Real Estate Alert

MAY 6, 2015 Banks’ Bad-Debt Tally Dropped 33% in 2014 Continuing their long cleanup from the downturn, large U.S. banks slashed their 11 TOP BANKS IN DISTRESSED ASSETS holdings of distressed commercial real estate assets by about a third last year. The 1,000 banking companies with the largest commercial real estate portfolios 2 Suburban Chicago Rentals Available cleared $12.4 billion of nonperforming loans and foreclosed properties from their Trepp Bank Navigator. 2 Sacramento Office Bundle for Sale books during 2014, according to regulatory data compiled by At yearend they held $25.9 billion of such troubled assets, down 32.5% from $38.3 2 Waterman to Buy 2 NY Offices billion the previous year. The portion of the banks’ total real estate holdings listed as nonperforming or in 3 Walker & Dunlop Maps Broker Plan foreclosure dropped to 1.8% by Dec. 31, from 2.9% a year earlier. That measure of 4 Goldman Lists Downtown Tampa Hotel distress had peaked at 8.6% in 2010. But there’s still some work to be done to reach a normal level of less than 1%, said Trepp managing director Matt Anderson. 6 Sale-Leaseback Play in Oklahoma City “Multi-family has already recovered, but that’s not quite the case for the other areas of commercial real estate lending,” Anderson said. For the entire banking 6 Chicago Industrial Package Available See BANK on Page 10 6 JP Morgan Showing NJ Office Building 8 Value-Added Virginia Offices Listed Industrial REIT Puts Portfolio Back on Block Industrial Income Trust 8 Suburban Boston Offices on the Block After backing off plans for an initial public offering, is once again shopping its massive warehouse portfolio. 8 Apartment Fund Corrals Capital The 57.6 million-square-foot package has a whisper price of roughly $4.5 billion, which would indicate a 5.2% capitalization rate. 8 Coach Warehouse Up for Grabs Because the buyer would have to take all 283 properties, the potential field of 19 West Coast Shopping Centers Pitched bidders is limited to giant investors. Among those in the hunt: Blackstone of New York, Brookfield Asset Management of Toronto and a partnership between two Sin- 23 Capital Sought for High-Yield Fund gapore investors — Global Logistic Properties and sovereign wealth fund GIC. Mon- treal-based Ivanhoe Cambridge also took a look, but has dropped out. 23 Well-Leased Pittsburgh Offices for Sale Eastdil Secured and CBRE are running the marketing campaign for Industrial 23 MARKET SPOTLIGHT Income, a nontraded REIT sponsored by Denver-based private equity firmBlack Creek Group. The offering is the latest twist to a long-running saga. The REIT tapped Bank of THE GRAPEVINE See BLOCK on Page 19 New York Life Real Estate Investors has NY Holiday Inn Seen as Redevelopment Play hired veteran capital-raiser Paul Behar as senior director and head of business An investment group is marketing a 597-room Holiday Inn hotel in Midtown development. He started work April 20 in Manhattan that could be redeveloped to include residential units. Manhattan, reporting to senior manag- The Holiday Inn 57th Street is expected to trade for about $300 million, or ing director Mark Talgo, who heads the slightly more than $500,000/room. That valuation is boosted by a 378-space under- insurer’s real estate unit. Behar joined ground garage that generates substantial revenue. The owner, a group of individual from Hunt Cos. of El Paso, Texas, where investors, has given the listing to Eastdil Secured. he was a senior vice president focused on The 37,650-square-foot parcel could be redeveloped into a combination of hotel capital formation and acquisitions. He rooms and residences. The existing hotel has no brand or management contracts, so previously worked at Tuckerman Group, a buyer could bring in a high-end flag. which Hunt acquired in 2013. The property is at 440 West 57th Street, between Ninth and 10th Avenues. It encompasses a mid-block tower with 18 floors that faces 57th Street and an attached Pacific Industrial, a warehouse specialist 10-story building to the rear that faces 56th Street. The hotel, completed in 1964, in Southern California, hired Kevin Rice has undergone $6.5 million of renovations since 2011. The amenities include a See GRAPEVINE on Back Page See HOLIDAY on Page 19 May 6, 2015 Real Estate 2 ALERT Suburban Chicago Rentals Available four tenants, including University of Phoenix and the state Judicial Council. It’s at 2860 Gateway Oaks Drive in the Natomas An investment team is marketing five apartment complexes submarket, about five miles north of downtown Sacramento. in suburban Chicago with a combined value of about $285 mil- The other two buildings, with a combined 148,000 sf, are at lion. 101 Creekside Ridge Court and 1101 Creekside Ridge Drive in The garden-style properties, which encompass 1,876 units, the Roseville submarket. They are 89% leased. Tenants include are 95% occupied. Investors can bid on any combination of the Adventist Health and PMC Sierra. Class-A and -B complexes, all in Illinois. HFF is representing Sacramento is slowly emerging from the recession. Its office the seller, a partnership between Friedkin Realty and Jackson occupancy rate, which slipped below 80% in 2010, has inched Square Properties, both of San Francisco. up to 83%. Although heavily dependent on state agencies, the Two of the properties are in Bloomingdale. The 360-unit market is portrayed by local pros as an alternative for compa- Camden at Bloomingdale, which was built in 1991, is at 38 nies priced out of the Bay Area and Silicon Valley, roughly 70 Glenwood Drive. The 342-unit Stratford Place, developed in miles southwest. 1990, is at 232 Butterfield Drive. The portfolio also includes the 416-unit Aspen Place, at Waterman to Buy 2 NY Offices 826 Terrace Lake Drive in Aurora (built in 1987); the 384-unit Parkway Commons, at 565 Gunderson Drive in Carol Stream A Waterman Interests partnership has struck a deal to buy (built in 1972); and the 374-unit Meadows at River Run, at 350 two recently renovated office buildings in Midtown Manhattan. Whitewater Drive in Bolingbrook (built in 2001). The New York investment shop and an unidentified Although older than many Class-A properties, the listed institutional backer agreed to pay about $117 million for a complexes have attractive amenities, including pools and fit- 118,000-square-foot building at 142 West 36th Street and a ness centers. The units have faux wood floors and balconies or 92,000-sf building at 234 West 39th Street. The price works out patios. to $557/sf. Chicago’s strong economy has strengthened the region’s Eastdil Secured is brokering the sale for a joint venture apartment market. The 95.7% average occupancy rate is pro- between local firmHerald Square Properties and Boston fund jected to tick up this year, according to Marcus & Millichap, operator Davis Cos. The pair bought the buildings at yearend even though thousands of units came on line in the past two 2013 and renovated them last year. Updates included reconfig- years. uring the lobbies and modernizing building systems. A boom in hiring by technology and other firms has fueled Each property is 96% occupied by a mix of small tenants. demand for high-end rentals in downtown Chicago, causing Roughly 75% of the leases roll over within five years. There is a rents to rise. In turn, some tenants priced out of downtown combined 25,000 sf of street-level retail space. have fled to the suburbs, driving up rents there by an average of The 16-story building at 142 West 36th Street is between 3% annually over the past three years. Broadway and Seventh Avenue. It was built in 1922. Tenants include I. Buss & Allan Uniform (8,000 sf), New Amsterdam Sacramento Office Bundle for Sale Coffee & Tea (7,500 sf), Giliberto Designs (7,000 sf) and Weinman Bros. (7,000 sf), according to CoStar. Seven Sacramento office properties are hitting the block, The 10-story building at 234 West 39th Street, between Sev- with expectations that bids will come in around $120 million. enth and Eighth Avenues, was built in 1921. Tenants include Deutsche Asset & Wealth Management has hired DTZ to mar- Samuel Dong (17,000 sf), Sequin (8,000 sf) and Central Park ket the 631,000-square-foot package. At the $190/sf estimated West Sportswear (4,000 sf). The property has 30,000 sf of avail- value, the initial annual yield would be around 7.25%. Investors able air rights, which the buyer could use to build additional may bid on the portfolio or any of three clusters in separate stories or could sell to a nearby owner. The lease for the top submarkets. floor expires in 2017, making that a likely time to expand. The buildings are 89% leased. They were developed between Waterman is led by Philip Waterman 3d, a former executive 1999 and 2003 and have been owned by Deutsche, through its at Reckson Associates and Tishman Speyer who founded the RREEF funds, since 2006. shop in 2007. The firm targets office properties in New York Four of the buildings, totaling 366,000 sf, are in the Ran- City. cho Cordova submarket. They were developed in 2000-2001 at 10730, 10734 and 11120 International Drive and 3241 Kilgore Drive. The International Drive buildings are fully occupied, Unless your company holds a multi-user license, it is a violation of while the 103,000-sf building on Kilgore Road is only 52% U.S. copyright law to photocopy or reproduce any part of this leased.

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