Image courtesy Wikipedia user Wyn Van Devanter

The U.S. General Services Administration has selected the Trump Organization as its preferred team to handle a $200 million redevelopment of the Old Post Office building and annex in Washington’s Federal Triangle neighborhood, the GSA announced Tuesday. Under the Trump Organization’s proposal, the Old Post Office will, perhaps unsurprisingly, be converted into a luxury hotel with more than 250 rooms, upscale restaurants, a spa and conference facilities, while still preserving the building’s Romanesque Revival architecture.

Under the RFP, GSA and the Trump Organization will spend the next year negotiating a detailed redevelopment agreement that will specify usage, historic-preservation requirements and the federal government’s revenue stream. In the meantime, GSA will relocate the building’s current federal tenants, which include the Advisory Council on Historic Preservation, National Endowment for the Arts and National Endowment for the Humanities.

If negotiations proceed as expected, redevelopment is expected to start in 2014, with occupancy in 2016. At the end of the lease, control of the building will revert to the federal government.

Built between 1892 and 1899, the Old Post Office was already considered old-fashioned when it opened. The D.C. Mail Depot was moved to a larger building in 1914, and in the 1920s the Old Post Office faced demolition.

A lack of money during the Great Depression kept the building open, but in 1964 a federal commission recommended taking the building down. Though demolition permits were issued, historic preservationists fought for the building. In 1973 it was added to the National Register of Historic Places, and an extensive renovation began in 1976.

A generation later, the building had outlived its usefulness as federal office space, and Congress directed GSA in 2008 to enter into a long-term lease under Section 111 of the National Historic Preservation Act, thereby guaranteeing the restoration and retention of all of the building’s historic features, while allowing the private sector to determine how to develop it to its fullest potential.

Although redeveloping historic properties is often perceived as a niche activity, GSA is currently involved in several such projects.

One is in Grand Junction, Colo., where in February 2011 the agency announced plans to turn the 92-year-old Wayne Aspinall Federal Building and Courthouse into the nation’s first net-zero energy usage building on the National Register of Historic Places.

If the redevelopment meets its goals, the building will in the course of a year produce as much energy as it consumes. The project is also aiming for LEED Platinum certification. GSA will install a geothermal heating/cooling system that uses the warmth or cold of the ground to help control temperature. A solar panel array is projected to generate enough energy to balance out the building’s electrical demand.

After the project is completed in January 2013, nine federal agencies will take space in the Aspinall Building.

A vastly bigger GSA historic-redevelopment project is getting under way in D.C.’s southeast quadrant, where a former mental hospital overlooks the Potomac and Anacostia rivers.

The creation of the Department of Homeland Security was the largest restructuring of the federal government since the creation of the Defense Department. Similarly, the $3.4 billion St. Elizabeths project, which will be DHS’ new home, is the largest federal construction project in metro Washington since the Pentagon was built during World War II. St. Elizabeths was established by Congress in 1855 as a government hospital. Currently, the 118-acre east campus is owned by the D.C. government, and the 182-acre west campus is owned by the federal government.

Ground was broken in September 2009 on the new 1.2 million-square-foot headquarters of the U.S. Coast Guard, which is scheduled for completion in 2013. The $450 million building is being funded under the American Recovery and Reinvestment Act of 2009.

Most of the St. Elizabeths project, however, will involve adaptive reuse. GSA will preserve 51 of the 62 buildings on the west campus, while incorporating many sustainable elements. For example, about 80 percent of the roof area on the new buildings will be green. GSA’s goal is to achieve LEED Gold certification.

Mesa West Capital looked at the Hyatt Regency San Francisco’s impressive performance, its increasingly strong market and its solid ownership and decided to put its money where its mouth is. The portfolio lender has provided a partnership involving affiliates of Dune Real Estate Partners L.P. and DiNapoli Capital Partners L.L.C. with a $130 million first-mortgage loan for the refinancing of the 802-room hotel in downtown San Francisco.

“In the context of the hotel world, definitely lenders are warming up to the San Francisco hotel market because it’s arguably, outside of New York, the strongest hotel market in the United States,” Thomas E. Callahan, co-president & CEO-West, with PKF Consulting USA, told Commercial Property Executive.

Dune and DiNapoli snapped up the Hyatt Regency San Francisco from a subsidiary of Strategic Hotel Capital L.L.C. in 2007, after which point the team initiated a major renovation program at the 19-story property. Built in 1973 along the waterfront at 5 Embarcadero Center, the lodging destination sits in the bustling Financial District and features 67,000 square feet of function space, as well as a fitness center, restaurant and lounge.

As Ronnie Gul, principal with Mesa West, noted in a press release on the refinancing deal, the Hyatt Regency San Francisco is “outperforming the market in both rate and occupancy.” It’s an impressive achievement given the enviable strength of the city’s hotel market. The lending community may not be as keen on the hospitality sector as it is on multi-family, however, there are always exceptions and San Francisco’s hotel market is one of them.

“Room rates and RevPAR are extremely high,” Callahan said. “Most hotels’ occupancies are in excess of 80 percent, room rates of most hotels increased 14 to 15 percent in 2011 over 2010, and most people are forecasting room rates to increase at 8 to 10 percent this year.”

Furthermore, he added, there is no new construction on the horizon in San Francisco, as opposed to New York, where a fair number of new rooms are scheduled to come online.

The San Francisco hotel market’s positive fundamentals and strength are the keys to opening the door to financing in the current environment. “The truth is, of course, most lenders aren’t really excited about hotels per se, but if you are a lender looking to lend money on hotels, San Francisco is perceived as one of the best markets you can be in.”

Image courtesy Flickr user laverrue

It’s good to buy when opportunity presents itself and, capitalizing on one of those opportunities, a consortium including affiliates of Starwood Capital Group, the LeFrak Organization and Invesco Ltd. have purchased a beachfront, mixed-use property in Miami’s South Beach, including a hotel formerly known as the Gansevoort.

While the terms of the deal were not disclosed, the partners announced a $100 million renovation project for the property, which already includes 334 hotel rooms, 255 condo units across 294,000 square feet and 90,000 square feet of retail space. The hotel rooms will be renamed The Perry South Beach until its re-launch in 2013, when a new brand will be unveiled after the renovation. The partners also anticipate improvements to the condos, which will put the units on the market in late 2012.

Barry Sternlicht, chairman & CEO of Starwood, said that “global interest in the Miami marketplace is close to surpassing an all-time high,” noting that his firm has the opportunity to “create an outstanding destination resort and residences in this outstanding city.”

According to a report by Marcus & Millichap Real Estate Services Inc., Miami saw a 9 percent increase in demand for hotel rooms year-to-date in August of 2011, as compared to the same period a year prior. Additionally, the sector as a whole performed well into the fourth quarter of last year, with Florida as a whole seeing occupancy rise by 4 percent on a 6.7 percent jump in room demand. And, to Sternlicht’s point, not all of the spending has been from domestic sources: “A weak dollar relative to the euro has also boosted international travel to leisure markets such as Miami and Orlando,” the report noted.

As Commercial Property Executive previously reported, a Jones Lang LaSalle Inc. report sees hotel investment volume to hold steady in 2012, reaching the same $30 billion range as last year.

The property was sold by entities controlled by Credit Suisse, which had acquired it through foreclosure in 2010. Jones Lang LaSalle Inc.’s hotels group brokered the transaction for the financial-services company.

Image courtesy Wikipedia user Beyond My Ken

After acquiring New York City’s Clock Tower building at 5 Madison Ave. in 2007 for $200 million, Africa Israel USA has sold the property to Marriott International for $165 million. The building, also known by its full name of The Metropolitan Life Insurance Company Tower, was constructed in 1909 and served as the world headquarters of the insurance firm until 2005.

The hotel chain plans to make the building its first location of the Edition brand, which was described as “a new luxury, lifestyle hotel brand created in partnership between Marriott International and [hotelier and real estate developer] Ian Schrager. According to Kew Management, fashion designer Tommy Hilfiger signed a $170 million contract in May 2011 to transform the property into a hotel, but the deal fell through in September.

Vacant since 2007, the Clock Tower property was added to the National Register of Historic Places in 1972, was designated a National Historic Landmark in 1978 and became a New York City landmark in 1989.

“We are delighted to have achieved such a strong price for this asset as a hotel property,” Laurie Golub, general counsel & managing director of business affairs of AFI, said. “It speaks to the unique nature of the building and the exciting location, which is underserved by the hospitality industry.”

The hospitality sector is likely trending upward, according to a year-end report by PKF Consulting. “Despite inconsistent economic news,” the report noted, “increases in lodging demand and property-level net operating income have most industry participants feeling optimistic that hotel property values are heading upward.”

It’s akin to a good marriage. Carlson and The Rezidor Hotel Group have come together in a union that will allow them to act as one, while maintaining their own individual identities. The two international hotel companies just formed the Carlson Rezidor Hotel Group, a separate hotel entity created to be a global force in the hotel industry.

Carlson and Rezidor will remain separate legal entities.

The decision to join forces and create a new company was born from a synergy created between Carlson and Rezidor through working together for nearly two decades. The two first teamed up in 1994, when they entered into a master franchise agreement for the Radisson brand in Europe the Middle East and Africa. In 2005, Carlson acquired a 25 percent interest Rezidor, and continued to increase its ownership stake in the company over the years until it became majority shareholder with a 50.1 percent interest in 2010.

Carlson Rezidor makes its debut as one of the largest hotel groups in the world, with a portfolio exceeding 1,300 hotels carrying a range of premier hotel flags across 80 countries. In a prepared statement, Kurt Ritter, president and CEO of Rezidor, explained the new company’s objective. “The goal of this development is to generate more attractive financial returns for the owners and greater value for all shareholders, to be perceived by business partners around the world as one global hotel company, to offer more compelling and consistent value propositions to the guests, and to offer global career and development opportunities to the staff.”

The new company’s financial aspirations entail the production of at least $400 million in additional revenue and a nine-point expansion on the RevPAR Index by 2015. Indeed, industry experts forecast notable revenue increases for the hotel sector in a bevy of major metropolitan areas across the globe; although, those increases are not expected to be as large as they were in 2011. Of the 10 top markets in the Europe and Asia Pacific regions, Hong Kong topped the list with RevPAR growth of 24.7 percent in 2011, according to an early report by STR Global. The hotel research firm anticipates that Singapore will lead the pack in 2012, with estimated RevPAR growth of 9.6 percent, nearly one percentage point lower than 2011’s 10th highest ranking city, Cologne. Overall, RevPAR in the U.S. rose an estimated 6.1 percent, and it is on track to jump 8.6 percent.

Carlson Rezidor will maintain headquarters in both companies’ respective corporate office locations of Minneapolis, Minn., and Brussels, Belgium.

The Marriott at London's Heathrow. Image courtesy Flickr user UggBoy.

With some major hotel transactions in near the end of 2011 and this week’s announcement that LaSalle Hotel Properties has acquired the 934-room Park Central Hotel in Midtown Manhattan for $396.2 million, the hospitality sector looks like it might be back on its feet after some rough times. A new report by services provider Jones Lang LaSalle suggests just that, forecasting global hotel transaction volume to hold steady with last year’s totals in the $30 billion range.

Noting that hotel investment volumes surged in the first half of 2011 – but fell flat due to external economic circumstances in the second two quarters of the year – investment volume still increased 13 percent over 2010. “So far, the dislocation in the financial markets has not impacted underlying trading fundamentals,” Arthur de Haast, chairman of JLL’s hotel group, said. “This has reassured investors to a certain degree and has underscored the attractiveness of high quality, income producing hotel real estate as an asset class.”

The biggest sellers in 2012 are likely to be bank-induced, as a result of debt maturities and consequent refinancing challenges. In addition to the influx of assets expected to come to market, a significant amount of note sales are anticipated as well. Private equity firms and institutional investors are also expected to liquidate some previous acquisitions, either to divest select non-core assets or to return capital to investors as funds reach maturity.

In the United Kingdom, the U.S. and Ireland, institutions with significant real estate exposure have started taking action by means of placing stressed assets into the market, although activity has yet to start in Spain and Japan. Borrowers in Spain have more control over administration processes, as opposed to the U.K. and Ireland, creating reduced certainty for the banks and stemming greater levels of workout activity. Lenders in Japan are still reluctant to realise losses on hotel loans, which is causing delays in sales transactions.

“We expect that portfolio deals will dominate in several of these markets as banks, whenever they have a large portfolio, prefer to look for a portfolio solution to exit as opposed to selling assets individually,” said de Haast.

Additional, de Haast noted that “flexibility is a key theme in 2012,” further stating that the ability to react to change quickly will feature as a success indicator.”

A rendering of the proposed convention center.

In his State of the State speech on Wednesday, New York Governor Andrew Cuomo laid out an ambitious plan for the state that included plans for a 3.8 million-square-foot convention center in Queens – as well as what could be New York City’s first full-blown casino. In order to do so, he called for the sale of the 1980s-vintage Jacob K. Javits Convention Center on the city’s West Side.

The plan, where Cuomo called for “public-private partnerships that leverage state resources to generate billions in economic growth and create jobs,” would see private firms submit investment proposals to the state legislature before the administration would put together funds in return in the form of tax breaks, capital aid, matching federal funds and more to finalize the deal.

Cuomo said the convention center – which is in the middle of a $500 million renovation – no longer belongs in Manhattan, so bold steps would be needed to compete for trade shows in other cities such as Orlando and Las Vegas.

One of those private firms, Genting Americas – a subsidiary of the Malaysian firm Genting Group, which spent $800 million in developing the Aqueduct Racetrack gambling site – would have a joint venture with the state to finance the $4 billion project. Genting already operates the Resorts World New York Casino on the site, where it has a 30-year lease on land with an option to renew for another 10 years.

On Thursday, Genting said it would have the first, 2.6 million-square-foot phase of the project completed by 2014, with construction of the first of 3,000 proposed hotel rooms to begin in November 2015.

The Associated Press reported that the city has been losing billions in convention revenue – and has faced a flight of companies out of the city since the passing of the so-called “millionaire’s tax” last year.

According to the New York Daily News, Gentring, the developer which already runs the racing events at the site, the company wants exclusivity in the area were casino gambling to become legal. While neither Cuomo nor Gentring commented on specifics, a Gentring rep said the project is not contingent on casino’s legality. Cuomo is reported to be pushing for a constitutional amendment to allow gambling in the state.

“This will bring to New York the largest events, driving demand for hotel rooms and restaurant meals and creating tax revenues and jobs, jobs, jobs,” Cuomo said in his speech. “In addition to the new convention space, up to 3,000 hotel rooms will be developed. We will make New York the number-one convention site in the nation.”

Cuomo’s plan is already under fire from some sides. “Convention centers all over the country are money-losing white elephants, so basically what the governor is saying is that we ought to build the nation’s largest money-losing white elephant in New York City,” E.J. McMahon of the Manhattan Institute told CBS New York.

Haywood Sanders, a professor of public administration at the University of Texas at San Antonio, spoke with NPR affiliate WNYC and called Cuomo’s ideas “crazy,” noting that, in the face of economic uncertainty, “travel to conventions is something that is relatively easy to cut back on.” He also disliked the center’s location, saying that, since the convention center would not be in Manhattan, “it is not a site surrounded by the kinds of visitor amenities that one would think make for an attractive, desirable convention location.”

But the other side has been seen as well. Steven Spinola, president of the Real Estate Board of New York, was “thrilled” to hear the plans. “Repurposing the Javits Center Site holds the potential to create thousands of jobs and revitalize the metropolitan area. I applaud Governor Cuomo for using this moment of economic challenge as an opportunity to launch long-discussed but rarely acted on projects, and for his leadership in putting New Yorkers back to work.”

After demolishing the Javits Center, the plan would see the existing land sold to developers, with the state creating a master plan for housing, hotels and museums on the site.

Six months after announcing plans to purchase the Park Central Hotel in Midtown Manhattan, LaSalle Hotel Properties has wrapped up the acquisition of the 934-room property in a transaction valued at $396.2 million.

Carrying the address of 870 Seventh Ave., just across the street from Carnegie Hall, the lodging destination made its debut in 1928 and today features 14,000 square feet of meeting and function space and 4,800 square feet of retail space. Park Central last changed hands in 2005, when a partnership  involving affiliates of Highgate Holdings and Goldman, Sachs & Co.-managed real estate investment funds picked up the asset for $215 million from Lehman Brothers in a sale orchestrated by real estate services firm Sonnenblick-Goldman Co.

LaSalle bought the 31-story hotel with cash on hand, proceeds from the issuance of approximately $8 million of operating partnership units at $27 per share and borrowings under its new $750 million senior unsecured credit facility, which the company entered into to replace its $450 million credit facility in mid-December. The property originally sported an agreed-upon price tag of $405.5 million, but the acquisition cost ultimately dropped by $9.3 million, a sum reflecting the hotel’s income after debt service from Sept. 2 of last year through the closing.

With the asset firmly in place in its portfolio, LaSalle has big plans for Park Central. The full-service hotel has maintained its high-quality status through a series of makeovers over the decades, including $33 million of upgrades since 2004, and the lodging REIT plans to continue the longstanding pattern of periodic renovations with the investment of as much as $35 million. The makeover is on track to get underway late this year and will reach completion in 2013. LaSalle has contracted Highgate to stay on as manager of the property.

Park Central is one of three hotels LaSalle purchased in 2011. In March, the REIT acquired the 162-room Viceroy Santa Monica in the Los Angeles beach town for $80.1 million, and in October it snapped up the 182-room Villa Florence in San Francisco for $67.2 million.

Taken as a whole, 2011 was something of a tumultuous year: There was a rally in the summer when the economy looked to get back on track, then the events of the fall–after a debt crisis in Europe as well as re-rising unemployment and the Congressional debt debate domestically–slowed that train. Either way, it was an interesting time for commercial real estate. Here are our top 11 stories from 2011:

Highland Fairview Breaks Ground on Future Skechers Home
California Gov. Arnold Schwarzenegger presided over the groundbreaking of Highland Fairview Corporate Park in Rancho Belago, Calif., which developer Highland Fairview says will be the largest green building of its kind in the United States.

Revel Secures $1.2B for Stalled Casino Project
The entertainment firm has closed on a financing package for the 6.2 million-square-foot Revel Hotel and Casino in Atlantic City. Money issues brought most construction activity at the $2.4 billion beachfront entertainment resort to a halt in January 2009, leaving the project half finished.

Philadelphia’s High-Rise Drought Eased by 34-Story Apartment Project
The $104 million project would be the first high-rise in any property category to get underway in the city since the 2008 opening of Comcast Center.

Renaissance Man: As Starwood Capital Turns 20, Founder Barry Sternlicht Explores New Paths
If the commercial real estate industry held a decathlon for executives, Barry Sternlicht would be a serious threat to run off with the trophy, and not just because Starwood Capital Group’s chairman & CEO looks as fit as the tennis player he was at Brown University 30 years ago.

Behind PNC’s Acquisition of RBC Bank USA
RBC has been a major player in the commercial real estate lending sector, and the transaction will now add to PNC’s commercial real estate portfolio.

Facebook Leases New 1 MSF HQ
The nine-building campus, located at 1601 Willow Road about 30 miles south of San Francisco in San Mateo County, materialized over a two-year period commencing in 1993. Oracle came into possession of the asset in January 2010, when it officially completed its $7.4 billion buyout of Sun Microsystems.

Grubb & Ellis in Exclusive Talks with C-III Capital & Colony Capital
The service firm is getting a major infusion of capital from two new stakeholders in a move that could point to a sale or other large strategic investment.

Why Blackstone’s $1.1B Bet Goes Against the Grain
The Blackstone Group’s $1.1 billion acquisition last week of a suburban office portfolio from Duke Realty Corp. challenges conventional wisdom on multiple fronts–and departs from the standard approach of grabbing core office product in a handful of markets.

Health Care REIT Buys Genesis for $2.4B
The sales transaction frenzy in the healthcare real estate sector continues as JER Partners and Formation Capital sign on to sell the company, which comes to the table with a portfolio of 147 properties in 11 states.

CoStar Amps Up Offerings with LoopNet Acquisition
The deal comes as no surprise to those who keep an eye on the ins and outs of the industry. B. Riley & Co. director of research Ian Corydon said, “It has made sense for a long, long time.”

Fannie Mae Reveals Top Multi-Family Lenders
Performance hit a higher level in 2010, with each of the 10 lender partners each contributing a minimum of $870 million in loan volume, compared to 2009’s minimum of $700 million.

Houston's Hotel ZaZa

In separate transactions, Holliday Fenoglio Fowler has secured refinancing for two properties: a regional mall in suburban Boston and a boutique hotel in Houston.

HFF’s Pittsburgh office secured a permanent loan for the Square One Mall on Route 1 in Saugus, Mass. The amount of the 10-year, fixed-rate loan arranged with Deutsche Bank was not released. The securitized loan replaces maturing debt on the property and will also be sub-serviced by HFF.

The center’s owner is Mayflower Square One LLC, which includes entities partially owned by Simon Property Group, Teachers Insurance and Annuity Association of America and Canada Pension Plan.

The mall is anchored by Macy’s, Sears, Best Buy, T.J. Maxx & More and Dick’s Clothing & Sporting Goods. In its current configuration, the mall is the result of a $100 million redevelopment by New England Development Corp. of the former New England Shopping Center, which had closed in the mid-1980s. The redeveloped mall opened in August 1994.

HFF staff representing the borrower included executive managing director John Pelusi, managing director Claudia Steeb and director Lauren O’Neil.

One of the mall’s noteworthy features is a model of the planet Neptune, 4.5 inches in diameter, in the food court. It’s part of a scale model, at 1-to-400-million scale, of the entire solar system that was coordinated by Boston’s Museum of Science. The sun is depicted by an 11.6-foot half-sphere in the lobby of the museum’s Charles Hayden Planetarium in Boston, roughly seven miles distant.

In the second transaction, also announced Monday, the Houston office of HFF secured a $50 million, 10-year, fixed-rate, refinancing loan through Goldman Sachs Commercial Mortgage Capital LP for Hotel ZaZa in Houston’s Museum District.

The HFF team representing the borrower was led by senior managing director Mark West, director John Bourret and associate director Colby Mueck.

The 315-room luxury boutique hotel was built in 1925 as the Warwick Hotel and was substantially renovated before reopening in 2007 as Hotel ZaZa. Amenities include a spa, pool with private cabanas and full-service bar and grill, 21,000 square feet of meeting space, and a restaurant.

This property and a Hotel ZaZa in Dallas are affiliated with Preferred Hotels & Resorts.