This is an HTML version of an article that ran in Real Estate Forum. To see the story in its original format, click here.
The year-over-year increase in significant US commercial property sales—Real Capital Analytics reports that dollar volume was up 23% to $533 billion, the second-highest level after 2007—helps convey the magnitude of dealmaking in 2015. The numbers, though, don't tell the story of the intricacies and complexities of the year's top deals in sales, leasing and finance.
To do that, Real Estate Forum has broken out the hows and whys of these transactions, along with the key players, relying on submissions from companies involved along with other industry sources. Two of the year's most prolific dealmakers, the Blackstone Group and GE Capital Real Estate, are each covered separately, and we've also provided a sidebar spotlighting 2015's numerous mergers and acquisitions.
* * * * *
Trophy properties in gateway cities were highly sought after in 2015, breaking records yet again. New York City saw what's believed to be the largest single-building trade in the city's history when SL Green Realty Corp. paid $2.285 billion, plus about $300 million in lease improvement costs, for 11 Madison Ave. The 2.3-million-sf office property was purchased from a JV of the Sapir Organization—which had bought the property from MetLife for $675 million in 2003—and the CIM Group. The CBRE investment sales team of Darcy Stacom and William Shanahan, with DLA Piper as counsel, represented the sellers, while Greenberg Traurig advised SL Green. A Fried, Frank, Harris, Shriver & Jacobson LLP team led by Jonathan L. Mechanic and Julian S.H. Chung helped to structure $1.4 billion of 10-year, interest only, fixed-rate financing for the buyers from a consortium of lenders including Morgan Stanley, Deutsche Bank and Wells Fargo.
One mile uptown, RXR Realty emerged the victor in a competitive bidding process, laying out $1.2 billion to buy the Helmsley Building at 230 Park Ave from a JV of Monday Properties and Invesco Real Estate. Yet the trade of the 34-story, 1.4-million-sf trophy building in the middle of Park Avenue wasn't a straightforward asset sale. Rather, it involved the sale of REIT interests, involving many different levels of complications and risks. On the legal side, Greenberg Traurig's Richard J. Giusto, Danielle Gonzalez and Michael T. Lynott, and Schulte Roth & Zabel's Julian M. Wise and Seth R. Henslovitz, represented the sellers. Harry R. Silvera of Gibson, Dunn & Crutcher counseled RXR. CBRE's Darcy A. Stacom and William M. Shanahan handled the sale.
Another mile up, a partnership of General Growth Properties and Jeffrey Sutton's Wharton Properties paid $1.8 billion for the Crown Building at 730 Fifth Ave., reportedly setting a per-sf world record for a single office building at $4,490 per sf. A Skadden team lead by Audrey Sokoloff and David Wolin represented Deutsche Bank AG as administrative agent and co-lead arranger (together with Morgan Stanley, Goldman Sachs and Citigroup) in the $1.25 billion that went toward the buy. It took just four weeks to structure the complex financing, which also included both mortgage and mezzanine funds.
Eastdil Secured marketed the asset for sellers Winter Properties and Spitzer Enterprises, which had bought the then-half-empty 26-story building for $94 million in 1991. Although primarily an office property, it's the approximately 100,000 sf of retail space along the world's most expensive shopping corridor that gives the Crown Building its appeal—and price tag. GGP and Jeff Sutton will own, redevelop, lease and manage the retail portion of the property, and it's expected that the 290,000-sf office component will be redeveloped into a luxury hotel and residential condos by the Doronin/Shvo group.
On the subject of hotels, early last year Hilton Worldwide Holdings Inc. sold the iconic Waldorf-Astoria New York for $1.95 billion to Chinese investor Anbang Insurance Group Co. Ltd., while retaining a management agreement to continue to operate the property for the next 100 years. Fried Frank, Skadden and Greenberg Traurig—with Jonathan L. Mechanic, Audrey Sokoloff and Robert Ivanhoe leading the respective groups—negotiated on behalf of Anbang. Hilton announced it would use the proceeds of the deal to buy more hotels in the US through 1031 exchanges.
And it did, a few weeks later when it bought a portfolio of Florida and California properties for $1.76 billion. The biggest in the package was the Parc 55 Wyndham San Francisco, a 1,024-room hotel in Union Square that traded for $530 million. The other properties, accounting for $1.24 billion, are all in Florida: the 1,001-key Hilton Orlando Bonnet Creek and 498-room Waldorf Astoria Orlando in Orlando; and the 150-room Reach and 311-key Casa Marina, both Waldorf Astoria Resorts in Key West.
Moving to Chicago, the sale of the Aon Center at 200 E. Randolph St. Downtown was eclipsed only by Blackstone's deal for the Willis Tower (see sidebar). The city's third-tallest building sold for $712 million ($260 psf), representing an impressive exit for Piedmont Office Realty Trust, which purchased it for $462.5 million in 2003. An innovative marketing strategy by JLL's Bruce Miller and Nooshin Felsenthal—with Piedmont's in-house reps Ray Owens and Tom Prescott—generated much interest in the 2.8-million-sf asset from both foreign and domestic players, resulting in 86 tours and 18 first-round offers. At the end, the winning bid came from the 601W Cos., which tapped a JLL finance team, led by Keith Largay, to structure a $630-million financing package from Bank of China and Blackstone for the acquisition and property improvements.
It wasn't only trophy properties—nor single-building sales—that garnered high price tags or interest from overseas buyers last year. Foreign investors were behind one of last year's huge industrial portfolio sales. Henley Holding Co., a subsidiary of the Abu Dhabi Investment Authority, and the Public Sector Pension Investment Board, one of Canada's largest pension investment managers, teamed up to buy a 58-million-sf portfolio of 209 core industrial properties in 25 key US distribution markets. The seller, Exeter Property Group, earned $3.15 billion in the deal. Eastdil Secured and CBRE marketed the portfolio on Exeter's behalf. Fried Frank's Christopher Roman and Lee Parks and Kelly Anne Donohoe of Silverang, Donohoe, Rosenzweig & Haltzman LLC advised Exeter, which invested in the joint venture and will also continue to manage the purchased properties. Kirkland & Ellis LLP, Davies Ward Philips & Vineberg LLP and Torys LLP served as counsel to the buyers.
In Honolulu, General Growth Properties Inc. entered into a 75%-25% partnership with AustralianSuper Pty. to own and operate Ala Moana Center. Soon after securing $907 million from AustralianSuper, GGP sold an additional 12.5% interest to TIAA. All told, the transactions value the property at $5.5 billion. One of the largest and most productive malls in the world with over $1,350 of tenant sales per sf, the center is comprised of 2.2 million sf of retail and office space and is undergoing a major redevelopment. Meryl Chae led the Skadden team representing AustralianSuper in the partnership formation. The deal marks the buyer's biggest single-property acquisition and first US deal.
After rejecting Simon Property Group's nearly $23-billion takeover offer, Macerich Co. capitalized some of its holdings by selling minority stakes in eight shopping centers valued at a total of $5.4 billion. GIC Pte. Ltd., the sovereign wealth fund of Singapore, took a 40% stake in assets in Oregon, Arizona and Texas, as well as two in California. For its part, Heitman gained 49% ownership of a mall in New Jersey and two in Colorado.
Macerich expects to realize cash proceeds totaling $2.3 billion from the two JVs. Its team included Manatt, Phelps & Phillips LPP's Tom Muller and Anita Sabine; Philip C. Sutton of PriceWaterhouseCoopers; Edward L. Glazer of Goodwin Procter LLC; and DLA Piper's Michael D. Hamilton. Brian T. May and Jessica M. Waller of Mayer Brown served as legal advisors to Heitman. GIC was advised by Nancy M. Olson, Karen M. Lee, Jonathan Friedman and Evan Levy of Skadden.
Big prices were paid for retail assets, with the largest per-foot figure coming in at $4,565. That's how much Vornado Realty Trust paid to Starwood Capital Group and Crown Acquisitions for the 78,000-sf Old Navy Flagship Store in Manhattan's Herald Square. Leased to the retailer through 2019, the site also comes with 226,000 sf of additional zoning air rights. The REIT helped to meet the $355-million purchase price with a $205-million loan from Morgan Stanley. Incidentally, Vornado was also behind the city's largest retail lease, a 63,780-sf space at 640 Fifth Ave. for Victoria's Secret.
Akerman LLP handled one of the largest retail deals in Miami-Dade County history when its represented Playa Retail Investments LLC in its $370-million acquisition of a 1.1-acre block of Miami Beach's Lincoln Road. The price tag factors out to $4,900 per sf of retail space and $7,700 per sf of land. Akerman's Manny Fernandez, Carol Schoffel Faber and Kathryn A. Goldberger represented the buyer. The sellers, Fryd Properties and Comras Co., were advised by HFF's Manny De Zarraga, Daniel Finkle and Luis Castillo.
It wasn't an investor, but a tenant, that dug deep into its pockets in our next deal, involving 11,500 sf of Beverly Hills retail space last year. Exercising its right of first refusal after another investor submitted an unsolicited offer, Chanel paid $152 million for its 400 N Rodeo Dr. digs, factoring out to a whopping record $13,217 per sf. Private practice attorney Ron R. Goldie organized and structured the transaction for owner Rodeo Brighton LP and the sale was additionally handled by Elkins Kalt Weintraub Reuben Gartside LLP's Scott Kalt. Greenberg Glusker's Dennis Ellman also advised Rodeo Brighton. Chanel was represented by Ballard Spahr and Scott Pearson. The luxury retailer plans to join the purchased space with a store it owns next door to create a larger footprint.
Also in Southern California, TruAmerica Multifamily increased its footprint in a big way, closing one of the region's largest apartment deals in nearly two decades. In partnership with a syndicate of domestic and international institutional investors including the Guardian Life Insurance Co. of America and Allstate Life Insurance Co., the firm bought 14 properties from JH Real Estate Partners Inc. for $482 million.
Totaling 2,666 units, the portfolio is 95% leased and is comprised largely of 1980s vintage class B communities in Los Angeles County, San Diego County and the Inland Empire. Jim Fisher & Mike Smith of Lee & Associates (now with Berkadia) handled the deal, with TruAmerica's Robert Hart, Noah Hochman and Greg Campbell. The acquisition was leveraged with a $354-million Fannie Mae credit facility from Berkeley Point Capital, originated by Mitch Clarfield. The facility not only provides financing flexibility across the portfolio, but also gives the investor group the capability to acquire additional assets.
Fannie Mae's cousin, Freddie Mac, provided financing for a portfolio of another kind, some $1.3 billion for assets held by Holiday Retirement, represented by Skadden's Nancy Olson. The funds went to refinance 78 independent living facilities in 30 states across the US. The deal, structured by Russ Dey of Walker & Dunlop and closed within 47 days at the very end of December, was the biggest one ever completed by Walker & Dunlop, eclipsing the second-largest financing of $670 million done earlier in 2015.
Around the same time, Freddie Mac set a record of its own, closing the largest single-asset financing in the mortgage giant's history. Seeking to retire existing debt, repeat borrower Prime Residential took out an $878-million loan for Los Angeles' historic 144-acre Park La Brea. The West Coast's largest apartment community houses about 10,000 residents in 4,245 rent-controlled units throughout 18 towers and 175 garden apartments. HFF's Peter Smyslowski, Paul Brindley, Kevin MacKenzie and Charles Halladay brokered the transaction, which was inked in about two weeks over the holidays. Freddie Mac expects to securitize the loan through its K-Deal program.
On the subject of large financings, a few such deals are going toward the development of one of the biggest projects in US history. The Related Cos. and Oxford Properties received nearly $6 billion worth of funds to help develop various components of Hudson Yards, a 28-acre, $20-billion mixed-use development on Manhattan's West Side that will eventually feature 17 million sf of commercial and residential space, 14 acres of parkland, over 100 shops and restaurants, a hotel, 5,000 residences and a new public school.
To handle such a large project's requirements, a Kramer Levin team, led by Jonathan H. Canter and serving as condominium counsel to the developers, had initially structured a project-wide ownership association and management regime to govern the site's individual development parcels, roads and public spaces.
Culminating two years of work, the KL team then implemented a two-tiered condo ownership structure to facilitate a $5-billion finance package split into various components at 20/30 Hudson Yards. Some $1.5 billion from Deutsche Bank, Bank of China, Crédit Agricole and Industrial and Commercial Bank of China went toward the construction of the one-million-sf 20 Hudson Yards, a retail component also known as the Shops and Restaurants at Hudson Yards. A separate $690-million loan came from Bank of America, Wells Fargo and CIBC for 30 Hudson Yards, a 90-story, 1.4-million-sf tower that will house Time Warner's new world headquarters. The condo structure permitted additional capital infusion from KKR and Wells Fargo, which are each buying large blocks of office space (343,000 sf and 500,000 sf, respectively) in the tower.
A different condo ownership structure was devised for 15 Hudson Yards, an 800,000-sf tower to include some 400 rental and for-sale units as well as the “Culture Shed,” a new nonprofit that will operate a large performing arts facility. The unique structure made possible an $850-million construction loan from the Children's Investment Fund, represented by a Fried Frank team led by Michael Barker. The project also received $80 million in bond financing, in exchange for the creation of affordable units, from the NY State Housing Finance Agency and Citibank—a somewhat unprecedented venture given the configuration of the greater development.
Developers and legal teams are busy in the Southeast, where Bilzin Sumberg is advising Miami Design District Associates LLC on the $2.2-billion Miami Design District redevelopment. Comprised of Martin A. Schwartz, Craig Thompson, Alan Axelrod, Robert Siegel, Stephen Sandiford and Stacia Wells, the Bilzin team in May closed $590 million in financing for the project, comprised of a $490-million mortgage from Deutsche Bank, Bank of China and Crédit Agricole Commercial and Industrial Bank, and a $100-million mezz loan from a Blackstone affiliate—while achieving $1.3 million in tax savings for MDDA. The complex financing involved two sets of loan documents providing for construction funds, refinancings and operating funds for existing retail operations—and hundreds of pages of paperwork.
One major Southeast project was the result of a quiet land sale in the Atlanta suburb of Sandy Springs, GA. Scott McGregor and John Haynes of CBRE's Land Services Group were tapped to sell 76 acres that had once served as a private residence for a local family for over a century. A global marketing campaign resulted in over 20 offers, with the understanding that the winner would be able to create something that would draw tremendous value for the region. Developers Ashton Woods (with Mercedes-Benz USA and StreetLights Residential) signed a deal to construct a mixed-use project on the site that involved several revisions and input from the local community. The parcel had been transformed from a family residence to a $75-million transaction producing a new 456,000-sf headquarters for Mercedes-Benz USA, nearly 1,000 apartments and homes, 38,000 sf of retail and a 14-acre public park. Over a five- to seven-year timeline, the transaction and development plan will yield a buildout up to $1 billion—a boon to the once-apprehensive residents of Sandy Springs.
Folks in Summit, NJ saw a boon of their own when Celgene Corp. stepped up to buy the 1.3 million-sf former Merck & Co. campus at 556 Morris Ave., which sat vacant for two years. Yet the biopharmaceutical firm wasn't looking to buy space when it tapped the CBRE team of Leo Paytas, Tom Sullivan and Todd Ward in its space search. It actually was looking for 150,000 to 200,000 sf to house its growing administrative and R&D operations within 30 miles of its Summit headquarters. The brokers convinced their client that the wholesale purchase of the 88.4-acre site—featuring 850,000 sf of offices, 450,000 sf of high-end R&D facilities and amenities such as a large cafeteria and fitness center—would be the company's best option for optimizing its overall regional portfolio. The firm closed on the $90-million deal in October 2015. On the seller side, JLL's Daniel Loughlin, Joseph Garibaldi, Jodie Matthews and Peter Ladas spoke for Merck. Celgene is currently in the process of integrating its employees from its leased office and lab spaces throughout northern New Jersey into the newly acquired campus. Not only was Celgene able to reduce its occupancy costs throughout the region, but the additional space will allow it to expand, adding jobs to an area that had seen a huge loss when Merck closed its doors.
Elsewhere in New Jersey, another campus sale allowed one major company to monetize its real estate while maintaining its presence and operations. As part of a plan to reduce its real estate holdings, Verizon early in the year retained Cushman & Wakefield to advise it in the sale-leaseback of its 133-acre One Verizon Way campus in Basking Ridge. Within four months, the seven-building, 1.4-million-sf complex traded to Mesirow Realty Sale-Leaseback Inc. for $650.4 million, and Verizon signed a lease with the new ownership to continue operating at the campus for 20 years. The deal kept 3,900 employees in the area and attracted a high level of interest despite being in a submarket with a 20% office vacancy rate.
The SLB transaction is believed to be the largest office sale in New Jersey history and one of the largest single-tenant suburban office transactions ever completed in the US. The Cushman & Wakefield team working on the deal included investment bankers Michael Rotchford, Robert Elms, David Wenk and Mark Todrys; David Bernhaut of the NJ capital markets group; and Josh Kuriloff, NY brokerage and Verizon relationship manager. Garry Cohen and Douglas Barker led the team for Mesirow, with legal representation by Goldberg Kohn.
The Verizon team was led by John Vazquez, James Tousignant and Robert Haines as well as internal Verizon counsel, Steve Cohen. DLA Piper served as counsel for Verizon under the leadership of Mark Hurel.
It was a similar story in Ashburn, VA, where Verizon sold 22001 Loudon County Pkwy., a 12-building, 1.9-million-sf campus it took on when it bought MCI WorldCom in 2005. A JV of Davidson Kempner Capital Management LP and American Real Estate Partners paid $212.5 million for the 128.5-acre site. The telecommunications giant leased back 1.5 million sf for one year, but will retain more than one million sf for an additional 11 years. In addition to the sale and multiple leases, the deal involved the structuring of a land condominium and utility separation. CBRE's Michael Blunt and Randall Heilig represented Verizon, with internal help from the firm's global real estate manager, Gary Hucka.
The trend of large corporations monetizing real estate swept to the West Coast, where TIBCO Software signed a long-term SLB for its four-building, 292,000-sf R&D/office campus at 3301-3307 Hillview Ave. at Stanford Research Park. Morgan Stanley bought the property for $330 million, or $1,130 per square foot, in what's reportedly the largest single-asset sale in the city of Palo Alto, CA's history. Cushman & Wakefield's Adam Lasoff, Grant Lammersen, George Eckard, Seth Siegel and Michael McMillan handled the deal for TIBCO.
Yet it wasn't all cut-and-dried. For nearly a year, the C&W team worked with Vista Equity Partners, which was looking to complete a $4-billion leveraged buyout for TIBCO, to value the asset, which was also encumbered by a ground lease held by Stanford with less than 40 years term remaining. The overall transaction ended up comprising four major deals in one: the LBO, a 12-year corporate headquarters lease, a ground lease assumption and the sale itself.
At another major campus in the Silicon Valley, Palo Alto Networks was faced with a dilemma. The cyber-security firm projected its headcount and need for space would exceed its current 300,000-sf digs by as early as 2017, with a future potential requirement totaling one million sf. It had three options: maintain its existing space and and lease out a second location nearby; expand the existing campus, which is entitled for an additional 600,000 square feet; or relocate to a new campus.
Newmark Cornish & Carey's Andrew Hueser, Tom Sweeney and Lori Sweeney worked with the occupier on the site selection process, and found a candidate at the Campus @ 3333 in Santa Clara. It was almost perfect, except for the potential to grow to up to a million sf. Yet once owner Menlo Equities—advised by Colliers International's Gregg von Thadden and Don Reimann—agreed to acquire, raze and reentitle an adjacent building to accommodate the firm's future growth, the deal was done. In June 2015, Palo Alto Networks committed to 752,000 sf at the Campus @ 3333. Four months later, it signed on for more space, expanding its footprint to nearly 1.1 million sf. The deal is Santa Clara's largest lease and believed to be among the top three struck in Silicon Valley in the past quarter-century.
Further down the state, a crisis of a different sort led to one of last year's biggest leases in Downtown Los Angeles. The law firm of Lewis Brisbois Bisgaard and Smith LLP was housed in 160,000 sf at 221 N. Figueroa St. on the outskirts of the CBD—that is, until a fire at the apartment property next door forced them out. Within five days, Avison Young's Jonathan Larsen found temporary space for the 600 displaced employees at the US Bank Tower at 633 W. 5th St. A $150-million long-term lease was secured in May 2015, and LBBS now occupies 215,230 sf on nine floors of the 72-story tower, owned by Singapore-based OUE Ltd., which was represented in the deal by Peter Johnston and Cushman & Wakefield's John Eichler. The deal's significance isn't only its size. It moved a major firm from a class B property outside of Downtown to a class A asset in the heart of the CBD, not only lowering the building's vacancy by 20% but also lowered the DTLA vacancy by about a full percentage point.
An extensive three-year search for corporate headquarters space landed a major firm—and about 2,000 jobs—in the Dallas submarket of Richardson, TX. Stream Realty Partners' Tim Terrell and Jeff Schweitzer represented RealPage in its search and eventual lease of 420,000 sf at 2201 Lakeside Blvd. The site was occupied by State Farm, yet the parties worked together—with Cawley Partners' Addie Ludwig acting for the landlord—to craft penalties and incentives for the landlord to deliver the space to RealPage with enough time for the tenant to build out the space prior to its existing lease expiration.
Going back to New York, the city's biggest lease was also the catalyst for the development of a major project on the West Side. In April, Skadden, Arps, Slate, Meagher & Flom LLP, represented by head of NY real estate Neil Rock and counsel Russell Wohl, signed on as anchor tenant at One Manhattan West, taking 550,000 sf for 20 years. That deal allowed landlord Brookfield Property Partners LP to start work on the 2.1-million-sf tower, part of the new seven-million-sf mixed-use Manhattan West project.
A JLL team of Peter Riguardi, Kenneth Siegel and Matthew Astrachan handled negotiations on Skadden's behalf. Neil Rock, Russell Wohl and Stephen Pacicco of Skadden handed negotiations internally as counsel for Skadden. Jerry Larkin, Duncan McCuaig and David McBride were the in-house reps for Brookfield, which also tapped the Cushman & Wakefield team of Bruce Mosler, Josh Kuriloff, Mikael Nahmias and Ethan Silverstein as exclusive office leasing agents. Brookfield's counsel in the deal was a Fried Frank team led by Meyer Last and Jennifer A. Yashar. The law firm, led by Laurinda Martins, also assisted Brookfield in securing $1.25 billion in construction financing from a syndicate led by Wells Fargo. Fried Frank's Tal Golomb worked on the IDA component of the deal. Laurinda Martins is now in-house at Brookfield.
The city's seeing much new development, but one major deal played a role in bringing a landmark into the 21st century. Housed at the Empire State Building, LinkedIn was looking to find a new, long-term home that would accommodate growth to at least 300,000 sf and create a new, amenity-rich environment that would attract top talent. Convinced that the ESB couldn't meet those needs, the social media firm thought its only option was to move. Yet CBRE's Sacha Zarba, Greg Tosko and Lauren Crowley Corrinet saw more benefit to staying, with some big changes and negotiation acumen.
CBRE pursued several landlords looking to sign up LinkedIn as their anchor tenant. With this leverage and the promise that LinkedIn could serve as a symbol of the ESB's transformation to the digital age, CBRE worked with the trophy's owner, Empire State Realty Trust and the leasing team at Newmark Grubb Knight Frank, to create an attractive new home for LinkedIn. The bigger issue was convincing LinkedIn that ESB could be a compelling option. A football field of amenities, signage, connected elevators, outdoor space, expansion rights, the ability to broadcast from the top of an icon and a 21st century treatment of 75-year-old columns helped create a new vision for ESB in LinkedIn's eyes. CBRE struck a deal that will create a new vertical campus to house a new wave of LinkedIn engineers that also helps revitalize the landmark tower into a new home for one of the city's significant TAMI tenants.
One of Greater Boston's largest leases involved 295,030 sf of lab and office space at 675 W. Kendall in Cambridge, where Alnylam Pharmaceuticals will start its 15-year lease in 2018. Currently leased by Vertex Pharmaceuticals and occupied by three subtenants, the space wasn't being actively marketed as available. Transwestern | RBJ worked out an off-market deal—with Steve Purpura, Eric Smith and Jon Varholak repping the tenant and Purpura and Smith working for the landlord, BioMed Realty Trust—which also included the right for Alnylam to extend its lease at its current location at 300 Third St. and the right of first offer on an adjacent 349,325-sf building. All told, the firm has the ability to grow into three adjacent buildings totaling some 773,300 sf. In one fell swoop, BioMed gets a tenant to fill the property when it's vacated in two years while Alnylam avoids having to work out a more costly build-to-suit or split up its space. When it moves in, Alnylam will occupy more lab space than any other independent, Cambridge-founded company in one of the most space-constrained markets in the country.
What's touted as the largest private sector lease in the history of Washington, DC occurred when the Advisory Board Co. signed on for 532,000 sf for 16 years at the to-be-built 655 New York Ave., in what will be a massive 760,000-sf development project in Mount Vernon Triangle. Advised by the JLL team of Greg Lubar, Trip Howell, Marshall Durston and Amy Bowser, the healthcare and educational consulting firm considered options in all jurisdictions in Metro DC. Douglas Development Corp. began its phased assemblage of the entire city block 17 years ago, culminating with the last parcel acquisition just weeks prior to the lease with ABCO. The transaction was contingent upon the simultaneous negotiation of a 50-50 JV between, Douglas Development and Brookfield Properties, with a timely culmination contemporaneous with the execution of the lease. Douglas Development originally planned for a 350,000-sf office building on the western half of the block and a hotel on the eastern half of the site, but pivoted to design a 760,000 sf office and retail building in order to compete for the Advisory Board's tenancy.
The deal, however, was contingent on the passage of the DC Council Local Jobs and Tax Incentive Act of 2015. It passed in early December, allowing for up to $60 million in tax incentives to ABCO, conditional upon the company creating at least 1,000 new jobs in the District and leasing a minimum of 425,000 sf for 15 years. The lease was signed within days of passage of the incentives legislation by the DC Council, spurring the complicated development that incorporates 17 historic structures. ABCO is slated to move to its new corporate headquarters in May 2019. CBRE's Mark C. Klug and Randy Harrell, with Douglas Development's Norman Jemal and Brookfield's Greg Meyer and Bobby Swennes, negotiated on the landlord's side of the table.
The largest non-government lease in district will move Fannie Mae into 750,000 sf at Carr Properties' planned Midtown Center, after what was again a fierce competition to attract the tenant. A Fried Frank team led by Franz R. Rassman handled dozens of meetings on behalf of the landlord, which also sent in-house reps Oliver T. Carr III, Daniel P. Dooley, Austen Holderness and James Berkon into discussions. A lease for the new headquarters was signed two weeks after the first draft was delivered, with Cushman & Wakefield handling the deal for Fannie. Carr Properties is now demolishing the site, the former Washington Post headquarters, and the new state-of-the-art buildings are scheduled for completion in 2018.
Yet the biggest splash in the DC office bucket was the 15-year mega-lease that the US General Services Administration awarded to StonebridgeCarras, for 839,000 sf for the Department of Justice at the Constitution Square complex in NoMa. Not only last year's largest lease, it's also the largest federal government lease in DC in 13 years since the Department of Transportation took 1.3 million sf in 2002. The DoJ, which was the first tenant to sign at the complex when it took pre-leased 600,000 sf at Two Constitution Square, will occupy all of Three and Four Constitution Square—representing the final phase of the mammoth 2.6-million-sf project. Cushman & Wakefield's government services group represented StonebridgeCarras and its partner in this project, Walton Street Capital. GSA was represented by CBRE's team of Henry Chapman and Sara Dunstan. The GSA contracting officers were Joel Berelson and Sean McNeal.
Not to be outdone, the industrial sector saw its fair share of large transactions in 2015. In the Chicago suburb of Joliet, Jack Cozzie of Newmark Grubb Knight Frank and Ladson Montgomery of Newmark Grubb Phoenix Realty Group assisted Saddle Creek Logistics in its relocation to a 1.2 million sf build-to-suit on 60 acres at CenterPoint Intermodal Center. Located 40 miles outside of Chicago, the development offers immediate access to two of the country's largest intermodal operations, the Union Pacific Global IV and the BNSF Logistics Park Chicago. Landlord CenterPoint Properties, represented by NAI Hiffman's Dan Leahy and Adam Roth, delivered the $43-million project quickly and the 3PL firm moved in earlier this year. It's expected to create approximately 250 jobs, with 200 permanent workers to be based in the warehouse.
The Midwest's central location attracted Wayfair Inc. as well, which tapped Transwestern | RBJ's Jon Varholak and John Lashar to assist in its space search. Dermody Properties, with JV partner Hillwood Investment Properties, is working on a build-to-suit of nearly 900,000 sf for the online home furnishings and décor company at their LogistiCenter at 275 in northern Kentucky. The new site will complement Wayfair's current distribution center in Hebron, KY, allowing the company to increase its distribution capacity. Situated on 52 acres leased from the Cincinnati/Northern Kentucky International Airport, the complex is one of the largest single developments by square footage in the history of Dermody Properties. Phase one is slated for delivery this month, and phase two will be ready in May.
Handling not only the Wayfair lease, but also the land lease with the airport, were Michael Dermody, Douglas A. Kiersey, Jr., Gregory J. Arnold and Lou Berchicci of Dermody Properties and Todd Platt and Chris Brown of Hillwood Investment Properties. Cushman & Wakefield's David Kelly and Jeff Bender also worked on the deal for Wayfair.
Tenants flocked to the Inland Empire, another major US distribution hub. In the largest deal, Goodman Birtcher leased the entire 1.6 million-sf Goodman Logistics Center Rancho Cucamonga to Georgia-Pacific in one of the biggest such deals signed in SoCal in the past decade. The 75-acre, two-building spec project snagged the tenant just one month prior to completion. It will serve as a regional distribution facility for Georgia-Pacific's consumer products business, operated by a third-party logistics company.
In nearby Ontario, CA, Sares-Regis Group bought 150 acres of prime commercial land with plans to develop three million sf worth of distribution space. At the same time, the company pre-leased the largest of the seven planned buildings to QVC to serve as the retailer's first West Coast distribution hub. QVC, which will begin operating its 1.05 million sf of space this July, plans to hire about 1,000 employees by 2020. SRG was represented in the land acquisition and QVC lease by Joe McKay of Lee & Associates. QVC was represented by CBRE brokers Erik Wanland, Jay Dick and Mike Barker.
And in Perris, CA, a hush-hush deal between landlords Prudential Real Estate Investors and Howard Industrial Partners and tenant General Mills gave the consumer products company over 1.5 million sf at 4120 Indian St. within the Perris Valley Logistics Center. Cushman & Wakefield's Phil Lombardo and Andrew Starnes represented the landlord, while JLL's Peter McWilliams, Mike McCrary, Nicole Welch and Paul Sablock negotiated for General Mills.
THE BIGGEST BUYER, AND SELLER
By dollar volume, the Blackstone Group led the rosters of both US buyers and sellers in 2015 as per Real Capital Analytics. As one measure of how large a footprint the asset management giant left on the investment sales landscape last year, consider that on RCA's list of top buyers by number of properties, the top two investors achieved their rankings largely by partnering on a single mega-acquisition from Blackstone. Here's a look at some of the major assets that went out of—and into—the private equity firm's portfolio.
OUT: IndCor and More
The biggest of Blackstone's dispositions in 2015 was its February exit from the US industrial sector via an $8.2-billion sale to a JV of Global Logistics Properties Ltd. and GIC Pte. Ltd., the sovereign wealth fund of Singapore. Assembled through Blackstone Real Estate Partners beginning in 2010, the IndCor portfolio spans 117 million sf, with 722 properties in 23 states.
Goldman Sachs, as lead lender, Bank of America and Morgan Stanley funded $4.92 billion of acquisition financing for the transaction. The properties were divided into six separate pools, each of which served as collateral for a loan, namely: five, separate, non-recourse, fixed-rate loans totaling $4.17 billion and a $750 million, non-recourse, floating rate loan. Of the five loans that comprise the fixed-rate debt, three loans totaling $2.8 billion were securitized and the other two loans were sold in whole-loan form. The transaction was the largest mortgage financing since the mortgage debt markets reopened in '09.
Also in February, Blackstone closed on its $925-million sale to its joint-venture partner in a 5.6-million-sf shopping center portfolio. Kimco Realty Corp. acquired the remaining 66.67% interest in the Kimstone portfolio, including the assumption of $426.7 million in mortgage debt, from a subsidiary of BREP VII.
In April, Hudson Pacific Properties finalized its purchase of the Equity Office Properties Northern California portfolio from Blackstone in a $3.5-billion stock-and-cash transaction that started out as a phone call between the firms' chiefs. The deal for 8.2 million sf in 26 class A properties and two development sites totaling 40 acres, originally part of Blackstone's 2007 takeout of EOP, transformed Hudson Pacific into a preeminent West Coast office REIT, more than doubling its size to a $6.4-billion market cap.
Yet that wasn't the only Blackstone disposition connected to its EOP holdings. In November, a JV of Oxford Properties Group and institutional investors advised by J.P. Morgan Asset Management paid nearly $1.3 billion for two Boston office assets, 500 Boylston St. and 222 Berkeley St. And in Blackstone's hometown of New York City, Ivanhoé Cambridge and partner Callahan Capital Properties paid $2.2 billion for 1095 Ave. of the Americas, a former EOP property that the JV later rebranded as Three Bryant Park.
Blackstone's biggest splash in the multifamily pool during 2015 was as a buyer, but the company also made news as a seller. May saw the $650-million sale of a 4,600-unit portfolio of garden apartments to Strata Equity Group, with properties in Atlanta, Austin, Denver and Houston. The buyer, which partnered with a Mexican private investor group, used $495 million in Freddie Mac financing arranged by HFF to complete its purchase. And while the firm racked up billions in deals in the hotel sector, it was through its Hilton Worldwide Holdings group.
IN: Taking Stuy-Town Off the Market
Blackstone started and ended 2015 with major multifamily deals. In January, the firm agreed to buy 11,000 units in 36 properties from the Praedium Group for $1.7 billion in a deal handled by JLL's Jubeen Vaghefi and Denny St. Romain. By the end of the year, the firm was closing its $5.3-billion deal for the sprawling Peter Cooper Village/Stuyvesant Town apartment complex in Manhattan. The year's largest single-property buy, Blackstone made the Stuy-Town purchase in partnership with Ivanhoé Cambridge.
The deal was backed by Fannie Mae in the form of $2.7 billion in financing originated by Wells Fargo. Seller CWCapital Asset Management was represented by co-counsel Venable and Jonathan L. Mechanic, Janice MacAvoy and others from the law firm Fried Frank, which also represented the seller in another big Manhattan deal with Blackstone on the buy side.
In that case, Fried Frank's Lee Parks and Joshua Mermelstein led the team that represented RXR Realty, which brought in Blackstone as a 49% equity partner in a 5.3-million-sf office portfolio, including the massive Starrett-Lehigh Building. Blackstone paid $4 billion for its stake in the package, which encompasses nine properties in Manhattan and Princeton, NJ.
A Chicago office icon, the Willis Tower, traded in June when Blackstone bought the 108-story landmark for $1.3 billion from a partnership of the Feil Organization, BLDG Management, the Chetrit Group and American Landmark Properties.
Blackstone's biggest acquisition of 2015 also had a Manhattan component—the JW Marriott Essex House—but it was only part of a 17-property, 7,600-key national portfolio that the company acquired in taking Strategic Hotels & Resorts private. Closing in the final weeks of last year, the Strategic privatization was valued at $6 billion.
At roughly the same time as it closed on the Strategic and Stuy-Town deals, Blackstone also closed on another multifamily acquisition. This time, it was a $2-billion grouping of 33 garden apartments from Greystar, which was represented by HFF.
The Strategic deal was Blackstone's second REIT privatization of 2015. Earlier, it took out Excel Trust, also for approximately $2 billion. That deal added about 42 properties with 9.1 million sf of retail and 339 units to Blackstone's US holdings, and was announced shortly after Blackstone divulged its involvement in GE Capital's sale of most of its real estate business.
GE CAPITAL'S MASSIVE PAREDOWN
“The future of GE is as an industrial company,” CEO Jeffrey Immelt said last April. The occasion was the company's announcement that it would largely exit the financial services business over the next 24 months. As a major step in realizing that strategy, the bulk of the GE Capital Real Estate global platform traded to the Blackstone Group and Wells Fargo in no fewer than five transactions, in which GE was advised by Warren Gorrell and Bruce Gilchrist at Hogan Lovells, along with the Kimberlite Group and BofA Merrill Lynch.
In the largest of the five, Wells Fargo purchased from GE Capital more than 250 commercial mortgage loans with a balance of in excess of $9 billion. The loans were backed by properties across the US, UK and Canada. Dechert's Richard Jones, Kahlil Yearwood, Jeremy Trinder and a team of finance, tax, intellectual property, HR and competition attorneys represented Wells Fargo. The transaction represented a major portion of GE Capital's effort to end its status as a SIFI. Blackstone's flagship global real estate fund, the largest in the world, simultaneously purchased the balance of GE Capital's mortgage loans and paid an additional $3.5 million for GE Capital's US equity portfolio.
In the debt arena, Blackstone Mortgage Trust bought a $4.6-billion portfolio of first mortgage loans, mainly in the US, with financing provided by Wells Fargo. Outside the US, Blackstone's European real estate fund, BREP Europe IV, took GE Capital's European equity real estate assets for slightly more than $2 billion. These consisted of office, logistics and retail assets, located mainly in the UK, France and Spain. Last but not least, BREDS, Blackstone's real estate debt fund, bought a portfolio of performing first mortgage loans in Mexico and Australia for $4.2 billion. Simpson Thacher & Bartlett LLP's Greg Ressa advised Blackstone on those deals.
The Blackstone/Wells Fargo sales weren't the end of it. In August, Capital One Financial Corp. agreed to acquire $8.5 billion of healthcare-related loans and the Healthcare Financial Services business of GE Capital to form Capital One Healthcare, with more than $11 billion in total outstanding balances. The HFS platform included financing to companies in healthcare services, seniors housing, hospitals, medical offices, pharmaceuticals, and medical devices.
CBRE Capital Markets' national loan & portfolio sale advisory group, led by Patrick Arangio and Jack Howard, was the exclusive advisor to GE Capital on another multi-buyer sale. This time, it involved a national portfolio of performing, sub-performing and non-performing mortgage loans with an unpaid principal balance totaling $2.3 billion. Deutsche Bank AG purchased the largest group, which included 46 performing and sub-performing loans with a current UPB of $1.59 billion. Waterfall Asset Management purchased a portfolio of 265 small-balance loans from GE Capital's business property lending unit totaling $565 million in UPB, while Newcastle Investment Corp. purchased two performing loans with a UPB of $157 million, secured by a portfolio of golf courses located across the US.
AT THE ENTITY LEVEL . . .
Although the Blackstone Group was involved in a number of entity-level deals during 2015—as both buyer and seller—the year was exceptionally busy for M&A activity even without the presence of the asset management behemoth.
The industrial sector saw no fewer than three huge entity-level combinations worth a combined $18.5 billion. The largest of these was the $8.1-billion acquisition of Blackstone's IndCor platform by a partnership of Global Logistics Properties and GIC Pte. Ltd. But GLP wasn't done bulking up its US presence: it came back a few months after the IndCor deal closed to take Industrial Income Trust private for $4.55 billion. The deal boosted GLP's US presence by 50%, adding 58 million sf to its holdings and making it the nation's second largest owner of US industrial real estate.
Also active on the M&A front was the nation's largest industrial landlord, Prologis Inc. In partnership with Norges Bank Investment Management, Prologis acquired all of the real estate of KTR Capital Partners as well as its management company for $5.9 billion. KTR, which had attracted interest from sovereign wealth funds before deciding to sell its entire portfolio, was represented throughout the process by Weil, Gotshal & Manges LLP's J. Philip Rosen and Shayla Harlev. With Mayer Brown serving as legal counsel, Prologis handled the deal primarily in house, with the team lead by Hamid Moghadam, Edward Nekritz and Gene Reilly.
Office, too, accounted for billions of dollars worth of mergers, all in the REIT sector. In June, Griffin Capital Essential Asset REIT and Signature Office REIT closed on a $3-billion combination that created a company with 70 properties across 20 states, comprising mainly single-tenant office and industrial assets.
A merger of similar dollar value, in which Select Income REIT bought Cole Corporate Income Trust, crossed the finish line in January 2015. The year ended with a merger that created the largest office and industrial net lease REIT with an enterprise value of $5.7 billion, as Gramercy Property Trust acquired Chambers Street Properties and lined up $2.23 billion in new financings.
There are now two less multifamily REITs in the world following privatizations. Lone Star Funds took Home Properties private for $7.6 billion last October. The deal gave Dallas-based Lone Star ownership of more than 36,000 apartments on the East Coast and in the Chicago metro area. Two months earlier, an affiliate of Brookfield Asset Management acquired all shares of Associated Estates Realty Corp. in a deal worth $2.5 billion including the assumption of debt.
The self-storage sector also saw consolidation as Extra Space Storage acquired SmartStop Self Storage, taking 122 stores into its holdings. At $1.4 billion, the deal was the largest the sector had seen in 10 years and the third largest in its history. The seller was repped by an in-house team of H. Michael Schwartz, Skip Perry, Tim Morris, Michael McClure, James Berg, Wayne Johnson, Ken Morrison and James Barry.
In a category spanning all commercial property sectors—services firms—a trend toward consolidation continued in 2015. The year began with DTZ's acquisition of Cassidy Turley. DTZ was under the ownership of a consortium led by TPG Capital, which had acquired DTZ in 2014. In May, DTZ agreed to pay $2 billion to acquire Cushman & Wakefield from majority owner Exor SpA, merging under the Cushman & Wakefield brand. Brett White and Tod Lickerman led the effort resulting in the merger, which closed in September, just four months after initial talks began.
Itself the sum total of several mergers and acquisitions, CBRE Group marked 2015 with one of its biggest, the $1.475-billion purchase of Johnson Controls' Global Workplace Solutions business in September, and adopted GWS as the name of its occupier outsourcing business line. The deal increased CBRE's global portfolio of managed properties and facilities from 3.4 billion sf to more than five billion sf and added 14,000 employees to CBRE's 52,000 globally. CBRE also agreed to provide Johnson Controls with a full suite of corporate RE services under a long-term contract.
By dollar value, the largest commercial real estate merger of 2015 was in the grocery sector. Cerberus Capital Management's $9.2-billion acquisition of Safeway Inc., and Safeway's merger with the Cerberus-owned Albertsons, closed on Jan. 30 of last year.
This is an HTML version of an article that ran in Real Estate Forum. To see the story in its original format, click here.
The year-over-year increase in significant US commercial property sales—Real Capital Analytics reports that dollar volume was up 23% to $533 billion, the second-highest level after 2007—helps convey the magnitude of dealmaking in 2015. The numbers, though, don't tell the story of the intricacies and complexities of the year's top deals in sales, leasing and finance.
To do that, Real Estate Forum has broken out the hows and whys of these transactions, along with the key players, relying on submissions from companies involved along with other industry sources. Two of the year's most prolific dealmakers, the Blackstone Group and GE Capital Real Estate, are each covered separately, and we've also provided a sidebar spotlighting 2015's numerous mergers and acquisitions.
* * * * *
Trophy properties in gateway cities were highly sought after in 2015, breaking records yet again.
One mile uptown, RXR Realty emerged the victor in a competitive bidding process, laying out $1.2 billion to buy the Helmsley Building at 230 Park Ave from a JV of Monday Properties and Invesco Real Estate. Yet the trade of the 34-story, 1.4-million-sf trophy building in the middle of Park Avenue wasn't a straightforward asset sale. Rather, it involved the sale of REIT interests, involving many different levels of complications and risks. On the legal side,
Another mile up, a partnership of
Eastdil Secured marketed the asset for sellers Winter Properties and Spitzer Enterprises, which had bought the then-half-empty 26-story building for $94 million in 1991. Although primarily an office property, it's the approximately 100,000 sf of retail space along the world's most expensive shopping corridor that gives the Crown Building its appeal—and price tag. GGP and Jeff Sutton will own, redevelop, lease and manage the retail portion of the property, and it's expected that the 290,000-sf office component will be redeveloped into a luxury hotel and residential condos by the Doronin/Shvo group.
On the subject of hotels, early last year
And it did, a few weeks later when it bought a portfolio of Florida and California properties for $1.76 billion. The biggest in the package was the Parc 55 Wyndham San Francisco, a 1,024-room hotel in Union Square that traded for $530 million. The other properties, accounting for $1.24 billion, are all in Florida: the 1,001-key Hilton Orlando Bonnet Creek and 498-room Waldorf Astoria Orlando in Orlando; and the 150-room Reach and 311-key Casa Marina, both Waldorf Astoria Resorts in Key West.
Moving to Chicago, the sale of the Aon Center at 200 E. Randolph St. Downtown was eclipsed only by Blackstone's deal for the Willis Tower (see sidebar). The city's third-tallest building sold for $712 million ($260 psf), representing an impressive exit for Piedmont Office Realty Trust, which purchased it for $462.5 million in 2003. An innovative marketing strategy by JLL's Bruce Miller and Nooshin Felsenthal—with Piedmont's in-house reps Ray Owens and Tom Prescott—generated much interest in the 2.8-million-sf asset from both foreign and domestic players, resulting in 86 tours and 18 first-round offers. At the end, the winning bid came from the 601W Cos., which tapped a JLL finance team, led by Keith Largay, to structure a $630-million financing package from Bank of China and Blackstone for the acquisition and property improvements.
It wasn't only trophy properties—nor single-building sales—that garnered high price tags or interest from overseas buyers last year. Foreign investors were behind one of last year's huge industrial portfolio sales. Henley Holding Co., a subsidiary of the Abu Dhabi Investment Authority, and the Public Sector Pension Investment Board, one of Canada's largest pension investment managers, teamed up to buy a 58-million-sf portfolio of 209 core industrial properties in 25 key US distribution markets. The seller, Exeter Property Group, earned $3.15 billion in the deal. Eastdil Secured and CBRE marketed the portfolio on Exeter's behalf.
In Honolulu,
After rejecting
Macerich expects to realize cash proceeds totaling $2.3 billion from the two JVs. Its team included
Big prices were paid for retail assets, with the largest per-foot figure coming in at $4,565. That's how much
It wasn't an investor, but a tenant, that dug deep into its pockets in our next deal, involving 11,500 sf of Beverly Hills retail space last year. Exercising its right of first refusal after another investor submitted an unsolicited offer, Chanel paid $152 million for its 400 N Rodeo Dr. digs, factoring out to a whopping record $13,217 per sf. Private practice attorney Ron R. Goldie organized and structured the transaction for owner Rodeo Brighton LP and the sale was additionally handled by Elkins Kalt Weintraub Reuben Gartside LLP's Scott Kalt.
Also in Southern California, TruAmerica Multifamily increased its footprint in a big way, closing one of the region's largest apartment deals in nearly two decades. In partnership with a syndicate of domestic and international institutional investors including the
Totaling 2,666 units, the portfolio is 95% leased and is comprised largely of 1980s vintage class B communities in Los Angeles County, San Diego County and the Inland Empire. Jim Fisher & Mike Smith of Lee & Associates (now with Berkadia) handled the deal, with TruAmerica's Robert Hart, Noah Hochman and Greg Campbell. The acquisition was leveraged with a $354-million
Around the same time,
On the subject of large financings, a few such deals are going toward the development of one of the biggest projects in US history. The Related Cos. and Oxford Properties received nearly $6 billion worth of funds to help develop various components of Hudson Yards, a 28-acre, $20-billion mixed-use development on Manhattan's West Side that will eventually feature 17 million sf of commercial and residential space, 14 acres of parkland, over 100 shops and restaurants, a hotel, 5,000 residences and a new public school.
To handle such a large project's requirements, a
Culminating two years of work, the KL team then implemented a two-tiered condo ownership structure to facilitate a $5-billion finance package split into various components at 20/30 Hudson Yards. Some $1.5 billion from
A different condo ownership structure was devised for 15 Hudson Yards, an 800,000-sf tower to include some 400 rental and for-sale units as well as the “Culture Shed,” a new nonprofit that will operate a large performing arts facility. The unique structure made possible an $850-million construction loan from the Children's Investment Fund, represented by a
Developers and legal teams are busy in the Southeast, where
One major Southeast project was the result of a quiet land sale in the Atlanta suburb of Sandy Springs, GA. Scott McGregor and John Haynes of CBRE's Land Services Group were tapped to sell 76 acres that had once served as a private residence for a local family for over a century. A global marketing campaign resulted in over 20 offers, with the understanding that the winner would be able to create something that would draw tremendous value for the region. Developers Ashton Woods (with Mercedes-Benz USA and StreetLights Residential) signed a deal to construct a mixed-use project on the site that involved several revisions and input from the local community. The parcel had been transformed from a family residence to a $75-million transaction producing a new 456,000-sf headquarters for Mercedes-Benz USA, nearly 1,000 apartments and homes, 38,000 sf of retail and a 14-acre public park. Over a five- to seven-year timeline, the transaction and development plan will yield a buildout up to $1 billion—a boon to the once-apprehensive residents of Sandy Springs.
Folks in Summit, NJ saw a boon of their own when
Elsewhere in New Jersey, another campus sale allowed one major company to monetize its real estate while maintaining its presence and operations. As part of a plan to reduce its real estate holdings, Verizon early in the year retained Cushman & Wakefield to advise it in the sale-leaseback of its 133-acre One Verizon Way campus in Basking Ridge. Within four months, the seven-building, 1.4-million-sf complex traded to Mesirow Realty Sale-Leaseback Inc. for $650.4 million, and Verizon signed a lease with the new ownership to continue operating at the campus for 20 years. The deal kept 3,900 employees in the area and attracted a high level of interest despite being in a submarket with a 20% office vacancy rate.
The SLB transaction is believed to be the largest office sale in New Jersey history and one of the largest single-tenant suburban office transactions ever completed in the US. The Cushman & Wakefield team working on the deal included investment bankers Michael Rotchford, Robert Elms, David Wenk and Mark Todrys; David Bernhaut of the NJ capital markets group; and Josh Kuriloff, NY brokerage and Verizon relationship manager. Garry Cohen and Douglas Barker led the team for Mesirow, with legal representation by
The Verizon team was led by John Vazquez, James Tousignant and Robert Haines as well as internal Verizon counsel, Steve Cohen.
It was a similar story in Ashburn, VA, where Verizon sold 22001 Loudon County Pkwy., a 12-building, 1.9-million-sf campus it took on when it bought MCI WorldCom in 2005. A JV of Davidson Kempner Capital Management LP and American Real Estate Partners paid $212.5 million for the 128.5-acre site. The telecommunications giant leased back 1.5 million sf for one year, but will retain more than one million sf for an additional 11 years. In addition to the sale and multiple leases, the deal involved the structuring of a land condominium and utility separation. CBRE's Michael Blunt and Randall Heilig represented Verizon, with internal help from the firm's global real estate manager, Gary Hucka.
The trend of large corporations monetizing real estate swept to the West Coast, where TIBCO Software signed a long-term SLB for its four-building, 292,000-sf R&D/office campus at 3301-3307 Hillview Ave. at Stanford Research Park.
Yet it wasn't all cut-and-dried. For nearly a year, the C&W team worked with Vista Equity Partners, which was looking to complete a $4-billion leveraged buyout for TIBCO, to value the asset, which was also encumbered by a ground lease held by Stanford with less than 40 years term remaining. The overall transaction ended up comprising four major deals in one: the LBO, a 12-year corporate headquarters lease, a ground lease assumption and the sale itself.
At another major campus in the Silicon Valley, Palo Alto Networks was faced with a dilemma. The cyber-security firm projected its headcount and need for space would exceed its current 300,000-sf digs by as early as 2017, with a future potential requirement totaling one million sf. It had three options: maintain its existing space and and lease out a second location nearby; expand the existing campus, which is entitled for an additional 600,000 square feet; or relocate to a new campus.
Newmark Cornish & Carey's Andrew Hueser, Tom Sweeney and Lori Sweeney worked with the occupier on the site selection process, and found a candidate at the Campus @ 3333 in Santa Clara. It was almost perfect, except for the potential to grow to up to a million sf. Yet once owner Menlo Equities—advised by Colliers International's Gregg von Thadden and Don Reimann—agreed to acquire, raze and reentitle an adjacent building to accommodate the firm's future growth, the deal was done. In June 2015, Palo Alto Networks committed to 752,000 sf at the Campus @ 3333. Four months later, it signed on for more space, expanding its footprint to nearly 1.1 million sf. The deal is Santa Clara's largest lease and believed to be among the top three struck in Silicon Valley in the past quarter-century.
Further down the state, a crisis of a different sort led to one of last year's biggest leases in Downtown Los Angeles. The law firm of
An extensive three-year search for corporate headquarters space landed a major firm—and about 2,000 jobs—in the Dallas submarket of Richardson, TX. Stream Realty Partners' Tim Terrell and Jeff Schweitzer represented RealPage in its search and eventual lease of 420,000 sf at 2201 Lakeside Blvd. The site was occupied by
Going back to
A JLL team of Peter Riguardi, Kenneth Siegel and Matthew Astrachan handled negotiations on Skadden's behalf. Neil Rock, Russell Wohl and Stephen Pacicco of Skadden handed negotiations internally as counsel for Skadden. Jerry Larkin, Duncan McCuaig and David McBride were the in-house reps for Brookfield, which also tapped the Cushman & Wakefield team of Bruce Mosler, Josh Kuriloff, Mikael Nahmias and Ethan Silverstein as exclusive office leasing agents. Brookfield's counsel in the deal was a
The city's seeing much new development, but one major deal played a role in bringing a landmark into the 21st century. Housed at
CBRE pursued several landlords looking to sign up
One of Greater Boston's largest leases involved 295,030 sf of lab and office space at 675 W. Kendall in Cambridge, where Alnylam Pharmaceuticals will start its 15-year lease in 2018. Currently leased by Vertex Pharmaceuticals and occupied by three subtenants, the space wasn't being actively marketed as available. Transwestern | RBJ worked out an off-market deal—with Steve Purpura,
What's touted as the largest private sector lease in the history of Washington, DC occurred when the Advisory Board Co. signed on for 532,000 sf for 16 years at the to-be-built 655
The deal, however, was contingent on the passage of the DC Council Local Jobs and Tax Incentive Act of 2015. It passed in early December, allowing for up to $60 million in tax incentives to ABCO, conditional upon the company creating at least 1,000 new jobs in the District and leasing a minimum of 425,000 sf for 15 years. The lease was signed within days of passage of the incentives legislation by the DC Council, spurring the complicated development that incorporates 17 historic structures. ABCO is slated to move to its new corporate headquarters in May 2019. CBRE's Mark C. Klug and Randy Harrell, with Douglas Development's Norman Jemal and Brookfield's Greg Meyer and Bobby Swennes, negotiated on the landlord's side of the table.
The largest non-government lease in district will move
Yet the biggest splash in the DC office bucket was the 15-year mega-lease that the US General Services Administration awarded to StonebridgeCarras, for 839,000 sf for the Department of Justice at the Constitution Square complex in NoMa. Not only last year's largest lease, it's also the largest federal government lease in DC in 13 years since the Department of Transportation took 1.3 million sf in 2002. The DoJ, which was the first tenant to sign at the complex when it took pre-leased 600,000 sf at Two Constitution Square, will occupy all of Three and Four Constitution Square—representing the final phase of the mammoth 2.6-million-sf project. Cushman & Wakefield's government services group represented StonebridgeCarras and its partner in this project, Walton Street Capital. GSA was represented by CBRE's team of Henry Chapman and Sara Dunstan. The GSA contracting officers were Joel Berelson and Sean McNeal.
Not to be outdone, the industrial sector saw its fair share of large transactions in 2015. In the Chicago suburb of Joliet, Jack Cozzie of Newmark Grubb Knight Frank and Ladson Montgomery of Newmark Grubb Phoenix Realty Group assisted Saddle Creek Logistics in its relocation to a 1.2 million sf build-to-suit on 60 acres at CenterPoint Intermodal Center. Located 40 miles outside of Chicago, the development offers immediate access to two of the country's largest intermodal operations, the Union Pacific Global IV and the BNSF Logistics Park Chicago. Landlord CenterPoint Properties, represented by NAI Hiffman's Dan Leahy and Adam Roth, delivered the $43-million project quickly and the 3PL firm moved in earlier this year. It's expected to create approximately 250 jobs, with 200 permanent workers to be based in the warehouse.
The Midwest's central location attracted Wayfair Inc. as well, which tapped Transwestern | RBJ's Jon Varholak and John Lashar to assist in its space search. Dermody Properties, with JV partner Hillwood Investment Properties, is working on a build-to-suit of nearly 900,000 sf for the online home furnishings and décor company at their LogistiCenter at 275 in northern Kentucky. The new site will complement Wayfair's current distribution center in Hebron, KY, allowing the company to increase its distribution capacity. Situated on 52 acres leased from the Cincinnati/Northern Kentucky International Airport, the complex is one of the largest single developments by square footage in the history of Dermody Properties. Phase one is slated for delivery this month, and phase two will be ready in May.
Handling not only the Wayfair lease, but also the land lease with the airport, were Michael Dermody, Douglas A. Kiersey, Jr., Gregory J. Arnold and Lou Berchicci of Dermody Properties and Todd Platt and Chris Brown of Hillwood Investment Properties. Cushman & Wakefield's David Kelly and Jeff Bender also worked on the deal for Wayfair.
Tenants flocked to the Inland Empire, another major US distribution hub. In the largest deal, Goodman Birtcher leased the entire 1.6 million-sf Goodman Logistics Center Rancho Cucamonga to Georgia-Pacific in one of the biggest such deals signed in SoCal in the past decade. The 75-acre, two-building spec project snagged the tenant just one month prior to completion. It will serve as a regional distribution facility for Georgia-Pacific's consumer products business, operated by a third-party logistics company.
In nearby Ontario, CA, Sares-Regis Group bought 150 acres of prime commercial land with plans to develop three million sf worth of distribution space. At the same time, the company pre-leased the largest of the seven planned buildings to QVC to serve as the retailer's first West Coast distribution hub. QVC, which will begin operating its 1.05 million sf of space this July, plans to hire about 1,000 employees by 2020. SRG was represented in the land acquisition and QVC lease by Joe McKay of Lee & Associates. QVC was represented by CBRE brokers Erik Wanland, Jay Dick and Mike Barker.
And in Perris, CA, a hush-hush deal between landlords Prudential Real Estate Investors and Howard Industrial Partners and tenant General Mills gave the consumer products company over 1.5 million sf at 4120 Indian St. within the Perris Valley Logistics Center. Cushman & Wakefield's Phil Lombardo and Andrew Starnes represented the landlord, while JLL's Peter McWilliams, Mike McCrary, Nicole Welch and Paul Sablock negotiated for General Mills.
THE BIGGEST BUYER, AND SELLER
By dollar volume, the Blackstone Group led the rosters of both US buyers and sellers in 2015 as per Real Capital Analytics. As one measure of how large a footprint the asset management giant left on the investment sales landscape last year, consider that on RCA's list of top buyers by number of properties, the top two investors achieved their rankings largely by partnering on a single mega-acquisition from Blackstone. Here's a look at some of the major assets that went out of—and into—the private equity firm's portfolio.
OUT: IndCor and More
The biggest of Blackstone's dispositions in 2015 was its February exit from the US industrial sector via an $8.2-billion sale to a JV of Global Logistics Properties Ltd. and GIC Pte. Ltd., the sovereign wealth fund of Singapore. Assembled through Blackstone Real Estate Partners beginning in 2010, the IndCor portfolio spans 117 million sf, with 722 properties in 23 states.
Also in February, Blackstone closed on its $925-million sale to its joint-venture partner in a 5.6-million-sf shopping center portfolio.
In April, Hudson Pacific Properties finalized its purchase of the Equity Office Properties Northern California portfolio from Blackstone in a $3.5-billion stock-and-cash transaction that started out as a phone call between the firms' chiefs. The deal for 8.2 million sf in 26 class A properties and two development sites totaling 40 acres, originally part of Blackstone's 2007 takeout of EOP, transformed Hudson Pacific into a preeminent West Coast office REIT, more than doubling its size to a $6.4-billion market cap.
Yet that wasn't the only Blackstone disposition connected to its EOP holdings. In November, a JV of Oxford Properties Group and institutional investors advised by J.P. Morgan Asset Management paid nearly $1.3 billion for two Boston office assets, 500 Boylston St. and 222 Berkeley St. And in Blackstone's hometown of
Blackstone's biggest splash in the multifamily pool during 2015 was as a buyer, but the company also made news as a seller. May saw the $650-million sale of a 4,600-unit portfolio of garden apartments to Strata Equity Group, with properties in Atlanta, Austin, Denver and Houston. The buyer, which partnered with a Mexican private investor group, used $495 million in
IN: Taking Stuy-Town Off the Market
Blackstone started and ended 2015 with major multifamily deals. In January, the firm agreed to buy 11,000 units in 36 properties from the Praedium Group for $1.7 billion in a deal handled by JLL's Jubeen Vaghefi and Denny St. Romain. By the end of the year, the firm was closing its $5.3-billion deal for the sprawling Peter Cooper Village/Stuyvesant Town apartment complex in Manhattan. The year's largest single-property buy, Blackstone made the Stuy-Town purchase in partnership with Ivanhoé Cambridge.
The deal was backed by
In that case,
A Chicago office icon, the Willis Tower, traded in June when Blackstone bought the 108-story landmark for $1.3 billion from a partnership of the Feil Organization, BLDG Management, the Chetrit Group and American Landmark Properties.
Blackstone's biggest acquisition of 2015 also had a Manhattan component—the JW Marriott Essex House—but it was only part of a 17-property, 7,600-key national portfolio that the company acquired in taking Strategic Hotels & Resorts private. Closing in the final weeks of last year, the Strategic privatization was valued at $6 billion.
At roughly the same time as it closed on the Strategic and Stuy-Town deals, Blackstone also closed on another multifamily acquisition. This time, it was a $2-billion grouping of 33 garden apartments from Greystar, which was represented by HFF.
The Strategic deal was Blackstone's second REIT privatization of 2015. Earlier, it took out Excel Trust, also for approximately $2 billion. That deal added about 42 properties with 9.1 million sf of retail and 339 units to Blackstone's US holdings, and was announced shortly after Blackstone divulged its involvement in GE Capital's sale of most of its real estate business.
GE CAPITAL'S MASSIVE PAREDOWN
“The future of GE is as an industrial company,” CEO Jeffrey Immelt said last April. The occasion was the company's announcement that it would largely exit the financial services business over the next 24 months. As a major step in realizing that strategy, the bulk of the GE Capital Real Estate global platform traded to the Blackstone Group and
In the largest of the five,
In the debt arena, Blackstone Mortgage Trust bought a $4.6-billion portfolio of first mortgage loans, mainly in the US, with financing provided by
The Blackstone/
CBRE Capital Markets' national loan & portfolio sale advisory group, led by Patrick Arangio and Jack Howard, was the exclusive advisor to GE Capital on another multi-buyer sale. This time, it involved a national portfolio of performing, sub-performing and non-performing mortgage loans with an unpaid principal balance totaling $2.3 billion.
AT THE ENTITY LEVEL . . .
Although the Blackstone Group was involved in a number of entity-level deals during 2015—as both buyer and seller—the year was exceptionally busy for M&A activity even without the presence of the asset management behemoth.
The industrial sector saw no fewer than three huge entity-level combinations worth a combined $18.5 billion. The largest of these was the $8.1-billion acquisition of Blackstone's IndCor platform by a partnership of Global Logistics Properties and GIC Pte. Ltd. But GLP wasn't done bulking up its US presence: it came back a few months after the IndCor deal closed to take Industrial Income Trust private for $4.55 billion. The deal boosted GLP's US presence by 50%, adding 58 million sf to its holdings and making it the nation's second largest owner of US industrial real estate.
Also active on the M&A front was the nation's largest industrial landlord,
Office, too, accounted for billions of dollars worth of mergers, all in the REIT sector. In June, Griffin Capital Essential Asset REIT and Signature Office REIT closed on a $3-billion combination that created a company with 70 properties across 20 states, comprising mainly single-tenant office and industrial assets.
A merger of similar dollar value, in which Select Income REIT bought Cole Corporate Income Trust, crossed the finish line in January 2015. The year ended with a merger that created the largest office and industrial net lease REIT with an enterprise value of $5.7 billion, as Gramercy Property Trust acquired Chambers Street Properties and lined up $2.23 billion in new financings.
There are now two less multifamily REITs in the world following privatizations. Lone Star Funds took Home Properties private for $7.6 billion last October. The deal gave Dallas-based Lone Star ownership of more than 36,000 apartments on the East Coast and in the Chicago metro area. Two months earlier, an affiliate of Brookfield Asset Management acquired all shares of Associated Estates Realty Corp. in a deal worth $2.5 billion including the assumption of debt.
The self-storage sector also saw consolidation as Extra Space Storage acquired SmartStop Self Storage, taking 122 stores into its holdings. At $1.4 billion, the deal was the largest the sector had seen in 10 years and the third largest in its history. The seller was repped by an in-house team of H. Michael Schwartz, Skip Perry, Tim Morris, Michael McClure, James Berg, Wayne Johnson, Ken Morrison and James Barry.
In a category spanning all commercial property sectors—services firms—a trend toward consolidation continued in 2015. The year began with DTZ's acquisition of Cassidy Turley. DTZ was under the ownership of a consortium led by TPG Capital, which had acquired DTZ in 2014. In May, DTZ agreed to pay $2 billion to acquire Cushman & Wakefield from majority owner Exor SpA, merging under the Cushman & Wakefield brand. Brett White and Tod Lickerman led the effort resulting in the merger, which closed in September, just four months after initial talks began.
Itself the sum total of several mergers and acquisitions, CBRE Group marked 2015 with one of its biggest, the $1.475-billion purchase of
By dollar value, the largest commercial real estate merger of 2015 was in the grocery sector. Cerberus Capital Management's $9.2-billion acquisition of
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
