SL Green Realty Corp. formed a venture with Stonehenge Partners and entered into a contract to acquire eight retail and multifamily properties for $416 million. Stonehenge, which operates a large portfolio of New York City multifamily properties, will reposition and manage the residential portion of the portfolio. The transaction is expected to be completed in the first quarter of 2012.
SL Green indicated that a key component of the transaction is 724 Fifth Avenue, a high-profile retail location located between 56th and 57th streets in Manhattan's Plaza District. Prada currently occupies approximately 20,700 square feet including the grade, mezzanine, second floor and lower level retail, as well a boutique office floor. It is situated in the vicinity of other retail properties which SL Green has ownership of, including 717 Fifth Avenue, home to Giorgio Armani's flagship store and the future flagship store of Dolce & Gabanna, in addition to 720 Fifth Avenue.
The residential portion of the portfolio includes a total of 402 rental units located in prime Midtown and Upper East Side submarkets. The SL Green/Stonehenge venture plans to significantly upgrade a selection of units and building amenities. Stonehenge, which currently owns and manages over 2,560 apartment units in New York, will be responsible for day-to-day management and marketing of the multifamily assets along with the execution of the renovation/upgrade program.
"This is an exciting opportunistic investment for SL Green, which already has an outstanding track record in acquiring and repositioning New York City office and retail properties,” SL Green President Andrew Mathias said in a statement. “We also are excited about making our first significant equity investment in the multifamily area, which helps to diversify our portfolio further while still maintaining our New York City focus."
FTI Consulting Inc. served as an advisor to SL Green and Stonehenge in the transaction. Fried, Frank, Harris, Shriver & Jacobson LLP represented SL Green and Kirkland & Ellis LLP represented Stonehenge Partners in the transaction. Greenberg Traurig LLP acted on behalf of the seller.
Ranieri, WL Ross to Acquire Deutsche Bank Bershire Mortgage
Ranieri Real Estate Partners L.P., a real estate financial services company, and private equity funds affiliated with WL Ross & Co. LLC entered into a definitive agreement last week to acquire Deutsche Bank Berkshire Mortgage, a subsidiary of Deutsche Bank. Terms of the agreement were not disclosed.
DBBM originates multi-family loans for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA). It is the second largest originator of Fannie Mae loans and services a $28 billion multi-family loan portfolio. The company was founded in 1988 and became a unit of Deutsche Bank in 2004. Jeff Day will remain as CEO and the current management team and staff are expected to remain with the company.
“We believe that multi-family is a fundamentally important and growing sector of the housing market,” WL Ross Chairman James B. Lockhart III said in statement. “We have long been interested in this sector, and we are confident that we have identified the right vehicle and point in the real estate cycle to pursue an investment.”
The acquisition is expected to be completed by the end of the year, and the company will be renamed following the closing.
MEPT Acquires 200 West Madison
Multi-Employer Property Trust last week purchased 200 West Madison, a 928,040-sq.-ft. class-A office building in Chicago's West Loop neighborhood, for $217.5 million from a joint venture that includes Tishman Speyer, Pearlmark Real Estate Advisors LLC and a major U.S. pension plan. Paul Barile and Janice Sellis of Transwestern's investment services group represented MEPT in the transaction.
MEPT, a $5.1 billion open-end commingled real estate equity fund, acquired the 88% leased office building through a limited partnership subsidiary in an all-cash transaction. Located at the intersection of Madison and Wells Streets, the 45-story building has access to public transportation, is a short walk to restaurants, shopping and hotels and has earned Leadership in Energy & Environmental Design (LEED) Silver certification from the U.S. Green Building Council.
"The vacancy rate in the West Loop has fallen over the last several quarters and demand for office space has been led by companies relocating to and expanding in downtown Chicago. We think this trend will continue and benefit office buildings such as 200 West Madison in Chicago's central business district," noted David Antonelli, executive vice president and MEPT portfolio manager at Bentall Kennedy, real estate advisor to MEPT.
In the heart of Chicago's financial and government districts, the building is leased to a diverse base of approximately 70 tenants including law firms, financial services groups, a design school and other service businesses. MEPT plans to complete capital improvements and modernizations to help attract tenants to the building through a program of active asset management and marketing.
Fund Targets Grocery-Anchored Retail
Phillips Edison-ARC Shopping Center REIT Inc., a partnership of Phillips EdisonAmerican Realty Capital, a New York City-based real estate advisory firm, formed a joint venture with discretionary clients of CBRE Investors’ (CBREI) global multi manager group to acquire more than $200 million in grocery-anchored neighborhood and community centers throughout the United States.
The joint venture, operating under PECO-ARC Institutional Joint Venture I, will put up approximately $102 million in equity contributions toward its acquisition fund, in addition to securing $102 million in financing. Phillips Edison—ARC Shopping Center REIT will contribute approximately $52 million to the venture, while CBREI will supply the remaining $50 million.
Phillips Edison-ARC will hold a majority interest in the venture and will serve as the general partner, with responsibility for finding, financing and operating the centers. The new fund will target grocery-anchored neighborhood and community shopping centers throughout the U.S., concentrating on areas with stable and growing residential populations.
The joint venture partners plan to fulfill their $200 million acquisition target by the spring of 2012. For more on the fund, click here.
JLL Arranges Sales, Lines Up Financing Philly Tower
Jones Lang LaSalle closed the sale of 1700 Market Street, a class-A trophy office building located in Center City Philadelphia for $143.5 million. The property traded on behalf of Pearlmark Real Estate Partners (formerly Transwestern Investment Co.). The firm, in conjunction with Meridian Capital, also arranged a senior mortgage and mezzanine financing of $123 million through UBS for the new buyer, a partnership formed by David Werner.
Leading the Jones Lang LaSalle team on this transaction was International Director Tom Beneville, Senior Vice President Jerry Kranzel and Vice President Mike Carpenter. Senior Vice President Dustin Stolly and Meridian Capital’s Managing Director Ronnie Levine arranged the financing.
“This property offers an unparalleled combination of location, parking, and tenant amenities,” said Beneville in a statement. “In addition, it is one of the largest office property sales in almost four years and will set pricing expectations in Philadelphia’s CBD for the next investment cycle. Philadelphia is an exceptionally strong market with a stable and growing economy. As a result, many buyers expressed interest in 1700 Market, including REITs, pension funds and international investors.”
The property lies in the heart of Philadelphia’s central business district at the corner of 17th Street and Market. The 841,172-square-foot building also includes an attached five-story, 761-car parking garage.
First Industrial Realty Trust Closes Secured Financing Transaction
First Industrial Realty Trust Inc. announced the closing of a secured financing transaction with a life insurance company for gross proceeds of $77.6 million.
The financing is secured by 24 buildings totaling approximately 2.3 million square feet. The properties are located in Tennessee, Ohio, Illinois, Minnesota, Texas, Wisconsin and California. The term of each of the loans which comprise the financing is 10 years, with the interest rate fixed at 4.85% over a 30-year amortization schedule. The loan-to-value ratio for this financing was approximately 70%.
Innovative Capital Advisors, HAS Commercial Launch $50M Fund
Commercial mortgage lending specialists Innovative Capital Advisors (ICA), has partnered with Chicago-based HSA Commercial Real Estate, a full-service real estate firm, to launch ICA Real Estate Equity Fund I, a $50 million investment fund seeking commercial real estate acquisition and investment opportunities throughout the Midwest.
The recently closed fund is being managed by Peter Mavrogenes, senior managing director and CEO of ICA, and Tim Blum, executive vice president of HSA Commercial. Both are finance and real estate veterans and principal investors in the fund’s first installment.
The managers of ICA Real Estate Equity Fund I are seeking commercial real estate assets valued at less than $10 million in all property types (excluding hospitality) in metropolitan Chicago and second-tier markets throughout the Midwest. The Fund is focused on existing income-producing properties located within high-barrier-to-entry, infill markets. HSA Commercial will provide expertise in acquisitions, finance, management, leasing and due diligence for these properties.
ICA and HSA Commercial are planning a series of funds to be implemented in the next five to 10 years as the group continues to attract capital from insurance companies, pension funds and high net worth investors.
MSREI, Witkoff Group Acquire 1107 Broadway
Morgan Stanley Real Estate Investing (MSREI) announced the acquisition of 1107 Broadway (the former Toy Building North), a 350,000-sq.-ft. office building located along the west side of Madison Square Park in Manhattan, in partnership with The Witkoff Group. MSREI and The Witkoff Group plan to convert the vacant building, which was acquired through a short sale process, into luxury condominiums.
CBRE Investors Sells Remaining Interest in 1540 Broadway
The CB Richard Ellis Strategic Partners Value 5 fund has sold its remaining equity interest in 1540 Broadway in New York to Edge Fund Advisers on behalf of HSBC Alternative Investments Ltd.. In 2010, Edge purchased a non-managing member stake in the building on behalf of an exclusive syndicate of HSBC Private Banking Clients.
The CB Richard Ellis Strategic Partners U.S. Value 5 fund, a commingled private equity real estate fund that closed in 2007 with capital raised from institutional investors in the United States, Europe and the Middle East, purchased 1540 Broadway via a distressed sale in March 2009. At acquisition, the property was 78.1 percent leased. Since then the Value 5 fund’s general partner has executed leases totaling 200,000 square feet, bringing the building to 92 percent occupancy. Given this success, the general partner determined that it was an appropriate time to sell its remaining interest in the property to realize the investment’s appreciation for the benefit of the fund’s investors.
“1540 Broadway has been a major turnaround story and a success story not just for our fund investors but also for the Midtown Manhattan office market,” said Vance Maddocks, President of CB Richard Ellis Strategic Partners U.S., in a statement. “With our leasing performance and the resulting property value increases, it was in the best interest of our investors to capitalize on the improved market conditions.”
Bill Shanahan and Darcy Stacom, both vice chairmen of CBRE Investment Properties, represented CB Richard Ellis Investors in the transaction.