NOVEMBER 12, 2014 Cushman Asking Parent for Capital to Expand Signaling a shift in direction,Cushman & Wakefield’s new chief executive is 3 Big DC-Area Grocery Center for Sale pressing the company’s parent to pump in some $580 million of capital to help the brokerage compete against increasingly aggressive rivals. 3 Net-Leased Listing in Silicon Valley Former Goldman Sachs executive Edward Forst, who took Cushman’s helm in 3 Fund Ready to Develop Apartments January, is arguing the infusion is necessary for the company to defend its crum- bling position as the third-largest global commercial real estate brokerage, accord- 4 Rockpoint Snares NY Apartments ing to Cushman insiders. The capital could be used to acquire other brokerages and recruit talent across service lines internationally, with a priority on investment 6 Ace Hotel Available in Downtown LA sales, especially in the U.S. 8 Canadian Vehicle Holds First Close It’s unclear how Forst’s plan will be received by Cushman’s parent, Exor, a con- glomerate controlled by the Agnelli family of Italy. Exor’s previous reluctance to 10 Value-Added Rental Play Near Atlanta back growth at Cushman was seen as the reason behind the abrupt resignation of See CUSHMAN on Page 12 10 JP Morgan Markets Bay Area Offices 10 Puerto Rican Bank Shops Shaky Loans Heitman to Buy Chicago Trophy From Tishman 10 Buyer Sought for Ore. Business Park Heitman has emerged as the winning bidder for the office tower at 353 North 11 Carr Shops ‘Spy Tech’ Offices in Va. Clark Street in Chicago, beating out a mix of foreign and domestic investors. The investment manager’s offer for the 1.2 million-square-foot building topped 14 Angelo Gordon Buys Industrial Bundle $700 million, or $583/sf. The capitalization rate is believed to be in the vicinity of 5%, in line with other recent trophy trades in Chicago. It’s unclear if Chicago-based 14 Big NH Shopping Center Hits Market Heitman is acting on behalf of its core fund or an institution it advises. 13 ON THE MARKET The deal is a coup for the seller, Tishman Speyer, which is being advised by JLL. Tishman acquired the building in 2010 from Mesirow Financial for $385 million. 15 MARKET SPOTLIGHT Mesirow, which developed the property in 2009, had struggled to lease up space and pay off construction loans amid the market downturn. But since then, Chicago’s downtown office market has been boosted by rising demand for space from technology firms and companies relocating from the sub- urbs. New York-based Tishman lifted the occupancy rate to 96% from 80%, bringing See HEITMAN on Page 6 THE GRAPEVINE Blackstone Team Offers San Francisco Hotel The buzz is that an unidentified inves- tor has made a pre-emptive bid for the A large San Francisco hotel that hit the market last week could attract bids of 1.2-million-square foot office build- around $525 million — more than twice its value when it was recapitalized two- ing at 1095 Avenue of the Americas in and-a-half years ago. Midtown Manhattan. The property, also The 1,024-room Parc 55 Wyndham, the city’s fourth-largest hotel, is being known as Three Bryant Park, was put offered unencumbered by brand and management contracts. JLL is handling the on the block in September by New York offering for a partnership led by Blackstone, which bought its majority stake in the fund titan Blackstone. Broker Eastdil 2012 recap of the then-overleveraged property. Secured started a sales campaign, but The estimated value of $513,000/room reflects San Francisco’s position as one of that’s been put on hold following the the nation’s top hotel markets, where growth in occupancy levels and room rates has offer of around $2.25 billion, or outpaced the national average over the past few years. That’s due in part to an influx $1,875/sf. Talks are ongoing. A trade of of technology companies to downtown offices. What’s more, an abundance of for- the 42-story tower at that price would eign and domestic investors eager to own hotels in top markets, plus the continued be the largest single-property sale in low cost of financing, have fueled buyer interest. the U.S. since 2008, when another The 32-story Parc 55, at 55 Cyril Magnin Street, carries a four-diamond rating See GRAPEVINE on Back Page See BLACKSTONE on Page 15 ® Deal Tracking and Powerful Analytics for Your Portfolio

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© 2010-2014 LeaseLinks, LLC. November 12, 2014 Real Estate 3 ALERT Big DC-Area Grocery Center for Sale Calif., are expected to hit $90 million, or $180/sf. At that price, a buyer’s initial annual yield would be about 5.75%. San A BlackRock partnership is marketing a large grocery- Diego-based Westcore has listed the property with Cassidy anchored retail center in Northern Virginia that could fetch Turley. about $250 million. The complex, consisting of nine low-rise buildings, is net A trade at that price would be one of the biggest retails deals leased to Flextronics, an electronics manufacturer with its head- ever in the Washington area. quarters in nearby San Jose. The lease runs until 2024. About The 482,000-square-foot Stonebridge at Potomac Town Cen- 40% of the space is used for offices and the rest for research and ter, in Woodbridge, is 84.8% leased. It’s anchored by a 139,000- development and for light manufacturing. sf Wegman’s and boasts an Apple store. Similar high-quality Flextronics has invested about $50 million in improvements retail properties in such strong markets have been trading at to the property over the last seven years. While the company capitalization rates of 5% and even lower. has a long-term lease and considers the complex vital, the prop- Eastdil Secured is representing BlackRock and its partner, erty’s layout provides options if the tenant eventually were to Washington-based Roadside Development. The duo acquired vacate or downsize. Individual buildings could be repositioned the site in 2007 and developed the property in phases between and sold separately. Also, the campus is adjacent to a planned 2010 and 2012. retail and residential development, and could be redeveloped The center is about 25 miles south of downtown Washing- for similar uses. ton, in an area that’s growing rapidly and becoming more afflu- The buildings are along Gibraltar Court, between Interstates ent. Roadside estimates that the surrounding trade area, which 680 and 880 about 10 miles north of downtown San Jose.  extends beyond a five-mile radius, has 352,000 residents with an average household income of $110,000. Fund Ready to Develop Apartments In addition to Wegman’s, one of the nation’s top-performing grocers, and Apple, tenants include DSW, Old Navy, REI and Ulta. Opportunity-fund shop Encore Capital has met its $500 mil- Restaurants include Not Your Average Joe’s, P.F. Chang’s and Uncle lion equity goal for a vehicle that will develop apartment prop- Julio’s. The weighted average remaining lease term is 10.2 years. erties. The property, at 14900 Potomac Town Place, has what The San Francisco firm will wait until yearend to hold the marketing materials describe as a pedestrian-friendly, “Main final close, as scheduled, but the equity has already been com- Street” design, along with nearly 2,700 parking spaces. It’s adja- mitted and the manager isn’t seeking any more. cent to Interstate 95, where 330,000 vehicles pass each day. The vehicle, ResCore Property Trust, will seek a 20% return The offering includes 23.4 acres of additional land that by building multi-family properties in urban centers that have investors have been told is suitable for mixed-use future devel- large populations, high job-growth rates and relatively low opment. A proposal has been floated to build a minor-league supply. Among its targets are Austin, Dallas, Los Angeles, San baseball stadium, via a $70 million public-private partnership, Francisco, Scottsdale, Ariz., and the Florida markets of Fort as a new home for the Potomac Nationals. BlackRock was unin- Lauderdale, Miami, Orlando and Tampa. terested in the project, but a buyer could pursue it. Encore has already invested about 20% of the fund’s equity A sale at the estimated value would be the third-largest in total to buy land for two projects in San Francisco and one in Los dollars for a retail property in Washington or its suburbs in at least Angeles. With leverage, the vehicle would have some $1.5 bil- a decade. One of the top deals was recent and the other is pending. lion of investment power. The manager is focusing on ground- In August, Atlanta-based Jamestown Properties paid $272.5 up development, but would also consider redevelopment million for the 278,000-sf Shops at Georgetown Park in Wash- projects. It often teams up with local operators on individual ington, earning a stingy initial annual yield of less than 5%. developments. Eastdil advised the sellers, a partnership between Vornado After constructing and stabilizing the properties, Encore’s Realty and Angelo, Gordon & Co., both of New York. exit strategy is to take the vehicle public by the end of 2018. That deal currently holds the record, but will be eclipsed by The firm didn’t use a placement agent, instead soliciting another trade involving Vornado. In March, the REIT agreed to equity directly from pensions, endowments, insurance compa- sell the 1.3 million-sf Springfield Town Center mall in Spring- nies, family offices and wealthy individuals. field, Va., to Pennsylvania Real Estate Investment of Philadel- Encore was co-founded in 2009 by industry veterans Art phia for $465 million. The transaction is expected to close early Falcone and Tony Avila, who are managing principals. Bill next year, upon completion of renovations.  Powers, a Pimco alumnus, is also a managing principal and serves on the investment committee. Net-Leased Listing in Silicon Valley The shop’s first two funds, which invested in multi- and single-family properties, raised a combined $700 million of Westcore Properties is pitching a Silicon Valley office/indus- equity. The first fund is fully invested. The $500 million Encore trial property that’s fully leased to an electronics company. Housing Opportunity Fund 2 had its final close last year and is Bids for the 500,000-square-foot complex in Milpitas, roughly 70% invested.  November 12, 2014 Real Estate 4 ALERT Rockpoint Snares NY Apartments brokering the sale. At the $964,000/unit purchase price, Rockpoint’s initial Rockpoint Group has agreed to buy an apartment building on annual yield would be about 3.75%. But the buzz is that the Manhattan’s Upper East Side from J.P. Morgan Asset Manage- company plans a repositioning that would boost the return to ment for $215 million. nearly 5%. The 223-unit Wimbledon, at 200 East 82nd Street, drew The Wimbledon, which is nearly fully leased, was developed interest both from apartment operators and from redevelopers in 1980. J.P. Morgan has poured about $15 million into renova- interested in converting the units into condominiums. Rock- tions in recent years. point, a Boston investment manager acting via its new core- The units range in size from studios to three bedrooms. The plus fund, will continue to rent out the apartments. CBRE is amenities include a 24-hour doorman, a rooftop deck, a fitness center and a children’s playroom. There is 6,000 square feet of retail space, leased to Citibank through 2020. Rockpoint will house the investment in its Core Plus Fund 1, which in September completed raising $950 million of equity, including additional discretion- ary capital pledged by limited partners for co-investments. The vehicle, which shoots for a roughly 10% return, is Rock- GROWING point’s first fund that isn’t target- ing an opportunistic yield. YOUR SMALL BALANCE LOAN OPTIONS As previously reported, the fund has agreed to buy the MARKET-LEADING TERMS 475,000-sf office building at 275 INTRODUCING ARBOR’S FREDDIE MAC • $1M - $5M loans Battery Street in San Francisco for SMALL LOAN PROGRAM • Non-recourse around $305 million, or $642/sf. • Low interest rates & Eastdil Secured is representing the PARTNER WITH THE SMALL LOAN maximum proceeds TIAA-CREF.  PIONEER—NOW WITH AN EVEN seller, BIGGER & BETTER PLATFORM • Full-term interest-only options • Flexible pre-payment • 80% LTV • 1.20 DSCR & no underwriting floors for top markets • Assumable • Cash out available

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CURRENTLY ON THE MARKET REPRESENTATIVE CLOSED TRANSACTIONS

Modera Pembroke Pines Embassy Suites One Sixteen Huntington 800 17th Street Phase I 230 Keys 274,218 SF $392,000,000 Property Sale Acq. Financing & $95.5 M Property Sale All-suite Hotel Trophy Office Building 364,502 SF LEED Platinum Office Building Luxury Multi-housing Community Orange (Anaheim), CA Boston, MA Washington, D.C. Pembroke Pines, FL ON THE MARKET ON THE MARKET Closed: October 2014 Closed: October 2014

Mezzo Bayport North Distribution Center Sunbelt Grocery Portfolio Alta Alameda Station 94 Units 563,500 SF Property Sale Property Sale & Acquisition Financing Luxury High-rise Multi-housing Tower Rail-served Distribution Complex Seven Retail Shopping Centers 338-unit Class AA Multi-housing Community Atlanta, GA Houston, TX FL, GA, SC, TX Denver, CO ON THE MARKET ON THE MARKET Closed: September 2014 Closed: September 2014

For investment sales, financing, distressed debt/REO, loan sales, equity recapitalization, restructuring services, or advisory services, contact HFF. Visit hfflp.com for more information.

DEBT PLACEMENT | INVESTMENT SALES | EQUITY PLACEMENT | ADVISORY SERVICES | LOAN SALES | LOAN SERVICING November 12, 2014 Real Estate 6 ALERT Ace Hotel Available in Downtown LA Greenfield Partners is marketing a new boutique hotel in downtown Los Angeles that’s expected to trade for about $100 SEALED million. The 182-room Ace Hotel Downtown Los Angeles opened in January following extensive redevelopment of its 1920s-vin- tage building, which includes a 1,600-seat theater. Greenfield, BID a Westport, Conn., fund operator, has given the listing to JLL. The property comes with brand and management contracts with Ace Hotel of Portland, Ore., which specializes in trendy bou- AUCTION tique properties. There are a total of seven Ace hotels, including properties in London, New York, Palm Springs, Calif., and Seattle. The Los Angeles hotel is in a 13-story Spanish Gothic build- Suggested ing constructed in 1927 for United Artists. It housed offices and the movie studio’s flagship theater. The property passed through the hands of several other owners until 2011, when Greenfield Opening Bid: acquired it from Wescott Christian Center for $11 million. Greenfield launched a thorough renovation that converted the building for hotel use while restoring original architec- ture — including the theater, which features a 2,300-square- $4,000,000 foot lobby, an ornate auditorium with balcony and mezzanine levels, and private event space. It can be used for live shows, concerts and screenings, and seats can be removed to accom- modate large gatherings. 573 FULLY PERMITTED The hotel includes another 1,600 sf of function space, four ACRES IN COSTA RICA bars and restaurants, a fitness center and a rooftop pool. Hacienda Matapalo on the Southern Pacific Coast The Ace is at 929 South Broadway, in the city’s historic Broadway Theater district, which is in the early stages of revi- • Master Plan approved for 150 talization. Several upscale shops and restaurants have opened within two blocks of the Ace, and a Whole Foods supermarket residential home sites & over 900 is due next year a few blocks away. condo units, with 116 lots in Phase 1 Financials for the property were unavailable. A buyer would look to continue ramping up the hotel’s performance to • Significant infrastructure already increase its return. Marketing materials say the Los Angeles in place hotel market saw revenue per room grow at an average annual rate of 10% from 2010 to 2013.  SEALED BIDS DUE BY Heitman ... From Page 1 DECEMBER 8, 2014 it in line with the Class-A average in the surrounding River North submarket. www.carltoncostarica.com The building’s recent vintage, its high-caliber tenants and Bidders may obtain detailed information and bid long-term leases made the listing appealing to the biggest core package documents from our web site. buyers. The largest occupants are Mesirow, law firm Jenner & Block and executive search firmSpencer Stuart — all headquar- Howard L. Michaels tered in the building — and Intercontinental Exchange. Those Chairman, [email protected], 212.716.5607 four tenants occupy 76% of the space. The weighted average Kevin Swill remaining lease term is 11 years. [email protected], 917-332-2057 Buyers have proved willing to pay up for trophy office proper- Cameron Green ties in Chicago, sending prices to record highs. In June, Irvine Co. [email protected], 917.332.2056 of Newport Beach, Calif., handed over $850 million, or $654/sf, for the 1.3 million-sf tower at 300 North LaSalle Street. That ranks NEW YORK · PALM BEACH · LONDON · MADRID · DUBAI · TEL AVIV · ATHENS as the city’s biggest deal, both on an overall and per-foot basis. HFF brokered the sale for KBS Realty of Newport Beach. 

36131 CostaRica REAlert 3.5x9.indd 1 11/6/14 4:48 PM B:9” T:8.5” S:7.75”

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14_PREI_Partnership_REA_8.5x11.indd 1 8/7/14 4:45 PM November 12, 2014 Real Estate 8 ALERT Canadian Vehicle Holds First Close Toronto and Ottawa markets, but will also consider Montreal and other large Canadian markets. With leverage, the fund A Canadian apartment buyer is about halfway to the equity would have roughly C$500 million of buying power. goal for its fourth fund. Conundrum, which doesn’t use a placement agent, solicits Conundrum Capital of Toronto closed in the past two weeks capital mostly from Canadian and European institutions, but on C$123 million ($110 million) of initial commitments for is also approaching investors in the U.S., the Middle East and Q Residential Property Income Fund 4. The overall target is Asia. C$250 million. The manager has already invested the capital lined up for Conundrum shoots for a 13-15% return by acquiring apart- its first close. But some of that equity will likely be recycled ment properties from local operators and bringing their man- by putting debt on the acquired properties. Conundrum will agement up to institutional standards. It primarily targets the consider selling the fund’s holdings at some point to a private REIT that it operates under the Q Residential name. The manager seeded the REIT a few years ago with the holdings of the C$143 million Conundrum Residential Property Income Fund 2. Q Resi- dential typically gets a chance to bid on all Conundrum-owned properties before they are for- mally listed. The third fund in the series had its final close in 2012 and has fully invested its C$195.8 million of equity. Chief executive Daniel Argiros oversees Conundrum’s property purchases with chairman Gordon McMehen. Managing director Jason Currie is in charge of mar- keting. 

Got a Message for the Real Estate Marketplace? Your company’s advertisement in Real Estate Alert will get the word out to hundreds of professionals actively involved in buying, selling and managing real estate assets. For more information, contact Mary Romano at 201-234-3968 or [email protected]. Or go to REAlert.com and click on “Advertise.” This announcement appears as a matter of record only. August 2014

US$250,000,000

Lionstone Investments has formed a joint venture to invest primarily in U.S. office properties with Hermes Real Estate Investment Management.

Hodes Weill Securities, LLC acted as the exclusive financial advisor and placement agent

6M_AWZSt0WVO3WVOt4WVLWV ___PWLM[_MQTTKWUtQVNW(PWLM[_MQTTKWU November 12, 2014 Real Estate 10 ALERT Value-Added Rental Play Near Atlanta ing. The average remaining lease term is six years. The property’s strong fundamentals are likely to appeal to An investment shop is pitching four suburban Atlanta apart- core investors, while its location offers potential upside. San ment properties to value-added investors. Mateo and other Mid-Peninsula submarkets are expected to see The Class-B complexes, in Norcross, Ga., encompass 1,208 dramatic increases in rents and occupancy as the neighboring units. They are valued at about $65,000/unit, or $79 million. Silicon Valley and San Francisco office markets, both among the Investors can bid on any combination. The seller, Realty Finan- strongest in the nation, become more expensive for tenants.  cial of Wellesley, Mass., has given the brokerage assignment to Multi Housing Advisors. Puerto Rican Bank Shops Shaky Loans At the estimated value, the capitalization rate would be around 6%. A buyer could boost the return to 7.5% by under- A bank is marketing $443.3 million of distressed commer- taking renovations in order to raise rents and make the well- cial mortgages and other loans in Puerto Rico. occupied complexes more competitive with newer properties San Juan-based FirstBank is offering the 537 assets as a port- nearby. According to Realty Financial, a buyer would reap a folio, with the thinking it will appeal to institutional investors 23% return on equity by spending about $5,000/unit on such looking to establish or expand a presence in Puerto Rico. Six of improvements as upgraded appliances, flooring and fixtures. the assets are properties the bank has foreclosed on and the rest The listed properties, which were built between 1979 and are outstanding loans. 1987, are: The package is expected to trade at a steep discount. The • The 416-unit Highland Reserve, at 4200 Jimmy Carter bank’s advisor, Mission Capital, will take initial bids Dec. 9, with Boulevard. the aim of closing a sale by the end of the first quarter. • The 300-unit Highland Valley, at 4250 Jimmy Carter Bou- By balance, 62.3% of the pool consists of commercial mort- levard. gages. Land loans make up 10.5%. The bank-owned properties • The 252-unit Highland Corners, at 301 Noble Forest Drive. backed loans with an unpaid balance of $49 million, represent- • The 240-unit Highland Lakes, at One Ashley Lakes Drive. ing 11.1% of the portfolio. The rest of the debt consists of com- The occupancy rate is 94% at Highland Reserve and 97% at mercial, industrial and other loans. the three other properties. The garden-style complexes have The notes have a weighted average origination date of units with 1-3 bedrooms, swimming pools, clubhouses and fit- 2009 and a weighted average maturity of 2015. Sixty percent ness centers. are either delinquent by more than four months or already Atlanta’s rental market has had a healthy, if uneven, recovery. matured. The average balance is $826,000. From its nadir in 2009, the average occupancy rate has climbed In the wake of the market crash, regulators required 5 percentage points, to 93.1%, according to Marcus & Millichap. FirstBank to raise capital, and in 2011 it was recapitalized by Suburbs north of the city, like Norcross, have an average occu- Oaktree Capital of Los Angeles and Thomas H. Lee Partners of pancy rate of about 95%, faring much better than the southern Boston. Although Oaktree’s real estate unit is an active buyer submarkets, which have double-digit vacancy rates. of distressed debt, prospective buyers have been told it won’t Construction has picked up, with more than 7,000 units participate in the bidding.  coming on line last year and a comparable number this year. That’s opened the door for owners to polish up Class-B proper- Buyer Sought for Ore. Business Park ties and raise rents, while still offering lower rates than those on newer units.  Deutsche Asset and Wealth Management is looking to sell a sprawling business park in a suburb of Portland, Ore. JP Morgan Markets Bay Area Offices Parkside Business Center in Beaverton, Ore., has 735,000 square feet of industrial, office, flex and storage space that’s The listing of a fully leased Bay Area office complex is likely 93% leased. Bids are expected to top $70 million, or $95/sf. JLL to benefit from the strength of the nearby San Francisco and has the listing. Silicon Valley markets. The complex is at 9725 SW Cirrus Drive, about 15 miles west J.P. Morgan Asset Management is shopping the of downtown Portland. Developed in phases between 1979 and 209,000-square-foot complex at 700-900 Concare Drive in San 1989, it contains 40 single-story buildings, spread out over 52 Mateo, about 20 miles south of downtown San Francisco. Bids acres. The bulk of the space is in light industrial use (634,000 are expected to come in around $140 million, or $670/sf. JLL sf). About 53,000 sf is used for offices and seven buildings has the marketing assignment. totaling 47,000 sf are used as storage space. Developed in 2003, the property consists of two five-story There are more than 200 tenants, minimizing the risk of a sud- buildings and a small, single-story structure. Salesforce.com den plunge in occupancy. The average in-place rents are about leases all of one mid-rise building, accounting for about half the 13% below the market average. Industrial and office properties space. Other tenants include financial-services firmBertram in Beaverton and other Westside submarkets of Greater Portland Capital and two Japan-based technology companies, Rakuten generally perform well, but a buyer could consider repositioning and CapCom. A credit-union branch occupies the small build- Parkside for other uses down the line.  November 12, 2014 Real Estate 11 ALERT Carr Shops ‘Spy Tech’ Offices in Va. Systems (16,000 sf). All have invested considerably in build- outs of their space for use as data centers and to process clas- Carr Properties is offering an office building in Chantilly, sified information — known in military parlance as sensitive Va., that is well occupied by firms that work with federal intel- compartmented information facilities. Such space is typically ligence agencies. equipped with redundant power feeds and fiber-optic links to The 116,000-square-foot building, known as Independence government agencies. Center 2, is 91% occupied. It is expected to fetch bids in the Leases for less than 7,000 sf are scheduled to expire over the vicinity of $29 million, which would result in an initial annual next three years. The property’s occupancy rate is below the yield of 8% for the buyer. historical 97% average for buildings near the NRO, leaving a JLL is pitching the property to core-plus investors on behalf buyer some hope to increase revenues by leasing up space. of Carr, a developer focused entirely on the Washington-area. The Class-A building — at 15040 Conference Center Drive The building, completed in 2006, drew a number of govern- near Interstate 66, Routes 50 and 28, and the Dulles Toll Road ment contractors as tenants because it is adjacent to facilities — is about 30 miles west of Washington. It is part of the Route operated by the FBI and National Reconnaissance Office, as well 28 South/Westfields submarket, which has seen its occupancy as a Central Intelligence Agency outpost slated to open next and asking rents dip slightly amid lessening demand for space. year. But the slumping demand has largely affected older Class- The largest tenants areTechnology Management Associ- B properties, as tenants showed a preference toward newer, ates (64,000 sf), L-3 Communications (18,000 sf) and Arion higher-quality buildings. 

November 12, 2014 Real Estate 12 ALERT

Also, in April, Exor chief executive John Elkann, the heir to Cushman ... From Page 1 the Agnelli family’s investment business, added the title of chair- chief executive Glenn Rufrano in June 2013. man of Cushman. Some view that as a potential signal of greater But Forst has concluded that Cushman needs to expand to engagement by the Agnelli family in the brokerage business. remain competitive, according to people familiar with the mat- What’s more, Exor’s stock has soared 69% since the beginning ter. “We’re in a market where you are either growing or you of 2013. And in contrast to last year, when it was raising cash are standing still,” said one Cushman insider. “And there is no for the Chrysler deal, Exor now has capital available to invest. In standing still if you want to be a viable platform.” May, Elkann told reporters at an Exor shareholders meeting that Some veteran brokerage pros think Exor is nearing an inflec- the company plans to pump at least €2 billion ($2.5 billion) into tion point where it will have to either sell Cushman or commit two new investments, most likely in the services sector. more capital. “Without a doubt, if Cushman does not reinvest, The Agnelli family’s commitment to its investment in Cush- that company is dead, long term,” said one top brokerage pro. man has long been the source of speculation. Exor acquired a Rufrano, Forst’s predecessor, had gone down this same road 71.5% stake in 2007 for $625 million. Before long, the com- with Exor. A specialist in turning around troubled real estate mercial real estate market crashed, taking a toll on Cushman firms, he was hired as chief executive in 2010 with a mandate and other brokerages. Soon rumors began circulating that the to rebuild business lines crushed by the downturn. But he family was unhappy with the ill-timed investment. disagreed when Exor later insisted that Cushman upstream Exor’s €9.1 billion portfolio is dominated by two investments dividends to the parent, rather than plow them back into the — a 46.7% stake in Fiat Chrysler and a 27.1% interest in CNH brokerage. At the time, Exor was raising cash for a big play: Industrial, which manufactures trucks, construction equipment the crown jewel of its investment portfolio, automaker Fiat, was and agricultural equipment. While Cushman is Exor’s third-larg- moving to take full control of Chrysler. est holding, it accounts for only 5.1% of the portfolio’s value. Exor then installed Forst, who formerly held several top Brandon Dobell, a partner and analyst at investment bank posts at Goldman, including chief administrative officer and William Blair & Co. of Chicago, said Cushman wasn’t a natural fit co-head of its investment management division. Many outsid- for Exor’s industrial roots. “It’s always difficult for conglomerates ers viewed the appointment of an executive whose expertise to think about investing in people businesses,” he said. “There was corporate management, rather than real estate or broker- is always a tug and pull. It’s a more challenging analysis for an age, as an indication that Exor was focused on improving Cush- industrial owner. You are not buying stuff, you are buying people.” man’s bottom line in preparation for a sale or IPO. Dobell, who estimates Cushman’s worth to be in the vicinity But in the meantime, Cushman has fallen further behind of $1.6 billion, said it’s hard to get a read on Exor’s plans for the amid rising competition in the brokerage sector. It stands to brokerage. “It seems like every three or four months you hear be supplanted as the world’s No. 3 full-service brokerage by the something new, with no consistency, just rumors,” he said. pending merger of DTZ and Cassidy Turley. Those two compa- Even if the Agnelli family gives the green light to a Cushman nies had combined revenues of $2.9 billion in 2013, eclipsing expansion, it may have already missed an opportunity. Based Cushman’s $2.5 billion. What’s more, brokerage experts believe on the stock prices of CBRE and JLL, valuations for brokerages the merged company, controlled by a TPG consortium, will are much higher than they were a few years ago when Rufrano continue to expand aggressively. Said one source close to Cush- pushed for expansion. Meanwhile, other big brokerages and man: “That was a big wake-up call.” upstarts alike are also in expansion mode, making the hunt Other full-service firms are also nipping at Cushman’s heels. for talent and acquisition opportunities that much more fierce. Colliers International, right behind Cushman with $2.3 billion In fact, when Cushman was seeking to expand, it briefly con- of revenues, is seeking to expand. And BGC Partners, the parent sidered acquiring Cassidy, a firm now set to combine with an of brokerage Newmark Grubb, would take a leap forward with emerging rival.  its pending deal to buy Apartment Realty Advisors. Cushman, which declined to comment for this article, has already lost its perennial top-three spot in Real Estate Alert’s NEW DEALS ranking of sales brokers of large U.S. properties. It placed fifth for 2013, behind Eastdil Secured, CBRE, HFF and JLL. Last Minnesota Office Complex month, Cushman’s capital-markets operation was dealt another blow when star brokers Mike Winn and Tim Richey — 16-year A MetLife Real Estate Investors partnership will see an initial Cushman veterans and Denver’s dominant office team — annual yield of just over 7% on its $369 million purchase of an defected to CBRE. That left Cushman with just one remaining office park near Minneapolis. The 1.7-million-square-foot -com dominant office-sales team: the Boston crew led byRob Griffin. plex, in Bloomington, Minn., is valued at $217/sf. A 50/50 joint Some recent changes at Exor may make the company more venture between MetLife and Allstate purchased the five-building receptive to Forst’s recommendation for an infusion. In July, property last week. The complex is 93% leased. Tenants include Shahriar Tadjbakhsh, whom Cushman insiders identified as Emerson, Morgan Stanley, Oracle, Tata Consultancy Services and the driving force behind the shift away from Rufrano’s growth UBS. The seller was a partnership led bySam Zell’s Equity Group strategy, resigned as Exor’s chief operating officer. of Chicago. Cushman & Wakefield/NorthMarq was the broker.  November 12, 2014 Real Estate 13 ALERT ON THE MARKET ON THE MARKET

Multi-Family

Estimated Property Size Value Owner Broker Color (Development site) 140,000 sf of $42 million Pako Realty, Cushman & Listing consists of 24,500 sf of land containing two- 4222 27th Street, Long developable New York Wakefield story building that houses the Korea Times newspaper, Island City, Queens, space which is vacating. Pitched to multi-family developers. N.Y. Bids to be taken in early December. A residential tower would offer views of the Manhattan skyline. Development could include ground-floor retail space. Gateway and Reserve 171 units $40 million Summerset 2 HFF Two adjacent townhouse-style developments five miles at Summerset, $234,000/unit Associates, east of downtown Pittsburgh in the Squirrel Hill 1876 Parkview Yield: 5.8% Pittsburgh neighborhood. Gateway (131 units) was completed in Boulevard, 2013 and is 98% occupied. Reserve (40 units) was Pittsburgh developed in 2003 and is 100% occupied.

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November 12, 2014 Real Estate 14 ALERT Angelo Gordon Buys Industrial Bundle Ga., and one each in Lancaster, N.Y., Pico Rivera, Calif., and Pleasantview, Utah. Angelo, Gordon & Co. paid $160 million this month for 2.1 The properties in Germany are manufacturing facilities. In million square feet of industrial properties in North America Canada, there are two distribution facilities and two manu- and Europe in a sale-leaseback transaction. facturing/distribution properties.  CBRE advised the seller, CSM Bakery Solutions, an arm of giant Dutch bakery supplier CSM. New York-based Angelo Big NH Shopping Center Hits Market Gordon acted via one of its AG Net Lease funds. CSM will continue occupying the properties under absolute net leases, Emmes Asset Management is offering a one-time New with initial terms of 10-20 years and annual rent bumps. Hampshire mall that was recently redeveloped into a gro- The package encompasses eight distribution centers and cery-anchored shopping center, with expectations it could 10 manufacturing or flex properties. Eleven of the properties, fetch roughly $47 million. totaling 1.1 million sf, are in the U.S., spread across 10 mar- A buyer paying that price for the 265,000-square-foot kets. Three properties in Germany account for 800,000 sf, and Shoppes at Bedford Mall would see an initial annual yield four in Canada total 164,000 sf. of about 6%. It would be the highest price paid for a New Marketing materials said rents would provide $13.5 million Hampshire retail property since the financial crisis. HFF edged of net operating income in the first year, and that CSM would out Cushman & Wakefield for the brokerage assignment. retain the right of first offer should the buyer later seek to sell. The property, anchored by The Fresh Market, Kohl’s and CSM produces, supplies and distributes ingredients and Marshall’s, is 96% leased. A Whole Foods Market and Han- baked goods worldwide. It operates 61 facilities with 8,500 naford Supermarket are slated to open soon on adjacent employees in 28 countries. Rhone Capital, the New York pri- land. Those stores, which aren’t being offered, would func- vate equity arm of Rhone Group, acquired CSM last year. tion as shadow anchors, drawing customers to Shoppes at The U.S. properties in the portfolio include six distribu- Bedford Mall. tion facilities, in Houston, Salt Lake City, North Las Vegas The property is situated along South River Road, just and Reno, Nev., and Rancho Cordova and Union City, Calif. south of Manchester, N.H., and about 55 miles north of Bos- Five properties are used for manufacturing: two in Tucker, ton. It was built as a mall in the 1960s, but struggled in the years before Emmes bought it in 2007 as part of a portfolio. During the 2007-2009 recession, New York-based Emmes put off its plans to redevelop the mall into more of a power center. The renovation, begun in 2010, involved demolishing a large portion of the existing structure. More than half the current space is new construction. 

Plugged NEW DEALS Portland Office Building A partnership including ScanlanKemperBard has acquired a in? 208,000-square-foot office property in Portland, Ore., for $40 million, or $192/sf. The capitalization rate is roughly 5%. The Commercial Mortgage Alert, seller was local investor John Beardsley. CBRE arranged the sale, which closed Oct. 24. The 73%-leased building, at 309 SW the weekly newsletter that Sixth Avenue, is known as the Historic U.S. Bank Block. Ten- tips you off to opportunities in ants include Oregon Entrepreneurs Network, Sitka Technology, real estate finance and securitization Small Business Innovations and Thetus. ScanlanKemperBard, based in Portland, made the purchase in partnership with an you won’t see anywhere else. unidentified institutional investor. They plan to spend some $3 million on renovations. 

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stake and operates the property. Blackstone ... From Page 1 At the time of the recap, the market’s fundamentals were from AAA. It’s in a prime location near the intersection of Pow- on the rebound from the downturn, and they’ve been improv- ell and Market Streets, within a few blocks of the Union Square ing ever since. Hotels in the San Francisco/San Mateo market retail district and the Financial District. have posted double-digit growth in revenue per room in each Rockpoint Group of Boston and Dallas-based Highgate Hold- of the last four years as both occupancy levels and room rates ings purchased the property in 2006 for $220 million. They have grown steadily. For the first nine months of this year, the spent another $30 million in 2010 for a major renovation and average occupancy rate was 85.1%, up from 83.6% in the same brought in the Wyndham flag. But an effort to sell the hotel in period last year. Room rates grew 11.2% to $206.53, pushing 2011 failed, and the partnership struggled to refinance a $211.5 revenue up by 13.1% to $175.69/room, according to STR. Rev- million mortgage that matured in early 2012. enue per room is expected to continue rising due to growing That’s when Blackstone stepped in with a $65 million capital demand and a limited construction pipeline. infusion, taking a 75% ownership interest, while Rockpoint and Financials were unavailable for Parc 55, which was com- Highgate put up another $10 million of equity. The recapital- pleted in 1984. Since the 2010 renovation, it’s undergone ization valued the property at $235 million, or $230,000/room. another $5 million in improvements. The property has more The new partnership obtained a $152 million loan fromArchon than 30,000 square feet of event space, fitness and business Group and paid off the matured debt. Highgate has a small equity centers and three restaurants and bars. 

MARKET SPOTLIGHT Manhattan Hotels  It’s a banner year for sales, with $2.2 billion of deals already closed. That’s the most since 2006, when $3 billion of properties traded hands.  Despite a spike in supply over the past two years, revenue per room continues to grow, leaving buyers confident.  Eye-popping valuations are being fueled in part by conversion plays. Some buyers are willing to pay up to win auctions because they see upside from converting some rooms into residential condos. On the Market Hit No. of Estimated Value Property Seller Market Rooms ($Mil.) (Per Rm.) Broker Manhattan at Times Square Rockpoint, Highgate, Goldman October 689 $500 $726 Eastdil Secured New York Marriott East Side Morgan Stanley October 655 390 595 JLL NYLO Lehman Brothers November 291 200 687 Eastdil Secured Ace Hotel New York (leasehold) GFI Development, Dune Real Estate September 269 180 669 JLL Gramercy Park Hotel RFR Realty October 186 150 806 Eastdil Secured Recent Deals No. of Sales Price Property Buyer Closed Rooms ($Mil.) (Per Rm.) Broker Waldorf-Astoria Anbang Insurance (Pending) 1,425 $1,950 $1,368 (None) Sofitel Keck Seng Investments October 398 265 666 Eastdil Secured Hotel Carter Chetrit Group (Pending) 600 190 317 Eastdil Secured Fairfield Inn & Suites Midtown Shidler Group September 239 135 566 Eastdil Secured Hampton Inn United Nations KFH Capital Investment October 148 80 543 (None) Holiday Inn Express Herald Square KFH Capital Investment October 135 66 490 JLL Comfort Inn Manhattan Meadow Partners September 132 50 379 Cushman & Wakefield November 12, 2014 Real Estate 16 ALERT

THE GRAPEVINE worked for two years. He previously ects. He was previously senior project spent some 13 years at Long Wharf manager for regional development at ... From Page 1 Real Estate of Boston, starting when the Port Authority of New York and New it was the real estate arm of Fidelity Jersey, where he handled real estate Midtown office tower, the General Investments. and transportation-infrastructure proj- Motors Building, fetched $2.8 billion. ects, including the planned Moynihan Offers for a trophy office tower that Station. Patrinely, based in Houston, Acquisitions pro David Kessler has been Invesco Real Estate is shopping in develops office and residential proper- named president of Blesso Properties, downtown Houston are close to the lofty ties throughout the U.S. a New York development firm. Kes- market expectations of $525/square foot, sler, who started Monday, came from or nearly $440 million, and bidding con- Jon Campos joined Investcorp this New York investment shop Waterbridge tinues. Among those believed to be chas- month as an associate vice president in Capital, where he spent the past four ing the 837,000-sf building at 1000 Main New York. He was previously a senior years as director of acquisitions. He Street: Clarion Partners, Heitman, Hines fund accountant at Brookfield Asset previously worked at JSRE Acquisi- (apparently teaming with Korean inves- Management, where he spent the last tions of New York, the real estate family tors), J.P. Morgan, KBS Realty, Metzler three years. Prior to that he worked at office ofJoseph and Jacob Safra. Blesso Real Estate and some foreign investors. Deloitte & Touche, dealing primarily focuses on residential, retail and hotel The offering is benefiting from a drought with real estate clients. projects in New York and Panama. It of trophy listings in red-hot Houston. was founded in 2001 by chief executive Only one other office property worth at Brokerage Savills Studley wants to add Matthew Blesso. least $200 million has traded in the city a staffer in New York. It’s looking for this year, and there are no others on the someone with 5-10 years of experi- Veteran asset manager Brian Collins block. CBRE is advising Dallas-based ence in acquisitions, brokerage or asset has joined Clarion Partners as a senior Invesco, which acquired the building two management. Duties include helping vice president in Boston. He started years ago for $335 million, or $400/sf. with due diligence, underwriting and this month, supervising the New marketing of office, retail and multi- York investment manager’s Boston Patrick Higgins will join Patrinely family properties in Greater New York. portfolio. Collins joined from Davis Group of New York this month as a vice Experience in the New York market isn’t Cos., a Boston fund shop where he president to work on development proj- required.

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