Global Viewpoints

CB Richard Ellis Realty Trust Signs 260,000-SF in Leases

Source: CB Richard Ellis Realty Trust

CB Richard Ellis Realty Trust has signed leases totaling over 260,000 square feet for industrial properties in its portfolio.

• Assa Abloy Hospitality Inc., the global leader in hotel security technology, has extended their lease for five years and six months for the 44,008 square foot warehouse distribution building they occupy in the International Business Center located at 631 International Parkway, Suite 100 in Richardson, Texas.
  
• Cintas-R.U.S. L.P., the largest uniform supplier in North America, has extended their lease for three years for the 16,856 square foot flex warehouse/office building they occupy at Millenium Business Park at 505 Century Parkway in Allen, Texas.
  
• Circor Instrumentation Technologies LLC, which specializes in fluid process control solutions, has renewed their lease for 10 years and nine months for the 104,160 square foot light industrial warehouse building they occupy in Fairforest Business Park at 405 Centura Court in Spartanburg, S.C. CBRE Realty Trust and Circor are investing significant capital to improve this building.
  
• Jacobs Engineering Group Inc., one of the world’s largest and most diverse providers of professional technical services, has leased the 101,650 square foot light industrial warehouse building known as North Rhett II at 201 Luken Road in Goose Creek, S.C., for an initial one-year term with options to renew for a total term of four years.

“These lease agreements represent significant activity in a variety of markets where we have existing investments,” said Brian Welcker, director of asset management for CB Richard Ellis Realty Trust’s advisor. “The commitment by these tenants to our properties is a direct result of our ongoing marketing and leasing efforts to be as responsive and proactive as possible to meet the needs of our current tenant base and expand new relationships.”

RICS Appoints New Head of Sustainability

Source: RICS

RICS has appointed Arlette Anderson to the newly created position of RICS Head of Sustainability.

Anderson is developing a framework strategy which will coordinate sustainability activity and projects across the organisation. The aim is to create a sustainable centre of excellence, encouraging members to be more involved in the promotion of sustainable land, property and construction.

Anderson ’s sustainability objective is to balance economic, environmental and social objectives at global, national and local levels whilst building enthusiasm and commitment from stakeholders, and pushing through the policies and interventions required.

The key priorities will be engaging with RICS members and sustainable communities, while building on the objectives of the existing RICS Sustainability Working Group. RICS’ sustainability projects will focus around the themes of climate change and mitigation and adaption, waste and materials, water and biodiversity and sustainable communities. Currently RICS is undertaking over 100 different projects with a relevance to the sustainability programme.

Anderson was previously employed as Director of Sustainability and Corporate Social Responsibility at Atisreal, international property consultancy company, part of the BNP Paribas Group, where her role was to formulate Atisreal’s sustainability response specifically identifying commercial opportunities assisting clients with their sustainability requirements.

Commenting on her appointment Arlette Anderson said: “RICS has already achieved a lot in pushing the sustainability agenda, a key factor in me wanting to join such an organisation. We are really making headway in delivering sustainable solutions in land, property and construction and are perfectly placed to shape a more sustainable future. With such diversity within the organisation, it was recognised that a cohesive approach was needed to ensure that members are aware of the work that is being done on matters of sustainability that should be affecting their work. ”

Logistics Provider Takes 40,000 Square Meters in Western Germany

Source: ProLogis

ProLogis, a leading global provider of distribution facilities has leased 40,000 square meters (423,000 square feet) of recently completed distribution space in western Germany to LGI Logistics Group International, a subsidiary of the Willi Betz Group and one of Germany's largest providers of third-party logistics services.

LGI has leased 100 percent of the space in a facility at ProLogis Park Hunxe, a new distribution park located along the A3 highway, an important motorway for freight transport to and from the Benelux, less than 40 kilometers from the Netherlands border. The site also is in the Rhine region, which has long served as an important distribution corridor in Germany. LGI, which has been the exclusive outsourcing provider for Hewlett Packard (HP) in Germany since 1995, will use the space as the primary European distribution center for HP printers.

"Western Germany continues to serve as a strategic location for distribution," said Christian Bischoff, regional director for ProLogis in northern Europe in a statement. "Given its modern transportation infrastructure and centralized location, supply chain participants benefit from the region's access to major markets in Germany and the surrounding countries."

"We selected ProLogis Park Hunxe for its central position in Europe, access to a highly skilled workforce and good connections to inland waterway, rail and highway networks," said Dr. Andreas Bunz, managing director at LGI. "Our new space will enable us to optimize our European supply chain by providing quicker access to our current customer base and reducing transport time from container to warehouse."

Founded in 1995 as a joint venture between Hewlett-Packard Germany and the Willi Betz Group, LGI currently ranks as one of Germany's top logistics contractors. The company has more than 2,000 employees at 33 locations throughout Europe.

ProLogis is the largest provider of industrial space in Germany with approximately 1.36 million square meters (14.6 million square feet). In addition to LGI, other ProLogis customers in Germany include Jack Wolfskin, Volkswagen, Dachser, Rewe and BLG.

The Home Depot to Shutter EXPO Business

Source: The Home Depot

The Home Depot, the world's largest home improvement retailer, has decided to shutter its EXPO business. The Home Depot is also taking steps to streamline its support functions. These decisions will impact 7,000 associates, or approximately two percent of the Home Depot's total workforce.

According to a prepared statement, the EXPO business has not performed well financially and is not expected to anytime soon. Even during the recent housing boom, it was not a strong business. It has weakened significantly as the demand for big ticket design and decor projects has declined in the current economic environment. Continuing this business would divert focus and resources from the Home Depot's core "orange box" stores. Therefore, over the next two months, the Home Depot will be closing 34 EXPO Design Center stores, five YardBIRDS stores, two Design Center stores and a bath remodeling business known as HD Bath, with seven locations. These steps will impact approximately 5,000 associates in those locations, their support functions and their distribution centers.

"Exiting our EXPO business is a difficult decision, particularly given the hard work and dedication of our associates in that business and the support of our loyal customers," said Frank Blake, Chairman and CEO. "At the same time, it is a necessary decision that will strengthen our core Home Depot business."

Land Securities Completes Sale of Fleet Street Estate

Source: Land Securities Group

Land Securities Group PLC has completed the sale of its Fleet Street Estate to the City of London Corporation for £74 million.

The Fleet Street Estate comprises eight adjoining self-contained buildings which provide an aggregate lettable floor area of 200,512 square feet (18,628 square metres).

The freehold site occupies a prime position in the heart of London’s Midtown district. The Estate is bounded by Fleet Street to the north, Whitefriars Street to the west, Salisbury Square and Salisbury Court to the east and the Harrow public house and Primrose Hill to the south. A substantial part of the site is occupied by the Office of Fair Trading. Ownership is being transferred to the City in three tranches.

Richard Linnell, Head of Investment Management in Land Securities' London Portfolio, said: "We have assembled this site around the Headquarters of the OFT, and have added value with the recent extension of the OFT lease. We believe that the capital released by this sale will work better for us by generating outperformance in other areas than through redeveloping this particular site."

Sheriff George Gillon, Chairman of the City of London's Property sub Committee said: “This is a significant strategic purchase for the City of London Corporation and shows the City’s confidence in the long term prospects for City property. Long term income secured against a Government covenant is also attractive at this time of declining interest rates.”

The City Surveyor and Drivers Jonas advised the City, and Land Securities were represented by BH2.

Urban Investment Partners Establishs Mulitfamily Property Management Company

Source: Urban Investment Partners

Urban Investment Partners of Washington, D.C. has established a multifamily property management subsidiary, UIP Property Management, Inc. (UIPPM). C. David Barton, CPM®, ARM® has joined UIPPM as President effective January 1, 2009. He previously headed Washington-based Hagner Management.

David Yampolsky has moved from UIP’s core operation to serve as Senior Vice President of UIPPM. Additionally, Frederick Silvers, formerly of Bojan Realty of Capitol Hill, has joined UIPPM as Vice President for Operations and Maintenance.

UIPPM, with a total of 16 employees, will join UIP’s other business units at the company’s new offices at 3404-06 Connecticut Avenue, N.W. in Washington, D.C. later this month. UIPPM will initially provide property management services for the approximately 900 multifamily units in UIP’s residential portfolio, plus 540 units that were previously managed by Hagner. The company will begin taking on fee-based third-party rental property management and work for condominium associations throughout the Washington, D.C. metropolitan area immediately.

“Since we became active in the redevelopment, acquisition, and management of urban multifamily properties in the mid-1990’s, we have built a substantial base of skills and knowledge in asset management,” said Steve Schwat, Principal, UIP. “By absorbing most of the highly experienced Hagner Management team, we are perfectly positioned to launch a premier management company that will provide a level of service unmatched in the industry.”

“Our mission will be to provide our residents with quality, affordable apartment homes while providing our investors with superior returns,” Schwat continued. “We will strive for perfection and never lose sight of who pays the rent in our buildings and who invests in our city. We plan to implement the latest Internet-based technologies to allow residents to request maintenance and repairs online and otherwise obtain highly responsive service.”

Grubb & Ellis Healthcare REIT Acquires Mountain Plains Portfolio in Texas

Source: Grubb & Ellis

Grubb & Ellis Healthcare REIT, Inc. recently acquired the Mountain Plains Portfolio, a two-property medical office building portfolio in San Antonio and the Houston suburb of Webster for $43 million. The acquisition closed in December 2008.

Located at 4243 E. Southcross Blvd. in San Antonio, Pecan Valley Medical Office Building consists of approximately 60,000 square feet of gross leaseable area. The two-story building is situated on approximately 3.1 acres of land and includes surgery rooms, an indoor rehabilitation pool and an imaging center. The medical office building is across the street from Southeast Baptist Hospital, a member of Baptist Health System, a private network of hospitals including four additional locations in San Antonio totaling approximately 1,537 beds. Built in 1998, Pecan Valley Medical Office Building is in close proximity to State Route 13 and is currently 100 percent occupied.

Built in 2006, Clear Lake Medical Office Building is located at 250 Blossom St. in Webster. Situated on approximately 4.7 acres of land, the four-story building consists of approximately 110,000 square feet of gross leaseable area and is currently 100 percent occupied. The property is across the street from Clear Lake Regional Medical Center, a 595-bed tertiary regional referral center offering comprehensive inpatient and outpatient medical, surgical and specialty services. Additionally, Clear Lake Medical Office Building is adjacent Triumph Hospital Clear Lake, a long-term acute care center with 100 private rooms and 14 intensive care unit rooms.

“With the addition of these two assets, Grubb & Ellis Healthcare REIT completed 21 healthcare acquisitions in 15 states in 2008,” said Scott Peters, president and chief executive officer, Grubb & Ellis Healthcare REIT. “We continue to grow and build our portfolio for long-term value.”

Pecan Valley Medical Office Building and Clear Lake Medical Office Building were acquired from unaffiliated third parties. All sellers were represented by P.J. Camp and Jay Miele of Shattuck Hammond Partners.

Grubb & Ellis Healthcare REIT, Inc. is a publicly registered, non-traded real estate investment trust. The REIT has made 42 geographically diverse property acquisitions and other real estate-related investments valued at approximately $966.4 million based on purchase price, which includes 129 buildings, as of December 31, 2008. The REIT's property portfolio totals 5.1 million square feet, and includes 110 medical office buildings, four hospitals, 12 skilled nursing and assisted living facilities and three other office buildings located in 17 states, including: Arizona, California, Colorado, Florida, Georgia, Indiana, Kansas, Minnesota, Missouri, New Hampshire, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah and Virginia.

Over €50BN Equity Targeting European Commercial Real Estate

Source: Jones Lang LaSalle

Over €50bn of equity capital is targeting European commercial real estate in 2009, according to Jones Lang LaSalle’s new European Capital Markets outlook paper ‘Time for Decisions’. Whilst some estimates of “war chests of equity” waiting to target distressed assets are overblown, institutions and third party money managers, opportunity funds, international wealth entities and some German open and closed ended funds will be looking for appropriate opportunities to enter the market.

Tony Horrell, Head of European Capital Markets at Jones Lang LaSalle said: “We have no doubt that operating conditions in 2009 will be the most challenging that many in the market have ever encountered, but for those able to look to the medium term and with access to capital we think 2009 will be the year when the market begins to clear and some opportunities will be too good to miss. For the smart investor this year will be about positioning themselves to take advantage of these buy-side opportunities as they emerge.”

Real estate debt finance is set to remain limited this year, with low loan-to-value ratios and high margins. Horrell continued: “We fully expect it will take three to five years for banks to repair their balance sheets and they will only begin to address this problem in 2009. They will most likely be ultra-cautious and conservative in their handling of their outstanding real estate exposure and highly selective in their lending criteria.”

Values across Europe overall have already fallen by up to 40% in some markets from their peak in summer 2007 and more value erosion is a certainty in 2009, and for some it will be better to sell now where markets have further to fall. At the fourth quarter 2008 some markets in Europe had recorded yield decompression in excess of 200 basis points since the peak for prime offices and shopping centres, whilst others have yet to experience more than a 50 basis points correction.

Nigel Roberts, Chairman of European Research at Jones Lang LaSalle commented: “Some markets like London, Paris and Madrid are well advanced in their market corrections and will no doubt attract increased investor interest if the fundamentals are judged to support the new price levels. Fair value estimates, likely yield ceiling indicators and asset specific pricing will become crucial decision tools in 2009 for investors timing their market entry, and judging price and value trade-offs. We also expect market conditions will contribute to the trading of increasing numbers of assets that are seldom brought to the market and these will most likely reflect premium prices or change hands irrespective of whether the market has hit a recognised price floor.”

Nigel Roberts concluded: “The rental markets and the strength of tenant demand will be the critical components of pricing and value assessments in 2009. The supply side of most markets is not expected to be a problem because the pipelines are generally not swollen with schemes which are committed or under construction. Attention will focus on the resilience of demand in the face of some of the weakest economic fundamentals for decades. In some markets however, weak demand will lead to subletting and grey space will result in ever higher vacancy rates.”

German Real Estate Investors Win Sustainability Award

Source: Union Investment

Three properties owned by Union Investment Real Estate AG, a German commercial real estate investment firm, are among first buildings in Germany to be certified in accordance with the country’s sustainability criteria. The Laim290 and Riem Büro West office buildings in Munich and the Emporio project in Hamburg, which involved extensive refurbishment of an existing highrise building, all picked up quality awards from the German Sustainable Building Council (DGNB).

The certificates were presented by Germany’s minister for transport, building and urban affairs, Wolfgang Tiefensee, and DGNB president Prof. Werner Sobek on Monday at the BAU 2009 show in Munich.

“The DGNB quality award requires compliance with extremely strict standards that bear comparison with international certification systems such as LEED and BREEAM. It thus represents a high level of recognition for our properties. The award system provides detailed, transparent information on the holistic quality of the buildings, covering economic viability, energy efficiency and user comfort,” says Dr. Reinhard Kutscher, chairman of the Management Board of Union Investment Real Estate AG. As a founding member of the DGNB, Union Investment was actively involved in developing the certification system, which is specially tailored to the needs and requirements of the German market.

“Awarding the first certificates sends out an important signal that will lead to greater market transparency and enable investors to make better informed decisions,” explains Kutscher. All three of the buildings submitted by Union Investment for this pilot certification process achieved creditable results.

The Laim290 office building on Landsberger Straße, Munich, which comprises around 14,413 square metres of space, received the Silver award for sustainable building – the second-highest accreditation for sustainable buildings in Germany – as did the pre-certified office project Riem Büro West, which forms part of Munich’s Messestadt Riem development.

The Emporio project in central Hamburg, which is scheduled for completion by mid-2011, was also pre-certified Silver. Thanks to its resource-efficient design, energy efficiency and the quality experience it offers both users and local residents, Emporio will be one of Hamburg’s most sustainable buildings.

The three DGNB (pre-) certified properties are part of the portfolio of the open-ended real estate fund UniImmo: Deutschland.

Morgan Stanley and Citi to Form JV

Source: Citigroup

Morgan Stanley and Citi today announced they have reached a definitive agreement to combine Morgan Stanley's Global Wealth Management Group and Citi's Smith Barney, Quilter in the UK, and Smith Barney Australia into a new joint venture to be called Morgan Stanley Smith Barney. This joint venture will be the industry's leading wealth management business. It will not include Citi Private Bank or Nikko Cordial Securities.

The joint venture combines businesses that have:

• More than 20,000 high-quality financial advisors;
• $1.7 trillion in client assets;
• $14.9 billion in pro-forma combined revenues;
• $2.8 billion in pro-forma combined pre-tax profit;
• 6.8 million client households globally – with a strong presence in the critically important high-net-worth client segment; and,
• A footprint of more than 1,000 offices around the globe.

Under the terms of the agreement, Citi will exchange 100 percent of its Smith Barney, Smith Barney Australia and Quilter units for a 49 percent stake in the joint venture and an upfront cash payment of $2.7 billion. Morgan Stanley will exchange 100 percent of its Global Wealth Management business for a 51 percent stake in the joint venture. After year three, Morgan Stanley and Citi will have various purchase and sale rights for the joint venture, but Citi will continue to own a significant stake in the joint venture at least through year five.

Morgan Stanley and Citi each will distribute their products through what will be the leading global wealth management platform. Each organization will retain its deposits as of the close of the transaction. New deposits collected in the joint venture will be allocated based on ownership of the new company.

The transaction, which has been approved by the Boards of Directors of both companies, is expected to close in the third quarter, subject to regulatory approvals and other customary closing conditions.

John Mack, Chairman and CEO of Morgan Stanley, said, "By bringing together Morgan Stanley's and Citi's strong wealth management businesses, we are creating a new industry-leading wealth management franchise. Morgan Stanley Smith Barney will become the first choice for clients and high-quality financial advisors by offering an even broader range of financial products and services, as well as the best market intelligence and investment opportunities from both Morgan Stanley's and Citi's global networks. This joint venture is an important step forward in our effort to build our wealth management franchise, which we believe will be an increasingly important and profitable part of Morgan Stanley's business in the years ahead."

Citi will benefit from this transaction by monetizing its investment in its wealth management business, while continuing to benefit from a multi-year earnings stream as it simplifies and streamlines its organizational structure. The joint venture expands Citi's access to retail customers for our capital markets products and research, allowing us to better serve our issuing clients. In addition, Citi will continue to capture our current levels of order flow for our investing clients. At closing, Citi will recognize a pre-tax gain of approximately $9.5 billion, or approximately $5.8 billion on an after-tax basis, and will create approximately $6.5 billion of tangible common equity.

Citi CEO Vikram Pandit said, "This joint venture creates a peerless global wealth management business and provides tremendous value for Citi. Once this transaction is completed, our clients and Financial Advisors will benefit from the combined intellectual capital, market intelligence and product capability of Citi and Morgan Stanley. For Citi, the joint venture provides significant synergies and scale, substantially reduces our expenses and enables us to retain a significant stake in a company that immediately becomes the industry leader with real growth opportunities. We will own 49 percent of this leading wealth management business and will continue to participate in its earnings and growth. In addition, we will generate equity capital that we can deploy to other core businesses which are well positioned to deliver attractive returns in the future. Citi and its clients will maintain access to the industry's leading wealth management platform for capital markets transactions."

The joint venture is expected to achieve cost savings of approximately $1.1 billion – in part by rationalizing and consolidating key functions including technology, operations, sales support, product development and marketing. These operational efficiencies represent approximately 15 percent of the combined firm's estimated expense base, excluding financial advisors' commission compensation.