n overwhelming majority, 81% of retail loss prevention executives, indicate that their companies have been victims of organized retail crime. "Even more, 93%, say they're concerned about this rising phenomenon and see the problem as getting worse, not better.
The survey was unveiled during National Retail Federation's Loss Prevention Conference and Exhibit in Minneapolis. Organized retail crime is perpetrated by teams that steal goods in order to resell them into the stream of commerce, which distinguishes it from petty thievery and shoplifting. The Retail Industry Leaders Association estimates that such organized thievery costs retailers $34 billion a year, and, during the conference, some estimates were as high as
$37.4 billion.
A year ago, just 30% of the retail loss prevention executives in the poll saw organized retail crime as a significant or severe issue.
This year, the proportion reached 41%, and several retail companies discussed their own more organized approaches to combating it.
Safeway is among them. For years, Safeway convinced themselves that shrinkage was due primarily to a combination of bad inventory paperwork and employee theft, with shoplifting a minor factor.
Approximately a year ago, the company began cross-referencing its reports in order to determine not just dollar losses, but also obtain details on the items missing. As a result, it discovered that over a brief time it had lost $6 million worth of baby formula. A video taken by a Safeway security camera showed how skillfully organized crime teams work. One member of the criminal team, which Safeway's senior investigator, called a filler, picks designated products from the shelves and puts them into a container, which might be a false- bottomed purse or even a plastic garbage bag.
As the filler works, a spotter watches out for security, and often a cruiser keeps watch over the entire process. When the container is filled, the team whisks out the door into a waiting car. Often our stores don't even know they've been victimized until hours later.
Once away from the scene of the crime, organized retail criminals convert the stolen goods into cash through a fence or middleman who takes the merchandise to an illegitimate wholesaler, who processes it through a cleaning room before selling it to a sales agent. Cleaning usually eliminates store identification and replaces bar codes.
During the same process, the expiration date on medicines or baby formula may be extended.
Safeway investigators developed a foundation for combating organized theft. It is more complicated and time-consuming that just catching a crook. It relies on interaction with law enforcement and includes arresting fillers and using traditional crime-fighters' methods to get them to inform on and identify fences.
More than half, 59% of the loss prevention executives in the NRF poll said they had recovered merchandise or gift cards from a physical fence operator, and 67% said they had recovered such goods from eFencing (internet) operations. Due to the vastness and complexity of organized retail crime, a majority, 89%, feels there's a need for a national database to track activity. 75% say they either will or are likely to participate in such a system.
Federal legislation to support the development and maintenance of a nationwide database that helps retailers and law enforcement agencies work together to eliminate organized crime is making its way through Congress. Similar legislation is underway in at least five states.
The database, the Retail Loss Prevention Intelligence Network (RLPIN), along with other networking groups, has helped both retailers and law enforcement agencies nationwide fully understand just how multifaceted organized retail crime can be. Linking related incidents of retail crime makes it easier to build higher-penalty cases at the state and federal level.
At the same time, retail loss prevention departments are expanding to include specialists in organized retail crime and in government affairs. A government relations/loss prevention manager for Wal-Mart and an organized retail crime loss prevention investigator for Walgreens told how they are collaborating to draft legislation and to educate both retailers and legislators on the significance of organized retail crime and the need for coordinated combat practices.
By working together, they have, for example, helped legalize reverse stings in 3 states. A reverse sting allows law enforcement to sell recovered or new merchandise to known fences, thus reaching beyond the store floor to a higher level of the criminal endeavor.
One of the challenges retailers face is persuading law enforcement officials at local, state and federal levels that retailers are not asking them to deal with a shoplifter. The word shoplifting is misleading. It connotes petty theft and prevents law enforcement agents from seeing the more significant dangers of organized retail crime.
From loyal shoppers to retail executives, no one is immune from the consequences of organized retail crime. As more criminals become involved in organized theft rings, it could become increasingly violent and unpredictable. This higher level of thievery calls for greater coordination among law enforcement, legislators and retailers."
from GlobeSt.Retail, June 12, 2006
For more information see; www.houstonrealtyadvisors.net
Wednesday, February 28, 2007
New Life to Retail Leasing
The shopping center industry is undergoing a renaissance, and nowhere is its newfound vibrancy more evident than in the anchor store.
"As always, location is an operative factor in leasing anchors in open-air markets, but increasingly anchor leasing is also a function of the center's format.
Whether it is a lifestyle center, a town center, or a mixed-use venue, however, any center will benefit from a crossover anchor store such as Target that has successfully courted customers from all income brackets.
SuperTarget's new grocery offering rounds out the retailer's appeal for any developer, while still leaving room for a gourmet grocer such as Trader Joe's or Whole Foods.
Other large retailers that cater more to men are seeing their stock rise, such as Dick's and Bass Pro Outdoor Shops. Old-line anchors such as Macy's and JCPenny have altered their format, but are still viable anchors for any center.
Retailers are increasingly viewing markets as either underserved or growth markets, with the main differentiators being growth rate and proximity to shopping in the town center format. Mixed-use spaces are clearly the format of the future, as condos are being built at the hub of commercial spaces. At the mixed-use Village at Gulfstream Park, serving both Miami and Ft. Lauderdale, condos, houses, and retail will all center around the Gulfstream Park racing track, inviting the possibility of the sporting venue as anchor.
Despite all the changes in shopping-center leasing, it is still incumbent on developers to promote their centers and assure the success of new formats when courting anchor stores."
from Retail Traffic, May 2006 for more informationsee: www.houstonrealtyadvisors.net
or call Ed Ayres at 713 782-2060
"As always, location is an operative factor in leasing anchors in open-air markets, but increasingly anchor leasing is also a function of the center's format.
Whether it is a lifestyle center, a town center, or a mixed-use venue, however, any center will benefit from a crossover anchor store such as Target that has successfully courted customers from all income brackets.
SuperTarget's new grocery offering rounds out the retailer's appeal for any developer, while still leaving room for a gourmet grocer such as Trader Joe's or Whole Foods.
Other large retailers that cater more to men are seeing their stock rise, such as Dick's and Bass Pro Outdoor Shops. Old-line anchors such as Macy's and JCPenny have altered their format, but are still viable anchors for any center.
Retailers are increasingly viewing markets as either underserved or growth markets, with the main differentiators being growth rate and proximity to shopping in the town center format. Mixed-use spaces are clearly the format of the future, as condos are being built at the hub of commercial spaces. At the mixed-use Village at Gulfstream Park, serving both Miami and Ft. Lauderdale, condos, houses, and retail will all center around the Gulfstream Park racing track, inviting the possibility of the sporting venue as anchor.
Despite all the changes in shopping-center leasing, it is still incumbent on developers to promote their centers and assure the success of new formats when courting anchor stores."
from Retail Traffic, May 2006 for more informationsee: www.houstonrealtyadvisors.net
or call Ed Ayres at 713 782-2060
Tuesday, February 27, 2007
Tenant's obligation to "yield up" premises in good condition
Tenant's obligation to "yield up" premises in good condition does not apply to land outside leased buildings.
"IBM, as tenant, leased premises defined as 113,400 gross square feet in two buildings.
The lease separately defined the land on which the buildings were situated, with certain lease provisions applicable to the land.
Before execution of the lease, IBM had used the site for manufacturing purposes under other arrangements. An underground storage tank had leaked chemical waste, which IBM abated under an agreement with the landlord and the state environmental agency.
After the lease terminated, the landlord claimed that the lease obligated IBM to clean up the soil, bedrock, and groundwater to a higher quality, even though IBM was in full compliance with the earlier abatement agreement. The landlord pointed to a lease provision that called for the tenant, at lease termination, to remove its goods and effects [and] peaceably yield up to the Landlord the premises in good order and condition.
The trial court, allowing extrinsic evidence, held for the landlord, construing the lease as a whole to obligate IBM to yield up the land in good condition, free of all contamination. The appellate courts reversed, holding that the lease definition of premises was clear and unambiguous, and thus the yield up provision did not apply to the land. Whether this outcome is what the parties actually intended is impossible to say. Arguably the landlord should have lost for an alternative reason. Should not its participation in the abatement agreement estop it from subsequently claiming that the lease required abatement to a higher standard? The decision underscores the need for real estate lawyers to pay careful attention to the use of defined terms throughout documents that they draft and review. South Road Assocs., LLC v. IBM, 826 N.E.2d 806 (N.Y. 2005)."
from Probate & Property, March/April 2006
For more information see: www.houstonrealtyadvisors.net
713 782-2060 ask for Ed A. Ayres
"IBM, as tenant, leased premises defined as 113,400 gross square feet in two buildings.
The lease separately defined the land on which the buildings were situated, with certain lease provisions applicable to the land.
Before execution of the lease, IBM had used the site for manufacturing purposes under other arrangements. An underground storage tank had leaked chemical waste, which IBM abated under an agreement with the landlord and the state environmental agency.
After the lease terminated, the landlord claimed that the lease obligated IBM to clean up the soil, bedrock, and groundwater to a higher quality, even though IBM was in full compliance with the earlier abatement agreement. The landlord pointed to a lease provision that called for the tenant, at lease termination, to remove its goods and effects [and] peaceably yield up to the Landlord the premises in good order and condition.
The trial court, allowing extrinsic evidence, held for the landlord, construing the lease as a whole to obligate IBM to yield up the land in good condition, free of all contamination. The appellate courts reversed, holding that the lease definition of premises was clear and unambiguous, and thus the yield up provision did not apply to the land. Whether this outcome is what the parties actually intended is impossible to say. Arguably the landlord should have lost for an alternative reason. Should not its participation in the abatement agreement estop it from subsequently claiming that the lease required abatement to a higher standard? The decision underscores the need for real estate lawyers to pay careful attention to the use of defined terms throughout documents that they draft and review. South Road Assocs., LLC v. IBM, 826 N.E.2d 806 (N.Y. 2005)."
from Probate & Property, March/April 2006
For more information see: www.houstonrealtyadvisors.net
713 782-2060 ask for Ed A. Ayres
Monday, February 26, 2007
Future Trends for 2007 and Beyond
Future Trends and Plans, Acquisition/Disposition Strategies and Properties Under Contract
In this week's CoStar Lead Street, we identify the new hot investment market and why one investor thinks it should be Florida residential land. We also report that: Home Depot is studying options for its HD Supply chain and Applebees for its casual dining eateries; plus we identify the latest site selection decisions and properties to come under contract. Infrastructures the New "Hot" Investment Market The infrastructure investing market will quickly rival other real estate-related investment markets - such as CMBS, REITs, and private equity - in terms of market size, according to Ernst & Young. It's the "hot" alternative investing market right now and shows little sign of cooling. Plus, the capital requirements in this sector potentially dwarf those of other markets. the accounting firm says in their 2007 outlook. With hundreds of billions of dollars needing to be spent to bring existing infrastructure up to standard in the United States alone - and trillions needed globally - the immediate impact for the construction sector is evident. However, investors and commercial developers could see tremendous opportunities in the next 10 years. The need for improved roads, bridges, ports, airports, mass transit systems, water, and energy supply - will only fuel additional development opportunities for homebuilders and commercial developers. What's less clear is whether the construction sector has the capacity to handle the weight of work required. The huge spend likely to occur may push prices of labor and raw materials far higher. However, an emerging private-funding sector fueled by pension funds, major banks may provide some of the capital needed to enable public agencies and states to push ahead with ambitious infrastructure development plans. Be Among the First To Read Lead Street Nearly 2,500 people read CoStar Lead Street each week. If you want to be among the first to know when a new CoStar Lead Street is posted, e-mail me your name, title, company and e-mail address. You can reach me by clicking on the byline above or at mheschmeyer@costar.com Buying Land for Future Residential Recovery Cypress Creek Capital Inc., a real estate investment and advisory company, has formed a new subsidiary, Cypress Creek Capital Florida Land Investors LLC, to acquire land throughout the state that is at least 50 acres, raw or developed, entitled and non-entitled, said Jan David Reese and Steven Beauchamp, company principals. "The residential land bubble currently bursting in Florida is setting the stage for a significant drop in prices," said Reese. "The slow down and adjustment period expected over the next few years should produce opportunities for Cypress Creek Capital Florida Land Investors to control major land tracts to resell when the residential market recovers." Cypress Creek Capital also owns in excess of $100 million of office and retail properties in Florida in partnership with institutional and private investors. Home Depot Studies Options for HD Supply Operations The Home Depot has decided to evaluate strategic alternatives for its HD Supply business, including a possible sale, spin or initial public offering of the business. The company said there can be no assurance that any transaction will occur or, if one is undertaken, its terms or timing. The company has retained Lehman Brothers as its financial advisor to assist in this process. "Today's announcement is a continuation of the strategic review we did in November," said Frank Blake, chairman and CEO of The Home Depot. "We are undertaking this action today because of our desire to increase our focus on our retail business. With annual revenues of approximately $12 billion, HD Supply is a healthy, growing and vibrant business, and we are undertaking this evaluation to determine whether there are strategic alternatives with respect to HD Supply that would optimize shareholder value." HD Supply is the wholesale distribution business of The Home Depot, and has nearly 1,000 locations nationwide and in Canada, and employs more than 26,000 associates. Applebees Up for Sale? Applebee's International Inc. has formed a committee of independent directors to explore strategic alternatives for enhancing shareholder value. All strategic alternatives are being reviewed. "While acknowledging a difficult macro environment for casual dining, all of our company restaurant and support center associates, as well as our valuable franchise partners, are focused on improving the things that are within our control," said Dave Goebel, president and CEO of Applebee's. "Our long-term strategies are designed to make Applebee's more relevant to all of our guests with the goal of driving guest traffic and higher average unit volumes through existing restaurants, with less emphasis on new restaurant development. Our key strategic initiatives in 2007 include continued improvement of our food, evolution of our advertising, and a greater emphasis on communicating our value proposition to our guests." Applebee's, based in Overland Park, KS, develops, franchises and/or operates more than 1,940 Applebee's restaurants operating system-wide. New Site Selections GHX LLC will relocate to a larger office building, creating a campus-like environment for its world headquarters, in Louisville, CO. The move is expected to occur in August 2007. The company will move from approximately 47,000 square feet of space in the Westmoor Technology Park in Westminster to 80,000 square feet. In addition to building and hosting an Internet-based trading exchange, GHX has developed services that support and automate numerous supply chain processes for both provider and supplier organizations. In 2006, several acquisitions resulted in new products being added to the GHX suite of services, including sales force automation tools, business intelligence services, and contract and rebate management services for the pharmaceutical industry. From 2005 to 2006, GHX doubled in terms of full time employees and today employs approximately 530 people, with more than 200 based in Colorado. GHX will add another 45 new positions at its Colorado headquarters in 2007. Advance Auto Parts Inc. , an automotive aftermarket retailer plans to open a new distribution facility in Remington, IN. It will serve Advance's growing store base in the Midwest. The company expects that the facility to open in summer 2008, making it the ninth distribution center in the company's logistics network. The completed facility will be approximately 550,000 square feet. Once the building is complete, it will be outfitted with state-of-the-art material handling systems and equipment. The new distribution facility site is adjacent to Interstate 65, providing convenient access to Indianapolis and Chicago and points beyond. Norwood Co. in Allentown, PA, will be the developer. Norwood also developed Advance's last major Distribution Center project in the Lehigh Valley area of Pennsylvania. Cytec Industries Inc. completed the site selection for a carbon fiber expansion project with Greenville, SC, chosen as the location of the company's proposed new facility. Employing capital best practices, the project is in the assessment and engineering definition phase. Pending final approval, construction is expected to begin in 2008 with plant start-up scheduled for early 2010. The expansion would double Cytec's carbon fiber manufacturing capacity and provide additional capability to meet the demand for next-generation carbon fibers. Cytec's capital investment in the expansion, projected at approximately $150 million, is in addition to a modernization and recommissioning effort completed last year at the company's existing carbon fiber manufacturing site in Greenville, which increased Cytec's annual carbon fiber production capacity by 33% and added 60 new jobs. Cytec expects to add approximately 225 additional skilled and professional jobs when the expansion project is fully operational. Be Among the First To Read Lead Street Nearly 2,500 people read CoStar Lead Street each week. If you want to be among the first to know when a new CoStar Lead Street is posted, e-mail me your name, title, company and e-mail address. You can reach me by clicking on the byline above or at mheschmeyer@costar.com NPC Contracts for Pizza Huts in the Northwest NPC International Inc. signed an asset purchase agreement with Pizza Hut of Idaho Inc.; Rocky Mountain Pizza Huts Inc.; Northwest Restaurant Group Inc.; and Northern Idaho Pizza Huts Inc. to acquire 59 Pizza Hut units located primarily in Idaho and the Spokane Valley for $27.1 million. The 51 restaurants, six delivery/carryout units and two express units generated $46.7 million in sales during the 52 weeks ended December 2006. Forty of these stores are located throughout Idaho, four in eastern Oregon and 15 in Washington, primarily in the Spokane Valley. Forty-four of these locations will be leased from the sellers on certain agreed-upon terms and 15 locations will be leased from unrelated third parties. NPC expects the acquisition to close in mid-March 2007. Consummation of the transaction is subject to approval by Pizza Hut Inc. and other customary consents and approvals. "We are truly excited about this acquisition due in large part to the high-quality restaurant teams that operate in these markets and the opportunity for future organic growth in the high-growth markets of Idaho and the Spokane Valley," said Jim Schwartz, chairman and CEO of NPC International in Overland Park, KS. "In addition, this acquisition, when combined with the 26 stores we currently operate in Portland, OR, will provide us the critical mass to leverage our above store support infrastructure and a beachhead for additional growth through acquisition in the rapidly growing mountain states." NPC International Inc. is the world's largest Pizza Hut franchisee and operates 815 Pizza Hut restaurants and delivery/carryout units in 23 states. Also Under Contract Broadway Real Estate Partners is buying the controlling interest in the 1.7 million-square-foot office tower at 450 W. 33rd St. for about $664 million, or $380.14 per square foot. The property is being sold by a venture that includes The Chetrit Group LLC and Arbor Realty Trust Inc. The investor group plans to keep a 2% interest in the property, as well as 50% of the property's 800,000 square feet of air rights. Douglas Harmon of Eastdil Secured brokered the deal. The 16-story property between Ninth and Tenth avenues was built in 1969. It is fully leased. Tenants include a host of media companies, such as New York Daily News, The Associated Press, U.S. News & World Report LP and Thirteen/WNET New York. Other tenants include J.P. Morgan Chase & Co., Financial Information Services Agency and New York & Co. Inc., according to CoStar Group information. A Grubb & Ellis subsidiary company, GERA Property Acquisition LLC, entered into a contract to purchase a Class A office building at 6400 Shafer Court in Rosemont for $21.45 million. The seller is F/B 6400 Shafer Ct. (Rosemont) LLC, a shell company of Foresite Realty Partners. Foresite Realty Partners' current headquarters is at 6400 Shafer Court. The approximately 176,000-square-foot building is currently 55% vacant, with its largest tenant being Kanbay International, which currently occupies approximately 21% of the building. The deal is expected to close Feb. 28. Dividend Capital Total Realty Trust Inc. deposited a non-refundable amount of $500,000 into an escrow account in connection with an intended acquisition of the Shackleford Office Center in Little Rock, AR. Shackleford Office Center built in 2001 is under contract for $21.32 million. It contains 101,977 square feet and is 100% occupied by the Federal Bureau of Investigation. The deal is expected to close this week. Columbia Equity Trust agreed to purchase 10201 Lee Highway in Fairfax, VA. A consortium of investors, involving Gatewood Plaza LP, Suburban Hill Joint Venture, Lisa Wassermann Gill and Carolyn Stopack Kaplan, currently own the 87,816- square-foot office property. Columbia Equity agreed to pay $17.05 million, or about $194 per square foot, and committed to a non-refundable deposit of $500,000. Closing is expected within 30 to 90 days. The 21-year-old Gateway Plaza building is currently 95% occupied. It sits on just less than 3 acres near the I-66/Route 123 interchange. Equity Inns Inc. agreed to purchase a 140-room Marriott Courtyard in the western Chicago suburb of Elmhurst from a partnership controlled by First Hospitality Group for $13.9 million, or $98,000 per key. Exclusive of the estimated market value of an adjoining outparcel which is included in the purchase price, the total purchase price equates to an average cap rate of approximately 9.5%, based upon expected net operating income for the year-end 2006. The hotel recently completed a $2 million dollar renovation and is not expected to require any significant additional capital investment. Supertel LP agreed to purchase six hotels from Budget Motels Inc. and Waterloo Hospitality Inc. for $38.6 million. The hotels are located in: Alexandria, VA (a Comfort Inn and a Days Inn); Fredericksburg, VA (two Days Inn); Bossier City, LA (Days Inn); and Shreveport, La (Days Inn). The closing date for four of the hotels is March 30, with the remaining two scheduled for July 31. Costar research department February 2007. Call or eamil ed www.houstonrealtyadvisors.net
In this week's CoStar Lead Street, we identify the new hot investment market and why one investor thinks it should be Florida residential land. We also report that: Home Depot is studying options for its HD Supply chain and Applebees for its casual dining eateries; plus we identify the latest site selection decisions and properties to come under contract. Infrastructures the New "Hot" Investment Market The infrastructure investing market will quickly rival other real estate-related investment markets - such as CMBS, REITs, and private equity - in terms of market size, according to Ernst & Young. It's the "hot" alternative investing market right now and shows little sign of cooling. Plus, the capital requirements in this sector potentially dwarf those of other markets. the accounting firm says in their 2007 outlook. With hundreds of billions of dollars needing to be spent to bring existing infrastructure up to standard in the United States alone - and trillions needed globally - the immediate impact for the construction sector is evident. However, investors and commercial developers could see tremendous opportunities in the next 10 years. The need for improved roads, bridges, ports, airports, mass transit systems, water, and energy supply - will only fuel additional development opportunities for homebuilders and commercial developers. What's less clear is whether the construction sector has the capacity to handle the weight of work required. The huge spend likely to occur may push prices of labor and raw materials far higher. However, an emerging private-funding sector fueled by pension funds, major banks may provide some of the capital needed to enable public agencies and states to push ahead with ambitious infrastructure development plans. Be Among the First To Read Lead Street Nearly 2,500 people read CoStar Lead Street each week. If you want to be among the first to know when a new CoStar Lead Street is posted, e-mail me your name, title, company and e-mail address. You can reach me by clicking on the byline above or at mheschmeyer@costar.com Buying Land for Future Residential Recovery Cypress Creek Capital Inc., a real estate investment and advisory company, has formed a new subsidiary, Cypress Creek Capital Florida Land Investors LLC, to acquire land throughout the state that is at least 50 acres, raw or developed, entitled and non-entitled, said Jan David Reese and Steven Beauchamp, company principals. "The residential land bubble currently bursting in Florida is setting the stage for a significant drop in prices," said Reese. "The slow down and adjustment period expected over the next few years should produce opportunities for Cypress Creek Capital Florida Land Investors to control major land tracts to resell when the residential market recovers." Cypress Creek Capital also owns in excess of $100 million of office and retail properties in Florida in partnership with institutional and private investors. Home Depot Studies Options for HD Supply Operations The Home Depot has decided to evaluate strategic alternatives for its HD Supply business, including a possible sale, spin or initial public offering of the business. The company said there can be no assurance that any transaction will occur or, if one is undertaken, its terms or timing. The company has retained Lehman Brothers as its financial advisor to assist in this process. "Today's announcement is a continuation of the strategic review we did in November," said Frank Blake, chairman and CEO of The Home Depot. "We are undertaking this action today because of our desire to increase our focus on our retail business. With annual revenues of approximately $12 billion, HD Supply is a healthy, growing and vibrant business, and we are undertaking this evaluation to determine whether there are strategic alternatives with respect to HD Supply that would optimize shareholder value." HD Supply is the wholesale distribution business of The Home Depot, and has nearly 1,000 locations nationwide and in Canada, and employs more than 26,000 associates. Applebees Up for Sale? Applebee's International Inc. has formed a committee of independent directors to explore strategic alternatives for enhancing shareholder value. All strategic alternatives are being reviewed. "While acknowledging a difficult macro environment for casual dining, all of our company restaurant and support center associates, as well as our valuable franchise partners, are focused on improving the things that are within our control," said Dave Goebel, president and CEO of Applebee's. "Our long-term strategies are designed to make Applebee's more relevant to all of our guests with the goal of driving guest traffic and higher average unit volumes through existing restaurants, with less emphasis on new restaurant development. Our key strategic initiatives in 2007 include continued improvement of our food, evolution of our advertising, and a greater emphasis on communicating our value proposition to our guests." Applebee's, based in Overland Park, KS, develops, franchises and/or operates more than 1,940 Applebee's restaurants operating system-wide. New Site Selections GHX LLC will relocate to a larger office building, creating a campus-like environment for its world headquarters, in Louisville, CO. The move is expected to occur in August 2007. The company will move from approximately 47,000 square feet of space in the Westmoor Technology Park in Westminster to 80,000 square feet. In addition to building and hosting an Internet-based trading exchange, GHX has developed services that support and automate numerous supply chain processes for both provider and supplier organizations. In 2006, several acquisitions resulted in new products being added to the GHX suite of services, including sales force automation tools, business intelligence services, and contract and rebate management services for the pharmaceutical industry. From 2005 to 2006, GHX doubled in terms of full time employees and today employs approximately 530 people, with more than 200 based in Colorado. GHX will add another 45 new positions at its Colorado headquarters in 2007. Advance Auto Parts Inc. , an automotive aftermarket retailer plans to open a new distribution facility in Remington, IN. It will serve Advance's growing store base in the Midwest. The company expects that the facility to open in summer 2008, making it the ninth distribution center in the company's logistics network. The completed facility will be approximately 550,000 square feet. Once the building is complete, it will be outfitted with state-of-the-art material handling systems and equipment. The new distribution facility site is adjacent to Interstate 65, providing convenient access to Indianapolis and Chicago and points beyond. Norwood Co. in Allentown, PA, will be the developer. Norwood also developed Advance's last major Distribution Center project in the Lehigh Valley area of Pennsylvania. Cytec Industries Inc. completed the site selection for a carbon fiber expansion project with Greenville, SC, chosen as the location of the company's proposed new facility. Employing capital best practices, the project is in the assessment and engineering definition phase. Pending final approval, construction is expected to begin in 2008 with plant start-up scheduled for early 2010. The expansion would double Cytec's carbon fiber manufacturing capacity and provide additional capability to meet the demand for next-generation carbon fibers. Cytec's capital investment in the expansion, projected at approximately $150 million, is in addition to a modernization and recommissioning effort completed last year at the company's existing carbon fiber manufacturing site in Greenville, which increased Cytec's annual carbon fiber production capacity by 33% and added 60 new jobs. Cytec expects to add approximately 225 additional skilled and professional jobs when the expansion project is fully operational. Be Among the First To Read Lead Street Nearly 2,500 people read CoStar Lead Street each week. If you want to be among the first to know when a new CoStar Lead Street is posted, e-mail me your name, title, company and e-mail address. You can reach me by clicking on the byline above or at mheschmeyer@costar.com NPC Contracts for Pizza Huts in the Northwest NPC International Inc. signed an asset purchase agreement with Pizza Hut of Idaho Inc.; Rocky Mountain Pizza Huts Inc.; Northwest Restaurant Group Inc.; and Northern Idaho Pizza Huts Inc. to acquire 59 Pizza Hut units located primarily in Idaho and the Spokane Valley for $27.1 million. The 51 restaurants, six delivery/carryout units and two express units generated $46.7 million in sales during the 52 weeks ended December 2006. Forty of these stores are located throughout Idaho, four in eastern Oregon and 15 in Washington, primarily in the Spokane Valley. Forty-four of these locations will be leased from the sellers on certain agreed-upon terms and 15 locations will be leased from unrelated third parties. NPC expects the acquisition to close in mid-March 2007. Consummation of the transaction is subject to approval by Pizza Hut Inc. and other customary consents and approvals. "We are truly excited about this acquisition due in large part to the high-quality restaurant teams that operate in these markets and the opportunity for future organic growth in the high-growth markets of Idaho and the Spokane Valley," said Jim Schwartz, chairman and CEO of NPC International in Overland Park, KS. "In addition, this acquisition, when combined with the 26 stores we currently operate in Portland, OR, will provide us the critical mass to leverage our above store support infrastructure and a beachhead for additional growth through acquisition in the rapidly growing mountain states." NPC International Inc. is the world's largest Pizza Hut franchisee and operates 815 Pizza Hut restaurants and delivery/carryout units in 23 states. Also Under Contract Broadway Real Estate Partners is buying the controlling interest in the 1.7 million-square-foot office tower at 450 W. 33rd St. for about $664 million, or $380.14 per square foot. The property is being sold by a venture that includes The Chetrit Group LLC and Arbor Realty Trust Inc. The investor group plans to keep a 2% interest in the property, as well as 50% of the property's 800,000 square feet of air rights. Douglas Harmon of Eastdil Secured brokered the deal. The 16-story property between Ninth and Tenth avenues was built in 1969. It is fully leased. Tenants include a host of media companies, such as New York Daily News, The Associated Press, U.S. News & World Report LP and Thirteen/WNET New York. Other tenants include J.P. Morgan Chase & Co., Financial Information Services Agency and New York & Co. Inc., according to CoStar Group information. A Grubb & Ellis subsidiary company, GERA Property Acquisition LLC, entered into a contract to purchase a Class A office building at 6400 Shafer Court in Rosemont for $21.45 million. The seller is F/B 6400 Shafer Ct. (Rosemont) LLC, a shell company of Foresite Realty Partners. Foresite Realty Partners' current headquarters is at 6400 Shafer Court. The approximately 176,000-square-foot building is currently 55% vacant, with its largest tenant being Kanbay International, which currently occupies approximately 21% of the building. The deal is expected to close Feb. 28. Dividend Capital Total Realty Trust Inc. deposited a non-refundable amount of $500,000 into an escrow account in connection with an intended acquisition of the Shackleford Office Center in Little Rock, AR. Shackleford Office Center built in 2001 is under contract for $21.32 million. It contains 101,977 square feet and is 100% occupied by the Federal Bureau of Investigation. The deal is expected to close this week. Columbia Equity Trust agreed to purchase 10201 Lee Highway in Fairfax, VA. A consortium of investors, involving Gatewood Plaza LP, Suburban Hill Joint Venture, Lisa Wassermann Gill and Carolyn Stopack Kaplan, currently own the 87,816- square-foot office property. Columbia Equity agreed to pay $17.05 million, or about $194 per square foot, and committed to a non-refundable deposit of $500,000. Closing is expected within 30 to 90 days. The 21-year-old Gateway Plaza building is currently 95% occupied. It sits on just less than 3 acres near the I-66/Route 123 interchange. Equity Inns Inc. agreed to purchase a 140-room Marriott Courtyard in the western Chicago suburb of Elmhurst from a partnership controlled by First Hospitality Group for $13.9 million, or $98,000 per key. Exclusive of the estimated market value of an adjoining outparcel which is included in the purchase price, the total purchase price equates to an average cap rate of approximately 9.5%, based upon expected net operating income for the year-end 2006. The hotel recently completed a $2 million dollar renovation and is not expected to require any significant additional capital investment. Supertel LP agreed to purchase six hotels from Budget Motels Inc. and Waterloo Hospitality Inc. for $38.6 million. The hotels are located in: Alexandria, VA (a Comfort Inn and a Days Inn); Fredericksburg, VA (two Days Inn); Bossier City, LA (Days Inn); and Shreveport, La (Days Inn). The closing date for four of the hotels is March 30, with the remaining two scheduled for July 31. Costar research department February 2007. Call or eamil ed www.houstonrealtyadvisors.net
COSTAR REPORT 2/26/07
Brookfield Flips Former JPMorgan Bldgs. to Crystal River
Two-Bldg. Portfolio in Phoenix & Houston Trades for $234 MillionBrookfield Asset Management (NYSE: BAM) is selling two fully leased office buildings in Houston and Phoenix to Crystal River Capital (NYSE: CRZ) in a deal valued at about $234 million. The 1.2 million-square-foot transaction includes the 750,000-square-foot Chase Tower -- Arizona's tallest building -- at 201 N. Central Ave. in downtown Phoenix, and the 412,500-square-foot North American Technology Center at 1111 Fannin St. in downtown Houston. JPMorgan Chase anchors both buildings under 15-year, triple net leases. Toronto-based Brookfield, which teamed with Blackstone Group to acquire Trizec Properties and Trizec Canada last year for $8.9 billion, acquired the two buildings last fall on behalf of Brookfield Real Estate Opportunity Fund in a 33-property, $460 million portfolio acquisition from JPMorgan Chase. That deal also included Chicago's landmark 300 S. Riverside Plaza office building and Milwaukee's 472,500-square-foot Chase Tower. "These are high-quality acquisitions that we believe will be immediately accretive to our stockholders and reflect the benefit of our association with Brookfield's operating platforms," said Clifford Lai, president and CEO of Crystal River. The New York-based REIT is externally managed and advised by affiliates of Brookfield Asset Management. Crystal River also announced it purchased a $28.5 million investment in BREF One LLC, a real estate finance fund sponsored by Brookfield Asset Management. For more information see www.houstonrealtyadvisors.net
Two-Bldg. Portfolio in Phoenix & Houston Trades for $234 MillionBrookfield Asset Management (NYSE: BAM) is selling two fully leased office buildings in Houston and Phoenix to Crystal River Capital (NYSE: CRZ) in a deal valued at about $234 million. The 1.2 million-square-foot transaction includes the 750,000-square-foot Chase Tower -- Arizona's tallest building -- at 201 N. Central Ave. in downtown Phoenix, and the 412,500-square-foot North American Technology Center at 1111 Fannin St. in downtown Houston. JPMorgan Chase anchors both buildings under 15-year, triple net leases. Toronto-based Brookfield, which teamed with Blackstone Group to acquire Trizec Properties and Trizec Canada last year for $8.9 billion, acquired the two buildings last fall on behalf of Brookfield Real Estate Opportunity Fund in a 33-property, $460 million portfolio acquisition from JPMorgan Chase. That deal also included Chicago's landmark 300 S. Riverside Plaza office building and Milwaukee's 472,500-square-foot Chase Tower. "These are high-quality acquisitions that we believe will be immediately accretive to our stockholders and reflect the benefit of our association with Brookfield's operating platforms," said Clifford Lai, president and CEO of Crystal River. The New York-based REIT is externally managed and advised by affiliates of Brookfield Asset Management. Crystal River also announced it purchased a $28.5 million investment in BREF One LLC, a real estate finance fund sponsored by Brookfield Asset Management. For more information see www.houstonrealtyadvisors.net
The SIOR Commercial Real Estate Index
The SIOR Commercial Real Estate Index showed modest improvement with an increase of 0.30 points over February's index as reported in the May 2006 release from the Society of Industrial and Office Realtors.
from SIOR.com
"The national industrial and office property market index advanced to 119.70, compared with 119.40 in February 2006 and 115.75 in November 2005. This is good news for owners of industrial and office property. An Index Value of 100 reflects well-balanced commercial real estate conditions. Values greater than 100 represent strong market conditions favoring existing owners, as landlords and as sellers of properties. Values below 100 indicate favorable negotiating conditions for tenants and for those looking to acquire real estate.
The SIOR index, compiled from survey responses from more than 300 SIOR Industrial and Office Real Estate Brokers in late April/early May, is a diffusion index, calculated by methods similar to the Index of Leading Indicators, the Consumer Confidence Index, and the Purchasing Managers Index.
Industrial properties such as warehouses and distribution centers are further along than office in their cyclical recovery. The industrial subindex registered 122.24 in the Second Quarter, up modestly from its 121.69 score in the First Quarter. Industrials achieved very strong scores in improving occupancy and in the virtual disappearance of subleasing activity as a drag on market performance. In addition, rental rates have risen materially in two-thirds of the nation's industrial markets, compared to one year ago. Tenants find sufficient bargaining strength to extract leasing concessions in just 30% of the markets responding. Development is reaching nearly normal levels, and owners of prime land see strong acquisition demand.
Economic trends, however, are the subject of some concern as questions about the effect of both local and national economic conditions on industrial market trends returned lower scores than in the previous quarter.
The Office subindex rose 1.96 points since February, and now stands at 117.41. The Office Market is experiencing broad-based rental rate increases, driven by occupancy gains reported by just over 70% of the survey panel. Investment pricing is strong – at or above replacement cost as indicated by 79% of the respondents. Development is still lagging, however, and this presages further improvement in vacancy rates for the year ahead. Subleasing has minimal impact on offices right now, but tenants still have some bargaining power to negotiate lease concessions in about half the markets covered. In trying to capture this opportunity while it lasts, tenants have brought leasing activity to normal or higher-than-normal levels reported by the survey panelists.
Regionally, the West remains at the top of the list of market areas, with a subindex score of 136.07. Respondents from this region cite the pressure of their thriving economy on commercial real estate markets. Rental rates are rising rapidly, as demand for space is outstripping new supply. Development has not yet returned to its normal level, though builders are avidly searching for new commercially zoned land. The super-heated housing market of recent years has diverted many potential commercial locations into residential use. With the exception of development, the West scores the highest of all regions on the full range of variables covered in the SIOR survey.
The South scored 123.35, evincing considerable strength. Parts of the region are still adapting to the changes wrought by the hurricanes of 2005. Louisiana and Mississippi are dealing with population dislocations and the rebuilding of businesses. But markets with close ties to the energy industry are seeing tremendous commercial space demand. While the South does not match the West's extreme high scores for many of the index components, it does well throughout the entire list of variables. It is the region that is getting closest to its historical average in commercial development, and is virtually at the normal score in terms of the balance of negotiating power between landlords and tenants. However, the sprawling markets typical of this region have received less benefit in investment price than the other three geographic divisions.
Scarcity is beginning to drive market behaviors in the Northeast, which registered a regional score of 114.78 in the May survey. It is a sellers' market for commercial development land, even though builders are not yet rushing to market with speculative projects. As in the South, landlord/tenant bargaining power is showing good balance. Rental and vacancy trends, and subleasing conditions, all post positive responses in the Northeast tallies. Financial industry and government growth, as well as globalization in all its manifestations, have been the demand catalysts in this region.
However, respondents do note that investment pricing is still out ahead of rent and occupancy improvements, as capitalization rates remain very low. The relatively high costs here may account for a comparatively low pace of overall leasing activity, as several respondents see more lookers than takers of commercial space.
The troubled automobile industry and its network of supplier and services firms have been the long-time economic engine of the Midwest. This economic base cannot support much new commercial real estate demand at present, and this is at the root of the region's sub- par score of 97.11 in the May survey. While some improvement in conventional measures such as asking rents and overall occupancy can be seen in the numbers, leasing activity here is by far the weakest of any region, and 77% of the respondents identify the tenants as holding the dominant position at the bargaining table. Tellingly, the Midwest is the only region where the impact of the local economy is rated as hurting rather than helping the real estate markets.
Methodology
The SIOR Commercial Real Estate Index is constructed as a diffusion index, a very common and familiar indexing technique for economic measures. Other examples of diffusion indexes include the Index of Leading Economic Indicators, the Consumer Confidence Index, and the Institute of Supply Management's Purchasing Managers' Index. In the SIOR Commercial Real Estate Index, a value of 100 represents a well- balanced market for industrial and office property. Values significantly lower than 100 indicate weak market conditions; values significantly higher than 100 measure strong market conditions. The theoretical limits of this Index are a low of zero, and a high of 200, though it is unlikely that such limits would be approached as long as the property markets are operating efficiently.
The Index is based on a survey questionnaire with ten topics. The topics covered are
(1) recent leasing activity;
(2) trends in asking rents;
(3) trends in vacancy rates;
(4) subleasing conditions;
(5) levels of concession packages in leases;
(6) development activity;
(7) site acquisition activity;
(8) investment pricing levels;
(9) the impact of the local economy on the property market; and,
(10) the effect of the national economy on the property market."
For more information see www.houstonrealtyadvisors.net
from SIOR.com
"The national industrial and office property market index advanced to 119.70, compared with 119.40 in February 2006 and 115.75 in November 2005. This is good news for owners of industrial and office property. An Index Value of 100 reflects well-balanced commercial real estate conditions. Values greater than 100 represent strong market conditions favoring existing owners, as landlords and as sellers of properties. Values below 100 indicate favorable negotiating conditions for tenants and for those looking to acquire real estate.
The SIOR index, compiled from survey responses from more than 300 SIOR Industrial and Office Real Estate Brokers in late April/early May, is a diffusion index, calculated by methods similar to the Index of Leading Indicators, the Consumer Confidence Index, and the Purchasing Managers Index.
Industrial properties such as warehouses and distribution centers are further along than office in their cyclical recovery. The industrial subindex registered 122.24 in the Second Quarter, up modestly from its 121.69 score in the First Quarter. Industrials achieved very strong scores in improving occupancy and in the virtual disappearance of subleasing activity as a drag on market performance. In addition, rental rates have risen materially in two-thirds of the nation's industrial markets, compared to one year ago. Tenants find sufficient bargaining strength to extract leasing concessions in just 30% of the markets responding. Development is reaching nearly normal levels, and owners of prime land see strong acquisition demand.
Economic trends, however, are the subject of some concern as questions about the effect of both local and national economic conditions on industrial market trends returned lower scores than in the previous quarter.
The Office subindex rose 1.96 points since February, and now stands at 117.41. The Office Market is experiencing broad-based rental rate increases, driven by occupancy gains reported by just over 70% of the survey panel. Investment pricing is strong – at or above replacement cost as indicated by 79% of the respondents. Development is still lagging, however, and this presages further improvement in vacancy rates for the year ahead. Subleasing has minimal impact on offices right now, but tenants still have some bargaining power to negotiate lease concessions in about half the markets covered. In trying to capture this opportunity while it lasts, tenants have brought leasing activity to normal or higher-than-normal levels reported by the survey panelists.
Regionally, the West remains at the top of the list of market areas, with a subindex score of 136.07. Respondents from this region cite the pressure of their thriving economy on commercial real estate markets. Rental rates are rising rapidly, as demand for space is outstripping new supply. Development has not yet returned to its normal level, though builders are avidly searching for new commercially zoned land. The super-heated housing market of recent years has diverted many potential commercial locations into residential use. With the exception of development, the West scores the highest of all regions on the full range of variables covered in the SIOR survey.
The South scored 123.35, evincing considerable strength. Parts of the region are still adapting to the changes wrought by the hurricanes of 2005. Louisiana and Mississippi are dealing with population dislocations and the rebuilding of businesses. But markets with close ties to the energy industry are seeing tremendous commercial space demand. While the South does not match the West's extreme high scores for many of the index components, it does well throughout the entire list of variables. It is the region that is getting closest to its historical average in commercial development, and is virtually at the normal score in terms of the balance of negotiating power between landlords and tenants. However, the sprawling markets typical of this region have received less benefit in investment price than the other three geographic divisions.
Scarcity is beginning to drive market behaviors in the Northeast, which registered a regional score of 114.78 in the May survey. It is a sellers' market for commercial development land, even though builders are not yet rushing to market with speculative projects. As in the South, landlord/tenant bargaining power is showing good balance. Rental and vacancy trends, and subleasing conditions, all post positive responses in the Northeast tallies. Financial industry and government growth, as well as globalization in all its manifestations, have been the demand catalysts in this region.
However, respondents do note that investment pricing is still out ahead of rent and occupancy improvements, as capitalization rates remain very low. The relatively high costs here may account for a comparatively low pace of overall leasing activity, as several respondents see more lookers than takers of commercial space.
The troubled automobile industry and its network of supplier and services firms have been the long-time economic engine of the Midwest. This economic base cannot support much new commercial real estate demand at present, and this is at the root of the region's sub- par score of 97.11 in the May survey. While some improvement in conventional measures such as asking rents and overall occupancy can be seen in the numbers, leasing activity here is by far the weakest of any region, and 77% of the respondents identify the tenants as holding the dominant position at the bargaining table. Tellingly, the Midwest is the only region where the impact of the local economy is rated as hurting rather than helping the real estate markets.
Methodology
The SIOR Commercial Real Estate Index is constructed as a diffusion index, a very common and familiar indexing technique for economic measures. Other examples of diffusion indexes include the Index of Leading Economic Indicators, the Consumer Confidence Index, and the Institute of Supply Management's Purchasing Managers' Index. In the SIOR Commercial Real Estate Index, a value of 100 represents a well- balanced market for industrial and office property. Values significantly lower than 100 indicate weak market conditions; values significantly higher than 100 measure strong market conditions. The theoretical limits of this Index are a low of zero, and a high of 200, though it is unlikely that such limits would be approached as long as the property markets are operating efficiently.
The Index is based on a survey questionnaire with ten topics. The topics covered are
(1) recent leasing activity;
(2) trends in asking rents;
(3) trends in vacancy rates;
(4) subleasing conditions;
(5) levels of concession packages in leases;
(6) development activity;
(7) site acquisition activity;
(8) investment pricing levels;
(9) the impact of the local economy on the property market; and,
(10) the effect of the national economy on the property market."
For more information see www.houstonrealtyadvisors.net
Saturday, February 24, 2007
Landlord’s Refusal to Consent to Tenant’s Assignment
"A health-care provider leased space in a shopping center near a hospital campus. The lease restricted use of the premises for outpatient surgical procedures and general medical and physician's offices, including related uses and for other purposes reasonably acceptable to Landlord, and allowed the tenant to assign the lease with the landlord's consent, providing that such consent shall not be unreasonably withheld.
Two years later the hospital bought the shopping center, subject to the leases, as a strategic purchase with future hospital expansion in mind. Shortly, the tenant closed and sought to assign the lease to an entity planning to open an occupational medicine clinic, which was to provide medical services to employees of corporate clients, rather than to the general public. The hospital, as new landlord, refused to approve the assignment because the assignee would be competing with the hospital.
The district court held that the landlord acted reasonably, because the assignee's use would provide greater competition with the hospital than the original tenant's use. The court of appeals reversed, holding that the assignee's use was within the scope of the use clause's reference to general medical and physician's offices, including related uses. It considered the landlord's refusal of consent unreasonable for two reasons:
1) First, increased competition with the landlord's business is wholly personal to the landlord and does not relate in any way to an objective evaluation of the proposed assignee as a tenant.
2) Second, reasonableness must be evaluated based on the parties'
expectations as of the inception of the lease, at which time the original landlord was not a competitor in providing medical services. This is a significant decision because very few cases deal with a landlord's denial of consent for anticompetitive purposes or a successor landlord, whose interest diverges from that of the original landlord.
See Freidman on Leases § 7:3.4 (Patrick A. Randolph ed., 2004). Tenet HealthSystem Surgical, L.L.C. v. Jefferson Parish Hospital Service District No. 1, 426 F.3d 738 (5th Cir. 2005)."
for more information contact Ed at www.houstonrealtyadvisors.net
or at 713 782-0260
Two years later the hospital bought the shopping center, subject to the leases, as a strategic purchase with future hospital expansion in mind. Shortly, the tenant closed and sought to assign the lease to an entity planning to open an occupational medicine clinic, which was to provide medical services to employees of corporate clients, rather than to the general public. The hospital, as new landlord, refused to approve the assignment because the assignee would be competing with the hospital.
The district court held that the landlord acted reasonably, because the assignee's use would provide greater competition with the hospital than the original tenant's use. The court of appeals reversed, holding that the assignee's use was within the scope of the use clause's reference to general medical and physician's offices, including related uses. It considered the landlord's refusal of consent unreasonable for two reasons:
1) First, increased competition with the landlord's business is wholly personal to the landlord and does not relate in any way to an objective evaluation of the proposed assignee as a tenant.
2) Second, reasonableness must be evaluated based on the parties'
expectations as of the inception of the lease, at which time the original landlord was not a competitor in providing medical services. This is a significant decision because very few cases deal with a landlord's denial of consent for anticompetitive purposes or a successor landlord, whose interest diverges from that of the original landlord.
See Freidman on Leases § 7:3.4 (Patrick A. Randolph ed., 2004). Tenet HealthSystem Surgical, L.L.C. v. Jefferson Parish Hospital Service District No. 1, 426 F.3d 738 (5th Cir. 2005)."
for more information contact Ed at www.houstonrealtyadvisors.net
or at 713 782-0260
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