MARCH 21, 2016 WWW.REALESTATEFINANCEINVESTMENT.COM The definitive source on commercial property sales, financing and investment

FINANCING BIOMED DEAL D.C.-AREA OFFICE CITIGROUP, GOLDMAN SALE HIGHLIGHTS DEMAND FOR ROLL OUT UNIQUE LOWER RISK, GOV’T- SINGLE-BORROWER CMBS TENANTED OFFICES BY ELIZABETH BLOSFIELD Acquisition fi nancing also includes about $971m BY SHERRY HSIEH of mezzanine debt totaling $2.74bn. Mission Ridge Offi ce Although the collateral is also seen less Complex, Chantilly, Virginia Citigroup and Goldman Sachs have launched frequently in CMBS, market pros are confi dent CGGS 2016-RND, a single-borrower that the deal can get done at good levels. “I commercial mortgage-backed securities deal wouldn’t call lab [properties] as traditional offi ce with an unusual structure that will be used to [properties], but some investors like lab space help fi nance Blackstone Real Estate Partners VII’s more. Your tenants are usually long term and acquisition of BioMed Realty Trust. you have less rollover concerns because of the Th e $1.8bn off ering is comprised of a fi ve- type of space, oft en built to suit, these tenants year, fi xed-rate interest-only loan totaling $1.1bn need,” pointed out an analyst. Th e Blackstone that is secured by the fee and leasehold interests participation is also a benefi t. “We’ve seen other 8LIVIGIRXWEPISJE'PEWW%SJ½GI in 30 lab offi ce properties and one multifamily non-traditional deals get done, and you have complex in suburban Washington, D.C., property as well as a two-year, fl oating-rate Blackstone [Group] as the sponsor so that can be that is 94% occupied by long-term, interest-only $658m loan secured by the fee and a plus to the deal,” the lawyer explained. ½VWXKIRIVEXMSRJIHIVEPKSZIVRQIRX leasehold interests in 28 lab offi ce properties. CGGS 2016-RND holds two separate loan ERHTVMZEXIWIGXSVGSRXVEGXSVXIRERXW “It’s [the structure] defi nitely not what I would pools that collectively represent a substantial MWTYXXMRKXLIWTSXPMKLXSRERMRZIWXSV call common. You have two separate collateral portion of BioMed’s stabilized lab offi ce WLMJXXS[EVHKSZIVRQIRXSGGYTMIH pools and you have a fi xed-rate and fl oating-rate portfolio. Th e fi xed-rate portion is collateralized SJ½GIFYMPHMRKW±8LIVIEVITVSFEFP] component to the loans,” said a lawyer specializing by properties totaling 4.6m square feet, with ½ZIXSWIZIRFMHWSREZIVEKIJSVIZIV] in structuring single-borrower transactions. the largest concentrations in San Diego and KSZIVRQIRXHIEPXLEXLMXW Th e Blackstone Group-owned fund completed San Francisco, according to Fitch Ratings. Th e the market, so there is its $8.8bn acquisition of BioMed, a public real lab/offi ce properties are leased to 98 unique clearly more capital than estate investment trust that owns, manages and life science tenants, including Ironwood EZEMPEFPISJJIVMRKW[LMGLMW 11 develops offi ce and laboratory space, in October. Pharmaceuticals, Ionis Continued on page 11

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markets, such as Newport Beach, Beverly Hills, Timbers Resorts taps into Kauai market the San Francisco Bay Area and Scottsdale. With this in mind, it tracks historic pricing with hotel and resi development and absorption data in key markets through- out California, as trends in Hawaii have his- Timbers Resorts, a Carbondale, Colo.-based ownership opportunities. The hotel portion is torically aligned with the strength of activity in company that develops, sells and operates lux- in the design stages, with the full, $800m devel- California and throughout the West Coast. ury residence clubs and boutique hotels and opment set for delivery in 2020. “What we’ve seen in the last three years is that resorts worldwide, is seeing strong opportuni- Timbers sees a need for new development, real estate development activity in California ties for development in the Hawaiian island of particularly along the oceanfront, as demand in has gone up 15.4%, particularly residential Kauai. Kauai’s market continues to strengthen, while development, which indicates that the market “Hawaii is a tough market to crack, which is other markets throughout Hawaii have begun to is going the right way,” Cuthbertson said. “Some why we’ve been very measured and judicious in see a pullback in demand due to over-develop- of the biggest transactions that have happened what we pursue there,” said CEO Greg Spencer. ment, he added. in Kauai have happened just recently with tech “Kauai in particular has had very little develop- “One thing we’ve noticed about Hawaii is that professionals, mainly from Silicon Valley and ment. It hasn’t seen a new multifamily building each island has its own micro-economic con- the Bay area, looking for an escape.” since 2010, so there is certainly a vacuum that ditions,” said Michael Cuthbertson, managing Despite negative global headwinds that could we are seeking to fill by providing new product director of development. “In Oahu, for example, affect buying activity in certain parts of the U.S., to a market that hasn’t had any in a long time.” developers are starting to pull back a little on a Timbers remains bullish on Hawaii’s market The firm’s first Hawaii deal involves trans- couple of the large towers that were in planning in 2016. “What we’re seeing is the strength of forming a 450-acre stretch of land into a new because of the saturation in that market. There’s the Hawaii recovery really coming into its own oceanfront resort named Hokuala that will not the same competing factor in Kauai, because right now. It’s still on the upswing,” Spencer said. include a private residence club, luxury whole very little is on the table to be built right now. We “There are definitely some headwinds out there ownership residences, a retail shopping village haven’t seen any new entries into the condo mar- globally, but we’re trying to alleviate any risk and a boutique hotel. Construction has already ket in the last 25 years that are oceanfront, and by providing fresh product on an island that begun on the first phase, the Timbers Kaua’i oceanfront property is virtually irreplaceable.” is starting to get a lot of traction. We feel good - Ocean Club & Residences, which comprises The firm expects to see buyers of its luxury about the resiliency of our product and Hawaii’s luxury homes offering fractional and whole residences coming mostly from West Coast market as a whole.”

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Bridges Ventures is looking for commercial sector knowledge—as evidenced by its “We’ve seen a major uplift in value over real estate transactions in emerging U.K. development of a portfolio of care homes in XLITEWX]IEVSVWSERHEVIFIRI½XMRK locations and niche sectors that are affected partnership with Castleoak. from having bought before many other by changing demographics, including 8LI½VQ[EWEPWSIEVP]XSWIIXLI MRWXMXYXMSRW²6MRKIVEHHIH±8LIVIMWELYKI healthcare, education, small businesses and potential for affordable housing development shortage of housing in London, particularly affordable housing. The London and New in London, harnessing the impact of the EXXLIPS[IVIRHSJXLIQEVOIX² =SVOFEWIH½VQ[LMGLVIGIRXP]WI[IHYT Crossrail project (now the Elizabeth Line). One of its more notable recent deals was another £57m of transactions, is currently XLIEGUYMWMXMSRSJ1MHHPIQEVGL3J½GI4EVO investing via its third dedicated property EWUYEVIJSSXSJ½GITEVOGPSWIXS fund, Bridges Property Alternatives Fund III. 'SZIRXV]GMX]GIRXVI8LI½VQEGUYMVIHXLI Bridges raised £212m for the fund, holding a property via a joint venture with Evanacre, ½REPGPSWMRKMRQMH with the goal of redeveloping it and leasing 8LI½VQKSXMXWWXEVXMRMRXLI to small- to medium-sized businesses. venture capital/private equity sectors. Coventry, which is one of the more deprived Having invested successfully in a number areas of the U.K., could see the creation of of property-backed business, it created a QSVIXLERNSFWXLSYKLXLI½VQ´W[SVO property fund management business in on the property, Ringer noted. 2009. Bridges was able to acquire Middlemarch “Everything we do at Bridges has a for about half of its estimated replacement ½RERGMEPVIXYVRERHEWSGMEPFIRI½X²WEMH cost of about £160 per square foot. Despite Simon Ringer, partner and head of property ERSFZMSYWRIIHJSVVIRSZEXMSRXLI½VQ funds. “We’re investing in underserved areas liked the property’s location—which is of the country, creating jobs and bolstering less than a mile from a major road that XLIPSGEPIGSRSQ]²*VSQXLIWXEVX&VMHKIW has recently been affected by a huge believed that it could generate both market construction project. “The buildings are returns and impact; Ringer says that its early HMJ½GYPXXSVIEGLRS[FYX[IORS[XLEXMR funds have seen internal rates of return .YP][LIRXLI[SVOWEVI½RMWLIHERHXLI above the market norm. Bridges sold 158/170 Edmund Street, VSEHWEVISTIRMX[MPPFIEHMJJIVIRXWXSV]² Bridges aims to complete deals on Birmingham, U.K., in December 2014 Ringer said. Once the building is leased, an off-market basis, often working with to F&C UK Property Fund for £11.65m Bridges believes the value will be closer to TEVXRIVW[LSLEZIWTIGM½GQEVOIXSV after a two-year hold. £200 per square foot.