A subsidiary of Cole Corporate Income Trust Inc., an entity managed by Cole Real Estate Investments, acquired 55 Corporate Drive in Bridgewater, N.J., from Mack-Cali Realty Corp. for approximately $72.3 million.

The four-story, 205,439-square-foot Class A property was developed by Mack-Cali as a build-to-suit for healthcare company Sanofi-Aventis in early 2011.

“What appealed to us is a combination of investment-rate credit, it’s a long-term lease (still 13 years), a strategically important asset—part of their U.S. headquarters, and it’s a good-quality location,” Robert Micera, Cole’s chief investment officer for office and industrial, told Commercial Property Executive. “It’s in good proximity to the major highways in New Jersey and in good proximity to New York. All of these things combined make this fit right in with our parameters of seeking long-term lease transactions that have great creditworthy tenants and good rent growth.”

Cole Real Estate Investments has a number of properties in the area, all of which encompass its strategy of buying functional real estate with strong attributes.

“It’s a headquarters type of campus facility and there are other corporate headquarters in the area,” Micera added, pointing to the multi-tenant possibilities should Sanofi-Aventis ever vacate.

There are three other buildings in the campus that weren’t part of the acquisition, but the location represents nearly 20 percent of the healthcare company’s U.S. division space.

According to Micera, since the building is only a little over two years old, there are no immediate plans for renovations, as it’s a well-constructed asset with a lot of high-end finishes.

Mack-Cali Realty owns or has interests in 278 assets, including 269 office and office/flex properties totaling 31.1 million square feet and nine multi-family rental properties containing more than 3,300 residential units, all located in the Northeast.

“The sale of this property continues our strategy of monetizing non-core assets,” Mitchell Hersh, its president & CEO, said in a company statement.

Adam Spies, Kevin Donner and Neill Wessell of Eastdil Secured L.L.C. of New York, represented Mack-Cali in the transaction.

From left: Stéphane Pinchon, managing partner, Your Care Consult, Mel Gamzon, president, Senior Housing Global Advisors; Guillaume Truong, head of investments – healthcare real estate, GECINA; Bromme Cole, president, Hampton Hoerter China

By Eliza Theiss, Associate Editor

With social, economical and demographic shifts occurring all around the world, the question of healthcare and elderly care is becoming more and more of an issue as well as an investment opportunity. And with the unavoidability of aging and necessity of healthcare there is a massive opportunity for growth and expansion for the real estate industry, as well as significant risks. To address the issue, MIPIM 2013’s brought together specialists from three of the largest markets: the United States, China and Europe.

“Nearly nine percent of the world’s GDP is spent on healthcare,” observed  Pichon Stéphane, managing partner for Your Care Consult and the panel’s moderator.  That 8.8 percent, however,  is very much an average. Healthcare spending varies greatly across the globe; North America unsurprisingly leads the list, with 14.5 percent of its GDP going toward healthcare expenditures, Europe’s more prosperous West and North regions spend around 10 percent, the Middle East spends 5.1 percent and Asia spends 7.3 percent.  Whatever the region and  spending pattern, though, the healthcare industry offers growth potential worldwide.

China’s one-child policy, for example, has created the 4-2-1 family structure: four grandparents, two parents, one child. That translates into one caretaker per six people, which puts significant strain on the youngest generation. While the one-child policy has drastically reduced births and artificially created an elderly demographic that is set to soon outnumber the entire population of the U.S., the continuous economic growth has  shaped the young generation into a mindset very similar to their Western counterparts. In a nutshell, young people don’t want children.  And if they do, they delay starting a family.

This impacts the senior housing industry heavily in China. Even though Chinese social conventions hold children responsible for their elders’ care, the young middle class today either cannot take charge of their elders or prefers not to. Bromme Cole, president of Hampton Hoerter China, sees this as an opportunity, since with shifting values, taking care of elders can also start to mean housing them in high-end senior living facilities. These properties are designed for this specific purpose, by developers that have the know-how, rather than players that were forced out of the general multifamily industry. The potential for growth in China is vast, assuming the government refrains from imposing harmful, non-market oriented policies. Cole also predicts that prospects for “value-add” or distressed acquisitions will likely dominate China’s senior living landscape.

And while the senior housing industry is in its infancy in China, the U.S. senior housing industry has grown to a $275 billion business in the past 30 years and is expected to keep growing.  Between 2025 and 2030 the current yearly growth of 18,000 new senior housing units could skyrocket to 77,000 and 82,000 annually.

The senior industry was put on the map by specialized health care REITs that now  occupy three of the top ten REIT slots in the U.S. Furthermore, said Mel Gamzon, president of Senior Housing Global Advisors, during “the five recession years, senior (housing) outperformed all other markets.“ He also predicted that value-add properties are the next logical target for investors because the supply of available Class A senior living assets is running out. Gamzon also emphasizes the necessity of creating mixed-use, inter-generational projects, so as not to cut off the elderly population from the rest of the community, as well as creating independent living communities where residents can focus on preventive health, fitness and wellness.

San Diego—Mortgage originations for commercial properties will increase by 11 percent in 2013, the Mortgage Bankers Association (MBA) forecasted. The market share of multifamily financing may tick down this year as capital supply to the other commercial real estate sectors make a comeback.

At MBA’s Commercial Real Estate Finance/Multifamily Housing Convention & Expo, MBA released its 2013 mortgage financing outlook. Originations of commercial and multifamily mortgages will grow to $254 billion in 2013, compared to $229 billion in 2012. (In its inaugural financing volume forecast, MBA had predicted the 2012 volume to be $230 billion.)

“Our forecast anticipates Fannie Mae, Freddie Mac and FHA, as well as life insurance companies, will all continue to have strong appetites for making loans, and—coupled with growth in originations for CMBS—the total market will continue to expand,” stated Jamie Woodwell, MBA’s vice president of Commercial Real Estate Research, in a press release.

At a press briefing during the conference, Woodwell predicted that multifamily financing will total about $105 billion in 2012. This financing volume far outstripped expectation, as only $77 billion was originally forecasted for the multifamily sector for the year.

Multifamily financing volume may experience a slight shrinking in 2013 and subsequent years to “a more traditional size” relative to the overall commercial property mortgage market, said Woodwell, during a press briefing held at the conference. Woodwell said multifamily financing had seen its share of the overall commercial property financing market increase due to funding availability and multifamily fundamentals. In 2012, multifamily financing was 46 percent of total commercial property mortgage financing. As mortgage funding for the other sectors are returning a little more strongly, however, “we’ll see more of that traditional balance” between the multifamily and commercial property market shares, said Woodwell.

MBA forecasts GDP to increase to 2.0 in 2013 from 1.8 percent last year, while unemployment rate will fall to 7.6 percent, compared to 8.1 percent for 2012. MBA said the 10-year Treasury yield will rise slightly from 1.8 percent in 2012 to 2.2 percent for 2013. However, actions by the Fed, on which a large part of the interest rate prediction is predicated, could be unpredictable, noted Jay Brinkmann, chief economist and senior vice president of Research and Education.

In the fourth quarter of 2012, MBA reported that commercial and multifamily mortgage originations increased by 49 percent compared to the fourth quarter of 2012. “During the fourth quarter, commercial and multifamily mortgage borrowing and lending hit the highest level since 2007,” stated Woodwell. MBA’s mortgage bankers originations index shows originations for 2012 increased by 24 percent compared to 2011.

The fourth quarter increase in commercial/multifamily lending volume was driven by increases in originations for hotel and office properties, according to MBA. The mortgage financing volume increases, relative to fourth quarter 2011, were 331 percent for hotel properties, 78 percent for office properties, 49 percent for multifamily properties, 46 percent for industrial properties, 5 percent for retail properties and 26 percent for health care properties.

By investor type, the dollar volume of loans in the fourth quarter compared to the same period in 2011 rose by 228 percent for CMBS, 68 percent for commercial bank portfolio loans, 51 percent for GSEs and 18 percent for life insurance companies.

MBA President & CEO David Stevens

The low-interest-rate environment is driving the demand for relatively higher-yielding commercial real estate loans, and the commercial real estate financing industry cautiously greeted the rapid return of liquidity into the sector during the Mortgage Bankers Association’s (MBA) 2013 Commercial Real Estate Finance/Multifamily Housing Convention & Expo. The exposition opened on Monday with a record attendance level of about 2,600.

“As the year begins, we can see positive momentum,” said Debra W. Still, 2013 MBA chairman, at the opening session. “Commercial and multi-family real estate finance has enjoyed a relative calm amidst the storm.” Still, she noted favorable conditions for both financing and commercial real estate–interest rates are lower than ever before, and yields and cap rates remain attractive relative to those of other investments. “Multi-family markets have arguably never been stronger, and office and retail markets offer plenty of upside.” Still cited, however, challenges to the commercial property sector including the European sovereign crisis and federal deficit, and she referred to the current “artificially low” interest rates.

“You feel good about the business environment, and you should,” said David Stevens, MBA president and CEO, in addressing attendees during the opening session. Stevens said that delinquencies are at the lowest level since 2009, the $2.4 trillion in mortgage outstanding is increasing, and CMBS issuance is expected to grow this year to $65 billion from $45 billion last year. “This really reflects the demand and recovery on the private capital side.” Life insurance companies and banks, meanwhile, are also looking to retain mortgages, he said.

On the other hand, although the low interest rates provide many benefits, Stevens said, capital is struggling to obtain concurrently desirable yield levels and asset quality in the low-yield environment.

One fear among market participants is that debt investors’ bid for the relatively higher returns offered by commercial property could lead to lower underwriting standards and a weakened CMBS sector—all too soon–as lenders compete for the same deals.

Debt investor groups across the board are generally said to be increasing their appetites for commercial loans this year. CMBS and bank financing has returned to the market, while life insurance companies and the GSEs are expected by many industry players to maintain if not increase the dollar amounts of their financings in 2013. Fannie Mae closed 2012 with $33.8 billion in multi-family financings, while Freddie Mac announced $28.8 billion in new multi-family volume for the same year.

A key driver of increased liquidity for the overall commercial property sector has been the recovery in demand among investors for CMBS. “Sustained bond market rally in the second half of 2012 has helped drive down funding costs, enabling CMBS lenders to reduce rates charged to borrowers,” stated Jones Lang LaSalle in a press release.

In the session “The Search for Yield,” moderator E.J. Burke, executive vice president and group head of KeyBank Real Estate Capital, commented that it appears “there is far more capital chasing for a home than there are good deals.”

“A lot of this has come back too quickly. We are concerned about how fast things have moved in terms of risk tolerances,” said Kevin Riordan, president, CEO and director of CreXus Investment Group. “I can’t answer if $100 billion is a normal market [for CMBS financing], but I think we are getting there too quickly.” Riordan also said that the “creep” over time of lenders institutions to the secondary market has already turned into a “herd.”

Life companies are still under-allocated to the multi-family sector in the billions, estimated Brian Casey, managing director and head of real estate debt strategies of MetLife Inc., in responding to a question about how much financing life companies would execute under ideal circumstances.

And Diana Reid, executive vice president of PNC Real Estate, said that banks have resolved their balance sheet issues and become more competitive in multi-family construction financing in the fourth quarter. As a result “there are more lenders looking for the same deals,” she said. Still, pricing, rather than recourse, remains the point of competition.

There were also questions raised about the self-regulation of CMBS and whether B-piece buyers are holding onto the risks rather than selling them. “I do not believe we are at CMBS 2.0,” said Reid, referring to the new, safer regime of CMBS that will prevent a repeat of 2007. Reid noted the Dodd-Frank risk retention regulations are yet to be released.

MBA announced this week that it forecasts commercial multi-family mortgage originations to increase by 11 percent to $254 billion in 2013 from 2012. Commercial and multi-family mortgage originations jumped by 49 percent in the fourth quarter compared to the same quarter in 2012.

By investor type, the dollar volume of loans in the fourth quarter of 2011 compared to the same period in 2011 rose by 228 percent for CMBS, 68 percent for commercial bank portfolio loans, 51 percent for GSEs and 18 percent for life insurance companies. For the entire year, originations in 2012 rose by 24 percent, MBA reported.

JLL said it expects capital availability to drive transaction volume increases of 15 to 20 percent in 2013. “Competition for core product is opening up attractive opportunities for borrowers,” it stated, and that JLL’s capital markets experts are “seeing a variety of aggressive debt structures,” on core products such as debt yields between 8 and 10 percent and DSC ratios of 1.15 to 1.35.

While making possible many deals and rescuing mortgages from default, the extremely low interest rates also introduce another point of concern: refinancing risk in the future when and if interest rates should increase again, and many speakers referred to that risk. Financed at extremely low interest rates, properties may have difficulty finding refinancing if interest rates rise significantly in future, especially if they have not amortized, or property values do not rise, adequately.

The longer the low interest rates persist, the greater the buildup of stress, said Sally Gordon, managing director, Risk and Quantitative Analysis Group, of BlackRock, Gordon presented a general session on portfolio diversification strategy.

The seeming lack of euphoria among lenders despite the return of liquidity could also  be attributed perhaps to the recognition that the abundance of capital, especially that slushing in the CMBS markets, could disappear overnight and be affected by both foreign and domestic developments, as has happened in recent memory. “Liquidity can evaporate faster than you even thought possible,” commented Gordon.

The potential volatility of the capital markets tied in with the life lessons of guest speaker John Bucksbaum, founder of Bucksbaum Retail Properties LLC. Bucksbaum recounted his experiences with the financial crisis in the late-2000s as former CEO of retail giant General Growth Properties (GGP). One of his biggest mistakes, where the GGP bankruptcy was concerned, was to allow mortgage maturities to compress in the same time period, said Bucksbaum. The second mistake, in view of the fact that liquidity could disappear very quickly, was to not raise equity when there was the opportunity, and to wait for higher stock prices before making a stock offering for the public company. “You don’t always know when you can raise equity. The day may come when “you need equity, and you don’t have it,” said Bucksbaum.

And as Gordon said, once liquidity dries up, it may be too late to mitigate the risk.

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Ground is scheduled to break in February on the new $56 million Tehachapi Hospital in Tehachapi, Calif. Bernards and Colombo Construction Company Inc., acting in a joint venture partnership, will provide the Tehachapi Health Care District with construction management services for the approximately 79,000-square-foot project.

The replacement facility will sit just two miles from the current 17,000-square-foot Tehachapi Hospital, located roughly 40 miles southeast of Bakersfield and 40 miles northwest of Edwards Air Force Base. Demand for services–the healthcare center is the only hospital within a 50-mile radius–is one of the factors that spurred the development endeavor.

“Despite being a very small hospital, Tehachapi serves a large portion of South and Southeast Kern County, including areas that lie outside our District’s geographical boundaries,” Alan J. Burgess, CEO of Tehachapi Hospital told Commercial Property Executive.

Like the existing location, the new Tehachapi Hospital will be a 25-bed, critical access hospital, but it will also feature space for a few additional services, including surgery, obstetrics and ICU.

The escalating need for larger accommodations is not the only reason that the Tehachapi Health Care District is building anew. The current facility, which was constructed in 1956 following the destruction of the original hospital by the 1952 Tehachapi earthquake, falls short of meeting the California Seismic Safety Standards for a critical access hospital.

The pervasiveness of aged hospitals that fall beyond today’s standards is a mounting problem. “One of the greatest challenges facing hospitals and healthcare systems is the cracking, eroding infrastructure prevalent in so many older hospitals,” according to a report by commercial real estate services firm Jones Lang LaSalle.

The current Tehachapi location, however, will continue to serve a purpose. “Upon completion of the new hospital, the existing facility will be used as an outpatient medical center, with a minimum of cosmetic improvements,” Burgess said.

Projects like the one Bernards and Colombo are now undertaking will only rise in number in the U.S. “Throughout last year, hospitals and systems went through the process of developing real estate strategies to help position themselves for the future,” Shawn Janus, a managing director with JLL, said in a prepared statement. “This should translate into new real estate projects on the development front. RFP/RFQ activity has been increasing and we see this as a growing trend in 2013.”

The new, state-of-the-art Tehachapi Hospital is on schedule to open its doors in 2015.

Physician’s Office Pavilion at WakeMed North, Raleigh, N.C.

The Griffin-American Healthcare REIT II Inc. more than tripled its portfolio in 2012 with acquisitions totaling $866 million, including 14 properties purchased in December for $183.6 million. Those acquisitions plus purchases made earlier in December pushed the REIT’s holdings to 139 properties in 27 states acquired for about $1.325 billion.

“It may be an understatement to say that 2012 was a record year on many levels for Griffin-American Healthcare REIT II,” said Danny Prosky, a principal of American Healthcare Investors and president & CEO of the REIT. “Our portfolio of medical office buildings, hospitals, skilled nursing facilities and assisted living facilities more than tripled during the past year, based on purchase price, and became even more broadly diversified in terms of geography, asset type and revenue sources.”

In its most recent acquisitions,  the Newport Beach, Calif.,-REIT acquired nine medical offices and five assisted living facilities located in California, Florida, North Carolina, Indiana and Alabama for $183.6 million.  Earlier in December, the REIT bought a Houston medical center and a three-building portfolio of senior care facilities in Massachusetts for a total of $47.6 million.

The REIT’s portfolio is comprised of 33.4 percent skilled nursing facilities, 48.5 percent medical office buildings and 18.1 percent hospitals, according to its website. As of Sept. 30, 2012, the portfolio was 96.8 percent leased.

Acquisitions announced this week include the Central Indiana Medical Office Portfolio I, a five-building, multi-tenant portfolio with 182,000 square feet of space in Indianapolis, Lafayette, Ind., and Carmel, Ind. The portfolio was acquired from entities affiliated with Cornerstone Companies, Inc.

Sutter North Bay Health Plaza in Santa Rosa, Calif., a three-story, multi-tenant medical office building with 102,000 square feet, was acquired from Urdang/Sequoia Creek Holdings, which was represented by Vince Schwab of Marcus & Millichap.

Northside Medical Office Building, a three-story property with 53,000 square feet located on the campus of Hospital Corporation of America’s Northside Hospital in St. Petersburg, Fla., was acquired from Northside Medical Plaza L.L.C., which was represented by Philip Faircloth of RJ King Associates. It is leased to eight tenants, including the hospital which rents more than half of the building.

Physician’s Office Pavilion at WakeMed North in Raleigh, N.C., is a four-story, multi-tenant building with about 77,000 square feet of space located at the WakeMed North Healthplex, which has announced plans to build a 61-bed acute care hospital on the campus. The building is fully leased, more than half of it to long-term triple-net tenants. It was acquired from Jamestown North MOB L.P., represented by Chris Bodnar and Lee Asher of CBRE Inc.

Bessemer Medical Office Building, a five-story building with about 100,000 square feet of space is located on the Medical West hospital campus in Bessemer, Ala., The building was acquired from the Johnson Development subsidiary of Med West MOB L.L.C., which was represented by Sean Tu and Mike Davis of Cain Brothers.

Five assisted living facilities with a total of 183,000 square feet and 480 beds in North Carolina were acquired in a sale-leaseback transaction from Carillon Assisted Living L.L.C., which was represented by Jason Ficken of Quadriga Partners. The properties are fully leased and located in Fayetteville, Fuquay-Varina, Indian Trail, Knightdale and Lincolnton, N.C.

The purchases were made using $133.3 million in borrowings under the REITS’s unsecured line of credit with Bank of America,  N.A., cash and units of limited partnership of Griffin-American Healthcare REIT II Holdings, L.P., the REIT’s operating partnership. Those units were issued to the sellers of the Central Indiana MOB Portfolio I as partial payment, the REIT stated.

Griffin-American REIT II also borrowed $23.5 million from its unsecured line of credit with Bank of America for the Bellaire Medical Center purchase near Houston, and $22 million for the acquisition of the Massachusetts Senior Care Portfolio. Both purchases also required cash to complete.

The medical center is a 161,000-square-foot, 154-bed long-term acute care center and behavioral rehabilitation hospital built in 1978. Approximately $6.8 million will be spent to increase patient beds. It was acquired from 5314 Dashwood, L.P., a subsidiary of PinPoint Commercial.

The Massachusetts portfolio has 201 beds in three buildings that include skilled nursing and assisted living faculties with a total of 104,000 square feet of space in Boston and Dalton, Mass.  It is master leased to Trinity Health Systems L.L.C. under a long-term absolute net-lease. The off-market purchase was acquired from Merrimack Health Group Inc.

The REIT, co-sponsored by American Healthcare Investors and Griffin Capital Corp., was previously known as the Grubb & Ellis Healthcare REIT II. Several large acquisitions were made throughout 2012, including the purchase of six buildings for nearly $109 million that was announced in early October. That acquisition included three Los Angeles-area hospitals. A week earlier in September, the REIT had stated that it acquired three medical office properties for about $60 million, two in Knoxville, Tenn., and one in DeSoto, Texas.

Stockholm

Citycon Oyj, a subsidiary of Gazit-Globe Group, and the Canada Pension Plan Investment Board (CPPIB) have entered into definitive agreements to acquire the Kista Galleria shopping center in Stockholm from DNB Livsforsikring ASA. The value of the property amounts to approximately $700 million (SEK 4.6 billion). The shopping center will be owned by a joint venture controlled 50 percent by Citycon and 50 percent by CPPIB. The transaction is expected to close in January 2013.

Located in the heart of one of Europe’s growth hot spots, Kista Galleria has an annual footfall of approximately 18.1 million visitors (the highest in Stockholm) and annual sales of $360 million (third highest in Stockholm).

The shopping center offers access to 185 shops and restaurants as well as cinemas, bowling, indoor go-cart and other leisure activities. Overall, the facility features approximately 970,000 square feet of gross leasable area (GLA), including 650,000 square feet of retail space. The remaining 330,000 square feet comprise a hotel, student housing, healthcare premises and municipal services.

Kista Galleria will be Citycon’s largest shopping center by GLA. For CPPIB, it is the first direct property investment in the Nordics.

“The strength of Kista Galleria is its location and traffic connections, which generate a steady footfall of more than 50,000 daily visitors. Kista Galleria is located at the epicenter of one of the fastest growing areas of Stockholm, with thousands of new residential units being built within the next few years and steady growth of the office stock. Kista Galleria’s robust footfall, driven by its strong local catchment area and infrastructure, is natural and sustainable,” said Marcel Kokkeel, Citycon Oyj’s CEO.

Kista is the largest office submarket outside the Stockholm city center, hosting a large number of telecoms, Internet and IT companies. It is also home to more than 125,000 residents. Furthermore, the Kista Galleria Shopping Center is served by excellent transport connections both in terms of public transportation (metro station, commuter train and local buses) and access from major highways.

“As part of its strategy and sustainability model, Citycon invests in shopping centers located in city centers or in other vibrant urban environments. Sweden is a rapidly urbanizing society. While the population in the total catchment area currently stands at about 345,000, it is forecast to grow substantially in the coming years. In addition, it is estimated that in the next 15 years, the population of Stockholm will increase by half a million people,” Kokkeel added.

“The acquisition of Kista Galleria marks a major milestone in Gazit-Globe’s business development in Europe,” said Chaim Katzman, Chairman of Gazit-Globe Group. “The acquisition fits in well with the Group’s strategy of continuing to expand through the purchase of successful, yield-producing assets and contributing to their betterment by applying the global expertise and experience gained from holding more than 600 supermarket-anchored shopping centers in the United States, Canada, Europe and Brazil.”

“We are very pleased to be making our first real estate investment in the Nordics together with Citycon, a recognized leader in this fast-growing market,” said Graeme Eadie, senior VP, Real Estate Investments at CPPIB. “We look forward to partnering with Citycon on future investment opportunities in the region as we continue to expand CPPIB’s retail portfolio in Europe.”

Ken McCarthy, global chief economist, Cushman & Wakefield

With an acrimonious and seemingly endless presidential campaign finally completed, CRE experts are watching to see how newly re-elected President Barack Obama and Congress deal with a host of financial issues impacting the real estate market, including the budget deficit, debt and spending, tax rates, capital gains taxes and job creation.

They are also hopeful that the uncertainty which had been hanging over the business world, including commercial real estate, has been lifted.

“The main thing right now from the corporate America standpoint is people are just looking for some semblance of certainty,” said John Sikaitis, director of Americas Office Research Markets for Jones Lang LaSalle.

“The fact that we have someone and we now know where they say they will go goes a long way toward creating more confidence,” said Ken McCarthy, global chief economist for Cushman & Wakefield. “Over the last six months we didn’t know what the policy environment was going to be like. That’s the worst. Knowing who’s going to be president will be an important factor for the real estate industry and for the economy in general.”

Sikaitis said the President is going to have to extend an olive branch across party lines with the Congress that is going to remain split with the Republicans controlling the House of Representatives and Democrats continuing its majority in the Senate. He also said Congress needs to be less partisan to get legislation moving to help the overall economy.

“We need a Congress that actually legislates and compromises across the party lines,” Sikaitis told Commercial Property Executive. “This is currently the least effective Congress in history. This Congress has produced less legislation than any other Congress in 75 years.”

John Sikaitis, director of Americas Office Research Markets, JLL

Charles Achilles, vice president of legislation and research for the Institute of Real Estate Management, a Chicago-based association representing property managers, also said compromise will be needed in Congress but noted that gridlock historically results when different parties are in power.

In his acceptance speech early this morning, President Obama pledged to work across the aisle in his second term.

“Tonight you voted for action, not politics as usual,” he told a cheering crowd at Chicago’s McCormick Place convention center. “You elected us to focus on your jobs, not ours. And in the coming weeks and months, I am looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together — reducing our deficit, reforming our tax code, fixing our immigration system, freeing ourselves from foreign oil. We’ve got more work to do.”

That work will begin immediately as the President and lame duck Congress will have to tackle the “fiscal cliff,” which includes a series of tax breaks expiring at the end of the year and deep cuts to agencies such as the Department of Defense and entitlement programs like Medicare that were agreed upon during the debt ceiling deal reached in 2011.

The potential spending cuts, also called “sequestration,” have already depressed the Washington, D.C. metro office market because so many government agencies or federal contractors have not been increasing long-term leasing, noted Sikaitis. He took it a step further by stating that tenant demand in the Metro D.C. market is tied strongly to Congressional activity. JLL research found that over the past 20 years, the office market in the region is strongest when passage of legislation is at its highest. For example, positive net absorption was at 52.4 million square feet between 1985 and 1988 when there was a record amount of legislation passed. During the past four years, the market saw cumulative absorption gains of 4.5 million square feet.

Charles Achilles, VP of legislation and research, IREM

The CRE executives pointed to possible changes in the capital gains tax structure sought by President Obama as an imminent problem for the industry.

“Owners who have a significant capital gain may want to sell before the tax increase. There could be some tax-driven activity,” McCarthy said.

Achilles said an increase in capital gains tax rate up to 20 percent from 15 percent for people making over $200,000 and couples making more than $250,000 could take away incentives for some people to invest in real estate.

He also said the Democratic plan to tax carried interest as regular income would have a big impact on his association’s members.

In addition to the probable ending of the Bush era tax cuts, new taxes to fund the Affordable Care Act (Obamacare) are set to begin in 2013. With Republican Gov. Mitt Romney losing the presidency, the Obamacare policies will continue to be implemented, which some say could impact job creation.

Also moving ahead will be regulatory changes to banks and financial institutions under the Dodd-Frank legislation passed during President Obama’s first term. Jeffrey DeBoer, president and CEO of The Real Estate Roundtable, said his group’s members have concerns about the impact of the Dodd-Frank regulations, particular those governing the commercial mortgage-backed securities (CMBS) market and the proposed Volker Rule, which he said could unintentionally impede real estate capital formation.

“The industry will continue working with national real estate trade groups to encourage a more robust recovery of the CMBS market, which will ensure a broader recovery in commercial real estate markets while strengthening financial institution balance sheets,” Deboer said.

Both DeBoer and Achilles said the Basel III capital accord that requires increased capital reserves by financial institutions could make it even more difficult for loans and mortgages to be made.

Achilles said CRE financing is still often difficult to get. He is particularly concerned about a program for small businesses that allows them to refinance loans on an annual basis. He said it expired in September and Congress has not extended it. The association’s web site noted that an estimated $360 billion of commercial mortgage debt is due within the next year and that many small business owners would like to turn to the Small Business Administration’s 504 refinancing loans for salaries, rent, utilities, to pay off or down credit debt and other financial obligations.

“What’s best for the country are those things that encourage small business,” Achilles said.

Rezoning has been approved for Dallas-based KDC’s $1.5 billion, master-planned, mixed-use project in Richardson, Texas, clearing the way for the company to acquire the needed 186 acres of land and move forward with the development, KDC announced Tuesday. The Richardson City Council approved the rezoning on Monday night.

The acquisition of the land, which consists of two major blocks and is sited in a tax- increment financing zone, is expected to be completed by year’s end. The as-yet-unnamed development straddles Plano Road on the south side of President George Bush Turnpike (Texas 190) just east of the North Central Expressway (US 75), in the northern Dallas suburbs. The site is adjacent to the Bush Turnpike station on Dallas Area Rapid Transit’s Red Line.

The project reportedly is the largest in KDC’s history. The company previously developed three projects in Richardson: the 800,000-square-foot Nortel Networks Galatyn Park Campus in 2001 (now occupied by Bank of America and State Farm), the 1.1 million-square-foot Blue Cross Blue Shield campus in 2009 and the 535,000-square-foot Fossil campus in 2011.

KDC CEO Steve Van Amburgh told Commercial Property Executive that the new project’s first phase, totaling about $600 million to $700 million, should consist of more than 1 million square feet of office space, a healthcare facility of about 50,000 square feet, 75,000 to 100,000 square feet of restaurants and service/convenience retail, 600–800 units of multi-family, and a limited-service hotel.

Construction probably will start in February or March, with deliveries starting in the third or fourth quarter of 2014. That phase, Van Amburgh said, will constitute about 35 to 40 percent of the eventual total buildout.

As for the following phase, Van Amburgh said that KDC has been in meetings regarding a grocery-anchored retail center. This would be in line with the company’s desire to create, as Van Amburgh put it, “a great mix of amenities in a pedestrian-friendly environment … a live-work-play environment.” The development is planned to include 3,925 multi-family residential units when buildout is complete in four to five years.

Van Amburgh told CPE that demand for the project’s various components will be powered by job growth created by companies expanding in the area. The motive forces behind that expansion, he said, include Texas’ right-to-work laws and lack of corporate or individual income taxes.

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Emeritus CEO Granger Cobb

Emeritus Corp., the largest provider of assisted living and memory care services in the country, has just made plans to branch out into new territory. The company will enter the home health care business with a big splash through the planned $102 million acquisition of Florida-based Nurse on Call Inc.

It’s a new game for Emeritus, but it’s a complementary one. “As the largest Medicare-licensed home health provider in Florida, Nurse on Call is a great fit for Emeritus Senior Living,” Granger Cobb, CEO of Emeritus, told Commercial Property Executive. “Building from the large base of Nurse on Call services currently provided in seniors’ homes, we plan to offer these services to residents in Emeritus’ 44 Florida communities–and to then expand the platform to other states where we have a significant presence.”

Those services span from assistance for individuals in need, help with basic daily living activities to patients recovering from surgery, all provided by a group of 1,700 skilled nursing, rehabilitation therapy, medical social services staff members.

With plans to rely on proceeds from the recently announced, $1.8 billion disposition of a portfolio held in a joint venture with Blackstone Real Estate Partners VI, Emeritus will purchase 91 percent of the equity of NOC’s parent company, leaving the remaining stake to certain members of the management team at NOC.

When all is said and done, Emeritus will have established a very large footprint in the Sunshine State’s home health care industry. Currently, NOC operates from 28 offices spanning 47 counties.

NOC will not only increase Emeritus’ staff by nearly 2,000 in one fell swoop, it will, Emeritus anticipates, fatten the company’s wallet in short order as the purchase of NOC is expected to be immediately accretive to earnings. The transaction is on target to close before year’s end.