Archive for June, 2011

Industrial Players All Smiles at I.con Conference

Sunday, June 26th, 2011
 
Industrial real estate investors, developers and brokers are in a buoyant mood these days, a fact reflected by a record crowd of some 300 industry pros who attended the recent two-day NAIOP I.con conference in Long Beach, Calif.
 
This year’s conference attracted some of industrial real estate’s heaviest hitters, including Jack Fraker, vice chairman and managing director of investment properties at CB Richard Ellis, Jim Dieter, executive vice president /industrial operations/brokerage at Cushman & Wakefield and Craig Meyer, managing director and head of industrial and logistics services at Jones Lang LaSalle.
 
The event kicked off with a bang, addressing what has become the most popular topic expected to impact the industrial market in the years ahead: the widening of the Panama Canal, which is scheduled for completion on the canal’s 100th anniversary in 2014.
 
The wider canal will accommodate larger ships, and many pundits believe that will reroute more trade from West Coast ports directly to their East Coast brethren. In advance of the canal’s opening, U.S. logistics and trading patterns have already begun to shift, and West Coast, Gulf Coast and East Coast ports are in a pitched battle for the business ahead.
 
Curtis Spencer, president of logistics consulting firm IMS Worldwide, chaired a panel including representatives from three of the country’s largest ports. Spencer noted that recent trends are tending to throw cold water on earlier predictions of the Panama Canal’s influence as a true “game changer” for U.S. logistics. “It was cheaper going by water (Asian goods moving directly to the East Coast through the Panama Canal) before the recession, but that’s not the case anymore,” said Spencer.
 
There are several reasons for the change, he noted, including reduced shipping speeds to save fuel (so-called “slow steaming”), rising fuel costs, environmental concerns and time to market versus costs.
 
The real battleground, according to Spencer, will be in the U.S. heartland, where retailers coordinate the increasingly complex handoff of goods arriving at logistics centers on their way to consumers.
 
Jim MacLellan, director of marketing at the Port of Los Angeles, said the port has clawed back much of its trade losses during the recent recession, and is concerned about higher fees for cargo moving through the Panama Canal and the impact of slow steaming. “The shift in trade to the East Coast and Gulf Coast ports will be gradual,” said MacLellan.
 
One of the more interesting/unusual factoids coming from the conference was the notion that pirates could tip the balance of world trade, at least in the short term. The spate of Somali pirates attacking ships coming through the Suez Canal (the primary shipping route for cargo moving from Asia/Singapore west to the East Coast of the U.S.) has “jacked up” insurance rates for shippers over the last year, said MacLellan. As a result, many Asian manufacturers are once again favoring shipments across the Pacific to the Western U.S.
 
However, there are at least two sides to every argument.
 
“I feel like I have to defend myself here,” said Kevin Burwell, director of the Virginia Port Authority. “We should call this the bring Curtis to Jesus meeting,” referring to Spencer’s belief that East Coast ports will not benefit as much from the Panama Canal widening as originally expected.
 
Burwell believes the Port of Norfolk, for example, could see half a million or more TEUs (twenty-foot equivalent units, a standard measure of cargo) from the Panama Canal after 2014. “We’re going to be a fortunate recipient of the canal’s widening, but it won’t happen overnight,” said Burwell.
 
Meanwhile, in the Gulf of Mexico, the Port of Houston is “right in the middle,” said John Moseley, general manager of trade development at the Port of Houston Authority. At the end of the day, industrial real estate location is about cost and proximity to the consumer, and the Texas economy is growing at a record clip,” said Moseley.
 
Heading another all-star panel, Gene Reilly, president of the Americas with Prologis (which just completed the largest-ever merger with AMB Property Corp.), said there is a big disconnect between today’s increasing industrial demand and consumer demand. Growth in trade across the U.S. has encouraged growth of industrial space. This is leading the recovery in the consumer spending market, which remains sluggish overall. In Southern California, for example, the industrial markets are on fire, while the state continues to struggle toward a recovery.
 
“Most people don’t think about it this way, but we are consuming more now than we were at the peak of the markets, but inventories have dropped 8%,” said Reilly. “That tells me there is still room to grow our national industrial space supply.”
 
Certainly a shortage of capital is not a concern these days. Another hot conference topic was the surprisingly high level of investment capital that is aggressively targeting both apartments and industrial. Even the dreaded “s” word is rearing its ugly head once again, with a great deal of new speculative industrial construction now underway, especially in Southern California. Attendees agreed that more larger industrial boxes are being built, ranging from 800,000 to 1.5 million sq. ft. Industrial build-to-suit activity also has risen dramatically across the U.S.
 
“I think we’re all surprised at how quickly the capital has returned,” said Ryan Gallagher, senior managing director at Holliday Fenoglio Fowler. “Six months ago it was a totally different story.”
 
David Buck, managing director at USAA Real Estate, said the firm wants to double its assets to $15 billion in the next few years, and will invest in $400 million in new development in 2011. Jack Fraker with CBRE said institutional investors have taken a renewed interest in industrial, a trend which will continue for the next two years. “Big industrial portfolios are coming back,” said Fraker.
 
Eastdil Secured senior managing director Steve Silk, whose firm brokered more than $3 billion in industrial sales in 2010, said investors have earmarked $15 billion to purchase industrial in 2011, but only $2 billion is for sale.
 
To help put the money in the ground, ProLogis’ Reilly observed that more industrial buyers will explore secondary and tertiary markets. However, he cautioned that they will be highly selective with stricter underwriting criteria.
 
Several markets were identified as the leading hot spots for industrial investment, including perennial favorite Southern California, Chicago, New Jersey/New York, South Florida, Savannah, Norfolk, Toronto, and Eastern Pennsylvania. Two notable foreign targets include Brazil and Poland.

Banks Can’t Get Enough Sr. Housing

Saturday, June 25th, 2011

Seniors housing continues to gain favor in U.S. investment circles. Further proof of that fact was served up recently as one of the largest players in the space, Senior Housing Properties Trust, entered into a new $750 million bank facility.

The Newton, Mass.-based REIT (NYSE: SNH) replaced its previous $550 million unsecured revolving credit facility, which had a maturity date of December 31, 2011. The maturity date of the new facility is June 24, 2015, and includes a borrower’s option to extend the facility for one year to June 24, 2016.

 Here’s the kicker… the number of banks participating in the new facility increased from 18 to 26 this time around. Wells Fargo Securities, LLC and RBC Capital Markets, LLC are the joint lead arrangers for the new facility.

SNH principally owns private pay senior living communities and medical office buildings located throughout the US.

The new facility is pretty generous in its terms. Interest paid on drawings under the new facility is set at LIBOR plus 160 basis points, subject to adjustments based on changes to SNH’s credit ratings. The new facility also includes a feature under which the maximum borrowing may be increased to up to $1.5 billion in certain circumstances.

Banks participating in the new facility include:

Wells Fargo Bank, N.A.       Administrative Agent 

Royal Bank of Canada       Syndication Agent 

Bank of America, N.A.       Documentation Agent 

Regions Bank       Documentation Agent 

BBVA Compass Bank       Senior Managing Agent 

RBS Citizens, N.A.       Senior Managing Agent 

PNC Bank, N.A.       Senior Managing Agent 

Sumitomo Mitsui Banking Corporation       Lender 

TD Bank, N.A.       Lender 

Capital One, N.A.       Lender 

Comerica Bank       Lender 

Citigroup Global Markets       Lender 

UBS Loan Finance LLC       Lender 

Mega International Commercial Bank (New York)       Lender 

Taiwan Cooperative Bank       Lender 

The Bank of East Asia, Limited       Lender 

Chang Hwa Commercial Bank, Ltd.       Lender 

Hua Nan Commercial Bank, Ltd.       Lender 

Bank of Taiwan, Los Angeles Branch       Lender 

Chinatrust Commercial Bank Ltd.       Lender 

Bank of Communications Co., Ltd.       Lender 

First Hawaiian Bank       Lender 

Jefferies Finance LLC       Lender 

United Overseas Bank Limited       Lender 

Morgan Stanley Bank, N.A.       Lender 

First Commercial Bank New York Branch       Lender

Canopy Commercial, CB Richard Ellis/OK Complete Merger

Thursday, June 16th, 2011
 
Canopy Commercial|Auction, a two-year old boutique investment sales firm headquartered in Oklahoma City, and CB Richard Ellis|Oklahoma have merged to expand the state’s largest full-service commercial real estate service company’s scope of services to include specialized commercial real estate investment acquisition and disposition capabilities. The merger brings one of the region’s most productive investment sales teams to the firm.
 
Canopy Commercial|Auction was founded in 2009 by Jason Little, CCIM and quickly grew to a team of four specialized investment sale brokers – Little who specializes in retail investment sales, Daniel Morris, CCIM specializing in multi-family investment sales, Will Lightfoot, CCIM, specializing in single tenant net leased investment sales, and its most recent addition, Cody Bridwell, specializing in office investment sales. The firm distinguished itself as the only regional firm specializing in accelerated marketing and auction services, with 100% of its advisors receiving focused training in these advanced methods.
 
Canopy became nationally recognized for its high productivity compared to its competitors and for several of its notable transactions which occurred at a time of the lowest transaction volume in a generation. Canopy’s most recent noteworthy completed transaction is the sale of Silver Springs Pointe, a Kohl’s department store anchored shopping center located in Oklahoma City. The sealed bid auction campaign generated twenty five qualified bidder registrations, nine sealed bid submissions, and sold for $16,012,049, over $1 million above the suggested minimum bid. For its accomplishments, particularly in the single tenant net leased and retail investment sale markets, the firm and its advisers have been featured in such national publications as Commercial Investment Real Estate, Retail Traffic, REBusinessOnline.com, and CoStar.com.
 
Founded in 1978 as Tulsa Properties, Inc., what is now CB Richard Ellis|Oklahoma, an Affiliate office of CB Richard Ellis, Inc., has grown to 123 employees and is committed to providing single source comprehensive commercial real estate services. Adding the successful Oklahoma City corporate office to Tulsa’s affiliation, CB Richard Ellis|Oklahoma is comprised of 40 real estate professionals, many of which have earned at least one industry designation such as CCIM and SIOR. Backed by an experienced marketing, research and management staff, the company services the entire state with brokerage, leasing, management, investment, development and corporate services. In 2010 the company completed 770 transactions involving over 14.6 million square feet with a value in excess of $256.7 million. CB Richard Ellis|Oklahoma also services more commercial properties than any other firm in the state. With 22 designated real estate managers overseeing 15 million square feet in 201 properties, this division provides comprehensive services with a clear focus on maximizing value. CB Richard Ellis|Oklahoma believes success comes with their unparalleled commitment to customer service and meeting the unique needs of each client.