand for entry-level housing. While some as the nature of the market. “It’s the same way partially off set by higher construction costs and Millennials will move out and have families, cit- for all apartment units. People make lifestyle fi nancing costs. [Micro-apartment buildings ies that have economic opportunity and cultural changes so they’re going to leave and move on, will] probably sell for slightly higher cap rates resources will always have an overwhelming but there are still going to be kids graduating, too – perhaps +0.25% but the jury is still out draw, he continues. [living costs] will be expensive, and they will on that as there have not been many sales,” says “Smaller, more effi cient space is completely gravitate towards high cost areas. People are Manning. keeping up to ethos of Millennials. Just as going to struggle and [micro-apartments] are Construction costs for Th e Panoramic, which Uber has changed their habits with respect to a solution,” says John Williams, president and is slated to open later this year, were about $400 cars, micro-apartments are anticipating and CIO at Avanath Capital Management. per square foot. Rents for Panoramic’s units are prefi guring the shift of Millennials into smaller Because of their design, micro-apartments just above $5 and $6 per square foot – making spaces,” says Kennedy. “Aff ordable, clean but cater to very specifi c tenants. “You are singu- them roughly 30% below market. Additionally, well designed, super-effi cient housing is a time- larly narrowing your universe of renters, let 12% of units are considered aff ordable housing. less idea with growing demand.” † alone buyers…the positive is that they are usu- Building small units in a city such as San ally priced better, and renters are looking for a Francisco with a very expensive cost of land monthly payment that is inexpensive, usually in makes sense, Weissenberg notes. “Th e price of Danielle Balbi Reporter, REFM denser, urban areas, near jobs and transporta- land is becoming so expensive in major cities –

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FXVKPDQZDNHÀHOGFRP 20 ANALYSIS:FUND LAUNCH

CAPITAL IDEAS

JESSICA POTHERING REPORTS ON LAUNCHING A NEW FUND IN TODAY’S MARKET

hen Brian Malliet launched BKM smaller number of experienced managers: only million in industrial properties over his career. Capital Partners to raise his first 7% of all the real estate capital raised in 2013 Malliet felt he had what investors value most independent first real estate fund went to new fund managers, compared to the in a fund manager – track record – he just had management business in 2013, it 45% that went to managers who had raised to prove it. seemed like the fundraising envi- at least nine funds in the past. It seemed the Two years on, BKM – a boutique industrial Wronment was not on his side. chances of success would be slim. real estate fund management firm – has invested Close to 450 private real estate funds were Malliet, a 25-year industry veteran, spent $95 million in five properties covering close to actively raising capital at the time and in spite most of his career with Voit Real Estate Ser- one million square feet, which BKM expects will of a more successful fundraising year by dollar vices, dedicating 13 years to the brokerage side generate a 20% internal rate of return. It is in the amount, the number of funds that successfully of the business then moving into development, midst of raising a $200-300 million fund. The reached their targets by year-end had dropped and eventually into asset management and company said it is in advanced stages of negoti- dramatically from the year before. Investor cap- operation as co-owner of the platform. In all, ation with investors for about half that amount, ital was becoming more concentrated among a he has raised and invested more than $850 and aims to reach its first close this summer and

JUNE 2015 ANALYSIS: :FUND LAUNCH 21 fully close before year end. Getting to this stage, Malliet has spent a lot of time doing his homework. He knew new funds do not happen overnight; rather, some take years beyond the average 18 months of fundraising to close, while most do not close at all. Constructing a precise strategy was a critical fi rst step – next would be proving it. WHAT I SAW AS A COMMONALITY AMONG SUCCESSFUL FUNDS WAS For two years, Malliet aggressively worked the conference circuit, trying to understand A NICHE-FOCUSED STRATEGY. A LOT OF THE NEW ONES THAT DIDN’T investors’ real estate mindset and studying which funds were successful and why others GET FUNDED WERE GENERALIST FUNDS AND WERE COMPETING WITH were not. He subscribed to all of the industry trade publications, following new fund launches, THE BIG GUYS. I KNEW FIRST TIME FUNDS HAVE TO BE NICHE their strategies and who was appointed to their boards. BRIAN MALLIET, BKM CAPITAL PARTNERS “What I saw as a commonality among suc- cessful funds was a niche-focused strategy. A lot of the new ones that didn’t get funded were 60% of institutional investors say they will not fund sector for 2015’s fi rst quarter. Starwood generalist funds and were competing with the invest in new funds outright, according to data Capital and CIM Group’s new funds accounted big guys. I knew fi rst time funds have to be fi rm Preqin’s latest investor survey. for an additional $8 billion for the quarter, while niche,” Malliet explained. BKM is very niche: “We strongly advise new funds and potential the other 21 funds that successfully closed by multi-tenant industrial business parks in the funds to have assets already in their portfolio or March 31 added up to only 25% of the total. Western United States. lined up before marketing their funds. It sends a “It's almost a buyers market for investors. Th e With Voit, Malliet spent over three years whole diff erent message to investors. It says the fundraising market is very crowded – investors in the downturn helping the firm manage its fund is live and they can get deals done,” Lashine can pretty much pick and choose who they want existing portfolio and watching the market for explained. It also gives investors something too to work with and where to put their capital,” signs of recovery. When he finally decided to look at – a chance to tangibly understand they explained Lashine. “And when you’re running a go out on his own in 2013, he felt the funda- kinds of assets a manager is targeting and how large portfolio, adding a new fund may not be mentals in the multi-tenant industrial sector their underwriting works. the most important thing you have to do.” were starting to turn. But rather than shooting Even with a ready portfolio and demon- For Malliet and his team, it was understood straight for a traditional new fund approach strated pipeline, raising a fund is an uphill that strong relationships would be the other key of developing an investment thesis and taking battle for most new managers. There has been to success. For this reason, the young company it to market, Malliet and his partner Nima a clear trend since the downturn of investors spent a year carefully building its board and Taghavi took a page from the Silicon Valley narrowing the range of fund managers they identifying a placement agent – Mercury Cap- tech-start up scene and decided to prove their work with, choosing to commit more capital ital Advisors – to help BKM effi ciently execute strategy by seeding the company themselves. to a smaller number of large managers, rather a formal fundraising plan and get in front of “We did it backwards. We funded a 'startup' than spreading their allocations across a wider investors. While Malliet is confi dent that a fi rst company with a couple million dollars from pool. Roughly a third of institutional investors close is imminent, it has nevertheless taken our GP’s, we raised a friends and family round, plan to invest in only one real estate fund in upwards of 50 investor meetings to get to this we spent time proving that the niche product 2015, according to Preqin’s latest investor sur- point. opportunity was there and that it could be vey, while an additional 30% intend to invest “For those who have decided not to invest scaled. We put an execution team in place, put in two only. with us, the main reason they give is that they an impressive board together,” – which includes “Just choosing a small corner of the market are not a fi rst closer in a new fund,” Malliet former ceo of Morgan Stanley John Mack, and is not a guarantee,” said Paul Murphy, director explains. Some appear to be interested in test- Jeff Gehl, managing director of private equity of private funds with EY’s Real Estate Corporate ing the waters via a separate account agreement, fund of funds manger RCP Advisors. “A year Finance group. "Successful new fund managers which Malliet believes could translate to future after we launched the company, we started buy- should focus on a niche, but they have to be able fund investments. ing value-added assets,” Malliet recalled. to prove that niche is scalable, and that they can Yet, while running a fund and separate "We had decided it’s not if we can do this, get deals done in order to attract institutional accounts concurrently may be a necessary but when we can get this done. Th e message to capital." step to kick into the fund management space future investors was that we are going ahead in First quarter fund raising data makes no as a new manager, it is not a long-term goal to any case." mystery of who is winning the lion’s share of engage in multiple investment strategies. Demonstrating pipeline is important for new real estate commitments: global platforms. "When we started, the goal was to have a fund managers because unlike 2005-2007 when Blackstone Group’s broke its own record for the fund strategy built around an operator model it was much easier for new funds to raise capital, largest private fund ever raised in March, raking because it is the most eff ective way to put cap- investors remain cautious since the downturn in $14.5 billion at lightning speed – reportedly ital to work and get involved in the real estate. and see new funds as exceedingly high risk less than four months after launch – shredding It's important to investors that managers have a today, according to Nancy Lashine, managing the industry average of 18 months. Th e fund laser-focused strategy. We are committed to a partner of Park Madison Partners, a placement amounted to exactly 50% of the total commer- niche, so we have to stay narrow,” Malliet con- agency based in New York. Indeed, more than cial real estate capital raised across the private cluded. †

JUNE 2015 22 COMMENT

SARE TACTICS JILL NICHOLSON DISCUSSES WHAT CHANGES TO CHAPTER 11 SARE BANKRUPTCIES COULD MEAN FOR CRE DEBT PROVIDERS

JUNE 2015 COMMENT 23

Proposed changes to the United States Bankruptcy Code BIOGRAPHY could have profound implications for lenders' negotiat- ing strength in certain bankruptcy cases. This includes traditional CRE lenders, as well as the growing number of commercial real estate funds that originate debt.

n recent years, the United States Bankruptcy Code THE PROPOSAL SEEKS TO ELIMINATE has come under fire for providing outdated models for current financial problems. Since it was established THE BANKRUPTCY CODE’S in 1978, the Code has weathered numerous financial crises and provided a measure of predictability and REQUIREMENT THAT AT LEAST ONE Icertainty to both debtors and their creditors. How- Jill Nicholson is a ever, support is emerging to alter longstanding princi- IMPAIRED CLASS MUST VOTE TO partner and trial ples of bankruptcy law, including the rights of secured lawyer with Foley lenders in chapter 11. ACCEPT A PLAN & Lardner LLP and In 2012, the American Bankruptcy Institute estab- chair of the firm's lished a commission to review potential reforms to For example, Class I in a bankruptcy plan is comprised national Bankruptcy chapter 11 of the United States Bankruptcy Code. The of unsecured trade debt. There are 10 creditors with & Business Commission recently issued a 332-page report with pro- allowed claims in that class holding $1 million in debts. Reorganizations posed changes to the Bankruptcy Code, some of which All 10 creditors have voted. If six out of the 10 creditors Practice. She focuses would fundamentally alter chapter 11 cases involving vote in favor of the plan, the first criterion is satisfied. If on commercial commercial real estate lenders and special servicers, those six creditors also hold at least two thirds of the $1 bankruptcy and such as the ability to block confirmation of a proposed million, the second criterion would also be satisfied, and insolvency matters, plan in a single asset real estate case (SARE). the plan can be confirmed. creditors’ rights, out- SARE bankruptcy cases generally involve single prop- Now let’s assume that the lender’s unsecured defi- of-court workouts and erties or projects in which the property generates all of ciency claim is $3m and that the bankruptcy court restructurings, and the debtor’s gross income, and on which the debtor is not required that the lender’s claim be included with trade complex multidistrict conducting business other than operating the property debt in Class I. That means that there are 11 creditors financial services and related incidental activities – 11 U.S.C. § 101(51B). with a total of $4m in claims. Suppose all 10 of the trade litigation. She is also a They frequently involve a CRE lender or special servicer creditors now vote in favor of the plan, but the lender member of the firm’s making a significant secured claim and minimal, unse- votes to reject it. Under the formula above, the first prong Real Estate Practice cured claims by third-party vendors on trade debt. In for- is still satisfied because 10 out of the 11 creditors have mulating its plan, a SARE debtor must place these claims voted in favor of the plan. The second prong, however, in specified classes. For example, the secured claim of cannot be satisfied, because only $1m of the $4m – less a commercial real estate lender would be placed in one than the two thirds required – in claims have accepted class, while the unsecured claims of trade debt would the plan. As a result, the lender could effectively block be placed in a separate class. Each class, in turn, has the confirmation of the plan. opportunity to vote on the debtor’s proposed plan. Under the Commission’s proposal, lenders and ser- Currently, the Bankruptcy Code requires that at least vicers would no longer be able to employ the strategy one impaired class votes in favor of the debtor’s plan in above to block plan confirmation in SARE cases. Instead, order for it to be confirmed. Requiring approval by a sin- the proposal seeks to eliminate the Bankruptcy Code’s gle impaired class demonstrates semblance of support by requirement that at least one impaired class must vote a creditor constituency. This means a SARE debtor could to accept a plan, finding that such a requirement “was confirm a plan simply based on approval of the trade debt an impediment to confirmation and subject to signifi- class — even over the objection of the lender or servicer. cant abuse”. As a result, a lender or servicer would lose However, lenders and servicers can exert critical lev- its blocking position, and confirmation of a debtor’s erage in a SARE case under its present form. In many SARE plan becomes much easier. The elimination of this instances, the property is underwater. As a result, the requirement chisels away at a key leverage point availa- lender or servicer typically has a secured claim up to the ble to CRE lenders in SARE cases. value of the property and a separate, unsecured claim The Commission’s proposal is the starting point for for the remaining deficiency. In certain jurisdictions, the an ongoing dialogue about the rights of commercial real unsecured deficiency claims may be placed in the same estate lenders. It also marks a material turning point, class as other unsecured claims, like trade debt. Why is shifting the balance of power to CRE debtors seeking this important? A lender may utilize its deficiency claim to modify the terms of CRE loans. While lenders and to block acceptance of the plan by a single impaired class. servicers currently remain free to utilize this strategy, Here’s how the process works. In order for a plan to be they should remain mindful of what may be on the hori- accepted by a class, it has to meet two criteria: zon. Moreover, they should plan accordingly, whether it 1. More than half of the total number of allowed claims be through modifying existing loan documentation to vote in favor of the plan. account for increased bankruptcy risk or engaging in 2. At least two thirds of the total amount of allowed efforts designed to make their voices heard regarding the claims vote in favor of the plan. pending proposal. †

JUNE 2015 24 ANALYSIS: INVESTMENT TRENDS

BIG APPLE MANAGERS TARGETING MIAMI RETAIL MARKETS

number of New York fund managers just come online in newly constructed prop- is probably responsible for 75% of the recent are hoping to re-create two of New erties. The Design District will soon house surge in investor capital,” said Joe Furst, Chair York’s funkiest retail submarkets in brands like Dior, Givenchy, Miu Miu and East of Wynwood Business Improvement District an emerging area of Miami. Managers Coast Jewelry (ECJ Luxe), whereas the more and managing director of Wynwood at Gold- that include East End Capital, RedSky boutique-like Wynwood sees the likes of Aesop man Properties. The company owns more than A and London-based JZ Capital, KAR, and Warby Parker, market players told REFM. 400,000 square feet, or about 30 buildings in and Junius Partners see parallels between The Design District and Wynwood aren’t the submarket. Manhattan’s Meatpacking District and Miami’s interchangeable. The Design District, a more Wynwood’s main Second Avenue corridor Design District and between SOHO/Brook- mature market that is preferred by high-end has seen rents rise steeply over the past 10 lyn’s Williamsburg submarket and Wynwood. retailers, is seeing sales prices of $3,000 per years, increasing from around $12 per square Miami’s rise has been clearly documented square foot while pricing in Wynwood is foot to $50-60 Furst said. Rents in the remain- over the past 18 months, with drivers that closer to around $1,000 per square foot. This der of Wynwood have risen from around $8-9 are a bit apart from New York. “There’s been is a substantial jump in values – two years per square foot to $30-45 per square foot dur- a lot of absorption of space as small business ago, pricing was closer to $1,000 and $300 per ing the same period, he added. growth drives the economy,” said Charles Fos- square foot, respectively. The neighborhood is also benefitting from chini, vice chairman of CBRE’s capital market, It’s Wynwood, however, that is seeing the the street art that is part of its Wynwood Walls debt and structured finance team. “Executive most interest right now. The submarket, situ- program. “The street art creates a unique sense space, meet-me type spaces are popular, with ated between then I-95 and Florida East Coast of place which makes Wynwood a cultural emerging markets like the Design District and corridor, is benefiting from zoning changes destination for visitors and locals, which led Wynwood growing into new business hubs.” that will allow for higher density development the way for creative businesses,” Furst added. With this emergence comes retailers that and greater height build outs, one broker told “The Design District is great, but Wynwood are expanding their bases from downtown REFM. This has translated into a big boost provides an exciting and fresh localized food Miami and Miami Beach to occupy ground- in attracting investors eyeing potential rent and retail scene which Miami lacked.” floor space in warehouses and space that has increase with future tenants. “The re-zoning When East End Capital paid $23.5m, or $270

JUNE 2015 ANALYSIS: INVESTMENT TRENDS 25

MIAMI BUYER SNAPSHOT square foot in Wynwood to a record-breaking $1,200. Furst sees the $1,200 per square foot MOST ACTIVE BUYERS purchase price justified, adding that another JANUARY 2014 - PRESENT New York-based group is looking at a deal that ACQUISITIONS NUMBER OF PROPERTIES could go as high as $1,500 per square foot. Red- Sky officials declined to comment. More than 60 new businesses, mostly inde- pendent retail stores and restaurants, have opened in Wynwood over the last year alone, and boutiques and concept stores dominate the northwest corridor of Second Avenue. Pop- $435m 24 ular destinations include design store Elemen- GGP tal and Plant the Future, a part-greenhouse, part-gallery home decors and landscape store designed by artist Paloma Teppa. Another tenant is the Haus Fashion Lab, a boutique concept of make-up artist and hair designer $239m 23 Emilio Uribe. ASHKENAZY ACQUISITION CORP. National retailers that want to move into Wynwood have to fit a certain profile, Furst explained. “You have to be entrepreneurial, design-focused, and have a specific point of $57m 23 view. Warby Parler is a good example. The price point and design are exceptional, with a MOISHE'S MANAGEMENT beautiful but simple store build out,” he added. Driving the growth of the retail sector is MIAMI HAS BEEN ON THE RISE FOR A the city’s office market, which is seeing a sup- WHILE NOW, AND ITS LATEST EMERGING $71m 23 ply-demand imbalance. More Class B office THOR EQUITIES buildings are being converted into Class A AREAS, WYNDWOOD AND THE DESIGN space as demand rises from smaller law firms DISTRICT, ARE BEING HEAVILY TARGETED and boutique financial services companies. “In Miami, it’s very entrepreneurial and small BY NEW YORK FUND MANAGERS. $35m 23 business growth is really driving the economy. SHERRY HSIEH REPORTS IZHAK PROPERTIES Right now we’ve got a market that is more mature in terms of multifamily and condo, but there’s not much product for sale on the office $83m 23 side. There has been no new construction, per square foot for two acres on Northwest JZ CAPITAL PARTNERS except some repositioned Class B getting Class 24th Street in 2014, it was the largest transac- A pricing,” a broker told REFM. tion to date in Wynwood. The fund manager, Crocker Partners’ newly renovated 31-story which owns six properties in the submarket, SunTrust International Center is one such sees the neighborhood as attractive to the $83m 23 example. With the $15m renovations, includ- younger demographic and TAMI tenants. “We REDSKY CAPITAL ing redesigned lobby, sky terrace and compli- love Wynwood, it has great location – easy mentary tenant fitness center, the building is access from I-95, proximity to the airport and well-positioned for the small tenants. “We are you can get to downtown or Brickell without receiving a lot of interest from tenants and bro- taking the highway. It's also the experience – kers, and we are getting more per square foot,” you have old warehouses being converted into said Angelo Bianco, partner, of the 75% leased offices, retail spaces, restaurants,” said Marc $342m 23 SunTrust. Gitto, director. “You can make the compari- MORGAN STANLEY Crocker Partners is looking to develop a son to Chelsea, Williamsburg, but it’s its own number of urban markets, including a mixed- thing. It’s unique.” use office/hotel/hotel-branded residential/ Six months later, RedSky Capital and JZ retail in downtown Floradale and another Capital completed the largest deal on a price $156m 23 mixed-use multifamily/retail in Boca Raton. per square foot basis in the submarket. The RFR REALTY partners paid $10.6m or $770 per square foot Recent Design District/Wynwood Deals for 13,775-square-foot 2407 Northwest Second 1 Northeast 40th Street, $29m (Design District) Avenue. Furthermore, RedSky’s most recent 35 Northeast 40th Street, $28m (Design purchases, roughly $100m, in March, which $156m 23 District) includes two Design District properties and COMMERZ REAL 2621 Northwest 2nd Avenue, $26m one Wynwood property, brought sales price per (Wynwood) †

JUNE 2015 26 Q&A: JON PICKARD, PICKARD CHILTON

BETTER DESIGNS BOLSTER TENANT BASE JON PICKARD OF PICKARD CHILTON TALKS TO REFM ABOUT CREATING THE PERFECT WORKING ENVIRONMENT

he old real estate adage of location, loca- Th is is particularly true with buildings that tion of a fl oor and also slightly reduced the size tion, location as the primary factor that house law fi rms, many of which are located in of the attorney's offi ces from 10 by 15 feet to 9.6 infl uences the success of a building is outdated commercial buildings. “Many law by 15 feet. With increased effi ciency in planning, shifting slightly as factors such as design fi rms are headquartered in existing 1960s-1970s the law fi rm was able to reduce its occupancy become more important for tenants who buildings that do not provide the access to views costs by about 30%. Tare looking for unique spaces that will and daylight that would support the fi rm’s needs. “When the building was sold, the strength of help them to attract and retain staff . We can work with a client to craft a new building the law fi rm contributed to the strength of the “Carefully considered design can have an that will meet their needs for decades to come,” building,” Pickard said. “Th at, combined with impact on tenant strength, which in turn has Pickard said. the fact that the property was on an accessible, a direct impact on the fi nancial strength of a Th is includes diff erent designs and confi g- beautiful site meant that it set multiple records building,” said Jon Pickard, principal of New urations to create fl oor plates that allow more in the city. Architecture may not directly infl u- Haven, Conn.-based architecture fi rm Pickard attorneys on the perimeter of the space while at ence sales price but it clearly indirectly infl u- Chilton. “We create better buildings that attract the same time reducing a fi rm’s overall footprint. ences it and that story can be told about many better tenants.” In one situation, the fi rm changed the confi gura- projects we have designed.”

JUNE 2015 Q&A: JON PICKARD, PICKARD CHILTON 27

PRESENTEEISM IS THE RECOGNITION THAT A SIGNIFICANT PERCENTAGE OF THE EMPLOYEE BASE IS NOT MENTALLY OR EMOTIONALLY ENGAGED IN THEIR WORK JON PICKARD, PICKARD CHILTON BIOGRAPHY Jon Pickard, prin- cipal, has designed or collaborated in How has architecture changed since you’ve started our clients to reduce the absenteeism and presenteeism of the design of some Q your career? their employees. of the world’s most recognized buildings, rchitecture today is about working as part of a collab- What is presenteeism? including the Exxon- A orative real estate team, not proclaiming: ‘Th is is what Q Mobil Offi ce Complex we shall do!’ It’s about working with smart developers and Presenteeism is the recognition that a signifi cant per- in Houston and the brokers to be able to meet specifi c needs as well as expec- A centage of the employee base is not mentally or emo- Devon Energy Center tations of tenants but to also make sure buildings are not tionally engaged in their work. Th e employee may be pres- in Oklahoma City. so customized that when a tenant moves out the owners ent but they are not attentive. Th ey may be preoccupied Prior to the founding are left with a building that still has broad and fl exible with family issues or something that makes them not quite of Pickard Chilton, market appeal. Th e process is much more integrated than there. If we can create an environment that is welcoming he collaborated with just the architect singularly making pronouncements. and positively infl uences their attitude, that is a profound Cesar Pelli in the I’ve noticed that there’s been a shift in how the c-suite and direct benefi t to the client. It’s part of the reason why design of numerous of a company looks at corporate headquarters. Real estate the c-suite is now paying much closer attention to real landmark projects, isn’t just a place to work anymore. estate beyond occupancy costs. including the World Drawing on my experiences, which date back to the Financial Center in very late 1970s, real estate was a necessary cost. You had As real estate in major markets becomes scarce, New York, and Kuala to house your staff in an appropriate place for them to do Q we’ve seen many very tall, very thin buildings go Lumpur City Centre their work. Th ere wasn’t an enormous amount of care paid up. How do you design the interior of these spaces? in Kuala Lumpur. to the character or the quality of the space. Smaller fl oor plates are not as attractive for commercial When did real estate shift from a necessary cost? A tenants. A small fl oorplate cannot provide the same Q Was it back in the 1990s when tech fi rms started effi ciency per employer as a larger fl oorplate. As you build adding climbing walls? taller and the fl oor plates grow smaller, you have to gen- erate increasing revenue to substantiate it. It makes more I believe I fi rst recognized the shift sometime in the sense to build two 20-story buildings than one forty-story A 1980s, during my work with Cesar Pelli. Th ere was building because of the costs and effi ciency. greater sense of the image that a building would be send- Th is is partly the reason that the vast majority of com- ing out to the world. Th ere was a rediscovery of the use mercial buildings are less than 56 stories. Th ere is a sweet of stone, which for many corporations meant that they spot below that height that makes economic sense. To were communicating the message that they were proud build taller buildings, the structural and wind forces all and strong. begin to accelerate and you have to spend more money Architects embraced the realization that the workplace and resources. It’s easy to justify a building of that size can make a meaningful diff erence to an employee’s abil- going up in Manhattan but in other markets, economics ity to do their jobs. Today, one can observe a consistent will drive it and you’ll see buildings in 55-story range. † reduction in the area dedicated to each employee. With the consolidation in the workplace, employers and their Samantha Rowan architects are dedicated to creating an environment that Head of content, REFM embraces the well-being and productivity of their employ- ees. Th at increase in productivity more than compensates for the slight increase in rents that comes from creating a more welcoming collaborative environment. Our client, Devon Energy, has seen a 40% increase in recruitment and a signifi cant increase in retention. Th e cost to replace an employee is meaningful, so the value of retaining an employee becomes extremely important. As architects, we are crafting environments that will help

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Mobile access to Daily, weekly & Print copy & Real Estate breaking news digital edition of Fund Manager E-alerts the weekly issue WWW.REALESTATEFUNDMANAGER.NET DATA 29 MAY FUND LAUNCH ROUNDUP

A roundup of real estate private equity funds launched or raising capital during the first quarter of 2015, aggregated via our own reporting and published reports.

Source: REFM, published reports Equity Target/Amount Company Fund Name Raised Investment Focus Geographic Focus Gerrity Group Gerrity Retail Fund 2 $400m (target) Retail, necessity-based properties US, primarily CA such as supermarkets, drug stores Lubert-Adler Partners Lubert-Adler Fund 7 $575m (raised) Retail; multi-family US MKP Capital MKP CRE Fund 2 N/A Below-investment-grade CMBS; US subordinated commercial mortgages Oak Tree Real Estate Capital Oak Tree Real Estate $400m (target) Office; industrial; retail US Capital Fund III Mesa West Capital Mesa West Core Lending $800m Commercial mortgages US Fund (open-ended) Rialto Capital Management Rialto Mezzanine Part- $300m (raised) CMBS B-pieces US ners Fund Waterton Associates Waterton Residential $500m (target) Residential, core and core-plus US Property Venture 12 apartments Kayne Anderson Real Estate Kayne Anderson Real $1b (raised) Medical-office; seniors and student US Advisors Estate Partners 4 housing Prudential Real Estate Investors Senior Housing Partner- $629m (raised) Senior living, including independent-/ US ship Fund 5 assisted-living and dementia-care facilities LEM Capital LEM Multifamily Senior $400m (target) Residential, senior living US Equity Fund 4 Shopoff Realty Investments Shoppoff Strategic In- $50m (target) Undeveloped land US come Fund 2 APRIL 2015 REIT DEBT AND EQUITY OFFERINGS

The following is a listing of all real estate investment trust debt and equity offerings completed in May.

Source: NAREIT Common Stock Preferred Equity Gross Amount Gross Amount Offered, Including Offered, Including Company Overallotment ($M) Company Overallotment ($M) Hudson Pacific Properties 172 Colony Capital 288 Realty Income Corporation 278 New York Mortgage Trust 104 FelCor Lodging Trust Incorporated 207 New Residential Investment Corp. 877 Senior Debt Spirit Realty Capital 273 Gross Amount Gramercy Property Trust 271 Offered, Including Company Overallotment ($M) Blackstone Mortgage Trust 702 Ryman Hospitality Properties 400 Starwood Property Trust 326 Healthcare Realty Trust Incorporated 250 CoreSite Realty Corporation 219 Communications Sales & Leasing 400 Hannon Armstrong Sustainable Infrastruc- 85 ture Capital Communications Sales & Leasing 1,110

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$120,500,000 $72,000,000 $221,500,000 Canadian Imperial Bank Interim / Construction CMBS / Mezzanine Interim of Commerce ranked as Mixed-Use Office Office the strongest of the major Watters Creek Green Hills Corporate Center 311 South Wacker banks (publicly traded) in New York, NY Redding, PA Chicago, IL North America – Bloomberg Markets, 2014 $103,000,000 $62,000,000 $78,900,000 Interim / Mezzanine CMBS CMBS Office Retail Indust. / Ware. NAIOP REX Award for Investment Deal of the 200 West Adams Outlets of Mississippi Pappas Commerce Center Year* Chicago, IL Jackson, MS Boston, MA $16,500,000 $21,080,000 $55,000,000 CMBS CMBS Interim Retail Office Multifamily Magnolia Town Center The Viridian Building West 7th Street Riverside, CA San Diego, CA Ft. Worth, TX

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* Investment Deal of the Year – CIBC acted as Advisor in the sale of 79 Canadian office and industrial properties to Slate Properties Inc., NAIOP REX, 2014. The wholesale banking arm of Canadian Imperial Bank of Commerce includes its branches in Hong Kong and Singapore, as well as its wholly owned subsidiary CIBC World Markets Inc. and other directly or indirectly held subsidiaries including: CIBC World Markets Corp., CIBC World Markets plc, CIBC World Markets Securities Ireland Limited, CIBC Australia Ltd., and CIBC World Markets (Japan) Inc. CIBC World Markets Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. CIBC World Markets Corp. is a member of the Financial Industry Regulatory Authority. CIBC World Markets plc is regulated by the Financial Services Authority. CIBC World Markets Securities Ireland Limited is regulated by the Central Bank of Ireland. CIBC Australia Ltd. is regulated by the Australia Securities and Investment Commission. CIBC World Markets (Japan) Inc. is a member of the Japanese Securities Dealer Association. Canadian Imperial Bank of Commerce, Hong Kong Branch, is a registered institution under the Securities and Futures Ordinance, Cap 571. Canadian Imperial Bank of Commerce, Singapore Branch, is an offshore bank licensed and regulated by the Monetary Authority of Singapore. DATA 31 APRIL 2015 REIT PERFORMANCE DATA

The FTSE NAREIT All REITS Index, the broadest benchmark of the US REIT Industry that contains both equity and mortgage REITS, produced a total return of -.85% and a dividend yield of 4% in April, compared to 1.92% and a dividend yield of 2.01% for the S&P 500 Index during the same period.

Source: NAREIT NCREIF Fund Index Open End Diversified Core Equity

YTD Total April 30 Div 1-Year Annualized 5-Year Annualized 10-Year Annual- return Yield Total Return Total Return ized Total Return FTSE NAREIT All REIT Index -0.85% 4% 12.85% 12.87% 7.76% FTSE NAREIT Composite Index -0.99% 4.05% 12.56% 12.61% 7.54% FTSE NAREIT All Equity REIT Index -1.17% 3.57% 13.22% 12.90% 8.42% FTSE NAREIT Mortgage REIT Index 1.64% 10.59% 5.82% 10.14% -1.27% S&P 500 Index 1.92% 2.01% 12.98% 14.33% 8.32% MOODY'S/RCA CPPI INDEX

The Moody’s/RCA CPPI is based on repeat-sales (RS) transactions that occurred at any time up through the month prior to the current report. This April CPPI report provides price indices through February 2015. These indices are estimated using transaction data collected through the month of March 2015.

Source: Moody's Investors Service National All-Property Composite Index

200

180

160

140

120

December 2000 Index = 100 100 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Price Changes by Sector and Market Type: Value-Weighted Composite Tiers Higher Tier Share of Higher Tier Index Month 3-Month 12-Month Composite* Tier Composite** 1 National All-Property 1.40% 4.70% 16.00% N/A 100% 2 Apartment 1.20% 4.50% 16.40% National / T1 28.60% 2 Core Commercial 1.50% 4.80% 15.80% National / T1 71.40% 3 Retail -0.70% 5.50% 11.50% Core Comm / T2 27.20% 3 Industrial 2.40% 5.80% 18.70% Core Comm / T2 20.70% 3 Office CBD 3.80% 5.60% 16.90% Core Comm / T2 26.70% 3 Office Suburban 0.60% 2.40% 16.60% Core Comm / T2 25.40% 3 Office 2.30% 4.10% 16.80% Core Comm / T2 25.40% 5 Major Markets 2.30% 5.90% 17.90% Standalone 46.90% 5 Non-major markets 0.50% 3.70% 14.30% Standalone 53.10%

JUNE 2015 APRIL 20, 2015 ;;;6)%0)78%8)*-2%2')-2:)781)28'31 The definitive source on commercial property sales, financing and investment

NEWS ANALYSIS GE PORTFOLIO SALE BORROWERS TURN TO BRIDGE SUBSCRIBE LOANS TO STEM SIGNALS BROADER REFINANCING GAP

MARKET SHIFT &=(%2-)00)&%0&- were considered a growth company,” Bob Stella, &=)0->%&)8,&037*-)0( principal at Cresa, told REFI. “Th at totally Borrowers with weaker properties that %2((%2-)00)&%0&- changed aft er the crisis. GE Capital doesn’t have haven’t yet turned the corner are increas- the same kind of latitude to operate with the MRKP]WIIOMRKSYXFVMHKIPSERWXS½PPXLI General Electric’s decision to sell $23bn of its safety net of being a commercial bank and being ½RERGMRKKET±8LIVIEVIGPIEVP]KSMRKXS real estate assets to Blackstone Group and Wells able to ride out problems, so they’ve been trying be assets that are coming to their loan Fargo & Co. is a sign of a changing commercial to fi nd their way and fi gure out what to do next.” maturity in 2016 and 2017 that are not real estate market as well as a shift for the Th e recent deal with Blackstone represents stabilized,” said Keith Largay, a managing Fairfi eld, Conn.-based company. the largest commercial real estate transaction HMVIGXSVEX.00MR'LMGEKS±?8LSWIEWWIXWA “Th e surprise for us last week at the end since the downturn and one of Blackstone’s were bought at peak or near peak, and PUT of this transaction is that we had no idea that WSQILEZIRSXWIIRWYJ½GMIRXGETMXEP behind the curtain, GE was working on a much ±8,)=;%28)(83)<-8%7 VIMRZIWXQIRX-RWXIEHSJ?GLSSWMRKARI[ larger strategic decision with GE Capital,” said PSRKXIVQ½RERGMRK?WSQISJAXLIWIHIEPW Jonathan Gray, global head of real estate at 19',3*8,)6)%0)78%8) will be recapitalized with bridge loans that Blackstone, speaking at NYU’s Shack Institute -2(9786=%74377-&0)-2 [MPPLIPTJYRHMQTVSZIQIRXW² of Real Estate REIT Symposium. “We didn’t Demand for bridge loans and capital know that they would be doing something this 32)86%27%'8-32² has always been prevalent, but the growth transformative with the overall company.” of debt funds has accelerated in the last Shortly aft er the deal with Blackstone and .32%8,%2+6%= QSRXLW±1SWXSJXLIWIXVERWEGXMSRW Wells Fargo was announced, GE indicated that EVIWXVYGXYVIHEWXLVIIXS½ZI]IEVPSERW the sale was part of a broader plan to sell most biggest real estate transactions since 2007, in 8LIVIMWWMKRM½GERXYTJVSRXJYRHMRKTPYWJY of its media, fi nancial and appliance assets in which it acquired Equity Offi ce Properties Trust ture funding to provide capital to stabilize order to focus on its industrial manufacturing in a $39bn deal. “In some ways, this reminded the asset—costs for tenant improvements, business, as the company’s fi nancial business has me of our Equity Offi ce transaction, but even leasing commissions, and capital been aff ecting its stock price since the downturn. that was like child’s play compared to what we MQTVSZIQIRXW²0EVKE]EHHIH “If you went back and looked at GE’s stock did here,” Gray said. ±&VMHKIPSERWUYMXIJVEROP] for 15 years leading up to the fi nancial crisis, Alec Burger, president and ceo of GE Capital have always been an integral 11 you would see that it was going up, and they Real Estate, approached Continued on page 11 TRANSACTIONS SPEAK LOUDER THAN WORDS $30+ Billion Sold

INTERESTED IN SELLING? WHERE REAL ESTATE IS MOVING™ WWW.AUCTION.COM/SELL-RE SEARCH LISTINGS AND SET ALERTS: WWW.AUCTION.COM/BUY-RE ©2014 Auction.com, LLC All rights reserved. www.auction.com/licensing TREPP CHARTS 03 FINANCING 04 MORTGAGE RATES 06 PROPERTY SALES 07 GUEST INTERVIEW 09 ON YOUR WEEKLY AGENDA

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Contact: Anthony Taylor | [email protected] +44 (0)207 832 6533

ZZZUHDOHVWDWH¼QDQFHLQYHVWPHQWFRP PEOPLE MOVES 33

homebuilder in Brazil, overseeing vice president and co-founder of new business development, land the Boston office. acquisitions, and residential pro- jects. He also previously worked at Cyrela where he was in charge of new developments in the São Cornerstone brings on PEOPLE Paulo region. business development chief

Timothy Chi to join Cornerstone Real Estate Advisers MOVES DiamondRock's board has appointed J.D. Sitton as a man- of directors aging director in business devel- opment, the company announced. expand its U.S. Eastern Region Sitton will succeed Graham Bond, Hermes Investment platform. Myrie’s responsibilities DiamondRock Hospitality Com- who will be retiring on August after Management appoints include operational coordination, pany hired Timothy Chi to the seven years at Cornerstone and Philip Nell financial planning and analysis company's board of directors, more than 35 years in the real estate support. He joined Colliers from expanding the REIT’s board investment industry. Marcus & Millichap were he membership to eight. Chi is the Hermes Investment Management served as associate director of co-founder and CEO of Wedding- appointed Philip Nell as a fund capital markets. Myrie has more Wire, a global marketplace for the director for its £6bn real estate than 15 years of experience in real wedding and events industry. Pre- Madison International division, Hermes Real Estate. estate. viously, he cofounded Blackboard Realty hires Andrew Nell will join in July from Aviva Inc. and assisted in its initial public Schaffler Investors, where he most recently offering. led its European retail funds. He Madison International Realty has will work alongside Hermes Real John Elliott joins hired Andrew Schaffler as its direc- Estate CEO Chris Taylor to build Madison Marquette tor of listed real estate securities to the group’s strategic partnerships Redefine International oversee the firm’s public markets and joint ventures. adds Donal Grant as investment activities, the company Real estate development and CFO announced. Schaffler will be based investment firm Madison Mar- in Madison’s New York office. quette appointed John Elliott as Before assuming this role, he served Ben Patton to direct the company's new CFO and chief U.K. REIT Redefine International on Cohen & Steers Capital Manage- Hermes' real estate administrative officer. Elliott will appointed Donald Grant as the ment’s portfolio management team. debt team oversee the firm’s financial oper- company’s new CFO. Donald will ations as well as the information join in August from Capital & technology and human resource Counties Properties PLC, where Hermes also appointed Ben teams’ activities. He has more than he served as financial controller Federal Realty take on Patton to a new role directing 20 years of real estate accounting for the last six years. He is a qual- three new hires the firm’s real estate debt team. experience, most recently serving ified Chartered Accountant and Based in London, Patton will be as senior vice president at New has 17 years’ prior experience of responsible for originating and Tower Trust Company, a division working with banking and broking Federal Realty appointed three executing commercial real estate of Bentall Kennedy. institutions. executives to its core portfolio team. debt transactions for the Hermes Jeffrey Mooallem was named man- Real Estate Debt Fund – a £400m aging director of Core Shopping fund launched in 2013. Patton Center Operations, reporting to previously served as vice president Paladin Realty Partners HFF hires Christopher the CEO. Mooallem has 20 years of in the real estate team at Barclays gain Felipe Miguez in Phaneuf real estate experience in operations, Bank. Brazil office leasing, acquisitions and develop- ment. He will be responsible for the HFF has hired Christopher Phaneuf REIT’s 58 shopping centers com- Felipe Miguez joined Paladin as a managing director in its Boston prising 11 million square feet. Fed- Colliers International Realty Partners as investment office, where he will focus on local eral Realty also hired Jarett Parker hires Mel Myrie manager in the firm’s São Paulo, and national institutional invest- and Michael Linson on Mooallem’s Brazil office. He will source and ment sales within the office, multi- team. Parker was brought on as vice manage all of the fund manager’s family and retail sectors, the com- president of asset management in Colliers International brought on investments in Brazil. Prior to pany announced. Phaneuf joined the Metro DC Region. Linson was Mel Myrie as the firm’s regional joining Paladin, Miguez worked at HFF from Eastdil Secured, where hired as vice president of finance for finance & operations manager to Direcional/Forcasa, an affordable he previously served as a senior the Core Shopping Center Division.

JUNE 2015 34 NEWS IN BRIEF MONTH IN REFM

LAUNCH ACQUISITION

Behringer Securities and Meritage Capital A fund advised by CBRE Global Inves- London New York have launched a strategic partnership to tors has acquired Gateway at Burbank, a Pageant Media 240 West 37th Street develop, manage and distribute a series of 74,391-square-foot, two-building Class A Thavies Inn House Suite 302 3-4 Holborn Circus New York, specialized investment funds, according grocery-anchored neighborhood shopping London, EC1N 2HA NY 10018 to a press release. The funds, led by Mer- center in Burbank, the company announced. T+44 (0)20 7832 6500 T+1 (212) 268 4919 itage Capital, will encompass multiple One building is a free-standing grocery store investment strategies and aim to address while the other is a multi-tenant retail build- EDITORIAL challenges presented by market volatility. ing anchored by a drugstore. The property is Head of content Behringer Securities will lead capital-rais- fully leased to seven tenants. The property is Samantha Rowan ing for the funds through its relationships 93% leased. +1 (212) 268 4944 [email protected] with a wide network of independent finan- Launch editor cial advisors. MERGER Jessica Pothering +1 (202) 352 7995 [email protected]

FUNDRAISING Cushman & Wakefield and DTZ have Reporter struck a deal to merge, becoming one of Sherry Hsieh +1 (646) 569 5642 Los Angeles-based DealPoint Merrill and the largest global real estate services com- [email protected] Sperry Van Ness International Corporation panies, according to a press release. The Data manager have formed a real estate private equity new company, which will operate under Indira Peters-DiDio investment platform, according to a press the Cushman & Wakefield brand, will have +1 (212) 268 4919 release. The venture is set to raise $100m revenues of more than $5.5bn, over 43,000 [email protected] in its first year to invest in commercial real employees and will manage more than 4 COMMERCIAL Commercial manager estate properties in the US. The partnership billion square feet globally on behalf of Jo Cole is looking to buy discounted assets in the institutional, corporate and private clients. +44 (0) 20 7832 6636 apartment, multi-tenant retail, self-storage The transaction is valued at $2b. [email protected] and medical office sectors. CONTENT SALES Content sales manager ACQUISITION Anthony Taylor +44 (0) 20 7832 6533 DEAL [email protected]

Clarion Partners and New England Devel- EVENTS Colony American Homes priced its third opment have completed the acquisition of Head of Events securitization transaction – a $640m pass- Palm Beach Outlets in West Palm Beach, Beth Hall +44 (0) 020 7832 6576 through certificate for issuance and sale of Florida from Palm Beach Mall Holdings, an [email protected]

3,879 single-family rental units. The deal ownership entity comprised of New Eng- PRODUCTION features a blended interest rate of LIBOR land Development, Eastern Real Estate and Head of production plus 188.8 basis points and is slated to close Lubert-Adler, according to a press release. Claudia Honerjager on June 11, 2015. New England Development will continue to Sub-editors be responsible for all development, leasing Luke Tuchscherer ACQUISITION Mary Cooch and management activities for Palm Beach Alice Burton Outlets. The 460,000 square foot retail Designer TruAmerica Multifamily purchased a 315- property has more than 100 stores. Jack Dougherty unit, Class A apartment community in Salt Group head of content Lake City, marking its first investment in Gwyn Roberts the state. The 4,200-acre property, Crossing FUNDRAISING +1 (646) 569 5758 [email protected] at Daybreak, was constructed in 2011 by seller Western National Properties, and fea- JPMorgan’s Gavea Investimentos Ltda sub- Chief executive Charlie Kerr tures one-, two- and three-bedroom homes, sidiary and Brookfield Asset Management as well as amenities such as a 24-hour gym, are in the market to raise as much as $1.2b ISSN 2058-8097

picnic and barbecue areas and a pool. The to invest in Brazil, according to Bloomberg. Printed by The Manson Group.

deal features a 5-year interest only term, The partners are in talks with international © 2015 with a 2.15% floating rate. investors for the offering. All rights reserved. No part of this publication may be reproduced without written permission of the publishers.

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