Industrial & Investment Real Estate Brokerage
DTZ/Cassidy Turley Merger Adding Another Global CRE Player
Can DTZ Group Take Third Place In the International Properties Services Market?
September 24, 2014
The merger of Washington, D.C.-based Cassidy Turley with DTZ announced this week pairs a mid-market company with 60 offices around the U.S. with a recapitalized international player that has long sought a bigger piece of the U.S. property market -- and now has the financial backers to bankroll its global expansion.
The new DTZ Group, created by the acquisition of Cassidy Turley by a consortium of private equity company TPG Capital, PAG Asia Capital and Ontario Teachers’ Pension Plan, would approach Cushman & Wakefield in terms of annual revenue.
The Cassidy Turley acquisition should enable DTZ to make an instant impact in the all-important U.S. market. While DTZ has a strong franchise in Europe and Asia, "They’ve been mostly an afterthought in the U.S.," said Brandon Dobell, an analyst with William Blair & Co. who tracks the CRE services industry. The challenge for the new company during the integration will be keeping top CT talent, especially tenant representation experts, from jumping ship, he added.
It's likely that DTZ will pursue an IPO down the road as part of its bid to become a true rival to CBRE, JLL, Colliers International (a unit of Toronto-based FirstService Corp.) and HFF Inc. Such a move is expected, Dobell said, given the solid performance of the CRE services sector and the new company’s need to raise cash to recruit talent and lock up key producers.

Revenue/Employee Count for Major CRE Firms Company 2013 Revenue Employees
CBRE $7.18 billion 44,000* JLL $4.46 billion 52,700 DTZ Group $2.9 billion (est.) 28,200 Cushman & Wakefield (Exor S.p.A)$2.5 billion16,000Colliers International (FirstService Corp.)$2.1 billion15,800

*Excluding 4,325 affiliate employees

"You have a private equity backer that at some point will need some liquidity -- TPG is not in the business of holding things for a decade or two," Dobell told CoStar News. "Obviously, Brett White is a tremendous asset for TPG, as well as for the operating company. He’s seen everything, been through a ton of market cycles and M&A during his time at CBRE, so he’s an invaluable resource."
Although the value of the transaction was not disclosed, the Wall Street Journal reported the deal at between $500 million and $600 million, including less than $75 million in debt, citing sources familiar with the transaction.
The Cassidy Turley transaction hinges on the expected closing of the TPG consortium’s $1.15 billion acquisition of DTZ from Australia-based UGL Limited, whose chairman, Richard Leupen, on Tuesday called the CT deal "a positive development for both companies."
"We believe the potential combination of these two companies will reinforce DTZ’s positon as a leading global property services company and enhance the future opportunities for both companies and their people," Leupen said. UGL also confirmed today that TPG has advised of its intention to complete the purchase of DTZ in early November.
Dobell said the Cassidy Turley transaction is emblematic of the consolidation wave that has swept away numerous mid-sized CRE firms, leaving a few large companies and niche players. Most recently, London-based Savills PLC paid $260 million in cash and stock for New York-based Studley Inc.
Since the 1980s, the CRE services space has resembled the investment banking industry, evolving from a couple of large firms and scores of much smaller players to a handful of large companies and niche firms competing against a pool of middle sized firms that have either lost their business identity or can’t match the global scale and reach of their larger rivals.
"The middle is going to be challenging. Just look how many firms have gone away the last four years," Dobell said. "This transaction brings together two firms that were at risk if they couldn’t get bigger -- and it probably staves off customer and broker concerns about the longevity of those businesses."
In today’s environment, service providers like JLL and CBRE that cross-sell financial services or serve multinational companies with a global list of services like property and facilities management a grabbing a disproportionate share of sales and leasing activity, Dobell explained.
"The competitive pressures for having a full suite of services globally are really relevant, and are certainly fueled by access to cheap debt," Dobell said, noting that CBRE, now a $10 billion company, was at $200 million market cap as recently as 2008.
Recurring revenue streams such as property and facilities management are much larger, constituting 40% of total revenue for JLL and CBRE compared to 15% or 20% in 2007, creating a hedge against property market peaks and valleys.
"As the CRE industry becomes more diverse, the business is becoming less cyclical, and those kinds of companies tend to be pretty good places for private equity money, as well as places where brokers will stay put through a market cycle," Dobell said.
Just Sold:  21,098/SF Freestanding Industrial Warehouse on 1.35 Acres in South Ontario.  Noah Samarin of the Samarin Industrial Group represented the buyer, Ashtel Dental LLC, in it’s purchase of the property to be used as it’s North American Headquarters.

Just Sold:  21,098/SF Freestanding Industrial Warehouse on 1.35 Acres in South Ontario.  Noah Samarin of the Samarin Industrial Group represented the buyer, Ashtel Dental LLC, in it’s purchase of the property to be used as it’s North American Headquarters.

GUTHRIE BUYS AIRPORT DISTRIBUTION CENTER IN ONTARIO - See more at: http://www.rebusinessonline.com/main.cfm?id=17&date=20140923&region=Western#sthash.wUJBuFGY.dpuf

ONTARIO, CALIF. — Guthrie Development Company and its private equity partner have acquired Airport Distribution Center, a 221,171-square-foot industrial park in Ontario, for a reported $20.2 million. The center is located at 1500, 1550, and 1590 Milliken Ave. The park contains three buildings and 30 units. The Class A space is 93 percent leased. The seller, Panattoni Development Company - See more at: http://www.rebusinessonline.com/main.cfm?id=17&date=20140923&region=Western#sthash.wUJBuFGY.dpuf

Just Leased:  49,000/SF Freestanding Manufacturing Warehouse in Riverside, CA

Just Leased:  49,000/SF Freestanding Manufacturing Warehouse in Riverside, CA

Just Leased:  13,838/SF unit in a larger 98,000/SF Multi Tenant Industrial/Distribution Warehouse in Chino, CA

September 22, 2014 OPTICAL LENS MAKER RELOCATES CALIFORNIA - See more at: http://www.rebusinessonline.com/main.cfm?id=17&date=20140922&region=Texas#sthash.PelWQXld.dpuf

OPTICAL LENS MAKER RELOCATES CALIFORNIA DISTRIBUTION CENTER TO DALLAS

DALLAS — Lewisville, Texas-based HOYA Vision Care has signed a 101,817-square-foot lease at Trade Center IV, located at 755 Regent Blvd. in Dallas. The firm will move into the space in October to commence distribution of its optical lens products.

- See more at: http://www.rebusinessonline.com/main.cfm?id=17&date=20140922&region=Texas#sthash.PelWQXld.dpuf

Market Trend: Select Top Five Inland Empire Industrial Leases Signed in Q2 2014
The select top industrial lease signed during the second quarter of 2014 in the Inland Empire market was at Empire Gateway Bldg 2 in the West San Bernardino submarket. Yokahama Tire Corporation leased 658,756 square feet there. Colliers International represented the landlord.
Restoration Hardware leased 625,000 square feet at 5085-5125 Schaefer Ave. in the West San Bernardino submarket. Lee & Associates represented the tenant and the landlord in the deal.
Federal Mogul signed a 522,772-square-foot lease at 22750 Cactus Ave. in the Riverside submarket. Colliers International represented the landlord, while CBRE represented the tenant.
Ownes & Minor leased 520,161 square feet at 5125 Ontario Mills Pky in the Airport Area submarket. Lee & Associates represented the landlord.
United Furniture Industries renewed its 505,192-square-foot lease at Distribution Centre 1 in the North San Bernardino submarket. CBRE represented the landlord, while The Bradco Companies represented the tenant.
In the first quarter, Euro-Pro Operating leased 779,052 square feet at Empire Gateway Bldg 1 in the West San Bernardino submarket. Colliers International represented the landlord.
This trend is compared to the U.S. National Industrial select largest lease signings occurring in Q2 2014, which include the 1.7 million-square-foot lease signed by Michelin at RidgePort Logistics Center in the Chicago market, RosKam Baking Co.’s lease of 885,781 square feet in the Western Michigan market, United Furniture Industries’ 800,000-square-foot lease in the Greensboro / Winston-Salem market, CEVA Logistics’ 648,758-square-foot renewal in the Memphis market, and the 620,000-square-foot lease by 99 Cents Only in the Los Angeles market. In the first quarter, Exel leased 947,715 square feet in the Charlotte market.
The information in this news report is based on CoStar’s Second Quarter 2014 Market Report, a 40+ page comprehensive research report available to CoStar subscribers. To learn more about quarterly research reports and other benefits available to CoStar subscribers, please call 888-226-7404.
CoStar’s Repeat-Sale Index Tracks Rising Transaction Volume, Improving Investment Conditions
September 17, 2014
Plentiful capital available for investment and improving market conditions continued to provide a boost to property pricing this past July, according to the latest CoStar Commercial Repeat Sale Index (CCRSI).
The CCRSI's equal-weighted U.S. Composite Index, which is more heavily influenced by the more numerous smaller, lower value property sales, increased by a strong 1.5% in July 2014 and 11.9% for the 12 months ending in July 2014, rising to within 20% of its prerecession peak reached in 2007.
Meanwhile, price gains have moderated in the value-weighted U.S. Composite Index, which is more heavily influenced by higher-value trades. This component of the Index began to recover earlier and is nearly back to its peak levels reached in 2007. The value-weighted Composite Index advanced 0.8% in July 2014, and 8.0% for the 12 months ending in July 2014.
Pricing for property in the General Commercial segment has been increasing steadily over the past 15 months, and gained momentum in recent months due to improving market fundamentals and increased capital flows across the commercial real estate size and quality spectrum. The General Commercial Index is up more than 27% from its trough in 2011, and is 18.5% below its prerecession peak. The Investment Grade segment has increased 40.3% from its trough in the beginning of 2010 and is 15.4% below its prior peak.
Overall property sales volume was up in July as healthy market fundamentals, low interest rates and increasing allocations to commercial real estate by major investors provide an attractive environment for property investors.
Consistent with recent pricing gains, sales volume increased evenly across the high and low end of the market as investors broaden their search for yield. Trailing 12-month sales volume rose 26% in the Investment Grade Index and 21% in the General Commercial Index through July 2014.
Sales of distressed property continued to decline as a percentage of total sales, dropping from a peak of over 35% in 2011 to 11% through the first seven months of 2014.
More information about CoStar's CRE price indices can be found here.
Surge in CMBS Volume Prompts New Ventures, Raises Concerns
Cushman & Wakefield, PREI and Macquarie All Expanding CMBS Practices Ahead of Coming Wave of Debt Maturities
September 17, 2014
The resurgent CMBS market is enjoying its strongest month in seven years with about $15 billion of new mortgage-backed offerings being sold. The return of the CRE financing conduit has not gone unnoticed by investors, and firms such as Cushman & Wakefield and Principal Real Estate Investors expanding their CMBS services.
When September ends, CMBS issuance is projected to be up 20% year-over-year, according to Morgan Stanley Research, with a total of 21 separate CMBS deals totaling over $15 billion expected to price this month. This is by far the most active month since the end of the global financial crisis and compares to pre-crisis volumes.
Should all these deals price as expected, issuance volumes through the first three quarters of 2014 would exceed $67 billion, Morgan Stanley notes.
At the same time, the rebound in origination volumes has prompted some concerns over loosening underwriting standards among CMBS originators to win market share, coupled with declining insurance companies demand for loans as rates fell.
While acknowledging that underwriting standards are loosening, analysts at the investment bank noted they still appear to be more conservative than those underwritten in 2007, and also noted the expansion beyond core primary markets.
"The percent of CMBS loans secured by
properties outside the top 25 MSAs is increasing to nearly 50% (compared to less than 35% prior to the global financial crisis)," Morgan Stanley researchers noted in their Global Securitized Products Outlook: Fall 2014, held this week. "In 2013, CMBS market share was 24% overall, consisting of 20% for primary markets, 25% for secondary markets and 35% for tertiary markets. For issuance to increase to above $100 billion in the coming years, CMBS originators would need to have approximately 30% market share driven primarily by secondary and tertiary markets."
The greater issuance volume is coming at a key time given the forthcoming wall of CRE debt maturities.
The CMBS market has only surpassed the $100 billion annual issuance level three times: in 2005, 2006 and 2007. Because of the record volume in those years, an unusually heavy supply of debt maturities will hit in the coming three years, which may lead to a shortfall if demand among investors proves insufficient to handle the volume, according to research done by Peter Linneman, NAI Global chief economist.
Even if issuance hits $120 billion in 2015, 2016 and 2017, there will be a shortfall of roughly $240 billion in those three years, according to Linneman.
Signaling a strong vote of confidence in the resurgence of CMBS activity, Cushman & Wakefield has added a capital markets and commercial real estate veteran to its leadership roster to expand its capital markets platform. Bob Kline of RW Kline Cos. joined the firm this week as senior managing director of the Equity, Debt and Structured Finance Group.
Kline was previously CEO of his own CMBS debt restructuring firm and the leader of the equity/debt advisory team at RW Kline Capital LLC.
At Cushman & Wakefield, Kline will spearhead a specialized national CMBS advisory practice focused on CMBS debt maturities, assumptions, restructurings and rescue capital, creating what he said will be the largest CMBS debt restructuring practice in North America.
As CEO of RW Kline Cos., Kline facilitated more than 600 note sales, acquisitions and more than $8.7 billion in restructurings.
Also in the past week, Principal Real Estate Investors, the real estate group of Principal Global Investors, and Macquarie Group, announced they are creating a lending platform focused on originating and securitizing commercial mortgages called Principal Commercial Capital.
Principal is already actively involved in CMBS purchasing and commercial mortgage servicing. The major investor also has a lengthy track record as a CMBS loan originator and seller. The firm has contributed almost 2,000 loans totaling more than $16 billion to more than 50 securitizations.
The new venture will enable Principal Real Estate Investors to offer a wider menu of options for borrowers.
Principal Real Estate Investors and Macquarie will jointly manage the nationwide lending platform. Principal will source, underwrite, close and service loans. Macquarie will provide funding and capital markets expertise.
Macquarie has recently hired a team of CMBS veterans, led by Timothy Gallagher, to expand its presence in the U.S. commercial real estate market.
"There will be a substantial volume of commercial mortgage loans maturing over the next few years. That provides Macquarie with a sound opportunity to establish a CMBS debt platform in the U.S.," Gallagher said.

Canyon Hills Marketplace in Lake Elsinore Sells for $33.5M
               

      

Canyon     Hills is fully occupied by tenants like Stater Bros., CVS, Jack in the Box,     Wells Fargo, Carl’s Jr. and Panda Express. 

   

LAKE   ELSINORE, CALIF. — HELF Investments has acquired   Canyon Hills Marketplace, a 108,358-square-foot neighborhood shopping center   in Lake Elsinore, for $33.5 million. The center is located at 25381-25341 and   29996-29997 Canyon Hills Road.

Canyon   Hills is fully occupied by tenants like Stater Bros., CVS, Jack in the Box,   Wells Fargo, Carl’s Jr. and Panda Express. The center opened in two phases in   2006 and 2009.

"This   shopping center is an attractive asset not only because of the high-quality,   detailed architecture but because it is the focal point of the   community," says Kobzi. "It is located adjacent to the highly   desirable gated community of Canyon Lake and within the trade area of the   communities of Audie Murphy Ranch and Tuscany Hills."