Global Viewpoints

Patrick Murray to Lead Real Estate Management Services for Colliers International

Edited: Jennifer Brenner Andrade
Source: Colliers International

Colliers International has tapped Patrick Murray to grow its real estate management services arm. As a managing partner and senior vice president, Mr. Murray will be responsible for Colliers’ current portfolio of 14.5 million square feet of retail, office and industrial/flex properties located throughout California and Nevada. Murray comes to Colliers International from McMorgan & Company LLC, where he served as senior vice president, head of asset management in the company’s San Francisco headquarters.

“Colliers International is looking forward to Patrick Murray joining us,” said Ed Del Beccaro, senior managing partner for Colliers International. “Colliers Property Management is poised to expand its services for distressed properties. With Patrick’s strong background and knowledge of this area he is well suited to continue the Colliers’ tradition of excellent service for our clients,” said Del Beccaro.

Mr. Murray has more than 27 years of diverse commercial real estate experience including asset management, property management, acquisitions, dispositions, leasing, development and distressed asset redevelopment. Prior to joining Colliers International, Murray spent 16 years with McMorgan & Company, LLC, a San Francisco-based investment firm, with oversight of a national portfolio of real estate assets valued in excess of $1.6 billion. Prior to joining McMorgan & Company, Murray spent 7 years at Cushman & Wakefield in San Francisco where his team was the recipient of BOMA’s “Building of the Year” award.

“In today’s challenging market, property owners are going to be looking for guidance and a quality organization to help lead them through these difficult times,” said Patrick Murray, managing partner and senior vice president of Real Estate Management Services for Colliers International. “Colliers International takes a very entrepreneurial approach to looking at problems. They think creatively, work with integrity and always put the owners interests first. They hold on to top talent and I’m very pleased to be a part of the organization.”

CB Richard Ellis Wins Outsourcing Award for Commercial Real Estate Services

Edited: Jennifer Brenner Andrade
Source: CB Richard Ellis

CB Richard Ellis Group, Inc. has been recognized as the #8 ranked provider of outsourcing services -- and the highest ranking firm within the commercial real estate services sector -- in the annual Global Outsourcing 100 released by the International Association of Outsourcing Professionals (IAOP). The list ranks the top outsourcing service providers across all industries.

Joining CBRE in the top ten were Accenture, IBM, Sodexo, Tata Consulting, Wipro Technologies, Convergys, ISS, Infosys Technologies and Capgemini.

The selection marks the third consecutive year in which CB Richard Ellis has been named to the prestigious list, which recognizes the world’s best outsourcing service providers. An independent panel of judges organized by IAOP cited customer satisfaction as a key reason for CB Richard Ellis’ high ranking.

“Being recognized as the world’s top outsourcing provider of commercial real estate services is a testament to the confidence clients have in the capabilities of our professionals and our platform,” said Bill Concannon, Vice Chairman of Global Corporate Services for CB Richard Ellis. “Today’s challenging economic climate has created a heightened opportunity for companies to re-evaluate their real estate operations, and more and more find our outsourcing solutions address their cost reduction and elevated service requirements.”

The Global Outsourcing 100 rankings are determined by an independent panel of judges based on four characteristics: size and growth rate, customer references, demonstrated competencies, and management capabilities.

"For over six years, CB Richard Ellis has served as McKesson's exclusive third-party real estate provider," said Frank Robinson, Vice President, McKesson Corporation. "Our long-term relationship is evidence of our level of satisfaction with CBRE's performance and optimism about future investments and service enhancements. We applaud this recognition of CBRE's continuous effort to raise the bar."

CB Richard Ellis represents 88 of the FORTUNE 100 companies and offers an unrivaled suite of commercial real estate services on a global basis. The company was responsible for more than $138 billion of property sales and lease transactions in 2008, and managed more than 2.2 billion sq. ft. of commercial properties and corporate facilities as of December 31, 2008.

Rockwood Capital Closes Fund with $964 Million in Capital Commitments

Edited: Jennifer Brenner Andrade
Source: Rockwood Capital

Rockwood Capital, LLC (“Rockwood”), the private real estate investment company, today announced that it has closed Rockwood Capital Real Estate Partners Fund VIII, L.P. (“Fund VIII”) with approximately $964 million in capital commitments. The value-added fund will primarily invest in hotel, retail, office and residential properties, in the United States.

Fund VIII has a diverse investor base consisting of public and private pension funds, foundations and endowments, insurance companies, and high net worth individuals. More than half of the Fund VIII investors have also invested in previous Rockwood funds, and, for the first time, the new fund includes commitments from foreign institutions, including pension plans from Switzerland.

Fund VIII will employ Rockwood’s strategy of capitalizing on unique supply/demand imbalances within markets and property sectors to create value. The firm will target assets in quality settings and surroundings and will increasingly emphasize mixed-use environments that bring work, housing and amenities closer together. Rockwood will continue to work with strong, experienced local partners within the major knowledge-based and supply constrained markets where it has depth and breadth: Boston, New York City, Metro-Washington D.C., Los Angeles, the San Francisco Bay area, and southern Florida.

“We are extremely pleased to close Fund VIII with such strong support from our recurring investors. We are grateful for their continued confidence in our ability to execute on our proven investment strategy,” said Sharon Ann Miller, managing director. “We are also delighted to begin relationships with our new LPs and look forward to working with them to add value to their existing investment portfolios by successfully investing Fund VIII.”

“Despite today’s unsettled real estate environment, we believe that we are heading into what could be the best investment period in the last 20 years,” said Tyson Skillings, Fund VIII’s portfolio manager. “We are actively analyzing our target markets to ensure that we understand the critical trends and key drivers and that we have identified the best-in-class operators/owners/developers so that as the market recovers, we are well-positioned to take advantage of the opportunities produced from the current depressed conditions.”

Financial Crisis’ Worsening Bite Hits European Non-Listed Real Estate Funds

Edited: Jennifer Brenner Andrade
Source: INREV

INREV, the European Association for Investors in Non-listed Real Estate Vehicles, reports that its index returned -26.8% in 2008 as the global financial crisis continued to bite into returns from European nonlisted real estate funds. This compares to returns of -2.1% in 2007. The UK contributed heavily to the overall negative result as it saw its returns in Euros falling to   -49.6% from -13.2%.

However, results from the Ex-UK Index show that the impact of the downturn is also now clearly being felt on the Continent, with returns falling to -9.8% in 2008 from 11.9% in 2007.

“In 2007, the UK took the full brunt of the crisis but the results now show the impact of the downturn spreading to Continental Europe,” said Andrew Smith, chief investment officer, Aberdeen Property Investors and Chairman of the INREV Benchmarking Committee. “When you break down the returns by capital growth and income return, they show that the major contribution to the negative returns in 2008 came from the rapid decline in capital values. This is a result of financing problems and market confidence and activity falling in 2008.” The INREV Index shows that capital growth fell to -30.3% while income returned 3.5%.

For the first time, INREV has introduced a “Local Currencies Index,” which removes the impact of currency fluctuations and helps improve fund performance analysis. This index returned -20.2% in 2008 compared to 2.2% in 2007.

“The introduction of the ‘Local Currencies Index’ marks another improvement in the development of the INREV Index as a benchmarking tool for our members and enables them to undertake better performance attribution analysis,” said Lisette van Doorn, chief executive of INREV.

The Index also includes a gearing sub-index which shows the impact of debt on fund performance. The gearing sub-index compares fund returns for vehicles with low (<30% of GAV), medium (≥-30% of GAV≤ 60%) and high (>60% of GAV) gearing. Using local currencies, funds with high levels of gearing returned -39.0%, a considerable underperformance relative to the INREV Index return of -20.2%. The results also show that low geared funds actually performed worse than medium geared funds with returns of -17.6% and -16.6% respectively, although the difference is minor. These results can be explained by the large contributions of UK funds (48% by number of vehicles) to the low geared group.

Portugal and the Netherlands were the best performing countries with 1.6% and 1.1% returns respectively in local currencies while all other country sub-indices produced negative returns with Italy and Germany at the higher end with -0.6% and -1.0% respectively. The UK and Sweden were the worst performing countries at -34.7% and -23.9% respectively, although the Sweden sub-index is based on a small sample. Residential was the best performing sector with a return of -1.3%. The retail and office sectors were the worst performing sectors at -27.1% and -20.6% respectively.

For the first time, collection and calculation of the INREV Index 2008 was done in-house with Ernst & Young auditing the methodology, data processing and calculation. “This is an important next step for INREV as the independent source of information for the non-listed real estate funds market,” said Johan van der Ende, CIO PGGM Investments and Chairman of INREV. “The development of the INREV Index into the industry’s performance benchmark is at the top of our priority list. Therefore, we are extremely happy with the large number of funds that have contributed to this index, showing the support from our members”

The INREV Index measures annual net asset value based performance for non-listed real estate funds investing 90% or more in Europe. The 2008 release of the Index covers 224 vehicles with a total net asset value of €68.1 billion.

From now on, the Index will focus on institutional core and value-added vehicles with the “Opportunity Funds” to be included in a separate consultative index with an internal rate of return (IRR) methodology.

Brookfield Acquires New London Head Office

Edited: Jennifer Brenner Andrade
Source: JLL

Brookfield Europe has acquired 14,820 sq ft at 23 Hanover Square, W1S 1JB from Jones Lang LaSalle for its new purpose-built London Head Office.

Formerly the ground and first floors at 22 Hanover Square, W1, 23 Hanover Square comprises wholly self contained office accommodation with its own street level entrance direct from Hanover Square. Access between the ground and first floors will be via a newly constructed internal staircase within the building.

Brookfield will relocate to 23 Hanover Square from their existing 14,530 sq ft at 40 Berkeley Square later this year.

James Tuckey, Chairman, Brookfield Europe said: “We believe the time is right to relocate to offices designed to meet the requirements of our European business.”

Andy Mottram, Head of Jones Lang LaSalle England said: “The decision to sublet these floors at Hanover Square, taken after reviewing our space requirements, will help reduce our occupancy costs which will contribute to the cost cutting measures being implemented across the whole of the Jones Lang LaSalle business in England.”

New ULI Publication to Explore How Capital Market Turmoil is Restructuring Real Estate Finance

Edited: Jennifer Brenner Andrade
Source: Urban Land Institute

Real Estate and the Financial Crisis, a new publication from the Urban Land Institute, offers a comprehensive analysis of how turmoil in capital markets worldwide is restructuring real estate finance.

Written by highly acclaimed real estate finance expert and Brookings Institution Senior Fellow Anthony Downs,this timely book provides candid insights into what caused the financial market meltdown and the long-term consequences. Downs provides an insider’s view, examining public policy and the role of the Federal Reserve. He discusses ensuing policy recommendations for commercial and residential real estate lending, as well as scenarios for a new era in the financial sector.

Highlights include:

• An explanation of what happened in financial markets, the housing market, commercial property markets, and mortgage backed securities, and their roles in the financial crisis.
  
• An analysis of public policy responses and recommendations for future policies to improve the financial system – including new approaches for operating within a shrinking financial system; responding to a shift in housing and financial policies; and approaches for stabilizing commercial real estate markets.
  
• An explanation of the long term impacts on the residential housing sector, residential mortgage securitization, the commercial property sector, and commercial real estate finance.

Downs offers a look at four different scenarios for moving beyond the current financial crisis:

Scenario one: weak U.S. recession, speedy return of credit availability by late 2009 – likelihood of occurring, 15 percent.

Scenario two: strong U.S. recession in 2009, continued lack of real estate credit availability until 2010 – likelihood, 65 percent.

Scenario three: serious U.S. recession, collapse of the dollar, higher interest rates and a prolonged recession through 2010 – likelihood, 8 percent.

Scenario four: two- to three-year recession, massive federal spending, inflationary pressures, high interest rates – likelihood, 12 percent.

“There will be no return to the easy availability of financial credit for real estate during most or all of 2009,” Downs writes. “Only in 2010 and beyond will such a return be possible, though certainly not assured. That situation is consistent with the likelihood of the 2008-2009 American recession lasting well into 2010.”

The capital markets will not stabilize until confidence can be restored among capital suppliers – providers of both equity and debt capital – in the availability of reliable information on the true market value of real estate securities and real estate properties, Downs notes. He lists four ingredients to restore confidence: 1) the passage of time (“capital supplies must go through a period in which the frequency of write-downs and losses by those who create securities fades away”); 2) the steady improvement of space market conditions over a period of time long enough to provide higher profits to property operators; 3) a favorable comparison of real estate to other asset classes such as stocks and bonds; and 4) a downward adjustment of property prices to reflect the new investment and economic realities.

From these observations, Downs concludes that:

• The credit crunch will not end quickly, but will take at least one more year and perhaps up to three more years to disappear;
• Real estate capital markets will gradually improve as investors become impatient with low yields on other assets and as more property owners accept the need to give investors higher returns; and
• The recovery of real estate capital markets will depend in part upon how well the non-real estate investment trust part of the broader stock market fares: the better it does, the longer it will take for capital to come back to real estate.

Real Estate and the Financial Crisis is the second book authored by Downs that has been published by ULI. The first, Niagara of Capital, explored the lending frenzy prior to the credit market collapse. Downs, a longtime ULI member, is a former ULI trustee and a former academic fellow for the Institute. He has served on numerous ULI product councils and is a frequent speaker at ULI meetings. Downs has served as a consultant to many of the nation’s largest corporations, major developers, and government agencies at all levels, including agencies at The White House. He has a PhD in economics from Stanford University and is a widely published author.

Raffles Singapore Hotel To Expand Amidst Rumors of Possible Sale

By: Jennifer Brenner Andrade

The famous Raffles Singapore Hotel which is owned by Fairmont Raffles Hotels International is planning an expansion. The Singapore authority has given approval for an Arcade redevelopment plan for the property. This approval will add significant value to the hotel as it will include up to 78 additional guest rooms.

Kingdom Holding Company (KHC), which is chaired by Saudi Prince Alwaleed bin Talal bin Abdulaziz Alsaud, holds a 58.1% controlling interest in Fairmont Raffles. Recently published press reports have generated rumors that Fairmont was looking to sell the Singapore asset and that KHC may be interested in offloading some of its share. These rumors, which were reported primarily in a London-based publication have not been officially confirmed. Indeed a statement on KHC’s website reports that Fairmont Raffles is an integral component of KHC’s diverse hotel portfolio.

KHC also reported that The Savoy, an iconic, luxury hotel in London which is currently undergoing a £118 million renovation, is scheduled to re-open in late 2009 and will be managed by Fairmont. The 268 room hotel is considered a landmark and opened in 1889.

SUN Apollo Announces Management Changes in India

Edited: Jennifer Brenner Andrade
Source: PRNewswire

SUN Apollo Real Estate Advisors Pvt. Ltd. , recently announced that managing director and chief executive officer, Chetan Dave, will step down from his roles and transition to the role of senior advisor to the company. Mr. Prakash Kalothia who has served on the SUN Apollo Investment Committee since its inception and has been with the SUN Group for seven years will assume managing director and the chief executive officer roles.

In Mr. Dave's senior advisor role, he will remain on the Board of Directors of SUN Apollo and continue to advise the investment committee. He will continue to provide advice and guidance on the Fund's portfolio of investments and its investment strategy going forward. Under Prakash's leadership, the Sun-Apollo team will continue to invest the Fund with the same focus and discipline that has guided them since the Fund began investing three years ago.

"I have been with SUN Apollo since its inception and helped raise the $630 million SUN Apollo India Real Estate Fund. After having relocated from the US, I have spent the past three years establishing the Indian operations, building a solid investment team and made several significant investments in all property types. During a time of unprecedented market turmoil, we have been very patient and I believe the Fund is extremely well positioned to take advantage of the market opportunities," said Mr. Dave. "I have worked closely with senior teams of SUN, AREA, my investment team, advisors and partners and I am grateful for their support. At this point, keeping in mind certain personal priorities, I am looking forward to transitioning to a less intense role."

"Chetan was amongst the earliest investors who identified the potential of Indian real estate opportunity, even before FDI was permitted. He had an entrepreneurial passion for establishing a blue-chip investment platform in India, which is what he has accomplished," said Uday Khemka, Vice Chairman of SUN Group.

"Chetan has done a terrific job in establishing and building the SUN Apollo business in India with a high degree of organizational skills, integrity and investment acumen. We are grateful for his enormous effort in positioning the franchise for continued success and appreciate his continued involvement during the transition," said William Benjamin, CEO of Europe and Asia and COO of AREA Property Partners (formerly Apollo Real Estate Advisors).

Dave has more than 20 years of experience in the real estate industry. Mr. Dave was formerly chief investment officer with Transwestern in Houston, Texas, prior to which he was a principal in the real estate group of J.P. Morgan Partners in New York.

As managing director of the SUN Group, Prakash has been responsible for the management and oversight of SUN's real estate investment business in India since 2002. Prior to joining SUN in 2002, Mr. Kalothia worked for Lend Lease Corporation and Larsen & Toubro (India's largest engineering and construction company). Prakash has been an integral member of Sun-Apollo since the Fund's inception working with Chetan to build the local team and manage relationships with local operating partners.

"Prakash helped conceive of the idea of the Fund. He was invaluable in its formation and has been an active force on the Investment Committee. We have full confidence in his ability to build on Chetan's success," said William Benjamin.

Rents Falling and Yields Rising Across EMEA in First Quarter 2009

Edited: Jennifer Brenner Andrade
Source: CBRE

CB Richard Ellis has announced the results of its Rent and Yield Indices for the first quarter of 2009, broadly reporting falling rents and rising yields across Europe.

Key findings included:

Rents

Offices
Prime office rents across Europe fell in the first quarter of 2009. The CB Richard Ellis office rent index for the EU-15 area fell by 3.4% in the quarter, taking the year-on-year rate of growth to minus 4.1%.

Twenty eight of the 48 locations in the survey saw prime rent falls, one location increased and 19 remained unchanged. The largest falls occurred in Kyiv (down 33% to €357 per sq m per annum) and Moscow (down 20% to €918 per sq m per annum). The only increase was in Zagreb, where rents increased by 0.8% to €211 per sq m per annum.

Retail
Prime rents also fell in the retail sector. The CB Richard Ellis retail rent index for the EU-15 area fell by 1.3% in the quarter, taking the year-on-year rate of growth to 0.6%

Only one location in the survey saw an increase in the level of prime rent, 13 declined and 29 remained unchanged. The largest falls were recorded in Warsaw (down 33% to €960 per sq m per annum) and Bucharest (down 30% to €1,080 per sq m per annum). The single increase occurred in Birmingham, where rents increased by 9% to €1,669 per sq m per annum.

Industrial
Industrial rents also fell in the quarter. The CB Richard Ellis industrial rent index for the EU-15 area fell by 2.2% in the quarter, taking the year-on-year rate of growth to -4.6%.

Twenty four of the 43 locations in the survey saw the level of prime rent remaining stable, 18 declined and only one location saw an increase. The largest falls were in Dubai (down 33% to €67 per sq m per annum) and Kyiv (down 22% to €64 per sq m per annum). The single increase occurred in The Hague, where rents increased by 8.3% to €65 per sq m per annum.

Yields

Offices
Office yields across Europe rose in the first quarter. The CB Richard Ellis office yield index for the EU-15 area rose by 19 basis points in the quarter, and as a result is 107 basis points higher than a year ago.

Thirty four of the 49 locations in the survey saw upward yield movements, two saw yields move lower and 13 remained unchanged. The largest rise occurred in Moscow with yields moving 150 basis points higher to 11.5%, with Sofia, Zagreb, Budapest, Bucharest and Belgrade each seeing increases of 100 basis points. Running counter to the general upward trend, there were yield reductions of 15 basis points in Manchester and Birmingham taking both to 7.5%.

Retail
Retail yields also rose in the quarter. The CB Richard Ellis retail yield index for the EU-15 area rose by 24 basis points in the quarter, and as a result is 98 basis points higher than it was a year ago.

Thirty of the 42 locations in the survey saw upward yield movements, 12 remained unchanged and there were no reductions. The largest rises occurred in Bucharest (300 basis points) and Moscow (150 basis points), leaving both at 11.5%.

Industrial
Industrial yields also rose. The CB Richard Ellis industrial yield index for the EU-15 area rose by 32 basis points in the quarter, and as a result is 120 basis points higher than a year ago.

Thirty two of the 41 locations in the survey saw upward yield movements, none saw yield reductions and nine remained unchanged. As in the retail sector, the largest rises (150 basis points) occurred in Moscow and Bucharest, taking them to 13.5% and 10% respectively.

Commenting on these changes, Richard Holberton, Director, EMEA Research said: “The effects of the general deterioration in short-term economic prospects are very evident in the downward pressure on all the sector rent indices this quarter. This weakening in the rental outlook, along with loss of liquidity and higher risk premia, continues to cause repricing in the investment market. Yields continue to rise in most markets, although some parts of the UK market notably saw very modest movements and, in a couple of cases, negative shifts.”

Hines Extends "Green Office" Program to Over 4,000 Tenants

Edited: Jennifer Brenner Andrade
Source: Hines

Houston-based international real estate firm, Hines, has expanded its internal green office program, HinesGO®, to a new audience – 4,300 office tenants occupying more than 120 million Hines-managed square feet in over 100 cities in the United States, Mexico, Canada, Panama, Brazil, China and Russia. Originally designed to enhance the sustainable features and operation of the space the firm itself occupies – more than 230 offices on four continents – the program has been adapted for Hines’ tenant base in more than 650 office buildings around the world. GREEN OFFICE complements the LEED® Green Building Rating System and the ENERGY STAR® “Bring Your Green to Work” programs, drawing on Hines’ 52 years of sustainable expertise attained through the development, management and acquisition of more than 1,100 properties.

“Encouraging our tenants and their employees to make greener choices will pay off in environmental dividends, as well as in energy savings. Our own employees have embraced the program; and our tenants have been asking for advice. We hope this is only the beginning of an ongoing dialog of how we can all share responsibility for reducing greenhouse gas emissions,” said Hines President and CEO Jeff Hines.

GREEN OFFICE is promoted through a tenant guide, distributed by building managers, which encourages tenants to identify and implement no-cost and low-cost alternatives to operating in a standard indoor office environment. Scored on a scale of 100, offices are evaluated in seven categories: Energy Efficiency, People & Atmosphere; Travel & Commuting; Reduce, Reuse & Recycle; Cleaning; Remodeling & Construction; and LEED. When a specific strategy or improvement has been implemented, participating tenants earn “Leaf Credits.” If an office achieves 70 Leaf Credits, it is then designated as a GREEN OFFICE.

The program encourages tenants to conduct cost-benefit analyses for improvements that can be achieved at nominal cost. For example, with the installation of occupancy light sensors, the HinesGO scorecard indicates there might be some upfront investment, which will likely be returned through reduced operating expenses. Hines is a participant in the U.S. Green Building Council’s LEED program and the U.S. Environmental Protection Agency’s ENERGY STAR program, with more than 98 projects, representing approximately 65 million square feet that have been certified, pre-certified or registered under the various LEED programs. Hines has also labelled more than 130 buildings, representing approximately 76 million square feet, in the ENERGY STAR program.