Northeast Real Estate Business

NOV-DEC 2015

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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Northeast Real Estate Business • November/December 2015 • 49 in a statement accompanying the re- search. In 2014, Japanese investors pumped $1.3 billion into U.S. assets, which ac- counted for 75 percent of the group's overseas investments, according to CBRE. New York attracted the lion's share — $488 million — followed by Honolulu and Boston. Recent deals in- clude the $247 million sale of the 347 Lexington Ave. offce building to To- kyo-based real estate investment man- ager Unizo Holdings. But cross-border capital sources are increasingly look- ing beyond core properties for more ambitious strate- gies. After taking time to study the U.S. markets and growing more con- fdent in their due diligence, foreign buyers have moved up the risk con- tinuum to take on value-add plays and development, Murphy says. Still, he and other com- mercial real estate observers wonder how high prices can go. "The New York market is fully fve years into a nice bull run, but how much more runway do we have?" Murphy asks. "We've got a lot of de- velopment happening and prices are at record levels, so if you're buying here, you're at the top of the market and you have to get comfortable with that." Summer Slowdown The $1.3 billion dip in foreign capi- tal dollars fowing into the Northeast in the frst eight months of 2015 versus the prior year coincided with a broader slowing of commercial property sales over the summer. Nationally, transac- tion dollar volume of $34.4 billion in August marked a year-over-year de- cline of 2 percent, according to Real Capital Analytics. That also followed a drop of 14 percent in dollar volume for the month of July from a year ear- lier, the researcher says. Year-to-date through August, however, dollar vol- ume nationwide was still up 26 per- cent to $328.2 billion nationwide over the same period of 2014. Jim Costello, a senior vice president with Real Capital Analytics, down- plays the signifcance of slowing in- vestment sales nationally. The frst few months of the year were marked by large portfolio deals, including Black- stone Group's $8.1 billion sale of its IndCor Properties industrial platform to a Singapore venture between sover- eign wealth fund GIC and Global Lo- gistics Properties, and the $5.9 billion sale of KTR Capital Partners to indus- trial REIT Prologis and Norges Bank. Given the typical pause that accom- panies summer, maintaining the mo- mentum created by those deals was sure to be a challenge, Costello says. What's more, widening spreads in the commercial mortgage-backed securi- ties market chilled lending, which also tempered transactions, he adds. "You don't buy $7 billion worth of real estate without putting some debt on it, and you aren't going to go to your local bank for it," Costello explains. "I'm sure there are deals out there that didn't close, and when the debt mar- kets open again they'll see their turn at the plate. The fourth quarter is going to be what it's all about." A strong dollar that requires cross- border investors to sell more of their currencies as well as a shortage of landlords willing to part with high quality real estate may also be sup- pressing deals, observers say. "Part of the problem for sellers is, what do they do with their proceeds?" asks Jon Epstein, principal of the capi- tal markets group at Avison Young in New York. "You can't put your money in bonds like owners in the past, who earned seven or eight percent on a 30- year treasury. Now it's like three per- cent." Rick Sharga, executive vice presi- dent with Auction.com, suggests that the foreign capital infusion into real estate has played a role in limiting real estate invest- ment opportunities, and cross-border investors haven't slowed their activ- ity. "Investors in European bonds or Chinese real estate have found the U.S. real estate market to be more afford- able and more stable," Sharga says. "There's a notion that it's a safe invest- ment and that the government won't do anything so egregiously dumb as to threaten that investment." Direct foreign investors dumped $62 billion into the country over the 12 months ending in the second quar- ter, and through August this year they were the most active purchasers of U.S. properties behind private buyers, ac- cording to Real Capital Analytics. For- eign capital accounted for 14 percent of direct investment dollar volume through August this year, a year-over- year increase of 200 basis points, ac- cording to the research company. Indirect Route Observers suggest that foreign capi- tal's participation in private vehicles adds several billion dollars to their di- rect investment totals. Funds typically don't disclose investors or commit- ment amounts, but they continue to raise an increasing amount of capital, according to Preqin, a data and analy- sis provider focused on alternative as- sets. In the third quarter this year, 33 closed-end real estate funds raised For additional information, please contact info@silbertrealestate.com • 908-604-6900 NEW JERSEY'S PREMIER NEW CONSTRUCTION FOR LEASE • Approved multi-phase mixed use development, comprising 400 apts. with ground floor retail for lease within Phase I; • Phase I nearing completion, including approximately 14,937 SF of ground level retail VERMELLA HARRISON Mixed Use Urban Development Town of Harrison, Hudson County, New Jersey • Mixed use retail and residential development built in 3 phases, heart of downtown Fanwood at the corner of South and S. Martine Avenues; Building 1 leased and occupied; • Phase 2: ±11,100 SF ground level retail, plus 40 luxury apartments nearing completion; • Phase 3: 16 unit luxury apartment building under construction FANWOOD CROSSING Downtown Mixed Use Transit Village Borough of Fanwood, Union County, New Jersey • Wegmans supermarket anchored lifestyle development projected July 2017 supermarket opening; • Multiple village style retail buildings aggregating 62,000 SF plus 3 acre expansion Phase III; • Immediately adjacent Exit 172 of Garden State Parkway situated within a corporate mecca of Class A office and a Median HH Income of $120,258 THE SHOPPES AT DEPIERO FARM 25+ Acre Lifestyle Environment Borough of Montvale, Bergen County, New Jersey • 70,000 SF brand new Class A, highly visible retail within award winning sister projects "40 Park and The Metropolitan"; • A 795 space attached parking garage, as well as metered street parking; • Limited retail opportunities remain within Morristown's largest retail and residential mixed use development SHOPS ON THE GREEN 70,000 Square Foot Mixed-Use Development Town of Morristown, Morris County, New Jersey • Somerset County's Premier Transit Village opposite the NJ Transit rail line; • ShopRite anchored plus 100,000 SF of exciting pedestrian friendly retail including world-renowned Wolfgang's Steakhouse Grill, Starbucks and Chase Bank with multi-level luxury residential apartments; • The Borough of Somerville is the county seat within the center of Somerset County and is rated among the wealthiest counties within the nation SOMERVILLE TOWN CENTER 14.5 Acre ShopRite Anchored Redevelopment - Transit Village Borough of Somerville, Somerset County, New Jersey James Murphy Colliers International Rick Sharga Auction.com

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