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Schmooze-A-Rama

At our Bisnow 2014 Atlanta Forecast, we met up with Franklin Street Real Estate Services’ Ricky Jones fresh from brokering the sale of the Ponce De Leon Hotel. Nazar Properties purchased the 58-room, 19k SF extended-stay hotel for an undisclosed sum from the long-time family who owned it. Franklin’s Jake Reid was the main broker behind the sale; he previously told us the 1.2-acre site could be used for a future mixed-use development. View PDF

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Two Westchase area apartments fetch nearly $80 million

Two northwest Hillsborough County apartment properties totaling 670 units have sold for a combined $78.2 million, records show.

Preserve at Westchase, located at the northwest corner of West Linebaugh Avenue and Countryway Boulevard, sold for $33,737,000, while nearby Tuscany Bay at Countryway and Citrus Park Drive traded for $44,554,000.

IMT Capital of Sherman Oaks, Calif., bought both properties from a portfolio controlled by Dallas-based Archon Group. Both transactions closed Tuesday. Calls to IMT on Wednesday and Thursday were not returned.

The 264-unit Florida Apartment Club in Boynton Beach is also believed to be part of the deal, but that could not immediately be confirmed.

“This shows the continued strength of the multifamily market for well-located, well-maintained apartments,” said Darron Kattan, managing director and multifamily brokerage specialist for Tampa’s Franklin Street, which was not part of the deal.


IMT took a $33.9 million mortgage on Preserve and a $44.8 million note on Tuscany, both through the Federal Home Loan Mortgate Corp., known as Freddie Mac, records show. Download PDF

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Brand New Burger King Wins Cash Buyer

TAMPA, FL – A 3,220-square-foot Burger King with a corporately-guaranteed ground lease has traded hands. The net leased asset sold for $1.2 million in an all-cash transaction.

Jonathan Graber and Rafeal Wright of Franklin Street represented both the seller and the buyer in the deal. Forge Capital Partners, a Tampa-based commercial real estate investment company, sold the property to an investor from Central Florida. The investor plans on holding the net leased property long-term as a passive investment.

“Burger King was under construction with its new prototype during the sale process,” says Right. “Franklin Street was able to bring a buyer with an extensive existing portfolio who was willing to close within only days of contract execution. It was a win-win for both parties.

The Burger King is located at 2601 East Hillsborough Avenue in Tampa. Burger King Restaurants are 99% owned and operated by independent franchises, many family-owned and operated, in more than 13,000 locations and territories worldwide. The new Tampa store is scheduled to re-open with the new prototype this month.


“This sale show that demand in the retail single-tenant market is still very high,” says Graber. “It was within the aggressive rates we have been seeing in today’s market and the new construction show the commitment to this location which has been onsite since 1968.” Download PDF

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Duo Represents Both Sides in $12.5 Million Retail Sales

Dealmakers: Greg Matus and Peter Crane

The Deal: The Franklin Street brokers represented both sides in the sale of two Fort Lauderdale retail centers for nearly $12.5 million.

Details: They brokered the sale of the 25,678-square-foot, 19-tenant, unanchored retail center at 4300 North Federal Highway to HAZ Real Estate Investment LLC on Feb. 26. The Toronto investor paid $6.25 million for the property, which was 95 percent leased at closing. The seller was Gerig Group LLC, a private investor based in Middleburg.

“Demand for this asset was very high as we had more than 20 offers,” said Matus, who specializes in unanchored South Florida retail centers.

The second transaction involved the 12,300-square-foot center at 2121 N. Federal Highway, which sold March 11 for $6.1 million. The property is fully occupied by regional and national tenants with long-term leases. THe seller, 2121 Investments LLC, built the retail center in 2013 on land owned by a third party. The buyer, Boston Trader 2121 LLC, purchased the building as part of a 1031 exchange. Two other brokerage firms tried to market the property before Franklin Street got the listing.

“There’s significant investor demand for multi-tenant, unanchored retail centers in South Florida,” Matus said. “Rising rents and the low cost of capital are driving the market at the moment.”

Background: Greg Matus is the regional managing partner and Peter Crane is an investment associate with Franklin Street.

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Franklin Street adds director

Franklin Street Real Estate Services has added Cammi Goldberg as director of leasing and landlord representation.

She had been a commercial leasing manager for RAM Realty Services.

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People on the Move | Franklin Street

Franklin Street hires Westcott Toole, Bernadette Rivera and Lianne Sawyer.

Westcott Toole
Current title/position: Assistant Commercial Property Manager
Industry: Commercial Real Estate
Duties/responsibilities: Toole assists with the management of a diverse portfolio of commercial properties throughout the Tampa Bay area. He is responsible for performing regular property visits and inspections while also supporting tenants and owners with all aspects of operation.

Bernadette Rivera
Current title/position: Property Staff Accountant
Industry: Commercial Real Estate
Duties/responsibilities: Rivera performs several accounting services for Franklin Street Management properties including compiling/preparing monthly financial statements, entries, and general ledger reconciliations, monthly closings, processing accounts receivables/payables, and administering accounting procedures.

Lianne Sawyer
Current title/position: Account Manager
Industry: Insurance
Duties/responsibilities: Lianne Sawyer supports Franklin Street Insurance Services agents across all five Franklin Street offices, managing and growing their book of business and handling daily customer service, including endorsement activity and routine coverage questions. 

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Briefcase: Franklin Street

Franklin Street managed the $2.393 million sale of a 36-unit apartment building at 447 N.E. 125th St. in North Miami. Download PDF

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Improving Retail Fundamentals Show Bright Future Ahead for Atlanta

Southeast Real Estate Business

With an economy that’s normalizing with improving fundamentals, the Atlanta retail market is on the right track for sustained growth.

Throughout 2013, Atlanta experienced a drop in vacancy rates along with the unemployment rate. In addition, retail sales rose nearly 3.5 percent over last year, provoking a rise in consumer confidence.

The unemployment rate in Georgia fell from 9 percent in 2012 to 8.3 percent in 2013. This is still a full point below the national average. For 2014, the unemployment rate in Georgia is expected to reach well under 8 percent. During the last 12 months, Atlanta has experienced job growth of 2.5 percent.

Retail payrolls are also expected to continue improving in 2014, pushing a near 3 percent gain as a result of both increasing existing stores sales as well as modest new store opening growth.

VACANCY RATES, RENT GROWTH

Since the beginning of the year, overall metro retail vacancy rates have dropped below 11 percent, which is a 50 basis point decrease over last year. Neighborhood and community retail centers still maintain the highest vacancy of just under 15 percent. Power centers have experienced a strong year-over-year recovery, averaging a 7.5 percent vacancy across the region. Tenant demand in the metro area’s strongest malls, however, has forced vacancy rates of just under 6.5 percent.

The power center rent growth has experienced the greatest gains, pushing a 3 percent increase over last year. Malls continue to maintain the highest average rates at $22.50 per square foot, which is a 2.5 percent increase over 2012. Neighborhood and community centers experienced a step backwards over last year’s 1 percent decline during 2012.

Rental growth will continue to increase as the lack of available space continues to diminish. 2014 and 2015 will have a greater percentage increase in rent growth than the percentage decrease in vacancy rates.

RETAIL CONSTRUCTION

In metro Atlanta, construction is falling short of the need for space. The region has more than 1.5 million square feet planned primarily between three distinctly different missed-use projects under construction.

Outside of these three projects, there are virtually no retail developments of critical mass projected to open through 2016. This is much lower than the past, considering the Atlanta market includes nearly 6 million people and nearly 349 million square feet of retail space. In 2006, 12 million square feet of retail space was delivered, compared to 2011 when more than 800,000 square feet was brought on line.

Ponce City Market is the redevelopment of the former Sears, Roebuck & Co. building, which will include 330,000 square feet of retail and restaurant space.

NEW EXPANDING RETAILERS

The largest retail project to open in 2013 was a 158,000-square-foot Walmart Super Center, followed by 117,000-square-foot BJ’s, its fifth store in the state.

Outdoor retailers and “performance wear” continue to see growth locally and nationally. Athleta and lululemon athletica recently opened stores in Atlanta and project additional openings in the market. Cabela’s has its first store in the market under construction. Academy Sports + Outdoors has continued to be active in the region and is expected to maintain a modest pace in 2014 and 2015. Dollar stores and auto parts continue to be strong growth retailers as well.

Food in all capacities remains a strong category, from raw product retailers to restaurants. Arizona-based grocery store Sprouts Farmers Market is new to the state with plans to open four stores next year and more in years to come. At the other end of the spectrum there are many new franchisee quick service concepts competing to find prime locations.

INVESTOR SENTIMENT

For the right product, Atlanta is a seller’s market, with single-tenant properties and Class A portfolios in high demand. Like much of the nation, investors seeking value added assets will find limited listings for distressed and repositioning opportunities, as most of this product has been picked over and these properties have stabilized.

DOWNTOWN

Downtown is one submarket that has tremendous velocity. Atlanta is an event city and has secured a number of major conventions through 2015 that will keep traffic robust. The Civil Rights Museum and the college Football Hall of Fame are both under construction in the city. The Atlanta Falcons also have announced a new $1 billion stadium, which is slated to open in 2017.


Though the Atlanta Braves recently announced its move to Cobb County, also planned for the 2017 season, this presents a tremendous redevelopment opportunity for Turner Field, the Braves current stadium. Certainly, we hope this opportunity will bring some of the brightest ideas to the forefront of downtown’s continued development. View PDF

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Ponce Hotel sells

An intown Atlanta hotel has a new owner. The Ponce DeLeon Hotel, located just blocks from the future Ponce City Market, has sold for $1.6 million, according to Fulton County court records.

The new owners, Nazar Holdings LLC, might turn the 58-room, 18,500-square-foot building into student apartments, according to sources. Nazar could not be reached for comment.

The sale could signal that Ponce City Market, a massive project that’s transforming the former Sears building into a hip, mixed-use community, is becoming a powerful catalyst for redevelopment along Ponce.

“This real estate transaction is, in my mind, another spillover effect from Ponce City Market and the tremendous impact it is going to have on all of our intown neighborhoods in this area,” said John Wolfinger, who leads the Virginia-Highland Safety Team.

Peggy Denby, president of the Midtown Ponce Security Alliance, added: “It is probably the single best thing that could happen to Ponce de Leon at this point. We are thrilled.”

That’s because the property has been an ongoing issue for the alliance.

“We still have plenty of druggies on that block living in and revolving around the hotel in some way, and it is quite a bit of work for us,” said Steve Gower, vice president of Midtown Ponce Security Alliance.


Jake Reid and Ricky Jones of Franklin Street represented the seller, Edwin Porterfield, in the transaction. It closed Oct. 15, according to court records. View PDF

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More Money: 2014 Multifamily Investment Forecast

What’s in store for multifamily investors in the new year ahead? Most industry observers are expecting financing volumes to further expand in 2014. “We do think there will be more capital available,” says Bob Barolak, co-COO at Greystone, Lenders will become even more eager to make loans in the multifamily space he says, because of greater confidence in the economy and markets.

Another majore reason for an expected bump in capital available in the next 12 months is that CMBS financing has come back into the multifamily sector – from a volume of practically zero in 2012. “Until the second quarter of 2013, CMBS lenders could not compete in the multifamily space,” Barolak points out. “That has changed in a big way. They will continue to increase market share significantly in 2014.”

Until some time last year, CMBS could not effectively offer interest rates and/or LTVs that match Fannie and Freddie’s, and were thus not competitive in the multifamily space. But, the situation has turned around. Currently, CMBS multifamily financings are carrying interest rates of about 5.10 to 5.20 percent, or about 10 to 15 basis points lower than rates in Fannie Mae transactions, according to Barolak. Maximum LTVs on CMBS loans – up to 75 percent on 10-year terms for multifamily properties – have also become competitive with those of Fannie and Freddie loans.

More over, CMBS lenders can become “extremely aggressive” for deals they want to acquire to round up a securitization pool, Barolak says. In such instances, “they can dramatically lower the interest rate significantly below what Fannie and Freddie will offer.”

CMBS total securitization this year is projected to increase from an expected $87 billion in 2013 to about $100 billion this year, says Hal Holliday, executive vice president of CBRE. (At its peak in 2007, the level of domestic CMBS issuance totaled some $700 billion.) “No question about it,” adds Barolak, CMBS volume in the multifamily sector will unquestionably increase significantly in 2014.

Multifamily loans are valuable components of CMBS securitization pools. Additionally, the low interest rate environment is said to be driving investor demand for the high-yielding CMBS in the securities market. Reflecting the investor demand for the CMBS, CMBS spreads are expected to remain more or less steady going forward this year, says Andrew Wright, CEO of Franklin Street Capital. At the same time, CMBS investors will be maintaining their return requirements for the bonds. Consequently, there will be pressure for spreads not to narrow either, he suggests.

Life insurance companies are another investor group that may also increase their financing volumes in 2014. All indications are that life companies’ appetite for multifamily is only going to grow in 2014, Barolak says. “Everything we are hearing suggests they will.” These institutional lenders may also somewhat change multifamily underwriting metrics from “very conservative to less conservative” this year, adds Holliday.

Contrasting with CMBS and life companies, commercial banks constitute a financing source that may not necessarily increase its volume this year, but will at least maintain the same level. The banks have resolved many of their balance sheet issues and are once again looking for high-yielding real estate business opportunities. Regional, local and community banks in particular have become noticeably active again the past year. Holliday says banks will continue to be active issuing loans, whether term or construction loans.

As far as construction financing, Wright maintains that construction lenders are starting to become much more cautious, recognizing that the phenomenal rent growth of the past few years will start to slow, and that some markets are beginning to get over-heated. “It is not a problem, but people are getting more cautious,” Wright says.

On the interim financing side, private debt capital players are another lending source that are expected to continue increasing their participation in the multifamily space. “Non-bank, high-yield capital sources offering bridge, mezzanine, preferred equity and high LTV first mortgages” are very plentiful today. “It is a very active” area of multifamily financing that will become more significant this year, says Holliday.

Another available multifamily financing option that is anticipated to remain steady is FHA-insured financing, which is expected to continue at the maximum loan commitment level of $25 billion, a level that has been repeatedly reached early in each of the last few years.

The prognostication for increased capital flows is balanced somewhat by possible pullback by Fannie and Freddie, and widely expected increases in interest rates some time this year. Last year, Fannie Mae and Freddie Mac were mandated by their regulator and conservator the Federal Housing Finance Agency (FSFA) to reduce their multifamily financing volume by 10 percent. At press time, it was still an open question whether FHFA would continue to shrink Fannie and Freddie’s footprint further for 2014. The agency was still seeking comments from the industry before it made its decision.

However, even if the decision is to reduce Fannie Mae and Freddie Mac’s financing volumes this year, the newly resurgent CMBS financings could make up for any drops in financings on the GSE side. And in any case, part of the rationale for FHFA to reduce its volume is so the private market could better compete. Thus, arguably, it will be unlikely that FHFA will reduce the financing targets to a level that CMBS could not compensate for.

Rising interest rates, on the other hand, could impact the availability of capital for multifamily as the yields for alternative investments increase and compete for investor dollars. Wright says he could see the 10-year Treasury rate crossing the 4 percent level at “some point in the third or fourth quarter” as the Federal Reserve eases on QE3. As the economy starts to recover and corporate profits improve, Wright says, the Fed would not be likely to continue artificially keeping money “so cheap.”

Nevertheless, the effects of any rise in interest rates on multifamily transactions may be limited: interest rates are still historically low, and increasing NOIs could compensate for the higher interest rates.


Everyting being equal, lenders may continue to feel good about the market. “All in all, t his will be a terrific year for the multifamily markets,” says Holliday. “There may not be the stratospheric rent growth and absorption we experienced in the early years of this recover, but it is going to be a very solid market for multifamily acquisition and lending.” And when financing companies feel good about the sector, they will lend. View PDF