CONTENTS Capital Raising for Non
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CONTENTS Capital Raising for Non
The WEEKLY Friday, October 30, 2015 Property News Accesso to Buy Office Property Near Atlanta Accesso Partners LLC has struck a deal to acquire North Point Center East, a 540,137-square-foot office property in the Atlanta suburb of Alpharetta, Ga. The Hallandale Beach, Fla., investment manager is acquiring the property from Cousins Properties Inc. in a deal arranged by CBRE. Cousins, an Atlanta REIT, had expected that the property would sell for a price that would result in a capitalization rate of 6.5 percent, which would peg the property’s value at $97.5 million, or about $181/sf, based on the $6.3 million of net operating income the complex is on-track to generate this year. But it’s not known whether it’s getting what it sought. The property would mark Accesso’s entree into the Alpharetta market. The company, which owns 25 properties with a total of 9.2 million sf of office space, owns two other Atlanta properties, both in the Galleria area: the Highlands building, with 150,000 sf at 7100 Highlands Parkway SE, and Platinum Tower, with 312,228 sf at 400 Interstate North Parkway. North Point Center East is comprised See ALPHARETTA, Page 5 CONTENTS Oaktree Raises $1.2Bln for Latest Opportunity Fund...Page 5 E-mail Parser Added to TreppTrade Platform...Page 7 Hedge-Fund Manager Launches Another Non-Traded REIT...Page 9 Austin, Texas, Office Sees Offers Topping $220Mln...Page 10 Vol. 10 Issue 44 REIT News Capital Raising for Non-Traded REITs Plummets This Year Capital raising for non-traded REITs has plunged this year as AR Capital, the industry’s heavyweight, has continued to suffer from the blowback stemming from accounting irregularities reported by an affiliated REIT last year. According to FBR & Co., only $7.6 billion was raised through the end of September, a 38 percent drop from the $12.3 billion raised during the same period in 2014. AR Capital, which is still raising capital for a number of American Realty Capital-branded REITs, raised $2 billion of that total - a 63 percent drop from the $5.4 billion it raised a year earlier. And its Cole Capital Corp. affiliate raised only $154 million this year through September, down from $1.2 billion a year earlier. So, 95 percent of the industry’s drop could be attributed to the American Realty Capital Properties’ accounting issue, according to FBR. Other companies, such as NorthStar Asset Management Group, the investment management affiliate that NorthStar Realty Finance Corp. had spun off last year, are picking up the slack, raising $952 million this year, up 44 percent from a year earlier. Meanwhile, with the American Realty Capital accounting issue roughly a year old, a small rush of new non-traded REITs is hitting the market. They’re timing coincides with the pullback from the sector by AR Capital and Cole Capital. Retail investor demand for non-traded REITs might be unchanged from last year, which would present an opportune time for other sponsors to launch vehicles. KBS Realty Advisors, for instance, earlier this month launched KBS Growth & Income REIT Inc., with a $2.3 billion capital-raising target. The company will pursue a value-creating core strategy. See REIT, Page 3 Property News Boston Apts. Selling for Record $1Mln/Unit The Rockpoint Group is paying about $128 million, or a record-setting $1 million/unit, for the 128-unit Arlington apartment property in Boston’s Back Bay area. The Boston investment manager is buying the luxury property, at 100 Arlington St., from a venture of Congress Group and Related Cos., which redeveloped what once was the headquarters of the Boston Consolidated Gas Co. last year. The sales price results in a capitalization rate of less than 4 percent. The 13-story property’s units fetch among the highest monthly rents in the city, ranging from $3,200 for a one-bedroom unit to $8,500 for a two-bedroom unit. Those asking rents compare with a $2,514/unit monthly average for all class-A properties in the city. The limestone-clad building was constructed 88 years ago and designed by Parker, Thomas and Rice, whose other works in Boston include Fenway Studios and the R.H. Stearns Building at 140 Tremont St., both of which are listed on the U.S. National Register of Historic Places. More recently, the building housed the city’s first charter school, the Boston Renaissance Charter Public School, which opened in 1995. When the school moved to the city’s Hyde Park neighborhood five years ago, the building was sold to the Congress Group for $45 million. Two years later, See ARLINGTON, Page 7 THEINSIDER Tenants at Americas Tower in Talks to Renew Leases Bank Hapoalim and QVT Financial LP are said to be in talks to renew their leases for a total of 121,871 square feet at Americas Tower in midtown Manhattan. The two companies are on leases that run for at least another nine months. Bank Hapoalim occupies 73,911 sf through April 2017 and pays $72.02/ sf in rent, while QVT leases 47,960 sf through next July. QVT pays $85.67/ sf in rent, but subleases nearly 24,000 sf of its space to Signature Bank and Knowledge Group. It’s not clear whether it’s negotiating to renew its lease for all its space, or just the space it occupies. Asking rents in the building run from $66/sf in its lower floors to $82/sf in its upper floors, which puts them in line with what the two tenants are paying. Americas Tower, with 1 million sf at 1177 Avenue of the Americas, is 94 occupied, according to servicer data compiled by Trepp LLC. It is on track to generate $36.3 million of net cash flow this year, more than three times the amount needed to service its $360 million of mortgage debt, which is securitized through AOA Mortgage Trust, 2015-1177. The 47-story property, between 45th and 46th streets, is owned by a venture that includes Silverstein Properties and the California State Teachers’ Retirement System. Sharga said. Wilcox, who most recently was vice president and director of capital markets on the East Coast for Marcus & Millichap, is based in New York. He had joined Marcus & Millichap in 2013 after nearly five years with Savills, where he was a managing director and head of capital markets. Auction.com Hires John Wilcox to Build Financing Capability Rubenstein Hires Mike Daugard to Pursue Opportunities in D.C. Long-time investment-sales professional John Wilcox has joined auction. com as senior vice president of commercial real estate finance. He’s charged with helping develop the auction company’s capability of arranging financing for buyers of assets through its site. “This will benefit buyers,” explained Rick Sharga, executive vice president of auction.com. They’re also likely to place more aggressive, or greater bids if they’re more confident they’ll be able to line up a specific amount of financing. Sellers, meanwhile, should be confident they’d have “a larger pool of qualified buyers vying for their properties,” Mike Daugard, the former director of acquisitions and portfolio management at Washington REIT, has joined Rubenstein Partners as vice president for its Washington, D.C., office. In his new post, Daugard is charged with identifying, evaluating and executing investments in the Washington area and will work closely with Steve Evans, regional director. Rubenstein, a Philadelphia investment manager, is in the process of investing the $515 million of equity commitments it had raised in 2012 for its Rubenstein Properties Fund II, which pursues office properSee INSIDER, Page 3 The most important news in the market, direct to your inbox. To access Commercial Real Estate Direct online and receive The Weekly, sign up or start a free trial at www.crenews.com or call 212-329-6239. www.crenews.com -2- October 30, 2015 INSIDER...From Page 2 REIT...From Page 1 ties on the East Coast from Boston to Florida. While at Washington REIT, Daugard worked on, among other things, the REIT’s $500.75 million sale last year of a portfolio of medical-office properties to Harrison Street Real Estate Capital, and its sale in 2011 of a large industrial portfolio for $350 million. He also was instrumental in reinvesting proceeds of those transactions into office, retail and apartment properties. He previously was with JLL, Lowe Enterprises, the Mills Corp. and Van Metre Cos. And Griffin Capital has launched Griffin-American Healthcare REIT 4 Inc., with a $3.2 billion equity target. It would be the latest non-traded REIT sponsored by Griffin Capital, which last year sold one of its predecessors, Griffin-American Healthcare REIT II, to NorthStar Realty in a deal valued at $4 billion. As its name indicates, the latest REIT would pursue investments in medical-office, seniors-housing, hospitals and other healthcare-related properties. Bayonne, N.J., Apartments Sell for $147.5Mln Lisa Payne Resigns as CFO of Taubman Centers Lisa A. Payne is stepping down as chief financial officer of Taubman Centers Inc., effective next March, to pursue other opportunities. Payne had joined the Bloomfield Hills, Mich., REIT in 1997 from Goldman Sachs, where she was a vice president in its investment-banking division. She previously had been in Chemical Bank’s real estate department. She’ll be replaced by Simon J. Leopold, treasurer and executive vice president of capital markets. Leopold had joined Taubman three years ago and most recently spearheaded the company’s sale of seven malls with 7.3 million square feet to Starwood Capital Group for $1.4 billion. Tanger’s CFO, Frank Marchisello, Retiring Frank Marchisello is retiring as chief financial officer of Tanger Factory Outlet Center, effective May. Marchisello has been with the Greensboro, N.C., REIT since 1993, when he joined as chief accounting officer. He previously was with Gilliam, Coble & Moser, an accounting firm, where he was partner of its real estate business, whose clients included Tanger. He was named chief financial officer in 1999 and was instrumental in navigating the company through its initial public offering of common shares that year. He’ll be replaced by Jim Williams, the company’s chief accounting officer, who has been with Tanger for 22 years. Castle Lanterra Properties has paid $147.5 million, or $271,140/unit, for Alexan CityView, a 544-unit apartment property on the Bayonne, N.J., waterfront. The Suffern, N.Y., company, which was founded six years ago by Elie Rieder, a long-time apartment-property investor, bought the five-year-old complex from its developer, a venture of Trammell Crow Residential and AIG Global Real Estate in a deal brokered by JLL. Alexan CityView is 91 percent occupied and includes a 10,000-square-foot clubhouse, fitness center, indoor basketball court, resort-style swimming pool and seven-story parking garage. But Rieder said Castle Lanterra would upgrade some of those amenities. For instance, he said the fitness center would be expanded as would the property’s clubhouse. The property, which sits on a 7.4-acre parcel, also is being renamed Harbor Pointe. It sits on the Peninsula at Bayonne Harbor, offering views of lower Manhattan. Castle Lanterra is in talks with owners of neighboring parcels to possibly develop additional units. The property is near a PATH commuter-subway station that provides quick access to lower and midtown Manhattan. It is 15 minutes from Jersey City, N.J. Rieder had founded Castle Lanterra in 2009 and over the past two years has invested some $500 million on more than 3,000 units. It focuses on the northeast, mid-Atlantic and southern regions. 350 S. Main St. #312 P.O. Box 1865 Doylestown, PA 18901 267-247-0112 The Weekly, Copyright 2015, is published every Friday, 52 times a year, by Commercial Real Estate Direct. The publication is a supplement to the Commercial Real Estate Direct Web site and contains a sampling of the latest week’s major news stories. It is a violation of federal law to photocopy or otherwise reproduce any part of this publication without the permission of Commercial Real Estate Direct. For information on advertising or group rates, email Sales@crenews.com, or call 800-556-7461. October 30, 2015 Orest Mandzy managing editor orest.mandzy@crenews.com John Covaleski Josh Mrozinski Staff Writer josh.mrozinski@crenews.com Felicia Daniel customer service felicia.daniel@crenews.com John Connolly staff writer john.covaleski@crenews.com staff writer john.connolly@crenews.com Daniel P. Moynihan copy editor daniel.moynihan@crenews.com -3- www.crenews.com Registration now open www.crefc.org CRE FinanCE CounCil’S INDUSTRY LEADERS CONFERENCE JANUARY 11-13, 2016 Loews MiaMi Beach hoteL, MiaMi, FL www.crenews.com -4- October 30, 2015 PROPERTYNEWS ALPHARETTA...From Page 1 of four buildings off North Point Parkway, about 24 miles north of Atlanta. Rents run about $14.40/sf, which is 12 percent below the submarket’s average of $16.41/sf, according to Reis Inc., which projects rents to increase to $17.16/sf by next year. While the property is 93 percent occupied, it faces some near-term roll-over that could benefit Accesso, if it’s able to increase rents to market levels. Nonetheless, tenants have an average of 6.2 years remaining on their lease terms. Among its big tenants is Kids II Inc., which makes toys for infants and tod- dlers. It leases 64,093 sf as its headquarters, but it moved to Atlanta’s Buckhead area, so it likely won’t renew when its agreement matures in two months. The property sits in a market with 15.3 million sf whose occupancy rate is slated to inch up to 82.7 percent next year from 81.7 percent in the second quarter, according to Reis’ projections. It expects some 259,000 sf to be absorbed through next year, indicating that demand for space should remain solid. Cousins developed the property in the late 1990s in a venture with Prudential Real Estate Investors, and 12 years ago bought out its partner’s stake. Landmark Apartment REIT Seen Selling Landmark Apartment Trust Inc., a non-traded REIT that earlier this year sought to list its shares, has agreed to be purchased by a venture of Starwood Capital Group and Milestone Apartments REIT in a deal valued at nearly $2 billion. Landmark, which is headquartered in Richmond, Va., was launched by Grubb & Ellis in 2005 as Grubb & Ellis Apartment REIT. But unlike most other non-traded REITs, which typically are capitalized by mom-and-pop investors, Landmark’s investor base is weighted with institutions, such as Blackstone Group, iStar Financial Inc. and Canadian pension OPSEU Pension Trust. That’s the result of its recapitalization three years ago in a deal that involved the purchase by the REIT of 21 properties from an institutional investor group, each of which received units in Landmark’s operating partnership affiliate in return. In addition, iStar and Blackstone had invested $209.8 million in preferred shares issued by the company to help fund the purchase of the properties. Under the agreement with the Starwood/Milestone venture, every Landmark common share and operating partnership unit will receive $8.17 in cash, or a total of $531 million. The REIT also has $228 million of preferred equity outstanding and $1.2 billion of debt, including $983 million of mortgages, and as of June it had $160 million outstanding under a credit facility provided by lenders led by Bank of America. Milestone, a Toronto REIT that invests solely in apartment properties October 30, 2015 in the southeastern and southwestern United States, would buy 15 of Landmark’s properties, with 4,172 units, for a total of $502 million, and Starwood would buy the remaining properties, with 19,615 units, for a total of $1.4 billion. Milestone also will manage the properties that Starwood buys, earning a 3 percent fee. Landmark’s predecessor initially had sold its shares for $10 each, but as of last year had valued them at $8.15 apiece. It was able to substantially bolster the size of its portfolio through its recapitalization and now owns 78 properties with a total of 23,787 units in the Sunbelt region that it carried on its balance sheet at a value of $1.7 billion, as of the end of June. During the three months that ended in June, its portfolio generated $64.6 million of revenue, but operated at a loss, primarily because of the interest it pays on its debt and preferred shares. Net operating income for the quarter was $34 million, for an annualized $136.2 million, which would give the Starwood/Milestone team’s purchase price a capitalization rate of just more than 7 percent. The company’s properties are concentrated in Texas, where it owns 28 with a total of 8,522 units; Florida, where it owns 15 with 4,675 units, and North Carolina, where it owns 13 with 3,620 units. It also owns properties in Alabama, Georgia, Tennessee, Virginia and South Carolina. Its properties are 95.7 percent occupied and generated an average of $956/unit in monthly revenue. -5- Oaktree Capital Raises $1.2Bln for Latest Fund Oaktree Capital Group so far has raised $1.2 billion of a targeted $3.5 billion of equity commitments for its latest opportunistic investment fund. The Los Angeles investment manager late last year had launched the fund, Oaktree Real Estate Opportunities Fund VII, just a few months after raising $2.7 billion for its predecessor, Fund VI. That fund’s capital has been fully invested and was roughly 90 percent committed to investments by last June, roughly a year after being launched and soon after starting its investment cycle. According to the Contra Costa County (Calif.) Employees’ Retirement System, which had committed $80 million to Fund VI and $50 million to Fund V, which had raised $1.28 billion of commitments in 2012, both funds have performed strongly. Fund V, for instance, already had returned 51.5 percent of the capital it had raised and has generated a 19.9 percent gross internal rate of return. Fund VI, meanwhile, so far has generated a 24.9 percent IRR. Fund VII is projected to provide its investors with a gross IRR of more than 15 percent. It will have a four-year investment cycle and 10-year term, but it could be extended. The latest fund, like its predecessors, invests in real estate, including corporate-owned properties, debt against properties, real estate companies and securities. And while it’s able to invest overseas, its focus is the United States. The latest fund is expected to have only a nominal exposure to structured finance, specifically CMBS. Previous funds at times had substantial exposures, which were largely opportunistic, as market volatility temporarily depressed bond values. Meanwhile, Fund VII’s exposure to loan portfolios is expected to shrink slightly, to 5 percent of all its investments, from 6 percent for Fund VI. Some previous funds had greater concentrations, but those were driven by Oaktree’s ability to source opportunities, particularly from the FDIC. www.crenews.com www.crenews.com -6- October 30, 2015 MORTGAGENEWS E-mail Parser Added to TreppTrade Platform Trepp LLC has launched a major enhancement to its TreppTrade product that allows users, primarily investors in CMBS, to easily track the trading color they might receive from various sources for bonds they’re watching. Through a collaboration with Solve Advisors, a Rockville Centre, N.Y., technology company that specializes in the structured-finance market, TreppTrade now will display the trading color derived from users’ own e-mails, which is extremely helpful when they’re looking to buy or sell bonds. Investors and traders typically communicate pricing and other information about CMBS they might be offering for sale, or looking to buy, via e-mail. An investor looking to sell a portfolio of bonds might disseminate what’s called a bid list to various broker-dealers. And each of those would, in turn, distribute the anonymous bid list to their clients for auction. Once a bond trades, the broker-dealers can distribute trading color, to include cover, or second-place bids, to those investors who turned in offers. The result of only one week of bond trading could result in a mountain of e-mails from dozens of participants about the bonds that might have been out for bid in that given week. Add to that the information contained in dealers’ offer sheets and market e-mails would make managing that manually at the very least challenging and often very confusing. TreppTrade is trying to address the challenges by absorbing those e-mails and integrating the information in them on users’ screens. So a bond buyer who has received a dozen e-mails, each of Greystone Sees $800Mln to $1Bln of Conduit Lending Volume This Year Greystone originated some $700 million of commercial mortgages that were sold through securitization last year, its first full year in the conduit-lending business. And this year, it says it’s on track to originate $800 million to $1 billion of loans. The New York lender, which is best known for its agency-lending chops, started writing loans for securitization in 2013 as part of an effort to broaden its scope. After all, many of its apartment-owning borrowers also own other types of properties. Since it already did business with them, it made sense to expand its line of offerings to accommodate them. The company also has the capability of funding bridge loans against non-multifamily properties that aren’t quite ready yet for permanent conduit loans. Greystone originates loans against apartment properties under Fannie Mae, Freddie Mac and Federal Housing Administration programs. It also funds bridge loans through a balance-sheet program that serves as a feeder for permanent agency loans. Last year, it funded roughly $600 million of those loans. While its expertise is in the multifam- October 30, 2015 ily and healthcare sectors, the company actively funds loans against other property types, specifically through its conduit-lending program. Its overall origination volume last year was $4.5 billion. That’s projected to increase to more than $5 billion this year. Unlike many other lenders that contribute loans to the CMBS market, Greystone is absent from most rankings of loan contributors. That’s because it typically sells its originations immediately after funding them. It funds its loans with proceeds from warehouse lines it has with two major banks, which then buy the loans it writes. As a result, those banks typically get credit for its originations. But the company does all its own underwriting and its loans are written using its own documentation. On the conduit side, Greystone is a decidedly middle-market lender. Last year, for instance, it completed 26 conduit financings, giving each an average size of nearly $27 million. But that tally included one $90 million loan. Exclude that and its average loan size declines to nearly $24.5 million. This year, it will have written between 35 and 40 loans of roughly $25 million each. -7- which includes pricing information on a specific bond, would have the relevant information from each of those e-mails tied to bonds it might be watching on the TreppTrade platform. And all that information would be shown side-byside to a host of other details on the specific bond, including collateral data, and recent news about individual loans that a user could use to conduct thorough analysis. “TreppTrade delivers on the promise of showing you what you need to know, when you need to know it,” explained Michael Gabriella, vice president of product management and head of credit analytics at Trepp. ARLINGTON...From Page 1 Related paid $30 million for a stake in the property on behalf of its Related Real Estate Recovery Fund. The Related/Congress venture retained many of the landmarked building’s historic features, such as its bronze mail chute, two-story arched windows in its lobby and its Italian marble floors. Individual units have upscale finishes that include ceilings as high as 12 feet, washed white-oak flooring, walnut cabinets, KitchenAid appliances that include microwaves and dishwashers with stainless-steel finishes and Bosch washers and dryers. The Arlington, which already is 95 percent occupied, includes a basketball court that was salvaged from when the building served as a school, game room with billiards table and dining room. It’s staffed by a 24-hour doorman and offers concierge services, housekeeping and dry-cleaning services. Its ground-floor retail space is occupied by the Liquid Art House, a restaurant with an art gallery that provides in-home dining to tenants. The price Rockpoint is paying is some 35 percent more than the $740,741/unit that Related had paid earlier this year for the 54-unit 142-170 Charles St. in the nearby Beacon Hill neighborhood. A total of eight apartment properties in Boston have sold this year for prices north of $500,000/unit. Meanwhile, the 31 apartment properties that have changed hands in the city this year sold for an average of $350,759/unit, for an average cap rate of 4.9 percent. www.crenews.com Fitch Ratings has been rating U.S. CMBS transactions for twenty-five years. Since 1990, we’ve leveraged independent thinking and rigorous analytics to provide balanced ratings, insightful research, and precise surveillance tools for the U.S. CMBS market. In that time we’ve built a legacy of transparency and openness by maintaining an open dialogue with investors. fitchratings.com www.crenews.com -8- October 30, 2015 REITNEWS Highland Capital Launches Non-Traded REIT Capital Funds Distributor Inc., its parent’s retail-distribution arm. Highland, which has some $21 billion of assets under management, moved into the retail sector in 2000, and in 2004 got into the mutual-fund business. NexPoint Hospitality is run by James Dondero, co-founder of Highland; Brian Mitts, chief financial officer, who is chief operations officer for Highland Capital Management, and Matthew McGraner, chief investment officer, who serves in the same capacity at Highland. Like most non-traded REITs, NexPoint Hospitality will sell shares, subject to a relatively hefty load, to retail investors. It will sell two classes, which is now becoming the norm. Class A shares, which would be sold for $25 each, would be subject to an upfront 7 percent sales commission and 3 percent dealer-manager fee. Class T shares, meanwhile, would be priced at $23.94, and would be assessed the same up-front dealer-manager fee. But the sales commission initially would be 3 percent, with the remainder paid out annually over the following four years, or until the REIT executes a liquidity event. Starwood to Pay $5.4Bln for 72 EQR Properties million to invest in additional properties through tax-deferred exchanges. The properties Starwood is buying from EQR are in South Florida, with 33 properties that have 10,742 units; Denver, with 18 properties that have 6,635 units; Washington, D.C., with 10 properties that have 3,020 units; Seattle, and California’s Inland Empire. They’re being purchased unencumbered by debt, giving Starwood plenty of flexibility to line up fresh financing. It’s buying the portfolio through its Starwood Global Opportunity Fund X, through which it raised $5.6 billion of equity commitments earlier this year. The EQR properties are a mix of midrise and garden-style apartments. Christopher Graham, senior managing director and head of real estate acquisitions for the Americas at Starwood, said South Florida and Denver, the two markets with the largest representation in the portfolio, have had 5.4 percent rent growth over the past five years, which he said was greater than the national average. NexPoint Credit Strategies Fund, an affiliate of hedge-fund manager Highland Capital Management, has launched a non-traded REIT that would pursue investments in the hotel sector. The entity would be the third property-owning REIT sponsored by the Dallas company, which pursues investments primarily in high-yield bonds, but also has exposure to public equities and real estate. It got into the REIT sector less than three years ago, when it carved out its real estate holdings - a portfolio of apartment properties - into a REIT that operated as a NexPoint Credit Strategies subsidiary. Then earlier this year, it spun that business off as NexPoint Residential Trust Inc., a traded REIT. The company owns 39 properties with 12,038 units in the Southeast and Texas that are 93 percent leased. Meanwhile, last year, it launched an effort to raise $1.1 billion through NexPoint Multifamily Realty Trust Inc. that would pursue core-plus apartments, meaning properties whose rents could be increased with modest upgrades or renovations. It expects upgrades to cost Starwood Capital Group has agreed to buy 72 apartment properties with 23,262 units from Equity Residential for $5.4 billion, marking its largest non-hotel acquisition ever. According to Equity Residential, the price results in a capitalization rate of 5.5 percent. For Starwood Capital, a Greenwich, Conn., investment manager, the announcement comes just after it struck a deal to buy 63 properties with 19,615 units from Landmark Apartment Trust Inc., a non-traded REIT, for $1.4 billion. Those properties are concentrated in Texas, Florida and North Carolina. The latest purchase would bring its portfolio to 88,000 units, making it among the largest apartment owners in the country. Including its two latest deals, it would have purchased 67,800 units over the last 12 months along. “The size of this transaction underscores our conviction in multifamily housing’s continuing ability to offer superior risk-adjusted returns,” explained Barry Sternlicht, chairman and chief October 30, 2015 no more than $4,000/unit. That would be in contrast with NexPoint Residential, which pursues value-add properties that would require greater capital improvements than those pursued by its newer sibling company. Its latest venture, NexPoint Hospitality Trust Inc., as its name indicates, will pursue hotels, specifically extended-stay and select-service properties, and to a lesser degree, full-service properties. All of the properties would be flagged under the most common national brands, from Marriott International, Hilton Hotels & Resorts, Hyatt Hotels Corp., Starwood Hotels & Resorts Worldwide Inc. and InterContinental Hotels Group. The company aims to follow a value-add, or slightly opportunistic strategy, in that it would buy properties that would benefit from a re-branding, capital improvements or redevelopment and are in markets with barriers to entry. The properties it invests in would be managed by Pillar Hotels & Resorts, an Irving, Texas, hotel manager that specializes in limited-service properties. Shares in NexPoint Hospitality will be sold for $25 each through Highland executive of Starwood. In contrast, EQR, as Equity Residential is commonly referred to, owns 392 properties with 109,347 units, before its latest deal. But the Chicago REIT is shrinking its portfolio as it increasingly focuses on owning properties in urban markets and that are close to transportation venues. To that end, it’s planning to sell another 26 properties with 4,728 units next year. More than 70 percent of those units represent the company’s entire Connecticut portfolio and are in what it considers non-core submarkets in Massachusetts. The bulk of those properties were inherited through the REIT’s 2000 purchase of Grove Property Trust. Those assets, which would be sold as small portfolios and individual properties, will bring EQR’s total proceeds from asset sales to roughly $6.1 billion. It will use about $3.8 billion of that to pay a special dividend of $9-$11/ share, $2 billion to repay debt, including possibly all its 2016 maturities, and $300 -9- www.crenews.com GENERALNEWS Austin Office Sees Offers Topping $220Mln Commonwealth Partners, which is offering for sale the 418,338-squarefoot 301 Congress Ave. office building in Austin, Texas, is said to have drawn offers of greater than $220 million, or $525/sf. The Los Angeles investment manager owns the property in a venture with the California Public Employees’ Retirement System, which had acquired it in 2007 for $119.8 million. At the time, CalPERS’ national office portfolio was owned through a venture with Hines. Commonwealth had replaced Hines in 2011. The 22-story property was constructed in 1985 and is widely considered to be among Austin’s most sought-after office addresses. It is believed to be very well occupied, with tenants that include RetailMeNot Inc., which three years ago signed on for 95,000 sf, and Teza Technologies, which earlier this year took 12,200 sf on its top floor. Recently, consultancy Gerson Lehrman Group nearly doubled its footprint in the building with a lease for nearly 42,000 sf. Meanwhile, the class-A vacancy rate in Austin is a very manageable 12.8 percent, according to Reis Inc., which pegs asking rents at $40.44, up considerably from the $33.46/sf rate when the Record Volume of Apt. Loans Originated in 2014 A record $195.1 billion of loans against apartment properties with five or more units each were originated last year, according to the Mortgage Bankers Association. The Washington, D.C., trade group compiled its data by surveying the country’s largest lenders and culling data from smaller financial institutions through their disclosures as required by the Home Mortgage Disclosure Act. Last year’s volume was up 13 percent from 2013 and was driven by a near-30 percent increase in lending by Fannie Mae and Freddie Mac, to $61.2 billion. According to the MBA, the total volume was comprised of 40,974 loans, giving each an average size of $4.8 million. The number of loans declined from 2013, when 44,696 were originated, but their average size increased from $3.9 million. The year’s volume was originated by a whopping 2,876 lenders, slightly less than the 2,898 lenders that wrote loans in 2013. But the five most-active lenders, JPMorgan Chase Bank, Wells Fargo Bank, CBRE Capital Markets Inc., Walker & Dunlop and PNC Real Estate, accounted for just more than 30 percent of the total volume. JPMorgan, for instance, wrote 5,768 loans with a balance of $16.9 billion; Wells Fargo wrote 2,046 loans with a balance of $16.5 billion, and CBRE wrote 453 loans with a balance of $8.7 billion. A total of 19 lenders each originated $2 billion or more in loans. And not surprisingly, most of those have very active agency-lending platforms. While banks and thrifts maintained the largest share of the market last year, funding $69 billion of loans, or 35 percent of the year’s total, Fannie American Realty Fund Raises $566.8Mln Investment manager American Realty Advisors has raised $566.8 million of equity commitments for American Strategic Value Realty Fund LP, an open-end vehicle that pursues value-add investments. The Glendale, Calif., company, which has some $7 billion of assets under management, had launched the fund, its flagship, in 2010 and has consistently outperformed its benchmark, the NCREIF Fund Index-Open End Diversified Core Equity, or NFI-ODCE, Index. American Realty has some $7 billion www.crenews.com of assets under management through its flagship fund, other core investment vehicles and certain separate accounts. Among the investors in the Value Realty Fund are the Fort Lauderdale, Fla., Police & Fire Retirement System, which had committed $20 million to it, and the Stanislaus County, Calif., Employees’ Retirement Association, which committed $30 million. Value Realty Fund targets an internal rate of return of 11-13 percent, before fees, according to a presentation that Verus Advisory Inc., the former Wurts -10- CalPERS venture bought the building in 2007. But those solid fundamentals have prompted an increase in new development, which could impact occupancies. Offsetting that risk, however, is the fact that nearly 40 percent of the space coming online is already leased. Reis notes that nearly 2.9 million sf will be added this year to Austin’s 44.2 million-sf inventory. While it’s not projecting an impact on asking or effective rents, it expects that the overall vacancy rate, which would include properties classified as B as well as A, would increase this year to 16.4 percent from 15.8 percent. and Freddie funded 31 percent of the total. The other major investor groups, life-insurance companies, Federal Housing Administration and CMBS trusts, accounted for a combined $36.7 billion of volume, or 18 percent of the total. Banks and thrifts tend to focus on relatively small-balance loans, as evidenced by the 31,488 loans they wrote last year, giving them an average size of $2.19 million each. USBancorp, for instance, funded 510 loans, making it among the most active lenders, in terms of number of loans. But its average loan size was only $1.2 million, so its total volume amounted to only $633.9 million. In fact, the MBA found that 1,884 lenders that wrote loans last year had an average loan size of $1 million or less. Meanwhile, the 4,092 loans written by Fannie and Freddie had an average balance of nearly $15 million each, while the 706 loans that life insurers wrote had an average balance of $25.9 million. & Associates, recently had made for the Fresno County, Calif., Employees’ Retirement Association. The fund pursues investments in the four major property types, with a 49 percent allocation to office, 20 percent to retail, 17 percent to multifamily and the remainder to industrial. Properties it would invest in are typically in or near major markets and would be in need of repositioning, or might have a vacancy issue that was prompted by a lack of sponsor capital for renovations or tenant improvements. October 30, 2015 DATADIGEST Top 10 Conduit Loans - 1H 2015 Bal ($mln) Property Name City State Prop Type LTV % Coupon Maturity Date % NOI ($mln) Ticker Name 703.5 Courtyard by Marriott Portfolio Various VR LO 63.00 3.69 Apr. 10, 2020 102.89 COMM 2015-CR23, COMM 2015-LC21, GSMS 2015-GC30, 260.0 3 Columbus Circle New York NY OF 50.00 3.61 Mar. 10, 2025 30.65 CGCMT 2015-GC29, COMM 2015-CR22, WFCM 2015-LC20 248.0 Selig Office Portfolio Seattle WA OF 220.0 26 Broadway New York NY OF 63.36 3.91 Apr. 10, 2025 32.08 CGCMT 2015-GC29, GSMS 2015-GC30 59.50 4.38 Jan. 10, 2022 16.19 COMM 2015-DC1, COMM 2015-CR22 175.0 Soho-Tribeca Grand Hotel Portfolio New York NY LO 57.84 4.02 Nov. 15, 2024 23.66 CSAIL 2015-C1, CSAIL 2015-C2 170.0 Discovery Business Center Irvine CA OF 47.49 4.18 Nov. 15, 2024 20.95 MSBAM 2015-C20, MSBAM 2015-C21 155.0 The Club Row Building New York NY OF 62.00 4.38 Jan. 15, 2025 11.89 JPMBB 2015-C27, JPMBB 2015-C28 150.0 Houston Galleria Houston TX RT 48.00 3.29 Mar. 15, 2025 102.33 JPMBB 2015-C28, JPMBB 2015-C28 144.0 One Memorial Cambridge MA OF 54.5 4.02 Oct. 10, 2024 18.87 COMM 2015-LC19 135.0 100 West 57th St. New York NY 60.00 2.31 Nov. 10, 2019 4.21 COMM 2015-CR22, COMM 2015-DC1, WFCM 2015-NXS1 Source: Trepp LLC Top 10 Defeased Loans - 1H 2015 Balance ($mln) 335.0 Property Name City ST Prop Type Coupon % Maturity Date Brookdale Office Portfolio Various VR LTV % NOI ($mln) OF 4.98 Sept. 11, 2015 63.3 31.0 Ticker JPMCC 2005-LDP5 % of Deal 16.03 242.0 Selig Office Portfolio Seattle WA OF 5.77 Jan. 1, 2016 71.9 28.3 JPMCC 2005-LDP5 12.49 220.0 353 North Clark Street Chicago IL OF 5.12 Jan. 6, 2016 53.7 26.0 DBUBS 2011-LC1A 10.71 202.0 222 South Riverside Plaza Chicago IL OF 6.19 June 6, 2016 73.1 18.8 GSMS 2006-GG8 7.72 177.0 535 and 545 Fifth Avenue New York NY OF 5.77 May 11, 2016 63.9 11.3 CSMC 2006-C3 13.30 179.5 Michigan Plaza Chicago IL OF 4.94 Nov. 5, 2015 59.9 22.4 MSC 2011-C1 13.27 160.5 Harbor Point Apartments Boston MA MF 6.54 July 6, 2017 77.9 17.1 GSMS 2007-GG10 3.12 160.5 Ashford Hotel Portfolio Various VR LO 5.22 July 1, 2015 76.0 23.1 MLMT 2005-CKI1 21.64 135.0 9200 Sunset Boulevard Los Angeles CA OF 5.80 July 6, 2017 65.8 14.96 GSMS 2007-GG10 2.69 119.9 300 South Riverside Plaza Chicago IL OF 5.43 Jan. 6, 2016 53.3 15.4 DBUBS 2011-LC1A 5.67 Source: Trepp LLC October 30, 2015 -11- www.crenews.com DATADIGEST Recently Priced CMBS Conduits Source: Morningstar Deal Name Date Size ($mln) Underwriter COMM, 2015-CCRE27 Oct. 20 931.62 DB S+125 S+525 Rialto JPMBB, 2015-C32 Oct. 19 1,148.16 JPM, Barc S+127 S+565 LNR GS Mortgage, 2015-GC34 Oct. 14 848.38 GS, Citi S+125 S+510 KKR MS-BofA-ML, 2015-C25 Oct. 7 1,179.42 MS, BofA S+125 S+520 Eightfold Sept. 28 1,090.90 DB S+125 S+525 Seer Capital Wells Fargo, 2015-NXS3 Sept. 25 814.50 WF S+115 S+460 LNR Wells Fargo, 2015-LC22 Sept. 15 963.70 WF S+122 S+460 Rialto Citigroup, 2015-GC33 Sept. 14 958.49 Citi, GS S+124 S+460 LNR BofA-ML, 2015-UBS7 Sept. 14 757.28 UBS, BofA S+117 S+440 Ellington Wells Fargo, 2015-SG1 Aug. 18 716.33 WF, SocGen S+120 S+440 Rialto JPMBB, 2015-C31 Aug. 13 1,027.32 JPM, Barc S+120 S+475 KKR Aug. 13 1,127.41 DB, Cantor S+116 S+440 Eightfold COMM, 2015-CCRE26 Source: Morningstar COMM, 2015-CCRE25 10-yr AAA BBB- B-piece Buyer For historical data points, please visit the Commercial Real Estate Direct Web site, at www.crenews.com. CMBS Pricing Matrix New Issue Spreads (bps over swaps) Bond Source: Morningstar Top 10 Liquidated Loans - August 2015 Name DealID Bal $mln Loss $mln Sever% 10/9 10/2 5-yr AAA 10/23 10/16 77.5 76.5 75 76.5 10-yr AAA 123 123 121.5 122 10-yr AAA Jr. 158.5 159.5 157 155 AA 209.5 212 208.5 214 A 310 309 302.5 309 BBB- 497.5 485 482.5 472.5 Legacy Spreads (bps over swaps) %ofDeal PropType Bond 10/23 10/6 10/9 10/2 126.5 126.5 125 126.5 Computer Sciences LBUB08C1 67.65 55.61 82.2 7.99 OFF SuperSr AAA Prudential Plaza-B JPM06LDP7 37 37 100 1.32 OFF 20%Sub AAA 209.5 208 205 207.5 RET Junior AAA 603.5 595.5 591.5 582 Mall at Steamtown LB03C5 37.13 36.66 98.74 80.7 1100 Executive Twr-B CS08C1 27.5 River Park Plaza GCC05GG5 29.7 27.5 100 4.51 OFF 23.2 78.09 2 OFF Fisher/Kahn Bldg GCC05GG5 23.97 18.84 78.58 1.61 OFF Reckson Port II LBUB05C7 27.4 18.71 68.3 5.63 Park 100 Port LBUB08C1 16.61 16.61 100 Senator Office Bldg GCC05GG5 34.36 13.36 Trafalgar Plaza CD06CD2 18.8 11.96 10/9 10/2 OFF 5yr AAA 57 58 53 54 1.96 IND 10yr AAA 76 76 76 74 38.89 2.31 OFF 63.64 1.07 OFF Source: Trepp LLC www.crenews.com Freddie Mac K-Series Spreads (bps over swaps) -12- Bond 10/23 10/16 Note: Medians were compiled using spreads provided by several investment banks. Reporting banks were quoting 5-year swaps at a median spread of 2bps over Treasurys, while 10-year swaps priced at 4bps less than Treasurys. October 30, 2015 ©2015 Morningstar, Inc. All rights reserved. The Morningstar name and logo are registered marks of Morningstar. Marks used in conjunction with Morningstar products or services are the property of Morningstar or its subsidiaries. Morningstar Credit Ratings AAA Everything Investors Need to Know—From AAA to Z At Morningstar Credit Ratings, the ratings are just the beginning. Our research Morningstar Credit Ratings, LLC teams generate a comprehensive analytical package that equips investors ratingagency.morningstar.com with the information required to make informed decisions. Our analysis provides 11 800 299-1665 a concise Morningstar opinion on the risks that matter. We cover the full spectrum of a transaction: from new-issue and ongoing surveillance to objective operational risk reviews of servicers, property managers, and other third-party transaction participants. Investors can count on Morningstar to deliver an original perspective on CMBS, RMBS, single-family rental securities, and ABS. October 30, 2015 -13- www.crenews.com