31 posts tagged “investment”
Forest City Enterprises' New York-bases subsidiary, Forest City Ratner Companies, Inc. (FCRC) and Nets Sports and Entertainment have signed a letter of intent with Russia's Onexim Group for the development of Atlantic Yards according to a CPE article. The partnership will ensure the successful completion of a world-class entertainment venue in Brooklyn, the relocation of the NBA Nets basketball team and the economic and housing benefits of the 22-acre Atlantic Yards Project.
In accordance with the agreement, entities to be formed by Onexim Group will invest $200 million and make certain contingent funding commitments to acquire 45% of the arena project and 80% of the NBA team, and the right to purchase up to 20% of the Atlantic Yards Development Company, which will develop the non-arena real estate. Mikhail Prokhorov, president of Onexim Group, said, "I have a long-standing passion for basketball and pursuing interests that forward the development of the sport in Russia. I look forward to becoming a member of the NBA and working with Bruce and his talented team to bring the Nets to Brooklyn."
The transaction is expected to close by the first quarter of next year after securing approval from the NBA's Board of Governors. The Raine Group and Goldman, Sachs & Co. advised FCRC and NSE. Simpson Thacher & Bartlett LLP acted as legal counsel to FCRC and NSE. Hogan & Hartson advised Onexim Group.
For more news and information visit Blumberg Capital Partners.
PCCP LLC, a California property investor, purchased Opus West's largest property at bankruptcy auction for $29.9 million according to a Dallas Business Journal article. Opus West Corporation and some of its subsidiaries filed voluntary petitions in July for reorganization under Chapter 11 of the U.S. Bankruptcy Code in order to facilitate its "ongoing financial restructuring".
PCCP bought the property for $29.9 million, or approximately $24 per square foot. The industrial property is at 2525 E. State Highway 121 in Lewisville, Texas. The property is comprised of three buildings with the Class A asset totaling 1.25 million square feet and is currently 65% leased. The purchase was made using the buyer’s $746 million investment fund.
For more news and information, visit Blumberg Capital Partners.
The Moody’s/REAL Commercial Property Price Index (CPPI) has been released by Real Capital Analytics showing a 7.6% decline in May 2009, leaving the index 34.8% below the peak measured in October 2007. And, as reported on Bloomberg.com, about $2.2 trillion of U.S. commercial properties bought or refinanced since 2004 are now worth less than the original price, raising the threat of more foreclosures.
The CPPI measures the change in actual transaction prices for commercial real estate assets based on the repeat sales of the same assets. RCA notes that large commercial real estate price declines in the last two months suggest that a bottom may be starting to form, although higher transaction volumes would be necessary in order to draw any more definitive conclusions. There were 282 transactions in May, 52 of which were repeat-sales transactions, passing the old low set in the early 2000’s.
"We have evidence that prices have fallen over 30% and the leverage you can get is 50-60% of value, so for owners holding on to properties, they're going to have to come up with a big check," Dan Fasulo, managing director with RCA, told CPN. "On non-healthy properties, lenders are foreclosing on those assets; they're throwing in the towel, and on development sites, as well. There's no income anyway, so they might as well take it back."
For more news and information, visit Blumberg Capital Partners.
LoopNet conducted a Pulse Poll of its members, a community of commercial real estate and investment professionals, which showed that only 10% of the respondents believe an economic recovery will come in 2009, a noticeable decline from the 33% of last quarter. According to the Birmingham Business Journal, more than 30% believe recovery will come in 2011, up from 25% in May, and 56% expect it to come in 2010, up from 42% in the previous poll.
LoopNet goes on to explain that while the expectations for an increase in transaction volumes have shifted, the shift appears to be driven more by pessimism about 2009 than a long term reassessment. A solid majority of 56% now believe that 2010 will see an uptick in volume, and increase of 14 points from Q2. There is, however, a significant contingent that does not expect recovery until 2011.
For more news and information, visit Blumberg Capital Partners.
Philip Blumberg was interviewed by Nikkei Veritas in a piece titled "Still early to buy U.S. commercial real estate" and expressed his view that the U.S. commercial real estate market still has a way to go before bottoming out. An excerpt:
It seems you earned 17.6% in profits last year.
"Our past three years of devoting ourselves to sales, without buying, bore fruit. We built up cash savings and released ourselves from the need to rely on debt. We made sure that buildings we own or manage are fully set up, with gyms and cafeterias, which kept rents from going down."
"I've been predicting the confidence collapse for more than two years. With so much risk investment, which relied on cheap leverage, prices went up to an unrealistic level."
To read the full article, click here.
Barry Sternlicht is starting a mortgage REIT in a time when credit is badly needed to restore market liquidity.
Sound familiar?
This new innovation in the debt markets, which provided high leverage at low rates, without recourse or risk to the borrowers, required other non-securitized loan providers, such as commercial banks, to be competitive and keep up or drop out, further rapidly expanding credit.
As the reaction to the overly abundant credit, initially in the sub-prime residential market, spread to other sectors, in the form of credit market contraction, a price/value decline was set off.
Lack of credit has also dried up capital for the purchase market, currently with transaction volumes at their lowest level in decades.
Historically, its almost always increased capital flows that induce the major crisis in real estate, not recessions.
And the re-establishment of prudent, patient capital flows that cures it.
When capital flows to real estate dramatically increase its often debt, abundant cheap debt, that starts the cycle.
A predictable cycle, that stops only when the effects of over-levered inflated investments are felt.
Those effects are usually in the form of too much capital fueling over building with eventually insufficient demand to keep up (eg the residential markets today),
Because real estate is a lagging re-actor (due primarily to the long time lag in development and the lease renewal lag in commercial assets) the supply/demand reaction is delayed, and the imbalance becomes dramatic.
So does the crash - typical of real estate.
These cyclical problems and solutions are very similar across time.
Barry Sternlicht is a very bright and experienced innovator to real estate structures and I'd give respect to his mortgage REIT direction as one means of restoring capital flows to real estate.
CoStar published an article today investigating the pricing trends for commercial mortgage-related investments, finding the conditions not so separate from those in play on the property side -- even with funding available for debt and mortage investments, there's still a disconnect between what buyers are willing to pay and what sellers are willing to accept. Several industry experts weighed in on the issue, including Michael Singh, managing director of Jones Lang LaSalle Americas in LA: "If notes are available at the right price, investors are ready to move... pricing has been a big sticking point as seen in the continued wide bid-ask spread. Lenders generally seek to recover 80% or more on performing notes while investors typically bid sub 60%."
David S. Akeman, director of capital markets of Stan Johnson Co. in Tulsa, OK, told CoStar Group: "There is a market, but I hear that most lenders or note holders typically aren't discounting the performing commercial real estate notes enough to attract buyers. Many I have personally spoken with are still trying to discount less than 10%. One life company is trying to hold out for par on a vacant Stock Building Supply (property) that is no longer paying rent. This will change in the future, but right now the lenders are stressed, not distressed."
For more news and information, visit Blumberg Capital Partners.
Real Estate Forum published "A Conversation With Blumberg Capital Partners' Philip Blumberg: Finding investment opportunities in a down market". An excerpt:
What types of investments do you play for the new fund?
We are clearly looking to make investments in the US debt markets. I think there are some outstanding opportunities on the debt side. That means buying existing loans at significant discounts where you feel you're within a margin of safety and can generate double-digit returns.
To read the full article, click here.
Philip Blumberg appeared on CNBC Squawk Box Europe today on a segment titled "The Reality of Real Estate".
To view the full transcript, visit Blumberg Capital Partners.
How Do the Markets Relate? Philip Blumberg of Blumberg Capital Partners comments on how problems in the residential market can -- and do -- effect other markets. For more news and information, visit Blumberg Capital Partners.
