As Housing Rebound Helps More Retirees Sell Homes

MARK HESCHMEYER, EDITOR
SEPTEMBER 16, 2013
WWW.COSTAR.COM
A WEEKLY NEWSLETTER FOCUSING ON CHANGING MARKET CONDITIONS, COMMERCIAL REAL ESTATE, MORTGAGES AND
CORPORATIONS PUBLISHED BY COSTAR NEWS
IN THIS WEEK'S ISSUE:
As Housing Rebound Helps More Retirees Sell Homes, Investors Prep for Increased Demand for Senior Housing ........................ 1
Institutional Players Jockeying To Lead Single-Family Rentals......................................................................................................... 4
Flush With Cash and Making Deals, Investors from South Korea, Norway Targeting U.S. Real Estate ........................................... 6
Blackstone Taking Hilton Worldwide Public....................................................................................................................................... 9
Hines Forming Third Public REIT, Seeking to Raise $2.5 Billion ....................................................................................................... 9
Kilroy Realty Raising $250 Mil.; Looks To Dispose of $450 Mil. in Assets ...................................................................................... 10
Steadfast REIT Passes $1 Billion in Assets; Forms a New Apartment REIT................................................................................... 10
Kennedy-Wilson Funding a $450 Mil. Pipeline ................................................................................................................................ 10
Summit Hotel Tidying Up Finances To Make a Run at $165 Mil. More in Properties ...................................................................... 11
Capital Markets Report: HFF Arranges $580M Refi for Las Vegas‟ Miracle Mile Shops ................................................................. 11
Capital Markets Round-Up .............................................................................................................................................................. 12
Furniture Brands Files for Chapter 11; To Close 32 Facilities ......................................................................................................... 12
Tesco Selling Fresh & Easy to Yucaipa; 50 Stores To Close .......................................................................................................... 14
Facility Closures & Downsizings ...................................................................................................................................................... 14
Forest City, QIC Complete Mall Joint Ventures ............................................................................................................................... 15
Google Signs Lease for Former Mayfield Mall ................................................................................................................................. 15
As Housing Rebound Helps More Retirees Sell Homes,
Investors Prep for Increased Demand for Senior Housing
Relatively Affordable Senior Unit Prices Attracting Buyers, REITs Allocating More Funds for Property
Acquisitions
Senior housing investment sales, which have been slowly creeping up this year, could see a big boost in activity
in the near future. Investors in the sector see senior living assets continuing to benefit from the ongoing recovery
in housing, which is making it easier for older owners to sell their homes in anticipation of moving to a senior
housing facility.
Seeing this trend, several major public REITs are beginning to sell some of the their commercial assets, which
are getting premium pricing in the current market, to raise money to redirect towards senior housing and care
facilities, in expectation that the prices will rebound.
Sales volume of senior multifamily housing properties, including assisted living and congregate care facilities, in
the first half of this year is ahead of volume in the first half of last year - $1.59 billion vs. $1.18 billion, according
to CoStar COMPs records.
However, per unit sales prices have been trending down since peaking in the third quarter of 2011 from about
$88,000/unit to $58,000, according to CoStar COMPs.
HCN LEADING THE CHARGE
One of the biggest players in the market, Health Care REIT Inc. (NYSE:HCN), completed the $745.2 million final
phase of the Sunrise Senior Living property portfolio acquisition this past summer. The REIT‟s aggregate $4.3
billion investment in Sunrise Senior Living includes 120 wholly-owned properties and five properties owned in
joint ventures with third parties.
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HCN has also acquired senior living portfolios in Canada and the United Kingdom. And the Toledo, OH-based
REIT is far from done. According to SNL Financial, the REIT has $2.76 billion in revolving credit facilities and
cash on hand, giving it the third largest war chest of any equity REIT in the country.
"There are a lot of buyers in the market right now," Scott M. Brinker, executive vice president of investments of
the REIT said recently. "Like us, they're attracted by resilient returns and strong fundamentals. In times like
these, we turn to our vast network of relationships for proprietary deal flow."
Other investors are also positioning themselves for future investment in the sector. This past week, Senior
Housing Properties Trust in Newton, MA, announced a deal extending the term and reducing the interest rate
and fees on its $750 million unsecured revolving credit facility. It owns 395 properties in 40 states and
Washington, DC.
Senior Housing Properties Trust„s credit facility had a maturity date of June 2015 and interest paid on drawings
was LIBOR plus 160 basis points. The maturity date of the amended credit facility is extended to January 2018
and interest paid on drawings is reduced to LIBOR plus 130 basis points.
The REIT had no problem finding lenders willing to back the deal. Wells Fargo, Royal Bank of Canada and
Citigroup lead the facility, which also included 16 other national and international lenders.
Lenders across the board are stepping up their activity in the market.
"We expanded our large corporate banking team to add a senior housing team," Kessel Stelling, chairman and
CEO of Georgia-based Synovus Financial, recently announced. "They specialized in skilled nursing, assisted
living, and independent living facilities. [There is] great growth and great quality growth in that area, and we
adopted a bank-wide unified sales platform system to allow these new units to communicate better with our
existing bankers spread throughout our five-state footprint as we began to sell deeper and cross-sell
opportunities throughout our footprint.”
Investors Real Estate Trust, a Minot, ND-based that invests primarily in income-producing properties in the upper
Midwest, this summer said that, for the remainder of its 2014 fiscal year, it planned to dispose of assets in noncore markets, particularly industrial and retail segment assets, and use the proceeds to buy more assets in its
multifamily and health care segments.
The REIT currently owns 65 health care properties (including senior housing) and 88 multifamily residential
properties with 10,351 apartment units. It also owns 68 commercial office properties, 14 commercial industrial
properties and 28 commercial retail properties with a total of approximately 12 million square feet of leasable
space.
ROUNDABOUT WAY TO INVEST IN SENIOR HOUSING
Another REIT, Mortgage REIT Newcastle Investment Corp. is also setting itself up to expand its senior housing
debt investment activity, but in a roundabout way.
Newcastle, which owns approximately 52% of GateHouse Media Inc.‟s $1.2 billion of debt, is beefing up its
newspaper investments so that it can eventually spin off its media assets into a new company leaving it to be
more singularly focused on senior housing assets.
Newcastle Investment Corp. this week acquired Dow Jones Local Media Group, which operates 33 local
publications, including eight daily and 15 weekly newspapers, from News Corp. for $87 million.
The Local Media Group operations will be managed by GateHouse Media, which Newcastle plans to put into
bankruptcy reorganization. Newcastle has entered into an agreement with other creditors in a prepackaged plan
of reorganization, which will convert its debt position into equity of GateHouse. The company would then emerge
from bankruptcy as a new stand-alone entity.
Following the deal, Newcastle will be more concentrated in the senior housing sector.
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As of this week, Newcastle has invested about $167 million in senior housing. By the end of the year, it expects
to have $400 million deployed.
"That‟s our estimate based on current market conditions and on current pipeline that although we have in front of
us," Wesley R. Edens, chairman of Newcastle said.
Institutional Players Jockeying To Lead Single-Family Rentals
REITs and Potential REITs Expanding Acquisition Capacity and Management Capabilities
As growth among the publicly held entrants in the single-family field is beginning to show some tapering as
housing prices rise and profits have yet to materialize, a handful of players made moves last week to raise
investment funds and expand their single-family rental management capabilities.
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For starters, Barry Sternlicht‟s Starwood Property Trust Inc. edged ever closer to spinning-off its single-family
rental homes and distressed and non-performing residential mortgage loans into a new REIT.
The trust has entered into a non-binding letter of intent to purchase certain assets of an operator of single-family
homes. This potential acquisition would be limited to the purchase of management-related assets, and would not
include the acquisition of any single-family homes or residential mortgage loans.
If the acquisition goes through, the core management team of the acquired operator would become part of the
spin-off, which would then also become a third-party manager of the single-family properties that Starwood does
not purchase in the deal.
It was Sternlicht who just a few weeks ago forecasted a potential consolidation within the industry as institutional
entrants in the arena vie for scale.
Starwood Property Trust also went to market this week with a 25 million share common stock offering looking to
raise up to nearly $700 million. The REIT intends to use the net proceeds to originate and purchase additional
commercial mortgage loans and other target assets and investments.
As of June 30, its portfolio of residential REO properties consisted of 4,329 owned single-family rental homes
and single-family homes underlying distressed and non-performing residential mortgage loans, including 2,778
single-family rental homes.
Also this past week, Donald R. Mullen Jr., who helped Goldman Sachs Group Inc. profit from the U.S. housing
crash before forming his own firm to acquire REO properties, lined up a new revolving credit facility of $400
million.
Mullen‟s firm, Progress Residential LLC (formerly Fundamental REO LLC), has raised more than $1.1 billion to
buy single-family houses. The proceeds of the new $400 million credit facility will be used for the acquisition,
renovation and management of single-family homes across the country. Deutsche Bank served as sole lender.
Progress Residential is leasing nearly 6,000 homes in 20 markets across nine states.
American Homes 4 Rent, which completed its initial public stock offering last month raising more than $670
million, this week filed for a follow on offering of preferred stock looking to raise another $100 million or more. It
intends to use the net proceeds of the offering to continue to acquire and renovate single-family properties,
including certain escrow properties.
As of July 31, AH4R owned 19,825 single-family properties for an estimated total investment of $3.4 billion and
had an additional 458 properties in escrow at an average property price each of $166,636.
Moving forward, American Homes 4 Rent said that it may expand beyond single-family properties to also invest
in condominium units, townhouses and real estate-related debt investments.
Lastly, Ocwen Financial Corp., which specializes in servicing high-risk loans, and Altisource, a provider of asset
recovery and management services, moved forward with a $100 million follow-on stock offering for their
Altisource Residential. The company completed its initial public offering this past May.
Virgin Islands-based Altisource Residential acquires single-family properties by buying distressed mortgage loan
portfolios. Its strategy is to work with borrowers to modify and refinance loans to keep them in their homes and
convert the majority of unmodified loans into renovated rental properties.
As of June 30, it owned 1,332 single-family mortgages with an unpaid principal balance of $328 million. It did not
break out how many of those properties it owned.
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Flush With Cash and Making Deals, Investors from South Korea, Norway
Targeting U.S. Real Estate
By: Randyl Drummer
A pair of recent high-priced investment property sales illustrates the growing interest from cross-border capital in
U.S. commercial real estate.
In the latest acquisition, an affiliate of Oslo-based Norges Bank which administers Norway's oil-based sovereign
wealth fund, Government Pension Fund -- Global (GPFG), has agreed to buy a stake in a New York City office
trophy office tower for $684 million.
Boston Properties, Inc. (NYSE: BXP) said it will sell a 45% interest in its Times Square Tower for roughly $1,200
per square foot to Norges Bank Investment Management (NBIM). The fund managed by NBIM ranks among the
world‟s largest sovereign wealth funds, with $737.2 billion in assets under management as of August 2013.
It‟s the second large deal of 2013 for Norges Bank, which last year announced its intention to deploy $11 billion
from GPFG into global real estate for the first time, and promptly backed up its words in February by acquiring a
$1.3 billion interest in a five-building office portfolio owned by TIAA-CREFF.
Meanwhile, Korean investors have also been active. Groups like Korea Investment Corp. (KIC), South Korea‟s
largest sovereign wealth fund with $56.6 billion under management, and the National Pension Service of Korea
(NPS) amongst several others have been actively pursuing core deals in top tier markets including New York,
Washington, D.C., Chicago, Houston and San Francisco.
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In late July, Principal Real Estate Investors, representing a consortium of Korean investors that included Korean
Federation of Community Credit Cooperatives (KFCC) closed a deal for $370 million to acquire Washington
Harbour, a mixed-use property in the upscale Georgetown neighborhood of D.C. from a joint venture of
Rockpoint Group and MRP Realty.
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And in late May, the pension service bought 811 Main Street, a shiny new 972,474-square-foot office tower in
Houston‟s CBD, from Hines for $480 million, or $493.59 per square foot.
In total, cross-border acquisitions by South Korean entities exploded from just $200 million in the first half of last
year to $5.4 billion through June 30, 2013, eclipsed only by global funds and U.S. investors, according to the
most recent Jones Lang LaSalle Global Capital Flows report. Four of the top 10 cross-border purchasers were
Asia based.
China rose from $1.7 billion to $3.8 billion during the same period, while Norway jumped from $300 million to
$2.8 million. South Korea and Norway entered the top 10 this year.
Foreign property investors have always scouted the U.S., drawn by the relative political and economic stability of
the United States over many other international markets. But until recently, they often did more circling than
striking deals.
That being said, direct investment by cross-border groups as a percentage of total U.S. CRE transaction volume
has increased gradually from just under 2% in 2005 to about 7.5% as of second-quarter 2013 -- including an
uninterrupted upward climb since 2008, the trough of the downturn.
As of second-quarter 2013, Asian investors trailed only Canada and Mexico groups in total U.S. acquisitions.
Asian's total investments are about double those of both South America and Europe, according to CoStar data.
Foreign capital, notably investors from South Korea, the Middle East and Europe, has been particularly visible
this year in large office CBD deals in New York, Chicago, Washington D.C. and other primary U.S. markets,
according to Jones Lang LaSalle‟s Third-Quarter Global Markets Perspective.
Analysts say the Manhattan deal with Boston Properties in particular could be a harbinger of future activity, since
cross-border investors tend to progressively ramp up their activity with trusted partners.
In addition to keeping its majority stake, BXP will retain property and leasing management of the Times Square
Tower. GPFG's minority stake underscores the caution with which foreign investors are proceeding this time
around.
Unlike past forays into U.S. property markets, when non-domestic groups often invested alone (some say
recklessly) and on occasion suffered heavy losses, offshore entities are now increasingly choosing to seek the
security of a joint-venture partner or other arrangement in the current market, said Guy Benn, director of crossborder investments for Savills New York.
Not only is this often more tax efficient, but it also enables the investor to benefit from their local partner‟s
expertise, Benn said.
"Foreign investors are prepared to consider more structured investments, rather than the previous straight „I just
need to own [assets] in America‟ approach," said Benn, noting that groups are better educated, more
sophisticated and perhaps more risk averse having witnessed mistakes made by investors in past cycles.
Some Korean investors are less inclined to take full control of a transaction and prefer to co-invest in U.S. deals,
added Jason Park, a capital markets specialist who relocated from Savills in Korea to join Benn in the company‟s
U.S.-based cross-border investment team in New York.
"There is more of an openness to work through structured deals of some type, whether they are traditional joint
ventures, preferred equity investments or even mezzanine investments," Park said, adding that the immediate
need for stable income is another reason why some groups are prepared to sacrifice their share of capital
appreciation on sale if current returns are high enough.
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Blackstone Taking Hilton Worldwide Public
The Blackstone Group is spinning off a minority ownership stake in Hilton Worldwide Holdings in a proposed
initial public offering of common stock that could raise up to $1.5 billion.
As a part of the strategy, Blackstone would also restructure a portion of Hilton‟s debt through a CMBS offering
that could go as high as $3.5 billion - potentially the second largest CMBS offering in the U.S. (Goldman Sachs
put together a $3.66 billion CMBS deal at the last peak of the market in 2007).
The number of shares to be offered and the price range for the proposed Hilton Worldwide offering have not yet
been determined. Deutsche Bank Securities Inc., Goldman, Sachs & Co., BofA Merrill Lynch, and Morgan
Stanley & Co. LLC are acting as the joint book-running managers for the offering.
At $27 billion in assets, Hilton Worldwide is one of the largest and fastest growing hospitality companies in the
world, representing a chain of 4,041 hotels, resorts and timeshare properties comprising 665,667 rooms in 90
countries and territories. It owns or holds lease interests in 157 of those hotels.
Its premier brand portfolio includes luxury hotel brands Waldorf Astoria Hotels & Resorts and Conrad Hotels &
Resorts. Its full-service hotel brands are DoubleTree and Embassy Suites Hotels, and its focused-service hotel
brands are Hilton Garden Inn, Hampton Inn, Homewood Suites and Home2 Suites. In addition Hilton owns a
timeshare brand, Hilton Grand Vacations.
Prior to undertaking the public offering, Blackstone expects to close on a number of refinancing transactions,
including entering into a multi-billion dollar new senior secured credit facilities; a private placement of a multibillion dollar senior notes and first priority senior secured notes; and entering into a multi-million dollar bank loan
secured by its Waldorf-Astoria New York property.
The refinancing catching the most attention though is the potential issuance of multi-billion dollar commercial
mortgage-backed securities offering.
The offering would be backed by loans securing 23 hotels owned by the Hilton-affiliated CMBS borrowers. The
CMBS loan is expected to have both a fixed-rate and floating-rate component.
Blackstone followed a similar strategy with its Extended Stay America hotel chain, putting together a $2.5 billion
CMBS deal before registering to sell shares of the chain in a public offering. Extended Stay‟s IPO is still in the
registration process.
Hines Forming Third Public REIT, Seeking to Raise $2.5 Billion
Hines Interests LP is going back to the U.S. stock markets to raise funds for new globally focused investment
REIT.
Hines Global REIT II Inc. has filed registration paperwork to raise up to $2.5 billion to invest in a diversified
portfolio of commercial real estate properties and other real estate investments throughout the United States and
internationally. This would be Hines third publicly offered REIT.
The new REIT will be structured similar to its predecessor, Hines Global REIT I, which was launched in August
2009 and has a $3.2 billion portfolio of 32 projects with 9.7 million square feet in 18 locations. Almost half of its
holdings are the U.S., with the rest located in the United Kingdom, Poland, Russia and Australia. Its holdings
include 15 office properties in the United States.
Hines Global I expects to consider a liquidity event sometime between 2017 and 2019 through the sales of
assets, the portfolio, a merger, a listing or similar transaction.
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Kilroy Realty Raising $250 Mil.; Looks To Dispose of $450 Mil. in Assets
Los Angeles-based Kilroy Realty Corp. priced a secondary public offering for 5.5 million shares of its common
stock which could raise more than $250 million.
The company intends to use the net proceeds from the stock sale to acquire properties, including office
properties and undeveloped land), to fund development and redevelopment projects, and repay some debt.
Kilroy Realty‟s portfolio includes 115 office buildings totaling 13.5 million rentable square feet. As of June 30,
these properties were approximately 90.7% occupied by 545 tenants.
Kilroy currently has two fully-leased properties in San Diego and an adjacent land parcel that it may seek to
develop in the future under contract for $125 million. The acquisition is expected to close in the third quarter of
2013.
As part of its current investment strategy, the REIT is also considering selling some properties and undeveloped
land in its portfolio with the intent of recycling the proceeds into new investments. It has identified $150 million to
$400 million of operating properties and/or undeveloped land that it could sell over the next 18 months.
The company, which operates as a REIT, has focused on real estate assets in the coastal regions of Los
Angeles, Orange County, San Diego, the San Francisco Bay Area and greater Seattle.
Steadfast REIT Passes $1 Billion in Assets; Forms a New Apartment REIT
Steadfast Income REIT Inc. recently acquired a pair of apartment communities in separate transactions for a
total price of $36.4 million. The two deals pushed the Irvine, CA-based affiliate of Steadfast Cos. past the $1
billion milestone made up of 48 properties in 11 states.
Since surpassing the milestone in its portfolio, Steadfast Cos. filed registration papers to launch a second
multifamily REIT, Steadfast Apartment REIT Inc. The new REIT is looking to raise $935 million through the sale
of common stock.
It plans to use proceeds primarily to acquire a diverse portfolio of established, stable apartment communities. It
also plans to use a portion of the funds it raises to target properties that offer value-add opportunities through
renovation and repositioning.
Steadfast Income REIT‟s latest buys include the 240-unit BriceGrove Park in the Columbus, OH, suburb of Canal
Winchester for $20.1 million; and Watermark at Hamburg Place a newly constructed 150-unit apartment
community in Lexington, KY, for $16.3 million
Kennedy-Wilson Funding a $450 Mil. Pipeline
International real estate investment and services firm, Kennedy-Wilson Holdings Inc. priced a public offering of 6
million shares of its common stock looking to raise more than $100 million.
The company expects to use the net proceeds for future acquisitions and co-investments, and to repay the $50
million outstanding debt.
Since June 30, the company has backed $1 billion of real estate-related investments, which includes the
purchase of 23 commercial properties, two loan originations and one loan portfolio purchase. Its total equity
investment in these transactions was $121 million.
As of last week, the Beverly Hills-based investment firm had separate contracts to purchase six real estaterelated investments in the United States and the United Kingdom, as well as a real estate loan servicing
business platform in Spain, at an aggregate purchase price of more than $450 million.
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The company also said it is currently in discussions with lenders to expand and extend its unsecured revolving
credit facility.
Summit Hotel Tidying Up Finances To Make a Run at $165 Mil. More in
Properties
Summit Hotel Properties Inc. is selling 15 million common shares looking to pay off loan and credit facility debt.
At the same time, the Austin-based REIT has agreements to purchase six hotels with an aggregate acquisition
cost of $165 million.
Summit said the properties currently under contract are located primarily within a top 50 MSA, with a particular
concentration on the West Coast.
Summit Hotel Properties focuses on acquiring and owning premium-branded select-service hotel properties in
the upscale and upper midscale segments. As of Sept. 11, it owned 93 hotels with a total of 10,978 guestrooms
located in 24 states.
Last month, it sold a 78-room SpringHill Suites in Lithia Springs, GA, for $2.4 million; and a 71-room Fairfield Inn
in Lewisville, TX, for $2 million.
The hotel REIT has also obtained commitments from a syndicate of lenders to obtain a $300 million senior
unsecured credit facility intended to replace both its $92 million senior secured interim loan and its $150 million
senior secured revolving credit facility.
Deutsche Bank Securities and Merrill Lynch, Pierce, Fenner & Smith are serving as joint bookrunners for the new
unsecured credit facility.
Capital Markets Report: HFF Arranges $580M Refi for Las Vegas’ Miracle
Mile Shops
By: Justin Sumner
HFF arranged a $580 million refinancing secured by the Miracle Mile Shops, a 501,522-square-foot elite mall
located in the epicenter of the Las Vegas Strip.
Claudia Steeb, Manny de Zarraga, Barry Brown, Gerry Rohm and Bryan Levy with HFF arranged the 10-year,
fixed-rate CMBS loan led by Cantor Commercial Real Estate, with JP Morgan and Citigroup participating.
Proceeds were used to refinance existing loans in addition to planned improvements including a renovation to
the retail area surrounding the PH Live Theater, which will be home to Britney Spears‟ new show in Las Vegas.
HFF‟s Miami and Pittsburgh offices worked with the ownership group, a joint venture between Tristar Capital and
RFR Holding LLC. The ownership group acquired the mall in December 2003 for $241.5 million and immediately
embarked on a $130 million renovation and rebranding effort.
The mall is now 95% leased to more than 180 tenants, many with sales exceeding $1,000 per square foot.
Miracle Mile Shops, home to H&M, Urban Outfitters, Guess, Gap, and others, features a 4,903-space parking
garage, five movie theaters, and is anchored by the Planet Hollywood Resort & Casino and the Elara Hilton
Grand Vacations Hotel. Robert K. Futterman & Associates serves as the project marketing and leasing advisor.
"We have positioned Miracle Mile Shops as one of the top five malls in the country with tenant sales at double
the national average and over 26 million shoppers per year,” said David Edelstein, president of Tristar Capital.
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Capital Markets Round-Up
Merlone Geier Partners, a San Francisco-based private real estate investment company focused on retail and
retail-driven mixed-use properties on the West Coast, has raised $843 million for its latest fund: Merlone Geier
Partners XI. The amount is nearly a quarter of a million more than raised for its previous fund formed in January
2012.
Crown Castle International Corp. is converting to a REIT. The copany, which owns, operates and leases
towers and other infrastructure for wireless communications, controls more than 30,000 towers and 1,700
wireless communication sites in the US and Australia. The company said the timing and amount of future
dividend distributions will be based on a number of factors, including investment opportunities around its core
business and its existing federal net operating losses of $2.7 billion.
Siguler Guff & Co., a multi-strategy private equity investment with more than $10 billion of assets under
management, has formed its second distressed real estate fund, and raised an initial $100 million. Its first
distressed real estate opportunities fund had committed capital of $630 million. It was formed to assemble a
value-added portfolio of “debt and equity interests in commercial property primarily in the U.S.
Silo Financial Corp., a real estate specialty finance company, joined Knighthead Capital Management to form
Knighthead Funding LLC, which will invest primarily in bridge loans and other special situation debt opportunities
up to $20 million in size secured by a broad range of real estate assets throughout the East Coast and other
major U.S. markets.
The Pennsylvania State Employees‟ Retirement System has committed up to $50 million to the real assets class
with Regional Real Estate Investment Corp. in a new venture with Pennsylvania Real Estate Investment Trust
(PREIT), to establish a real estate separate account focused on investing exclusively within the Commonwealth
of Pennsylvania. The commitment further focuses investments in the separate account real estate portfolio
helping to increase SERS‟ control and liquidity options, and reduce fees as outlined in SERS‟ 2012-13 Strategic
Investment Plan (pg. 30). SERS‟ real estate consultant The Townsend Group assisted with the interview.
Furniture Brands Files for Chapter 11; To Close 32 Facilities
Furniture Brands International and certain of its wholly-owned subsidiaries filed for voluntary Chapter 11
bankruptcy reorganization. The retailer also announced it has an agreement to sell itself to affiliates of fund
manager Oaktree Capital Management.
Oaktree will acquire substantially all of the assets of the firm except the company‟s Lane Furniture business,
which Furniture Brands plans to sell separately. As part of the bankruptcy filing, Furniture Brands has asked to
cancel leases on 32 properties.
Tenant
HDM Retail (f/k/a DH Retail Space)
Broyhill Furniture
Industries
Thomasville Retail
(f/k/a Classic
Design
Furnishings)
Lane Home
Furnishings Retail
Lane Home
Furnishings Retail
Leased Premises
26,600 SF at 130 South
Central Ave., Hartsdale, NY
202,949 SF at 2358
Cottonwood Ave., Riverside,
CA
21,897 SF at 275 Route 4,
Paramus, NJ
21,827 SF at 5131
Brandywine Parkway,
Wilmington, DE
23,548 SF at DeKalb Plaza,
Store No. A100, 330 W.
DeKalb Pike, King of
Prussia, PA
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Apprx.
Monthly
Rent
$71,377
Lease Term
December 28, 2003 –
September 30, 2013
Landlord
Central Avenue Realty
Company LP
$63,928
December 1, 2004 –
January 31, 2015
Space Center Sycamore
CanyonLLC
$46,595
March 1, 2003 –
September 30, 2013
The Mall at IV Group
PropertiesLLC .
$39,270
July 11, 2005 –
October 31, 2015
Acadia Realty Trust
$38,854
December 22, 2004 –
December 31, 2014
Kravco Simon Co.
12
Tenant
Lane Home
Furnishings Retail
Lane Home
Furnishings Retail
Lane Home
Furnishings Retail
Lane Home
Furnishings Retail
Thomasville Retail
(f/k/a Classic
Design
Furnishings)
Broyhill Retail
HDM Retail (f/k/a DH Retail Space)
Lane Home
Furnishings Retail
Thomasville Retail
(f/k/a Classic
Design
Furnishings)
Thomasville Retail
Lane Home
Furnishings Retail
Lane Home
Furnishings Retail
HDM Retail (f/k/a DH Retail Space)
Thomasville Retail
(f/k/a Classic
Design
Furnishings)
Thomasville Retail
(f/k/a Classic
Design
Furnishings)
Lane Home
Furnishings Retail
Thomasville Retail
(f/k/a Classic
Design
Furnishings)
Thomasville Retail
(f/k/a Classic
Design
Furnishings)
Lane Home
Furnishings Retail
Broyhill Retail
Leased Premises
19,906 SF at 976 Bethlehem
Pike, North Wales, PA
20,000 SF at 5780
Centennial Center Blvd., Las
Vegas, NV
20,010 SF at 1487 North
Dysart Road, Avondale, AZ
20,185 SF at 20901
Hawthorne Blvd., Torrance,
CA 90503
15,103 SF at 98 Route 10
West, East Hanover, NJ
22,800 SF of retail space at
1690 Highway K, O‟Fallon,
MO
19,879 SF at 4240 Furniture
Ave., Jamestown, NC
22,875 SF at 14250A
Manchester Blvd.,
Manchester, MO
13,044 SF at Route 35 at 36,
Eatontown, NJ
15,421 SF at 3901 Design
Center Way Palm Beach
Gardens, FL
18,000 SF at 1620 Highway
K, O‟Fallon, MO
17,320 SF at 7922 Dublin
Blvd., Dublin, CA
15,336 SF at 68 Carolina
Point Parkway, Greenville,
SC
10,146 SF at 530 West
Francisco Blvd., San Rafael,
CA
14,520 SF at 66 Carolina
Point Parkway, Greenville,
SC
15,343 SF at 5850 University
Drive, Huntsville, AL
10,500 SF at 1530 Camino
de la Reina, Suite C, San
Diego, CA
15,780 SF at 650 Frazier
Drive, Franklin, TN
23,000 SF at 3840 Route 42,
Black Horse Pike,
Turnersville, NJ
19,865 SF at Vista Ridge
Plaza, 420 E. Round Grove
Road, Lewisville, TX
THE WATCH LIST NEWSLETTER
Apprx.
Monthly
Rent
Lease Term
May 2, 2005 – May 2,
2015
Landlord
Integral Development
Associates
$34,851
August 12, 2004 – April
30, 2017
June 25, 2005 – June
25, 2015
Centennial 2009 LP
Grace Avondale LL c/o W.M.
Grace Co.
$33,239
April 1, 2004 – March
31, 2014
DNJAY OneLLC c/o Leather
Expo Inc.
$31,842
December 13, 2004 –
December 31, 2014
Williams ParkwayLLC
$35,582
$35,300
$30,504
March 5, 2006 – March
31, 2016
May 1, 2005 – April 30,
2015
$26,592
June 28, 2005 – June
27, 2015
A&R Manchester,
$26,305
January 1, 2004 –
January 31, 2019
Eatontown Monmouth Mall
LLC and Vornado Realty
Trust
$25,402
February 1, 2007 –
February 28, 2017
March 5, 2006 – March
31, 2016
January 1, 2005 – May
31, 2015
PGA Design c/o Kessinger
Hunter & Company, LC
CapHarbor Realty
AdvisorsLLC
Gilroy Theatre Co. Inc. and
SPI Breuners DublinLLC
$24,768
April 1, 2006 – March
31, 2016
EVCO Construction Co. Inc.
$24,646
March 1, 2005 –
February 28, 2015
McPhail‟s Inc.
$23,910
April 22, 2006 – April
30, 2016
July 12, 2004 – July
31, 2014
EVCO Construction Co. Inc.
Secured Properties Investors
XII LP
$23,100
October 21, 2004 –
October 31, 2014
Sunbelt Management Co.
$23,013
October 1, 2005 –
September 30, 2015
Brookside Properties Inc.
$22,578
June 23, 2007 –
October 30, 2017
StelaurLLC
$21,520
April 23, 2005 – April
30, 2015
Kimco Lewisville LP8
$31,350
$26,151
$25,575
$24,382
CapHarbor Realty
AdvisorsLLC
Evco Construction Co. Inc.
13
Tenant
Thomasville Retail
Thomasville Retail
(f/k/a Classic
Design
Furnishings)
Thomasville Retail
(f/k/a Classic
Design
Furnishings)
Thomasville Retail
(f/k/a Classic
Design
Furnishings)
Broyhill Furniture
Industries
The Lane Co.
Furniture Brands
Resource Co.
Leased Premises
17,000 SF at 5951 South
180th St., Tukwila, WA
14,058 SF at 1431-1441
Randall Road, Geneva, IL
12,750 SF at 12551
Jefferson Ave., Newport
News, VA
12,565 SF at Fayette
Pavilion III Shopping Center,
230 Pavilion Parkway,
Fayetteville, GA
81,200 SF of premises
located at 418 Prospect St.,
Lenoir, NC
9,090 SF at 1425 Ellsworth
Industrial Drive, Atlanta, GA
2,500 at Archer‟s Business
Center, 1404 East Central
Ave., Suite 14, Bentonville,
AK
Apprx.
Monthly
Rent
$21,250
Lease Term
October 28, 2000 –
October 31, 2015
Landlord
Franmo HoldingsLLC Gary
Gallelli
$18,744
November 27, 2001 –
May 31, 2014
White BreadLLC
$17,000
September 30, 2005 –
October 31, 2015
Retail Properties of America
Inc
$15,706
January 8, 2005 –
January 31, 2015
Developers Diversified
Realty Corp.
$8,763
April 1, 1998 –
December 31, 2013
December 19, 2003 –
May 18, 2014
Michael MunozLLC
Lumber Yard Partners LLC
c/o The Courtland Co.
$2,906
November 25, 2008 –
July 31, 2015
JW Properties Group
$10,417
Tesco Selling Fresh & Easy to Yucaipa; 50 Stores To Close
Following its strategic review in the United States, Europe-based Tesco agreed to sell the substantive part of its
Fresh & Easy‟s operating business to YFE Holdings Inc., an affiliate of Yucaipa Companies LLC in Mexico.
Yucaipa is reportedly buying 150 of Fresh & Easy‟s 200 stores as well as its Riverside, CA, distribution and
production facilities.
Those stores not included in the transaction will be closed over the coming weeks. A list of stores involved in the
deal has not yet been released.
“Though the chain will initially close 50 locations (and this number may even increase as they root out
underperformers), I expect new ownership to eventually return to growth mode-possibly aggressive growth
mode,” Garrick Brown, Director of Research for Cassidy Turley wrote last week in his Research Rant. “Yes, the
50 or so closures will return about 750,000 square feet of space to the marketplace-impacting Las Vegas,
Phoenix, Sacramento and Southern California most. However, their typical footprint of 15,000 square feet won‟t
face anywhere near the leasing challenges that larger, traditional grocery stores in the 50,000 to 80,000 square
foot range typically face. The potential retail tenant pool for this size range is actually fairly decent.”
Facility Closures & Downsizings
Patriot Coal Corp. plans to idle its Logan County complex near Man, WV. Approximately 250 employees will be
impacted.
Company
Blount International
Bank of America
JP Morgan ChaseMortgage Bank
Bank of America
Address
3901 SE Naef Road
16001 N. Dallas Pkwy
City
Milwaukie
Addison
State
OR
TX
Closure
or Layoff
Layoff
Layoff
1111 North Point Drive
1201 Main St.
Coppell
Dallas
TX
TX
Closure
Layoff
THE WATCH LIST NEWSLETTER
No. of
Layoffs
199
113
Impact Date
10/22/2013
9/30/2013
52
87
10/11/2013
9/30/2013
14
Company
International PaperEdinburg East
Container Plant
JPMorgan Chase Chase Home Lending
Pentagroup Financial
Xerox Business
Services
Retreat Capital
Management
Walmart-Laredo
Distribution Center
Bank of America
Carrier Corp.
JPMorgan Chase
AxleTech
International
Address
City
State
Closure
or Layoff
No. of
Layoffs
1010 Chapin Road
Edinburg
TX
Closure
105
9/20/2013
14800 Frye Road
5959 Corporate Drive, Suite
1400
Ft. Worth
TX
Closure
451
10/11/2013
Houston
TX
Closure
123
9/27/2013
1390 Don Haskins
6303 Commerce Drive, Suites
180, 150
Houston
TX
Layoff
81
9/27/2013
Irving
TX
Closure
73
10/10/2013
40781 Black Diamond
2375 Glenville Drive
1700 E. Duncan St.
111 E. Wisconsin Ave.
Laredo
Richardson
Tyler
Milwaukee
TX
TX
TX
WI
Closure
Layoff
Closure
Closure
53
324
102
94
9/16/2013
9/30/2013
9/30/2013
10/11/2013
1005 High Ave.
Oshkosh
WI
Layoff
63
11/15/2013
Impact Date
Forest City, QIC Complete Mall Joint Ventures
By: Randyl Drummer
Forest City Enterprises, Inc., (NYSE:FCEA and FCEB) has completed and partially closed joint ventures with
QIC, one of Australia's largest institutional investment managers, on eight Forest City regional malls.
The agreements call for QIC, established in 1991 by the Queensland government to manage its long-term
investments, to recapitalize and invest in Forest City's mall portfolio. Seven of the JVs closed on Sept. 10 and
the eighth is expected to close by the end of the month.
The deal values the portfolio at $2.05 billion at a capitalization rate of about 5.75% on forecasted 2013 net
operating income (NOI). Forest City expects to generate $350 million in total liquidity after transaction costs.
Forest City will use most of the liquidity to reduce debt, but also expects to use a portion to pay for expansion,
renovation and other initiatives at a number of the malls.
Sales at the eight malls currently average approximately $500 per square foot, on a rolling 12-month basis.
The partnership with QIC is the company's largest such initiative to date, and "an exciting opportunity to work
with an experienced global investor to enhance these already strong retail centers," said David J. LaRue, Forest
City president and chief executive officer.
The eight properties included in separate JVs are Victoria Gardens in Rancho Cucamonga, CA, and Promenade
in Temecula, CA, both in the Inland Empire market; Charleston Town Center in Charleston, WV; Mall at
Robinson near Pittsburgh, PA, Galleria at Sunset, Henderson, NV; South Bay Galleria, Redondo Beach, CA, and
Antelope Valley Mall, Palmdale, CA, both in L.A. County; and Short Pump Town Center in Richmond, VA.
Google Signs Lease for Former Mayfield Mall
By: Randyl Drummer
Google, Inc. has inked a long-term office lease for 500,000 square feet at the former Mayfield Mall in Mountain
View, CA, reputedly Northern California's first air-conditioned shopping center.
The property's owners, a joint venture between Rockwood Capital, LLC and Four Corners Properties, LLC, has
begun a full renovation and conversion of the campus into Class A office space, with completion expected in
2014.
THE WATCH LIST NEWSLETTER
15
The campus is on 27.6 acre at 100 Mayfield Ave. Terms were not disclosed for the lease, which Rockwood and
Four Corners called the largest signed in Silicon Valley this year.
The mall property was originally constructed in 1966 and was occupied by such businesses as J.C. Penney,
Wells Fargo Bank, Mayfair Market and a Greyhound bus terminal.
The renovated buildings will incorporate historic elements from the property‟s previous retail use into a modern
office campus with multi-story sky-lit atriums and LEED Green Building certification, and other standard perks
familiar to Google employees.
"The renovation of the Mayfield Mall into a premier office campus will be a catalyst for the transformation of an
evolving mixed-use urban location that benefits from rail," said Jason Oberman, vice president at Rockwood
Capital. "The repurposing ... will incorporate the property's historic architectural elements and will utilize green
building techniques, modern design, and advanced building technology."
Kevin Cunningham and Jack Troedson of Cornish & Carey Commercial Newmark Knight Frank represented the
landlord. Steve Berkman, real estate partner at Paul Hastings, represented the landlord in the lease negotiation.
THE WATCH LIST NEWSLETTER
16