Monday, December 29, 2008

BAIL OUT NEEDED?????

The commercial real estate industry is the latest to seek a government bailout.
A dozen real estate development groups have asked Uncle Sam for help to avoid defaults, foreclosures and bankruptcies. The Wall Street Journal reports that some of the country’s biggest developers have asked Treasury Secretary Henry Paulson to be included in a $200 billion loan program recently created by the government to support the market for car loans, student loans and credit card debt.
In a letter to Paulson, the commercial real estate leaders warn that thousands of properties are in danger of foreclosure because current financing is coming due and credit for new financing is hard to come by. The report cites research from Foresight Analytics LCC that says $530 billion of commercial mortgages will be coming due for refinancing in the next three years.
Unlike residential mortgages, commercial mortgages are usually designed to last five to 10 years with balloon payments at the end of the term. A loan must be refinanced or repaid at the end of the term. If refinancing is unavailable, an owner would be faced with attempting a distress sale or losing the property.
Treasury officials have indicated a willingness to consider adding commercial real estate to the $200 billion loan initiative, but it could take time. The program is not even expected to be up and running, let alone modifiable, until February. For more information see www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Friday, December 19, 2008

Aetna Signs 1st Lease at 3 Sugar Creek Center

Aetna, a health care benefits firm, signed a long-term lease for 51,974 square feet of new office space at 3 Sugar Creek Blvd. in Sugar Land, TX. The company will occupy the second and third floors, and is expected to move in the second quarter of next year. The 152,915-square-foot, Class A office building was built last year. The six-story building has three passenger elevators and one freight elevator. There is 100,941 square feet available for lease in the building. For more information see: www.houstonrealtyadvisors.com and www.houstonrealtyadvisors.net

Thursday, December 11, 2008

259,000 sq ft Industrial lease

Banta Corp., a subsidiary of Chicago-based RR Donnelley, has renewed its lease for 259,200 square feet within the West by Northwest Business Park, located at 6315 West by Northwest Blvd. in Houston. Micheal Palmer, John Simons and Susana Rosas of CB Richard Ellis’ Houston office represented Banta in the transaction. The landlord, locally based Claymoore Northwest, was represented by Brian Gammil of the Houston office of Transwestern. Terms of the lease were not released. For more information see http://www.houstonrealtyadvisors.com/ or http://www.houstonrealtyadvisors.net/

Thursday, December 4, 2008

2009 outlook is stormy Around the World Raindrops Keep Falling

The global economy is sick and the prognosis for 2009 is gloomy at best. The United States and much of the EuroZone are expected to be in a recession next year, while the Asian and Latin American economies will slow significantly, according to global economists. "2009 is going to be a year where we need to wear our hard hats," says Sean O'Dowd, a senior capital markets analyst with Boston-based consulting firm Financial Insights. "We're going to take some artillery fire… it's going to be a nasty fight."
As the financial crisis intensified during the latter part of the third quarter and into the fourth quarter, the availability of credit around the world was severely diminished. This lack of credit has slowed spending in advanced countries and caused foreign investment in poorer nations to dry up. "The countries that have the bigger debt loads are going to get hit harder during this recession," says Thomas Hall, Ph.D. and professor of economics at Miami University in Oxford, Ohio. While economists believe the worst of the financial crisis and capital markets panic has ended, the damage to the global economy has been done. "The word 'credit' is derived from the Latin word meaning trust and people today have a lack of trust that they're going to be paid back," says Ray Torto, global economist with CB Richard Ellis. "It's a huge crisis of confidence, and we have to address that before the economy will improve." The International Monetary Fund (IMF) slashed its 2009 global forecasts in mid-November and now predicts contractions in GDP in the world's most developed economies. The IMF expects the world's largest economy, the U.S., to contract by 0.7 percent in 2009. And, the IMF's new projections for Europe are even gloomier than the European Commission's 0.2 percent growth forecast for 2009. EuroZone growth has been revised downward to -0.5 percent from 0.2 percent. The slowdown in Europe is expected to be widespread, with GDP expected to dip in Germany, France, Italy, and Spain. Across the globe, confidence is severely shaken, and it may never fully recover, experts warn. That means both consumers and businesses are increasingly risk averse and will do all they can to avoid spending money. "Global businesses' sentiment has never been as negative," says Mark Zandi, head economist at Moody's Economy.com, referring to his organization's Survey of Business Confidence. "The financial panic is too much for many businesses to bear." He contends that the "collective psyche of global businesses has been shattered by the ongoing financial panic." The Survey of Business Confidence showed that sentiment fell to another new low during the first week of November. Even worse, sentiment is weak across all industries. Across the globe, business confidence was -22 percent in mid-November. To put that number in context, readings between 25 percent and 30 percent are consistent with an economy that is expanding at potential. Survey readings below 10 percent are consistent with recession. The all-time peak was nearly 40 percent at year-end 2005. "Nearly all respondents think current conditions are eroding and that they will not be any better six months from now," Zandi says. "Pessimism regarding the outlook is overwhelming."Below, the Global Real Estate Monitor tours the globe and provides an economic forecast for 2009.
United States
The U.S. economy has deteriorated significantly under the weight of the financial turmoil, and experts predict that the worst is still ahead. The U.S. economy contracted during the third quarter 2008, and it is expected to shrink in the fourth quarter as well. In 2009, there will be little or no growth, according to experts. "The danger of a severe and protracted recession is high and will be even higher without prompt and forceful action by the federal government," Zandi says. Over the past year, real GDP has increased 0.8 percent, but it declined 0.3 percent in the third quarter, slightly better than the consensus expectation for a 0.5 percent drop but still down from growth of 2.8 percent in the second quarter. The U.S. economy is expected to decline 2.2 percent in the fourth quarter, and Zandi expects no growth in 2009, provided that another $300 billion stimulus package is passed. Otherwise, GDP growth could be negative by as much as 2.5 percent. Meanwhile, experts predict the unemployment rate will continue to rise into 2010, peaking near 8 percent. The most recent numbers from the U.S. Bureau of Labor Statistics show that unemployment was 6.5 percent in September 2008, the 10th straight month of net job losses. Moody's Economy.com forecasts employment to reach its cycle low in the third quarter of 2009, and unemployment to touch its cycle high in the first quarter of 2010.Even worse, consumers are tapped out, says Nathaniel Karp, an economist with Birmingham, Ala.-based Compass Bank. "Consumption is declining at the highest rates in three decades," he notes, adding that consumers are in one of the "worst situations" they've ever been in. While inflation has been a concern over the past 12 months, deflation will be a larger concern in 2009. To date, the U.S. has experienced only two periods of deflation in the past century: a brief and relatively painless episode in 1949 and during the Great Depression from 1929 to 1933. During that four year period, prices in the U.S. fell 23 percent, discouraging spending and investment.
Latin America
While commodity prices and demand for exports to the U.S. are falling, domestic demand throughout Latin America is rising. That means that most countries are facing slower growth and weaker currencies, but will manage to avoid a recession in 2009, experts forecast. Latin America will continue to slow, with regional GDP moderating to 3.4 percent. All Latin American countries will decelerate to 3 percent to 4 percent except Mexico, which will grow by 1.5 percent to 2 percent in 2009. That compares to roughly 2.4 percent this year. Mexico will be the slowest growing Latin American country in the foreseeable future. Mexico's peso has lost 15 percent of its value versus the dollar so far this year, which normally boosts Mexican exports by making them more competitive. Unfortunately, that will not be the case in 2009 since the U.S. and Europe both will have weak demand for imports. In macroeconomic terms, Brazil, Chile and Peru will remain the strongest in the region, while the weakest will be Argentina, Venezuela, and Colombia. Brazil, which has experienced problems with inflation in the past, will benefit from the swift and aggressive action its central bank has taken including rate cuts and the injection of massive liquidity into its banking systems. Argentina's economy remains uncertain, primarily because of issues related to the nationalization of pensions. If nationalization passes the Argentine Senate, then the country could use the $26 billion gained from private pension funds to refinance its debt and avoid default next year. However, in the medium to long run, the nationalization of pensions to pay off immediate debt obligations for 2009 would add to an already-burdensome national debt. For its part, Venezuela's future is also uncertain. The country's political environment is contributing to lack of investor confidence (see how Venezuela's political environment also is impacting its transparency for commercial real estate). Moreover, slumping oil prices are expected to have quite a negative impact on the country, which depends more heavily on oil revenues than does any other country outside the Persian Gulf. According to Moody's Economy.com, more than 90 percent of total export revenues come from oil, while nearly 60 percent of fiscal revenues are tied to this commodity.And, like the U.S. and Europe, Latin America is suffering from the credit crisis. Latin American companies are having a hard time securing short-term lines of credit to finance exports. While central banks around the region have tried to correct the problem, the Latin American equity markets would benefit from a less volatile global credit market.
The U.K. and EuroZone
Uncertainty in the credit markets will "cast a long shadow over Europe," according to Moody's Economy.com. European economies contracted in both the second and third quarters of this year, pushing the region into recession. In mid-November, European finance ministers decided against a EuroZone stimulus package, but its central banks have slashed interest rates. For example, the Bank of England cuts its rate by 150 basis points, and the European Central Bank lowered its rate by 50 basis points to 3.25 percent. The cuts are expected to give a much-needed stimulus to those weakening economies. In 2009, experts predict that United Kingdom interest rates will go as low as 2.5 percent. The U.K. and Germany, the largest economies in Europe, have already experienced significant slowdowns, and Central and Eastern Europe are expected to suffer severe recessions. Like the U.S., the region will undergo substantial economic pain as businesses and consumers continue to deleverage. Moreover, most EuroZone economies will be weighed down by decreased business investment, weak household demand and rising unemployment. The U.K. economy has faltered under the weight of the credit crisis, and like the U.S., it is experiencing its own residential market meltdown. As a result, the British economy contracted in the third quarter.Similarly, Germany, the largest EuroZone economy, has fallen victim to the weakened global climate. Largely dependent on exports to the rest of Europe, Germany has been weakened by both falling domestic and foreign manufacturing orders. However, the German government is working on a targeted stimulus package that is expected to shore up the economy. Unfortunately, a sharp recession in Eastern Europe now seems inevitable since most countries there have been running huge deficits and financing the deficit is almost impossible. That doesn't bode well for the EuroZone as a whole since 30 percent of EuroZone exports are destined for Eastern Europe, more than twice those bound for the U.S. Germany and the Netherlands are the most exposed – their exports to Eastern Europe account for 3.5 percent of their GDP.Moody's Economy.com says several Eastern European and Baltic countries face financial meltdowns akin to Asia in 1997. Across the region, the private sector, including consumers, had borrowed heavily in foreign currency at relatively low interest rates. However, much of the borrowing was short term, and few, if any borrowers hedged against currency fluctuation. Now, foreign currency is unavailable and currency exchange rates are in a freefall. Sadly, these countries have little foreign reserves to back their currencies.In times of stress, emerging economies have historically turned to the IMF, but there are worries that even the IMF might not have the resources to bailout all the countries in trouble. The IMF has approximately $250 billion in reserves – enough to provide 15 or so bailouts similar to the ones it provided for Ukraine ($16.5 billion) and Hungary ($15.7 billion). Moody's Economy.com says EuroZone and Swiss banks are most exposed to the travails of Eastern Europe and other emerging markets. They loaned $3.5 trillion to emerging economies, compared with $500 billion from the U.S. and $200 billion from Japan.
Asia-Pacific
While 2009 is expected to be a tough year for the U.S. and EuroZone, most Asia-Pacific countries will still see positive growth, albeit slower than the past few years. However, some Asian countries including Japan will actually fall into a recession. Unlike the U.S. and the EuroZone, Asia-Pacific's slowdown cannot be blamed on the financial crisis. In fact, most experts agree that the region got off pretty lightly compared to the rest of the world. The bank failures and write-downs that have bedeviled the U.S. and Europe have largely ignored the Asia-Pacific region, despite the large portfolios of U.S. assets that Asia has built in recent years. As of mid-November, Asia has yet to see a bank failure, or a bailout, related to the U.S. credit crisis.Indeed, Asia holds the largest piece of U.S. mortgage-backed securities – roughly $795 billion of mortgage debt consisting almost entirely of securities issued by Fannie Mae and Freddie Mac. But these securities are of high quality and not supported by subprime mortgages. Moreover, Asian investors have not taken a hit because of mark-to-market losses because international accounting rules do not require this type of mark downs for investments expected to be held to maturity.While Asia-Pacific is largely unscathed from the mortgage meltdown, the credit crisis has taken a bite out of the region's export activity. That's a big problem because exports make up a higher share of the region's GDP than in any other region in the world, according to Moody's Economy.com. Any decrease in overseas demand will have a marked impact on the region's economic growth (see related story on U.S. seaport activity). China, which has become the world's manufacturing center for everything from shoes to soap, has already seen its exports decline precipitously as demand from the U.S. and Europe withers. The country expects to post growth of around 9 percent over the next few years compared with 11.9 percent in 2007. Interestingly, anything below 8 percent GDP growth in China is considered a recession by the Chinese government. The rest of the Asia-Pacific region will likely follow China's lead, and countries that have come to rely on China to drive their economies will also see their growth rates decline. That means the next 12 months will be the toughest the region has seen in years, with growth at 10-year lows.However, the slowdown can be mitigated by government action. "In India and China, the government controls the major financial institutions," Zandi says. "It can keep the wheels of the real economy greased by simply ordering state-owned banks to provide liquidity to targeted markets."China, for example, recently unveiled a massive fiscal stimulus package, pledging spending of 4 trillion yuan through 2010. The government will focus on 10 major areas: affordable housing; rural infrastructure; expansion of transport networks; improvement in health and education systems; environmental protection; industrial innovation; post-earthquake reconstruction; raising average income; reform of value-added tax; and strengthening the role of the financial industry. The stimulus package is expected to help the entire Asia-Pacific region. Unfortunately, it won't help the regions that are really suffering, specifically the U.S., says Richard Green, Ph.D. and director of University of Southern California's Lusk Center for Real Estate. "There's no real chance that strength in other parts of the world will boost the U.S.," he says. "We forget that China, as massive as it is, is still much smaller than the U.S. economy. We're going to have to pull ourselves out of this." For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Tuesday, December 2, 2008

BIOFUELS POWER CORP. TO PURCHASE POWER PLANT

The Woodlands, Texas-based Biofuels Power Corp. has agreed to purchase the decommissioned H.O. Clarke Electric Generating Station, located at the intersection of Main Street and Hiram Clarke Road in Houston. The acquisition will include the 79-acre site, as well as all of the remaining infrastructure and equipment, which includes 65,000 barrels of aboveground storage tanks and a high-pressure natural gas pipeline that is connected to the distribution system. The power station, which was constructed in the 1940s, was decommissioned in 2004. At the time, the station’s gas-fired turbines were also removed. Biofuels Power Corp. plans to redevelop the site into a clean energy industrial park that will provide power to tenants by way of biofuels, biomass, natural gas, biogas and solar energy. The deal is expected to close by the end of the year. The construction timetable for the redevelopment was not disclosed. For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Thursday, November 20, 2008

NEW RETAILERS OPEN AT VINTAGE PARK

The grand openings have been held for six new tenants at Vintage Park, an approximately 500,000-square-foot lifestyle center located in Houston. Situated on 84 acres at the intersection of Louetta Road and Highway 249, the center’s new tenants include BRIX Wine Cellars, The Castleberry Center for Aesthetic Dentistry, Fish City Grill, Post Net, Signature Home Theater and Shogun Japanese Grill & Sushi. Many of the openings occurred when the center held its grand opening ceremonies in October. Tenants already open at Vintage Park include Cheeburger Cheeburger, H-E-B Vintage Market, LandAmerica Commonwealth Title, Pepper-Lawson Construction, Potbelly Sandwich Works, Starbucks Coffee, and Vintage Wellness & Aesthetic Center. Tenants opening soon at the center include Freshberry Frozen Yogurt, Mia Bella, Peli Peli, Pizza Fusion, Salaa & Trio Prime Steakhouse and Bar, Bank of Texas, Compass Bank, Heritage Texas Properties and Kickerillio Cos. Vintage Park is owned by Houston-based The Interfin Companies. It is the retail component of The Vintage, a 630-acre master planned community. For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Wednesday, November 19, 2008

Sugaland, Tx buildings sale @ Hwy 6 and US 59

New York-based Norvin Partners has acquired Health Center I and II, two medical office buildings totaling approximately 117,000 square feet that are located in Sugar Land. The two properties are situated close to highways 6 and 59, and are located within the epicenter of Sugar Land’s medical community. Both are undergoing significant renovations. The properties are anchored by a physician-owned ambulatory care center. Norvin acquired Health Center I and II from Memorial Hermann Health System. Transwestern Houston will provide leasing and management services for the properties. The acquisition price was not disclosed. For more information see: www.houstonrealtyadvisors.com and www.houstonrealtyadvisors.net

Tuesday, November 18, 2008

Two of the Big Guys team up in Houston, Tx.

Houston-based REITs Weingarten Realty Investors and Hines Real Estate Investment Trust, Inc. (Hines REIT) have formed a $271 million joint venture, in which a subsidiary of Hines REIT will acquire a 70 percent interest in a portfolio of 12 supermarket-anchored shopping centers owned by Weingarten. The transaction will close on multiple dates. The first closing, comprising eight of the shopping centers and totaling approximately $205 million, occurred on November 13. The portfolio, which is more than 96 percent leased, totals 1.5 million square feet. The shopping centers are located in Texas, Georgia, Tennessee, Florida and North Carolina. Their trade areas have average populations exceeding 100,000 people and average household incomes of more than $80,000. The shopping centers are anchored by supermarkets tenants that include Kroger, Randall’s (Safeway), H-E-B, Publix, BJ’s Wholesale and Harris Teeter. Other anchors at the properties include Marshall’s, Barnes & Noble, Palais Royal and Stein Mart. “We announced in 2006 an effort to further our joint venture program,” says Gary Greenberg, senior vice president, capital markets, for Weingarten Realty Investors. “This is a continuation of that program, and it will bring us close to $2 billion in transactions since 2006.” The joint venture has a commitment from an undisclosed life insurance company to provide a $100 million loan for the transaction that is expected to close before the end of the year. Weingarten is providing $134 million in preferred equity for the initial closing. Weingarten also will be responsible for the ongoing management and leasing of the properties. In a time when retail sales are down, the investment in these 12 properties speaks to the strength of the centers and their respective markets. “We have been in business for 60 years and have a track record of successfully operating properties in all business cycles,” Greenberg says. The Dallas office of Holliday Fenoglio Fowler represented Weingarten in the joint venture transaction. For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Monday, November 17, 2008

Tenants back in driver seat NOW!

"The concern isn't that Houston, Texas specifically, has reached a critical point, but there is an undercurrent that it might due to the widespread and fast-paced momentum. In fact, industry professionals agree that vacancy and absorption--in some submarkets--validate the need to build. There are fears of overbuilding because there's so much activity.



Liquidity and overbuilding were in the spotlight. A lot of these buildings are being purchased on the come. Those buildings have no choice but to push rents. The question is will rents catch up to construction costs. Everyone who is buying building and everyone who is building a building are thinking it will happen. But, developers are going to have to take a lower return until the rents are there.


The consensus is that the pendulum is swinging back to Tenant's market after several years with landlords in control now that we are in the real rescission.


The reality is rents are rising, buildings are filling and the buy-in is cheaper in Houston than either coast. As coastal investors buy into the region, the market's veterans are banking on Houston historical appetite for new and expensive. And yes, there is the age-old concern about what will happen to existing class B and class A buildings." For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Friday, November 14, 2008

GROUNDBREAKING OCCURS FOR SHADOW CREEK VILLAGE

PEARLAND, TEXAS — Houston-based Greatland Investment has broken ground for the development of Shadow Creek Village, a 29,000-square-foot retail project located in Pearland within the Shadow Creek Ranch master-planned community. Situated on 3 acres at the corner of FM 518 and Kirby Drive near Pearland Town Center, Shadow Creek Village is seeking to attract fine dining restaurants, dry cleaners, salons/spas and other consumer service-related tenants. The project also contains a pad site for a bank. The $6 million project is scheduled for completion in February 2009. Greatland Investment is developing the project, with construction management services being provided by Houston-based EDWEA. It will be managed by CSL Leasing & Management. Fro more information see ; www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Monday, November 10, 2008

City approves variance for TIAA-CREF building

The City of Houston’s Planning Commission has granted a variance to TIAA-CREF to accommodate a 30-story office building it plans to construct in the Galleria area.
TIAA-CREF intends to build an office tower at 1300 Post Oak, in place of an existing two-story 24-Hour Fitness. The office building will be located next to the Four Oaks Place office complex that is also owned by TIAA-CREF.
The owner needed city approval to build the structure 15 feet away from Post Oak instead of the standard 25 feet. The setback change, granted last week, applies on Post Oak from Four Oaks Place Drive to West Briar Lane.
The building will be located closer to the street in keeping with guidelines being developed for the future rail corridor. The Metropolitan Transit Authority of Harris County plans to construct a rail line down the middle of Post Oak.
Houston-based Transwestern is development manager and leasing representative for the proposed office building, which has been on the drawing board for more than a year.
With more than $435 billion in combined assets under management, TIAA-CREF is the leading retirement system for people in the academic, research, medical and cultural fields. For more information see; www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Wednesday, November 5, 2008

High-rise security from the ground up

High-rise security from the ground up
The design and installation of an access control system raises a host of issues beyond the technology itself.



"The attacks of Sept. 11, 2001, made high-rise security a prominent issue for building owners. But it would be a mistake for building owners to focus so much on measures to prevent terrorist attacks that they neglect other security threats like workplace violence, theft and domestic violence. Although these other incidents are less severe in scope than a terrorist attack, they also occur with far greater frequency.


One way to address the spectrum of security risks in a high-rise building is with an access control and alarm monitoring system that complements the security measures of tenants. Such a system can prevent or delay a criminal from entering, make the building less inviting as a target and establish an image of a safe and secure environment.


Even though the installation of an access control and alarm monitoring system seems straightforward, it can be problematic and very costly when security is not part of a cohesive architectural program. The most opportune time to incorporate access control is at the beginning of the planning and programming process.


This requires that multitenant buildings be segregated into two broad
areas:


Base Building


The structure, building support, and common spaces and equipment under the domain of the building owner.


Tenant Fit-Out


Space specifically built out and occupied by the tenant; in some instances, separate design and construction teams could be working in this space.


When a high-rise will have multiple tenants, it is important to ensure that the access control system used by the base building will be interoperable with the ones used by tenants; otherwise, tenants will have to use two types of credentials.
The control of grade entrances and below grade entrances - loading docks, main entrances, tertiary grade entrances and so forth - represents the first and most important part of a building's security. Security at these locations should unobtrusively allow access to legitimate users, prevent illegitimate access, and segregate visitor traffic to a concierge or security desk to validate a visitor's need to access the building.


Different spaces, different needs


The best method for accomplishing these goals at main lobby entries is with optical turnstiles. Optical turnstiles are especially valuable in large open atriums, where the size of the space and the number of people present significant security challenges. Optical turnstiles provide a quick and relatively unobtrusive way to ensure that people passing through have proper access credentials. These turnstiles can be equipped with or without barriers; the devices can have electric photo sensors that identify and sound an alarm if someone attempts to enter without presenting an access control credential.


By contrast with main entry lobbies, loading docks require the use of doors with hardware and equipment rated for high-volume use.


One way to improve security in both the base building and the tenant spaces is to sub-compartmentalize elevator and floor access. This approach involves adding security controls - for instance, locked doors or optical turnstiles - at various points to deter potential criminals.
For example, outside a building, the landscape might direct visitors to a certain entrance. The visitor might be required to use an access control credential to enter the building. At the elevator, the visitor might again have to use an access control credential to proceed to a specific floor.


Compartmentalization is easily done if it is planned into the architecture of the building.


In particular, it is important to control the vertical pedestrian core - stairwells, elevators and service elevators. This further compartmentalizes the facility, making a malevolent act more difficult to carry out. These controls provide a level of base building security in addition to security measures taken by individual tenants.


Providing the right space


In a high-rise environment, properly designed security systems will be distributed throughout the structure, and planners need to incorporate into the program enough space for the system to be monitored and administered and to properly house the front-end systems. Without adequate space, the effectiveness of the security system may be compromised. And if that space isn't provided in the initial planning, it will be more costly to make room for it after the building has been fully programmed.


In a major high-rise, a good rule of thumb is that 1,000 to 1,500 square feet of space will be required for the area that will support the monitoring and maintenance of the system. This space is not solely for the access control and monitoring system; a variety of other activities will be occurring in this area. For example, this space might house a locksmith or provide room for security officers to write up reports. The amount of space depends on the specifics of the security program, but it is important in programming to provide ample space. Later, it is easier to reduce the amount of space than to increase it.


Another important spatial consideration is the need for a continuous stacked security riser. Stacking is basically programming these spaces vertically so they are located at the same point on every floor. This is beneficial in maintenance and can also keep conduit costs to a minimum.


The riser closet does not need to be large; a simple four-foot deep by six-foot wide room with a double door opening should be sufficient to support distributed security requirements for the foreseeable future.
Closets on each floor should have dedicated 110v power, telecommunications and a minimum of a four-inch continuous sleeve. This approach will make it easier to add and delete devices for each floor independently and allows the building to adapt quickly to the security needs of its clientele.


In some instances, the security system shares closets with the telecommunications system. This is not recommended because the telecommunications and security staff have different priorities.


In one project, security closets were eliminated from the design to save money, and the access control and alarm monitoring system was moved to the telecommunications closets. At the closeout of the project, the telecommunications department was charging for the time their personnel spent to provide access to the closets and to oversee the installation and maintenance of security panels.


Finally, it's worth considering providing space for remote badging stations. From time to time, the access control credential will have to be replaced. Providing space for remote badging stations will aid in the badging process and make security unobtrusive. For example, a remote badging station might be located on a floor with the cafeteria or a workout room. That would save occupants needing a new badge the time and trouble of going to a badging station on the main floor that is busy issuing temporary badges for visitors and handling other matters.


Architectural Design and Security


The placement of access control readers requires careful attention. For instance, credential readers need to be mounted so as to meet the requirements of the Americans with Disabilities Act (ADA) for both frontal and side approach. The location of the credential reader is especially important, because the device will seem obtrusive if it is improperly placed. As an example, in the case of a single door, the access control reader should be placed 42 inches above the finished floor and on the same side as the door handle.


Proper design and placement of readers can prevent problems. In one case, a reader was mounted on the left side of a door that swung open to the left. As a user reached over to present the credential, someone else exited through the door, wedging the first person between the wall and the door.


The options for placing a reader can be affected in the construction process by other trades. For example, the place where one electrical contractor installs conduit for light switches may limit the choices another electrician has for the placement of the credential reader. The best way to avoid this problem is to have a single electrical contractor on the project. If this is not possible, the security designer should coordinate electrical requirements with the electrical designer to ensure all electrical subcontractors are aware of other equipment that will need to be installed.


In some instances, the architecture of the building presents areas where mounting a credential reader is impractical, inconvenient or not possible. Only a small space is required to mount a reader, so if the security designer works with architects early in the process it should be possible to eliminate problem areas.


Taking the time during planning to coordinate door hardware choices with the access control and alarm system design will also pay substantial dividends. In many cases, doors within tenant spaces are glass and, therefore, require different door hardware than typical wood doors. By ensuring that the architect and security designer work together early on to identify door hardware requirements, the facility executive can protect both the budget and the schedule from unexpected shocks.


There are other ways in which early planning makes it possible for architectural design to improve security. One example is placing doors on opposite sides of an elevator vestibule. This approach compartmentalizes the vestibule, creating another zone of security on the floor. This is an excellent way to prevent elevator surfing by an individual who may be casing the high-rise.


It's important to remember building code compliance in these cases.
If doors are placed on both sides of an elevator vestibule, there is no longer an unimpeded path of egress for someone exiting the elevator. By properly blending architectural and security designs, it is possible to meet life-safety requirements as well as security needs. For example, an exit stairwell can be placed directly off the elevator vestibule to provide a means of egress. That approach would maximize security while providing code compliance.


The design and installation of an effective access control and alarm-monitoring system raises a host of issues beyond the technology itself, from the use of architectural barriers, to code compliance, to effective placement of readers. The only way to address those issues is with communication during the design process. It takes time and effort, but the result will be a system that serves the needs of the building owner, tenants and visitors for years to come." For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Monday, November 3, 2008

New building doubles SpectraCell’s space

SpectraCell Laboratories Inc. has doubled the size of its facilities by adding a second 20,000-square-foot building on its campus in the Westchase Business District.
The new $3.5 million facility houses SpectraCell’s state-of-the-art clinical laboratory operations while the existing building, designed in 2005, retains the corporate, financial, marketing and administrative functions.
The new building was completed and opened in late October.
SpectraCell, a privately-owned biotech firm, is a federally accredited laboratory that provides advanced clinical testing services to health care providers nationwide using its patented Functional Intracellular Analysis and Lipoprotein Particle Profile tests.
“Our business has grown at a strong pace over the past few years,” said William “Chip” Stanbeffy, the company’s chairman and CEO. “The number of tests performed by us each month has skyrocketed. We outgrew our current building in three years.”
The company has more than doubled its number of employees since 2005 and now serves more than 3,000 physician clients in 38 states. For more information see; www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com


Houston Business Journal - by Monica Perin Reporter

Tuesday, October 28, 2008

Galleria Tower Cancelled by Turnberry LTD.

Turnberry Ltd. confirmed this week that it no longer plans to build a 34-story luxury condo tower by the Galleria Mall that had been in the works for more than three years.
The 184 proposed condo units, priced from $1 million to more than $3.5 million, were to be located west of Post Oak Boulevard, between Hidalgo and W. Alabama.
Buyers were notified of the developer’s decision last week, and have been refunded their deposits plus interest accrued on the money, according to Turnberry.
Jim Cohen, a vice president of sales for the prolific development firm, said in a statement released this week that the project was cancelled because the firm could not get a construction loan during the current financial crisis.
“With great reluctance we have decided to suspend development operations for Turnberry Tower, Residences at the Galleria,” Cohen said in the statement. “This is the first project Turnberry has had to discontinue in more than 40 years in the real estate development business.”
The Aventura, Fla.-based company has developed more than $7 billion in commercial and residential property, including 20 million square feet of retail space, 7,000 apartments and condo units, 1.5 million square feet of office space and 2,000 hotel and resort rooms.
Turnberry’s splashy marketing effort in Houston began in September 2007 with the unveiling of a 12,000-square-foot, multimillion-dollar sales center/model home near the development site.
The sales center closed last week, and the developer has not decided what it will do with the property. For more information see www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Thursday, October 23, 2008

KBC Signs 30,000-SF Prelease at Energy Crossing

KBC Advanced Technologies Inc., a process engineering, consulting and software group, signed a lease for 30,000 square feet at 15021 Katy Freeway in Houston. The six-story, 480,000-spuare-foot office property at Energy Crossing I and II, broke ground in early 2008 and will be completed in February 2009. KBC is the first tenant to sign a lease with Opus West, the landlord. The tenant is expected to move into the space in March upon completion of the property. John Pruitt and Dena Wren of CB Richard Ellis represented the landlord. Anthony Squillante of Jackson Cooksey represented the tenant. for more information see: www.houstonrealtyadvisors.com or www.houstonrea;tyadvisors.net or www.edayres.com

Tuesday, October 21, 2008

Commercial Real Estate Sales Slump Spans Globe

The dearth of transactions that has daunted U.S. commercial real estate investors for 14 months has spread overseas, but observers suggest that measures to restore liquidity could help some markets to avoid the degree of paralysis that lingers in North America.
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Transaction volume worldwide has contracted across property types and totaled $388 billion year-to-date through August, down 57% from the same period in 2007, according to New York-based researcher Real Capital Analytics. That pace is still slowing, with third-quarter sales expected to show an even steeper decline of 68% from the year-ago quarter.
“The credit crunch that has been impeding deal flow in the U.S. and Europe is now spreading throughout Asia and erupting into a full-blown financial crisis in the West,” researchers contend in the September/October issue of Global Capital Trends, published by New York-based researcher Real Capital Analytics.
But if the credit crunch is to blame for declining sales numbers, then recent measures taken by governments around the globe may help to slow the downward spiral of dwindling transactions by boosting liquidity. This month the United Kingdom announced it will invest £37 billion in its largest banks, while the United States agreed to infuse its own banking system with $250 billion and expanded government backing of deposits through the FDIC. The Bank of Japan took steps to bolster Japanese stocks and finances, and 27 states in the European Union agreed to work together in supporting their own banks.
Those coordinated responses should help increase liquidity, but investors remain cautious about declining economic indicators, according to Global Market Perspective, a report published Oct. 17 by real estate service provider Jones Lang LaSalle. Even in markets where property values experience declines, however, more readily available credit will increase the number of investors able to bid on properties as more property owners become distressed and are forced to sell.
“For every region of the world, it all hinges on whether debt capital comes available,” says Keven Lindemann, director of the real estate group at SNL Financial in Charlottesville, Va.
Making deals
So far, most overseas markets have maintained transaction volume better than the U.S. Through August, year-to-date commercial real estate sales in the U.S. reached $105.5 billion, down 77% from the previous year and down 80% since the crisis began, Real Capital Analytics reported.
By contrast Europe, the Middle East and Africa collectively had $152.4 billion in commercial real estate sales this year through August, down 46% from a year earlier. The U.K.’s $37.6 billion in sales since the beginning of the year were down 55% from a year ago.
While it’s too early to show up in sales data, the fourth quarter may bring an increase in transaction volume in Europe and the U.K., says Earl Webb, CEO of Capital Markets at Chicago-based Jones Lang LaSalle. Based on conversations with brokers and investors in Europe, Webb says the gap between bids and asking prices in Europe is narrowing and more sales are occurring as some banks as investors liquidate real estate assets.
“Investors there who need liquidity tend to get it by selling assets into the market at market-clearing prices faster than they do here,” Webb says. “In the U.K. for example, property trades are already taking place at fairly considerable discounts over where pricing was a year ago.” Indeed, buyers in August could expect an average yield of 6.3% for office, industrial and retail properties in the region, up from 5.8% a year earlier, according to Real Capital Analytics.
The only major commercial real estate market to see a decline approaching the precipitous drop in volume experienced in the U.S. has been Australia/New Zealand, where sales of $6.7 billion year-to-date mark a 74% decline from the same period last year. As a whole, the Asia-Pacific region, including Australia and New Zealand, racked up $113.3 billion in commercial real estate sales this year through August, down only 18% from the year-ago period.
Asia retains liquidity
Asia’s transaction volume has plummeted since midyear and volume for sales in the region will be down 68% in the third quarter from a year ago, Real Capital Analytics estimates. Asia enjoyed a brief surge in acquisitions earlier this year when investors sought refuge in markets they hoped would escape the illiquidity crisis plaguing the West. Japan even posted a 19% gain with its year-to-date transaction volume of $28.9 billion through August, although that number masks a more recent decline that is expected to show up as a 41% drop in sales in third-quarter sales from a year ago.
Some investors clearly expect to see buying opportunities in Asia, and those acquisitions could usher in renewed transaction volume by establishing market prices, according to SNL Financial’s Lindemann. Merrill Lynch has formed a $2.65 billion investment fund to buy Asian real estate, for example, and LaSalle Investment Management has launched a $3 billion opportunity fund focused on the same region. “The idea is that there are going to be some distressed sellers out there,” he says.
Transaction volume in Asia is down in part because investors the world over have grown more cautious in reaction to this year’s bank failures and bailouts, according to Lee Menifee, director of global strategy at CB Richard Ellis Investors in Los Angeles. Less debt is available in the region than in previous years, too, because the largely U.S.-based lenders who provided mezzanine loans and other secondary leverage have ceased to offer new loans.
Yet there is good reason for investors to consider commercial real estate acquisitions in China, Japan and other major Asian markets, Menifee says. Japan’s domestic banks continue to offer mortgage financing at 65% loan-to-value ratios for core assets in that country. The base interest rate in Japan is an incredibly low 0.5%.
China has lowered its official lending rate by 80 basis points to an attractive 6.92% and could easily boost liquidity if needed by easing restrictions on the use of foreign capital in real estate acquisitions. In the larger Asian markets, at least, the sales slump may be more transient than it has been in the West. “Asia is certainly not immune from the credit crisis,” Menifee says, “but it’s relatively less impacted.” For more information see www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Commercial Real Estate Sales Slump Spans Globe

The dearth of transactions that has daunted U.S. commercial real estate investors for 14 months has spread overseas, but observers suggest that measures to restore liquidity could help some markets to avoid the degree of paralysis that lingers in North America.
Transaction volume worldwide has contracted across property types and totaled $388 billion year-to-date through August, down 57% from the same period in 2007, according to New York-based researcher Real Capital Analytics. That pace is still slowing, with third-quarter sales expected to show an even steeper decline of 68% from the year-ago quarter.
“The credit crunch that has been impeding deal flow in the U.S. and Europe is now spreading throughout Asia and erupting into a full-blown financial crisis in the West,” researchers contend in the September/October issue of Global Capital Trends, published by New York-based researcher Real Capital Analytics.
But if the credit crunch is to blame for declining sales numbers, then recent measures taken by governments around the globe may help to slow the downward spiral of dwindling transactions by boosting liquidity. This month the United Kingdom announced it will invest £37 billion in its largest banks, while the United States agreed to infuse its own banking system with $250 billion and expanded government backing of deposits through the FDIC. The Bank of Japan took steps to bolster Japanese stocks and finances, and 27 states in the European Union agreed to work together in supporting their own banks.
Those coordinated responses should help increase liquidity, but investors remain cautious about declining economic indicators, according to Global Market Perspective, a report published Oct. 17 by real estate service provider Jones Lang LaSalle. Even in markets where property values experience declines, however, more readily available credit will increase the number of investors able to bid on properties as more property owners become distressed and are forced to sell.
“For every region of the world, it all hinges on whether debt capital comes available,” says Keven Lindemann, director of the real estate group at SNL Financial in Charlottesville, Va.
Making deals
So far, most overseas markets have maintained transaction volume better than the U.S. Through August, year-to-date commercial real estate sales in the U.S. reached $105.5 billion, down 77% from the previous year and down 80% since the crisis began, Real Capital Analytics reported.
By contrast Europe, the Middle East and Africa collectively had $152.4 billion in commercial real estate sales this year through August, down 46% from a year earlier. The U.K.’s $37.6 billion in sales since the beginning of the year were down 55% from a year ago.
While it’s too early to show up in sales data, the fourth quarter may bring an increase in transaction volume in Europe and the U.K., says Earl Webb, CEO of Capital Markets at Chicago-based Jones Lang LaSalle. Based on conversations with brokers and investors in Europe, Webb says the gap between bids and asking prices in Europe is narrowing and more sales are occurring as some banks as investors liquidate real estate assets.
“Investors there who need liquidity tend to get it by selling assets into the market at market-clearing prices faster than they do here,” Webb says. “In the U.K. for example, property trades are already taking place at fairly considerable discounts over where pricing was a year ago.” Indeed, buyers in August could expect an average yield of 6.3% for office, industrial and retail properties in the region, up from 5.8% a year earlier, according to Real Capital Analytics.
The only major commercial real estate market to see a decline approaching the precipitous drop in volume experienced in the U.S. has been Australia/New Zealand, where sales of $6.7 billion year-to-date mark a 74% decline from the same period last year. As a whole, the Asia-Pacific region, including Australia and New Zealand, racked up $113.3 billion in commercial real estate sales this year through August, down only 18% from the year-ago period.
Asia retains liquidity
Asia’s transaction volume has plummeted since midyear and volume for sales in the region will be down 68% in the third quarter from a year ago, Real Capital Analytics estimates. Asia enjoyed a brief surge in acquisitions earlier this year when investors sought refuge in markets they hoped would escape the illiquidity crisis plaguing the West. Japan even posted a 19% gain with its year-to-date transaction volume of $28.9 billion through August, although that number masks a more recent decline that is expected to show up as a 41% drop in sales in third-quarter sales from a year ago.
Some investors clearly expect to see buying opportunities in Asia, and those acquisitions could usher in renewed transaction volume by establishing market prices, according to SNL Financial’s Lindemann. Merrill Lynch has formed a $2.65 billion investment fund to buy Asian real estate, for example, and LaSalle Investment Management has launched a $3 billion opportunity fund focused on the same region. “The idea is that there are going to be some distressed sellers out there,” he says.
Transaction volume in Asia is down in part because investors the world over have grown more cautious in reaction to this year’s bank failures and bailouts, according to Lee Menifee, director of global strategy at CB Richard Ellis Investors in Los Angeles. Less debt is available in the region than in previous years, too, because the largely U.S.-based lenders who provided mezzanine loans and other secondary leverage have ceased to offer new loans.
Yet there is good reason for investors to consider commercial real estate acquisitions in China, Japan and other major Asian markets, Menifee says. Japan’s domestic banks continue to offer mortgage financing at 65% loan-to-value ratios for core assets in that country. The base interest rate in Japan is an incredibly low 0.5%.
China has lowered its official lending rate by 80 basis points to an attractive 6.92% and could easily boost liquidity if needed by easing restrictions on the use of foreign capital in real estate acquisitions. In the larger Asian markets, at least, the sales slump may be more transient than it has been in the West. “Asia is certainly not immune from the credit crisis,” Menifee says, “but it’s relatively less impacted.”Oct 21, 2008 2:02 PM, By Matt Hudgins Commercial News
For more information see: www.hostonrealtyadvisors.com or www.houstonrealtyadvisors.net

Monday, October 20, 2008

New Research Center: Seed grant stimulates local collaboration at new research center

Rice University researchers working out of the planned Collaborative Research Center will get a $3 million jump-start with a seed grant from the John S. Dunn Research Foundation.
The Houston-based foundation awarded the funding to Rice University for the purpose of initiating collaborative research studies in biomedical science that have the potential for clinical applications.
One condition of the grant requires researchers to collaborate with scientists or physicians from other Texas Medical Center member institutions, which relates to the original mission of the center.
In announcing plans for the CRC in 2004, Rice officials made clear that their main goal was to facilitate joint research between Rice’s experts in biological sciences, engineering, computation, and the physical and mathematical sciences and Texas Medical Center physicians and scientists (see “Research hub unites Rice, TMC,” Nov. 5, 2004).
Charles Hall, president of the John S. Dunn Research Foundation, says his group’s top agenda has always been medical research.
“We get frustrated sometimes by not knowing who to give to for breast cancer research,” notes Hall, who also works as a tax attorney for Fulbright & Jaworski LLP.
“We’re very interested in getting a bang for our buck through collaborative work,” he says.
The late John Dunn Sr. established the Dunn Research Foundation in 1977 to support organizations and programs engaged in biomedical, educational and research programs, primarily in the greater Houston area. The foundation has awarded $1.5 million in various grants to Rice.
Richard E. Wainerdi, CEO of the Texas Medical Center, said in a written statement via e-mail that the TMC looks “forward to the development of some outstanding partnerships due to the foundation’s generosity.”
BRINGING RESEARCH OUT OF SILOS
Rice’s Collaborative Research Center is now slated to open in the summer of 2009, according to Kathleen Matthews, the Dean of Rice’s Weiss School of Natural Sciences.
The 10-story, 500,000-square-foot facility is currently under construction on the corner of University Boulevard and Main Street.
The first round of seed grants will be limited to cross-institutional teams of researchers within the CRC who have not previously worked together, and whose work shows potential for clinical use in the near future.
Matthews says the Dunn Foundation is helping Rice’s efforts by “bringing people together to do things that wouldn’t have happened if we stayed in our little silos.”
In terms of CRC occupants, the university’s entire department of bioengineering will be moving there once the building is ready, according to Matthews.
“They have been, from the very beginning of this idea, up front and very enthusiastic about being a part of this,” she says.
Also, some faculty from the university’s biochemistry and cell biology department will call the CRC home.
Rice is currently in ongoing discussions with other institutions, but Matthews could not say if any agreements had yet been finalized.
Initially, the CRC will hold seven to 10 labs per floor on eight of the 10 floors.
The grant from the Dunn Foundation, notes Matthews, will “catalyze new interactions by putting some resources out there for people who haven’t collaborated previously.”
Adds Matthews: “This gives them the resources to gather data, test an idea that they come up with together and take that to the next level.”For more information see www.Houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

HCSS TO BUILD NEW 42,000-SQUARE-FOOT HEADQUARTERS

SUGAR LAND, TEXAS — Construction software company Heavy Construction System Specialists has announced plans to relocate its corporate offices from Houston to Sugar Land. The firm will construct a 42,000-square-foot facility on an 11.92-acre site at the corner of Alston Road and West Airport Boulevard. The building will house corporate offices, as well as the company’s software research and development operations. The construction team and timetable were not released. For more information: see www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.et

Friday, October 17, 2008

ENERGY CENTER I RECEIVES LEED-SILVER

Dallas-based Trammell Crow Co. and Des Moines, Iowa-based Principal Real Estate Investors have received LEED-Silver certification from the U.S. Green Building Council for Energy Center I, a 332,000-square-foot office building located adjacent to Interstate 10 and Dairy Ashford in Houston. Completed in January 2008, the project is the largest speculative office building in Houston to receive LEED certification, as well as the first office building in Houston’s Energy Corridor to receive the designation. Sustainable features include high-efficiency chillers; a non-chemical, pulsed-power water treatment system; a CO2-based demand controlled ventilation system; the use of low-emitting adhesives and sealants; low-flow faucets and fixtures; a drip irrigation system; and the use of recycled and locally sourced construction materials during the build. Energy Center I is fully occupied by Foster Wheeler USA, which uses the building as its corporate headquarters. Construction is also advancing for Energy Center II, the second phase of the project. The project has been pre-certified to the LEED-Silver level, and is scheduled for completion in December. For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com

Thursday, October 16, 2008

Possession is 99% of the LANDLORDS!

While tenants need some certainty, landlords need flexibility to deal with construction timetables, governmental approvals, permitting, weather delays and other variables. Both landlords and tenants have legitimate interests to protect in addressing delivery of possession.


A tenant incurs significant costs and expenses in preparing to accept delivery. Tenants order and schedule the delivery of materials for construction of leasehold improvements, goods and merchandise; commit key personnel for the build-out and store opening; hire employees in contemplation of construction and store operations, and place advertising many months before the grand opening. Failure of the landlord to meet its delivery obligations results in numerous costs and operational ramifications to the tenant. All of these issues compel a prudent tenant to protect itself by adequately addressing delivery of possession and remedies in the event of a landlord breach of its obligations with respect to delivery.


Most tenants would prefer either:


(i) immediate occupancy upon full execution of the
lease, or


(ii) a fixed delivery date that is agreed upon at lease
execution, with the landlord obligated to perform certain specified improvements to the leased premises consistent with plans and specifications approved by the parties.


The more likely scenario, though, is for there to be no fixed delivery date at lease execution. Additionally, while the parties may agree generally on the work to be performed by each party, frequently there are no detailed plans and specifications for either the landlord's work or the tenant's work at lease execution. However, all of these issues need to be adequately addressed in the lease.
Creating a delivery window

The parties should be able to agree on a delivery window, obligating the landlord to deliver the leased premises to the tenant with the landlord's work substantially completed. This window is frequently a period of several months, and if the leased premises are not yet constructed, may be one, two or more years from lease execution. A landlord should be obligated to give the tenant notice by a certain date, typically several months prior to the first day of the delivery window, advising the tenant of the status of the landlord's construction and the estimated date that the landlord will deliver the leased premises to the tenant with the landlord's work substantially complete. This estimated delivery date must fall within the delivery window specified by the parties in the lease.


If agreed to by the parties, the landlord could have the right to revise the estimated delivery date prior to a date certain, by which time the landlord shall give the tenant a firm delivery date upon which the landlord's work shall be substantially completed and the leased premises delivered to the tenant. Upon establishing this final delivery date, the landlord should have no further right to modify the delivery date.


Neither the estimated nor final delivery date should be earlier than


(i) 30 days after the date the tenant receives the
estimated delivery date or the final delivery date from the landlord, as applicable, or


(ii) the first day of the delivery window, as agreed to in
the lease.


Nor should the estimated or final delivery date be later than the last day of the delivery window, as established in the lease.


If the landlord fails to provide notice of the final delivery date on or before the earlier of the final delivery date and 30 days prior to the previously established estimated delivery date, or if the final delivery date established by the landlord does not otherwise comply with the requirements of the lease (e.g., the final delivery date falls outside of the agreed-upon delivery window), the estimated delivery date should be deemed to be the final delivery date. Additionally, if the landlord fails to provide an estimated delivery date on or before the date the estimated delivery date is to be established, or if such date does not comply with the requirements of the lease, then the estimated delivery date should automatically be deemed to be the first or the last day of the delivery window, as established by the parties in the lease.


Tenant remedies for late delivery


In the event the landlord's work is not substantially completed and the leased premises are not delivered to the tenant on or before the final delivery date, the tenant should be entitled to specific remedies on account thereof. Most landlords want to quantify their exposure for late delivery and failure to substantially complete the landlord's work. Typically, the tenant receives a credit against its rental obligations for each day after the final delivery date until delivery of the leased premises is made to the tenant consistent with the terms of the lease, including substantial completion of the landlord's work.


Many tenants ask for a credit against base rent equal to one (1) day of base rent for each day of delay; others can negotiate two (2) days'
credit for each day of delay. Some credits relate to all rent, and some only relate to base rent. A tenant is wise to provide that time is of the essence regarding all the delivery dates discussed above.


A landlord's provision that the landlord shall have no liability for failure to deliver or for late delivery is rarely appropriate.


Deferring delivery or lease termination


In many instances, a rent credit is an insufficient remedy for the tenant. Many tenants only open their stores during certain times of the year. To address the blackout periods, a tenant should have the right, if the delivery has not occurred by a date certain with the landlord's work substantially complete, to defer delivery until a specified date. Some tenants may insist on the right to terminate the lease if the landlord fails to meet its delivery obligations. Most frequently, the tenant will obtain the deferral right, but not the termination right, unless the landlord fails to deliver the leased premises to the tenant with the landlord's work substantially completed by the deferred delivery date. A landlord should provide that the rent credit would abate during this deferred delivery period in the event the tenant exercises such deferred delivery right. In addition, if the tenant exercises a termination right on account of the landlord's inability to deliver the leased premises by a certain date, the tenant should try to obtain a reimbursement obligation from the landlord for the tenant's out-of-pocket costs incurred in negotiating the lease and preparing to occupy the demised premises. If the landlord agrees to same, the landlord usually will cap its exposure to a tenant for these costs.


Force majeure


Most of the foregoing dates and remedies should be subject to force majeure. However, a prudent tenant will insist that there be some outside date by which the tenant has the right to terminate the lease, regardless of whether the landlord failed to meet such date on account of force majeure or otherwise. While the landlord's damages may be tolled by force majeure, at some point a tenant should have a termination right, regardless of force majeure. A landlord should be obligated to give notice to the tenant in the event of a force majeure event. A strong tenant will insist that the landlord's failure to notify the tenant of a force majeure event within a specific number of days after the force majeure event will nullify the landlord's right to claim a delay on account of force majeure.


Landlord and tenant work obligations


Delivery without the landlord's approval of plans and specifications for the tenant's work should be unacceptable to a tenant. If a tenant cannot commence its work, it does not want delivery of possession. While many leases describe generally the work to be performed by the parties, the lease should provide for the parties to agree upon plans and specifications for both parties' work obligations. Within a certain number of days after lease execution, each party should be obligated to deliver to the other plans and specifications for their proposed work. Each party should have an affirmative obligation to provide comments thereto within a specified number of days after receipt thereof, with specific comments and proposed modifications thereto. Typically each party should be obligated to revise its proposed plans to reflect the reasonable objections and proposed modifications of the other party within a specified time thereafter.


This process of reviewing and submitting should continue until the plans and specifications have been approved by both parties. Failure to respond within the specified time frame should be deemed approval by the party failing to respond to the plans as last submitted. The lease should further provide for the landlord to obtain all necessary building occupancy permits necessary to perform the landlord's work, and the lease should address who is obligated to obtain the necessary permits and approvals for the tenant to perform its work and open the leased premises for business to the public. The lease should also state the landlord's obligations with respect to completion of common area improvements, including parking areas, curb cuts, lighting and landscaping. Certain common areas should be identified on the site plan of the center, which areas must be completed in order for the tenant to open and operate for business in the leased premises.


Many tenants do not want the delivery date to be deemed to have occurred until the tenant has been able to obtain all necessary permits to perform tenant's work. This is a negotiable item, depending on the strength of the parties and the scope of the work to be performed by each party.
Joint walk throughs

The parties should provide in the lease that they shall conduct a joint walk-through of the leased premises approximately 2 to 3 weeks prior to the final delivery date to ascertain the status of the landlord's construction and to identify items that need to be performed prior to delivery.
Completion of construction


The lease should identify what items the landlord must complete and provide to the tenant prior to delivery of possession and/or prior to the tenant's opening for business, such as occupancy permits, governmental approvals, certificates of completion by the landlord's architect, copies of contractor, subcontractor and supplier warranties, operation and maintenance manuals, the landlord's record drawings for construction of the leased premises, utility contact information, utility meter information, a subcontractor list with contact information, etc. All of these items are negotiable and the landlord may or may not be willing to provide them, depending on the tenant's negotiating strength.
Many things need to happen in a timely manner for a tenant to obtain possession at the time contemplated by the parties upon lease execution.
Landlords and tenants should not leave these issues to chance. Properly addressing delivery windows, dates, updates and revisions to the timing and the work obligations of the parties well in advance of delivery can greatly facilitate a smooth and timely delivery of possession of the leased premises to the tenant with the landlord's work substantially complete. A prudent tenant will protect itself and guard against delays and the consequences thereof, while providing some reasonable flexibility to the landlord to address the realities of construction and permitting requirements, many of which are beyond the landlord's reasonable control. By addressing these issues in the lease, both parties can protect themselves and facilitate a good start to their lease relationship prior to delivery and well in advance of the rent commencement date." For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net

Wednesday, October 15, 2008

Escalation issues

1. Well-designed office key to improving employee performance
Workplace design has a very real impact on companies' bottom lines.



"Businesses are embracing performance-focused workplace design as a strategic business initiative – as the forum that can drive employee excellence, business objectives, and ultimately, the bottom line.


In practice, many businesses seem to ascribe a low value to workplace design. Businesses that ignore the design and layout of their workplace are failing to optimize the full value of their human capital.


46% of workers surveyed do not believe creating a productive workplace is a priority at their companies, and 40% say that minimizing costs is the main reason behind their workplace's current layout. 20% rated their physical workplace environment as being only fair to poor.


The survey, conducted by Gensler, also demonstrates a link between the physical office and work processes such as innovation, collaboration and creativity. Two-thirds of workers believe they are more efficient when they work closely with co-workers. However, about 30% of workers don't think that their current workspace promotes spontaneous interaction, collaboration, or cooperation and teamwork among colleagues and direct reports. Only 50% believe that their current workplace design encourages innovation and creativity.


Topping the list of employee grievances about physical environment were:


a. Lack of space;
b. Too few quiet areas;
c. Uncomfortable workstations; and
d. Bad layout and design


Other results from the study include:


· Over 1/3 of respondents say their current workplace does
not promote health and well being;


· 62% of U.S. office workers have great respect for leaders
who work in an open plan environment with teams rather than in private offices.


· Only 42% of respondents say they would be proud to show
important customers or potential recruits their current workplaces."

Messages in this topic (1)
________________________________________________________________________
________________________________________________________________________
2. Escalation issues
Except for very short-term leases, almost every commercial lease executed today contains a rent escalation clause.


from Probate & Property, July/August 2006


"The trend is for landlords to create a lease in which the tenant pays a fixed return to the landlord plus reimbursement of many capital and expense items, such as taxes, insurance, maintenance, and operations. In effect, this trend applies the concept of the net lease - which formerly applied only to the leases of a freestanding structure to a single tenant- to all commercial leases.


Rent Escalation Methods


Landlords and tenants might structure a rent escalation clause in several ways.


These methods include increasing the rent by


• A fixed amount each year,


• The percentage increase in either the consumer price index (CPI)
or another inflationary index, or


• The actual increase in the landlord's operating,
maintenance, and insurance expenses and real estate taxes.


Some standard leases use a combination of 2 or more of these methods.


The most common escalation clause passes through to the tenant any increase in operating expenses and real estate tax. Landlords choose this technique for good reason. Because it is the most frequently used escalation provision, most tenants will accept it, and, of the available escalation methods, it is the most accurate reflection of a landlord's increased operating costs, because its computation should create an increase exactly equal to those costs. Yet it is the most complex of the 3 escalators.


Some leases have the tenants pay a percentage share of the total operating expenses for the operating year, but the more typical clause requires payment by each tenant of its percentage share of the increase in costs for the operating year over a base amount. When the increase is over a base amount, setting that base is crucial to the tenant.




Problems with Definitions- Property


The most significant definitional problem with operating expenses for the tenant relates to the definition of the landlord's property to which the pass-through charges apply. Normally, the landlord's property should be defined as the office, warehouse, or shopping center building or complex of buildings, any adjoining parking garage that serves the building, the real estate on which these improvements are situated, and private streets and easements, all of which are owned by the landlord. In some instances, though, the adjoining private streets or easements accessing the building are jointly owned or shared with third parties. In those circumstances, street and easement expenses should be shared proportionately with the third party.


The tenant should receive a breakdown of the real estate - that is, property descriptions, rates, and value - as of the commencement date of the lease. The tenant should determine whether the building is assessed at its full value or at a lesser sum in the event that the building is not fully completed or fully occupied. If the building is not completed, and therefore is assessed at less than its full value, the tenant will be subject to an escalation, even though the tax rate did not change, simply because the building was not fully assessed. The concept also holds true for an adjoining parking garage. Also, if any improvements are added to the building or parking garage after the commencement date of the lease or if any adjacent property is acquired, taxes on those items should be disclosed.




Taxes


A final area of concern is the tenant's liability for taxes. For example, if the landlord contests taxes and obtains a reduction or a refund, the tenant should share the benefit as a future credit or, if the term is at its end, receive a refund instead. Some states permit a tenant to contest property taxes.


With some minor exceptions, assessments payable in installments should be determined on an accrual basis. Each taxing authority has its own timetable for the payment of real estate ad valorem taxes. The taxes may be determined on a fiscal or calendar year basis and may be payable quarterly, semiannually, or annually with a penalty for late payment.
The tax reimbursement clause should dovetail with this actual timetable."

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3. Landlord's consent to sublease
Whether a landlord's refusal to consent to a sublease to a bank was unreasonable when tenant was a grocery store and landlord had reserved a spot in the shopping center.


from Recent Developments and Trends in Shopping Center Law, 2008 U.S.
Shopping Center Law Conference


"Carr-Gottstein Foods Co. (Tenant) leased space in a shopping center to be used as a grocery store from Norville (Landlord). The lease provided that Tenant must obtain Landlord's written approval prior to subletting and that Landlord must not unreasonably withhold such consent.


Tenant requested Landlord consent to a sublease to a bank.


Landlord withheld consent by demanding 75% of the bank's rent.


Tenant sued Landlord, alleging that Landlord's withholding of consent was unreasonable and in violation of the lease. Tenant argued that Landlord could not withhold consent to a sublease to a bank because under the lease, Tenant was permitted to operate a bank in its store.


Landlord consented that banking was a permitted use under the lease.


The trial court granted summary judgment for Tenant.


Norville v. Carr-Gottstein Foods Co., 84 P.3d 996 (Alaska 2004)


Holding:


Reversed. The Supreme Court of Alaska held that material issues of fact remained as to whether Landlord's withholding of consent to the sublease was unreasonable. Tenant's argument that under the lease Landlord must consent to any sublease that was for a use that would be permitted the Tenant's Use Clause if conducted by Tenant was incorrect as a matter of law. Reasonableness was the only limitation specified regarding the right of the Landlord to withhold consent.


Furthermore, Landlord's proffered reasons for withholding consent – a bank would interfere with Landlord's plan to lease space in the shopping center to another bank, and gross sales, and therefore percentage rents, would be impaired – are legitimate reasonable not impermissible under the lease's terms.


Whether Landlord's reasons for withholding consent were genuine and reasonable under the circumstances were questions of fact to be determined by the tried of fact.


The court also ruled that material issues of fact remained as to whether Tenant's lease permitted general branch banking."

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4. Breathing new life into former big box properties
Flexibility and patience are key to re-tenanting vacant big box facilities.


from Shopping Center Business, November 2008


"Many of the big boxes, including pet stores, discount retailers, electronics and sporting goods retailers of the 1990s have disappeared, often dragging the rest of the shopping center down with them. But when these facilities close, they leave behind opportunities for profit in an interesting real estate market niche: the acquisition and leasing of vacant or partially leased former big box retail locations.


These opportunities are often overlooked by larger developers and owners. It takes a certain kind of investor with specific skills, resources and patience to take advantage of these value-added opportunities successfully.


Big box properties for sale nationwide


No single driver fuels the recent trend of big box properties closing their doors. Mergers and bankruptcies play a key role. In some areas, demographics and market dynamics change, prompting retailers to seek new locations. Retail stores may follow the pull away from historic business core areas to more promising locations. Some retailers may decide to leave a regional market altogether.


Transforming undervalued properties into profit centers


A key advantage of these properties is that existing buildings, with full entitlements, can be acquired at a much lower cost than it takes to build a new facility in today's market.


The greatest challenge is to determine what to do with the building.


The successful buyer must be willing to buy quickly without having to identify a replacement tenant before closing. Further complicating the process is problematic acquisition financing – conventional underwriting standards will usually frown on a vacant big box with its negative cash flow.


With the capability to hold on to and carry a vacant or partly leased property for as long as 18 to 24 months, a buyer can seek potential users and try to anticipate the ways in which the market will develop.


Finding the right use for a former big box store


The first prospects to look at are the retailers who are similar to the former tenants. After that, flexibility is the key.


A typical challenge of big boxes: their extreme depth. Because the majority of retailers do not want depth of 350 to 400 feet (not atypical), owners may simply wall off the back part of the building, tear it down, or find alternative uses for it, such as storage.


Community issues figure in big box property re-use


Vacant big box properties can become problematic for a community. Their visibility can create a perception that the area is not a good retail market. The absence of retail tenants interrupts sales tax revenues.
Facilities can also become eyesores, inviting vandalism and trash dumping.


Some communities can impose complicated or unrealistic requirements on buyers and redevelopers, who must match the desires of the local communities with what is most practical and the best solution for an old location.


Success and profitability in a range of different markets


Many of these vacant big box transactions are one-off deals, too small to interest larger investment companies who have no appetite for risk.
As a nimble, niche operator in smaller markets, with the ability to close transactions fast, a specialist firm can acquire distressed, vacant and even stigmatized properties from different sellers and revitalize them successfully in different ways. To find the best opportunities, the buyer must be looking for properties in several different secondary and tertiary markets that show promise. The important ingredient is the understanding that patience will be required for success in all of these types of acquisitions. That is where the opportunities lie."
For more information see http://www.houstonrealtyadvisors.com/ or http://www.houstonrealtyadvisors.net/

Tuesday, October 14, 2008

POST OAK SALE COLLAPSE

A deal to sell the Post Oak Central office complex is off.
Owners Crescent Real Estate Equities LLC, JP Morgan and General Electric Co. had a contract to sell the three buildings to Los Angeles-based CB Richard Ellis Investors, an affiliate of CB Richard Ellis Group Inc. with $43.7 billion in assets under management. But the buyer is not going through with the deal, sources say.
CBRE Investors was expected to pay about $240 million, or $185 per square foot, for the properties.
Located in the Galleria area, Post Oak Central consists of buildings at 1980, 1990 and 2000 Post Oak Blvd. The complex has just under 1.3 million square feet of office space that is about 92 percent leased.
CBRE Investors was one of nearly a dozen groups that bid on Post Oak Central, according to Holliday Fenoglio Fowler LP, which is marketing the buildings. For more information see www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com

Monday, October 13, 2008

99 Ranch Market hitches Asian post to Houston with first store in Texas

An established chain of Asian grocery stores from California has leased space in a hot corridor of Interstate 10 to open the company’s first Texas location.
The store, 99 Ranch Market, will set up shop in a vacant space formerly occupied by a different kind of international grocery store — Fiesta Mart, which closed at the end of last year. 99 Ranch Market will occupy the 84,000-square-foot former Fiesta space on the northwest corner of I-10 and Blalock in the Blalock Market Shopping Center.
99 Ranch Market, part of Buena Park, Calif.-based Tawa Supermarket Inc., leased the space from Houston-based Weingarten Realty Investors, which was represented by John Wise on the transaction.
The grocery store will offer a variety of Asian products and exotic Far Eastern food when it opens next summer. Products will include Asian delicacies, fresh meat, seafood and produce.
Founded in 1984, Tawa Supermarket has 25 full-service stores in California and Washington. The chain also has licensee stores in Nevada, Georgia and Indonesia.
Jennifer Tsao, a Tawa spokeswoman in California, says the Weingarten site was chosen for the entrance into Texas because it’s conveniently located on the freeway.
The store’s proximity to I-10, however, caused Weingarten to lose quite a bit of the parking lot due to the freeway expansion project several months ago, which is part of the reason Fiesta decided to close its store.
Suzanne Anderson, a regional leasing director with Weingarten, says the parking lot will be restriped to maximize the number of available parking spaces.
“We’re going to have to re-lay out the parking,” she says. “It’s still going to be under what the typical grocery store might have.”
The store itself will gain a new look, but the building will basically stay the same.
“We’re not anticipating major structural changes,” Anderson says. “None of the building is going to be torn down.”For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com

Thursday, October 9, 2008

FOXCONN SIGNS BIG LEASE

Macfarlan Capital Partners and Buchanan Street Partners have secured the first tenant for Centre at Cypress Creek after acquiring the big chunk of former Hewlett-Packard Co. property in July 2007 for redevelopment.
Foxconn Technology Group has leased 40,000 square feet of office space in the complex at the southwest corner of State Highway 249 and Compaq Center Drive.
The 44-acre Centre at Cypress Creek in northwest Houston is comprised of three interconnected, four-story office buildings and a two-story, 400,000-square-foot office building, each with a parking garage. The buildings, which date back to the early 1980s, include the former headquarters of Compaq Computer Corp., which was acquired in 2002 by HP.
John Jenkins, a partner with Macfarlan Capital Partners, says the owners are just now wrapping up the redevelopment project, which took about $25 million and more than a year to complete.
“It allows us to bring a high-end corporate campus feel into a multitenant environment,” Jenkins said.
Foxconn, which provides parts and services to computer, communication and consumer electronics clients, decided to lease space in Centre at Cypress Creek in part to be next door to HP.
“They decided to go up there to nuzzle up to one of their major clients,” said Brad Marnitz of NAI Houston, who handled the lease deal for Foxconn.
Foxconn currently has several hundred thousand square feet of industrial space with an office component in several buildings around S.H. 249 and Beltway 8. Marnitz said the company is moving office personnel out of the warehouses to make more room for manufacturing.
This is Foxconn’s first office lease in Houston, he said, and it’s a great location for the employees. The firm will start moving in this month and finish by the end of the year.
Michelle Wogan, Dani Allison and Jennifer Leroy of Transwestern represented the landlord on the lease. for more informaion see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com

Tuesday, October 7, 2008

Amerigroup Corp sign 156,000 sq ft lease

Amerigroup Corp. has signed a lease that will move the company from Bellaire to Greenway Plaza.
The company, which operates Medicaid and Medicare programs, recently leased about 26,500 square feet in the building at 3800 Buffalo Speedway — part of the Greenway Plaza office complex. One attraction was the building’s close proximity to U.S. Highway 59.
While Amerigroup is jumping from a 76,000-square-foot building at 6700 West Loop South to the 156,000-square-foot Buffalo Speedway building about four miles away, the company’s new office will be about the same size as the old one.
Ryan Bishop and Preston Young of Stream Realty Partners LP represented Greenway Plaza in lease negotiations. Keith Lloyd of Grubb & Ellis Co. represented Amerigroup. For more information see : www.houstonrealtyadviors.com or www.houstonrealtyadvisors.net

Monday, October 6, 2008

RiverBend takes a turn for expansionFirst mixed-use project in League City grows from $80 million to $208 million

Houston Business Journal - by Allison Wollam Reporter

Three years after announcing plans for the first mixed-use development in League City, Deerwood Development Group Inc. has finally received approval for the planned urban development of their waterfront project, which has grown from an $80 million venture to a $208 million undertaking.
League City’s Planning and Zoning Committee approved the new PUD last month, which increased the original density of the RiverBend on Clear Creek project.
Darell Schmidt, president of Colorado-based Deerwood, which will sell pieces of the project with entitlements and improvements to other developers, says since the original PUD was approved back in April 2006 the footprint has changed dramatically.
“Over the last two years, we did our homework, asked a lot of questions and conducted multiple market and engineering studies ...,” he says.
Original plans for RiverBend called for four restaurant sites, two 100-room hotels, a marina and retail sites. The community was also slated to include 10 office pads which could accommodate residential lofts above the office space, as well as a 12-acre site for residential development.
Now, the denser project calls for 320,000 square feet of commercial office and medical space; 50,000 square feet of retail; a 142-room hotel and convention center; 16,000 square feet of restaurant space; 750 multifamily residential units — to include apartments, townhomes, condominiums and lofts — above the retail/office space; and an 80-slip day marina for public and private use.
Deerwood was able to eliminate most of the property’s flood plain, thereby making the site more fully developable to allow for the expanded uses.
Schmidt says the RiverBend site, located on the south shore of Clear Creek directly off of Interstate 45 and FM 518, did not sustain any major damage from Hurricane Ike. Deerwood is currently bringing in 140,000 cubic yards — which is equivalent to 87 feet tall — of dirt to raise the site, based on Federal Emergency Management Agency requirements.
Daren Schmidt, Darell Schmidt’s son and director of development for Deerwood, recruited League City-based Texcor Construction Services Inc. to perform mass grading on the development. Texcor began grading work in July.
Around the bend
Schmidt says the primary objective for RiverBend from the start was to preserve the wetlands adjacent to the waterfront.
The revised RiverBend project calls for a walkable, open-air model that is organized around a public plaza. Nature trails surround the plaza and pass through the wetlands on the water’s edge and connect to the marina on a lagoon.
Tony Allender, director of planning and development for the City of League City, says RiverBend has the potential to offer a first-class destination at the front door of League City.
“RiverBend will serve as a great economic catalyst for the additional improvements we want to see in the city,” he says. “It adds significant value and strength to the surrounding retail and local market.”
Allender says Deerwood worked with his staff to come up with ideas to minimize the traffic impact from the project.
A recent traffic impact analysis outlined several planned improvements to the corridors surrounding the site by the Texas Department of Transportation, including the NASA Road bypass and the State Highway 96 interchange. In addition, a ramp reversal near FM 518 will be installed, as well as a third lane on the I-45 feeder roads.
Once completed, this road work is expected to improve the site’s ability to handle the existing and projected traffic, Schmidt says. He believes the increased value of the project and design of the new site plan will make RiverBend more attractive to users. for more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net