Global Viewpoints

Entertainment Properties Trust Gets Toronto Shopping Center Out of Receivership

Edited: Jennifer Brenner
Source: Entertainment Properties Trust

Entertainment Properties Trust (EPR) recently completed the acquisition of the Toronto Dundas Square project, previously in receivership, by paying off senior debt of approximately $120 million Canadian. As a result of the closing of this acquisition, the Company's second mortgage note on the project has been extinguished. In conjunction with the acquisition, the Company has closed on a $100 million Canadian first mortgage credit facility with a group of banks.

Toronto Dundas Square is a 13-level entertainment retail center located in downtown Toronto, consisting of approximately 330,000 square feet of net rentable area, including one of the highest grossing theatre complexes in Canada, as well as 25,000 square feet of digital and static signage.

David Brain, president and CEO, commented on the acquisition, “We are very pleased to own such a premiere asset located at one of the busiest intersections in downtown Toronto. This property has excellent tenants such as AMC Theaters, Future Shop, Google and Adidas and we are excited about the added potential for significant growth in signage income.”

Entertainment Properties Trust is a real estate investment trust (REIT) that develops, owns, leases, and finances properties for consumer-preferred, high-quality businesses. EPR's investments are guided by a focus on inflection opportunities that are associated with or support enduring uses, excellent executions, attractive economics, and an advantageous market position. EPR’s total assets exceed $2.6 billion and include megaplex movie theatres and entertainment retail centers, as well as other destination recreational and specialty investments.

Colliers International Jumps a Notch in Annual Lipsey Survey

Edited: Jennifer Brenner
Source: Colliers International

Colliers International has climbed to the #2 spot in the annual Lipsey Survey of the top 25 brands in the commercial real estate industry. The firm had a lock on third place since 2004 and rose from 6th place in 2002 to 4th in 2003.

The results reflect the ballots, informal focus groups, and opinions from a variety of sources made up of more than 50,000 practitioners and industry leaders from REITs, institutions, mortgage bankers, commercial brokers, asset managers, property managers and related professionals surveyed and interviewed by The Lipsey Company, which is a training and consulting firm specializing in the commercial real estate industry.

"Although we are pleased to have moved up to second place, we will continue to pursue our strategy of ensuring our clients receive the highest levels of service and consistent delivery over the long-term," said Douglas P. Frye, chairman and CEO of Colliers International. "We have risen in the rankings largely due to our best-in-class service and the high quality service offerings that we provide around the world. We are in the process of integrating some of the top names in commercial real estate under the Colliers International brand including FirstService Williams, FirstService PGP Valuation and PKF Hospitality and Hotel Consulting which will mark the beginning of our final step to the summit in this survey and in the minds of our clients."

Earlier in the year, Colliers International announced it will combine operations and global real estate services platforms with FirstService Corporation (NASDAQ: FSRV; TSX: FSV) firms in the commercial real estate space. The combined entity will assume an industry-unique operating and partnership model and operate under the Colliers International brand.

ECE and Berlin Hyp Close 110M Euro Loan for New Shopping Centre in Poland

Edited: Jennifer Brenner
Source: ECE Projektmanagement

ECE Projektmanagement and the real estate finance business division of Landesbank Berlin AG and BerlinHyp have signed a loan contract for the construction of Galeria Kaskada in Szczecin, Poland. The total credit value amounts to 111 million euro. With the financing now in place, the construction of Galeria Kaskada will start in full scale in order to reach the planned opening date in the fall 2011. The complete investment of the project totals 190 million Euro.

According to Alexander Otto, CEO of ECE: “Our partnership with Landesbank Berlin and BerlinHyp proves that the best quality real estate projects brave the crisis and set the direction for the real estate market. The construction of Galeria Kaskada will be an impulse for the further international expansion of ECE in the CEE region, and in Poland in particular.”

Mr. Jan Bettink, chairman of the board of management of Berlin Hyp, states: “This deal once again underlines the strong position and good reputation of the joint business division of Landesbank Berlin AG and Berlin Hyp. We are proud to have closed this significant deal despite the current financial climate. ECE as well as we – as the financial partners – professionally teamed up and committed to completing the transaction within the set timeframe scheduled by the borrower.”

Galeria Kaskada will be the premium shopping destination in Szczecin and the region of Western Pomerania. It is perfectly located in the very heart of the city center of Szczecin, with convenient access by all means of transportation. The catchment area exceeds 720,000 people and stretches out far beyond the German-Polish border. Galeria Kaskada will house 140 stores offering a top mix of fashion brands, cosmetics, accessories, multimedia, food and services. Its best quality architecture will restore the urban character of the premises and bring back the city glamour to the center of Szczecin.

In terms of the project quality, solid financial grounds, and leasing ratio Galeria Kaskada meets the current high requirements of the financial markets. Almost two years before the opening as much as 55% of its retail space has been leased. The planned shops and fashion brands to be present in Galeria Kaskada include: Van Graaf, Intersport, C&A, Humanic, Max Mara Weekend, Camaieu, Promod, Tchibo, Coffee Heaven, Rossmann, Douglas, Sephora, L’Occitane, Apart, Yes, Adidas, Nike, Lee-Wrangler, Levi’s, Wittchen, Venezia, Ecco, and many more.

The start of construction for Galeria Kaskada will occur within the next few days with Strabag Polska as the general contractor. Strabag will take over the construction site from Stump Hydrobudowa, the ground work company who have been preparing the site for the construction.

With the timely commencement of the construction, ECE confirms its dedication to the company’s engagement in the cooperation with the city of Szczecin. ECE has already fulfilled a number of commitments from the agreement with the city, among them ECE constructed a building for the city puppet theatre “Pleciuga”. ECE will also contribute to the city’s infrastructure with the road system reconstruction around Galeria Kaskada. ECE has delivered the applicable traffic design documentation and will pay an agreed cash contribution.

The further development, construction and leasing, as well as long-term management of Galeria Kaskada will be realized by ECE with the loan support of its banking partner, BerlinHyp.

HFF Arranges $85M Acquisition Financing for California Media Campus

Edited: Jennifer Brenner
Source: Holliday Fenoglio Fowler, L.P.

The Houston and Los Angeles offices of HFF (Holliday Fenoglio Fowler, L.P.) have arranged $85 million in financing for the Lantana Media Campus, a 462,429-square-foot class A office campus in Santa Monica, California.

HFF associate director Colby Mueck, managing director Mark Wintner and executive managing director Scott Galloway worked exclusively on behalf of the borrower, The Lionstone Group, to secure the fixed-rate financing through Cornerstone Real Estate Advisers, based in Hartford, Connecticut . Houston-based Lionstone acquired the property from Maguire REIT with cash in December 2009 and closed on permanent financing in February 2010.

The property consists of four of the five buildings within the Lantana Media Campus including the 203,102-square foot Center Building , the 62,087-square-foot West Building, the 65,998-square-foot IMAX Building and the 131,242-square-foot South Building. Situated on 12 acres, the property is located along West Olympic Boulevard in Los Angeles’ Westside market close to the Santa Monica Freeway, the San Diego Freeway and the residential areas of Beverly Hills, Brentwood, Westwood, Santa Monica, Playa Vista and Hancock Park.

“The Lantana Media Campus is positioned in the heart of the media and post-production entertainment world and has historically exhibited strong occupancy and cash flow,” said Mueck. “The acquisition compliments Lionstone’s portfolio in the submarket which now exceeds 650,000 square feet.”

Lionstone Group is a privately owned real estate investment firm formed in 2001 to target property investments that have excellent long-term fundamentals. Currently, the firm has over $1.0 billion of discretionary equity being deployed in two investment strategies. Each investment strategy focuses on premium locations within major U.S. cities.

JLL Reports on Key CRE Trends for the Asia Region Preceding CoreNet Global's Singapore Summit

Edited: Jennifer Brenner
Source: Jones Lang LaSalle

More than 400 senior-level executives from the corporate and commercial real estate (CRE) industry around Asia will gather in Singapore on March 23 - 25, 2010 to examine various trends and contradictions that impacted the global economy in 2009.

One such paradox is the likelihood, that in 2010, lease pricing in commercial markets in Asia will rebound to the extent that it will no longer be a corporate tenants' market.

Real estate markets continue to change rapidly across the Asia region, according to Jeremy Sheldon, managing director of Jones Lang LaSalle's markets team in Asia Pacific. "In 2009, the global financial crisis put tenants at an advantage as no major city in Asia Pacific escaped its impact - the downward pressure on rents and hikes in vacancy - albeit to differing degrees. Now, as many countries move just as quickly from the downturn to a more balanced environment, some are already shifting back towards a more landlord favourable situation."

With such diversity of market cycles across the region, Mr Sheldon comments that CRE executives will play a key role in the way organizations transition back to business as usual or business growth, and whether they are able to emerge from the economic downturn with strength. "Cost saving will still be a clear objective - but the focus is shifting from short-term "survival", to building resilience for medium to long-term growth in this region - the growth engine for the future."

As confidence returns, Mr Sheldon notes that a number of important cultural and operational shifts in CRE procurement and utilization are also set to emerge with key trends likely to be as follows:

1. Upgrading but cutting into core space.
   The opportunities for tenants to upgrade their space and locations at zero or little cost are diminishing as rental rates bottom out in many markets in Asia. Financially strong corporations can use their leverage to enhance non- economic lease provisions, which will drive an improvement in leasing volumes in 2010. However, such activity will be tempered by a continuing sustained attack on occupiers' core space as better "line of sight" regarding real estate costs and ambitious saving targets are put in place.
   
   "We have witnessed this trend across different industry groups and geographies, with companies downsizing their core portfolio through space consolidation, subleasing, early terminations, and placing space into reserve," says Mr Sheldon. "We have also seen occupiers consolidating multiple brands and associated staff into single facilities not only to achieve headcount and cost reductions but also to facilitate a more collaborative working culture."
   
   
2. Alternative workplace strategies finally coming of age.
   Linked to space rationalization is the rekindling of interest in alternative workplace strategies (AWS). AWS has been part of the CRE vocabulary since the early 1990s but there is a sense from many markets that now is the time to activate these initiatives. "Major corporations operating in Asia are implementing workplace programmes designed to provide flexible work space and reduce both cost and space needs," expresses Mr Sheldon. "They are doing so in the context of strong portfolio planning that delivers some consistency and competitive real estate solutions that are attuned to the wider rhythm of the business and planning processes."
   
   
3. Reassessing 'own' versus 'lease' decisions.
   The direction of typical CRE tenure looks set to be challenged over the next decade. Corporate occupiers, whose balance sheets are in much better shape than some real estate investors, are increasingly exploring the possibility of using their lower-cost capital to drive down long-term occupancy costs by acquiring distressed facilities at deep discounts. Furthermore, proposed lease accounting changes will start to eliminate the traditional objections to ownership.
   
   
4. Sustaining cost avoidance will be key.
   Real estate costs are more transparent and better understood post downturn. Cost consciousness is likely to remain part of the corporate DNA even as growth returns. However, the focus is shifting from direct, short-term savings to some targeted investment aimed at longer-term cost avoidance. For example, in Asia Pacific a return to headcount growth has led to a renewed interest in the potential cost efficiencies of campus developments.
   
   According to Mr Sheldon, many global corporations activated a lean operating agenda through the difficulties of 2009 but kept issues of strategic importance in their longer-term thinking. Sustainability is one such important issue, not least because of the cost saving opportunities of implementing energy efficiency programmes, as is well documented in a recent CoreNet Global and Jones Lang LaSalle survey.
   
   "In an overall sense, 2010 will be known as much as 2009 as an important time for companies to improve their ability to be flexible," summarized CoreNet Global Director of Membership Richard Kadzis. "Flexibility in a number of contexts - financial, cost management, talent, sustainability, workplace practices and so much more - is in itself a major hedge against risk at a very uncertain time. After all, it's all about balancing contradictions in an uncertain world."
   

GGP Receives Proposal for Nearly $4B in New Equity Capital from Fairholme Capital Management and Pershing Square Capital Management

Edited: Jennifer Brenner
Source: General Growth Properties, Inc.

General Growth Properties, Inc. (GGP) recently announced that it has received a proposal from Fairholme Capital Management, LLC, one of its largest unsecured creditors, and Pershing Square Capital Management, one of GGP’s largest equity holders and a significant unsecured creditor, in which Fairholme and Pershing Square would commit $3.925 billion of new equity capital at a value of $15.00 per share to facilitate GGP’s emergence from bankruptcy.

Together with the previously announced $2.625 billion proposal from Brookfield Asset Management, Inc., this proposal, if accepted, would provide GGP with more than $6.5 billion of committed equity capital. GGP believes that this combined equity capital along with its anticipated new $1.5 billion debt issuance – or the reinstatement of a comparable amount of existing debt – would, if accepted, deliver substantially all of the cash required to fulfill GGP’s capital needs in connection with its emergence from bankruptcy and provide unsecured creditors with par plus accrued interest in cash.

“Our goal is to raise capital in the most cost-efficient way to maximize value for all of our stakeholders. We are pleased with the support shown by one of our largest unsecured debt holders and one of our largest equity holders.”

The GGP Board of Directors will study the proposal consistent with its fiduciary duties. The proposal remains subject to approval by the Board of Directors, approval by the Bankruptcy Court of proposed fees in the form of warrants and higher and better offers.

“The proposal from Fairholme and Pershing Square builds on the significant momentum we have created to return GGP to a strong financial foundation for the future,” said Adam Metz, chief executive officer of GGP. “Our goal is to raise capital in the most cost-efficient way to maximize value for all of our stakeholders. We are pleased with the support shown by one of our largest unsecured debt holders and one of our largest equity holders.”

In connection with the proposal, Pershing Square Capital Management’s William Ackman has resigned from GGP’s Board of Directors. “Bill Ackman has made significant contributions to GGP during his time on the Board. We understand his decision to resign to facilitate Pershing Square’s participation in this proposal,” continued Mr. Metz.

Under the terms of the proposal, $3.8 billion would be used to purchase shares of GGP stock at $10.00 per share, and $125 million will be used to backstop the remaining portion of a $250 million rights offering by General Growth Opportunities, a new company that will own certain non-core assets, at a price of $5.00 per share. Furthermore, the Company would have the right to reduce the $3.8 billion by $1.9 billion to the extent it is able to raise equity capital on more attractive terms. The proposal from Fairholme and Pershing Square is not subject to due diligence.

As previously announced, GGP reached an agreement in principle with Brookfield Asset Management Inc., one of the world’s largest real estate investors and asset managers, to invest $2.625 billion in a proposed recapitalization of GGP at a plan value of $15.00 per share and provide par plus accrued interest to unsecured creditors. The proposed equity commitment from Brookfield is not subject to due diligence and is subject to definitive documentation, approval by the Bankruptcy Court of proposed fees in the form of warrants and higher and better offers. The proposal is designed to maximize value for all GGP stakeholders and enable a restructured GGP to emerge from bankruptcy on a standalone basis with a diverse portfolio of high-quality income-producing assets, strong cash flow and a solid balance sheet capitalized principally with long-term non-recourse debt.

GGP currently has ownership interest in, or management responsibility for, over 200 regional shopping malls in 43 states, as well as ownership in planned community developments and commercial office buildings. GGP’s portfolio totals approximately 200 million square feet of retail space and includes over 24,000 retail stores nationwide.