Moving forward with its strategy of focusing its investment activity on Coastal California markets, San Francisco-based BRE Properties Inc. has sold an apartment property and acquired an apartment community and developable land in transactions valued at an aggregate $209.6 million.

In the largest of the three transactions, BRE snapped up the 500-unit Aqua Marina del Rey (pictured) in Marina del Rey for $166 million, a figure well below replacement cost. The property had been foreclosed upon by Brookfield Asset Management Inc. after a loan default by then-owner Stellar Management. Located in Los Angeles County on nearly six acres of land, the nine-year-old community encompasses two four-story structures, each sitting atop two levels of parking. BRE is planning to upgrade the property over the next three years.

BRE also acquired 2.4 acres of debt-free land in Sunnyvale in Northern California’s Silicon Valley. The site is located across from a CalTrain station and can accommodate the development of 280 apartment units. With the acquisition, the REIT now has two developable land parcels in the area.

The last of the three transactions involved BRE’s disposition of Boulder Creek, a rental community situated in Riverside within the Inland Empire market. The 264-unit property commanded $24.6 million and left the company with an expected gain on sale of approximately $7.8 million. Proceeds from the deal provided partial payment for the Aqua Marina del Rey and Sunnyvale land acquisitions, leaving the REIT to fund the remainder of the purchase price through its revolving credit facility.

BRE has spent the year “going coastal,” so to speak, having previously purchased two Southern California apartment properties and two San Francisco Bay-area communities with an aggregate 1,037 residential units, as well as a parcel of land in deals totaling $312 million.

“Right now, about 65 percent of our net operating income comes from California,” a company representative told CPE. “We have had a California-centric strategy in place for quite a long time.” BRE’s portfolio of directly owned and operated apartment communities consists of 75 properties featuring an aggregate 21,064 residential units in California, Arizona and Washington. The company also has five projects totaling 1,568 units in various stages of development, in addition to joint venture interests in 13 properties accounting for 4,080 units.

Southern California-based land brokerage firm The Hoffman Co. is looking to the north, having just opened a new office in Sacramento.

Hoffman has hired land acquisition specialist David Capel and partner Cameron Fowler to manage residential land deals in Sacramento, the San Francisco Bay Area, the Central Valley and along the Central Coast.

According to Hoffman principal Norm Scheel, Capel’s knowledge and experience in the Northern California market will facilitate the firm’s expansion.

Capel was previously director of acquisitions at Greenrock Holdings, L.L.C. in El Dorado Hills, California, and prior to that was director of Laing Sequoia Nocal Partners in Modesto, California. He earned his undergraduate degree in business administration from California State University, Sacramento.

Since 1978, Hoffman’s brokers have closed more than 1,100 real estate transactions. The firm represents land owners of all property types, including residential, multi-family, commercial and industrial sites.

Preparing to answer growing demand induced by the federal government’s Base Realignment and Closure process, Merritt Properties wraps up the acquisition of a nearly 36-acre site for the development of a 265,900-square-foot office park in Aberdeen, Maryland. The property is located just two miles from the Army’s Aberdeen Proving Ground and approximately 35 miles outside of Baltimore.

The project, Aberdeen Corporate Park, will sit at 635-660 McHenry Road within a designated Harford County Enterprise Zone. The five-structure, Class A complex will consist of two three-story buildings accounting for an aggregate 190,400 square feet of office space, one two-story building featuring 63,500 square feet of office space, two retail pad sites totaling 12,000 square feet and a fitness facility. Merritt plans to obtain LEED Gold certification for the three office buildings.

As a result of the BRAC process, 8,000 new employees will soon call Aberdeen Proving Ground home, and by the time 2015 rolls around, the base will have a bout 22,000 military and civilian workers on site. To accommodate the growth, the Army is investing approximately $1 billion to construct 3 million square feet of office, laboratory and testing space. However, that additional space will not sufficiently meet the needs of the government-related businesses that will grow or materialize in line with the expansion of Aberdeen Proving Ground’s staff.

“The effects of BRAC related growth should begin to be felt, especially the latter part of 2010 into 2011,” according to a midyear report by commercial real estate services firm Cassidy Turley. “Expected demand requires the timely availability of space to accommodate the contractors required to be close to the operations they are serving. Fifty-five percent of the space being built in Harford County has been pre-leased.”

BRAC is also having an impact on the Fort Meade army installation in Hanover County. BRAC will result in the addition of approximately 5,400 military, Defense Department, civilian and contractor employees to the neighboring to the base, not to mention the accompanying 4,900 family members.

So, with BRAC presenting a prime opportunity for developers, the government is not alone in the effort to address impending office demand from both Aberdeen Proving Ground and Fort Meade. Private office endeavors, in addition to Merritt’s Aberdeen Corporate Park, are in the works. The 1.6 million-square-foot Oxford Square, a mixed-use project under development by Preston Partners about sit six miles from Fort Meade, got a financial shot in the arm earlier this month with a capital investment from Canyon-Johnson Urban Funds.

Increased office demand spurred by BRAC will impact other commercial real estate sectors in the area, too. As per the Cassidy Turley report, “Many of the service businesses which will benefit from the spending generated by this activity may also have reason to expand.”

The first office building at Merritt’s Aberdeen Corporate Park is due to deliver in summer 2011.

Courtesy Flickr Creative Commons user mbowlersr

Construction spending dropped in July to an annualized rate of $805.2 billion, a 1 percent decrease from the month before, according to the U.S. Census Bureau on Wednesday. The July level of construction was the lowest in 10 years. Also, June’s figures were revised downward to 0.8 percent below May, instead of a gain of 0.1 percent.

Leading the way down among private-sector construction was homebuilding, which declined 2.6 percent. Private-sector construction as a whole dropped 0.8 percent, though non-residential construction was actually up by 0.8 percent. It seems that utilities are building power and communications facilities and the like.

“While the stimulus is funding some vital infrastructure projects, the private sector is too cautious and state and local governments are too cash-strapped to help,” Ken Simonson, the chief economist at the Associated General Contractors of America, said in a statement. “As a result, overall construction spending is at its lowest level in a decade and hundreds of thousands of construction workers are unemployed.”

APD Says Private Sector Handed Out 10,000 Pink Slips in August

Automatic Payroll Processing Inc. reported on Wednesday–as it always does two days before official monthly U.S., unemployment number emerge from the federal government–that the economy dumped about 10,000 private-sector jobs in August. The company, which crunches its numbers based on payrolls, doesn’t always align with the official numbers, though sometimes it’s close.

The decline, according to the company, is a “pause” in the recovery already evident in other economic data. The decline–slight, considering the size of the U.S. labor market–came after six monthly increases representing an average gain of 37,000 private-sector jobs per month.

“Today’s ADP National Employment Report shows that U.S. private sector employment remains essentially flat,” Gary C. Butler, president and CEO of ADP noted in a statement. “Employers require economic certainty and a favorable environment in order to expand their businesses and create jobs.”

U.S. Factories Churning Out Goods

Americans might not be buying things at the crisp pace characteristic of a recovery, but we sure are making things that fast. The Institute for Supply Management reported on Wednesday that manufacturing in the U.S. expanded for the 13th month in a row in August.

The organization’s Manufacturing ISM Report on Business said its Purchasing Managers Index was 56.3 in August, up from 55.5 in July. More than 50 means manufacturing is growing, and the index has averaged 56.6 over the last year.

Wall Street was positively giddy on Wednesday, with the Dow Jones Industrial Average up 254.75 points, or 2.54 percent. The S&P 500 and the Nasdaq advanced nearly 3 percent each: 2.95 percent and the 2.97 percent, respectively.

High-end discount department store Century 21 is taking over a high-profile space in Lower Manhattan. It will be replacing Barnes & Noble, which will close its location at 1972 Broadway in January 2011.

Century 21 plans to take possession of the space, which is across from Lincoln Center, in February 2011. This will be its second Manhattan location and its seventh metropolitan area location. The space is owned by Millennium Partners and was developed in the early 1990s.

Millennium Partners partner Mario Palumbo said that he believes Century 21 will drive a large volume of shoppers to the area. Moreover, he said other tenants will benefit from the retail traffic.

Millennium was represented by Gene Spiegelman of Cushman & Wakefield. It was the only real estate broker involved in the deal.

Century 21 has additional stores in Brooklyn, Queens, Long Island and New Jersey.

Pearlridge Center, a 1.2 million-square-foot mall in Honolulu, Hawaii, is on the verge of coming under new ownership. Glimcher Realty Trust and its joint venture partner, an affiliate of investment firm Blackstone Real Estate Advisors, have signed an agreement to acquire the property–the second largest mall in the State of Hawaii–from Northwestern Mutual Life Insurance Co. in a $245 million deal.

Located on Moanalua Road in Honolulu’s Aiea submarket, Pearlridge first opened its doors in 1972, expanded its square footage in 1976 and subsequently underwent substantial renovations in 1995 and 1996.

Glimcher and Blackstone, owning a respective 20 percent interest and 80 percent interest in the joint venture they established March, plan to finance the purchase of Pearlridge partially through a $175 million mortgage loan that the partners anticipate obtaining at the close of the transaction. They will supply the remaining sum through equity contributions reflecting their individual stakes in the joint venture, with Glimcher relying on funds from its line of credit for its part of the equity contribution. To solidify the acquisition agreement, the joint venture made a non-refundable, $10 million earnest money deposit. Upon the deal’s completion, Glimcher will take on leasing and management responsibilities for the two-segment shopping mall, which is presently 99 percent leased to a long list of tenants that includes anchors Macy’s and Sears.

Relying on tourism as its main economic driver, Honolulu has not escaped the impact of the recession and job losses, yet its retail market is strong, particularly in comparison to other major metropolitan areas on the mainland. At the mid-year point, the average vacancy rate in Honolulu was an enviable 3.41 percent, according to a report by real estate services firm Colliers Monroe Friedlander Inc.

Other properties that have traded in the Greater Honolulu area this year include the 170,300-square-foot Waianae Mall, a 92 percent-leased property that was snapped up by TNP Strategic Retail Trust Inc. for $25.7 million in June, and the 180,000-square-foot Mililani Shopping Center, which Stoneridge Capital Partners acquired for $50.3 million in cash. The Pearlridge transaction is scheduled to close in the fourth quarter of this year.

Development of a new 575,000-square foot satellite campus for the National Cancer Institute, a division of the U.S. National Institutes of Health, edges closer toward realization as The JBG Companies officially kicks off construction the $200 million project in Rockville, Maryland, today. JBG will own the build-to-suit facility, which the U.S. General Services Administration will lease on behalf of NCI under a 10-year agreement.

NCI’s new research campus will sit 25 miles north of Washington, D.C., at the Shady Grove Life Sciences Center on a nine-acre parcel within Johns Hopkins University’s Montgomery County Campus, where 16 biotech companies and research centers make their home. JBG is leasing the land for the NCI project from the university under a long-term agreement. The complex will consist of two identical seven-story structures and a parking garage with approximately 10,000 square feet of ground-level space to accommodate service retail. James G. Davis Construction Corporation is the general contractor onboard, and global architectural firm HOK is behind the design of the project, which will adhere to standards for the obtainment of LEED Gold certification.

The campus will allow NCI to consolidate 2,100 employees under one roof. Presently, the cancer research and training agency houses the group of workers at several locations near its Bethesda, Md., headquarters.

“Overall, the life sciences market here has suffered during the recession, so to have this kind of commitment from NCI is a big shot in the arm not only for Johns Hopkins, but for the Life Sciences Center,” Rod Lawrence, managing principal for JBG, told CPE. The university is well equipped to accommodate the life sciences industry. “At Hopkins’ Belward campus, there is room for commercial development and additional university-based developments.”

JBG is on schedule to complete the NCI project in early 2013.

Courtesy Flickr Creative Commons user chrisdlugosz

The much-anticipated S&P/Case-Shiller home price index for June was released on Tuesday, indicating that prices for single-family homes in 20 major U.S. metro areas rose 4.2 percent from June 2009. That’s an upward bounce in the price of housing, but very possibly of the dead-cat variety, reflecting the fleeting impact of the now-expired federal housebuying tax credit.

Still, 15 of the top 20 metro areas saw increases year-over-year, with San Francisco leading the pack with a 14.3 percent gain. San Diego gained 11.2 percent and Minneapolis was third, with a 10.7 percent increase. On the other end of the spectrum, the biggest year-over-year loser, according to the index, was usual-suspect Las Vegas, which remains mired in foreclosures. Home prices have slid there by 5.2 percent since June 2009.

The Case-Shiller numbers told a similar story, though not in the details, as the Monday report by Freddie Mac that U.S. home purchase prices rose 3.1 percent during 2Q10 compared with the previous quarter, though were down 0.2 percent when compared with a year earlier. The Freddie Mac report tracks a much wider universe of houses than Case-Shiller, but the point is the same: the tax credit acted as an electric shock that got the zombie up and walking for a while.

Consumers Pep Up a Bit

Consumers have been a grumpy lot in recent months, but the Conference Board reported on Tuesday that its Consumer Confidence Index was up to 53.5 in August, compared with 51.0 in July. Another dead cat in the house, or something more fundamental?

“Consumer confidence posted a modest gain in August, the result of an improvement in consumers’ short-term outlook,” Lynn Franco, director of consumer research at the Conference Board, said in a statement. “Consumers’ assessment of current conditions, however, was less favorable as employment concerns continue to weigh heavily on consumers’ attitudes.”

Indeed, the Conference Board reported that 45.7 percent of those surveyed said that jobs are “hard to get.” A minuscule 3.8 percent said that jobs are “plentiful” (who is this 3.8 percent? is another question the Conference Board might have usefully asked).

Most Banks Rack Up Profits in 2Q

Are banks out of the woods yet? Commercial banks and other savings institutions earned an aggregate of $21.6 billion during 2Q10, the FDIC said on Tuesday, compared with a $4.4 billion loss during the same period in 2009. Two-thirds of all banks U.S. reported a year-over-year improvement in earnings.

It’s the other third that need watching. Bank failures this year are on track to exceed last year’s total of 140, mainly community and regional banks still have millstones tied around their necks–that is, a lot of underwater commercial real estate loans, vintage mid-2000s, on their books.

Wall Street ended the day mixed on Tuesday, with the Dow Jones Industrial Average up 4.99 points, or a scant 0.05 percent, and the S&P 500 up 0.04 percent. The Nasdaq was down 0.28 percent.

Office vacancies remain high, with a near-term peak likely, and the operating environment for office properties is unfavorable and figures to be for the foreseeable future. Despite these numerous credit negatives, Fitch Ratings’ outlook for office REITs is stable.

The primary reason is that most office REITs have fared better than the market generally due to higher-quality portfolios and strong management and leasing teams. And while vacancies are still trending higher, the pace has begun to slow due to fewer space give backs and modest increases in office-using employment

Additionally, while most office REITs reported same-store net operating declines last year, the average decline for the companies in question was a scant 1.1 percent, well below management forecasts for 2010.

Following a wave of equity and unsecured debt issuance last year, office REITs continue to access the unsecured bond market, raising well over $1 billion thus far in 2010.

A substantial rise in office-using employment will be necessary to reverse negative rent and same-store net operating income trends, not likely over the near term. But once a solid recovery in office using employment takes hold and shadow space is utilized, office REITs will be positioned for a strong recovery due to lower levels of new supply since development has slowed to a trickle. This bodes well for major office markets such as New York City and Washington, DC.

It should be noted that Fitch continues to project further deterioration property-level performance. Nonetheless, office REIT ratings will generally be stable due to measures taken by companies to strengthen their balance sheets, capitalization and liquidity over the past two years.