Real Estate Alert
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MARCH 18, 2015 Trinity Church Weighing Bids on NY Portfolio Trinity Church quietly took initial bids last week on the leasehold interests in four 2 Office Fund Lines Up $300 Million Manhattan office buildings valued at more than $1 billion. The properties, in the Hudson Square submarket, encompass 2 million square 2 Upgraded Dallas Offices on the Market feet that are 98% occupied. CBRE is marketing them as a package. 2 High-End Apartments Offered in Austin Market pros think the portfolio could sell for up to $1.25 billion, or $625/sf. Based on estimated net operating income of roughly $45 million, the buyer’s initial 3 Grocery-Center Bundle Up for Grabs annual yield at that valuation would be 3.5%, in line with that of other well-leased office properties in Manhattan. 4 Listed Complex Could Be Expanded The in-place rents are well below the average market asking rent. That means a 6 Boston Lab Building on the Block buyer should be able to boost its return as leases roll over. Average asking rents in Hudson Square climbed $13.37/sf last year, to $71.45/sf, according to CBRE. 8 Senior Pros Eyeing Later Retirement Buyers of leasehold interests in Manhattan typically pay monthly rent on the underlying land over a 99-year lease. But one source said Trinity is seeking 8 Single-Family Rentals Offered in Fla. See TRINITY on Page 12 8 Equity Needed for NY Rental Project 10 Offices Near Boston Shopped High-Yield Funds Thriving Amid Bull Market 10 Apartment Fund Holds Final Close Many key metrics are on the rise for high-yield real estate funds. Real Estate Alert’s annual review of the fund sector found increases in the number 12 NEW DEALS of active commingled vehicles (up 4% from a year ago, to 440), the projected average fund size (up 6%, to $643 million), the number of individual fund operators (up 2%, 15 MARKET SPOTLIGHT to 368) and the aggregate amount of equity being solicited (up 10%, to $279 billion). “There’s a lot of capital out there chasing real estate today,” saidTimothy Kessler, principal of FPL Consulting of Chicago, which tracks public pension commitments THE GRAPEVINE to real estate vehicles. The biggest operators continue to dominate capital-raising, with just 15 manag- Joseph Szabo is returning to Tishman ers accounting for more than one-third of all commitments. But the buoyant mar- Speyer after spending less than a year at ket is also providing opportunities for smaller shops. another New York firm,Fisher Brothers, The fund review is in a 40-page supplement to this issue. It includes a master list as managing director of global operations. of funds, a breakdown of vehicles by type, and lists of canceled or postponed funds He left Tishman last May to oversee prop- and funds that fell short of their equity target. erty management for Fisher’s commercial portfolio in the city, including capital proj- Value-Added Pennsylvania Portfolio on Block ects and staffing. It’s unclear what Szabo’s new title and responsibilities will be at A DRA Advisors partnership is giving value-added investors another crack at a Tishman. He previously was a managing 1.6 million-square-foot portfolio of suburban office properties in Pennsylvania. director of operations, overseeing assets in The 29 Class-A buildings are valued at up to $200 million, or $125/sf. At that Brazil and China and day-to-day opera- price, a buyer of the entire package would have an initial annual yield of 9%. But tions at the Rockefeller Center complex in investors also have the option of bidding on any of four clusters of properties. Manhattan. He’ll report to Tom Madden, DRA, a New York fund shop, and its partner, Brandywine Realty of Radnor, a senior managing director appointed Pa., listed the portfolio last summer with CBRE, but no deal was struck. This time in January as global head of property around, they have tapped Cushman & Wakefield as their advisor. Bids are expected management for Tishman’s 99 million to be due in late April. square-foot portfolio. The portfolio is being pitched as a leasing play. The occupancy rate is 86%, with most of the vacancies concentrated in a handful of buildings. The net operating Meanwhile, Tishman Speyer’s previous income is just under $18 million. global head of property management, The buildings, which were constructed between 1970 and 2003, are either in See GRAPEVINE on Back Page See PENNSYLVANIA on Page 10 March 18, 2015 Real Estate 2 ALERT Office Fund Lines Up $300 Million 2011, when the downtown area was lagging behind the recov- ery of other major office markets in the city and the nation. HFF HighBrook Investment, which invests in office properties, has advised the seller on that deal, a partnership led by Blackstone, completed raising $300 million of equity for its second fund. which had acquired its stake via its 2007 takeover of Chicago- HighBrook Income Property Fund 2 will shoot for a 15% based Equity Office Properties. return via acquisitions, mostly in secondary markets. Targeted The Invesco team spent $11.5 million on renovations that areas include Atlanta, Charlotte, Dallas, Denver, Phoenix and were completed last year. They included a makeover of the Southern California. property’s 15-story central atrium, which previously had an The fund also can buy distressed debt with an eye toward ice-skating rink surrounded by retail space that included fast- taking over the underlying collateral. With leverage, it has food outlets. The rink was replaced with an indoor urban gar- some $750 million of investment power. den with fountains, tables and seating, providing more appeal New York-based HighBrook began marketing the vehicle for office tenants, and the retail space was upgraded to include early last year and lined up $145 million of initial equity a few gourmet coffee and food shops. months later. The final close was held this month. Prices have appreciated in the central business district as The investment shop was founded in 2010 byBrian Carr and Dallas’ economic recovery has accelerated — and as proper- David O’Connor. Carr, who is executive chairman and manag- ties have been spruced up. Many buildings had grown out- ing partner, previously worked on Morgan Stanley’s property dated as upgrades were deferred. Institutional investors, such funds. O’Connor, who is nonexecutive chairman, had co- as Invesco, that snatched up buildings at discounts during the founded High Rise Capital, a now-defunct hedge fund operator downturn have increasingly invested in improvements that that focused on real estate securities. local pros say are helping to revive the downtown area. Robert Giusti, who joined the firm in 2012 as vice president and Plaza of the Americas is at 600-700 North Pearl Street, at was recently promoted to partner, oversees acquisitions nation- San Jacinto Street. It’s adjacent to a DART station and within ally. Ed Gargiulo is principal and director of asset management. the Dallas arts district, a focal point of the city’s downtown The company raised its first fund in 2012 and has fully revitalization effort. invested its $230 million of equity. HighBrook’s overall portfolio encompasses 6.5 million High-End Apartments Offered in Austin square feet of commercial space. Office space accounts for all but one of its holdings. A developer is shopping an amenity-rich luxury apartment complex in Austin. Upgraded Dallas Offices on the Market The 302-unit RiverView was completed in 2013 and is 92% occupied. Bids are expected to come in around $76 million, or After picking up a downtown Dallas office complex during just over $250,000/unit. That would translate to a capitalization the slump and renovating it, an Invesco Real Estate partnership rate of about 5%. HFF is representing the owner, CDK Realty of is marketing the property to value-added investors. Dallas. The 1.2 million-square-foot Plaza of the Americas is expected The four-building complex, at 13000 East Riverside Drive, to fetch about $150 million. A buyer would work to lift its 74% is alongside a new boardwalk on the shore of Lady Bird Lake. occupancy rate. The pitch is that with the recent upgrades, the Two five-story buildings stand closest to the lake, with towers property is well-positioned to benefit from improving condi- of nine and 11 stories rising behind them. tions in the city’s central business district. The units have 1-3 bedrooms and condominium-style fin- At the estimated value of $123/sf, the initial annual yield ishes: granite countertops, wood flooring, walk-in closets and would be about 7%. CBRE is the broker. solar window shades that dim as the day gets brighter. Most Investors are being told that several big tenants have units have balconies with views of the lake. significant time left on their leases, providing stability while a The property’s numerous amenities are aimed at the young buyer works to fill the vacant space. Major tenants includeJ . P. professionals driving Austin’s high-end rental market. The resort- Morgan (89,000 sf until 2022), law firmThompson Coe (71,000 style pool has cabanas and towel service. There’s a fitness center sf until 2021) and Continental Casualty (45,000 sf until 2023). offering classes and personal trainers. A courtyard has a waterfall, The marketing campaign also highlights the opportunity to lounge seating, an outdoor television, barbecues and fire pits. raise rents, as 20% of the leased space rolls over within three The developer incorporated several “green” features, includ- years. In-place rents on that space are 21% below the level of ing a rainwater capture system, energy-efficient windows and recently signed leases at the building.