Fully leased premier office properties continue to be at the top of buyers’ list and Wells Core Income REIT has just added one such asset to its portfolio. The REIT recently acquired Franklin Center, a 200,600-square-foot office building in the Baltimore submarket of Columbia, Md., from Principal Real Estate Investors.

In addition to being occupied in its entirety by a creditworthy tenant, scientific and technology applications company SAIC, Franklin Center is also new — and green. The seven-story building made its debut in 2008, and it has earned LEED Gold certification by the U.S. Green Building Council.

The length of SAIC’s lease is unclear; however, Wells Core REIT should not have too much of a challenge maintaining a full tenant roster at Franklin Center should SAIC depart. The property, located near Fort Meade and the U.S. Department of Defense’s U.S. Cyber Command, sits in an area where the prospect for long-term demand for office space is on the rise. It has everything to do with jobs.

“Driven by numerous expanding industries, the Greater Baltimore area is ahead of the curve when it comes to market stabilization,” a report by commercial real estate services firm Cassidy Turley noted. “Market conditions should start to show signs of improvement with the influx of more than 15,000 jobs due to the DoD’s Base Realignment and Closure of 2005. The National Security Agency’s increased hiring efforts to support its cyber security initiatives should also have a positive economic impact on the area.”

Fountain Place in Dallas

Building on its “longstanding relationship with J.P. Morgan,” services firm Cassidy Turley has just landed a contract to lease and manage 2.5 million square feet of office space owned by the banking firm’s institutional investors. The assignment will span two properties: Dallas’ 1.2 million-square-foot, 60-story Fountain Place and Houston’s three-building, 1.3 million-square-foot Post Oak Central. J.P. Morgan Asset Management awarded the contract to Cassidy after a bidding process that was opened up to a number of firms, but signed the final arrangement within 60 days, Commercial Property Executive has learned.

“As a firm, we work with J.P. Morgan on multiple accounts,” Bret Bunnett, regional managing principal with Cassidy, told CPE. “And we are expanding our relationship with J.P. Morgan in a significant way with these two assignments.”

Fountain Place, at 720 feet, is the fifth-tallest building in Dallas. Its current tenant roll includes Hunton & Williams, L.L.P., Wells Fargo Bank, and Tenet Healthcare Corp. According to Bunnett, the property is 90 percent leased. Post Oak Central, which is 94 percent leased, houses Apache Corporation – which signed a nearly 600,000-square-foot lease renewal and extension earlier this week – Suez Energy North America Inc., Stewart Title and and Cox Radio.

Texas, as a whole, has fared well during the economic downturn of the last few years. According to a fourth-quarter report by services firm Marcus & Millichap Real Estate Services Inc., Houston will lead the nation in job growth in 2012, with employers adding 87,000 jobs for a 3.4 percent increase in employment levels. “Houston [led] the nation in hiring through the first three quarters [of 2011],” the report noted, “followed by nearby Dallas/Fort Worth.”

“We expect these buildings will continue their history of success,” Bunnett said. “We’re poised to take Fountain Place to at lease 96 percent [occupancy] and Post Oak all the way to 100.”

This contract brings Cassidy Turley’s Texas office management holdings to approximately 22 million square feet in Dallas and Houston alone.

Image courtesy Flickr user laverrue

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

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

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

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

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

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

Image courtesy Flickr user edenpictures

The U.S. Bureau of Labor Statistics reported on Friday that 243,000 jobs were added to the economy in January — up unexpectedly from 203,000 in December (which was revised upward a little). The private sector hired a lot of people, with large gains in professional and business services, leisure and hospitality, and manufacturing. Government employment changed little over the month, so at least it wasn’t a drag on the overall total. The nation’s unemployment rate shrank from 8.5 percent to 8.3 percent.

On Thursday, the U.S. Department of Labor had reported that for the week ending Jan. 28, initial jobless claims were 367,000, a decrease of 12,000 from the previous week’s revised figure of 379,000. The four-week moving average for new jobless claims was 375,750, a decrease of 2,000 from the previous week.

The weekly jobs report came on the heels of Thursday’s report by consultancy Challenger, Gray & Christmas Inc., which found that planned mass layoffs by private companies increased in January to 53,486, up 28 percent from 41,785 in December. Such a large number of planned layoffs isn’t that unusual in January, especially as retailers cut back, though this January’s number was also up from the same month a year ago, when planned firings totaled 38,519.

CBO Outlook Sees More Sluggishness

The Congressional Budget Office released some unpleased reading on Thursday in the form of its “Budget and Economic Outlook: Fiscal Years 2012 to 2022.” “The pace of the economic recovery has been slow since the recession ended in June 2009,” the report says, “and CBO expects that, under current laws governing taxes and spending, the economy will continue to grow at a sluggish pace over the next two years.”

The tedious pace of growth partly reflects the dampening effect on economic activity from the higher tax rates and curbs on government spending scheduled to occur this year and especially next, the report continues. “Although CBO projects that growth will pick up after 2013, the agency expects that the economy’s output will remain below its potential until 2018 and that the unemployment rate will remain above 7 percent until 2015,” the report notes.

Regarding the future direction of the federal deficit, the CBO said that if spending continues to rise in an environment characterized by federal revenues that about at the average share of GDP that they have for the past 40 years — rather than being allowed to increase, as under current law — the resulting deficits will spike federal debt to “unsupportable levels.” The kicker is that to prevent that outcome, Congress will have to restrain the growth of spending for Medicare, Medicade, Social Security, and defense; raise revenues above their historical share of GDP; or pursue some combination of those two approaches, according to the CBO. In recent years – decades, really — Congress has been unready, unwilling and unable to do exactly that.

Bernanke, Congressmen Spar Over Monetary Policy

Ben Bernanke was on Capitol Hill on Thursday, talking to the House Committee on the Budget during a hearing with the expansive title, “The State of the U.S. Economy.” After formal comments by the chairman, however, the title might as well have been “Paul Ryan (and Others) Berate Ben Bernanke over Monetary Policy.” Rep. Ryan of Wisconsin happens to be chairman of the Budget Committee at the moment, and went out of his way to express his displeasure over low interest rates and other Fed monetary policy: “I think this policy runs the great risk of fueling asset bubbles, destabilizing prices and eventually eroding the value of the dollar,” he said.

In a calm, central banker sort of way, the chairman stood his ground in the face of such criticism by Ryan or other members of the Republican-controlled committee (and it should be noted that Bernanke, too, is a Republican). “We are not seeking higher inflation,” Bernanke asserted. “We do not want higher inflation and we’re not tolerating higher inflation.”

Wall Street wiggled around indecisively on Thursday and finally ended up mixed. The Dow Jones Industrial Average lost 11.05 points, or 0.09 percent. The S&P 500 and the Nasdaq were up 0.11 percent and 0.4 percent, respectively.

SL Green Realty Corp. may be New York City’s largest office landlord, but the REIT hardly has tunnel vision when it comes to property types. In two separate joint ventures, SL Green has completed the acquisition of eight retail and residential assets in Manhattan’s Midtown and Upper East Side submarkets.  The REIT had announced plans for the $416 million purchase of the properties in October of last year.

In a partnership with Jeff Sutton, SL Green snapped up the 65,000-square-foot retail building at 724 Fifth Ave., relying on a $120 million, five-year mortgage loan to make the purchase. The property counts Prada as its lead tenant; the Italian luxury goods retailer leases 20,700 square feet of retail space on various levels, in addition to a boutique office space.

SL Green also just claimed 402 residential units and even more retail space for $193 million through its joint-venture purchase with Stonehenge Partners. The group of assets includes the 260-unit apartment building at 400 E. 57th St., which also features 16,000 square feet of ground-level retail, and 400 E. 58th St., a 125-unit residential tower with roughly 3,300 square feet of ground-level retail space. SL Green secured seven-year mortgage financings totaling $100 million to facilitate the acquisition.

Interests in the four-story retail building at 752 Madison Avenue and 19 & 21 E. 65th St., two mixed-use properties encompassing 17 multi-family units and 9,000 square feet of retail space, were also part of the SL Green-Stonehenge joint venture deal. And two commercial properties, the 6,000-square-foot mixed-use building at 762 Madison Ave. and the five-story commercial building at 44 W. 55th St., round out the group.

SL Green’s penchant for joint venture pursuits — both acquisitions and dispositions — continues, as indicated during the REIT’s fourth-quarter earnings conference call. “On both sides of the table, we were active, we continue to be so in 2012, notably 10 East 53rd Street, which was not discussed in December, is our latest acquisition,” Marc Holliday, CEO of SL Green, said. “It fits right in with our core business line of acquiring, repositioning and redeveloping prime New York midtown Manhattan assets in prime location. And in that case, we subsequently brought in a foreign and institutional equity joint venture partner to both leverage our equity, enhance our returns and increase our opportunity set.”

The properties on Boylston Street. Photo by Warren Patterson.

On behalf of a separate-account client, real estate investment manager Clarion Partners L.L.C. has acquired two adjoining office buildings in Boston’s Back Bay for $87.1 million, Clarion announced Tuesday. The 13-story buildings total 184,000 square feet.

535 and 545 Boylston Street have separate entrances facing onto Copley Square, but are connected on multiple floors. They were built in the mid-1960s and 1970s, Mark Weld, managing director at Clarion, told Commercial Property Executive, but in 2009 underwent an upgrade that included enhancements to the entries and the street-level retail façade.

Although the buildings are currently 92 percent leased, in an area with an average vacancy rate of about 6 percent, Weld said their occupancy is trending upward and he expects them to be at about 95 percent within the next several weeks. The buildings’ tenants include law and investment firms, consultancies and the administrative offices of a biotech company, he said. The typical tenant has 5,000 to 10,000 square feet, Weld said, and rents average about $50 a square foot.

Weld emphasized that the area on and around Boylston Street in the Back Bay has high barriers to entry and limited land available for new construction. The buildings are accessible by mass transit and two blocks from the entrance to the Massachusetts Turnpike.

Clarion has more than $24 billion in total assets under management for more than 200 domestic and international institutional investors.

It’s seen a flurry of activity in just a few months of its existence. Yesterday, Griffin-American Healthcare REIT II picked up $166.5 million worth of commercial real estate from the partnership of Westport Capital Partners and Reichmann International Development Co. in the form of ten skilled-nursing facilities across the Southwest.

Affiliates of Westport will continue to operate the facilities, and entered into a master lease with an initial term of 15 years with Griffin-American after the deal was struck. The portfolio features 1,364 beds in the ten facilities.

Just two weeks ago, Griffin-American spent $174 million on 11 facilities – ten skilled-nursing centers and one medical-office building – that totaled approximately 454,000 square feet. “Demand for healthcare services will only increase in the future,” Griffin-American CEO & president Danny Prosky told Commercial Property Executive. “As Baby Boomers continue to turn 65 over the next 18 years, and along with the general aging of the population, we’re bullish on growth and demand for the sector.”

In early December, amid its spinoff from former owner Grubb & Ellis Co., the healthcare REIT purchased an eight-property medical-office portfolio for $112 million. After that transaction, Prosky mentioned that, under his leadership, Griffin-American would be “aggressively acquiring quality, income-generating healthcare properties throughout the country and expects to own a portfolio of 73 buildings valued at nearly $710 million … in the next few months.”

Westport saw the sale as a win for its balance sheet. Russel Bernard, managing principal with the firm, noted that Westport grew the company’s operating income by a double-digit compounded growth rate for the first time since 2007. “The team was able to achieve this performance by repositioning the assts, driving improved occupancy and concentrating on census mix,” he said. “We are very pleased with the outcome of this transaction.”

Westport and RIDC have held a majority interest in the Westport portfolio since 2007.

In a sale arranged by real estate investment banking firm Savills, one of the firm’s institutional-investor clients picked up the Springhurst Towne Center, an 830,000-square-foot retail complex in Louisville, for $78 million. The seller, a partnership led by D. Talmadge Hocker of the Hocker Group, was represented by Savills.

Springhurst last changed hands in 2009, when Centro Properties took it off its books for $42 million – meaning the purchase price appreciated nearly 86 percent in two years. Market conditions for retail – specifically grocery-anchored retail. “As investors continue to seek out reliable investments, cap rates will continue to fall only for core properties, particularly urban retail, fortress malls and top-ranked grocery-anchored strip centers,” Margaret Caldwell, managing director of Jones Lang LaSalle retail, said. “Average cap rates for strip centers have hovered around 8 percent this year, while strips with grocery stores have been much lower, dropping 50 basis points over the last nine months or so.”

The Louisville area has been on the road to recovery throughout 2011 – albeit slowly. The unemployment rate, which peaked at 11.1 percent in January 2011, dropped to an estimated 8.5 percent by year’s end. According to a report by services firm Cushman & Wakefield Inc., the city will see a drop in retail vacancy overall, especially as space vacated by national tenants is reabsorbed and no new construction sits in the pipeline.

“Talmage Hocker’s performance with this asset was impressive,” John Williams, managing director with Savills, said. “Not only was he able to buy the property when credit markets were frozen, he succeeded in leasing more than 60,000 square feet to new tenants and significantly strengthened the tenant roster and cash flow. “

Springhurst is the area’s largest shopping complex, with sales in excess of $200 million per year. The venue is nearly 100 percent leased to retailers including Target, Dick’s Sporting Goods, Office Max and a Cinemark Cinema.

Image courtesy Flickr user ccstbp

Payroll specialist Automatic Data Processing Inc. kicked off the monthly parade of employment numbers on Wednesday by reporting that the U.S. private sector created a net of 170,000 jobs in January, down from the revised ADP figure for December of 292,000. Official U.S. Department of Labor numbers, which are sometimes at variance with ADP, will be out on Friday.

The service sector produced most of the new positions, according to ADP, some 152,000, while manufacturing jobs were up 10,000 and construction eked out a 2,000-job gain. Small- and medium-sized businesses (1-49 employees and 50-499 employees, respectively) created most of the new jobs: 95,000 by small operations and 72,000 by medium-sized operations. Large businesses (over 500 employees) created a miserly net of 3,000 new jobs.

January’s total may be down month-over-month — and December wasn’t quite as great as first reported — but ADP remains optimistic. “Over the last three months, the monthly gains in employment shown in the ADP National Employment Report have averaged 223,000, compared to 163,000 per month over all of 2011,” said Carlos Rodriguez, president and CEO of ADP, in a statement. “This is a positive development that we hope will continue throughout the course of 2012.”

PMI, Construction Spending See Upswings

In its latest Report On Business, published on Wednesday, the Institute for Supply Management said that economic activity in the U.S. manufacturing sector expanded in January for the 30th month in a row, and the that overall economy grew for the 32nd consecutive month. The Purchasing Managers Index registered at 54.1 percent, an increase of 1 percentage point from December’s reading of 53.1 percent, indicating continued expansion in the manufacturing sector (over 50 means expansion).

Nine industries reported growth in January, according to the ISM, including apparel and leather products; petroleum and coal products; machinery; computers and other electronics; transportation equipment; fabricated metal products; paper products; primary metals; and miscellaneous manufacturing. New orders, production and employment were all growing for the U.S. manufacturing sector as a whole, and prices were increasing as well.

Separately, the Census Bureau reported that U.S. construction spending was up in December by 1.5 percent compared with the previous month. The annualized rate of construction spending during December was $816.4 billion. While not precisely healthy, that figure is the highest annualized rate since early 2010.

New Mortgage Refi Proposal Detailed

Also on Wednesday, President Obama detailed the mortgage-refinance proposal that he mentioned in last week’s State of the Union address. The plan would expand the authority of the Federal Housing Administration enough to enable it to refinance as many as 3.5 million loans, many of which banks won’t currently touch because their mortgage holders are under water. The proposal’s odds of passage through Congress during an acrimonious election year are fairly slim, however, and the president is certain to make an issue of it in the coming months.

In Europe, worries that Portugal wouldn’t be able to persuade investors to pony up for its latest debt offering proved unfounded, as the nation was able to auction its entire offering of 1.5 billion euros’ ($2 billion) worth of three- and six-month securities. In fact, yields were down compared with the Jan. 18 auction, with three-month bills averaging 4.07 percent, down from 4.35 percent last month, while six-month bills averaging 4.46 percent, down from 4.74 percent.

Wall Street was feeling chipper on Wednesday, maybe happy that Facebook finally got around to pulling the trigging on its highly anticipated, big-deal IPO, or perhaps simply relieved by the decent manufacturing data. In any case, the Dow Jones Industrial Average gained 83.55 points, or 0.66 percent, while the S&P 500 was up 0.89 percent and the Nasdaq advanced 1.22 percent.