Hines: the juggernaut continues to roll In one month, Houston-based Hines wrapped up financing for office developments in Chicago and Atlanta, acquired a Midtown Manhattan trophy office tower and unveiled plans to develop a 40-story office tower in Seattle. Not bad by any standard.
In Chicago, Hines has signed Chicago- and Washington, D.C.-based law firm Gardner, Carton & Douglas to a 200,000 sq. ft. anchor prelease at 191 North Wacker Drive. With the prelease, Hines retained financing from National Office Partners LP, a venture between Hines and the California Public Employees' Retirement System (CalPERS). Construction of the 38-story, 700,000 sq. ft. tower will begin this fall, and occupancy is expected in late 2002. Gardner, Carton & Douglas will move from its current location at 321 North Clark in December 2002. The Chicago office of New York-based Insignia/ESG represented Gardner, Carton & Douglas in the transaction.
Hines also has lined up financing for One Overton Park in Atlanta's Northwest submarket at the confluence of Interstate 75 and I-285. Hines formed a venture with Atlanta- and Los Angeles-based CS Capital Management Inc. to build the $62 million, 15-story, 350,000 sq. ft. building. Construction of One Overton Park began last month. One Overton Park is the first phase of a mixed-use development that eventually will include 1.45 million sq. ft. of office space.
In New York, Hines has acquired 750 Seventh Ave. in partnership with Detroit-based General Motors Asset Management (GMAM). Hines and GMAM purchased the 36-story, Class-A building from New York-based Morgan Stanley Dean Witter (MSDW). Built in 1990, the 592,000 sq. ft. building is fully leased, with MSDW occupying 62% of the structure under a long-term lease.
Finally, in downtown Seattle, Hines will build a 40-story, 810,000 sq. ft. office tower at Fourth and Madison. Construction of the building, to be located in the financial district, is scheduled to begin this fall with completion slated for the first quarter of 2003. Burlington, Vt.-based IDX Systems has signed a lease for 324,000 sq. ft., and the building will be known as IDX Tower at Fourth & Madison. The local office of New York-based Cushman & Wakefield represented IDX in the transaction, while the local office of Colliers International represented Hines.
The building will be owned and financed by National Office Partners.
Jamestown continues German acquisition frenzy Jamestown, the Atlanta- and Cologne, Germany-based real estate adviser, has acquired 1211 Avenue of the Americas in New York on behalf of a closed-end fund of private German investors. New York-based Heitman Capital Management LLC sold the property and was represented by New York-based Eastdil Realty.
For the transaction, the Atlanta office of Houston-based L.J. Melody arranged $350 million in secured financing from New York-based Credit Suisse First Boston Mortgage Capital.
Completed in 1973, 1211 Avenue of the Americas totals 1.8 million sq. ft. In addition to three FOX television studios, 1211 Avenue of the Americas is the U.S. headquarters of News America Inc., the parent company of Rupert Murdoch's The News Corp. Ltd. The building is 99% leased.
Phoenix heats up with new development, acquisitions Developers have more than 2 million sq. ft. of office space on tap for the Phoenix area, while, on the acquisition front, the government of Singapore has disposed of an Uptown Phoenix, mixed-use development.
The Alter Group, Chicago, will develop The Corridors-Phoenix, an 80-acre office park that will contain between 1 million sq. ft. and 1.4 million sq. ft. in Phoenix's northern suburbs. Located two exits north of the Agua Fria/Pima Freeway - Phoenix's outer loop - The Corridors-Phoenix will be constructed in the Deer Valley area. Alter expects to complete two single-story office buildings this fall, and will break ground on a multi-story office structure in the fourth quarter.
With the new development, Alter plans to serve national and regional headquarter operations as well as back-office functions. Facilities will have parking ratios of five spaces per 1,000 sq. ft., and will have the flexibility to expand to eight spaces per 1,000 sq. ft.
In Phoenix's uptown area, PCS Arizona, a company formed by the government of Singapore, has sold the City Square Complex on Central Avenue. Praedium IV City Square LLC, a venture formed by New York-based Praedium Group and Phoenix-based Pacific Realty Advisors, acquired City Square for $45 million. The complex includes 750,000 sq. ft. of office space, a 180-room Lexington Hotel and a 35,000 sq. ft. sports club. The Phoenix office of New York-based Insignia/ESG represented the seller.
In Tempe, a partnership between Phoenix-based SunCor Development Co., Boston-based Bay State Milling Co. and locally based Benton-Robb Development is building Hayden Ferry Lakeside, a mixed-use project fronting Tempe Town Lake. The companies will partner as Hayden Ferry Lakeside LLC, and break ground in spring 2001 on the first phase, an eight-story, 200,000 sq. ft., Class-A office building. Full build-out of the property is expected to take eight to 10 years. The development is planned to include 740,000 sq. ft. of office and restaurant development as well as 388 residential condominiums.
Mack-Cali closes the deal in Jersey City Cranford, N.J.-based Mack-Cali Realty Corp. has completed the $152.5 million sale of International Financial Tower in Jersey City, N.J. An Atlanta-based joint venture between CommerzLeasing und Immobilien GmbH Duesseldorf and GOA Germania of America Inc. acquired the property.
International Financial Tower, a 622,000 sq. ft., Class-A property, is 99.9% leased. Mack-Cali developed the building in 1989.
Bentley Forbes acquires Indianapolis trophy The Bentley Forbes Group, Los Angeles, has acquired the North American headquarters of Thomson Consumer Electronics in Indianapolis in a 12-year, net sale-leaseback transaction. Houston-based L.J. Melody & Co. arranged $47.4 million in fixed-rate acquisition financing. New York-based Merrill Lynch Credit Corp. provided funding through L.J. Melody & Co.'s Newport Beach, Calif., office.
Built in 1994, Thomson's U.S. headquarters consists of a four-story, 246,500 sq. ft., Class-A building and a 324,000 sq. ft. R&D technical space.
Noted retail developer tackles Florida mixed-use project The Goodman Co., West Palm Beach, Fla., will join The Dove Group, Jacksonville, Fla., in developing 686 acres in Jacksonville's Freedom Commerce Center, which is located at Interstate 95 and Philips Highway. The site has been approved for development of 1.1 million sq. ft. of office space, 415,000 sq. ft. of retail, 40,000 sq. ft. of light industrial facilities, 448 multifamily units and 650 hotel rooms. The joint venture plans to begin construction in 2001.
The Goodman Co. has been developing retail establishments since the 1960s, and began developing office buildings in the early-1990s with the construction of Phillips Point in West Palm Beach.
nvestors flock to suburban Boston for $135 million in deals Similar to its CBD, Boston's suburbs continue to draw investors looking to cash in on the area's booming economy. Leading the way is Syosset, N.Y.-based Lazarus Burman Associates with its $50 million acquisition of 100 Crosby Drive in Bedford, Mass. Manhasset, N.Y.-based Amedex LP brokered the deal.
Marking Lazarus Burman's first New England acquisition, 100 Crosby Drive is a 284,000 sq. ft. office building that is net-leased to Computervision Corp., a subsidiary of Waltham, Mass.-based Parametric Technical Corp. Lazarus Burman acquired the building from Miami-based United Trust Fund, and plans to develop as much as 256,000 sq. ft. of office space on the 52-acre site.
In Cambridge, the Boston office of Dallas-based Trammell Crow Co. negotiated the $49.9 million sale of The Davenport Building. Trammell Crow represented the seller, Dallas-based Archon Group LP, and procured the purchaser, a joint venture between New York-based Westbrook Partners and Gainesville, Fla.-based Paradigm Properties. Originally constructed in 1860 and completely renovated in 1987, The Davenport Building comprises 220,750 sq. ft. and is fully leased.
Also in the Boston suburbs, locally based New Boston Fund Inc. has acquired the 206,722 sq. ft., six-story Watermill Center in Waltham for $35.6 million from a pension fund adviser. The building is less than one mile north of Massachusetts Route 128, Boston's high-tech thoroughfare.
Manhattan Mayhem The first quarter and spring statistics for the Manhattan office market boggle the mind. Downtown's vacancy came in at 7.6% with 560,000 sq. ft. of net absorption, while Midtown South's vacancy was 5.3%, with net absorption of 320,000 sq. ft., according to Insignia/ESG's March report. In Midtown, where average asking rents are hovering around $50 per sq. ft., March vacancies totaled 5.9%, with net absorption of 660,000 sq. ft., according to Insignia/ESG. Central Park area trophy properties are asking for $100 per sq. ft., and in some cases are achieving triple-digit rents, according to Cushman & Wakefield's first quarter report.
Demand is staggering due to new technology firms and companies looking for New York City's high profile, says Michael Laginestra, executive managing director at Insignia/ESG and a 26-year veteran of the New York office market. Lenders' demand for significant pre-leasing before development begins also is an important factor.
"I've gone through three up cycles now, and the difference between this one and the other two is primarily three things," he says. "One is the technological revolution taking place that has nothing to do with the actual office space, but is creating a tremendous amount of demand. The stats change from month to month, but there are months where one-third of the leasing activity is e-commerce related.
"The second thing is that there was no significant construction for a significant period of time - unmatched since World War II - because there was so much overbuilding," he continues. "This time we don't have this overhang of speculative office buildings that have been developed and are vacant or are under construction and vacant."
April's stock market gyrations may cool demand a bit, especially with so many NASDAQ companies driving demand, but it may take a while to hit, says Mitchell Steir, executive vice president at Julien J. Studley. Steir points out that it took a year for the stock market crash of 1987 to profoundly affect the city's office market, which is so directly tied to the financial markets. According to Steir, owners will look to close deals more quickly.
"They'll focus on wrapping up what's on the table rather than trying to squeeze more out of the deal or worrying about the next guy coming in who's willing to pay more," says Steir.
Both Laginestra and Steir point out the implications for the city's surrounding boroughs and the tri-state suburbs. The garment and printing industries are feeling the pinch as Times Square and areas such as Hudson Square draw more high-tech and Class-A users. Some areas have gone from single-digit per square foot rents to as much as $40 per sq. ft. in three to five years. That's not even considering the top-tier space.
"If a tenant takes 500,000 sq. ft. in a new building and the new construction requires a rent of $65 per sq. ft., then that becomes the benchmark," says Laginestra.
With so little space available and such high costs, some users have no choice but to look outside the city.
"If the price of Class-A space remains constant, there's no question you're going to see more corporate migrations outside of New York City," says Steir. "I'm a firm believer that corporations and major partnerships will not lease bulk space at these rates. You've got New Jersey, Westchester County and Connecticut where the delta continues to expand in terms of the relative pricing disparities between the various [New York City] markets in addition to other parts of the country."