REITs aren’t just a channel for equity-style investment in commercial real estate, they’re a kind of barometer to use to keep an eye on trends in specific sectors. When REITs go on a buying spree, it pays the trend-watcher to pick out what’s being acquired as well as the price tags. This way questions can be answered about where capital is meeting property – is it in tertiary or secondary markets? Is medical office looking better to portfolio managers than is assisted living? Presented are some of January’s biggest REIT acquisitions in the health care sector.
1. Griffin Capital’s Griffin-American Healthcare REIT III picked up more than $340 million in health care property in January. The 19 acquisitions broke down into 17 medical office buildings, one acute care hospital, and one senior housing facility.
“These latest acquisitions represent high-quality assets leased by very strong tenants and operators with whom we look forward to sharing mutually rewarding business partnerships,” said Danny Prosky, president, chief operating officer and one of the largest stockholders of the REIT. “They also add tremendous diversification to our rapidly growing portfolio.”
Notably, the REIT has announced that it has executed letters of intent and/or purchase and sale agreements to acquire 31 additional healthcare properties for an aggregate purchase price of approximately $530 million. These pending acquisitions are subject to customary closing conditions and the satisfaction of other requirements as detailed in the agreements.
2. Leading the three in dollar amount, Ventas completed a whopping $2.6 billion merger with American Realty Capital Healthcare Trust that netted 143 health care properties. This breakdown was more diverse than Griffin’s, as medical office buildings added up to half of the portfolio. The other half was more or less evenly taken up by assisted living, hospitals and senior housing. The full breakdown: 78 medical office buildings, 29 seniors housing operating communities, 13 seniors housing triple-net properties, 14 skilled nursing facilities, 7 hospitals, and 2 land parcels. For a look at where these properties are, click on Ventas’s map below. Read about the merger in full at this PDF.
3. Health Care REIT acquired a portfolio of Massachusetts, New Hampshire and Connecticut assisted living facilities for $360 million. The deal was completed in January and represented a profitable turnaround for the seller, Intercontinental Real Estate of Boston. The Boston Globe reports Intercontinental purchased the portfolio in 2005 for about $152 million and later put in about $20 million in renovations. The poftiolio consists of nine senior living facilities.
Sometimes, commercial real estate is a contact sport. Over the last five years, we’ve seen some titanic industry clashes falling under some familiar narrative categories: man vs. man, man vs. reality, and man vs. stockholders. Over at Llenrock blog, a favorite read for years, Eric Hawthorn has compiled a top five list of the battles royale in commercial real estate. It’s an entertaining read. The least surprising part of this compilation? Sam Zell appears twice.
But my personal favorite is the charade inherent in the story of “SEC vs. Standard & Poor’s,” wherein the regulator slaps the ratings agency on the wrist to the tune of $1.4 billion over its demented cheerleading of toxic mortgage-backed securities that fueled the 2008 meltdown. It’s not that the fine itself is a charade — a billion four isn’t chump change — but I will never forget that all three of the ratings agencies had bloody hands over MBS bundles and that despite Dodd-Frank’s existence, each agency remains capable of doing the exact same thing all over again in the future. There’s a charade going on when we look at that regulatory result and imagine the problem has been addressed. That lesson is widely unlearned, and you know what happens when you fail to learn from history? You’re doomed to repeat it.
Tucson’s golf-based economy assessed a penalty for slow play, oil prices are in play, and women in CRE need a more level playing field. It’s all in today’s Commercial Real Estate News Roundup (abridged edition) for February 4, 2015.
- Commercial real estate in Tucson slowly improving, Arizona Daily Star, Jan. 30, 2015 – The arrival of national chains and a good chunk of net positive absorption aside, to some, Tucson’s recovery has been caught in a sand trap.
- Slippery Situation: Oil’s Potential Impact on Real Estate, Commercial Observer, Jan. 28, 2015 – The Bakken range in the Dakotas and Houston seem extra-exposed to the chaos accompanying low oil prices.
- Why Do Women in CRE Earn Less? Globe St., Feb. 2, 2015 – The eternal question about C-suites and Y chromosomes addressed by CREW President.
- Chinese Real-Estate Firm Looks West—to California, WSJ, Jan. 27, 2015 – EB-5 investments are just part of the wave of foreign capital heading to the west coast
- Canadian pension funds scoop up US$2.75B in U.S. commercial property in first half of January, Financial Post, Feb. 3, 2015 – Investments, not gimmicks, sought by the pension funds north of the border
- Asian real estate buyers: First they want to meet the mayor, Puget Sound Business Journal, Jan. 27, 2015 – The social and commercial implications of foreign investment
- Qatar hotel options to multiply in 2015 amid rising visitor numbers, Doha News, Feb. 3, 2015
- Offices Minus Tenants Rise Beyond Manhattan: Real Estate, Bloomberg, Feb. 3, 2015
- 5 Best Markets for Office Investment, National Real Estate Investor, Jan. 28, 2015
- Office Space: Trulia office design is rooted in community, trees, San Francisco Chronicle, Feb. 2, 2015
- Suburban office building sales jump 20 percent in 2014, Crain’s Chicago Business, Feb. 2, 2015
- A recharge for industrial real estate, Orange County Register, Jan. 31, 2015
- El Paso-Juarez industrial real estate market back to pre-recession levels, El Paso Times, Jan. 31, 2015
- Hot industrial markets: New York, Chicago and … Lakeland? Tampa Bay Business Journal, Jan. 29, 2015
- Detroit’s Industrial Market Heating Up, in Spite of Older Building Stock, National Real Estate Investor, Jan. 30, 2015
- Why the grocery business is now retail’s hottest niche, Minneapolis Post, Feb. 2, 2015
- Denver retail scene is active, but some merchants are still staying away, Denver Business Journal, Feb. 2, 2015
- Amazon eyeing RadioShack real estate, Washington Business Journal, Feb. 3, 2015
- The Shakeout between Winners and Losers in Retail Real Estate Will Continue, National Real Estate Investor, Feb. 2, 2015
- TruAmerica Makes Bet on Upgrading Southern California Apartments, WSJ, Jan. 27, 2015
- How much will apartment rents rise in 2015? Experts offer mixed views, Austin Business Journal, Feb. 3, 2015
- Area’s apartment fever appears to be cooling, Houston Chronicle, Jan. 27, 2015
Introducing North Brother Island. It’s a once-developed island overgrown with trees. By itself, maybe not so interesting. But we are told in this business that location is everything, so it comes as a shock that this abandoned island is situated between Queens and the Bronx in New York City. You read that right: it’s New York real estate that has yet to be paved over.
The history of North Brother Island is fascinating, including a stay by the early 20th century legend “Typhoid” Mary Mallon, a hospital and a drug rehabilitation center, but most telling is the view from the highest point on the island. In the foreground, a broken brick chimney rises from the untamed trees, and in the background, the unmistakeable gotham skyline. Magnificent and creepy all at once.
Check out the entire photo essay at An Abandoned Island Near NYC Used To House A Hospital.
[Photo credit: Sliptalk.com]
Using events to anchor a co-workspace, using Chinese developers to pull towers out of San Fran ground, and using zingy jargon when consulting to convenience retail on how to sell more stuff — it’s all here in today’s Commercial Real Estate News Roundup for January 29, 2015.
- Clouds lifting from commercial real estate, Albuquerque Journal, Jan. 26, 2015 – Collier’s in Albuquerque posts great news for Duke city tempered with a wish for more spec development to invite national players in.
- Buffalo Niagara commercial real estate market improving, report shows, Buffalo News, Jan. 23, 2015 – Water’s not the only thing falling in the Buffalo Niagra area – retail and industrial vacancies are also down.
- Hawaii’s record-breaking 2014 saw $4.5B in commercial real estate transactions, Pacific Business News, Jan. 22, 2015 – About 235 transactions is what it took to set a $4.5B record on the islands.
- Foreign Real-Estate Developers Hit U.S. Shores, WSJ, Jan. 20, 2015 – It’s not just international capital headed here – it’s international developers.
- Top 5 Predictions for Medical Office Real Estate in 2015, NREI, Jan. 20, 2015 – Warning of increases in the costs of capital as well as a continuing wave of acquisitions, it appears something has to give out first.
- Chinese Developer To Build San Francisco’s 2nd Tallest Tower, Forbes, Jan. 25, 2015 – Two million sq. ft. of towers to be built in downtown SFO by a developer in Shenzen.
- A different take on the co-working space, Philadelphia Enquirer, Jan. 25, 2015 – A peek inside a Philly co-working facility that uses event planning as part of its value proposition.
- Are Cubicles Preferable to the Open Office Layout? New York Times, Jan. 14, 2015 – Mentioned at The Source recently is the backlash against the Silicon Valley-style wide open collaborative office layout. Now the NYT ponders a defense of the cubicle and corner office.
- Charleston area industrial real estate market picks up steam in 2014, Charleston Post and Courier, Jan. 25, 2015 – Sporting a 3.9% vacancy rate in spots, Charleston is booming – but where can they warehouse the goods?
- New Macy’s site in Sacramento shows rise of e-commerce, logistics as manufacturing wanes, Sacramento Bee, Jan. 23, 2015 – Macy’s new logistics facility in Sacramento, 58,000 Californian workers have gotten warehouse jobs since 2010.
- Forecast: Mobile generation demands more from DFW retail, Dallas Business Journal, Jan. 14, 2015 – New retail development constrained in Dallas-Ft. Worth as the online and brick and mortar worlds find reconciliation.
- Theme Parkifying, Corner Grabbing & Side Selling, CSPnet, Jan. 16, 2015 – Retailer jargon class begins now.
As a researcher in commercial real estate, it’s not often I find a documentary film director turning their camera to an everyday interior feature of our industry to tell a compelling story, but that’s exactly what Three Walls delivers. It’s a Canadian filmmaker’s look at the birth, growth and journey of that building block of the modern office layout: the cubicle. Watch the 25-minute film here.
Its blurb reads:
With equal doses of deadpan humour and historical insight, the Canadian filmmaker Zaheed Mawani tackles the rise of the cubicle and the matter of why its inventor, the US designer Robert Propst, came to hate its implementation. Along the way, we hear office workers who spend their days fantasising about breaking free from their three-walled lives, cultural critics who lament the soullessness of the modern office, and even a few cubicle defenders.
The short film is a well-made, balanced and very watchable surprise, even managing to be poignant about the topic. While often overlooked, or assumed as a permanent fixture of the office, the cubicle can inflame passions these days as information technology, desuburbanization, and millennial worker demographics are all conspiring to reshape the office layout, and with it the expectations of its workers and managers. It’s not just tech companies that advocate for “openness” as a basic expectation, running counter to cubicles. But something like a backlash against that trend has been forming for some time now, with advocates for more enclosed workspaces saying that worker collaboration is less valuable than worker concentration.
No matter which side of the debate you end up on, Three Walls will make you think about cubicles in a whole new way.
At RE/Journal CRE Forecast Conference this week at Chicago’s Hyatt Regency, the proceedings kicked off with a one-on-one with Howard Tullman, CEO of 1871, the non-profit startup hub located in Chicago’s Merchandise Mart.
1871′s reputation as a hotbed of technology startup innovation companies is for real, and Howard’s philosophies are apparent in all details down to the office layout, which became a topic of conversation naturally enough.
1871 currently sports 325 companies with nine unique incubators and accelerators that use markedly different floor plans reflecting in part key commonalities to the tenant companies, whose business lines exceed the boundaries of just high technology.
Visibility — particularly visibility of project leadership by the newest tenants plays a key role in 1871′s office layout.
Newer arrivals begin by climbing a kind of ladder, settling into a class of workspace that offers the least ameneties, but is still in full view of the nicer digs nearby. The trick is that the nicer space is where tenants whose businesses pass success milestones are moved, producing a kind of conveyor belt of visible success that drives the “Leadership [means] that people need role models and so we live it every day. We figure if they’re watching [mentor and more advanced businesses] and seeing how we are executing and what our responsibilities are, that’s the best way we can model the commitment that we expect from them.”
“I think where we’re headed is a new kind of community. When we talk to our workforce [aged 25 to 55] this idea of proximity [to the workplace] is really significant. They don’t want to own a car — that was a popular talk at the auto show recently [...] the idea is that the workers want to be close to where they work.”
A return to focus
Tullman went on in the session to describe a real trend in office layout and work patterns toward focus and away from “openness”.
“Openness I think we’re going to see the next few years is going to go away. Kids today think they can multi-task, but multi-tasking means you’re doing a lot of things poorly. So what we’re discovering is [...] they go away so they can focus and get something done. This idea of being in a n open area with constant disruption is going to change and it’s going to change pretty soon.”
Wall unit makers, take note.
Laura Heller at Fierce Retail reports on Target’s foray north of the border ending painfully, including a $1.6 billion loss and the closure of 133 stores. After purchasing nationwide retail chain Zellers and its 220 stores in 2011, it opened an additional 124 units in a single year. The aggressive expansion was not rewarded with expanded profits.
“With the benefit of hindsight, I wished we wouldn’t have opened up so many stores as we did at once,” Mark Schindele, president, Target Canada told theMinneaplis Star Tribune a couple of months ago. “We probably should have scaled back from what we did to get it moving in the right direction.”
Losses at Target Canada total roughly $1.6 billion to date, reported the Star Tribune.
“When I joined Target, I promised our team and shareholders that I would take a hard look at our business and operations in an effort to improve our performance and transform our company,” said Brian Cornell, Target chairman and CEO. “After a thorough review of our Canadian performance and careful consideration of the implications of all options, we were unable to find a realistic scenario that would get Target Canada to profitability until at least 2021. Personally, this was a very difficult decision, but it was the right decision for our company.”
Vegas rents are rising, cheap oil from the fracking boom is having unintended consequences in Houston, and home ownership’s biggest cheerleader, Freddie Mac, says renting is less popular than we thought. Quelle surprise! It’s all here in the latest Commercial Real Estate News Roundup for January 14, 2015.
- 2015 seen as year for commercial real estate to accelerate, Las Vegas Review Journal, Jan. 6, 2015 – Rent gains in Class-A and -B properties, big tenants looking to penetrate Las Vegas means the CRE outlook is “let it ride”.
- Six Trends in Commercial Real Estate to Watch for in 2015, Urban Land, Jan. 5, 2015 – Most notable trend in terms of investment: the idea that bonds and equities have had very strong run-ups that commercial property hasn’t yet matched…but is expected to.
- Foreign money floods Boston real estate market, Boston Herald, Jan. 12, 2015 – Every since the earliest days of the tea trade, offshore capital has found a home in Boston. But not as much as today!
- Incubator mindset leads to a perfect office space, Inman, Jan. 8, 2015 - The benefits of the shared-space tech-style office layout – the tug of war over the “correct” way to lay out office space will continue as long as startups thrive.
- Sand Hill Road office sale may set new national price record, San Francisco Business Journal, Jan. 12, 2015 – Make sure you’re not drinking coffee of any liquid when you read the square footage price in this story.
- Low Oil Prices Threaten Office Sector in Houston, National Real Estate Investor, Jan. 9, 2015 – The other shoe drops along with world oil prices. Will Houston’s office space sector make it through an oil bust?
- Atlanta industrial real estate market had its best year since the late 1990s, Atlanta Business Chronicle, Jan. 9, 2015 – Only 1997 and 1998 performed better than 2014 in Atlanta industrial space, says CBRE.
- Investors buy 390 acres near airport; business park envisioned, Austin Business Journal, Jan. 12, 2015 – Getting down to business near Austin’s airport
- D-FW industrial construction is the highest in more than a decade, Dallas Morning News, Jan. 12, 2015 – New building boom in the Dallas area being reported for industrial including three million-plus sq. ft. projects.
- Retail plazas dominate December commercial real estate sales, Buffalo News, Jan. 9, 2015 – Erie county around Buffalo seeing quote a bit of shopping for shopping centers.
- Economy Watch: Retail Recovery at a Snail’s Pace, Multi Housing News, Jan. 8, 2015 – Malls vacancies on the the rise, but community centers and neighborhood vacancies are improving
- Shopping-Center Owners Start Year With Optimism as 4th-Quarter Rents Rise, WSJ, Jan. 6, 2015 – Meanwhile, national shopping center rents left a gif wrapped under the tree for landlords.
- Utah Mall’s Travails Expose Property Weak Link: Mortgages, Bloomberg, Jan. 12, 2015 – Gateway shopping center’s early days during the 2002 Winter Olympics are a distant memory as debt downgrades pile up.
- How Long Will Renters Keep Renting? National Real Estate Investor, Jan. 6, 2015 – Freddie Mac says a lot of things, but these days they’re saying that renters don’t actually like renting.
- Houston ranked a top city for multifamily construction, Houston Chronicle, Jan. 6, 2015 – Apartments in Houston are taking off like the proverbial oil well gusher.
- OpenPath Investments Brings Unique Socially Responsible Platform to Multifamily Housing, Multifamily Biz, Jan. 8, 2015 – Sustainability and social outlook actually leads to healthy returns -and here’s an example.
There’s something nationally emblematic about the visual history of Chicago’s commercial real estate. Browsing a photo collection spanning the decades you can find a midwestern sensibility mixed with a gritty urban down-to-business look that speaks to a certain American outlook on business and enterprise. From the pre-WWII dawn of neon signage to elegant mid-century futurism to 1970s earth tones and softer typefaces, the look of American commerce in every era is about reaching and accommodating people. Its’ a fascinating journey, and Craig’s Lost Chicago is ready to take you on a ride through the decades of Chicagoland’s restaurants, retail and industrial property history.
- Craig’s Lost Chicago: Restaurants
- Craig’s Lost Chicago: Retail
- Craig’s Lost Chicago: Industrial (includes packaging)