Insignia marches toward industry consolidation Reaching out in new directions, Greenville, S.C.-based Insignia Financial Group Inc. continues to acquire strong regional companies in order to further its commercial real estate consolidation.
For example, Insignia announced on Oct. 20 that it had executed a letter of intent to acquire 100% of the stock of Richard Ellis Group Ltd., one of the leading real estate services and investment firms in the United Kingdom, for an undisclosed amount. This represents a new entry into the British market for Insignia. Richard Ellis has annual revenues of approximately $58 million.
Also, Insignia entered the single-family homebusiness with its acquisition of Cleveland-based Realty One, a full-service residential broker, and its affiliated companies, including First Ohio Mortgage Co., for approximately $39 million. Realty One is the 10th-largest residential real estate brokerage firm in the nation and the largest in Ohio, handling more than 20,000 transactions valued at more than $2.5 billion annually. First Mortgage originates single-family home mortgages for both Realty One clients and third parties. Of the $39 million, approximately $35 million was paid in cash and the balance in Insignia stock, valued at $20 per share.
Starwood Lodging, ITT join to form world's largest REIT Creating the largest hotel company and real estate investment trust in the world, Phoenix-based Starwood Lodging and ITT Corp. have signed a definitive merger agreement which provides for Starwood Lodging to acquire ITT for $15 in cash and $67 in newly issued paired shares in Starwood Lodging for a total value to ITT shareholders of $82 per share. Starwood will assume $3.5 billion in outstanding ITT debt for a total transaction value of approximately $13.3 billion. Including the pending acquisition of Westin Hotels, Starwood Lodging will have a total market capitalization of approximately $20 billion.
The merger of the two will create a hotel company with 650 hotels in 70 countries and combined revenues totaling more than $10 billion. It will control six international brands: Sheraton, Westin, CIGA, Four Points, The Luxury Collection and Caesars. Anticipated to close in the first quarter of 1998, the transaction will be accounted for as a purchase and is expected to be approximately 20% accretive to Starwood Lodging's pro forma Funds >From Operations (FFO) during the first 12 months of combined operations.
Starwood Lodging's Barry S. Sternlicht will continue as chairman and chief executive officer of the combined companies. ITT will have minority representation on the Starwood Lodging boards, and it will designate four directors, including Rand Araskog, ITT's chairman and CEO.
"The lodging industry has become a global business that benefits from scale and product distribution," says Sternlicht. "This transaction gives the combined companies a sound balance sheet, which will enable us to continue to be a growth company and to take advantage of our current acquisition pipeline and a rapidly consolidating industry."
DTZ keeps an eye on international investment Improving occupier demand and reducing levels of availability for good quality product have created a safe atmosphere for increased levels of investment and lending to United Kingdom property, reports DTZ Debenham Thorpe in the 22nd edition of its annual Money into Property report. And as long as investors and lenders do not overestimate the fundamentals of occupier demand, the anticipated levels of investment and lending over the next couple of years should not destabilize the market, the report says.
DTZ also reports that the comeback of institutional investors is sustainable by both pension funds and insurance companies. The latest quarterly net investment total is the highest it has been in three years. There is a potential for net investment in the order of 2.7 billion pounds to 3 billion pounds over the next two years because property fund managers expect total returns of 12% this year and next. The most likely constraint on this potential out turn is the availability of satisfactory product.
In the bank and building societies category, DTZ Debenham estimates that lending to property companies is now in the range of 43 billion pounds. In addition to the 30.1 billion pounds of official bank lending identified by the Bank of England, there is a substantial amount of lending by building societies, insurance companies and banks not authorized by the Banking Act of 1987, according to the report. Almost three-quarters of lenders now expect to grow their loan books over the next two years and none are planning to reduce property loan books, the report says.
And finally, direct overseas investment in United Kingdom property has increased during the first half of the year, reaching 2.4 billion pounds -- a threefold increase compared to the same period last year. The figure also exceeds the total amount invested from overseas during the entire year of 1996 which was 2.16 billion pounds.
Knight Frank notes office stabilization worldwide Stabilization in the world's office markets is a key finding in Knight Frank's latest edition of its Global Office Market Report, which profiles the office leasing and investment markets for 86 cities worldwide.
Although there are differences from country to country, the report cites some general trends that reach pretty much across the board. These findings include the following:
* Stabilization in most of the world's office markets has been reached due to economic growth; * Rents are stable or rising in most major markets; * Demand remains concentrated in the prime, high-quality market for which rental growth will be strongest; * Renewed development activity has occurred in many centers because of the lack of Grade-A accommodation; * And prime investment yields have stabilized internationally. Investment activity also is rising with overseas investment becoming more important.
Specifically speaking, however, most European countries have experienced improved letting markets and rental rates are stabilizing or rising as availability continues to fall. Cities experiencing rising rental values are Amsterdam, Stockholm, Paris, Lyon, Madrid, Lisbon, Munich and Hamburg. And cross-border activity is increasing with the British, French, Spanish and Dutch markets being the main beneficiaries, the report says.
In North America, the report says supply levels are also falling, providing for rapid rental growth in many markets including San Francisco, Los Angeles, Montreal, Ottawa and Toronto. However, downtown markets remain oversupplied, with rental declines continuing.
On the other hand, rents are stabilizing or rising in both Latin and South America, reflecting increased international demand and supply shortfalls in some markets, reports Knight Frank.
Being the least homogenous of all the world's markets, Asia shows vast differences between its major centers. The more mature markets and larger economies are slowing while the less established markets continue changing rapidly. Singapore, Malaysia and Hong Kong are expected to see slowing rent growths. Rental values have stabilized in India, but declined in China, the report says.
Economic growth, rising employment and increased business confidence have led to rental growth in most of Australia's and New Zealand's office centers. Supply continues to fall, which has resulted in the decline in vacancy rates for Grade-A and Grade-B accommodation. Prime yields are in the range of 7.5% to 10% and have remained stable over the past six months, the report says.
GMACCM closes largest ever conduit securitization In the largest commercial mortgage conduit securitization ever, Horsham, Pa.-based GMAC Commercial Mortgage has completed a $1.7 million offering. Deutsche Morgan Grenfell and Lehman Brothers acted as lead managers on the transaction. The securities are backed by 355 mortgages on 380 properties located in 43 states, the District of Columbia and Puerto Rico.
The conduit operation of Deutsche Morgan Grenfell contributed $506 million in mortgages; GMACCM, $490 million; ContiTrade Services, $328 million; and Boston Capital, $100 million. The remaining $266 million are loans originated by Paul Revere Life, which were jointly acquired by Deutsche and GMACCM. Credit leases back 6% of the pool balance.
Collateral consists of 25.5% retail, 18.8% multifamily, 18.1% office, 10.2% industrial, 9.4% hotel, 8.1% nursing, 4.3% mixed-use and 2.9% self-storage.
If it ain't broke ... Marcus reveals Home Depot plans It's 3 o'clock in the morning and you can't sleep. Most of us would be doomed to watching "Diff'rent Strokes" re-runs, but if you live in Flushing, N.Y., you're in luck. You could head on over to the local Home Depot and pick up a few home improvement supplies, because that store is open 24 hours a day.
The 24-hour store concept is just one of the plans for expanding and improving the highly successful chain that Home Depot Chairman Bernard Marcus announced while addressing attendees at the 1997 meeting of the National Network of Commercial Real Estate Women, held Oct. 16-18 in Atlanta.
Although he named Secaucus, N.J., as another 24-hour store location, Marcus would not speculate on how many stores would be open around the clock or where they would be, telling NREI simply that "the cashflow will have to be there."
Another expansion avenue Marcus mentioned will be in the form of the chain's Home Expo stores. Two more will roll out this year, and eventually he expects Home Expos to be in every major city.
Marcus also indicated that Home Depot has international aspirations, with a store scheduled to open this year in Santiago, Chile. While 20 stores are open in Canada, technically already making Home Depot an international chain, there currently appears to be much worldwide interest in snagging the retailer. "Even the Iraqis came to us," Marcus laughed, "they need to have a store."
One trend that Marcus said he doesn't see impacting Home Depot in the future is the Internet. "In the future, people will still want to touch and feel the merchandise," he reasoned.
In explaining Home Depot's success, Marcus told the NNCREW members: "We are flexible, we are not staid. The company keeps pushing the envelope."
New cap rate/pricing data provided by PIX This month, we're featuring our quarterly update on the state of multifamily, office and retail market cap rates and prices nationwide. This data is provided to us by Property Information Exchange (PIX), based in New York. PIX is an innovative information service that links qualified institutional investors with an ever-expanding pool of investment grade properties totaling over $3 billion. This data is an empirical measure of what more than 700 of the largest real estate investors and advisory firms are chasing.
Multifamily: Based on the latest quarterly numbers through Sept. 30, 1997, multifamily market cap rates stayed at 11.17% nationwide, which compares to 11.30% in July 1996, and 11.31% in January 1997.
In pricing terms, PIX data indicates that the average price per sq. ft. has increased slightly to $57.72 from $57.67 in July and $57.38 in January. But these numbers are down from $59.50 in July 1996.
Office: Based on the latest quarterly numbers through September 30, 1997, office market cap rates had increased to 10.36% nationwide, which compares to 10.12% in September 1996, and 10.21% in January 1997.
In pricing terms, PIX data indicates that the average price per sq. ft. has increased to $86.88 from $81.15 last September, and is up from $83.62 in January 1997.
Retail: Based on the latest quarterly numbers through Sept. 30, 1997, retail market cap rates had dropped to 9.94% nationwide, which compares to 9.98% in September 1996, and 9.96% in January 1997.
In pricing terms, PIX data indicates that the average price per sq. ft. has increased to $114.52 from $101.46 last September, and is up from $110.04 in January 1997.
NREI revamps website After more than a year serving as the commercial real estate industry's choice for dailyand trends analysis, the National Real Estate Investor website has been redesigned. In keeping with the magazine's dynamic yet easy-to-read format, new graphics make it even easier to navigate through the online site. For example, now you'll find specific headings categorized by property type.
The NREI site receives more than 120,000 "hits" per month, and is part of the real estate group website known as InternetReview. The website includes NREI sister publications Shopping Center World, Commercial Real Estate South and Midwest Real Estate News.
NREI has committed significant resources to constantly improve our website, with Kelly Angell as our online editor and Matthew Giles as our online manager.