The disruptive force of the sharing economy is undeniable. As noted by tech cheerleader Tom Goodwin, the world’s largest taxi company (Uber) owns no vehicles, the most popular media company (Facebook) makes no content, and $25B lodging provider Airbnb owns no real estate, despite its operations adding up to giant impacts on apartment rents in its biggest markets.
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.
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.
Patrolling the media for the latest in commercial real estate news, it’s the Commercial Real Estate Industry Weekly Roundup:
- Sturdy Outlook for Seattle Real Estate – The Emerald City’s rain-moistened commercial property market is looking stronger, says the Seattle Times.
- Commercial Real Estate Certification Ensures Rare Level of Expertise and Experience – The benefits of professional certification get a look in Atlantic City.
- Learn by Doing: Social Media in Commercial Real Estate – Houston Business Journal lets us know how social media ramp-up works by doing.
- Crowdfunders Eye Commercial Real Estate – NuWire on the recent SEC rules changes that are unleashing crowdfunding for commercial real estate deals. Think Kickstarter for commercial property.
- LG Pushing Contested Office Space – Electronics giant wrestles with its new headquarters deal in New Jersey
- Storied Providence Skyscraper, Now Empty, Seeks a Future – Rhode Island office tower looking for a new tomorrow
- Federal Space Reduction Leaving Mark on DC Office Market – “Big Government” somehow getting smaller, at least in square footage
- Florida Mall’s New Neighbor: 109,000 SF spec building – Central Florida sees 100,000 sq. ft of industrial space go online
- Perot Partnership to Invest $1 Billion in Warehouses – Hillwood Investments, the Perot family concern, goes for warehouse space in a big way
- Liberty Property Trust Breaks Ground on 200,000 SF building – South Jersey’s economy and location make sense for a major warehouse spec deal
- Storage Sector Primps for Uptown Approval – The stick-stuff-in-storage-units business looks for a fit in central business districts
- How to sink Chicago’s retail property market – Grocery retailer’s pullback in Chicago creates huge absorption problem
- Retail Landlords Gain Upper Hand – The benefits of ownership, told to NuWire
- Multifamily Market Growth Stable – Apartments show national attractiveness, says NuWire
- Multifamily remains frontrunner in REIT sector – The trusts trust in apartments, according to a recent piece in Housing Wire
- Have high-rise apartment rents peaked? – Crain’s Chicago Business ponders a glass ceiling for the high-rise apartment market
- Dallas Apartment Developer Builds his Company One Small Deal at a Time – Plucky Texas startup gets into the neighborhood-making business
- New Marina del Rey Apartments are Tailored to Tech, Media Workers – The new media economy’s workspaces are forcing changes in living space designs
- Burkle’s Bid Puts Morgans in a Bind – Hotelier fends off interested buyers in a New York City tale of takeover
- $1 Billion Foxwoods Casino Goes to a Vote Tuesday in Milford – A Massachusetts casino development is put before the people
- As Dormant Construction Market Stirs, Tahoe Seeks to Reinvent itself – Meanwhile in Lake Tahoe, stalled building projects are sputtering back to life
- Devil of a Stadium Plan – Arizona State University wants a stadium. But is that all they want? The Wall Street Journal takes a look.
- Einhorn Claims Victory in Fight over Florida Land – Hedge fund head manages to sell almost 400,000 Florida acres to the Mormons at the price he wanted
- Nearly 23,000 homes, shopping planned in Palm Beach County – Another deal for dirt in the Sunshine State
Music icon, philanthropist, actress and author Dolly Parton’s business acumen is legendary. Co-owner of Dollywood, the eastern Tennessee theme park that sees nearly three million visitors each season and keeps 3,000 people on the largest payroll in the county, Dolly’s long been known as an economic powerhouse with vision and drive.
Her 2012 announcement that she would be in partnership with Gaylord Entertainment to build a water park next to a Gaylord hotel property in Nashville seemed like more canny business sense. It would have been Dolly’s second such park, the first having opened in 2001 near her childhood home of Sieverville. But not all was smooth sailing for the announced project.
In September of last year, Parton announced she would be pulling out of the water park project. The reason: her business partner had decided to get out of the hotel management business, selling those assets to Marriott, and get into pure real estate holding.
Dolly Parton said Friday afternoon that her Dollywood company will not take part in the development of a planned water/snow park near the Gaylord Opryland Resort & Convention Center.
Citing Gaylord Entertainment’s upcoming departure from the hotel management business and conversion to a real estate investment trust, Parton said she had appreciated the cooperation of local and state government officials on the planned $50 million project but added that she needed to move on.
“Gaylord makes decisions that they feel are good for their company and their stockholders and I have to make decisions based on what is best for me and the Dollywood Company,” she said. “I think everyone knows I love Nashville and I hope the work we’ve already done will spark more family entertainment in Nashville.”
The demise of the water/snow park had seemed in the offing six weeks ago, when Parton said plans were in a holding pattern because of Gaylord’s agreement to sell its hotels brand and management to Marriott International for $210 million. Gaylord officials quickly countered to say they were still on board, but have since pulled the plug on from-the-ground-up development projects in Arizona and Colorado, saying their new REIT will focus on buying completed properties.
Months after breaking up with Gaylord and the Nashville project with its central Tenessee location, Dolly once again took it back home to her childhood haunt of Pigeon Forge, TN in the eastern side of The Volunteer State. In this case, “it” is a 100-acre, 300 room resort called DreamMore – named after her 2012 book of the same name.
Located just a stone’s throw from Dollywood, the 300-room Dollywood’s DreamMore Resort will sit on 100 acres and offer views of the Smoky Mountains. Centered on the rich traditions of storytelling, family and togetherness, the resort will feature many special touches including family sanctuaries like fire pits, swings, and hammocks plus story spots scattered throughout the grounds.
Showcasing design features and décor elements that celebrate the area’s natural beauty, DreamMore will offer an indoor and outdoor resort pool complex, a spa, and a full-service farmhouse-style restaurant. With an emphasis on encouraging family bonding time, the resort also features a family activities center where guests can secure reservations for a variety of adventures centered around wholesome fun, including hikes in neighboring Great Smoky Mountains National Park.
Dollywood’s DreamMore Resort is the second capital investment in a 10-year plan that includes more $300 million in future developments for Parton’s Dollywood properties. DreamMore Resort joins Dollywood Cabins as the company’s second venture in the lodging industry. Launched in 2010, Dollywood Cabins offers cabins two miles from Dollywood and Dollywood’s Splash Country.
There she comes again.
(Photo credit: Alejo Castillo)
Technology’s power to reshape commercial property operations has been at work for decades. We observe the waves of change in e-commerce as if nothing similar had ever happened before, but the fact is that the electronic era has constantly produced new realities for the commercial property industry to adopt, adapt or ignore at its peril.
The idea that background music of a certain tone adds value to retail and office spaces is an old and proven one. When I saw that Muzak, the company most identified with providing that element is changing its tune, ditching its 79 year-old name, I looked into the company’s history and found a mix of commercial psychology, marketing and music that we take for granted in any store or office walkthrough today.
Technological Upheaval, 1920s-Style
In the 1930s, Muzak grew from a 1922 patent on delivering music into buildings across electrical power lines. The company was a cutting-edge technological marvel in its heyday, and property owners lined up to order the service, at first out of novelty then later in a bid to understand and affect the psychological states of the shopper, the worker, the visitor. The commercial property industry terminology for this is “performance”, a measure of economic productivity value generated per square foot, value needed to offset (at least) or dwarf (at best) all the costs that space presents.
Muzak Becomes Mood
As reported by New York Times Ben Sisario, the psychology of mood and the economics of retail grew into a huge business. And that Muzak, the iconic brand of that ambient, pleasant hey-stick-around-it’s-nice-in-here audio programming was taking on a new more direct name: Mood.
Mood Media, based in Concord, Ontario, has become a leader in so-called sensory marketing, providing stores and other businesses the sights, sounds and even smells to envelop their customers. In addition to Muzak, which it bought two years ago for $345 million, Mood has divisions for signs, interactive displays and scents, which it says reach 150 million people each day at more than 500,000 locations around the world, from Saks Fifth Avenue to Petco.
On Tuesday, the company will announce that it is consolidating its services under a single brand, Mood, thus eliminating the Muzak name.
“It’s the end of an iconic American brand,” said Lorne Abony, Mood Media’s chairman and chief executive.
The move reflects the growing sophistication of in-store services, as well as the pressures facing physical retailers in the Internet age. At Mood’s interactive kiosks, for example, shoppers can try on clothes virtually, while the company pipes in upbeat songs and scents intended to set a mood or cover up unpleasant odors.
“There’s a huge opportunity and a need for physical retailers to make the experience more interactive as they do battle against online channels,” said Edward S. Williams, a digital entertainment analyst at BMO Capital Markets in New York.
Property managers and tenants will tell you the devil is in the details — small factors such as ambience add up to the performance of a property. Until the numbers tell the ambient music industry otherwise, expect to keep hearing lite versions of pop tunes in the successful retail and office spaces.
(Photo credit: jplpagan)
If there’s one common thread to the huge number of different technological changes roiling commercial real estate, it’s standardization. Standardization looks for ways to treat different things in the same way, and build efficiencies as a result. Standardization is behind all the software tools we use and increasingly depend upon – the web, your desktop, your phone, all need to run the application you need. The listings data you depend upon has to meet certain standardized criteria or it won’t publish. In finance, standardization of debt instruments gives us CMBS and other tools to increase credit and liquidity (sometimes too much!)
Standardization is also the enabler behind prefab (aka modular) construction. Long a fixture in single-family residential, the practice of assembling major building components off-site has not been as historically popular in commercial construction projects, accounting for only 1% of US building market, generally limited to schools, hospitals, dormitories and some retail stores. But that is changing as technology continues its inexorable march and commercial property developers look to squeeze every dime until it hollers.
The trade group Modular Building Institute says the market in modular construction for commercial buldings is set to increase over the next five years. I took a look at hotels and data centers and found trends that support this idea.
This neat animated video walk-through of a single hotel project utilizing modular construction techniques, details various measures of efficiency for construction schedules as the project gets built (mostly under a factory roof, down to the floor tile and wall treatments.)
Customization – the mortal enemy of standardization – is costly in the building of data centers. It is falling by the wayside in the provisioning of multi-tenant data centers (MTDC) that rely on standardization of space along with its critical cooling, access and power requirements. These packaging techniques for space afford tenants the ability to scale their square footage as their growth demands — as opposed to the maximum that the landlord would traditionally prefer to rent.
The prefabricated, modular data center promises to have a major impact on the economics and technology of this still-nascent commercial property industry. For all the same reasons that prefab is attractive elsewhere — efficiency, cost control, and the avbility to leverage real-world business metrics in space provisioning.
An excellent white paper detailing the impacts of prefab construction and provisioning is “Data Center 2.0: The Industrial Evolution”, provided by data center vendor IO. Download the full paper here.