Burton Katzman and DRA Advisors have formed a $240 joint venture equity partnership to recapitalize 24 infill light industrial properties in the Midwest, Commercial Observer can first report.
Newmark arranged the JV with a team led by Jordan Roeschlaub and Dustin Stolly, alongside Eden Abraham and Daniel Canvasser. The brokerage also arranged financing for the transaction, although the debt dollar amount couldn’t immediately be ascertained.
The deal is the first of many under the new partnership, which will target value-add industrial opportunities in the Midwest region.
The portfolio spans more than 2.2 million square feet, and is almost 100 percent leased to automotive companies, with a five-year weighted average lease term (WALT). There are over 40 tenants on the rent roll and none occupies more than 15 percent of the portfolio’s square footage, which Newmark stressed will help mitigate rollover risk.
“With a diversified rent roll and strong WALT, the seed portfolio is comprised of some of the most credit-worthy tenants in the automotive industry,” Roeschlaub said in a statement.
Stolly added that the JV opportunity was “well received by the capital markets community” and demonstrates “strong institutional investor demand” for light industrial assets.
In addition to investing in the 24 properties in the portfolio, the new venture will continue to target the acquisition of industrial properties across the Midwest, and seek value-add returns in a region where rents are below market, according to Newmark.
The transaction is part of Newmark’s big push into equity raising for both platform and programmatic JVs.
“The portfolio represents a highly compelling opportunity to acquire a dynamic, well-occupied, and cash-flowing light industrial portfolio at an attractive basis with a best-in-class joint venture partner,” Brett Gottlieb, managing director for DRA Advisors, said in a statement.
Andrew Coen can be reached at acoen@commercialobserver.com
The owners of the Blanchard Building in Long Island City, Queens, are selling the fee interest on the distressed office property with eyes toward converting it into a last-mile industrial development, Commercial Observer has learned.
Property owners Related Fund Management and BentallGreenOak (BGO) are working closely with their lender BrightSpire Capital and tapped Newmark’s Dustin Stolly and Jordan Roeschlaub to lead the marketing for office and retail complex on 21-10 51st Avenue along with Adam Spies and Doug Harmon, according sources and an offering memorandum (OM) obtained by CO.
Marketing of the former property’s fee interest comes as Related and BGO are considering handing back the keys on seven converted warehouses called The Point LIC, which includes the Blanchard Building, The Real Deal first reported in early February. BrightSpire, which was previously known as Colony Credit Real Estate, is now looking to sell nonperforming loans on The Point totaling around $150 million, according to TRD and sources.
The 220,000-square-foot Blanchard property is currently only 30 percent leased, with VaynerMedia, Unique Settings and Coffee Project NY among its tenants, according to the OM.
Related and BGO acquired the 220,000-square-foot Blanchard and another property in The Point portfolio — the Paragon Building at 2100 49th Avenue — for $104 million in 2016, according to the TRD.
The joint venture dropped $15 million to reposition the Blanchard from its prior warehouse use into an office building with adjoining retail aimed at attracting media and technology clients, CO previously reported. It had some success, getting digital media agency VanyerMedia to sign on for a 43,000-square-foot production studio in early 2017, CO previously reported.
However, the property, and the Long Island City office market in general, has struggled in recent years from the fallout of Amazon abandoning plans to open a second headquarters in the area, coupled with the COVID-19 pandemic spurring increased remote-work trends, according to sources.
The Blanchard currently sits at only 30 percent leased. Meanwhile, cable company Altice dropped out of its deal to lease the entire 130,000-square-foot Paragon after Amazon killed its Long Island City plans, TRD reported.
The OM noted that Blanchard is well “suited” for flexible industrial use as a last-mile logistics center given that industrial leasing in New York City’s outer boroughs saw 55 percent growth last year.
Officials at BrightSpire did not return a request for comment. Related, BGO and Newmark declined to comment.
Andrew Coen can be reached at acoen@commercialobserver.com.
There’s no denying that the distress that the market was beginning to see in the last couple of weeks has stayed. If anything, it looks like it’s getting worse.
The latest among the star real estate figures to have defaulted on a loan is the Chetrit Group.
The $85 million loan package at 545 West 37th Street in prime Hudson Yards territory consisted of a $53.7 million senior loan and a $31.3 mezzanine loan that were originated by JPMorgan Chase and Mack Real Estate Credit Strategies and is currently being shopped around by Newmark super brokers Dustin Stolly, Jordan Roeschlaub, Doug Harmon and Adam Spies. (And this is not Chetrit’s only property in trouble. The company just tapped Ian Schrager and Ed Scheetz to try to turn things around at the historic Bossert Hotel in Brooklyn Heights.)
Another floating-rate loan with a $140 million outstanding balance is also being shopped around by the same Newmark team for the McGraw-Hill Building at 330 West 42nd Street.
And, as one might expect smaller, less high-profile buildings are in trouble, too.
A $38.1 million CMBS loan at 717 14th Street in Washington, D.C. (a building which doesn’t exactly have a tenant problem; the U.S. Department of Treasury is one of the renters) is headed to special servicing.
Sigh.
The cherry on the week was Cushman & Wakefield’s oh-so-cheerful report that by the end of the 2020s 1.1 billion square feet of office space would likely be vacant and 1.4 billion square feet (more than 25 percent of the office space in the country) would be considered obsolete.
Of course, many owners had been grappling with just this kind of thing for a while. Tech, the tenant that had carried the office market through the first two years of COVID-19, has slowly started to unwind its grand office designs, and the savvy landlords have been preparing for this.
“Obviously, tech is not going to be in a great place this year,” Ryan Masiello, co-founder and chief strategy officer of VTS, told CO, “or even early next year. However, what is starting to change is return to office. The first part of returning to office is getting people back in seats.”
And some are finding that, yes, more old school FIRE tenants have been taking the place of TAMI tenants.
This is probably something that people who are invested in healthy (maybe even overly healthy) asset classes should consider.
Take industrial real estate. Rarely has the market seen the kind of explosive growth that the sector has experienced over the last three years. Which is something to be slightly wary about.
“Some markets like Southern California have seen 12-month rent growth at 70 percent,” said Mark Russo, senior director and head of industrial research for North America at Savills, the real estate services firm. “To say they’ve had a good run is an understatement. It has been an unbelievable ride in terms of rent growth. … Certainly, in some markets — South Florida, Northern New Jersey, Southern California — we are hitting a bit of an affordability wall.”
We hope we didn’t just ruin your Sunday
The truth is that crisis is also opportunity and there are plenty of shrewd operators who are taking a deep look at the landscape and scouring it for interesting possibilities.
Andrew Farkas appears to be very much in the market, for one.
Farkas largely sold off C-III, his collection of businesses over the last 12 to 18 months — the timing of which was pretty inarguably perfect. And since then he has plunked down $185.6 million for the Lexington Hotel in Midtown and $373 million for the Sheraton Times Square.
Today, Farkas told CO in an interview, the Lexington “is 95 percent occupied. And the average daily rate was around $300. So, it’s just — it’s killing it.”
He’s also been scouring the country for garden apartments and grocery-anchored retail. So take heed, readers, where the smart money is going.
And while we stand by what we said earlier about being somewhat mistrustful of crazy good success (yes, everything good comes to an end) while the ride is going, data centers have been performing excellently.
“In general, demand is stronger than it has ever been,” said Jim Kerrigan, managing principal of North American Data Centers, an industry consultancy.
And they might do even better in coming months and years as buildings and tenants look to reduce their server footprint.
CO says relax
One final asset class that bears consideration: cannabis.
The legal cannabis market is still fairly new in New York City. So far, only 66 retail licenses have been approved by the Office of Cannabis Management, and the city has been flooded with illegal headshops.
To wit, the Manhattan D.A. Alvin Bragg sent a letter to 400 illicit smoke shops around the city in February with the warning that if they don’t shut down the D.A. will demand that their landlords evict them.
But once these are shut down cannabis could mean big money for the city and for retailers.
“I think it’s going to be a $5 billion market,” the OCM’s head Chris Alexander told Commercial Observer in the Sit Down, “so we can expect hundreds of millions dollars coming back to the community.”
Something to consider on this leisurely Sunday.
See you next week.
Two of the commercial real estate industry’s most powerful investment sales brokers are jumping ship to one of their fiercest competitors.
Adam Spies and Doug Harmon, who were the highest-ranked investment sales team in Commercial Observer’s 2022 Power 100 list, are leaving Cushman & Wakefield for rival brokerage Newmark, the Wall Street Journal first reported Wednesday.
The duo, who together executed $22 billion in transaction volume across 165 transactions in 2021, will now work beside Newmark’s Dustin Stolly and Jordan Roeschlaub, who were ranked as the highest among debt and equity brokers last year in CO’s annual Power Finance 50 list.
“It’s a formidable partnership,” said one source upon hearing the news today.
Adam Doneger, Josh King, Kevin Donner, Marcella Fasulo and Avery Silverstein, longtime members of the Spies-Harmon team, are also joining Newmark, sources told CO. Spies and Harmon have worked as partners for more than 20 years.
The team starts Monday, sources said.
“Doug, Adam and members of their long-tenured team joining is a testament to the growth of our platform,” Newmark CEO Barry Gosin said in a statement. “These hires are expected to amplify Newmark’s strength, upwards trajectory and momentum to become the most trusted and sought-after capital markets firm in the world for both producers and clients.”
Gosin noted that the high-profile hire marks the latest example of Newmark’s rise in the capital markets space since its initial public offering in 2017. It generated $155 billion of overall investment sales and debt transactions over a 12-month period ending Sept. 30, 2022, a 194 percent increase from 2017.
Harmon and Spies will work alongside Newmark’s current co-heads of U.S. capital markets, Kevin Shannon and Robert Griffin. Harmon and Spies managed a group ranked No. 1 for New York capital markets in 2022 with nearly $5.7 billion of deals closed for the year, which included advising on the $850 million sale of the American Copper Buildings.
Over the course of his lengthy CRE career, Harmon has arranged transactions totaling over $250 billion in value since 1997. He previously worked with Spies at Eastdil Secured before the two jumped to C&W in late 2016 as chairmen of capital markets.
“The deepest bench of commercial real estate talent, across nearly every asset class and business vertical, is at Newmark right now,” Spies said in a statement.
Harmon said, “We are excited to start this new chapter and are committed to stamping an indelible mark on the industry.”
C&W did not immediately return a request for comment.
Andrew Coen can be reached at acoen@commercialobserver.com.
A joint venture between Asset Management Group and Bluestem Partners has landed $34 million in construction financing to build a warehouse and distribution center in Little Rock, Ark., Commercial Observer has learned.
First Security Bank provided the loan for the JV’s planned South Port Commerce Center project. The first phase will feature a 537,845-square-foot cross-dock facility while the second phase will consist of a 428,000-square-foot one
Newmark arranged the transaction with a team led by Dustin Stolly, Jordan Roeschlaub, Daniel Fromm, Ben Kroll and Tim Polglase.
The property at 7103 Zeuber Road is less than five miles from Bill and Hillary Clinton National Airport and the Port of Little Rock, Little Rock’s two main distribution hubs. It is also next to a five-story, 3.6 million-square-foot distribution center opened by Amazon last year.
A groundbreaking for South Port Commerce Center was held in July, with phase one of the project slated for completion in the second quarter of 2023. The facility will feature 152 trailer parking spaces and 449 parking spots for warehouse workers.
Representatives at First Security Bank and Asset Management Group did not immediately return requests for comment. Bluestem Partners declined to comment.
Andrew Coen can be reached at acoen@commercialobserver.com.
A joint venture between Westbrook Partners and MRP Realty has landed a $95 million debt package to refinance a mixed-use office asset in Washington, D.C., Commercial Observer has learned.
Deutsche Pfandbriefbank (PBB) and Brookfield Asset Management supplied the loan for the JV’s 2000 Penn property on George Washington University’s campus in the Foggy Bottom neighborhood. PBB was the senior lender.
Newmark arranged the transaction with a team led by Dustin Stolly and Jordan Roeschlaub alongside Christopher Kramer, Nick Scribani, Ben Kroll, Jake Neeb, Holden Witkoff and Joe Donato.
Located at 2000 Pennsylvania Avenue NW four blocks from the White House, the sponsorship undertook a $48 million renovation of the 11-story building in 2020 that included adding a tenant-only penthouse terrace, a lounge, conference space and a fitness center. The property also consists of new experiential retail space anchored by Western Market, the Foggy Bottom area’s first food hall.
Office tenants at 2000 Penn include law firms Olsson Frank Weeda Terman Bode Matz, Van Ness Feldman, Sughrue Mion and Carr Maloney, as well as business advisory company The Asia Group.
Officials at PBB, Westbrook Partners and MRP Realty did not immediately return requests for comment. Brookfield declined to comment.
Andrew Coen can be reached at acoen@commercialobserver.com.
Tribeca Investment Group, Meadow Partners and PGIM Real Estate have secured a $150 million loan for 295 Fifth Avenue in Manhattan.
Deutsche Pfandbriefbank provided the loan. Newmark brokered the deal with a team led by Dustin Stolly, Jordan Roeschlaub, Christopher Kramer, Nick Scribani, Ben Kroll and Holden Witkoff.
295 Fifth Avenue was known as the Textile Building for much of the 20th century, when it was the address of choice for makers of sheets, towels and rugs. It’s now a soon-to-be-completed 19-story, 710,000-square-foot office tower in Midtown South.
The sponsorship plans to add a new lobby and a penthouse office to the building. The retail storefronts will also be transformed.
“Being able to secure financing for this type of product during this uncertain time speaks to the quality of the collective ownership of the property,” Stolly said in prepared remarks.
“Since the pandemic, we’ve seen office users flocking to quality assets to attract and retain their talent. The recent top-of-the-line modernization at 295 Fifth Avenue will make it a destination property for the city’s office tenants,” Roeschlaub added.
Over $400 million is being spent at the property to create a “very amenitized” building, Elliott Ingerman, a principal at Tribeca Investment Group, told The New York Times.
Tribeca Investment Group, Meadow Partners and PGIM Real Estate did not immediately respond to requests for comment.
Emily Fu can be reached at efu@commercialobserver.com.
Arden Group has landed a $37 million debt package to refinance a Hilton-branded hotel asset on the University of Florida campus, Commercial Observer can first report.
Canyon Partners Real Estate supplied the loan on Arden’s 248-key Hilton University of Florida Conference Center Gainesville property. The full-service hotel contains 25,000 square feet of meeting space that caters to traveling athletic teams, University conferences and group events.
Newmark arranged the financing with a team led by Dustin Stolly and Jordan Roeschlaub alongside Chris Kramer, Nick Scribani, Tyler Dumon, Dan Morin and Andrew Harwood.
Located on the west side of the university campus at 1714 SW 34th Street, the hotel underwent a substantial renovation in 2016. The property has added new dining options in recent years including Shula’s Steak House and No Name Lounge.
Officials for Canyon Partners and Arden Group did not immediately return requests for comment.
Los Angeles-based Canyon closed a $650 million investment vehicle in May 2021 to target senior and subordinated debt investments in the top U.S. markets. Founded in 1991, the real estate direct-investing arm of Canyon Partners has over $27 billion in assets under management.
Philadelphia-based Arden Group has acquired roughly $6 billion of properties and managed in excess of $11 billion of commercial real estate assets since its founding in 1989. The firm expanded its industrial holdings last year with a $42.5 million acquisition loan from BlackRock to purchase a 12-building last-mile portfolio in Arlington, Texas.
Andrew Coen can be reached at acoen@commercialobserver.com.