All is Fair Game

Update 03/17/2012
March 17th, 2012 5:50 PM

Distressed Sales Volume Remains at Elevated Levels Despite Big Boost in Non-Distressed Sales in RecoveringEconomy

2012 Could Match $21 Billion in Distressed CRE Property Sales Last Year -- But It Hasn't Proved To Be Easy Money
Distressed trading volume has stabilized but continues to remain at elevated levels, increasing by approximately 2% last year over 2010. However, a surge in non-distressed property trading driven by improving economic conditions has begun to mitigate its impact on commercial real estate pricing levels overall.

According to CoStar Group data, the volume of distressed transactions in December 2011 remained well above the average monthly volume for the full year, yet the distress percentage of total observed transaction volume fell 30.1% in January 2011 to 21.1% in January 2012.

By way of comparison, distressed sales made up less than 3% of total sales volume in 2008.

Based on year-end 2011 data for sales of office, industrial, retail and multifamily properties, distressed property sales totaled $21 billion last year. That compares to $20.6 billion in 2010.

CoStar Group's Property and Portfolio Research (PPR) subsidiary expects distress transaction activity will continue to be elevated in 2012, according to Mark Fitzgerald, debt strategist for PPR, which he said should provide plenty of opportunities for other capital sources to enter the field.

"In particular, private equity has maintained 30% of its total transaction activity in the distress space, despite overall acquisitions increasing nearly threefold from 2009 to 2011," Fitzgerald said.

REITs, which have been the largest net buyers of assets by a significant amount over the past two years, have also not been significant players in distressed properties.

"REIT transaction activity has been driven by the low cost of capital and strong access to the public markets," Fitzgerald said. "This has enabled REITs to be highly competitive in core markets with low cap rates. However, one area that public REITs have generally avoided is distressed properties. Of the major equity capital sources, REITs have seen the lowest percentage of their acquisitions consist of distressed assets."

There are contradictory indications whether other major equity sources might be coming into the picture.

On the plus side, this past week, USAA Real Estate Co., with more than $7 billion of assets under management, made a strategic investment in Square Mile Capital Management LLC, a New York City-based real estate investment firm.

Square Mile has emerged in recent years as a prominent opportunistic real estate investor with a recognized specialty in distressed and high-yield debt, recapitalizations and undervalued equity situations.

"USAA Real Estate Co. continues to diversify its assets, and by investing in the Square Mile platform, we hope to broaden the investment opportunities we can offer our clients," said Pat Duncan,USAA Real Estate chairman and CEO.

"While we have made great strides as a firm in recent years, our platform's alliance with USAA Real Estate Co. will help us to open new doors and provide us with even more firepower in the marketplace," said Jeff Citrin, managing principal of Square Mile.

Also, TA Associates Realty, one of the largest private real estate advisors in the country, has been out raising money in the market for its Realty Associates Fund X. TA Associates has raised nearly $833 million on its way to raising $1.25 billion.

According to presentations by TA Associates, Realty Associates Fund X intends to execute value-added strategies, acquiring quality assets at favorable pricing. It's shooting for a target gross internal rate of return of 14% to 15% and expects to make its first purchase this quarter.

Where Is the Value in Value Add?


However, it does not appear to be easy to make a buck in the distressed investment arena, based on some of the numbers that have come in from public pension funds for their 2011 fiscal years.

For its year ended June 30, 2011, the California Public Employees Retirement System (CalPERS), the country's largest public pension fund, reported negative returns from its value added portfolio over the last 10 years - with the 10-year performance coming in at a negative 7.1%. It has posted a negative 20% return over the last three years.

According to Pension Consulting Alliance Inc., one of CalPERS investment advisors, the value add returns have hindered CalPERS overall real estate investment returns. The fund has had 3-year and 5-year overall real estate returns of negative 17.8% and negative 13.2% respectively. For the last 10 years, it has posted an overall positive, though insignificant 1.6% return.

"The performance of the real estate portfolio has been hindered by three primary factors: significant amounts of CalPERS’ capital were invested during the 2005 to 2007 period, which exposed the portfolio to the risk of vintage-year concentration; the high proportion of the portfolio invested for capital appreciation (not current income) in riskier, non-stabilized properties; and high amounts of leverage employed at the peak of the cycle," PCA reported.

"These final two factors have exacerbated historical underperformance to the benchmark during the economic crisis. Non-stabilized assets provide less income to insulate against valuation declines," PCA reported.

Over the last 12 months, CalPERS has been implementing a plan to shift its real estate emphasis towards strategic, stabilized, domestic core assets held for a longer term, and away from more tactical, opportunistic, appreciation-oriented investments held for a shorter term.

The California State Teachers Retirement System (CalSTRS) the nation's second largest public pension fund, also has been shifting its real estate funds towards core properties. The fund did not break out its value add returns separately for the quarter ended Dec. 31, 2011, but noted that it will overweight in core strategies for the time being.

"We continue to work with our partners to transfer assets from the value add and opportunistic categories to core once the assets are stabilized," CalSTRS noted.

The New York State Teachers Retirement System reported mixed results from its value add real estate investments. Its $22 million investment in Hines Interests: U.S. Office Value Added fund had returned a positive 17%. This investment was made in January 2005, two years before commercial real estate values peaked.

However, the $12 million NYSRS invested at the peak of the market in August 2007 in Hines Interests: U.S. Office Value Added II fund has posted a negative 38% return.

Illinois Municipal Retirement Fund, which started investing in value added funds late in 2008 -- after the market had collapsed -- has yet to see a return on its investments. As of April 2011, IMRF reported a negative 11.75% return.
 

Shell Taps Pittsburgh Area For Proposed $2B Chemical Plant

Energy Giant Signs Land Option Agreement for Plant That Could Creat 20,000 Jobs
 Shell Oil Co. has picked a site in Beaver County, PA over locations in two other states for a proposed $2 billion petrochemical complex that could create more than 10,000 permanent jobs and another 10,000 construction jobs.

Shell Chemical LP signed a land option agreement with Horsehead Corp. to evaluate the site in Potter and Center Townships near Monaca, PA, about 35 miles northwest of Pittsburgh. The facility would include an ethane "cracker" that would upgrade locally produced ethane from the Marcellus Shale, a sedimentary rock formation that extends through much of the Appalachian Basin of North America and contains vast untapped gas reserves.

Ohio Gov. John Kasich and West Virginia Gov. Earl Ray Tomblin aggressively courted the project. Shell said it continues to assess the commercial feasibility of a petrochemical complex in the Appalachian region. The next steps for the project include additional environmental analysis of the preferred Pennsylvania site, the company said in a release.
 
The company will conduct further engineering design studies, assessment of the local ethane supply and continued evaluation of the economic viability of the project.

"This is an important step for the project, and we look forward to working with the communities in Pennsylvania, and gas producers across Appalachia, as we continue our efforts to develop a petrochemical complex," said Dan Carlson, general manager of new business development, Shell Chemicals. "Shell looked at various factors to select the preferred site, including good access to liquids-rich natural gas resources, water, road and rail transportation infrastructure, power grids, economics, and sufficient acreage to accommodate facilities for a world scale petrochemical complex and potential future expansions."

In addition to an ethane cracker, Shell is also considering polyethylene and mono-ethylene glycol units to help meet increasing demands in the North American market. Much of the PE and MEG production would be used by industries in the Northeast.

Pennsylvania Gov. Tom Corbett said he has been working for several months with Shell to reach this point, who acknowledged that it’s still early in the process.

"Shell now knows what we all do; Pennsylvania is ideal for this project. Not only do we sit atop the richest known reserves of natural gas in the world, but we have a world class workforce, an expansive transportation network including rail, roads and air, excellent education institutions and a thriving quality of life here in Pittsburgh," Corbett said.

"The benefits to the state’s southwest and to all of Pennsylvania are immense," said Corbett. "The Shell plant would, if constructed, have the potential to be the single largest industrial investment in the region in at least a generation."

Crossman & Co. Opens Atlanta Office

John Zielinski Heads Local Group
Crossman & Co., an Orlando, FL-based retail property management and leasing firm, opened an Atlanta office. The company is one of the largest retail firms in the Southeast with client properties in Georgia, Alabama, Tennessee and South Carolina.

Senior vice president John Zielinski, CCIM will be the head of the local office at 6400 Powers Ferry Road. He is the former real estate manager for Publix Supermarkets and current director of leasing for Crossman in the Southeast.
 

Clarion Sells The Lenox in Atlanta for $59.3 Million

Parmenter Realty Picks Up 348,152-SF Office Tower in Buckhead
Clarion Partners sold The Lenox Building in the Buckhead area of Atlanta to South Florida-based Parmenter Realty Partners for $59.3 million or $170 per square foot.

The Retail Property Trust traded the 19-story office tower to Clarion for $71 million or $204 per square foot in spring 2000.

The Lenox is a 348,152-square-foot Class A property at 3399 Peachtree Road NE.
The structure is attached to Lenox Square Mall and the 370-room JW Marriott Hotel.

The buyer signed a tenant to 9,000 square feet during the deal’s due diligence period.

“This lease is indicative of the rebounding market, and we are excited to make our entrance into Buckhead with one of the finest Class A buildings available,” said Andrew Weiss, COO of Parmenter.

The company plans to upgrade the property and relocate its headquarters to the tower this year.

Parmenter’s acquisition team consisted of John Davidson, Michael Holmes and Reginald Macke. Cushman & Wakefield’s Southeast Capital Markets Group represented Clarion. Cushman & Wakefield Sonnenblick Goldman arranged the financing, which was provided by GE Capital Real Estate

Lincoln Property Wins 450,000-SF Leasing Assignment

OA Development Taps New Firm to Oversee Metro Atlanta Office Space
Lincoln Properties Co. Southeast, based in Dallas, TX, took control of the assignments for four metro Atlanta office properties owned by OA Development. The properties total approximately 450,000 square feet.

The portfolio includes:
  • 2400 Lake Park Drive in Smyrna, which is a 104,000-square-foot building that is 82 percent leased.
  • Lakeview 400 in Alpharetta which consists of two one-story buildings totaling 135,000 square feet. It is 93 percent leased.
  • Northwoods Business Center in Norcross is an office park that consists of three one-story buildings that total 111,000 square feet. The park is currently 70 percent leased.
  • Bluegrass Promenade in Alpharetta, a 99,000-square-foot building at 1200 Bluegrass Lakes Parkway, is currently 76 percent leased.

BB&T Corporation

BBT: NYSE; Financials/Banks

Company Information

BB&T Corporation (BB&T) is a financial holding company. BB&T conducts its business operations primarily through its commercial banking subsidiary, Branch Banking and Trust Company (Branch Bank). Branch Bank has offices in North Carolina, Virginia, Florida, Georgia, Maryland, South Carolina, Alabama, Kentucky, West Virginia, Tennessee, Nevada, Texas, Washington D.C and Indiana. In addition, its operations consist of a federally chartered thrift institution, BB&T Financial, FSB (BB&T FSB), and several non-bank subsidiaries, which offer financial services products. BB&T's operations are divided into seven business segments: Community Banking, Residential Mortgage Banking, Sales Finance, Specialized Lending, Insurance Services, Financial Services and Treasury. During the year ended December 31, 2010, it acquired the remaining 30% ownership interest in Sterling Capital Management, LLC and merged it with its existing investment advisor BB&T Asset Management, Inc.

BankAtlantic Bancorp Modifies Agreement to Sell BankAtlantic to BB&T

Published: March 13, 2012

FORT LAUDERDALE, Fla.--(BUSINESS WIRE)--Mar. 13, 2012-- BankAtlantic Bancorp, Inc. (NYSE: BBX) (“BankAtlantic Bancorp” or the “Company”) today announced that it has entered into an amendment to its November 1, 2011 agreement with BB&T Corporation (NYSE: BBT) pursuant to which BB&T would acquire BankAtlantic, the Company’s wholly-owned bank subsidiary.

The core provisions of the original agreement remain unchanged. In connection with the transaction, BB&T will acquire approximately $2.1 billion in loans and approximately $3.3 billion in deposits based on September 30, 2011 balances. BB&T will pay an estimated premium of $301 million to the closing net asset value of BankAtlantic. The premium, which equates to approximately 9% of total deposits at September 30, 2011, is subject to adjustment based on actual non-CD deposit balances at closing, but in no event will exceed $315.9 million.

Under the terms of the modified agreement, BB&T will assume BankAtlantic Bancorp’s obligations with respect to its approximately $285 million of outstanding trust preferred securities. BankAtlantic Bancorp will pay all accrued interest on the trust preferred securities in connection with the closing.

The original agreement contemplated that BankAtlantic Bancorp would retain designated loans and other assets previously held by BankAtlantic which in the aggregate were recorded on the balance sheet of BankAtlantic at approximately $624 million as of September 30, 2011. Based on BB&T’s assumption of BankAtlantic Bancorp’s outstanding trust preferred securities obligations, the companies have agreed that certain of those assets originally contemplated to be retained by BankAtlantic Bancorp will now be distributed to a newly established LLC, as described below.

Under the terms of the modified agreement, the companies have agreed to the formation of a new LLC, which prior to the closing of the transaction will receive approximately $424 million of loans and $17 million of real estate owned and other assets, net (based on BankAtlantic’s book value gross of any reserves as of January 31, 2012) previously held by BankAtlantic. BB&T will hold a 95% preferred interest in the LLC, and BankAtlantic Bancorp will hold a 5% preferred interest and the remainder interest described below. The assets held by the LLC are expected to be monetized over time. After such time, if any, as BB&T has recovered $285 million in preference amount from the LLC, BB&T’s interest in the LLC will terminate and BankAtlantic Bancorp will be entitled to any and all residual proceeds in excess of such amount. BankAtlantic Bancorp will provide BB&T with an incremental $35 million guarantee to assure BB&T’s recovery within seven years of the $285 million preference amount. Loans representing approximately 60% of the principal amount of the loans to be held by the LLC are currently paying interest.

BankAtlantic Bancorp’s interest in the LLC is in addition to approximately $175 million in commercial real estate nonaccrual loans and real estate owned (based on BankAtlantic’s book value gross of any reserves as of January 31, 2012) previously held by BankAtlantic and to be retained by BankAtlantic Bancorp following closing.

BankAtlantic Bancorp’s Chairman and Chief Executive Officer, Alan B. Levan, commented, “We are obviously pleased as this modified agreement clears the way for the transaction to continue. We currently anticipate that closing will occur in the second quarter of 2012, subject to the timely receipt of required regulatory approvals and satisfaction of other closing conditions. Pending closing, BankAtlantic will continue to operate in its normal course under the control of BankAtlantic Bancorp.”

Sandler O’Neill + Partners, L.P. and Cantor Fitzgerald & Co. provided financial advice to BankAtlantic Bancorp in this transaction.

About BankAtlantic Bancorp:

BankAtlantic Bancorp (NYSE: BBX) is a bank holding company and the parent company of BankAtlantic.

About BankAtlantic:

BankAtlantic, Florida’s Most Convenient Bank, is one of the largest financial institutions headquartered in Florida. Via its broad network of community branches and conveniently located ATMs, BankAtlantic provides a full line of personal, small business and commercial banking products and services. BankAtlantic is open 7 days a week and offers extended weekday hours, Online Banking & Bill Pay, a 7-Day Customer Service Center, Change Exchange coin counters, as well as retail and business checking accounts. Member FDIC.

 

Two banks raise dividends sharply

Full story: Winston-Salem Journal

BB&T Corp. and Wells Fargo & Co. shareholders were rewarded for their patience Tuesday when federal regulators said both banks are strong enough to handle an economic meltdown.

 
 
 

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Posted by Greg Shelley Phd on March 17th, 2012 5:50 PMPost a Comment

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