September 25, 2016

Gramercy, TPG Form New $1 Billion Net-Lease Office Venture

Gramercy Property Trust (NYSE:GPT) and TPG Real Estate announced they have partnered to form Strategic Office Partners, a new investment platform to acquire up to $1 billion in single-tenant net-lease office assets in high-growth U.S. metros over the next three years.

To seed the platform, New York City-based Gramercy sold a 75% stake in six office properties to TPG for $187.5 million, or $191 per square foot. The buildings encompass nearly 1 million square feet and are located in Nashville, Minneapolis. Westlake Village, CA in the Los Angeles market; Dublin, CA, in the East San Francisco Bay Area and San Diego’s Sorrento Mesa submarket.

Gramercy and TPG have committed a combined $400 million to the new venture, funded initially with a $200 million non-recourse credit facility from Morgan Stanley along with equity contributed by the companies. TPG Real Estate will hold a 25% interest in the equity partnership.

The properties in the six-asset office sale are occupied by single corporate users with an average lease tenure of more than 11 years, the companies said in a release. Half the assets have been occupied by the original tenant since construction and the portfolio has an average remaining lease term weighted by square footage of 3.6 years.

Mixed Views On Office Exposure

Dovetailing with the announcement, Fitch Ratings this week assigned its first-ever investment-grade rating to Gramercy, an initial issuer default rating of BBB with a stable outlook, based on the REIT’s solid credit metrics and consistent cash flow growth from its largely single-tenant, triple-net leased portfolio.

The ratings agency noted, however, that those strengths are tempered by Gramercy’s “less established” access to unsecured debt capital and its increased exposure to office due to the TPG partnership.

“Fitch views such heightened office exposure less favorably, due in part to increased uncertainty surrounding suburban office, and employee densification tempering office demand at the margin,” the rating agency said.

However, Mitch Germain and Peter Lunenburg, analysts with JMP Securities, said in a note to investors that they don’t see the new joint venture with TPG, a respected private-equity investor, as a deviation away from Gramercy’s core strategy of culling office exposure and redeploying capital into the industrial sector.

The execution on disposition of non-core assets, totaling a higher-than-expected $1.4 billion so far in 2016 including the TPG sale, is “nothing short of stellar,” the analysts said.

TPG Real Estate is an affiliate of TPG Capital (formerly Texas Pacific Group,) one of the largest private equity investment firms globally. Its other major investments in the real estate sector include backing the merger of the former DTZ and Cushman Wakefield, as well as investments in Catellus, Evergreen Industrial Properties, Mission West Properties and Parkway Properties.

“We see a compelling investment opportunity in the office net lease sector and believe that this portfolio of high-quality assets in strong growth markets is poised to benefit from positive fundamental trends,” Avi Banyasz, partner co-head of TPG Real Estate, said in a statement.

Gramercy President Ben Harris said the company will seek to leverage its asset management experience from managing its own portfolio and the portfolios of third-party clients to enhance the value of properties acquired through the new investment platform.

Please see CoStar COMPs #3702208 for more information on the transaction.

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NGKF Adds Top Entertainment Biz Broker Brad Feld in Latest Recruiting Coup

Brad Feld has almost 30 years experience representing landlords and tenants in the entertainment and CRE industries.
Brad Feld has almost 30 years experience representing landlords and tenants in the entertainment and CRE industries.Newmark Grubb Knight Frank (NGKF) announced it has hired veteran landlord broker Bradley J. Feld as vice chairman in the Southern California region.

Feld has almost 30 years of experience representing both landlords and tenants, including transactions totaling several million square feet for media, technology, healthcare, financial, professional, legal and Fortune 500 tenants. Coming to NGKF from Madison Partners, Feld’s role will focus on building the firm’s landlord/agency and tenant representation practice.

NGKF has racked up an impressive series of recruiting wins over the last year, most recently bringing aboard two Los Angeles are industrial brokers, John McMillan and Jeff Sanita, who previously worked for Cushman Wakefield.

Prior to serving as a partner at Madison Partners, Feld was an executive vice president at Cushman Wakefield, where he represented large institutional landlords, as well as leading national corporate service accounts and large tenant representative assignments.

His institutional clients have included Deutsche Bank/RREEF, Shorenstein Properties, JP Morgan, Watt Investment Partners, Federal Realty, Clarion Partners, Kilroy Realty, among others.

Feld’s entertainment industry clientele have included Viacom Inc., Paramount Studios, Ryan Seacrest Productions, E! Entertainment Television, and Comcast Entertainment Group, among others.

“NGKF is on a remarkable growth trajectory, with an exciting entrepreneurial environment,” Feld said in a statement. “I look forward to the opportunity to work with NGKF to build upon its already impressive landlord and tenant representation practice.”

NGKF President James D. Kuhn added, “Brad is one of the top three landlord brokers in Los Angeles. His arrival at NGKF is a game changer.”

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MBS RECAP: After Fed, Bonds Tune Out Into Weekend

For MBS Live members, this recap will largely be a rehash of the day’s most recent update which pointed out a consolidative range in force over the past two days.  Bond weakened just enough for a small amount of concern earlier today, but a friendly bounce let us know that traders had likely decided on the range for the rest of the day.  Here was the chart from that update:

2016-9-26 consolidate

And here is a more zoomed in version showing us how the rest of the day has played out (through the 3pm close).

2016-9-23 close

The takeaway here is that this week’s FOMC events were good enough for token rally in bonds.  It is nice to see, though it’s still a “safe” move considering it doesn’t take us officially back into the previous “post-Brexit” range that dominated most of July and August.  

Next week is month/quarter-end–a more active time for bond trading, and one where we often see the effects of compulsory trades that must be made before the end of the month-quarter.  This adds an element of complexity, as well as volume and liquidity to a market already tasked with deciding on its next move.  It should be interesting.  

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CoStar’s People of Note (Sept. 23) FelCor Trust, Hunt Mortgage Name New Presidents

It’s time to update those contact managers with CoStar’s People of Note, reporting news on significant new CRE hires and promotions. This week’s issue includes the following markets: Dallas / Ft. Worth, New York City, Chicago, East Bay, San Francisco, Columbus, Inland Empire, South Florida, Cincinnati, Denver, Baltimore, Boston, Washington DC, Vancouver / Calgary, Philadelphia, and Detroit / Grand Rapids.


FelCor’s Pentecost Succeeds Retiring Smith as President

By Jeanine Kaminski

FelCor Lodging Trust has appointed long-time company COO Troy A. Pentecost (pictured) to succeed recently-retired Richard Smith as president and interim senior executive officer.

Pentecost joined FelCor in 2006 and was named COO in 2010. A 35-year hospitality veteran, Pentecost was with Remington Hotel Corporation as senior vice president of operations and before that was with Wyndham International.


Hunt Mortgage Names Flynn as New President

By CoStar News Staff

Hunt Mortgage Group elevated James P. Flynn to president of the commercial real estate financing firm. He will keep his responsibilities as CIO at the firm.

Flynn has served as executive managing director and chief investment officer for the past year and a half, working in all aspects of CRE finance and serving as portfolio manager for its REIT. Before that he was a real estate attorney with Gibson Dunn Crutcher and an investment banker at Lehman Bros.

CoStar’s People of Note is published each Friday covering the latest commercial real estate executive level promotions and new hires.
Click on the headline of each article to jump to full coverage.
Follow the news on Twitter @TheCoStarGroup and @JSumner2.

Send new executive hires and promotion announcements to


Cushman Wakefield Names Noonan Managing Principal

By Bryce Meyers

Cushman Wakefield has selected Victoria Noonan to oversee the firm’s expanding metro Chicago team as managing principal.

The former Tishman Speyer managing director will head up a 350-member team and lead growth and recruiting initiatives. Noonan joined Tishman Speyer in 1978 as an administrative assistant before working her way up the ranks to managing director, a role that saw her manage the firm’s Chicago and Milwaukee leasing teams that handled a combined 9 million-square-foot office portfolio.


Lee Associates Promotes Davidson to Principal

By Bryce Meyers

Lee Associates has elevated Ryan Davidson to principal in the firm’s Oakland, CA office.

Davidson has spent a decade with Lee Associates providing commercial real estate brokerage and advisory services to clients in the I-880, I-80 and I-580 corridors. During that time he has represented a variety of corporations, entrepreneurs, owner users, family offices, lenders, investors, and developers. Davidson is a graduate of the University of California at Berkeley.


Larkin Joins FitzGerald Architects

By Alec Rosenfeld

Kristen Larkin, ASID has joined national residential and commercial design firm FitzGerald Architects as an associate principal.

Larkin’s extensive work experience includes more than 15 years of designing everything from multifamily developments to high profile offices. She was previously the principal of interior design at Antunovich Associates. Larkin earned her degree in interior design from Harrington College of Design.


CRE Veteran Fogg Joins Cushman Wakefield

By Anthony Edelstein

Greg Fogg has joined the San Francisco office of Cushman Wakefield as an executive managing director.

Most recently, the 26-year industry veteran worked at JLL as a managing director, where he represented clients in space acquisition, lease restructuring, and disposition. Additionally, he spent more than 10 years representing ownership interests at the Shorenstein Co. and William Wilson Associates, now Cornerstone Properties.


Olshan Properties Deputizes Marshall as Head of Retail

By Neal Carr

Kenneth J. Marshall has joined the Columbus, OH office of Olshan Properties as the new head of retail, a newly created position. As a member of the executive team, he will expand the portfolio and oversee its daily operations.

Marshall previously served as vice president of development at retail REIT WP Glimcher, overseeing retail and office developments. Before that the 25-year industry veteran served as executive vice president of Colonial Properties Trust.


NGKF Adds Ing, Sanden to Expand SoCal Presence

By Justin Sumner

Taylor Ing and Drew Sanden (pictured, right) have joined Newmark Grubb Knight Frank as senior managing directors. Based in the firm’s Ontario, CA office, the two are tasked with continuing to expand the firm’s presence across the region.

Ing most recently served as executive director with Cushman Wakefield, while Sanden held the position of associate director there.


Foschini Joins Berkadia as Senior Managing Director

By Justin Sumner

Charles Foschini has joined Berkadia as a senior managing director, the company’s highest production title. Based in the firm’s Miami, FL office, Foschini will work alongside Mitch Sinberg, senior managing director to continue expanding the firm’s footprint across the state.

Foschini brings nearly two decades of commercial real estate investment banking experience, having structured complex sales and finance transactions totaling more than $15 billion throughout his career. Foschini (pictured) also brings his top-producing team, which includes Chris Apone, managing director and Lourdes Carranza-Alvarez, senior production analyst.


NGKF Capital Markets Hires Yearout, Vondran from CBRE

By Philip Koroshetz

NGKF Capital Markets has lured real estate investment veterans Keith Yearout and Jim Vondran (pictured, right) from CBRE to the firm’s Cincinnati, OH office, where they will serve as senior managing directors.

Yearout and Vondran have worked together for the past decade, most recently as vice presidents of CBRE’s commercial investment properties group in Cincinnati.


Katz Selected to Co-Lead Denver Office of HFF

By Christina Armstead

Mark Katz (pictured) has been tapped to co-lead HFF’s Denver, CO office along with fellow senior managing director Eric Tupler. The 19-year industry veteran’s responsibilities will also include heading up the firm’s Denver investment sales platform.

Katz will relocate from HFF’s Chicago office where he managed the office investment sales team since 2012. In that time, he completed more than $5.5 billion in commercial real estate investment sales.


Harrington Joins MacKenzie CRE Services

By Amy Brouse

Terri Harrington has joined MacKenzie Commercial Real Estate Services’ Baltimore team as senior vice president.

Harrington brings 25 years of experience to the firm and will continue to represent tenants and landlords in the CBD and surrounding areas of Baltimore. As a senior vice president with JLL, she negotiated transactions within some of the most recognizable properties in downtown Baltimore.

CBRE Hires Campbell as VP
By Bryce Meyers

Jessica Campbell has been named vice president of CBRE Assessment Consulting Services (ACS), a division of its valuation and advisory services group.

…full story

Transwestern Expands Capital Markets Platform
By Shana Callahan

Transwestern bolstered its capital markets team in Boston with the hiring of Jeanette Ambrosio Gaede as vice president.

…full story

FCP Adds Hubbard, Curry
By Sean Freeman

Federal Capital Partners has hired two new professionals in its Chevy Chase, MD office: Sarah Hubbard, vice president and Kevin Curry, senior associate.

…full story

Watley Joins Re/Max Complete
By Alison Siwek

David Watley has made the move from Newmark Knight Frank Devencore to Re/Max Complete Commercial in Calgary, Alberta, Canada as an associate broker.

…full story

Parsons Joins Marcus Millichap
By Rudolph V. Walker III

Anne Parsons has joined Marcus Millichap as an associate. Based in the firm’s Conshohocken, PA office, Parsons will focus on acquiring and disposing of investment-grade industrial and office properties.

…full story

Signature Promotes Coutts
By Roxann Bonetti

Catherine Coutts has been promoted to property manager at Signature Associates. She started with the firm three years ago as an assistant property manager.

…full story

Follow the news on Twitter @TheCoStarGroup and @JSumner2.
Check out last week’s edition of People of Note.

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Mortgage Rates Lower as Market Digests Fed

Mortgage Rates made more substantial gains today, after financial markets had more time to react to yesterday’s announcement from the Federal Reserve.  Although the Fed held its policy rate steady, the bigger story was a sharp downgrade in the longer term rate outlook.  In short, the Fed sees interest rates remaining “lower for longer.”  They increasingly confirm this stance with their updated forecasts.  

Although mortgage rates don’t directly follow the Fed Funds rate, they are sensitive to changes in the expected path of the Fed’s rate.  With the Fed downgrading its rate hike expectations, mortgage rates have fallen.  We likely would have seen more of a move yesterday, but with the Fed announcement happening in the afternoon, it doesn’t leave as much time for lenders to react.  Today’s gains are partly due to those lenders getting “caught up,” but there has been further improvement in financial markets as well.  

Some of the more aggressive lenders are getting back to quoting 3.375% on top tier conventional 30yr fixed scenarios.

Loan Originator Perspective

Markets have digested yesterday’s Fed Statement and press conference, and breathed sighs of relief as there were no references to looming inflation or booming economies.  Pricing improved yesterday PM, and has done so again today, although the moves are not huge.  One scenario I’ve been watching improved 25 bps in pricing since Tuesday AM, which beats losing 25 bps.  I’ll float new applications for the moment, think we’ve got a little room for further improvement. –Ted Rood, Senior Originator

Today’s Best-Execution Rates

  • 30YR FIXED – 3.375- 3.5%
  • FHA/VA – 3.25%
  • 15 YEAR FIXED – 2.75%
  • 5 YEAR ARMS –  2.75 – 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • In the biggest of pictures, “global growth concerns” remain the driving force behind the long-term trend toward lower rates
  • Amid that trend, periodic corrections toward higher rates can and will happen.  These can happen for no apparent reason, or they can be brought on by changes in expectations surrounding central bank policy at home and abroad, as well as geopolitical and systemic risks

  • Time horizon and risk tolerance are 2 variables to consider when it comes to locking.  If you have plenty of time and don’t mind losing some ground, set a limit as to how much higher rates could go before you’d lock to avoid further losses, and then float in the hopes of never seeing that limit.
  • In the shorter-term, it’s always good to look for lock opportunities after rates have been moving lower or sideways repeatedly, especially if they’ve since begun to move back up in any sort of consistent way. 
  • As always, please keep in mind that the rates discussed generally refer to what we’ve termedbest-execution(that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also ‘bang-for-the-buck.’  Generally speaking, our best-execution rate tends to connote no origination or discount points–though this can vary–and tends to predict Freddie Mac’s weekly survey with high accuracy.  It’s safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie’s once-a-week polling method).

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Freddie Mac Starts Pilot Program With Looser Standards

Mortgage-finance giant Freddie Mac and two nonbank lenders are loosening income and documentation requirements for mortgage applicants in a new pilot program.

The changes announced Monday are designed to help boost mortgage originations among first-time buyers, applicants with low-to-moderate incomes and those who live in underserved areas.

The moves come nearly a decade after the start of the mortgage meltdown, as many…

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Ardmore Home Design Leases 129,000 SF in City of Industry

Ardmore Home Design has signed a long-term lease for 128,810 square feet in the industrial building at 768 Turnbull Canyon Rd. in City of Industry, CA.

The space will serve as the corporate headquarters for the firm’s home décor business lines Made Goods and Pigeon Poodle as Ardmore consolidates and relocates operations from three separate warehousing facilities in Baldwin Park.

“An improving housing sector has led to rapid growth for Ardmore Home Design’s products,” said Ty Newland, director and Inland Empire industrial specialist with Cushman Wakefield. “Recognizing its own growth needs together with tightening market supply, especially for Class A industrial product located in Los Angeles County, Ardmore Home Design moved quickly to secure a long-term lease for this Class A facility.”

The 128,810-square-foot, 4-Star warehouse sits on 5.9 acres in the western end of the City of Industry, with immediate access to CA Rte. 60 and minutes from the 605, a major north-south freeway in Los Angeles. It features 8-percent office build-out, 19 loading docks and two drive-ins, 30-foot clear heights, 800-amp heavy power, 52-foot column spacing and a fenced lot.

Ty Newland with Cushman Wakefield represented the tenant. Michael Brent with Lee Associates represented the landlord, Turnbull Canyon Enterprises.

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Pierhouse Condos Take a Bow in Brooklyn Bridge Park

To stand in the living room of a condo in Pierhouse in Brooklyn Bridge Park, with its 18-foot ceilings, is to intimately experience the grandeur of New York.

First visible is the greenery of the park itself, and a passing parade of cyclists, joggers and baby carriages. Beyond that is the East River, then the skyline of lower Manhattan with One…

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Expiration of Visa Program Nears

The popularity of the EB-5 program appears to be waning. Investor applications in the first nine months of this fiscal year were just 8,638, on pace for a big annual drop. The program was tapped to help finance New York’s Hudson Yards.

Facing an impending expiration, a controversial federal program designed to attract wealthy immigrants has federal lawmakers at an impasse, leaving its long-term future uncertain.

A key provision of the EB-5 program, which gives permanent U.S. residency to foreigners who invest at least $500,000 in certain businesses, is due to lapse Sept. 30, although Congress on Tuesday appeared to be ready to give it a short-term extension until after the presidential election.

The program has surged in popularity in recent years among real-estate developers who have tapped it to help finance some of the most high-profile projects in the U.S., including the giant Hudson Yards development rising on the west side of Manhattan. The main draw is the low-cost loans provided by the foreign investors—who are mostly from China—which can save the developers tens of millions to hundreds of millions of dollars in borrowing costs.

The facts make it clear that this program is in desperate need of statutory and regulatory reform.

—Rep. Bob Goodlatte

But the program has drawn criticism. Allegations of fraud have marred numerous projects that have left investors with neither their money nor a visa amid loose regulations, including a high-profile Vermont ski resort. In addition, the program has become dominated by high-end developments in prosperous urban neighborhoods that are using a piece of the program meant for rural and high-unemployment neighborhoods. This practice, known as gerrymandering because the developers draw special districts that link their projects with high-unemployment neighborhoods that are sometimes miles away, has made it harder to raise money in economically struggling areas, EB-5 professionals say.

Congressional lawmakers have reached an accord on measures to limit fraud. But for the past year, the urban developers and their allies in congress, mainly Sen. Charles Schumer (D., N.Y.) and Sen. John Cornyn (R., Texas), have beat back attempts to redefine the benefit so many of the high-end skyscrapers can’t qualify.

Mr. Schumer has said the investments create jobs throughout cities, suggesting there was no need to distinguish between poor Bronx neighborhoods and Midtown Manhattan. Other key lawmakers, including the Democratic and Republican leaders of the Judiciary committees in both the Senate and the House, disagree and have been holding out in an attempt to block the urban developers from dominating the program.

A bill introduced in the House of Representatives earlier this month would have reserved 4,000 of the 10,000 EB-5 visas awarded annually for projects in rural and low-income census tracts.

“The facts make it clear that this program is in desperate need of statutory and regulatory reform,” Rep. Bob Goodlatte (R., Va.) said in a statement announcing the bill.

Many developers are pushing for fewer restrictions, and any compromise still seems far off.

Multiple other ideas to bridge the gap have been floated, but few have gained traction. Among them, proposals include increasing the number of visas, restricting the benefit for rural and high-unemployment areas to only areas suffering from very high poverty.

Meanwhile, for the first time in years, the popularity of the program appears to be waning. While immigrant investor applications reached an all-time high of 14,373 in the federal fiscal year that ended last September, investor applications in the first nine months of this fiscal year were just 8,638, on pace for a big annual drop.

The slowdown has been attributed to a number of factors including the uncertainty over renewal as well as the yearslong waiting list that has formed for the program, which reached its 10,000 visa capacity for the first time in 2014.

On top of that, a slowdown in the Chinese economy and a government crackdown on moving money out of China have hurt demand, said Nicholas Mastroianni II, chief executive of the U.S. Immigration Fund, one of the larger companies that works with developers to secure EB-5 investors.

“It’s a combination of the unpredictability” and economic factors, he said. ‘We see a softening in the market.”

Write to Eliot Brown at

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Blackstone Divests Plaza Centre Office Bldg in Pasadena

DC Colorado Holdings LLC acquired the Plaza Centre building at 150 E. Colorado Blvd. in Pasadena, CA from The Blackstone Group LP for $30 million, or about $482 per square foot.

The 62,286-square-foot, boutique office was constructed in 1979 and renovated in 1997. Located in Old Towne Pasadena, the property was 89 percent leased at the time of sale.

“The sale of 150 East Colorado will enable the new owner to occupy nearly 3,000 square feet of the vacant space for their headquarters, and realize significant near term upside as more than 40 percent of the leased square footage expires in the next three years, with in-place rents more than 10 percent below current market rate,” explained Andrew Harper, director with Holliday Fenoglio Fowler LP’s investment sales team.

Ryan Gallagher and Andrew Harper of HFF represented the seller. Wen Li of Long Dragon Realty represented the buyer.

Please see CoStar COMPS #3682483 for more information on this transaction.

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