Falling Retail Rents Mean More Stores Coming

MARK HESCHMEYER, EDITOR
NOVEMBER 18, 2010
WWW.COSTAR.COM
A WEEKLY COLUMN FOCUSING ON DISTRESSED MARKET CONDITIONS, COMMERCIAL REAL ESTATE PROPERTIES,
MORTGAGES AND CORPORATIONS PUBLISHED BY COSTAR NEWS
IN THIS WEEK'S ISSUE:
Falling Retail Rents Mean More Stores Coming................................................................................................................................ 1
Borrower's 14,824 Apartment Units Placed in Special Servicing ....................................................................................................... 4
Roche Cutting Thousands from U.S. Workforce; Selling Facilities .................................................................................................... 4
Lack's Lacks Cash, Closing Down 36 Stores .................................................................................................................................... 6
Loehmann's Seeks Bankruptcy Protection; Cancelling 8 Store Leases ............................................................................................ 6
Real Estate Hiring Rebounds ............................................................................................................................................................ 7
Ameris Bank Picks Up $800 Mil. of Two Failed Georgia Banks' Assets ............................................................................................ 8
Minnesota-Based Stearns Bank Buys Failed Scottsdale, AZ, Bank .................................................................................................. 8
Real Money: Property Financings ..................................................................................................................................................... 8
General Growth Splits into Two, Emerges from Historic Bankruptcy ............................................................................................... 10
Simon To Sell Ohio Mall Under FTC Order ..................................................................................................................................... 11
Meredith Corp. To Consolidate Headquarters ................................................................................................................................. 12
Local Closures & Layoffs ................................................................................................................................................................. 12
Finding and Analyzing Distressed Assets in CoStar........................................................................................................................ 14
Watch List: Lodging, Multifamily in Special Servicing Due in December ......................................................................................... 14
Bonus Item: Supervalu Terminates Warehouse Lease ................................................................................................................... 15
Falling Retail Rents Mean More Stores Coming
Retailers Bouyed by Availability of Quality Real Estate at Reasonable Rental Rates
As retail rents continue to slide in search of a bottom, a number of retailers are reporting that they plan to step up
their store openings in the next couple of years to take advantage of now already more favorable pricing.
According to CoStar Group analysis, tenants have no shortage of availabilities in their choice of centers as retail
vacancy rates continue in the high teens. And tenants are wielding their upper hand by playing one landlord
against another to obtain favorable terms. Even centers that have avoided the growing rash of vacancies may be
harvesting fewer dollars in rents, as tenants everywhere are squeezing landlords for concessions, and leases
are rolling to lower market rates.
The trend is particularly true for malls and lifestyle centers. Per CoStar Group data, landlords have conceded the
most ground at these beleaguered property types. Cumulative rent losses have run 13.6% and 12.1% for malls
and lifestyle centers respectively through the third quarter of 2010.
So department store chains such as Menomonee Falls, WI-based Kohl's are stepping up their new store activity.
Kohl's opened 21 new stores this past quarter for a total of 30 stores this year and said it is looking to up that to
40 stores in 2011.
"I think the reason we increased to 40 was quite honestly mainly due to real estate cost favorability," Wes
McDonald, CFO of Kohl's in the company's third quarter earnings conference call. "So deals got a lot better than
we've been working for a while."
"Whether or not that continues is really going to be a function of the real estate costs remaining low," McDonald
added. "If they start to remain high and our sales estimates were still sort of sluggish, you might see us going
back to 30 but for now 40 for next year and we'll see how 2012 goes."
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Of the 40 stores Kohl's expects to open next year, 12 are takeovers of vacated space some Mervyn's, some WalMarts and some Lowe's, McDonald said. Of its new openings next year, 10 stores are planned to open in the
spring season and 30 in the fall.
hhgregg, a specialty retailer of consumer electronics and home appliances based in Indianapolis, which has
opened four stores in the past month, plans to step up new store activity in fiscal 2012.
"Due to our successful new market launches in the Mid-Atlantic market and the continued availability of quality
real estate at reasonable rental rates, the company believes the time to expand aggressively remains intact," the
company announced in its quarterly operating results. "As a result, the company expects to open 35 to 45 stores
in fiscal 2012."
The company opened 12 new stores in the quarter ended Sept. 30 (the second of its 2011 fiscal year) and
remains on track to open a total of 43 new stores in FY 2011.
The majority of its projected openings are expected to be in the Miami and Pittsburgh markets and a few other
select markets. This month, hhgregg opened a new store in Erie, PA (north of Pittsburgh) and Manassas, VA, (in
the Washington, DC, metro area). Late last month, new stores were opened in Naples and Ft. Myers, FL.
Dick's Sporting Goods Inc. based in Pittsburgh also said it is taking advantage of more favorable market
conditions.
"We continue to work with our landlords on lease expirations and continue to try to renegotiate those in those
locations where we want to continue to be," said Joseph H. Schmidt, president and COO. "We're also looking at
this opportunity to potentially relocate some stores from existing real estate to maybe some a better location in
the marketplace. We continue to find some opportunities to lower our lengths as we work through this."
(please continue reading on page 4)
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(More Stores Coming cont. from page 2)
It is not an across-the-board trend at this point, however. Retailers tied to the home improvement market
continue to reduce costs as the housing markets continue to slide.
Carol Tomé, CFO and executive vice president, corporate services for Home Depot, reported that her company
is continuing to drive productivity in its existing stores. It has opened only seven stores this year and will maybe
open 10 next year.
Robert Niblock, chairman and CEO of Lowe's, said in his company's third quarter earnings conference call that,
"we don’t expect consistent improvement in core demand until the fundamentals of the labor and housing
markets improve. However, we are prepared to operate effectively in a slow growth environment, focusing on
operational efficiency and prudent expense management. We are ready to respond if demand is better or worse
than expected."
Borrower's 14,824 Apartment Units Placed in Special Servicing
Two securitized loans totaling $715 million and backed by two related portfolios of 157 multifamily properties with
14,824 apartments units were placed in special servicing this week for imminent default.
The borrowers on the loans are affiliated with Montvale, NJ-based Empire American Holdings LLC.
Any more these days, properties transferred to special servicing for imminent default are being done so
voluntarily as a way to facilitate the restructuring of the loans. Officials with Empire American could not be
reached for comment.
The borrowers on the partial interest-only loans have been basically making monthly payments. And as of June
30, the properties backing the loans were producing net operating incomes with NOI debt service coverages
coming in around 1.5 times.
The properties known as Empirian Multifamily Portfolio Pool I and III are in both metropolitan and rural areas
across nine states with the geographic concentrations in Florida, Ohio, Georgia and Indiana.
The Empirian I Properties consist of 78 multifamily rental communities totaling 7,964 units located across eight
states. The properties range in size from 50 to 244 units, with an average of 102 per location, and are in 66 cities
across eight separate states: Florida (23 properties); Georgia (15); Indiana (nine); Kentucky (five); Michigan
(two); Ohio (21); Pennsylvania (one); and Tennessee (two).
The Empirian III Properties consist of 79 multifamily rental communities totaling 6,860 units located across eight
states. The properties range in size from 41 to 251 units, with an average of 87 per location and are located in 61
cities across eight states: Florida (23 properties); Georgia (14); Indiana (11); Kentucky (six); Maryland (four);
Michigan (two); Ohio (18); and Pennsylvania (one).
Both loans are held in the Merrill Lynch Mortgage Trust 2007-C1 CMBS and represent almost 18% of the CMBS'
holdings.
KeyBank is the master servicer on the loans; C-III Asset Management is acting as special servicer.
Roche Cutting Thousands from U.S. Workforce; Selling Facilities
Switzerland-based pharmaceutical giant Roche plans to cut 4,800 jobs worldwide with a major portion of the
reduction coming in the United States. The firm also intends to sell some of its U.S. facilities.
Approximately 800 jobs would be transferred to other Roche sites and 700 positions outsourced to third parties.
Combination of planned job reductions and transfers affect 6,300 positions overall. Some reductions will be
handled through normal attrition.
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The work force cuts represent about 6% of the company's total employees and will occur over the next two
years.
The largest reductions are planned in sales and marketing (2,650 positions) and in manufacturing. Most of the
planned job reductions will occur in the Pharmaceuticals Division. The main reasons are the previously
announced setback of the diabetes medicine taspoglutide and structural adjustments in the primary care sales
organizations – mainly in the US and Europe.
Within the group’s global manufacturing network, some technical operations activities will be reorganized in
California and in Germany. This will result in a reduction of 750 positions.
In addition, Roche intends to seek buyers for its sites in Florence, SC, and Boulder, CO, in the US, which would
affect additional 600 jobs.
Certain product development activities are expected to be discontinued or transferred – most of them from the
U.S. - to other Roche sites or third parties to improve overall productivity. Roughly 800 positions will be affected
by the planned reductions or transfers.
Following a comprehensive portfolio review, Roche will discontinue certain activities in research and early
development. These include RNA interference research in Nutley, NJ, and Madison, WI, in the U.S.
In addition, plans also include reorganizing certain internal functions to free up resources for upcoming phase II
studies of new molecular entities. Approximately 600 positions will be affected.
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Lack's Lacks Cash, Closing Down 36 Stores
Lack's Stores Inc., one of the largest independently owned retail furniture chains in the U.S. with 36 stores, is
closing up shop.
The Victoria, TX-based retailer filed for Chapter 11 bankruptcy reorganization but in its filing said has not been
able to find financing to purchase of new inventory or to underwrite additional customer notes receivable. As
such it is looking to conduct an orderly "as opposed to forced" liquidation of its real estate and inventories.
Lack Properties Inc., a wholly owned subsidiary of Lack’s, owns 14 of its stores and warehouse locations that are
leased to Lack’s. The remaining store locations are leased by Lack’s from third parties, including some that are
leased from various members of the Lack’s family. All of its locations are in Texas.
Lack's has hired Hilco Merchant Resources to sell its remaining inventory. Hilco is partnering with SB Capital
Group in that effort.
Lacks Furniture Stores
Abilene
Alice
Austin
971 W San Antonio
2004 E 42nd St
1019 South Hwy 35
New
Braunfels
Odessa
Port Lavaca
1550 Wildcat Drive
4002 Sunset Drive
Bandera Pointe: 11791 Bandera Road
Leon Valley: 6838 Bandera Road
Portland
San Angelo
San Antonio
San Antonio
60 Lack Lane
2501 Texas Avenue
Central: 3901 S Padre Island Drive
Northwest: 9510 Leopard
2400 Veterans Blvd
1817 North Mechanic
1001 South Fort Hood Rd
3110 H.G. Mosley Parkway
Austin
Austin
Bay City
Beeville
Clute / Lake
Jackson
College Station
Corpus Christi
Corpus Christi
Del Rio
El Campo
Killeen
Longview
San Antonio
San Antonio
San Antonio
Sinton
Temple
Tyler
Uvalde
Victoria
East: 4602 Avenue Q
Lubbock
West: 5741 50th St
2934 S John Redditt Dr
3111 Cuthbert
Lubbock
Lufkin
Midland
North Central: 18603 Blanco Road
Northeast: 8611 Perrin Beitel Rd
Southside: 2600 SW Military Drive
113 West Borden
2100 S 61st @ Loop 363
1817 Troup Hwy
2330 East Main
5802 North Navarro
Clearance Center: 3607 North
Navarro
General Office: 200 South Ben
Jordan
4800 Franklin Ave
6381 Buffalo Gap Road
1818 East Main
Central: 2020 W Anderson Lane
North: 13530 N Hwy 183 @ Anderson
Mill
South: 4001 South Lamar
3333 Avenue F
314 North Washington
Victoria
Victoria
Waco
Loehmann's Seeks Bankruptcy Protection; Cancelling 8 Store Leases
Discount retailer, Loehmann's Capital Corp. and its affiliates commenced voluntary "pre-negotiated" Chapter 11
proceedings in the U.S. Bankruptcy Court for the Southern District of New York.
The company took this action after reaching agreement with Whippoorwill Associates, Inc., as agent for its funds
that hold 70% of Loehmann's senior secured notes, and its equity sponsor, Istithmar World. The restructuring
plan seeks to reduce substantially the company's debt and recapitalize its balance sheet.
Istithmar World and Whippoorwill have agreed, subject to the satisfaction of certain conditions, to invest an
aggregate amount of $25 million in the company upon its emergence from Chapter 11 in the form of a
convertible preferred equity stake.
In addition, Loehmann's has obtained a commitment from its existing credit facility lender, Crystal Financial, to
provide a $45 million debtor-in-possession financing facility.
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The company expects to complete its pre-arranged restructuring and emerge from Chapter 11 during the first
quarter of 2011.
In connection with the restructuring efforts, Loehmann's concluded that a number of underperforming stores
should be closed and the leases for those stores terminated. They hired DJM Realty Services to market for
assignment and negotiate with landlords to terminate the leases.
Loehmann's has initially asked the courts to cancel leases on eight underperforming stores that have already
been closed.
Loehmann's with 1,900 employees operates 48 stores in 13 states and DC. Loehmann's leases all of its stores,
which average about 26,000 square feet, and as of October was paying about $3.5 million per month in rent for
its locations.
Loehmann's predecessor company had previously filed Ch. 11 in May 1999 and shed 25 stores in that process.
Address
Loehmann's Store Lease Cancellations
Counterparty
128 Ranch Drive, Milpitas, CA
770 Morris Tpke, Short Hills, NJ
Huntington Beach, CA
15830 S. La Grange Road, Orland Park, IL
1290 Worcester St., Natick, MA
34 E. Ridgewood Ave., Paramus, NJ
97-77 Queens Blvd., Rego Park, NY
851 N. San Fernando Blvd., Burbank, CA
2665 W. Hillcrest Drive, Thousand Oaks, CA
McCathy Ranch Shopping Center LP
Prima III LLC
Bella Terra Associates LLC
Simon Property Group Inc.
HC Atlantic Development LP
Fashion Center LLC c/o Willner Realty & Development
Federal Realty LP
Burbank Mall Associates LLC
Rich Newbury Park LLC c/o Rich Development Co.
Real Estate Hiring Rebounds
After two years of contraction, hiring in the real estate asset and wealth management industry rebounded in
2010, and compensation is set to show modest gains, according to a new report by global executive search and
assessment firm Russell Reynolds Associates.
Russell Reynolds Associates' 14th annual report, Navigating the New Terrain in the Asset & Wealth
Management Industry - 2010 Recruiting and Compensation Trends, includes recruiting and compensation trends
for asset and wealth management firms focused on real estate in the Americas, Europe and Asia/Pacific.
"Investors slowly began to allocate capital to real estate again, primarily to domestic, core and core-plus assets.
This has led to a renewed interest at firms for investment talent who specialized in core assets," said Debra
Barbanel, co-leader of the firm's Real Estate practice for the Americas. "The growing pool of foreign investors
also spurred greater demand for U.S.-based executives able to attract capital from Asia, Australia, Europe and
the Middle East in particular."
For the asset and wealth management industry as a whole, certain functions and specialties are starting to see
upward compensation pressure to attract or retain key personnel. But while overall U.S. compensation is set to
increase 10 to 15% this year, compensation in Canada, Europe and Asia is expected to jump 15 to 20%,
although bonus pools will be finalized later this year than in previous years.
"As the investing rebound takes shape, Europe and Asia are pulling ahead of the United States in attracting and
committing capital, and compensation naturally reflects that," said Barbanel. "Global platforms—and the
professionals who run them—are in a favored position. For example, many European institutional investors
haven't historically held significant allocations in equity or alternatives strategies as compared to their U.S.
counterparts, so they now have the flexibility to increase allocation targets to these segments going forward."
According to the report, investors began allocating capital to real estate again, although slowly and episodically
with a bias towards core strategies, which drove the hiring of senior acquisition professionals. Real estate
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investment firms sought to build portfolio value by hiring strong operating leadership for their assets and building
succession plans for the senior executives and functional executives of their operating companies.
More than ever, compensation will be driven by firm economics rather than by peer group: Those who can pay,
will; those who can't, won't, Barbanel said.
Ameris Bank Picks Up $800 Mil. of Two Failed Georgia Banks' Assets
Ameris Bank in Moultrie, GA, is acquiring two failed banks from the Federal Deposit Insurance Corp. (FDIC):
Darby Bank & Trust Co., a full-service bank with seven branches located in Vidalia, Lyons, Savannah, and
Pooler, GA, and Tifton Banking Co., a full-service, single-office bank in Tifton, GA
The Georgia Department of Banking & Finance closed the two banks this past week and appointed the FDIC as
receiver.
As a result of the Darby Bank & Trust Co. acquisition, Ameris Bank will assume approximately $590.3 million in
total deposits and $402.4 million in total loans and virtually all its other assets.
As of Sept. 30, Darby Bank & Trust had total assets of $654.7 million, including $18.6 million in foreclosed
nonresidential properties and $13.9 in foreclosed construction / development projects.
As a result of the Tifton Banking acquisition, Ameris Bank will assume approximately $144.6 million in total
deposits and $118.9 million in total loans plus virtually all of its other assets.
As of Sept. 30, Tifton Banking had total assets of $143.7 million. Most of its distressed assets consist of singlefamily related lending.
Substantially all of the loans and certain assets from both banks purchased from the FDIC are covered under
loss-sharing agreements.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $24.6 million for Tifton Banking and
$136.2 million for Darby Bank & Trust.
Minnesota-Based Stearns Bank Buys Failed Scottsdale, AZ, Bank
Copper Star Bank in Scottsdale, AZ, was closed this past week by the Superintendent of the Arizona Department
of Financial Institutions, which appointed the FDIC as receiver.
The FDIC entered into a purchase and assumption agreement with Stearns Bank in St. Cloud, MN, to assume all
of the deposits and three branches of Copper Star. Stearns Bank also agreed to purchase essentially all of the
failed bank's assets.
As of Sept. 30, Copper Star Bank had approximately $204 million in total assets. Included in those assets was
$26.2 million of foreclosed-on properties, primarily construction / development projects. The bank also held about
$16.3 million in loans in nonaccrual status on nonresidential commercial real estate.
The FDIC and Stearns Bank entered into a loss-share transaction on $165.2 million of those assets.
The FDIC estimates that the cost to its DIF will be $43.6 million.
Real Money: Property Financings
Thomas Properties Group Inc., through its joint venture with the California State Teachers' Retirement System,
closed on a $95 million first mortgage on two buildings in Houston: CityWestPlace Buildings III and IV. The new
loan, representing approximately 50% loan to value, was provided by The Northwestern Mutual Life Insurance
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Co. The loan will mature in 2020 and bears interest at a fixed rate of 5.03%. It replaces a short term floating rate
$92.4 million loan which was scheduled to mature in July 2011.
Kennedy Wilson replaced the existing financing on Summer House Apartments, a 615-unit Northern California
multifamily community that it acquired earlier this year with PCCP LLC. Terms include a loan of $70.8 million at a
ten-year fixed rate of 4.31%. Deutsche Bank Berkshire Mortgage represented Freddie Mac, the lender on the
transaction.
Thomas Properties Group Inc., through its joint venture with the California State Teachers' Retirement System,
negotiated the repayment and restructuring of mezzanine debt on Centerpointe I and II (Centerpointe), a twobuilding complex comprising 422,000 square feet located in Fairfax County, VA. TPG/CalSTRS has invested $40
million as new equity in Centerpointe, which was used to retire $46.6 million of mezzanine debt, realizing a
14.2% discount from the face amount of the debt which included releasing loan reserves of approximately $11.7
million held by the lenders to TPG/CalSTRS to use for capital needs at the property. This new equ ity, of which
the company contributed $2 million or 5%, is structured to provide a return that replicates the interest payment,
LIBOR plus 1.97%, on the retired $46.6 million mezzanine debt as well as the priority of the mezzanine debt. The
company has also negotiated an option for TPG/CalSTRS to repay the property's remaining $22 million of
mezzanine financing at a 50% discount to its face amount plus a 21.7% participation in the value of the property
above approximately $106 million. The lender will continue to be obligated to fund the remaining approximately
$5.6 million of loan reserves for property needs.
Pembrook Capital Management LLC provided a $19.9 million pari passu first mortgage financing together with
a Wall Street firm. The loan has a 10-year term and a 5.85% fixed rate. The first mortgage represents an
approximate 69% loan to value. The property is at 6904 Hollywood Blvd. in Hollywood on the Walk of Fame. The
sponsor, CIM Group purchased the property in 2007 and has a total cost basis of approximately $30 million,
including a $17 million renovation which was completed in July 2009.
Marcus & Millichap Capital Corp. arranged $15.1 million in financing for the acquisition of a prime office
building leased to the U.S. Department of Veterans Affairs in Phoenix. The 95,558-square foot single-tenant netleased office building is located at 3333 North Central Ave. The 13-year year loan amortizes in 18 years with a
fixed interest rate of 4.66%. The loan-to-value is 75%.
Unilife Corp. entered into a loan agreement with Metro Bank for two loans totaling $18 million, one in the
amount of $14.25 million and a second for $3.75 million. Proceeds will be used to finance construction of the
company's new corporate headquarters and primary manufacturing facilit y in York, PA, including repayment of a
$7 million bridge construction loan obtained from Univest Bank. The Facility A Note matures 20 years from the
completion of the construction and carries an interest rate based on the Wall Street Journal Prime Rate plus
1.5% per annum, with a floor of 4.5% per annum. The Facility B Note matures on Oct. 20, 2020, and carries the
same interest rate.
Marcus & Millichap Capital arranged a $13.35 million CMBS refinancing loan on a 50,000-square-foot medical
office building in Marina Del Rey, CA. The loan is for 10 years, amortized over 30 years with a fixed interest rate
of 5.58%. The LTV is 75%.
Cedar Shopping Centers Inc. completed fixed-rate long-term financing on Swede Square, a 98,000-square-foot
shopping center on the Germantown Pike in East Norriton, PA, near Philadelphia. The loan, in the amount of
$10.6 million (representing approximately 75% of appraised value), was placed with Citigroup Global Markets
Inc. and has a 10-year term with interest at 5.48% and amortization on a 30-year schedule.
The Matteson Cos. secured a $10 million, 10-year, 4.89% fixed-rate loan through One America for 3000 Park
Lane Office Building, a 105,315-square-foot office building in Pittsburgh, PA. Loan proceeds were used to
acquire the property. HFF, in cooperation with the Los Angeles office of Marcus & Millichap, worked on behalf of
Matteson.
Redtree Properties secured $7.5 million in permanent, fixed-rate debt for the refinance of 1200 Pacific Ave. a
mixed-use property in Santa Cruz, CA. The fully amortizing, 50% LTV loan features a 17-year term and a fixed
interest rate of 6.10%. The lender was ING Financial. Berkadia Commercial Mortgage originated the loan.
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Berkadia Commercial Mortgage originated $7 million in fixed-rate debt for the refinance of the Marriott
Residence Inn in a suburb of Boston. The non-recourse, 60-percent LTV loan features a five-year term and 25year amortization with a fixed interest rate of 5.30%. The lender was a national bank and the borrower was a
large national hotel REIT.
Marcus & Millichap Capital arranged a $3.445 million refinancing loan for a 52-unit apartment building in Valley
Village, CA. The loan is for 10 years, amortized over 30 years with a fixed interest rate of 4.58%.
Evergreen Communities secured a 10-year, 5.29% fixed-rate loan of $3.1 million with M&T Realty Capital
(Fannie Mae DUS for Eastwoods Estates, a 160-pad manufactured housing community in Lima, OH. Loan
proceeds will be used to replace maturing debt, cover closing costs and repatriate reserves for the property with
the additional cash proceeds. HFF placed the loan.
Cornerstone Realty Consultants arranged a $2.2 million loan for the refinance of a triple net leased Walgreens
retail condo in Boston's South End neighborhood at 1603 Washington St. Cornerstone structured a 7-year fixed
rate loan with a 5.85% interest rate and a 25-year amortization.
Thomas D. Wood and Co., along with Sky Mesa Capital and Realty, secured financing of $2 million from The
Standard Life Insurance Co. for McLeod I at 6372, 6392 and 6396 McLeod Drive, Las Vegas. The fixed-rate loan
has a term of five years, with a rate reset every five years, based on a 25-year amortization and an interest rate
of 5.875%. The loan-to-value is 75%.
Thomas D. Wood and Co. secured $3.6 million in financing from The Standard Life Insurance Co. for the
Shoppes of Village Pointe in Boca Raton, FL. The fixed-rate loan has a term of five years, with a rate adjustment
every five years, based on a 25-year amortization and interest rate of 5.25%. The loan-to-value is 30%.
Thomas D. Wood and Co. secured $2.5 million financing from Woodmen of the World Life Insurance Co. for
37,250 square-foot office/industrial building at 345 and 379 W. Michigan St. in Orlando. The borrower, an affiliate
of Pineloch Management Corp., refinanced Southpointe Center at a loan with a low, fixed rate of 5.5%. The non recourse, permanent loan has a term of 10 years, based on a 20-year amortization. The loan-to-value is 64%.
Thomas D. Wood and Co., along with Sky Mesa Capital and Realty, secured financing of $1,320,750 from The
Standard Life Insurance Co. for McLeod IV at 6380 McLeod Drive in Las Vegas. The fixed-rate loan has a term
of five years, with a rate reset every five years, based on a 25-year amortization and an interest rate of 5.50%.
The loan-to-value is 73%.
Thomas D. Wood and Co. secured $1.1 million in financing for Temple Village Plaza at 2335 Temple Trail in
Winter Park, FL. The fixed-rate loan has a term of five years, based on a 20-year amortization and an interest
rate of 6.25%. The loan-to-value is 45%.
Thomas D. Wood and Co., along with Sky Mesa Capital and Realty, secured financing of $950,000 from The
Standard Life Insurance Co. for 6320-6330 McLeod in Las Vegas. The fixed-rate loan has a term of five years,
with a rate reset every five years, based on a 25-year amortization and an interest rate of 5.50%. The loan-tovalue is 68%.
Thomas D. Wood and Co., along with Franklin Street Capital Advisors, secured financing of $550,000 from
Summit Investment Advisors for South Tryon BK Realty. The full-amortizing loan has a term of 15 years and an
interest rate of 6.25%. The loan-to-value is 45%. The ground was leased to Burger King for 20 years and is
located at 8943 S. Tryon St. in Charlotte, NC.
General Growth Splits into Two, Emerges from Historic Bankruptcy
By: Randyl Drummer
General Growth Properties Inc. emerged from Chapter 11 restructuring this past week, along with Howard
Hughes Corp., a separate publicly traded company spun off by GGP consisting of the former company's portfolio
of master-planned communities and other development opportunities. Both companies began trading last week.
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"Today marks the successful end of one chapter in GGP's history and the beginning of another," said Adam
Metz, CEO of GGP, in a statement upon GGP's emergence from Chapter 11. "Over the past 19 months, we have
taken extraordinary steps to remake GGP's entire financial structure while at the same time refocusing our
operations across all of our shopping mall properties."
General Growth filed for Chapter 11 protection in April 2009, collapsing under the weight of $27 billion in debt
and unable to refinance due to the collapse of the commercial mortgage-backed securities (CMBS) market.
During the epic bankruptcy case, GGP consensually restructured approximately $15 billion of property-level
debt, recapitalized with $6.8 billion in new equity capital, paid all creditor claims in full and achieved substantial
recovery for equity holders. GGP shareholders of record as of Nov. 1, 2010, received common stock in both
General Growth and Howard Hughes Corp.
The new GGP, still based in Chicago, comes out of the case as it started: the second-largest mall owner and
operator in the U.S., accumulating more than 185 regional malls in 43 states. Many of those properties were
financed exclusively with debt at the height of the real estate market three to six years ago.
The company followed up Wednesday with a series of announcements. GGP expects to pay two dividends in
first-quarter 2011, including a quarterly dividend of about $0.10 per share; and a one-time dividend paid 90% in
shares and 10% in cash. General Growth also said it expects to use cash to retire $570 million of debt
obligations, including $220 million owed to heirs of Howard Hughes, the reclusive billionaire who died in 1976.
The heirs were embroiled in a dispute with GGP over a property in Las Vegas. The cash, which also includes
$350 million to repay a note owed to the Pershing Square Capital Management hedge fund, will avoid the need
to make a dilutive issuance of more than 50 million common shares.
"We are fortunate the cash position in GGP exceeds that which was expected several months ago, enabling the
company to take advantage of this one-time opportunity pursuant to its pre-emergence investment agreements
to retire these obligations without having to issue shares at prices well below current market value," said GGP
Chairman Bruce Flatt.
Separately, GGP approved the sale of the Gateway Overlook Shopping Center in Columbia, MD, for $90.5
million.
UBS Investment Bank and Miller Buckfire & Co., LLC are serving as financial advisors to General Growth
Properties in connection with the restructuring, and Weil, Gotshal & Manges LLP and Kirkland & Ellis LLP are
acting as legal counsel to the company.
Simon To Sell Ohio Mall Under FTC Order
Following Simon Property Group's $2.3 billion acquisition of 22 retail outlet centers from Prime Outlets, the
Federal Trade Commission is requiring Simon to sell certain retail property and modify tenant leases as part of a
settlement intended to preserve outlet center competition in parts of southwest Ohio, Chicago and Orlando.
Under the proposed settlement, Simon said it would sell either its Cincinnati Premium Outlet center located in
Monroe, OH, or its Prime Outlets-Jeffersonville outlet center in Jeffersonville, OH. Simon also agreed to lift radius
restrictions for tenants with stores that lease space in its outlet malls in the Chicago and Orlando markets.
The agreement is expected to settle a complaint brought by the FTC over the impact the acquisition was
expected to have on retail outlet center competition in several markets and giving Simon a monopoly in outlet
centers serving the Southwest Ohio market and allowing Simon to prevent or limit new outlet center entry and
competition in the Chicago and Orlando markets.
The order will be subject to public comment until Dec. 10, after which the Commission will decide whether to
make it final.
THE WATCH LIST NEWSLETTER
11
Meredith Corp. To Consolidate Headquarters
By: Joshua H. Skillington
In a move to bring its office operations under one roof, Meredith Corp., a leading media and marketing company,
leased nine full floors comprising 212,594 square feet of space for its new corporate headquarters at Charles S.
Cohen's 805 Third Avenue at 50th Street in New York. When build-out is complete, the location will also include
a TV studio for live broadcasts.
The publicly held company plans to consolidate its Manhattan offices, currently housed in about the same
amount of space but at two separate locations -- 125 Park Ave. and 375 Lexington Ave. The relocation is
expected to be completed by late 2011. Meredith employs 700 employees in New York City.
Bruce Mosler, Arthur Mirante and David Glassman of Cushman & Wakefield, the building's leasing agents,
represented the landlord; while Edward Weiss, Joseph Cabrera and Robert Thuss of Cushman & Wakefield
represented Meredith in the long-term leasing transaction for floors 6 and 22 through 29.
Local Closures & Layoffs
Company
BFI Waste Systems of
North America
Claim Jumper
Claim Jumper
Claim Jumper
Claim Jumper
Crystal Stairs Inc.
DC Entertainment
Exel Inc.
General Chemical
West
Health Care Group
HMSHost
HSBC Processing
Services
Dr. Pepper Snapple
Group (7-Up)
Dr. Pepper Snapple
Group (7-Up)
Ross Sand Casting
Ind.
Bucyrus Community
Hospital
Superior Beverage
Group
Canon Business
Solutions
Clara Maass
Continuing Care
Address
225 Shoreway Road,
San Carlos, CA
8042 N. Blackstone
Ave., Fresno, CA
24301 Crenshaw Blvd,
Torrance, CA
18061 Gale Ave., City
of Industry, CA
3935 Alton Parkway,
Irvine, CA
5110 W. Goldleaf
Circle, Suite 150, Los
Angeles, CA
888 Prospect St., Suite
240, La Jolla, CA
315 W. Resource
Drive, Bloomington, CA
501 Nichols Road,
Pittsburg, CA
1325 Las Villas Way,
Escondido, CA
201 World Way, Los
Angeles, CA
931 Corporate Center
Drive, Ponoma, CA
14301 Industrial Ave.
North, Maple Heights,
OH
1550 Industrial Pkwy,
Akron, OH
1100 N. Main St.,
Orrville, OH
600 N. Sandusky Ave.,
Bucyrus, OH
375, 425 Victoria Road,
Austintown, OH
1250 Valley Brook
Ave., Lyndhurst, NJ
195 Belgrove Drive,
Kearny, NJ
THE WATCH LIST NEWSLETTER
Closure
or Layoff
Leased
or Owned
No.
Impacted
Closure
Owned
349
12/31/2010
7829791
Closure
Leased
89
12/18/2010
5427704
Closure
Leased
85
12/11/2010
5040809
Closure
Leased
73
12/11/2010
1479046
Closure
Leased
67
12/11/2010
5436120
Layoff
Leased
259
12/13/2010
248617
Layoff
Leased
33
12/27/2010
93596
Closure
Leased
71
12/31/2010
6879397
Layoff
Owned
19
12/28/2010
6550916
Layoff
Leased
208
12/15/2010
4803954
Layoff
Leased
895
12/31/2010
1494488
Closure
Leased
100
12/5/2010
255951
Closure
Leased
170
1/3/2011
489426
Closure
Owned
80
1/3/2011
5794102
Closure
Layoff due
to sale
Owned
86
12/31/2010
7829816
Owned
26
12/31/2010
Closure
Leased
40
1/4/2011
7829951
5959203,
5959191
Unknown
Leased
80
1/14/2011
163140
Unknown
Owned
204
11/30/2010
7829978
Impact Date
CoStar Prop.
ID Number
12
Company
Clara Maass
Continuing Center
Kensington Manor
Nursing &
Rehabilitation Center
Resorts International
Hotel
Saint Barnabas
Assisted Living of
Lakewood
Tommy Hilfiger USA
Vineland Kosher
Poultry
Chrysler Group
Health Net of the
Northeast
DJSP Enterprises
Citrus Health Care
United Space
Alliance, LLC
Illinois Quadel
Consulting Corp.
Holiday Inn Select
Rail Terminal
Services
Gallant Greetings
Corp.
Thomas & Herbert
CVP LLC
A.D. Conner Inc.
Asset Acceptance
Oshkosh Specialty
Vehicles
Replogle Globes
Villa Olivia Country
Club
Litchfield Healthcare
Center
Protein Solutions
Weil-McLain
Automotive
Components Holding
Sitel Operating Corp.
Address
206 Bergen Ave.,
Kearny, NJ
94 Stevens Road,
Toms River, NJ
1133 Boardwalk,
Atlantic City, NJ
77 Williams St.,
Lakewood, NJ
200 Liberty Way,
Cranbury, NJ
1100 S. Mill Road,
Vineland, NJ
5555 30th Ave.,
Kenosha, WI
1 Far Mill Crossing,
Shelton, CT
900 Pine Island Road,
Plantation, FL
5420 Bay Center Drive,
Tampa, FL
1102 John Glenn Blvd.,
Titusville, FL
2750 W. Roosevelt,
Chicago, IL
1801 N. Naper Blvd.,
Naperville, IL
3526 W. 43rd St.,
Chicago, IL
4300 United Parkway,
Schiller Park, IL
2750 W. Roosevelt
Road; 1741-49 E. 75th
St., Chicago, IL
160 LaGrange Road,
Frankfort, IL
55 E. Jackson, Suite
1600, Chicago, IL
2150 E. Dolton Road;
16745 S. Lathrop Ave.,
Harvey; Calumet City,
IL
2801 S. 25th Ave.,
Broadview, IL
1401 W. Lake St.,
Bartlett, IL
1285 E. Union Ave.,
Litchfield, IL
4220 S. Kildare Ave.,
Chicago, IL
500 Blaine St.,
Michigan City, IN
6900 E. English Ave.,
Indianapolis, IN
101 Canada Road,
Painted Post, NY
THE WATCH LIST NEWSLETTER
Closure
or Layoff
Leased
or Owned
No.
Impacted
Unknown
Owned
143
11/30/2010
7829990
Unknown
Owned
227
11/30/2010
7830000
Unknown
Owned
2,022
12/1/2010
6915618
Unknown
Owned
29
11/30/2010
7830009
Unknown
Leased
87
12/31/2010
652567
Unknown
Owned
50
12/11/2010
7830024
Closure
Owned
191
11/24/2010
Closure
Owned
750
3/1/2012
7567513
190288,
190289,
190290
Layoff
Leased
435
11/12/2010
790693
Unknown
Leased
73
4/1/2011
380408
Unknown
Owned
153
1/7/2011
792756
Layoff
Leased
124
12/31/2010
7830046
Closure
Owned
145
12/31/2010
4746952
Closure
Owned
210
12/31/2010
155747
Layoff
Leased
54
12/26/2010
150067
Layoff
Leased
54
1/1/2011
7830046
Closure
Owned
62
immediately
7830084
Layoff
Leased
55
immediately
144418
Closure
Owned
92
12/6/2010
5329402,
147065
Closure
Possible
Closure
Owned
83
12/17/2010
829648
Owned
187
12/22/2010
7830128
Closure
Owned
121
11/30/2010
7647481
Closure
Partial
Closure
Leased
309
immediately
146980
Leased
87
1/9/2011
7686011
Closure
Owned
26
12/31/2011
74329
Closure
Owned
267
12/31/2010
1435499
Impact Date
CoStar Prop.
ID Number
13
Company
Barnes & Noble Lincoln Triangle
Store
Exel Inc.
Address
Bon-Ton Stores
Hooker Furniture
Corp.(BradingtonYoung)
1972 Broadway, New
York, NY
various, Auburn, WA
Frederick Towne Mall,
Frederick, MD
920 E. 1st St.,
Cherryville, NC
Closure
or Layoff
Leased
or Owned
Closure
Layoff
Leased
unknown
Closure
Closure
No.
Impacted
Impact Date
CoStar Prop.
ID Number
171
146
1/29/2011
1/29/2011
7739260
Leased
56
1/31/2010
1168267
Owned
121
1/15/2010
6625746
Finding and Analyzing Distressed Assets in CoStar
Distress assets seem to be everywhere. Are you taking advantage of the opportunities left behind? In our
quarterly State of the U.S. CRE Market webinars and a recent panel discussion we've discussed distressed
assets in the marketplace. In this on-demand, fast-paced, 30-minute webinar we discussed how to find and
analyze these opportunities using your subscription to CoStar. Use your subscription to CoStar to locate
distressed opportunities and even better understand their effect on the market.
A COMPLIMENTARY COSTAR SUBSCRIBER WEBINAR
Log in to www.costar.com/ and click on the Knowledge Center tab.
Webinar Archives.
See this on-demand webinar in the
Watch List: Lodging, Multifamily in Special Servicing Due in December
The following information for these lead listings was provided by Investcap Advisors LLC, an industry leader in providing
surveillance data on loan and commercial real estate performance underlying the CMBS market.
Property Name
Address
Property Type
Cur. Bal.
CMBS; Special Servicer
Northfield Falls Mobile
VT Route 12, Northfield
Mobile Home
CSFB 2001-CF2; Berkadia
Home Park
Falls, VT
Park
$2,080,481 Commercial Mortgage
River Run Mobile Home
Mobile Home
Park
US Route 302, Berlin, VT
Park
see above see above; see above
Mobile Home
RMC Mobile Home Park
Junction Road, Berlin, VT
Park
see above see above; see above
Eastwood Manor Mobile
Mobile Home
Home Park
US Route 2, Berlin, VT
Park
see above see above; see above
Berlin Mobile Home
149 Partridge Road,
Mobile Home
Park
Berlin, VT
Park
see above see above; see above
1901 Collins Ave., Miami
JPMCC 2005-CIBC13; LNR
The Shore Club
Beach, FL
Lodging
$111,362,865 Partners
234 W. 42nd St., New
GECMC 2005-C4; Midland
Hilton Times Square
York, NY
Lodging
$81,000,000 Loan Services
Holiday Inn - Lodgian
1 S. Forest Beach Drive,
BALL 2006-BIX1; Bank of
Hilton Hotel
Hilton Head, SC
Lodging
$12,491,884 America
Holiday Inn - Lodgian
1 S. Forest Beach Drive,
BALL 2006-BIX1; Bank of
Hilton Hotel Part.
Hilton Head, SC
Lodging
$5,626,116 America
226 N. Hobson Street,
Park Village Apartments Mesa, AZ
Multifamily
$3,494,881 BACM 2004-1; LNR Partners
Worthington Woods
635 Worthington Forest Pl,
PMCF 2001-ROCK; ORIX
Apartments
Columbus, OH
Multifamily
$3,249,974 Capital Markets
Meadowstone
602 - 704 Barfield Road,
PNCMA 2001-C1; Midland
Apartments
Hastings, MI
Multifamily
$1,649,222 Loan Services
THE WATCH LIST NEWSLETTER
14
Advertisement
Bonus Item: Supervalu Terminates Warehouse Lease
Podolsky Northstar CORFAC International negotiated a lease termination agreement on behalf of Eden Prairie,
MN-based Supervalu in Wood Dale, IL. Supervalu’s Osco Drug subsidiary occupied the single-user, 440,000square-foot facility at 855 N. Wood Dale Road for 14 years. CEVA Group PLC, a Netherlands-based third-party
logistics firm with key contracts for the space already lined up, executed a lease for more than 230,000 square
feet of space at the building. The company has long-term expansion plans, which could lead to the leasing of
additional space there. After identifying CEVA as a replacement tenant, building owner AMB Property Corp.
granted Supervalu a full termination of its lease. Steven H. Podolsky, SIOR and principal, and Corey B. Chase,
principal, represented Supervalu in the lease termination.
THE WATCH LIST NEWSLETTER
15