Browse Month: August 2014

Palmer House, Thor Equities Snag Refi

The Palmer House Hilton

One of Chicago’s most storied hotel properties has carried on its legacy – by borrowing again.

The Palmer House Hilton, located at State and Monroe in downtown Chicago first opened in 1871 only to burn down two weeks later in the Great Chicago Fire. Builder Potter Palmer immediately secured a loan to rebuild – $1.7 million in what was considered at the time to be the largest individual loan ever.  It was built again.

This week, 143 years later, the venerable property went again to the financing well, albeit in somewhat greater volume.  In a refinancing deal announced this week, the property traded in its $365 million debt for a lower- and floating-rate $420 million debt as REJournals.com reports:

The deal brought together Thor Equity Partners, a bond issue / CMBS loan by Morgan Stanley (five years floating rate) and Jones Lang Lasalle who represented the equity firm.

Download: NAR Commercial Regulatory Report

I’m not sure how I missed this, but miss it I did.  NAR’s June 2014 Commercial Regulatory Report is available for free download, containing updates and summaries of  recent NAR actions in the regulatory space, including FAA, EPA, SEC, GSA and SBA.  If any property in your portfolio involves air, ground or finance (find me one that doesn’t!) you need to check out the report.

Check it out below or download a PDF from Realtor.org

June 2014 Commercial Regulatory Report_SAS

 

Bust: One Third Of Atlantic City’s Gaming Space Lost In 2014

English: Revel in Atlantic City

Capping a wave of casino closures on the Atlantic City boardwalk is Revel, the $2.4 billion, 47-story hotel tower that debuted in April 2012. The September shutdown of the starkly designed gambling palace hits the New Jersey economy hard, contributing to closures that take away about one third of AC’s gaming space.

What changed to turn AC’s multi-decade run as a gaming mecca into a parade of glittering vacancies?  Some point to Pennsylvania, whose recent expansions to gaming laws are keeping its players in its own state to play at standalone casinos such as Mount Airy, Sands, Rivers and SugarHouse.

Others suggest that the younger gaming customer tends to be a poker player, and Revel does not offer poker. As the NYT writes:

Internet gambling, which became legal in New Jersey last year, so far has not been a significant threat to the casinos. After initially forecasting that online betting could increase industry revenue by $1.2 billion in the first year, state officials sharply revised down forecasts for both revenue and expected tax receipts, which were scaled back to $34 million from $180 million.

“It hasn’t come close to what their projections were,” said Anthony S. Graziano Sr., executive director in the Coastal New Jersey office of Integra Realty Resources, a national real estate valuation firm.

Competition from out of state, especially in Pennsylvania, has been the main threat in Atlantic City, overshadowing any issues from the recession or Hurricane Sandy in 2012. Customers in eastern Pennsylvania now have a choice of gambling halls in Philadelphia, Bethlehem, Chester or Valley Forge, removing the need to drive an hour or more out of state.

 

CCIMs: Getting Busy With Industrial Deals

The 2Q14 CCIM Quarterly Market Trends Report has “dropped,” as the kids say.  What’s in the fine print? Growth. The second quarter of this year has extended a strong national trend in increased dealmaking for industrial real estate.  The businesses of making and moving stuff — manufacturing, logistics, warehousing — are lending strength to markets in associated properties, with 82 percent of CCIM members reporting they had received more serious inquiries from buyers over the same time period last year.

Industrial transaction activity jumped for 70 percent of CCIM Institute members who responded to a May/June 2014 transaction survey. Members of the CCIM Institute, a global commercial real estate affiliate of the National Association of Realtors, also experienced positive overall transaction and investment activity in the second quarter, according to the organization’s Quarterly Market Trends report. Approximately 54 percent of CCIM respondents reported greater overall deal flow than the same period last year and 66 percent reported more inquiries from serious buyers year over year in 2Q14. 

[…]

Industrial asset prices were higher for 52 percent of respondents and remained flat for 40 percent of members. Capitalization rates for industrial properties held steady for 60 percent of members; 32 percent said cap rates declined YOY. Industrial investments also registered highest on the investment value vs. price scale, coming in at 3.2 percent on a scale of 1 to 5 (with 1 being lowest and 5 being highest). 

Industrial isn’t the only sector that has enjoyed year-over-year growth, with retail, office, multi-family and hotel also posting gains.

Read the entire 2Q2014 CCIM Quarterly Market Trends report here.

 

 

Commercial Real Estate News Roundup for August 11, 2014

Pretending the property business is easy, St. Louis and its hot industrial market, retail lagging the recovery (but not in Miami)  and Macy’s goes shopping for commercial real estate talent – it’s all here in the Commercial Real Estate News Roundup for August 11, 2014.

General

Office

Industrial

Retail

Multifamily

Hotel

Land

 

Is Chicago’s Infrastructure Trust A Bust?

Chicago Skyway Tollbooths

When the now-embattled Chicago Mayor Rahm Emanuel announced, shortly after his 2011 election, his plan to create an infrastructure trust, the idea sounded pretty good — at first. When the details came out  — that the trust would be a private, opaque financing platform separate enough from government to not be beholden to public inquiry or FOIA requests — many privatization-weary Chicagoans braced for the worst. And why not? It turns out that so many Wall Street style “innovations” in real estate and infrastructure finance (the Chicago-style TIF comes to mind) do less to address civic need than they do to provide unaccountable disbursements to developers of already-desirable city land.

At the time, Bill Clinton characterized the idea as an “infrastructure bank”. But banks have one typical advantage that the Chicago Infrastructure Trust doesn’t: capital to allocate. As it turns out, far from a bank, the Trust is little more than a lightly-staffed financial innovation laboratory headed by a private equity guy. This is the lesson in a recent Crain’s Chicago Business piece, confusingly titled “Emanuel’s Infrastructure Trust Looks To Help Commercial Landlords“.  I say the piece is confusingly titled because it appears the “help” landlords can look forward to consists mainly of a tax hike:

Yet Mr. Beitler manages to keep expectations high by touting a $1.5 billion pipeline of potential deals, including a voluntary property tax assessment of commercial properties to pay for energy-related improvements. The trust is evaluating a dozen proposals totaling about $1 billion from 15 firms for the Property Assessed Clean Energy program, although not all those Pace bids will be accepted, he adds.

The trust’s slow progress is the result of several factors, including the novelty of a middleman trying to bring together City Hall and investment firms. Despite its hype, the trust is a small venture, financed with an estimated $1.5 million in city funds over its first two years (see the PDF). And the deals are difficult to do, with Mr. Beitler discarding more than a dozen proposals.

While the cash-strapped city’s need for “transformative” improvements in transportation and other infrastructure has not gone away, the trust has suffered from overly ambitious predictions.

“When the trust was set up there were certainly some high expectations set up for it,” says Peter Skosey, an expert on infrastructure finance and executive vice president of the Chicago-based Metropolitan Planning Council, where the trust’s board holds its meetings. “Many of those expectations weren’t warranted.”

So it’s an infrastructure trust, if you consider swimming pools infrastructure.  It’s an aid to commercial landlords – if those landlords aren’t paying enough taxes.  It’s a bank – but it has no money to lend. And it’s somehow a boon to the public – as long as the private equity deals are complicated enough and profitable for a very few.

Pretty innovative.

TRIRIGA: Big Blue Does Commercial RE

If you watch industry press releases and social media, sometimes it seems the commercial real estate software business is dominated by a mix of relatively recent applications that were born on the internet. A closer look can show a different view. Sometimes we are reminded that, dot-com whizbang IPOs aside, the fundamental financial and legal plumbing work of commercial real estate portfolio management is really an older set of well-known problems. Problems requiring breadth and depth to solve best.

Consider: professionals managing property portfolios —  either as tenants or landlords — above all need decision support.  They need to be able to put their eyes on exactly the piece or pieces of portfolio information that inform the business question of the hour — or the minute — so as to steer the ship into calm waters.

What won’t get you there is a pile of spreadsheets, schedules and word processing docs scattered everywhere.  Icebergs have a funny way of introducing themselves to the hull of your ship while you or your team spend days distractedly lining up just the right view of contracts, contacts, events and leases.

Building a software tool for ship-steering from a corner office is a software design goal that usually means expensive development and extreme depth of experience in the various niches of the business. That kind of depth and expense comes not from last month’s loudly-trumpeted startup, but rather from venerable giants, giants such as IBM.

Meet TRIRIGA

IBM’s TRIRIGA is Big Blue’s entry into the real estate management market. Because Big Blue means big business, unsurprisingly, TRIRIGA has the look and feel of a Cadillac dashboard. It brings depth and breadth and ease of use to commercial space needs in five main areas:

  • Real estate management
  • Capital projects
  • Space management
  • Facility maintenance
  • Energy management

Check out the video to see what Big Blue means when it builds a commercial real estate management solution. And before you ask, yes, you’re talking a Cadillac price: five figures a month. It’s no dot-com free service, but a review of the offering is a beautiful tour into the command centers of commercial property empires, one worth taking even if only to stimulate the imagination.