Global Viewpoints

With APAC Focus, Starwood Slated to Open 80-100 Hotels in 2010

Edited: Jennifer Brenner
Source: Starwood Hotels & Resorts Worldwide, Inc.

From the American Lodging Investment Summit (ALIS) in San Diego, Starwood Hotels & Resorts Worldwide, Inc. has announced that it expects to open another 80-100 high quality new-build and conversion hotels in 2010, coming off of the 83 opened and 77 new deals signed in 2009. Of these new hotels, roughly 70 percent will be outside of North America, with the majority in Asia Pacific. And Starwood’s upper upscale and luxury brands are leading the charge, representing more than 60% of the new openings. Among these hotels and resorts is expected to be its 1,000th property globally.

“Over the past two years Starwood has opened more than 160 new hotels, and we are well positioned for another year of meaningful growth with 80-100 new hotels that will be representative of our best,” said Frits van Paasschen, president and CEO of Starwood. “In 2010 and beyond, we will continue to focus on opening great hotels, signing high quality new projects and conversions, and taking critical steps to ensure Starwood and our development partners are positioned to own the upswing as we increasingly see the global market turn into positive territory.”

To meet the growing demand for high quality lodging in China, Starwood plans to double its portfolio there to 100 hotels by 2012. In 2010, Starwood is slated to open approximately 30 hotels in the market, including both The Luxury Collection and W brands’ first hotels in mainland China. The St. Regis, Westin, Le Meridien and Four Points by Sheraton brands will also increase their Chinese presence in 2010, while the Sheraton brand is experiencing the most robust growth and represents half the year’s total openings.

“China is expected to be one of the world’s largest outbound tourism markets by 2020, with a predicted 100 million outbound trips a year,” said Simon Turner, president of global development for Starwood. “As the Chinese travel, they are going to stay with the brands they know from home, which will have a meaningful effect on our business globally and underscores our focus there.”

As a global pioneer, Starwood was the first international hotel chain to enter China. And today it is the country’s largest international upscale hotel operator.

Growth is also fertile in India, where Starwood has already opened 25 hotels and plans to increase its portfolio roughly 60% by the end of 2012. Starwood’s steady expansion in India is fueled by several of its brands including Westin, which will open two new hotels this year. And last year’s debut of the Four Points by Sheraton brand in India will soon be followed by the upcoming launch of the Aloft brand, which is set to open three hotels there by the end of 2010.

“When you take a look at India and China combined, you have 40 percent of the world’s population, and between them, they are averaging 8 percent growth in GDP,” added Turner. “By working to further establish relationships with travelers in these critical, high-growth markets today, we are ensuring the success of Starwood tomorrow”

Today, Starwood’s North America and Europe, Africa and Middle East divisions are the company’s largest in terms of hotels, and Starwood continues to see strong growth opportunities within them. In 2010, Starwood will introduce several of its brands to new markets – including the debut of the W brand in London – while also furthering its leadership in markets where its brands are already established – such as the addition of two new Sheraton hotels in New York City. Critically, the hotels opening in these divisions will represent both new-build and conversion properties.

“Starwood has a high quality and large enough footprint to enjoy the benefits of critical mass in North America,” said Paul Sacco, SVP of development for Starwood’s North America. “However, there are numerous key markets in the vast North American landscape that represent strong growth potential for our nine well regarded and innovative hotel brands. We anticipate transaction activity will increase in 2010 with added focus on conversion projects, as well as select new build hotels. With our group of conversion-friendly brands, in addition to new build opportunities, we are well positioned to execute more than our fair share of opportunities in 2010 and beyond.”

In North America, which represents half of Starwood’s current portfolio, the company is slated to open approximately 30 hotels in 2010. Among these best-in-class properties are Aloft Brooklyn, New York; Element New York-Times Square; Sheraton Tribeca New York; and St. Regis Bahia Beach Resort, Puerto Rico. Growth in the New York City market is a key focus in 2010, with Starwood opening six hotels there and introducing its two newest brands – Aloft and Element.

Building on the 244 existing Starwood properties in Europe, Africa and Middle East, Starwood and its development partners are slated to open approximately a dozen more in the division, including Europe’s first Aloft. The St. Regis Mauritius Resort, which is on track to open this fall, is a conversion property, and will be the company’s fourth hotel on the island nation.

In Latin America, Starwood and its development partners see continued long term opportunities as demand growth significantly outpaces supply. And with low presence of international brands, particularly in the luxury segment, Starwood is poised for expansion throughout Latin America. In 2010, Starwood will debut the Westin brand in Peru – The Westin Libertador, Lima – and open the country’s second property under the Luxury Collection brand – Tambo Del Inka, A Luxury Collection Hotel. The Westin brand will also open its fifth hotel in Mexico and its first in Mexico City with The Westin Santa Fe.

Funding Closes on $171M TIFIA Loan for San Francisco’s Transbay Transit Center Project

Edited: Jennifer Brenner
Source: Transbay Joint Powers Authority (TJPA)

The Transbay Transit Center Project in San Francisco reached another important milestone as the Transbay Joint Powers Authority (TJPA) closed on the $171 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan for the project.

The loan was made possible based on the TJPA’s sound finance plans, favorable audits and positive credit reviews—requiring an investment grade credit rating. The loan will fund 14 percent of the project’s $1.2 billion Phase I capital costs to build the new Transbay Transit Center Project. The project is funded through local, state, and federal funding sources.

“This is a very important milestone that brings our collective vision of the Transbay Transit Center one step closer to reality,” said San Francisco Mayor Gavin Newsom. “With this funding today and positive news later this winter on our stimulus money request, we can begin actual construction on this critical project and begin creating thousands of jobs.”

“We are thrilled to be one of the first modern rail stations in the United States to achieve this historic milestone and look forward to continuing to make progress on the Transbay Project,” said Maria Ayerdi-Kaplan, executive director of the Transbay Joint Powers Authority (TJPA). “We are grateful for the strong leadership and support of Secretary LaHood and the United States Department of Transportation, Speaker Pelosi, Senators Feinstein and Boxer, Governor Schwarzenegger and Mayor Newsom on behalf of this important project.”

In addition, the $171 million TIFIA loan paves the way for the next increment of funding for the train box. TJPA has applied for $400 million in federal economic stimulus funds to construct the below grade train levels of the Transit Center as a part of the first phase of construction, which would ultimately save the project $100 million overall. Announcement of the American Recovery and Reinvestment Act (ARRA) funding is expected this winter.

“The Board of Directors wants to express our appreciation to the U.S. Department of Transportation for their hard work in support of the TIFIA loan,” said Nathaniel P. Ford Sr., Chair of the TJPA’s Board of Directors. “We are looking forward to ARRA’s decision soon so we can become the national model for how the long-awaited stimulus dollars can be put to use immediately to stimulate the economy of this region while also building transit infrastructure that will serve generations to come.”

TIFIA was established to create a Federal credit program for eligible transportation projects of national or regional significance under which the US DOT may provide three forms of credit assistance – secured (direct) loans, loan guarantees, and standby lines of credit. Implementation of the TIFIA program is the responsibility of the Secretary of Transportation.

A letter of interest was submitted by the TJPA to the DOT in October 2003 and the application was submitted in October 2008. The loan was recommended by the credit council in Washington D.C. for unanimous approval by the U.S. Department of Transportation (DOT) Secretary in September 2009 and approved by the TJPA Board of Directors in December 2009.

The Transbay Transit Center Project, which will replace the current Transbay Terminal with a new, multi-modal transportation center and centralize the region’s transportation network by accommodating nine transportation systems under one roof, will make public transit a more convenient option in the Bay Area, much as it is in other world-class cities. The three components of the project – replacing the outdated Transbay Terminal with a modern transit hub, extending the Caltrain rail line 1.3 miles into the heart of the Financial District and redeveloping the area surrounding the Transbay Transit Center with 2,600 new homes (35% affordable), parks and a retail main street – will help to return San Francisco to a culture of mass transit, allowing people to travel and commute without the need for a car, thereby decreasing congestion and pollution.

The project broke ground on the temporary terminal in December 2008 and demolition of the current bus terminal is scheduled for spring 2010. The total cost of the project is $4 billion.

It’s Not ‘If’ Interest Rates Will Rise But ‘When,’ Says Real Estate Center Chief Economist

Edited: Jennifer Brenner
Source: Real Estate Center at Texas A&M University

Mortgage interest rates are low right now, but don’t expect that to last. When the government quits buying mortgage-backed securities, rates will head up and away.

Dr. Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University, explained why mortgage rates were so low at the end of 2009.

“First, the global consensus among bondholders appeared to be that inflation will remain low in the United States for an extended period. This caused the ten-year U.S. Treasury rate to fall to between 3.2 and 3.6 percent for much of the second half of 2009.”

With extraordinary levels of federal deficit spending, Dotzour said it is unlikely that the low-inflation scenario will be popular when the economy starts to rebound. Consumers should expect mortgage rates to rise when signs of improvement appear.

A second factor contributing to the low mortgage rates is the Federal Reserve Bank’s unprecedented purchase of nearly all the mortgage-backed securities issued by Fannie Mae and Freddie Mac in 2009, he said. Totaling more than $1 trillion for the year, this program has been extended through the end of March 2010.

“The Fed has never done this before in its history,” said Dotzour. “They are doing this to stimulate the economy by keeping mortgage rates as low as possible. When the Fed stops buying these securities from Fannie and Freddie, mortgage rates are likely to increase, possibly quite abruptly.”

How far will rates go up when the Fed terminates its buying program? Dotzour said that question is difficult to answer precisely because this has never been done before. But many experts think that rates could move up one-half to 1 percent.

“The combination of extraordinarily low mortgage rates and current price levels are making homes extremely affordable to American families. In fact, national and Texas housing affordability indices indicate that homes are more affordable than ever. But this will not last. When the economy recovers and the Fed stops purchasing mortgages, rates will rise.”

Former Morgan Stanley Executive Larry Goodman Joins the Pinnacle Family of Companies

Edited: Jennifer Brenner
Source: Pinnacle Family of Companies

The Pinnacle Family of Companies, an international real estate investment and management firm, recently announced that Larry Goodman has been appointed president of the newly formed Pinnacle Equities. Goodman will be responsible for day to day operations and growth of Cascade Affordable Housing and Olympic Investors, and will be headquartered in Dallas.

Stan Harrelson, Pinnacle CEO, shares that "Pinnacle Equities was formed to align ownership in these two distinct and growth oriented platforms. In each case there is a defined strategy and set of objectives. The ability to add Larry to our team ensures that these companies will receive the very highest degree of institutional sophistication, discipline, and prudence. Coupled with Larry's entrepreneurial outlook and aggressive approach, I feel we have the opportunity to really energize the way these companies do business."

"This change is important for the success of Cascade and Olympic," said Basil Rallis, director, Cascade Affordable Housing. "It will allow both of these companies to grow and improve the performance of the assets we are entrusted to preserve and enhance."

Goodman has a strong background in investment and asset management, coming to Pinnacle with nearly twenty years of real estate experience, including fifteen years with Morgan Stanley and its predecessors Lend Lease and Equitable of Atlanta, Georgia. His most recent position at Morgan Stanley was executive director, portfolio management.

Goodman is a Certified Commercial Investment Member (CCIM) of the CCIM Institute, earned a Master of Corporate Real Estate (MCR) from CoreNet Global, and is a Real Property Administrator (RPA) through Building Owners and Managers Institute International. He is a member of the Urban Land Institute (ULI), the National Association of Industrial & Office Properties (NAIOP) and the National Multi Housing Council (NMHC).

A native of Miami, Florida, Goodman holds a Bachelor of Science in Real Estate Finance from the University of Alabama, Tuscaloosa.

Pricing Upturn Seen in Retail, Apartment Sectors

Edited: Jennifer Brenner
Source: CCIM Institute, Real Estate Research Corp.

Commercial real estate is positioning itself to be an attractive investment on a risk-adjusted basis in 2010 and 2011, according to the CCIM Institute and the Real Estate Research Corporation (RERC). Property prices in the retail and apartment sectors showed moderate increases in fourth quarter 2009, breaking the string of significant price declines throughout the previous 12 months.

"The latter part of 2008 and all of 2009 were definitely the shock years, and we're looking to 2010 as the recovery year," said Richard Juge, CCIM, the 2010 president of the CCIM Institute. "We will see more activity, perhaps not in gross dollar levels, but in the volume of deals that close in 2010. This is the time to buy."

Additionally, CCIM and RERC say that weighted average capitalization rates for the office, industrial, retail, and apartment sectors increased by 20 to 30 basis points in the fourth quarter.

"This is also part of the market re-pricing of risk, as cap rates expand to provide a more attractive income component to the investment," said Juge. "This is in contrast to the cap rate compression era several years ago."

The groups' RERC/CCIM Investment Trends Quarterly report also shows that 12-month trailing transaction volume increased slightly in the apartment and retail sectors, hinting that volume also may be starting to bottom out for these property types. However, transaction volume for the office and industrial sectors continued to decline, but at a much slower rate in the fourth quarter than in the previous three quarters.

"We keep searching for a bottom on prices, but it is an uneven landscape depending on the property type and investor willingness to mark-to-market their properties," said Kenneth Riggs, CCIM, president and CEO of Real Estate Research Corporation. "But we are seeing a more consistent environment where there is the beginning of a ground swell to sell assets for either strategic reasons or the asset is being sold under a distressed sale scenario. It is all about taking your medicine to get an asset price that will trade in this environment.

"This is the first step toward recovery, and the market is ready to move on and prepare for the next phase, which is capital moving in to buy attractively-priced quality commercial real estate assets. We are glad to see the shift occurring, because for many it has been a decade from hell riddled with euphoric highs that closed out with below-the-basement prices," said Riggs.

Published quarterly, the RERC/CCIM Investment Trends Quarterly report provides timely insight into transaction volume, pricing, and capitalization rates for the core income-producing properties. The RERC/CCIM Investment Trends Quarterly is produced by the Chicago-based Real Estate Research Corporation (RERC) in association with the 16,000-member Chicago-based CCIM Institute.

Cushman & Wakefield to Be Named First ARGUS Global Certified Client

Edited: Jennifer Brenner
Source: ARGUS Software, Cushman & Wakefield

ARGUS Software today announced that Cushman & Wakefield, the world’s preeminent commercial real estate services firm, will be named the first ARGUS Global Certified Client. As a part of achieving this level of distinction, Cushman & Wakefield will employ the ARGUS Software product suite, which is comprised of many of the industry standard tools for valuation, investment management and development feasibility, across all of its business units.

“Cushman & Wakefield is proud to receive this designation.” said Craig A. Cuyar PhD, global chief information officer for Cushman & Wakefield, “We believe this will not only set a new standard, but will also provide a common approach that will ultimately create tremendous efficiencies and financial benefits for our worldwide group of clients.”

“Cushman & Wakefield’s global scope and breadth is impressive,” said Mark P. Kingston, president and CEO of ARGUS Software. “In addition, the firm’s commitment to excellence and dedication to creating and deploying global best practices across its business is truly world-class. By utilizing ARGUS Global Certified Client, Cushman & Wakefield will benefit its entire customer base and enhance its position as an industry leader.”

Cushman & Wakefield is the world’s preeminent commercial real estate services firm. Founded in 1917, the firm has 231 offices in 58 countries, and more than 15,000 professionals. Cushman & Wakefield delivers integrated solutions by actively advising, implementing and managing on behalf of landlords, tenants, and investors through every stage of the real estate process. These solutions include helping clients to buy, sell, finance, lease and manage assets. The firm also provides valuation advice, strategic planning and research, portfolio analysis, site selection and space location assistance, among many other advisory services.

ARGUS Software is the leading provider of software and solutions for managing the value of real estate investments worldwide. ARGUS Software has a world-class user base consisting of over 90,000 customers and users and has been focused solely on the commercial real estate segment for over 20 years. The ARGUS Software portfolio includes industry-standard products such as ARGUS Valuation - DCF, ARGUS Developer, ARGUS Asset Management and ARGUS Lease CRM.