Investors looking for ultimate trophy properties should look no further than Arizona where legislators are proposing to sell state buildings and lease them back to help close a $3.4 billion state budget shortfall. Price estimates set by the governor and the Arizona Department of Administration are as follows:
State Capitol, including legislative and executive buildings: $105 million
State hospital: $176 million
Police headquarters: $50.5 million
State prisons: $391 million
Lottery headquarters: $6.5 million
Veteran’s Memorial Coliseum: $84 million
Sources: Phoenix Business Journal, Azcentral.com
New York Stimulates Affordable Housing
The nation’s first city to put stimulus funding toward affordable housing, New York City is financing acquisition and new construction with $60 million from the American Recovery and Reinvestment Act’s Tax Credit Assistance Program to build and rehabilitate four housing developments comprising 739 units, according to MHNOnline. New York City received $85 million total in TCAP funding and has three other projects slated to receive assistance this year. Nationwide, U.S. Housing and Urban Development awarded $2.25 billion in TCAP funding.
Markets to Watch
Orlando, Fla. — A concentration of large medical properties now under construction bodes well for future job creation as this central Florida city diversifies its employment base from entertainment and retail to healthcare and life sciences. The four medical centers and future spin-off companies are expected to create 30,000 jobs and generate $7.6 billion in revenue in the next 10 years, according to a Milken Institute study. While this will help create future multifamily demand, the current outlook is stagnant, with occupancy at 88 percent and rents dropping almost 5 percent since September 2008, the sharpest decline in 10 years. Multifamily investment properties have dropped in price from more than $88,000 per unit in 2006 to just over $63,000 this year.
Dallas-Fort Worth — Today’s commercial real estate bust is nothing like 1986, when Dallas’ office oversupply topped 40 million sf, the largest in the nation, according to the Dallas Morning News. However, the Metroplex’s empty office space again is approaching 40 million sf, although that accounts for only 20 percent of the market, given the metro area’s growth over the last 20 years. But the DFW office market could be slammed this time around too, says Marcus & Millichap. The average lease size decreased 60 percent in the first of half of 2009, and the overall office vacancy could reach 24 percent by year-end. In addition, office foreclosures increased 109 percent over last year’s midyear figures.
Cross Harbor Capital of Boston picked up the tony Yellowstone Club in Big Sky, Mont., for $115 million in a bankruptcy auction, a fraction of its estimated $400 million worth. The world’s only private ski and golf resort community, Yellowstone is the getaway spot for Microsoft mogul Bill Gates and others who seek to relax in privacy on the club’s 13,400 acres. The club’s largest developer and builder, Cross Harbor already owned a substantial portion of the undeveloped lots. Currently about half of the master-planned 864 residences are built, ranging in value from $4 million to $16 million.
Boise, Idaho, Market Snapshot Midyear 2009
Sector, Lease rate ($), YTD absorption (SF), Vacancy rate (%), Completed and under construction (SF), Planned construction (SF)
Office, 13.80, -213,000, 14.0, 510,707, 1,991,420
Industrial, .40, -610,000, 11.7, 878,784, 423,551
Retail, 13.95, -428,000, 13.0, 210,160, 2,470,206
Source: Thorton Oliver Keller Commercial Real Estate
Macy’s Department Store, which occupies St. Louis’ historic Railway Exchange Building’s first seven floors, is downsizing to three floors, from 400,000 sf to 125,000 sf. The St. Louis Development Corp. is kicking in $7 million in New Markets Tax Credit money to help fund the reconfiguration. The property — also once home to Macy’s Midwest headquarters, which closed last year — is up for sale, although no asking price has been listed.
Office Leasing, 2Q08–2Q09
National office leasing activity declined 4.8 percent in 2Q09.
Northern Virginia, 7.3%
South Florida, 6.5%
Washington, D.C., -21.5%
Los Angeles, -13.6%
Meijer to Build First Detroit Store
Meijer will build a 190,000-sf supercenter at the Shoppes at Gateway Park, Detroit’s largest commercial real estate development in 50 years, according to the Detroit News. Marshalls also has agreed to lease a 40,000-sf anchor store in the $80 million open-air shopping center that will include 40 shops, casual dining, and a bank. The mall is expected to open in 2011.
Captial Region Warehouse/Distribution Market
Market, Total stock (SF in millions), Vacancy (%), YTD absorption, Average rent ($PSF)
Baltimore, 105.5, 14.2, 107,545, 4.86
Suburban Maryland, 37.8, 15.1, -525,860, 6.35
Washington, D.C., 5.4, 10.3, -71,365, 11.51
Northern Virginia, 34.4, 11.2, -83,626, 8.54
Source: Jones Lang LaSalle
Oh Thank Heaven! 7-Eleven Is Growing
Convenience store 7-Eleven plans to open up 30 new Florida locations this year with another 40 to come in 2010, according to Laura Foster, real estate manager for the store’s Florida division. The stores are looking at shuttered gas stations and strip centers with end caps of 2,000 sf to 3,000 sf.
Tampa Records $23 Million Sale
The city’s first class-A multifamily transaction in over a year, Landmark Residential sold the 438-unit Three Palms Apartment complex in Tampa, Fla., for $23.5 million to a joint venture of Blackrock and BH Equities. The transaction came to about $53,600 per unit and the property is 90 percent occupied.
Minneapolis Charts Its Exposure
The Twin Cities has more than $5.8 billion of commercial mortgage-backed securities loan exposure; 10 percent of loans have been sent to special servicers, 9 percent are delinquent, and $700 million are on the watch list for potential return to lenders.
Sector,Properties in foreclosure (%), Delinquent properties (%), Watch list properties (%)
Retail, 71, 73, 26
Office, 16, 13, 42
Hospitality, 6, 5, 6
Multifamily, 2, 2, 8
Industrial, 2, 3, 10
Other, 3, 4, 8
Source: Colliers Turley Martin Tucker
Miami condominium developments such as 1060 Brickell Avenue have slashed prices, sparking a 37 percent rise in sales over last year. The median sales price of $138,700 is half of last year’s $277,100 per unit, according to the Florida Association of Realtors. The 1060 Brickell developer has closed on more than 200 units since cutting prices in half to about $200 psf.