Logistics market is hot, but is a bubble forming?

Clockwise from left: Blackstone Group's Jonathan Gray, KKR's Henry Kravis and Cerberus Capital Management's Stephen Feinberg (Photos via Getty; iStock; Cerberus)

Clockwise from left: Blackstone Group’s Jonathan Gray, KKR’s Henry Kravis and Cerberus Capital Management’s Stephen Feinberg (Photos via Getty; iStock; Cerberus)

Investors can’t get enough of warehouses and logistics spaces these days, but there are some signs that a bubble could be forming.

Asset management firms including Blackstone Group, Cerberus Capital Management and KKR have doubled down on logistics centers, and prices for warehouses have surged, Bloomberg News reported. According to real estate research firm Real Capital Analytics, values for industrial properties rose 8.5 percent in the past year, while retail real estate values fell 5.2 percent and offices stayed steady.

The intense interest in the niche sector has led some, including Jonathan Needell, CIO of Kairos Investment Management, to wonder whether logistics space is headed for a bubble.

“You’re getting people chasing industrial, in particular, to prices that are unsustainable,” said Needell. His firm controls $1 billion in commercial real estate.

Investment in warehouses has ticked up outside of the United States, too. According to research firm CBRE, investments in the sector made up 20 percent of global commercial real estate spending this year, compared with just 15 percent of the total in 2015.

CBRE also projects that logistics’ upward trajectory will continue for at least a decade. According to its analysis, logistics prices will rise 68 percent by 2030.

Still, some lenders are wary — especially as demand for new construction of logistics space surges to 1 billion square feet by 2025, according to JLL.

“There’s a huge amount of industrial space being built now,” Andrea Balkan, managing partner in Brookfield Asset Management’s real estate finance group, told Bloomberg. “We are always cautious on lending in markets or on property types which everyone else is rushing into.”

[Bloomberg News] — Georgia Kromrei

Blackstone’s Q2 earnings decline as real estate segment tumbles

Blackstone’s Q2 earnings decline as real estate segment tumbles

Distributable earnings rose, beating expectations

Blackstone Group CEO Stephen Schwarzman (Credit: Getty Images)

Blackstone Group CEO Stephen Schwarzman (Credit: Getty Images)

Blackstone Group’s earnings declined over the past three months as distributable earnings from the firm’s real estate segment fell by nearly a quarter from the same time last year.

The firm’s overall net income for the second quarter of the year fell to $305.8 million, or 45 cents per share, a significant decline from the $742 million a year ago, executives announced on the company’s earnings call Thursday morning.

At the same time, distributable earnings rose to $708.9 million, or 57 cents a share, exceeding most analysts’ expectations.

In particular, distributable earnings from the firm’s real estate segment fell by 24 percent year-over-year to $329.3 million, while private equity, hedge fund solutions and credit segments all saw distributable earnings rise significantly.

“The past few months have been a remarkable period for Blackstone characterized by transformation and continued momentum,” Blackstone CEO Stephen Schwarzman said during the call. “In addition to our ongoing business evolution, we’ve completed our corporate conversion, and the market response, as you know, has been quite positive.”

“If we continue to grow as the reference institution in our industry and meaningfully expand our potential investment base through conversion, it’s reasonable to assume that we should close the valuation gap between our firm and other top companies,” Schwarzman added.

It was the company’s last quarter as a partnership. The alternative investment firm completed its conversion to a corporation on July 1.

Blackstone’s conversion to a C corporation, made possible by tax law changes that lowered the highest corporate rate to 21 percent from 35 percent, allows the firm to tap a more diverse pool of investors.

The company spent several weeks after its April announcement on an extensive “roadshow” to introduce or re-introduce itself to investors. “The schedule was exceptionally high quality and included over 100 institutions, more than half of which were new to the alternative sector and Blackstone, and/or were materially restricted previously from owning P2Ps,” Blackstone CFO Michael Chae said on the call.

Thanks to the conversion, Blackstone has now become eligible for inclusion in many market indices such as S&P Total Market, MSCI and CRSP, and expects to be added to those in the fall.

In the questions segment of the earnings call, Blackstone executives shared their views on impacts from broader market issues, such as the impact of the U.S.-China trade war.

“I think the good news for us is that we don’t have that many businesses in the global supply chain, either retailers or big exporters, so the impact there directly to our portfolio is not quite as significant,” COO Jonathan Gray said. “The real question is will it leak more broadly into the economy or markets.”

“So far, the more dovish tone from central banks has outweighed the slowdown from trade,” Gray added, noting that many central banks have either reduced interest rates or signaled an intention to do so in response to the slowdown in trade.

The decline in interest rates made it more challenging for Blackstone to find opportunities to deploy the capital it has raised, especially in infrastructure. “I think the good news for us is that we’re operating at a very large scale,” Gray said. “By playing where the air is thinner, which is really the strength of our infrastructure business, we’ve got a better competitive dynamic.”

The past quarter saw Blackstone make one of the largest industrial real estate deals in history, buying a 179 million-square-foot warehouse portfolio from Singapore’s GLP for $18.7 billion.

Last week, Blackstone halted all improvement works at the 11,000-unit Stuyvesant Town and Peter Cooper Village complexes in New York, saying that it was “in the process of evaluating capital investments” in the properties in light of the state’s new rent laws.

Blackstone-backed mortgage lender Stearns files for bankruptcy

Blackstone-backed mortgage lender Stearns files for bankruptcy

Restructuring deal will wipe out $184 million in bond debt

July 09, 2019 11:30AM
Blackstone President and COO Jonathan Gray and Stearns Lending CEO David Schneider (Credit: Getty Images)

Blackstone President and COO Jonathan Gray and Stearns Lending CEO David Schneider (Credit: Getty Images)

Stearns Holdings, the parent company of residential mortgage lender Stearns Lending, filed for Chapter 11 protection Tuesday morning after agreeing on a debt-restructuring plan with majority owner Blackstone Group.

The restructuring will erase $184 million in outstanding bond debt from the California-based firm’s balance sheet, the Wall Street Journal reported. Stearns is also seeking court authorization to continue normal business operations during the bankruptcy process, including the payment of suppliers and vendors, and salaries and benefits for about 2,700 employees.

Blackstone acquired a majority stake Stearns Holdings in 2015. The financial firm is providing $60 million in new money for the restructuring, as well as a bankruptcy loan of up to $35 million to help the lender continue operations. Warehouse lenders have committed $1.5 billion to the plan.

Stearns’ $184 million in outstanding bonds are due to mature next August. The company paid down some of its bond debt last year by selling off most of its mortgage-servicing rights. In its Chapter 11 filing, it listed assets and liabilities each between $1 billion and $10 billion.

Mortgage rates tumbled in recent months after the Fed held off on raising interest rates further. A preceding period of rising rates had cut into Stearns’ lending business. [WSJ] — Kevin Sun

Blackstone just paid $18B in one of the largest real estate deals in history

Blackstone just paid $18B in one of the largest real estate deals in history

Assets span 179M sf overall

June 03, 2019 10:30AM
Blackstone CEO Stephen Schwarzman (Credit: Getty Images, iStock)

Blackstone CEO Stephen Schwarzman (Credit: Getty Images, iStock)

UPDATED: Monday, June 3 at 10:45 a.m. Blackstone Group is betting big on ecommerce with an $18.7 billion purchase of warehouse assets across the U.S., one of the largest industrial real estate deals in history.

The properties span 179 million square feet overall, and Blackstone is buying them from the Singapore company GLP Pte, according to Bloomberg. Retailers have needed more space for warehouse property as the popularity of online shopping continues to grow.

Blackstone has made several deals to purchase logistics space in recent years. Last year, it purchased Canyon Industrial Portfolio’s last-mile assets for $1.8 billion and reached a $1.9 billion deal to buy Canada’s Pure Industrial Real Estate Trust. It also agreed to spend $950 million for more than 100 warehouse assets from Harvard University’s endowment.

There are about 1,300 properties in the GLP portfolio, and Amazon is its biggest tenant. Blackstone, the world’s largest private manager of real estate assets, won the properties in an auction that also saw bids from Prologis and Brookfield Asset Management.

“Logistics is our highest conviction global investment theme today,” Ken Caplan, the global co-head of Blackstone Real Estate said in the statement, “and we look forward to building on our existing portfolio to meet the growing e-commerce demand.”

In April, Blackstone said its assets under management reached $512 billion. It’s in the process of seeking $5 billion for its latest real estate fund.

[Bloomberg] – Eddie Small

Correction: An earlier version of this article, repeated from the Bloomberg report, said this was the biggest private equity real estate deal ever. In fact, the largest private equity real estate deal was Blackstone’s $39 billion purchase of the Equity Office portfolio.

Billionaire Michael Dell is buying the 1,000-plus room Boca Raton Resort

Blackstone is selling the 337-acre waterfront resort

Jonathan Gray, Michael Dell and Boca Raton Resort

Billionaire Michael Dell’s MSD Partners is under contract to purchase the waterfront 1,047-room Boca Raton Resort & Club from the Blackstone Group.

The deal is expected to close at the end of the second quarter, according to a press release. The 337-acre resort, which was developed in 1926, includes two 18-hole golf courses, a 50,000-square-foot spa, seven swimming pools, 30 tennis courts, a full-service 32-slip marina, 13 restaurants and bars, and 200,000 square feet of meeting space.

MSD Partners declined to provide a sale price, but it could be one of the biggest hotel sales to close in South Florida. At $1 million a key, the property could trade for more than $1 billion.

Jeffrey Davis and Gregory Rumpel of JLL are representing Blackstone. They could not immediately be reached for comment.

Blackstone invested more than $300 million into renovating the resort, designed by Addison Mizner, since it purchased it 15 years ago. It’s managed by Hilton under the Waldorf Astoria Hotels & Resorts brand.

Blackstone picked up the Boca Raton property in 2004 in a $1.25 billion deal that also included Bahia Mar and Pier 66 in Lauderdale as well as two resorts in Naples.

MSD Partners is an investment adviser that was formed in 2009 by the Dell Technologies founder and principals of his private investment firm, MSD Capital. Dell’s firm was also rumored to be the buyer of 1 Hotel South Beach, but that deal fell through and the hotel ultimately sold to Host Hotels for $610 million, or $1.42 million per room, in February.

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What are the odds? Rare Las Vegas Strip casino hits the market

The New York investment firm made the once-failing property one of the most successful on the Strip

April 17, 2019 06:30PM
Blackstone Group CEO Stephen Schwarzman and the Cosmopolitan of Las Vegas (Credit: Getty Images and Wikipedia)

Blackstone Group CEO Stephen Schwarzman and the Cosmopolitan of Las Vegas (Credit: Getty Images and Wikipedia)

The Cosmopolitan hotel and casino was one of the biggest failures of the Las Vegas Strip in the last decade. Now, five years after buying and reversing its fortunes, Blackstone Group is reportedly exploring a sale.

The New York-based investment giant has retained Deutsche Bank and PJT Partners Inc. to explore options for the property, including a sale, according to the Wall Street Journal. If sold to a casino operator, the property could be earn $4 billion or more. That’s about double the $1.7 billion Blackstone paid for it in 2014.

The 110,000-square-foot hotel with 3,000 rooms sits next to the Bellagio and will likely attract interest from other resort and casino operators, including larger local players or international operators like Malaysia’s Genting Group.

The $330 average daily room rate at the Cosmopolitan is the highest on the Las Vegas Strip and earnings before interest, taxes, depreciation and amortization is around $300 million, sources told the Journal.

Those earnings are more than triple the earnings of the hotel before Blackstone bought the property from Deutsche Bank, which took over the unfinished property after the Bruce Eichner-led development group behind it defaulted on a construction loan.

The property opened in late 2010. Blackstone invested $500 million in the renovations, including converting the four then-unfinished top floors of the hotel into 21 suites meant to attract high rollers. It also built 18 new bars and restaurants at hotel and casino.

Blackstone benefited from strong tourist activity in Las Vegas during its ownership of the hotel, including an all-time peak of 43 million tourist visits to the city in 2016. [WSJ]Dennis Lynch

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National Cheat Sheet: Real estate’s top billionaires revealed, retail apocalypse continues… & more

Clockwise from top left: Dollar Tree to shutter or rebrand hundreds of Family Dollar stores, the richest real estate billionaires on an annual Forbes ranking hail from China and Hong Kong, dozens of Gap and Victoria’s Secret stores prepare to close amid low sales and real estate investment trusts are benefiting from the Federal Reserve’s decision to keep interest rates where they are.

China, Hong Kong real estate billionaires top Forbes’ richest list
Forbes has released its annual ranking of the world’s wealthiest people, and the real estate moguls who placed highest on its list are all from either China or Hong Kong. Evergrande Group’s Hui Ka Yan took the 22nd spot with a net worth exceeding $36 billion, while Dalian Wanda chairman Wang Jianlin placed 36th with a net worth of $22.6 billion, according to Forbes. Irvine Company chairman Donald Bren was the highest-ranked American property mogul, placing 68th on the list. Related Companies’ Stephen Ross took the 191st spot on the ranking with a net worth of $7.6 billion. Ross, the developer behind New York’s Hudson Yards, was the only major Manhattan real estate billionaire in the top 200. [TRD]

Hundreds of Gap, Family Dollar, Victoria’s Secret stores to close
Around 230 Gap stores and 53 Victoria’s Secret stores will be closing, their respective parent companies have said. Dollar Tree, which owns the Family Dollar chain, also plans to close up to 390 stores and convert another 200 Family Dollar stores into Dollar Tree shops, the Wall Street Journal reported. (Dollar Tree bought Family Dollar for around $9 billion in 2015.) As for Gap, it plans to split off its Old Navy brand into a separate company, as the chain’s “business model and customers have increasingly diverged from our specialty brands over time,” said a statement from board chairman Robert Fisher. Old Navy has been doing better than its sister companies, Gap and Banana Republic, according to USA Today. Meanwhile, Victoria’s Secret, a flagship of retail giant L Brands, has experienced a drop in sales amid an increased desire among shoppers for so-called “comfort lingerie,” according to CNBC. [TRD]

Amazon pulls plug on pop-up stores, plans new grocery chain
Fresh off ditching Long Island City for its so-called H2Q, Amazon is now preparing to shutter 87 pop-up retail stores throughout the country by the end of April, according to the Wall Street Journal. The e-commerce giant, which launched the small store concept in 2014, is reportedly reevaluating its physical retail plans. The purported move comes as Amazon prepares to launch a new grocery store line, one whose first outpost will open in Los Angeles, the Wall Street Journal reported. The Los Angeles store could open before the end of the year, and two other stores are expected to open at the beginning of 2020, according to the outlet. Amazon’s new chain isn’t being billed as a competitor to Whole Foods, which the company acquired in 2017 and reportedly has plans to expand, but will instead offer a broader range of products. The new stores will be about 35,000 square feet, although its plans aren’t set in stone, as Amazon could back out of its existing contracts, the outlet reported. [TRD]

We Company sheds 300 staffers, or 3 percent of its workforce
The co-working giant formerly known as WeWork, most recently valued at $47 billion ahead of a January rebranding as the We Company, let go of 300 employees last week, according to The Real Deal‘s exclusive reporting. The layoffs, which sources said took place globally in its WeWork, WeLive and WeGrow divisions, are the largest by the company since its formation in 2010. A We Company spokesperson said the company has plans to hire 6,000 employees this year, or about 500 per month, to bolster its current head count of roughly 10,000. The SoftBank Group-backed firm, whose CEO Adam Neumann has come under scrutiny for personal investments that mirror those made by the We Company, last made major cutbacks in 2016. Sources told TRD that the latest force reductions have been positioned as being for performance-related reasons. [TRD]

Keller Williams credits tech expansion for 2018 deal surge
A week after Douglas Elliman and Realogy disclosed less-than-stellar financials for 2018, franchise brokerage rival Keller Williams has unveiled some key financial metrics that it hit last year. The Austin-based real estate company said that its agents in the U.S. and Canada closed $332.4 billion in sales volume during its most recent fiscal year, up 5.7 percent from 2017, as contract volume jumped 5.5 percent year-over-year, to $365 billion. Keller Williams declined, however, to disclose its net income or address a decline in franchisee profits. The company, whose CEO Gary Keller returned to its leadership ranks earlier this year, claimed that key investments in technology were paying off. Official agent count remained steady at 159,447, although Keller Williams is in the midst of purging potentially thousands of inactive agents. [TRD]

REITs benefit from Fed’s decision to keep interest rates steady
The Federal Reserve’s recent decision to keep interest rates where they are has been good for real estate investment trusts. Real estate stocks on the S&P 500 fell 5.6 percent in 2018, but have jumped by 12 percent since the beginning of this year as investors set their sights on REIT shares, the Wall Street Journal reported. “The surprising drop in yields and the drop in mortgage rates could potentially be another positive for housing and housing-related stocks going forward,” LPL Financial senior market strategist Ryan Detrick told the outlet. The Fed raised interest rates four times in 2018, but held off on another rate hike in January. [TRD]


New York’s Chrysler Building nears potential $150M sale
Aby Rosen, principal and co-founder of Manhattan-based real estate firm RFR Holding, is nearing a deal to acquire the iconic Chrysler Building, according to The Real Deal‘s exclusive reporting. A source with knowledge of the negotiations told TRD that the purchase price is “not much higher” than the $100 million estimate that the Commercial Observer reported the building could trade for, in part due to a ground lease on the landmarked property. The Chrysler Building’s current owners, an Abu Dhabi government fund and the developer Tishman Speyer, put the Art Deco-style office tower up for sale in January. CBRE Group is marketing the building, which saw the Abu Dhabi Investment Council cough up $800 million in 2008 for what would become a 90 percent stake in the tower. The Chrysler Building, hamstrung by a costly ground lease, could now sell for a reported $150 million, according to the Wall Street Journal. [TRD]

Silverstein Properties, Cantor Fitzgerald to raise $2B OZ fund
In one of the largest funds so far to target the Trump administration’s increasingly popular Opportunity Zone program, financial services firm Cantor Fitzgerald and real estate developer Silverstein Properties announced on March 7 that they had joined forces on a fund that they hope will raise $2 billion. The duo, which are both based in Manhattan, said they will target ground-up developments in primary metropolitan markets with a focus on industrial, hospitality, office and retail projects. The partnership between Silverstein and Cantor Fitzgerald is the latest in a series of moves by real estate firms and other investors seeking to capitalize on the OZ program. Earlier this week, Greenwich, Connecticut-based Belpointe Capital announced its plans for an OZ-focused real estate investment trust that it hopes will raise $3 billion within eight years. [TRD]

Michael Cohen sues Trump Org over $2M in unpaid legal fees
President Donald Trump’s former personal lawyer, fresh off testifying on Capitol Hill and suing two Chicago-based taxi medallion moguls over a $6 million condo loan in Miami, is back in court again. Michael Cohen has sued the Trump Organization for breach of contract over its alleged nonpayment on roughly $1.9 million in legal fees. Cohen claims the president’s namesake real estate company must reimburse him for legal costs he incurred as a result of investigations into Trump’s 2016 presidential campaign. Cohen’s lawsuit, filed in Manhattan by lawyers from Binder & Schwartz and Gilbert LLP, states that at various times he has been represented by the Blakely Law Group, Davis Goldberg & Galper, McDermott Will & Emery, Monico & Spevack and Petrillo Klein & Boxer. Cohen, who was disbarred in New York State last month, claims that the Trump Organization cut him off after he began cooperating with federal prosecutors. [TRD]

Top Miami broker teams merge at Coldwell Banker, rebrand
One of Miami’s top broker teams has left its home of 16 years to merge with another top team. Judy Zeder’s team has parted ways with Coral Gables-based EWM Realty International and is teaming up with Jill Herzberg and Jill Eber’s group at Coldwell Banker. The new group will be called The Jills Zeder Group with Coldwell Banker. The families that comprise the two groups are longtime friends, Zeder said. “It’s a very unusual situation to have three families get along and like each other,” said Zeder, adding that they would be “working together for the benefit of the clients.” The two teams have closed a combined $5 billion in real estate sales since 2006. Eber and Herzberg, known as “The Jills” in South Florida’s real estate market, saw a former Miami realtor who tried to extort them receive a jail sentence in February. [TRD]

Nashville-based office REIT mulling potential IPO
Priam Properties is thinking about going public in a move that would make the Nashville-based outfit the first real estate investment trust in the U.S. to pursue an initial public offering this year, Bloomberg reported. The office landlord “has held discussions with investment banks about selling shares as soon as this year,” the outlet reported, citing sources familiar with the matter. Priam generally focuses on “high-growth markets” in states such as Florida, Ohio and Tennessee. Its representatives didn’t return requests for comment about the reported IPO. Dallas-based Fathom Realty, a cloud-based brokerage founded in 2010 that operates on a 100 percent commission model, is another real estate firm reportedly considering an IPO this year. [TRD]

Chicago gets priciest resi sale of year as condo trades for $11.3M
Despite some areas along the southern shore of Lake Michigan sinking due to climate change, Chicago had its priciest residential sale of 2019, the Chicago Tribune reported. A 31st floor unit at No. 9 Walton, a luxury condo tower along the Windy City’s Gold Coast that has attracted business magnates and celebrities, sold for $11.3 million to an as-yet-unidentified buyer. Nancy Tassone of Jameson Sotheby’s International Realty had the listing for the four-bedroom, 7,100-square-foot condo unit, while Natasha Motev of Jameson Sotheby’s is advising the buyer. Hedge fund billionaire Ken Griffin, who made headlines earlier this year for a record-setting penthouse purchase in New York, paid $59 million in late 2017 to buy the top four floors of No. 9 Walton. That deal remains the most expensive residential transaction ever in the Chicagoland area. [TRD]

Compass acquires Alain Pinel Realtors to grow in Bay Area
A week after picking up customer relationship manager Contractually, Compass is expanding again. The New York-based brokerage announced on March 4 that it bolted on Saratoga, California-based Alain Pinel Realtors, which has 1,300 agents in 33 offices across Northern California, Inman first reported. Compass’ expansion in the Bay Area continues an acquisition spree it began in 2017 when the SoftBank Group-backed firm snapped up San Francisco-based Pacific Union International, which reported $14 billion in sales in 2017. The acquisition of Alain Pinel brings Compass’ agent count in the Golden State up to around 4,500. Compass CEO Robert Reffkin said in January that the firm doesn’t plan to expand into any new markets this year. [TRD]

National Cheat Sheet: Newmark seeks $100M IPO, WeWork bags Lord & Taylor iconic Fifth Avenue flagship for $850M … & more

Clockwise from top left: Tesla is taking a new space in Los Angeles, Manhattan’s NoMad neighborhood is going to get a super tall building and WeWork is buying Lord & Taylor’s Fifth Avenue flagship.
Newmark Group files for $100M initial public offering
From TRD New York: Newmark Group filed for a $100 million initial public offering Monday in a bid to spin off from its parent company, Howard Lutnick’s BGC Partners. The filing with the U.S. Securities and Exchange Commission said the entity will include the commercial brokerage Newmark Knight Frank and the mortgage firm Berkeley Point and it will be listed on the Nasdaq under the symbol NMRK. Goldman Sachs, Bank of America Merrill Lynch, Citibank and Cantor Fitzgerald are affiliates on the deal. The New York-based Newmark Group generated revenues of $1.5 billion for the 12-month period ended June 30, 2017. Last year, NKF’s president Jimmy Kuhn said the brokerage quadrupled its revenue since it was acquired by BGC. [TRD]
Blackstone intends to double assets under management to $800B
The Blackstone Group is setting its sights on increasing its assets under management to around $800 billion in the next five years. That’s according to CEO Stephen Schwarzman who told Bloomberg on a quarterly conference call, “We have internal targets, plans, aspirations to basically double where we are.” The private equity firm had $387 billion in assets under management as of late September. That’s more than double the amount it oversaw five years ago. Real estate is the company’s largest business line, with $111.3 billion in assets under management. [TRD]
Nationwide, new-home sales hit 10-year high
Government data show that last month saw the biggest monthly gain in home sales since January 1992, due in part to a surge in the number of properties for which construction hadn’t yet started. The figures show 236,000 newly planned properties, the most since January 2007. The spike signals that residential building will strengthen in coming months, according to Bloomberg. The boom was concentrated mostly in the South, a possible reflection of growing demand following hurricanes Irma and Harvey. [TRD]
Major Market Highlights
WeWork bags Lord & Taylor iconic flagship for $850M for new HQ
Hudson’s Bay Company, succumbing to pressure unload its real estate assets, is selling Lord & Taylor’s flagship, a landmark 1914 building, to co-working giant WeWork and a partner for $850 million. WeWork Property Advisors — a joint venture with Rhône Capital, which is making a $500 million equity investment in HBC as part of the deal — is purchasing the 676,000-square-foot landmark building to become WeWork’s new global headquarters. The Real Deal first reported that WeWork and Rhône were raising several hundred million dollars for a real estate investment fund. Lord & Taylor will lease the lower floors, taking less than a quarter of its current space. The move is expected to hit after the 2018 holiday season. [TRD]
NoMad supertall at 262 Fifth Avenue gets approval from the city
The historic Manhattan neighborhood that some call NoMad — a nod to its location north of Madison Square Park — could be getting its first super tall building. Israeli developer Boris Kuzinez received approval from the city’s Department of Buildings for what could be the tallest building between Downtown and Midtown. Buildings on the lot have been demolished to make way for the 1,009-foot-tall tower with 41 apartments and an observation deck at 262 Fifth Avenue, according to New York YIMBY, which first reported on the DOB filings. [TRD]
Paramount Fort Lauderdale resi tower expected to sell out for $210M
The residential tower Paramount Fort Lauderdale Beach, which launched sales in 2014, is now completed and expected to sell out for about $210 million, broker Peggy Fucci told The Real Deal. The 95-unit, 18-story project at 701 South Atlantic Boulevard has three units remaining, including two penthouses asking $9 million and a unit on the amenity level asking $2.8 million. Records show 56 units have closed so far. About 15 percent of the building was sold to foreign buyers from Brazil, Mexico, Venezuela, Argentina and other countries, Fucci said. The project required 30 percent deposits, lower than the standard 50 percent required in Miami. [TRD]
Tesla takes 131K sf at Marina del Rey’s Omnicom building
Tesla is cruising into a new location in Los Angeles. Elon Musk’s electric car company signed a lease this month for the entire former Omnicom building at 4729-4755 Alla Road in Marina del Rey, The Real Deal first reported. Tesla will have 131,000 square feet of space across the four-story property, which sits on four acres of land. Tesla’s lease runs at least seven years and is valued at about $30 million, sources said. The building has been vacant since 2015, when former tenant ad agency Omnicom moved to Playa Jefferson. Grant Newman of Madison Partners, formerly of L.A. Realty Partners, was part of the listing team. [TRD]
Beverly Hills office trophy hits the market
A prized Beverly Hills office building that has not traded hands for more than 40 years hit the market last month. The Union Bank of California Building, a 97,000-square-foot building — with 24,500 square feet of street-facing retail space — has been owned by the limited partnership Beverly Union Company since 1978. The six-story building at 9460-9470 Wilshire Boulevard is 91 percent leased. Union Bank has been a tenant since it was built in 1959. The sale price of the building is expected to exceed $1,200 per square foot, Marc Renard of Cushman & Wakefield said. That would put the value of the building at over $116 million. [TRD]
Home billed as the country’s safest hits the market for $15M
A new home on the market in in Alpharetta, Georgia has all the requisite bells and whistles for an eight-bedroom mansion that’s 30 minutes from Atlanta, plus the superlative of being one of the safest homes in America. The Rice House was recently relisted for $14.7 million, down from its original $17.5 million, and is not yet complete. It was envisioned by a security architect who designed buildings for the U.S. Department of Justice for 20 years, and Bloomberg News reports the bedrooms have doors that can withstand fire from AK-47 assault rifles. There’s also a 15,000-square-foot bunker with its own power source. “This is a home where you could put a $20 million painting on the wall and sleep comfortably at night,” Paul Wegener of Atlanta Fine Homes Sotheby’s International told Bloomberg. [TRD]
Vail and Aspen consolidate their ski resort empires
Vail Resorts and Aspen Skiing Co. are increasingly dominating the ski resort industry, Bloomberg News reports. They’ve acquired 50 of North America’s biggest mountain resorts in the past five years. Vail’s latest moves include buying Vermont’s Stowe and, for $1.3 billion, Canada’s Whistler Blackcomb Holdings. Aspen partnered with KSL Capital Partners to make a $1.5 billion purchase of six ski resorts throughout Canada and the U.S. from Intrawest Resort Holdings. They also acquired four additional mountain properties in California and Utah. [TRD]

Source: The Real Deal Miami

Private real estate funds have a record $231B to spend — but few places to put it

From the New York website: Private real estate funds have more money to spend than ever before, but that’s not necessarily good news for the real estate market.
As of March, private real estate investment funds worldwide had $231 billion in aggregate dry powder – or capital commitments from fund investors ready to be spent – according to research firm Preqin. That’s the highest figure in history and a 10 percent increase since December (see chart below).
In one sense this is great for the real estate market. Most private real estate funds have fixed investment periods, meaning they are contractually required to spend their investors’ money by a fixed date (typically within five years). The more dry powder funds have, the more money is headed to the property market soon. And surveys show the U.S. market is still by far the most popular investment destination. Private funds will offer a much-needed boost as observers begin to worry about a market slowdown.

But there’s a more sober side note. Dry powder has grown in part because fund managers are having an increasingly difficult time finding profitable investments – not just because they are raising huge sums from investors. “Whilst there has been strong investment activity for these firms it is difficult to find opportunities at the moment,” said Andrew Moylan, senior research analyst at Preqin. “It’s is a very competitive market.”
If the past eight years are any indication, private funds spend their investors’ money more quickly in boom times and take longer to find assets in downturns. That’s why fund managers sat on large piles of dry powder in 2009 and 2010 even though they were raising little new money from investors (see chart atop the article).
Over the past year, fundraising totals fell while dry powder continued to grow; fund managers are taking longer on average to spend their investors’ money. The growing gap between dry powder and new funds raised hardly signals a crisis or even a downturn, but it could be another sign of a market slowdown.
“I’d say that there’s been a slowdown in transaction activity generally in the market,” said one senior executive at a real estate fund manager, pointing to recent uncertainty over global stock and oil markets and tighter lending. The executive added that he now sees more opportunities in value-add assets as other investors, spooked by global market turmoil, retreat from risk.
Others are less bullish. In a year-end Preqin survey, 56 percent of fund managers polled said they see finding attractive investment opportunities as their biggest challenge – far head of raising funds (27 percent). More than two-thirds of respondents — 67 percent — said finding investments is more difficult than a year earlier.
Haves and Have-Nots
As dry powder grows across the industry, it also becomes concentrated in fewer hands. “We’ve had three strong years of fundraising, but the number of funds closing each year is actually falling,” said Moylan.
Between the end of 2014 and the end of 2015, dry powder across the private real estate fund industry grew by $14 billion. Blackstone Group, the world’s largest private real estate fund manager, accounted for $9.4 billion of that increase. Blackstone raised a staggering $26 billion from investors for its real estate funds in 2015, which pushed up its dry powder from $14.1 billion to $23.5 billion over the course of the year (see chart below).

Apollo Global Management, another leading fund manager, saw its real estate dry powder shrink slightly in 2015 to $984 million (from $997 million in 2014), according to a filing with the Securities and Exchange Commission. Apollo declined to comment for this article, as did Blackstone and the Carlyle Group.
The accumulation of dry powder in large funds can be good news for smaller and mid-sized fund managers, argued Bob Faith, CEO of Greystar, a Charleston-based fund manager that is currently raising a $1 billion real estate fund. “You know, I’d say we haven’t really noticed a dramatic increase in competition except as to where it relates to large deals,” he said. “A lot of people are aggressively pursuing large transactions. We have been selling into that.”
In December, Greystar sold a 32-building multifamily portfolio for $2 billion. The buyer: Blackstone.

Source: The Real Deal Miami