KDC wants to bring its state-of-the-art corporate campus prototype to Lexington, Ky., and the commercial real estate and investment firm is under contract with Sperry Van Ness Real Estate Advisors-Lexington to do just that. KDC is planning to develop the KDC Corporate Center, a 250,000-square-foot headquarters destination at the University of Kentucky’s 735-acre Coldstream Research Campus.

The vision for KDC Corporate Center entails multiple buildings that will sprout up on a 38-acre site within Coldstream, which sits near downtown Kentucky. Such an endeavor marks a rare opportunity in the city. “Lexington is one of the most land-constrained markets in the country and developable land is at a premium,” Jeff Stidham, a vice president with KDC, told Commercial Property Executive.

The first phase of the project will yield a 100,000-square-foot structure designed to accommodate today’s users’ needs, especially their efficiency needs. The three-story building will feature layouts that promote effective use of space and employee productivity, and it will be high on sustainability. KDC will seek LEED certification for the property, which will offer such green features as increased daylighting opportunities and an under-floor system that will allow for energy cost savings of approximately 30 percent.

The initial phase of KDC Corporate Center will kick off upon the completion of leasing agreements accounting for 50 percent of the first building. The demand for premier space, KDC contends, exists and is on the rise. “There has been no new Class A office development of this type in more than ten years and there are currently no large blocks of Class A space in the market,” Stidham added.

KDC will capitalize on Coldstream’s proximity to the University of Kentucky and the presence of the 62 businesses that currently call the campus home to reel in lease commitments. “We are targeting research and development firms with close ties to University of Kentucky,” he sconcluded. “University of Kentucky’s pharmaceutical program is world-renowned and several national firms have substantial facilities here related to medical and pharmaceutical research.”

However, KDC is casting a wide net; the developer will market KDC Corporate center to office users beyond the research and development arena as well.

Construction has begun on Junction Flats, a six-story, 182-unit luxury apartment building in downtown Minneapolis located near Target Field and a major transit hub. The 240,000-square-foot building is being developed by High Street Residential, a Trammell Crow Co. subsidiary, in partnership with The Carlyle Group.

The cost of the development and the amount of the equity invested by The Carlyle Group, a global alternative asset manager, were not made public. The Carlyle Group is using equity from Carlyle Realty Partners VI, a $2.34 billion fund that targets opportunistic real estate investments in North America.

“Junction Flats is located just northwest of the central business district in the North Loop, a vibrant community that offers residents a unique experience and a wide range of destinations, including entertainment venues, fine dining and specialty shops,” Grady Hamilton, principal & head of Trammell Crow’s Midwest Business Unit, said in a news release. “We have excellent partners and are pleased to be moving forward with such a unique development in the heart of the North Loop.”

“This has all the makings of a great development, a vibrant city with a strong local economy, solid supply-demand fundamentals, convenient transit options and a trusted partner in Trammell Crow Company,” added Tom Levy, a Carlyle principal.

The project is being billed as a “transit-oriented development.” The site is near I-94 and I-394 and The Interchange, a multi-modal transit hub expected to be completed next year and serve an estimated 22,000 people a day.

Located on 1.37 acres in a downtown area known as the North Loop, Junction Flats will feature studio, one- and two-bedroom units and live/work units. It will have nine-foot ceilings, balconies and patios and upgraded appliances. Other amenities include a clubroom, pool deck, fitness center, dog-wash station, bicycle storage, business center and Wi-Fi coffee lounge and a covered heated parking garage.

Junction Flats should be completed by summer 2014. It will join several other new multi-family communities under development in Minneapolis and its nearby suburbs as a strong economy is driving the rental market. Trammell Crow said last week it is teaming with another partner, Investment Real Estate Properties to develop a six-story, 260,000-square-foot multi-family project known as Arcata in the suburb of Golden Valley, Minn. Construction is expected to start soon on the development located about a 10-minute drive from downtown Minneapolis. ESG Architects, also the lead architect for Junction Flats, is the lead architect for Arcata, which will have 165 luxury units.

Employment is expected to rise nearly 3 percent in the Minneapolis area this year and is boosting the demand for rental apartments, according to the Marcus & Millichap ApartmentResearch Market Report for the second quarter. The report said the Minneapolis-St. Paul area has the second-lowest multi-family vacancy rate in the nation. It is expected to be 4 percent this year, up 80 basis points due primarily to the construction of new properties.

“Construction is already at an eight-year high and the list of planned projects continues to expand,” the report noted.

Developers are expected to deliver about 3,400 units of market rate, affordable and student housing in 2013, a 1.3 percent rise in inventory, according to Marcus & Millichap. The report said 1,200 apartments have hit the market in the past 12 months, including about 364 finished in the first quarter of 2013. The pace is expected to continue because more than 6,400 multi-family building permits were issued in the last 12 months, up 32 percent year-over-year, the report stated.

Minneapolis is also the site of a $400 million mixed-use development by Ryan Cos. for a site adjacent to the new Vikings stadium planned for the city’s Downtown East neighborhood. It is expected to have 1 million square feet of office space, 40,000 square feet of retail and more than 300 residential units and be completed by summer 2016.

Industrial Income Trust, of Denver, a non-traded REIT, has purchased the 11-building, 808,400-square-foot Broadway 101 Commerce Park in Mesa, Ariz., for $77,002,000 in a cash deal, it was announced Thursday by Cassidy Turley. The closing took place the previous day, Commercial Property Executive was told by a spokesperson for Cassidy Turley, which represented the seller, Lincoln Property Co.

Built in two phases in 2005 and 2007, Broadway 101 Commerce Park comprises five warehouses, three general industrial buildings and three office/warehouse buildings. At 2140-2360 E. Broadway, the property is one-half mile from the Loop 101/Price Freeway.

The Cassidy Turley sales team included executive managing director Tom Powers; executive vice presidents Bob Buckley, Steve Lindley, Tracy Cartledge, Mike Haenel and Andy Markham; and vice president Marc Tuite. Powers works in Cassidy Turley’s Cincinnati office, while the other six brokers are in the Phoenix office.

Broadway 101 triggered “exceptional buyer interest with major institutional investors including several that were new to the Arizona market,” Buckley said in a release.

In addition, Cassidy Turley has handled the leasing at Broadway 101 since the project’s inception. The park is leased to a diverse tenant base that includes Worldwide Technology Holdings, PCT International, Aviall Services (a Boeing subsidiary), Mitel Networks, Siemens Water Technologies and Patterson Dental Supplies.

While the property was in escrow prior to closing, the Cassidy Turley spokesperson told CPE, the property enjoyed additional lease-up, with its occupancy moving into the high 80 percent range.

That’s consistent with nearby properties, according to first-quarter 2013 market stats from Cassidy Turley, because the West Mesa submarket ended the quarter at 11.6 percent average vacancy.

Overall, industrial space in metro Phoenix is doing dramatically better than just a year ago, according to the Cassidy Turley report, with user activity up sharply, strong net absorption, spec projects increasing and rents likely to rise 3 to 5 percent by year’s end.

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Multi-family is still reeling in the lenders. A 12-property apartment portfolio in Manhattan has just been refinanced to the tune of $94.4 million, courtesy of Beech Street Capital L.L.C. The mortgage banking firm financed a group of Freddie Mac loans for owners Henry Moses and Robert Moses as part of its correspondent relationship with originator Meridian Capital Group L.L.C.

The portfolio was irresistible.  “[They're] low-leveraged, well-located Manhattan properties,” Meridian’s Josh Rhine told Commercial Property Executive.   The collection of apartment communities encompasses 488 residences located on the Upper East Side, Lower East Side and in the East/West Village. And the tenant rosters are full at all 12 properties.

The Moses brothers have owned some of the assets for over a decade, having amassed the portfolio over a nine-year period beginning in 1999. A Wall Street lender had held the majority of the loans on the assets. The entire group of loans has now been replaced with a full-term seven-year interest-only loan package.

“The borrower was extremely pleased with the entire process,” Rhine said in a prepared statement. “Beech Street understood what they wanted and delivered accordingly.”

A $118 million, 16-property office portfolio fully leased to federal agencies through the Government Services Administration is on the market and attracting  interest from both U.S. and international buyers.

“This is getting a lot of attention and a lot of discussion,” Colin Cavill, a member of Colliers International GSAXCHANGE group that is marketing the 273,000-square-foot portfolio for West Second Street Associates, told Commercial Property Executive.

Cavill, managing director of Colliers International’s GSAXCHANGE, said the size of the portfolio is unusual in the GSA space.

“This is a very rare opportunity to pick up a portfolio that has geographic and tenant agency diversity in this space,” he added.

The properties are occupied by GSA tenants including the Social Security Administration, Internal Revenue Service, Immigration and Customs Enforcement, Department of Veterans Affairs and Customs and Border Protection. Seven of the properties are in Michigan; three in Ohio; two each in Florida and Texas and one each in Colorado and Minnesota. They were all build-to-suit and the oldest was built seven years ago. Two are still under construction but close to completion. The properties range in size from 6,000 to 40,000 square feet. The remaining average lease term is 10 years.

Cavill said the ongoing sequestration affecting the federal government budget does not affect these properties.

“Because these are long-term leases that have firm terms, there is not going to be any disruption of the rents,” he said.

Cavill said the GSA properties attract investors because they “provide a steady income stream and consistent yields.”

He told CPE that WSSA, a Flint, Mich.,-based developer and long-term property manager that specializes in GSA buildings, was selling the portfolio to redeploy the capital into other parts of its business.

But he added, “They’re not getting out of the GSA market.”

Cavill said the portfolio had been marketed for about two weeks, both inside and outside the U.S.  He expects bids to be submitted by May 21.

“We hope by early summer it will be closed,” he said.

The federal government is the largest single occupant in the U.S., leasing or owning more than 3 billion square feet of real estate. GSAXCHANGE, which is part of Colliers Government Solutions, is an investment sales and capital markets platform that deals solely with government-leased assets. Joining Cavill on the WSSA portfolio team are Bob Cottle and Darrin Kennedy.

“WSSA selected Colliers Government Solutions because of the deep federal-sector knowledge we provide, enabling us to better market the positive attributes of this portfolio,” Kurt Stout, executive vice president, Government Solutions at Colliers Internationl, said in a news release. “We are thrilled to have this opportunity to represent such a large portfolio of GSA properties, and look forward to expanding our presences in several strong markets.”

The Colliers Government Solutions platform consists of six services focused on government real estate: leasing, investment sales, finance, property management, appraisal and tax appeal. Members of the group work in teams to provide clients with solutions to deal with the often complex requirements of government-leased properties.

Waterman Interests Inc.’s ownership of the leasehold interest on 400 Park Ave., an office and retail building in the Plaza district of Midtown Manhattan, is now secure — at least until the 21st Century nears its end. The real estate investment and operating company, which owns the asset in joint venture with institutional investors advised by J.P. Morgan Asset Management, just signed a new 75-year master lease with Benenson Capital Partners, the longtime owner of the land beneath the 250,000-square-foot property.

The closing of the lease transaction comes approximately three years after Waterman Interests purchased the leasehold interest at 400 Park from RFR Holdings L.L.C. Waterman Interests didn’t originate debt for the acquisition then, and the asset remains unencumbered today.

Extension of the master lease frees Waterman to expand upgrades at the 21-story tower without the constraints of the previous lease, which was scheduled to expire in 17 years.

“The asset has already attracted ‘best-in-class’ banks, private equity firms and hedge funds, which have leased over 100,000 square feet as we commenced, and completed, Phase I of our capital improvements,” Philip “Tod” Waterman III, founder & managing member of Waterman Interests, told Commercial Property Executive. Recent commitments have come from Malayan Banking Berhad, which leased the entire 11th floor of the building in December 2012. Additionally, City National Bank took the entire 15,000-square-foot retail space and some office space last June.

Currently, 400 Park is roughly 70 percent occupied, and Waterman Interests is confident that, with the freedom to move forward with Phase II of its improvement program, it will be able to reel in even more tenants. As it implements upgrades — including renovation of the entryway, improved exterior and interior lighting, installation of a redundant chiller and emergency generator, and replacement of high-rise windows to match those in Phase I  — and completes construction of the new City National Bank branch at the corner of the building, and “we expect momentum to continue and accelerate,” said Waterman.

Also working in the property’s favor is the fact that the Manhattan office market is faring relatively well. The national vacancy rate in the first quarter was 15.4 percent, according to a report by commercial real estate services firm Cassidy Turley, while Manhattan recorded a vacancy of 11.8 percent. “(Demand is being spurred by the) intellectual talent pool, cleanliness and safety of the city, compared to other large cities around the world, and the diversity of the New York economy, which is constantly evolving and demanding diverse office occupancy choices,” Waterman added.

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.

A Class A office property just traded for a quarter billion dollars, and it didn’t happen in New York City or San Francisco or Washington, D.C.; it occurred in Minneapolis, Minn. Beacon Investment Properties L.L.C., acting in a joint venture with Harel Insurance Investments & Financial Services Ltd. and Menora Mivtahim Insurance Ltd., snapped up Minnesota’s tallest office tower, the 1.4 million-square-foot IDS Center, from Inland American Real Estate Trust for $253 million.  

“It’s a downtown property, it’s the premier property in Minneapolis,” Thomas Dunsmore, a senior vice president with commercial real estate services firm NAI Everest, told Commercial Property Executive. “The IDS building obviously is a trophy property so there’s going to be an intrinsic value.”

Inland had owned the asset since 2006, when it paid $277.9 million to acquire it. Inland is moving forward with its portfolio repositioning plans–the REIT wants to focus on the hospitality, retail and student housing sectors–and put the landmark skyscraper up for grabs, relying on commercial real estate and capital markets services firm HFF to find a buyer. It probably wasn’t a terribly difficult task.

“Minneapolis is attracting a lot of investors that have been priced-out of the top-tier markets,” Dunsmore said. “There are better cap rates and I think you’re seeing that there’s existing money that’s chasing properties here, and now there’s outside money chasing properties here.”

And it wasn’t just the building’s record height that attracted what Jamie Fink, a senior managing director with HFF, described in a prepared statement as “very strong interest in the property from international and national investors.” Case in point: Florida-headquartered Beacon’s partners in the purchase are both based in Israel.

Designed in 1972 by renowned architect Philip Johnson, the tower carrying the address of 80 S. 8th St. in the heart of downtown Minneapolis is 93 percent leased and has a very loyal tenant base; more than 30 occupants have called the IDS Center home for 20 years or more.  Additionally, the asset features the Crystal Court retail plaza, which is 100 percent leased.

HFF also worked on behalf of Beacon and partners to orchestrate a 10-year, $182 million financing package provided by JP Morgan Chase Bank NA.

The sale of the IDS Center is just one of many trades that have occurred in Minneapolis over the last year, and experts forecast that the trend to continue.

“There are a number of great elements about the Twin Cities marketplace that have always made it attractive, and we’re starting to see capital migrate into second-tier markets like ours,” Tom O’Brien, executive director with commercial real estate services firm Cushman & Wakefield/NorthMarq, told CPE. “There is lots of capital chasing deals and we expect to see continued activity and interest in the Minneapolis market throughout the year, whether it’s the central business district or the suburbs. There’s a lot of interest, but not enough product.”

KeyCorp has extended its occupancy of approximately 487,000 square feet at the company’s namesake corporate headquarters at Key Tower in Cleveland, Ohio.

Columbia Property Trust has owned the iconic, 57-story, Class A office tower and attached 10‑story historic building since December 2005. The 1.3-million-square-foot property has served as KeyCorp’s headquarters since the tower’s construction in 1991.

“KeyBank is the anchor tenant in Key Tower, a building that is named after the firm as part of the original development,” Kevin Hoover, Columbia Property Trust’s senior vice president real estate transactions, told Commercial Property Executive. “The renewal signifies KeyBank’s long-term commitment to the building, the City of Cleveland, and the overall Northeast Ohio region, and it reflects Columbia Property Trust’s commitment to finding long-term solutions for our valued tenant partners, which is an integral part of our plan to drive value for our investors.”

The lease extension commences July 1, 2015, and extends through June 2030. Terms were not disclosed.

“A primary component of the deal was Columbia Property Trust’s continued focus on operational efficiency and reducing the environmental impacts associated with the largest commercial office project in greater Cleveland,” Hoover said. “These efforts have been recognized with both an ENERGY STAR certification and a Gold designation in the LEED EBOM category. Sustainability continues to be a strategic goal for both Columbia Property Trust and KeyBank.”

Part of a larger complex known as Key Center, Key Tower integrates a modern 57-story office tower with the splendidly restored, century-old Society for Savings Building, and the adjacent 400-room, convention-caliber Marriott Hotel.

According to Hoover, other amenities within the complex include the Club at Key Center, a prestigious private fitness and dining facility operated by Club Corp of America, a 900-car heated underground parking garage, valet parking available through the Marriott, a conference center with advanced presentation technology, and a concierge service in the lobby along with a newsstand and Starbuck’s.

The building’s conference facility consists of three meeting rooms; a board room, a tiered amphitheater and a multi-purpose room. Rooms may be reserved in conjunction with one another or separately and separate staging for food is available for each room.

“Key Center is at the heart of downtown directly located on Public Square, an area undergoing a transformative renaissance,” Hoover added. “The city is committed to the renovation and enhancement of the area by creating a more park-like setting. In addition, Key Center is adjacent to Memorial Park offering a beautiful resting area and the historic Fountain of Eternal Life, also known as the War Memorial Fountain. The fountain was designed by Marshall Fredericks and is a tribute to citizens that served in World War II.”

Key Center is also located directly across the street from the new Global Center for Health Innovation and Convention Center. The Global Center for Health is the first permanent showroom for medical, surgical and hospital goods in the U.S.

Key Tower is one of the tallest buildings between New York and Chicago and was designed by Cesar Pelli and Peter van Dijk. It is the 18th tallest in the U.S. and 55th tallest in the world.

Massena, N.Y., a town of about 11,000 near the Canadian border, is among scores of communities nationwide hoping that prospective investors and developers will soon start arriving on the heels of lengthy  environmental cleanups. In Massena’s case, the site in question is a 217-acre site on the St. Lawrence River where General Motors Corp. operated a manufacturing plant from 1958 to 2009.

By 2015, the decades-long project will wrap up, clearing the way for industrial redevelopment, reports Brendan Mullen, who oversees cleanup at four former GM sites in New York for their court-appointed custodian, RACER Trust (the acronym stands for Revitalizing Auto Communities Environmental Response).

Cleanup of the 217-acre site has been complex and painstaking, requiring tasks that range from demolishing the 855,000-square-foot main building to excavating contaminated soil and shifting the location of an industrial landfill.

In preparation for eventual redevelopment of a 218-acre site formerly occupied by a General Motors Corp. manufacturing facility in Massena, N.Y., the superstructure of the 855,000-square-foot main building was demolished last year.

Painstaking as the cleanup has been, the approach suggests broader lessons about preparing industrial sites for their next chapters: a highly motivated owner, a ready funding source and — no less valuable — a cooperative rather than confrontational relationship with regulators.

At nearly $121 million, the price tag for the cleanup of the Massena site will be the most expensive undertaken among the 89 industrial sites relinquished by GM as part of its bankruptcy reorganization. RACER Trust was tasked by the U.S. Bankruptcy Court with marketing the sites, which initially encompassed 6,000 acres and 44 million square feet of buildings; about two-thirds of the properties need remediation. To finance that work, the trust has a $500 million cleanup budget on top of $270 million for maintenance, taxes, security and other standard holding costs. Taking community input into consideration, RACER Trust seeks proposals from developers that can benefit economically hard-hit areas. As a further stimulus, RACER Trust also prefers to hire local firms for the competitively bid projects. Preference is also given to local contractors and consultants as a further economic stimulus.

Today’s cleanup has roots in 1984, when the U.S. Environmental Protection Agency added the GM property to its national roster of remediation sites. Under its watchful eye, GM undertook a wide-ranging cleanup in the 1990s that included removing contaminated soil, dredging sediment from the St. Lawrence and Raquette rivers, excavating sludge from lagoons and installing wastewater treatment plants.

By the time RACER Trust took charge of the cleanup in 2011, the plant had already been shuttered for two years. Its first task was overseeing the dismantling of the 855,000-square-foot superstructure main building. In 2012, the priority was the removal of the building’s reinforced concrete foundation slab and underground tunnels directly beneath it. All told, demolition of the building yielded 16,700 tons of steel and more than 100,000 tons of concrete and soil, reported Mullen.

This year, the remediation effort is going deeper still, as excavation reaches as far as 50 feet below grade. Perras Environmental Control Inc., a local specialty contractor, will remove a 21,500-square-foot storage building in order to access the PCB-laden soil underneath it. Also on Perras’ to-do list: draining and excavating three process lagoons, plus dismantling an unused 10,000-square-foot wastewater treatment plant and a smaller support building.

Yet another set of tasks are ahead in the final two phases of the project. Next year, a contractor will pick a specialist to remediate another disposal area and move the toe of the slope of an industrial landfill 150 feet before capping it. Work is scheduled to conclude in 2015 with the installation of a permanent system of pipes, pumps and wells to treat contaminated groundwater.

The Massena cleanup, like others overseen by RACER Trust, is virtually free of the disputes with regulators that so often weigh down remediation efforts, project officials say. On the contrary, the EPA — the lead agency on the project — functions as a partner rather than an adversary. On March 13, for instance, federal and state regulators attended an organizational meeting with the RACER Trust team and Perras Environmental. “Typically, you would not see the regulators in that type of meeting,” said Mullen.

Participation of regulators enhances transparency, builds teamwork and fosters communication among all the stakeholders. It is impossible to place a dollar value on good will, but the spirit of cooperation also brings tangible benefits, Mullen contends. Working closely with the EPA and other agencies helps to streamline an approval process that might otherwise slow down the project. “Where we do really save our dollars is on that back and forth that we completely avoid,” he explained.

For more on brownfield remediation, turn to “Batting Cleanup” in the April 2013 issue of Commercial Property Executive.

JDS Development Group has acquired a 730,426-square-foot development site in New York City’s popular Murray Hill neighborhood from Sheldon Solow for a reported $172 million, with plans to build two multi-family towers on the two-acre vacant lot.

Meridian Capital Group L.L.C., a leading national commercial real estate finance and advisory firm, negotiated $128 million in financing for the developer.

JDS Development Group’s plan is to construct a total of 830 units in a 37-story building and a 47-story building on the site at 616 First Ave., along First Avenue between E. 35th and 36th streets and overlooking the East River.

The parcel is zoned for residential use and is the smaller of two plots totaling nine acres that were originally purchased in 2005 from Con Edison. The entire JDS project is expected to cost $600 million and will be fully financed, according to the company.

“Meridian arranged the financing with UBS Real Estate Securities Inc. in 17 days, leveraging its extensive relationship with the lender to enable the sponsorship to take advantage of one of the most unique post-Lehman buying opportunities in Manhattan,” Aaron Appel, a managing director at Meridian Capital Group, said in a company statement.

Plans call for more than an acre of open space at the base of the towers, and JDS is currently working with the Department of City Planning to ensure a strong connection to the waterfront. Although the FDR Drive stands between the property and the river, a pedestrian bridge or deck of some kind is being considered to alleviate the problem.

With Solow owning another seven acres in New York City, the multi-family landscape might soon be changing. Already in development is Zecekendorf’s 50 United Nations Plaza, a 44-story project at 47th Street and First Avenue set to house 87 luxury condominiums.

Robert Knakal, chairman of Massey Knakal Realty, said the New York City commercial property investment sales market is currently red hot, but warned that sustained periods of low interest rates typically lead to real estate bubbles.

“Things are phenomenal now if you are in the sales business,” said Knakal. Knakal gave an address as keynote speaker at the New York City Real Estate Career Expo, held yesterday at the New York City Bar Association.

Knakal said that the state of the New York City land market is currently “unprecedented.” Land prices in New York City have increased by 20 to 25 percent in the past three months, and have even exceeded levels achieved at the peak of the market in 2007. He said that the Upper West Side is registering prices of $600 per square foot, compared to $400 in 2007. And in Tribeca, land prices are $1,000 per square foot, up from $500 per square foot at the last market peak. “Land prices are on fire,” he said.

By dollar volume, the New York City investment sales volume in 2012 was $40 billion, compared to $63 billion at the market peak in 2007. Knakal noted that more buildings sold last year than at any time in New York City’s history. The relatively high sales level in 2012 was driven in part by the increase in the capital gains tax rate, said Knakal. He expects the number of buildings sold this year to decrease by 20 to 25 percent, but the dollar volume of sales to nevertheless increase. “If you are a sales broker, you are feeling pretty good.”

Knakal said that price per square foot of New York commercial properties has increased by 13 percent in 2012, and by 15 to 20 percent in the first three months of this year alone.

The drivers of the investment sales market are the low interest rates, the “same pool of capital fighting over” a limited pool of real estate, and relatively small yields in other investment vehicles resulting from a mediocre economy. Knakal emphasized that values are increasing not because of underlying fundamentals but above all because money is cheap as a result of low interest rates maintained by the Fed.

“The government is artificially manipulating interest rates.” The leasing market, he added, is not as hot as the investment sales market.

“Things right now look great, but are we in another period of asset bubbles? History tells us that sustained periods of low interest rates create asset bubbles.” And he said that in the past few real estate cycles, a spike in land prices has always preceded a downturn in the market. The sky-high price of land, he said, “makes us nervous.”

He said if interest rates eventually rise because of traction in the economy, that will be not pose as much of a threat to the real estate market as if interest rates rise as a consequence of the high level of government debt.

The Shops at Old Orchard – West Bloomfield, Mich.

A major retail purchase in Florida and Michigan is currently in the works. Ramco-Gershenson Properties Trust announced this week that they have entered into an agreement to buy out partner Clarion Partners’ 70 percent ownership interest in 12 of the 15 Florida and Michigan shopping centers they own and operate as Ramco/Lion Venture L.P. These assets (detailed below) were primarily acquired in 2004 and 2005.

The transaction is being funded with approximately $151.9 million in cash and the assumption of Clarion Partners’ pro-rated share of debt of approximately $104.9 million, making the total estimated acquisition cost $256.8 million. The deal is expected to close by the end of the second quarter.

A day after making the purchase public, Ramco-Gershenson announced an upsized public offering of seven million common shares at $15.55 per share with proceeds being directed at the 12-property purchase, though the offering is not conditioned on the completion of the acquisition.

The 12 shopping centers represent 2.2 million square feet and are all anchored by grocery and/or value-oriented retailers. Occupancy is strong, just over 93 percent, and the annualized base rent is approximately $14.51 per square foot. In 2012 the 12 centers generated $27 million in income, which equates to a 7.4 percent cap rate on the aggregate asset value of $366.8 million. Getting the centers to operate at this level took a little work, according to Dennis Gershenson, president & CEO of Ramco-Gershenson.

Cypress Point – Clearwater, Fla.

“A significant amount of the shopping centers saw some strong re-tenanting,” Gershenson told CPE. “There were a number of the assets that had both Circuit City and Linens ‘n Things in them, and we have replaced them all not just with other uses, but with viable destination oriented retailers.”

This tactic, combined with strong local demographics—all the Michigan properties are located in Oakland County, the tenth-highest income county in the United States with a population over one million—has led to particularly strong occupancy.

“Our Michigan assets in total, even in the worst of times, never fell below 92 percent, and at the present time we are at over 95 percent occupied in Michigan,” Gershenson said, adding that Florida assets are in the 92 to 93 percent range.

Things are looking up for retail over the next year on the macro level as well, according to data released by the U.S. Department of Commerce on Wednesday. February brick and mortar retail and food services sales were up 1.1 percent from January, and 4.6 percent above February 2012.

Just because Ramco-Gerhenson is buying out Clarion Partners in this portfolio doesn’t mean that the joint venture is through. The companies have confirmed a mutual desire to buy up to $350 million of additional shopping centers over the next several years, focusing on stable, high-quality assets in leading metro markets.

Hunter’s Square – Farmington Hills, Mich.

“I think that Clarion’s willingness not only to continue the venture with the three assets that are still jointly owned, but to buy back up to the total allocation at the get-go, speaks volumes about our relationship,” Gershenson said. “They are looking for very stable core assets as far as acquisitions are concerned, and we see their desire for those kinds of assets complimenting what we are looking for—properties where we can add value.”

The Florida shopping centers, which represent 58 percent of the acquisition, include:

• Mission Bay Plaza (Boca Raton), 263,721 square feet, anchored by The Fresh Market, Golfsmith, LA Fitness, OfficeMax, and Toys “R” Us.
• Marketplace of Delray (Delray Beach), 238,901 square feet, anchored by Ross Dress for Less, Winn-Dixie, and Office Depot.
• Cypress Point (Clearwater), 167,280 square feet, anchored by The Fresh Market, and Burlington Coat Factory.
• West Broward (Plantation), 152,973 square feet, anchored by DD’s Discounts (a division of Ross Dress for Less) and Save-A-Lot.
• Village Plaza (Lakeland), 146,755 square feet, anchored by Big Lots.
• Vista Plaza (Jensen Beach), 109,761 square feet, anchored by Bed, Bath & Beyond, Michaels, and Total Wine & More.
• Treasure Coast Commons (Jensen Beach), 92,979 square feet, anchored by Barnes & Noble, OfficeMax, and Sports Authority.
• Cocoa Commons (Cocoa), 90,116 square feet, anchored by Publix.

The Michigan shopping centers, which represent 42 percent of the acquisition include:

• Hunter’s Square (Farmington Hills), 354,323 square feet, anchored by Bed, Bath & Beyond, Buy Buy Baby, Loehmann’s, Michaels, Marshalls, and TJ Maxx.
• Winchester Center (Rochester Hills), 314,575 square feet, anchored by Bed, Bath and Beyond, Dick’s Sporting Goods, Marshalls, Michaels, and PetSmart.
• Troy Marketplace (Troy), 217,754 square feet, anchored by Nordstrom Rack, LA Fitness, Golfsmith, PetSmart, and Total Hockey.
• The Shops at Old Orchard (West Bloomfield), 96,994 square feet, anchored by Plum Market, an upscale grocer.

MIG Real Estate, a Newport Beach, Calif.-based real estate investment company, has acquired Acacia Creek, a 304-unit apartment home community in Scottsdale, Ariz., from Equity Residential.

The company would not disclose the sales price but published reports have the deal at close to $40 million.

“Acacia Creek is situated in an excellent location within the highly desirable north Scottsdale submarket,” Greg Merage, MIG Real Estate’s CEO, told Commercial Property Executive. “The property’s location provides easy access to employment centers and retail amenities. The property is also located in a highly desirable residential area and in a top school district,”

Located at 7007 E Gold Dust Ave, Acacia Creek is situated just west of

Scottsdale Road lies on 14 acres of land in close proximity to North and South Scottsdale retail and employment centers. The community is also adjacent to the Town of Paradise Valley, where median home prices exceed $1,000,000 and household income is more than twice the metro Phoenix average.

The property consists of one-, two-, and three-bedroom floor plans with full-size washer and dryers, fully equipped kitchens, linen closets, spacious walk-in closets, private patio/balconies with additional storage, and covered parking. Some units offer vaulted ceilings and fireplaces. Community wide, amenities include three outdoor pools, 24-hour fitness center, a picnic area with barbecue grills, gated entry and mountain views.

According to Merage, the opportunity to add value through renovation of the common areas, amenities and unit interiors in a desirable in-fill location were key reasons for the deal. The company is planning on improving the pools and fitness centers as well as the unit interiors to appeal to residents in the market.

“The property has three pools, a fitness center and a business center that will be upgraded as part of the renovation program,” Merage said. “The property is a strong addition to our portfolio and we anticipate increasing resident demand and leasing activity in the future.”

Since 2009, MIG purchases of office, retail, hotel and multi-family properties in major markets in the Sunbelt and Western U.S.

Sean Cunningham and Tyler Anderson of CBRE represented the seller in the transaction. MIG Real Estate represented itself. Alliance Residential will manage the property for MIG.

Ellipse at Government Center, Washington, D.C.

How do you get your hands on a billion dollars? Greystar Real Estate Partners and Goldman, Sachs & Co. kicked off 2013 with the announcement of plans to snap up an 8,010-unit multi-family portfolio from Equity Residential for $1.5 billion, and now CBRE Capital Markets’ Debt & Equity Finance group is helping the joint venture partners cull more than $1 billion to finance the acquisition, “Commercial Mortgage Alert” reported on Friday.”

CBRE had good raw material to work with in its pursuit of funds for the partners’ purchase. “Goldman Sachs and Greystar stepped up in record time with non-refundable earnest money and proved quickly that they are no- nonsense buyers,” Mike Bryant, vice chairman with CBRE Debt & Equity Finance, told Commercial Property Executive.

The portfolio consists of 27 high-quality apartment communities and CBRE secured seven-year Freddie Mac loans for each one of them, loans that are non-crossed and float over 30-day Libor. The two-stage funding transaction will conclude in late March, allowing Greystar and Goldman to complete the acquisition of the group of assets. When all is said and done, the joint venture will have enhanced its holdings with premier rental units in eight high-performing markets in Denver; Northern New Jersey; Phoenix; the San Francisco Bay area; Southern California; South Florida; and Washington, D.C.

The portfolio and the sponsorship combine to form the kind of union that the lending community simply cannot ignore. “[It has] excellent major apartment markets across the U.S., very little vacancy in each submarket and 30 percent equity investment to help mitigate any risk by the number one investment banking firm in the world,” said Bryant. Additionally, two-thirds of the properties will get a makeover over the next 36 months.

While multi-family remains a sector favorite among real estate lenders, it’s not every portfolio that commands such attention. But the climate for borrowers has certainly improved over the last few years and it appears that there are even better times ahead.

“Risk spreads are lower as the U.S. economy seems to have turned the corner and jobs pick up some momentum; at the same time treasuries have not moved a lot,” Bryant concluded. “The next year we should see interest rate spreads become more competitive as the CMBS market begins to compete again with Freddie, Fannie and the life companies for debt opportunities.”

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Late last summer, The Rockefeller Group and Investment Property Associates L.L.C. said they would break ground on the $57.5 million Liv Northgate in Gilbert, Ariz., in early 2013, and now they have. The joint venture has commenced work on the first phase of the 402-unit luxury apartment community at Rockefeller’s 155-acre mixed-use North Gateway project roughly 30 miles outside of Phoenix.

Liv Northgate is the sole “live” component of Rockefeller’s live-work-play North Gateway development, which could ultimately feature as much as 1 million square feet of office and industrial space and 12.2 acres of retail offerings. A garden-style apartment complex designed by Whitneybell Perry Architects, Liv Northgate’s units will be housed in two- and three-story structures on nearly 25 acres at the intersection of Warner and Recker Roads.

Rockefeller and IPA expect that North Gateway’s well-positioned location near freeways, airport and major employers will attract businesses to the mixed-use project’s office segment and, in turn, residents will follow to Liv Northgate. And market fundamentals are on Liv Northgate’s side as well. “Despite the reintroduction of new construction to the market, Greater Phoenix multi-family operating fundamentals remained healthy as 2012 came to a close, as renter demand for units continued to be buoyed by a strengthening employment outlook,” according to a report by commercial real estate services firm Colliers International, which represented both Rockefeller and IPA in the formation of their joint venture last year. “As 2013 begins, multi-family conditions are positioned to improve as hiring continues to fuel demand for apartments and the competition from single-family homes being employed as rentals should ease.”

With MC Clark Wayland on the ground orchestrating construction activity, Liv Northgate will help answer the increasingly loud call for apartments with the delivery of its first units in spring 2014.

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Photo Credit: Joe Woolhead

By Barbra Murray, Contributing Editor

The Beekman Tower Hotel in Midtown Manhattan has found a new owner and will soon find a new life. Silverstein Properties and a group of partners consisting of Fisher Brothers, Capstone Equities, Migdal Insurance Co. and Arkin Holdings have acquired the 174-room hotel from Lone Star for $82 million, and will transform the property into a luxury corporate apartment destination.

The two-building, 153,000-square-foot property at 3-7 Mitchell Place made its debut in 1929 as an affordable housing location for young women who had just arrived on the Manhattan career scene. And now, with Silverstein and Fisher acting as co-developers for the $25 million conversion endeavor, it is destined for a new incarnation. The target market for the new Silver Suites Residences at Beekman Tower will be guests looking for furnished, upscale, temporary living accommodations for 30 days or more. It’s a project that places Silverstein in one of its comfort zones.

“This is a product type that we already operate on the West Side of Manhattan in our Silver Suites Residences at Silver Towers (on West 42nd Street), so we thought that was the best use of this site, given its location and the nature and the size of the units,” Marty Burger, co-CEO of Silverstein, told Commercial Property Executive.

With Plaza Construction on the ground overseeing renovation activity, the partners will pay careful attention to maintaining the integrity of the Art Deco property’s façade, which holds a landmark designation from the Landmarks Preservation Commission. Architecture and interior design firm Stonehill & Taylor has been brought aboard to orchestrate the interior redesign of the connecting 26-story and 10-story structures.

With the ongoing strong demand for residential rentals across the country, the lending community is certainly drawn to traditional apartment projects, and in the case of Beekman Tower, it is apparently keen on corporate apartments, as well. Silverstein and Fisher had no shortage of financing options when setting out to buy Beekman Tower, which was marketed by Eastdil Secured on behalf of Lone Star. “There were many different lenders who wanted to provide the capital for this,” Burger revealed. “In fact, we had three lenders in the end who were very, very close and on top of each other. So we had really no issue in securing the debt for this project.” Cantor Commercial Real Estate ultimately provided an acquisition and development loan for Beekman Tower.

“We think with the strength of that submarket, being near the United Nations, this project will be really well received and we’re excited about it,” said Burger. “Plus, there’s the vast depth of the Midtown office market; when you just go a couple of blocks west, you’re right in the Midtown office market.”

In partnering up for the Beekman Tower project, Silverstein was able to pursue one of its current investment goals: joining forces with foreign investors, like Israel-based Arkin Holdings, a multi-faceted company with a focus on the pharmaceutical industry and its financial portfolio. “We’ve actually been doing a lot of work both trying to develop in Israel and bringing Israeli investors to the U.S.,” Burger noted. “New York has been such a strong place and a safe harbor for lots of foreign capital, and so that’s why we do seek not only domestic but foreign capital on our projects.”

Silver Suites Residences at Beekman Tower will welcome its first guests in September of this year with the introduction of 50 new corporate apartments to the market, followed by the debut of the remaining 124 units by early 2014.

On behalf of Shamrock Associates L.L.C., Binswanger, of Philadelphia, has brokered the sale of a single-story, 170,000-square-foot manufacturing building on 94 acres on Chase Hill Road in Ashaway, R.I., Binswanger announced late last week.

The sale closed in late October, according to Tim O’Callaghan, senior vice president in Binswanger’s Natick, Mass., office, who handled the transaction.

The buyer, Chase Hill Road Properties L.L.C., was formed on Sept. 21, according to the Providence Business News. The company is based in New York City, O’Callaghan told Commercial Property Executive, though he was unable to disclose further information.

The building features concrete floors; combination masonry block and insulated metal panel walls, ceiling heights to 26′ clear, columns spaced 20 by 25 feet and 40 by 50 feet, a 100 percent wet sprinkler system, about 10,000 square feet of office space, nine 9- by 10-foot dock-high loading doors, one 10- by 16-foot ground-level door, and one 1,000-pound capacity crane. About 80,000 square feet of the space is pre-racked, O’Callaghan said.

Ashaway is near the Connecticut–Rhode Island border, thus well away from either the Providence or New London markets. O’Callaghan pointed out, however, that the site is only about three miles off of I-95.

The building, O’Callaghan told CPE, was built in 1960 and then expanded in 1980. It was purchased by Garrity Industries around 2000 and used for flashlight packaging and distribution, but was vacated after Garrity was purchased by Duracell in 2006.

The buyer, O’Callaghan said, is aiming for flexibility and below-market rents in its plans for the building. Chase Hill Properties intends to gut out all of the existing office space, he said, and is considering a multi-tenant approach for the building, possibly dividing it roughly in half between the older and newer portions.

Phillips Edison–ARC Shopping Center REIT Inc., of Cincinnati, has acquired Brook Park Plaza, a 157,000-square-foot shopping center anchored by a Giant Eagle grocery store in Brook Park, Ohio, a suburb of Cleveland for an aggregate price of , the REIT announced late last week.

Other tenants include Goodwill and Fresenius Medical Services, and the center overall is about 88 percent occupied. The anchor tenant is 82,000 square feet and includes a fuel station.

The purchaser is a public non-traded REIT that focuses on the acquisition and management of grocery-anchored neighborhood shopping centers, with a mix of national and regional retailers selling necessity-based goods and services, in strong demographic markets. It’s co-sponsored by Phillips Edison & Co. and AR Capital L.L.C.

The Brook Park Plaza purchase brings the company’s total portfolio to 22 properties, all retail, totaling nearly 2.2 million square feet and diversified across 13 states.

“The acquisition of Brook Park Plaza is consistent with our acquisition strategy of acquiring well-occupied grocery-anchored neighborhood and community shopping centers located in infill locations throughout the United States,” Derk Taylor, director/Midwest acquisitions for Phillips Edison & Co., told Commercial Property Executive.

The seller was Albrecht Inc., of Akron, Ohio, a regional owner and manager of northeastern Ohio commercial real estate, primarily retail properties.

“Neighborhood shopping centers are in high demand, given the fact that the healthiest shopping center category is the neighborhood, convenience-oriented center,” Jeff Green, of retail consultants Jeff Green Partners, Phoenix, told CPE.

“These centers are a hotter commodity than the regional mall or power/big box centers, both of which are somewhat vulnerable in this struggling economic time.”

“The neighborhood centers most in demand by investors are those with the strongest, highest-volume area supermarkets, as the grocery category is the least likely to be impacted by Internet shopping,” Green added. “And in this case Giant Eagle has the highest market share in metro Cleveland.”

In other Cleveland news, BGL Real Estate Advisors, a subsidiary of Brown Gibbons Lang & Co., and Cleveland real estate developer Scott Berkowitz broke ground on Monday, Oct. 15, on a luxury aloft hotel at the Chagrin Highlands corporate center in Beachwood. It will be the second aloft hotel in the Cleveland area. In May 2013, an aloft hotel is expected to open in Cleveland’s downtown.

Optimism permeated the Emerging Trends in Real Estate results this year, with respondents finding a marked improvement over last year. Recovery, though, remains slow, noted Jonathan Miller, partner & co-owner of Miller Ryan L.L.C. and the longtime author of the report, a venture between PricewaterhouseCoopers and the Urban Land Institute. Miller and fellow researchers presented the results during a media briefing yesterday during the ULI Fall Meeting.

Jonathan Miller

“Recovery is definitely happening, and we’re profiting from it,” he declared, reflecting the sentiments of the more than 900 real estate investors, fund managers, developers, owners, lenders, brokers, advisors and consultants that participated in this year’s survey. And it is now occurring across the board: While multi-family has been the favored sector for investment for the past three years, he noted, the other sectors are now all attracting attention, as well. That said, in-depth interviews with 300 of the respondents revealed lingering uncertainty beneath the surface.

Among markets, the historical top cities remain in favor, although there was some surprising movement in how they ranked , based on investment, development and homebuilding prospects, according to Chuck DiRocco, director & head of real estate research at PwC, who is a co-author & production manager of the report. The biggest surprise was Washington, D.C.’s drop in favor, with the nation’s capital falling from the top spot down to No. 8 after three years leading the ranking. That shift in favor was revealed in a mid-year evaluation and has lingered into the more formal annual survey.

Last year’s second-place city, Austin, also dropped down, though it retained a respectable fourth-place listing, while formerly third-ranked San Francisco, continuing its return to strength, moved up to lead the ranking. Other top 10 cities included New York City, up to second place from fourth last year; San Jose, making waves with its move from seventh to third place; Houston, up from eighth to fifth; Boston, down only slightly, from fifth place to sixth; Seattle, now seventh (down from sixth last year); with Dallas-Fort Worth and Orange County, Calif., rounding out the list. Last year’s ninth and tenth place cities, Los Angeles and San Diego, dropped down to 16^th and 15^th place, respectively.

Chuck DiRocco

San Francisco made a particularly triumphant return because it won the “triple crown” of first place in investment, development and homebuilding, DiRocco noted. But performance among major cities across the country was promising, with the average market score at its highest since the early 2000s and an increase in the number of cities getting a green light for “generally good” performance while five fewer markets got a red light for “generally poor” performance than last year. Even the long-suffering Midwest is not as “red” as it once was, he said.

Another surprise was the rise in interest in secondary markets. “The major gateways have gotten too pricey for a lot of people,” Miller observed, as cap rates have continued to plunge. Investors in secondary markets, however, need to link up with a local operator to succeed, he warned, as they are in the best position to make money. “It’s a get-rich-slow (scenario), but you can make money,” he added.

Financiers also remain on the optimistic side, although they are not providing capital to everyone, according to Stephen Blank, senior fellow for finance at ULI and principal researcher & advisor for Emerging Trends. Equity providers across the board will capitalize the “usual suspects,” the well-heeled investors with solid reputations, but with others, “it’s a search for yield,” he said. The most confident investors include opportunity funds, REITs and foreign investors, while pension funds are taking a more cautious stance.

Stephen Blank

On the debt side, too, the most solid investors and properties will be able to obtain what they need, but for less-advantaged properties, financiers have no problem continuing to extend and pretend. They expressed confidence the CMBS market is returning sufficiently to cover the looming debt maturities.

Researchers’ top tips:

• Concentrate acquisitions in budding infill locations.
• Construct green office in 24-hour markets.
• Major hub distribution centers near ports and airports offer opportunity.
• Apartment development is leveling off.
• Single-family housing funds are worth pursuing, but with caution and only if they involve local operators.
• Pursue the big three “re’s”: Repurpose obsolete properties, refinance and renovate. Recapitalize well-leased assets and lock in low interest rates while you can.
• Hold core properties in 24-hour cities.
• Buy or hold public REITs and non-performing loans.

New York—Follow the job growth. That was the key takeaway during “Secondary and Tertiary Markets: Identifying, Finding and Investing in Commercial Real Estate Opportunities,” the recent Multi-Housing News and Commercial Property Executive webinar sponsored by Yardi and moderated by Executive Editor Keat Foong. Panelists, which included Gary Ralston, managing partner, Coldwell Banker Commercial Saunders Ralston Dantzler Realty LLC; John S. Sebree, vice president, national director, National Housing Group, Marcus & Millichap Real Estate; Albert M. Berriz, CEO, McKinley; and Ernie Katai, senior vice president, Berkadia, looked into commonly overlooked markets and provided insights for investors.

Gary Ralston

Focusing on the commercial property sector, Ralston said that investors are still concentrating on safe investments, and on an aggregate basis in secondary markets, the prices are still down. The annual population growth of the United States is almost 1 percent, so, according to Ralston, the goal of investors is to focus on states that are growing above that, such as Florida, Texas and Nevada. Additionally, investors and developers should pay attention to areas of employment growth, which he says has shifted to port-driven areas.

Other important tips that Ralston provided were to work with the best local professionals and to know the employment numbers and supply on a granular level.

“It’s a battle out there, and it’s fought with swords and not lasers, so get in close!” Ralston said.

On the multifamily side, Sebree also showed that the outlook for tertiary markets is appealing, especially in terms of employment.

“Tertiary markets tend to be more stable over time,” he said. “The change in [job growth] is dominated by tertiary markets.” However, in terms of employment, Sebree said that secondary markets tend to be more unstable.

Multifamily markets tend to follow employment rates, so according to Sebree, apartment vacancies correlate with employment rates.

He also suggested looking into these markets when it comes time to invest. According to Sebree, the markets with the lowest vacancies are New York (primary market); Portland, Ore. (secondary); and Salt Lake City (tertiary). The markets with the most positive movement in vacancies include Houston (primary); Charlotte, N.C. (secondary); and Columbus, Ohio (tertiary).

“Today is an incredibly good time to purchase,” Sebree said.

Berriz, who is involved in commercial and multifamily properties, provided a case study of the areas of the country his company focuses on. He echoed the other presenters in their assertions of looking to the areas of growing employment.

“Strategically, we’re very surgical,” he said. “We’re only looking in certain areas, and if you look in these areas, there’s terrific job growth.”

These areas, which Berriz said are commonly overlooked, include Cary, N.C.; Spartanburg, S.C.; and Gainesville, Fla.

“Most people don’t travel to these markets because they’re hard to get to,” Berriz said. “I urge the audience to think about [different] areas.”

Berriz also suggested some other secondary and tertiary markets with the most opportunity for investors. These include Houston, Atlanta and Las Vegas.

According the Berriz, investors should also be looking into Class-B and C multifamily properties, and the retail sector. However, do so cautiously.

“Be careful, because there are a lot of Class-C properties that can’t be turned around,” he said. “Not all assets are created alike.”

The final panelist, Katai, spoke about lenders and how they look at secondary and tertiary markets.

“Lenders define secondary and tertiary markets differently,” he said. “It’s still a bit of a wildcard how lenders will deal with it.”

According to Katai, lenders are primarily looking for jobs and economic growth and the financial strength of the borrower. They are also looking for quality assets that have a lower purchase price. Lenders are also finding a lot of desirability in college areas. Additionally, he suggested looking for different sources of financing, such as co-ops of small banks, instead of the usual large banks.

“There is no formula—everything is per the individual lender,” Katai said. It comes down to basic fundamental issues. You have to do your homework.”

Investment Property Associates, L.L.C. and The Rockefeller Group entered into a joint venture agreement to develop Liv Northgate, a 402-unit Class A apartment community in Gilbert, Ariz.

“The partnership is founded on shared values. IPA and Rockefeller both have a commitment to producing really high-quality products with a definitive focus on the end user, whether an office or multi-family,” Bill Fettis, Partner of IPA and co-founder of IPA Management, told Commercial Property Executive. “This project reflects that commitment.”

Situated on the northeast corner of Warner and Recker Roads, the site will comprise 24.67 acres and will complement The Rockefeller Group’s 155 acre mixed-use North Gateway project, which will accommodate 226,000 square feet of office space, 1.1 million square feet of industrial /flex and 12.2 acres of retail space.

Liv Northgate will be managed by IPA and the 402 garden-style, luxury apartment units will consist of two- and three-story buildings, a leasing office, high-tech clubhouse and extensive recreational amenities.

“IPA loves to design with a real personal touch,” Fettis said. “Things are really centered around conveniences for the residents, making sure everything is very accessible, that there’s lots of technology built into the units themselves and that it’s well suited to a modern lifestyle.”

Each unit will include a premium appliance package, custom cabinets, slab granite kitchen counters, full-size washer and dryer, walk-in closets, ceiling fans, state-of-the-art communications wiring, simulated wood flooring, window blinds, nine-foot ceilings and private balconies and patios with storage areas.

The developers will also focus on maximizing the square footage in the spaces to create comfortable living environments and promoting sustainability. Some of these features are reflected in intentional gathering spaces, state of-the-art fitness equipment, health and wellness classes, recycling stations and pedestrian walkways throughout the property that connect to surrounding greenbelts.

“We like to do some innovative things on the sustainability front. We offer a concierge recycling service to make things easy for residents,” Fettis said. “We also are providing electric car charging stations and maximizing green space in the property.”

Other amenities include two heated pools with fire and water features, sand volleyball, a 24/7 fitness center, a bark park and pet care station, numerous outdoor picnic and family recreation areas throughout the property and gated access.

Liv Northgate and North Gateway will represent one of suburban Phoenix’ most desirable mixed-use developments, in close proximity to freeways, aerospace companies located near Phoenix Mesa Gateway Airport, Banner/M.D. Anderson, other hospitals close by and DMB’s new Eastmark development.

The project is scheduled to get under way in early 2013; development costs are anticipated to be approximately $57.5 million.

“The Rockefeller Group is very pleased to be partnering with a company of IPA’s experience in developing and managing high quality residential communities in Arizona,” said Mark Singerman, Regional Director of The Rockefeller Group’s Arizona office. “With IPA as a partner, we look forward to bringing quality Class A, highly amenitized residential living to Gilbert.”

IPA was represented by Cindy Cooke, Brad Cooke, Carrie Burton and Alex Sampson of Colliers International in Phoenix. The Rockefeller Group was represented by John Finnegan, Chaz Smith and Ramey Peru, also with Colliers in Phoenix.

By Lynn Armitage, Contributing Editor

If you do business in the Twin Cities, you’ve undoubtedly heard of Normandale Lake Office Park, the premiere business complex in Bloomington, Minnesota, that is home to more than 85 companies, including Oracle Corporation and Prime Therapeutics.

Last Thursday, an affiliate with Equity Group Investments, the private investment firm founded by Chicago billionaire Sam Zell more than 40 years ago, acquired Normandale Lake, the largest Class A office asset in the Minneapolis market, in a joint venture for $268 million — exceeding the $255 million estimate industry sources had expected the office complex to command in the sale.

“Normandale is the premier office environment in the Minneapolis market,” said David Helfand, EGI’s co-president who led the joint venture with GEM Realty Capital Inc., and Perennial Investments and Advisors.  “We are committed to maintaining the park’s premium market position and exceptional reputation.”

So what will EGI get for its considerable investment? Normandale Lake is a 1.5 million-square-foot office complex that consists of five towers connected by enclosed skyways –- each with an attached parking garage.  The entire campus sits on 23 acres overlooking a 2,500‐acre recreational area. Stand-out amenities within the office park include first-class restaurants and delis, child care, conference centers, exercise facilities, convenience stores, and nearby walking trails and paths.

With such attractive bells and whistles, it’s easy to see why Normandale Lake is already 84 percent leased, and many of the largest tenants have been leasing for more than 20 years.

“The complex has a long track record of successfully serving the needs of the area’s most prestigious tenants,” said Helfand.

Normandale Lake Office Park currently has available floor-plates ranging from approximately 20,000 to 28,000 square feet, and contiguous spaces of up to 75,000 square feet. The entire campus is easily visible from I-494 and Highway 100 in Bloomington, and is 10 minutes from the Minneapolis airport, 13 miles south of downtown Minneapolis.

Its new owner, Equity Group Investments (EGI), has a diverse portfolio spanning industries and continents with interests in real estate, energy, logistics, transportation, communications and health care.

It’s a big deal, a very big deal. Storage Deluxe has sold a 1.6 million-square-foot self-storage portfolio in the Northeast to CubeSmart for a whopping $560 million, courtesy of a transaction orchestrated by HFF on the seller’s behalf.

“It will be a while before the industry sees another transaction like the Storage Deluxe deal,” Aaron Swerdlin, senior managing director with HFF, told Commercial Property Executive.

The CubeSmart has now enhanced its holdings by 22 facilities in New York, Pennsylvania and Connecticut. Only a select few had the opportunity to compete for the group of properties.

“Having fully marketed several deals for Storage Deluxe, and having achieved pricing in-line with our guidance on those deals, Storage Deluxe was comfortable that CubeSmart’s pricing was consistent with what we would achieve with a full process but without the disruption and distraction of a widely marketed deal,” said Swerdlin.

CubeSmart had the inside track, buoyed by an established relationship with Storage Deluxe. In September 2010, the REIT acquired two of Storage Deluxe’s New York facilities totaling 2,200 units in Brooklyn and the Bronx.

Had HFF marketed the portfolio widely, the firm would most certainly have had to field a bevy of offers.

“For large deals and core one-off deals in major markets, it’s honestly as good as I’ve ever seen it,” Swerdlin added. “I’ve focused exclusively on self-storage sales transactions for almost 20 years and I’ve never seen investor appetite like we see today.”

The self-storage market is on the upswing across the country and in the East, supply constraints and the migration of households to major employment centers continue to strengthen demand, according to a mid-year report by Marcus & Millichap Real Estate Investment Services. The year-over-year occupancy level is expected to increase 210 basis points to 87 percent in 2012.

Longtime Boston real estate heavyweight Jerome L. Jerry Rappaport Jr. has joined forces with head honchos at Chestnut Hill Realty on a new venture. Rappaport, Chestnut Hill founder and CEO Edward Zuker and managing director Robert Zuker have formed CHR Investors, a CHR affiliate that will center on apartment real estate investment.

The greater New England region will be CHR Investors’ main area of concentration and Rappaport, an industry veteran of more than four decades, will play a major role in the endeavor as managing director. He’s well-equipped for the job. Rappaport’s history in real estate investment, development and fund management spans 30 years. His prominence in the industry can be attributed to a variety of positions over the years, including that of co-founder of New Boston Fund, where he reigned for 18 years. During that time, New Boston Fund raised in excess of $1 billion in equity through various funds and developed or acquired more than 7,000 residential units.

“What a coup for Chestnut Hill Realty to get Jerry,” said David Begelfer, CEO of the Massachusetts chapter of NAIOP, where Rappaport once served on the board of directors. “He has a proven investment acumen and one of the widest networks of real estate and financial professionals in the business.”

Rappaport has a strong existing relationship with CHR. He has been acting as a consultant for the firm, assisting in the creation of a strategic growth plan and he has also had a hand in the firm’s development group. Additionally, Rappaport is a co-investor in the $100 million Chestnut Hill Realty Property Trust Fund I, an apartment acquisition vehicle.

With Rappaport at the helm, CHR Investors will focus their attention on off-market multi-family purchases, relying heavily on his and Ed Zuker’s connections cultivated through the rental Housing Association and their history in private property rights. The team will also pursue various institutional and multi-family RIA investors for opportunities.

Oak Grove Village, a luxury apartment complex straddling the suburban Boston cities of Melrose and Malden, Mass., has come under new ownership. With the assistance of CB Richard Ellis – N.E. Partners L.P., Pembroke Real Estate has sold the 550-residence property to an unidentified buyer.

Neither CBRE-NE nor Pembroke have disclosed the price tag attached to the Oak Grove sale; however, the Boston Business Journal has reported that the asset fetched $188 million.

The transaction comes three years after Pembroke, a division of Fidelity Investments, completed the two-phase development of Oak Grove. The high-end property occupies 16 acres and features approximately 15,000 square feet of retail offerings, as well as a coveted location just across from a Metro station.

Investors are keen on the metropolitan Boston apartment market, and for good reason. Demand outweighs supply-side pressures. The vacancy rate plummeted to a 10-year low of 3.6 percent in the second quarter, according to a report by Marcus & Millichap Real Estate Investment Services. With rising employment and the continuation of strict lending standards for homebuyers, there appears to be no end in sight to the tightening of the market. Marcus & Millichap anticipates that by year’s end, rents will reach uncharted territory.

It’s the perfect storm for investors, who are becoming increasingly interested in the outlying areas of Boston. ”Competition will remain fierce for top-tier properties in the core, encouraging yield-seeking buyers to venture to the suburbs, where cap rates average above 6 percent,” according to the report. The Oak Grove deal was just one case in point this week. Archstone just announced that it has completed the purchase of the 285-unit Station 250 luxury apartment community in Dedham, reportedly at a cost of $94.2 million.

Cervalis LLC has inked a long-term lease to occupy a 167,600-square-foot, new-construction data center and disaster recovery center in Norwalk, Conn., though the particulars (exact term, lease rate) haven’t been disclosed. According to the parties involved in the deal, it’s the largest lease in Fairfield County so far this year, and the largest build-to-suite in the county in more than a decade.

The lease means that FPG Norden, a subsidiary of Fortis Property Group, can now go ahead with the development of the property, which will be on a five-acre site. Construction is slated to begin during the first half of 2013.

“Even though Cervalis currently has 300,000 square feet of data center and disaster recovery space operating in New York, New Jersey, and Connecticut, it needs new inventory continuously to satisfy the needs of its clients,” Howard E. Greenberg president of Howard Properties, told CPE.

Greenberg, along with John Stoddard, vice president of Jones Lang LaSalle, represented Cervalis in the deal. Jodie Dostal, senior director, Cushman & Wakefield of CT Inc., represented FPG Norden.

“Bringing a data center on line is a very long-lead proposition,” Greenburg said. “The provision of redundant sources of electrical power and fiber connectivity, along with the installation of backup generators, and significant electrical and HVAC infrastructure, takes a significant amount of time to put in place. If the building isn’t built to suit, there’s time required to customize it to fit the stringent structural requirements of a data center.”

Cervalis is a provider of IT infrastructure products, including business continuity/rapid recovery, managed hosting, enterprise cloud computing, managed security, managed storage, networking & telecommunications and colocation. Its new facility in Norwalk will be near NorthropGrumman’s production facility.

“Data centers that include disaster recovery space also need to be close enough to major business centers so that employees of the companies housing their servers in the data center can commute to the disaster recovery space to operate there remotely in the event of an emergency,” Greenburg added. “But they shouldn’t be so close to the business centers as to be affected directly by the emergency. Norwalk fulfills both of those requirements.”

Shelling out $68 million, Alchemy Properties Inc. has just gotten its hands on part of a Manhattan landmark: the Woolworth Building. The real estate firm has big plans for its new purchase. Alchemy acquired a condominium interest in the top 30 floors of the 57-story high-rise from The Witkoff Group and Cammeby’s International for $68 million and will proceed to convert the vacant space in the office building into a premier residential condominium destination.

Alchemy will spend approximately $90 million to transform the top of the tower into über-upscale residences. In addition to lavish finishes and the like, the units will boast an elusive, highly coveted feature in Manhattan: lots and lots of space. With just over 100,000 sellable square feet to play with, Alchemy plans to create 40 to 45 residences containing two to five bedrooms.

“Because the units offer such amazing views, we decided we’re going to do larger units, which will really be quite spectacular,” Kenneth Horn, president of Alchemy, told CPE. Some of the homes will be full-floor units, taking advantage of the tapering size of the building as the floors go higher.

Alchemy is not putting an estimated price tag on the units just yet, but it will undoubtedly be a hefty one, as it’s not every day that exclusive homes in one of the world’s most recognizable skyscrapers hit the market. There’s an audience for such accommodations.

“We think our market will be New Yorkers, obviously, but we also think we’re going to get a very large international group to buy here because of the iconic value of the Woolworth Building and the fact that it’s just a prize; there aren’t that many buildings out there where the first residential floor starts 350 feet above the ground.”

Alchemy also has a recovering market on its side. Active inventory in Manhattan’s for-sale market declined in the second quarter, marking the second-fastest absorption rate since 2007, according to a report by Prudential Douglas Elliman Real Estate. Armed with positive market conditions, a quality project and solid sponsorship, Alchemy was able to attract acquisition financing from HSBC Bank.

Not everyone will be able to reside at the Woolworth Building, but some will still be able to work there, as Witkoff and Cammeby’s will continue to operate the first 27 floors of the property as office space.

Marriott Marquis Times Square – Photo courtesy Flickr user m einauge

Host Hotels & Resorts Inc. has just struck a deal with Vornado Realty Trust that will bring new prominence to the New York Marriott Marquis Times Square. The two companies recently entered into a lease agreement that lays the groundwork for Vornado to redevelop the retail segment of the 49-story hotel at a cost of approximately $140 million. The property’s coveted signage component is part of the deal, too.

Spanning an entire block in one of the most popular tourist destinations in the entire country, if not the world, the Marriott Marquis is a bit of an attraction in and of itself, featuring over 1,900 guestrooms and approximately 100,000 square feet of meeting space. Under the terms of the agreement, Vornado will upgrade and expand the property’s retail space through a project that will include the transformation of the underground parking facility. The goal: high-end retail.

“If you’re in an area where retail is very high, it definitely makes sense to have retail on the ground floor,” Roland deMilleret, managing director with hotel and leisure industries consulting firm HVS, told CPE. “It makes sense to maximize your retail revenue if you’re in a location like Times Square because that’s the highest and best use on the ground floor; you make more money with retail than anything else. So it makes sense that they are going to revamp the whole retail because there is potential in that area.”

The lease carries a 20-year term and encompasses an option that would pave the way for Vornado to take ownership of the space at a cost based on future cash flow. And there’s plenty of cash flow to be had through the building signage as well. Vornado plans to develop a six-story, 300-foot wide block front signage space. “Signage is also a big thing for those hotels,” deMilleret said. “They generate a lot of revenue from those signs. You definitely want to maximize [its use], so that strategy makes sense.”

Jones Lang LaSalle’s Capital Markets team has secured $48 million in Credit Tenant Leasing financing from a foreign institutional investor for an industrial and bus maintenance complex in Newark, N.J., owned by Hartz Mountain Industries Inc.

The investor provided the 4.323 percent, fixed-rate, 24-year loan for the property at 601 Doremus Ave. that consists of 21.7 acres of land and 638,092 square feet of space that is leased to New Jersey Transit Corp. through 2036.

“This was an extremely complex financing assignment for a very unique property that involved a modified industrial condominium regime. The loan provides financing for a critical facility for New Jersey Transit, in which the entire city’s buses are maintained,” said Joe Garibaldi, JLL managing director, who lead the team on the deal.

Executive vice presidents Brion Haist and Bill Cavagnaro also worked on the financing deal.

The financing derives its proceeds from the direct sale of bonds to investors in the global capital markets rather than capital from commercial real estate lenders. Haist said CTL financing works well for corporations, the federal government, certain municipal government entities and healthcare facilities such as hospitals.

“By and large, most of these rely on the concept of the triple net lease,” Haist said, noting that the New Jersey Transit facility has a triple net lease.

Haist told Commercial Property Executive that the unidentified foreign institutional investor frequently participates in CTL financing because it securitizes the rent stream that comes off the triple net lease.

“The securitization is structured in a way to isolate those rent payments against the credit of the tenant making them,” Haist said, adding that most tenants have credit worthiness that is at or near investment grade.

Haist, who joined the Jones Lang LaSalle Capital Markets team in November, 2010, said his group has done over $8 billion of these types of transactions over the last 10 years, both at JLL and at other firms.

“It’s a focus for our unit,” he said.

Jones Lang LaSalle Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. In 2011, the team – comprised of more than 1,200 specialists – completed $60 billion in investment sale and debt and equity transactions globally. In the United States, the team grew its volume by 122 percent in 2011 and is gaining market share across all property types.