A year after acquiring a nearly $1 billion portfolio of suburban office properties, Horsham, PA-based Workspace Property Trust on Monday filed to raise up to $100 million through an initial public offering.
Workspace Property, which first filed a confidential S-11 registration statement on June 30, plans to list on the New York Stock Exchange under the symbol WSPT, selling an undisclosed number of common shares in the IPO at a to-be-determined price. Goldman Sachs, J.P. Morgan and BofA Merrill Lynch are the joint book runners on the deal.
The company, led by former Mack-Cali Realty executives Tom Rizk as CEO and Roger Thomas as president, will use the IPO proceeds to purchase common units in its operating partnership, Workspace Property Trust, L.P., from Safanad Suburban Office Partnership, LP, an affiliate of Safanad Ltd.
The operating partnership will in turn use a portion of the net proceeds to repay the company’s existing loan with KeyBank NA, repay a senior mortgage loan and three mezzanine loans in relation to the purchase of its second portfolio, and pay about $63.9 million in cash to redeem the preferred equity issued by the operating partnership as part of the second portfolio acquisition.
The operating partnership expects to use any remaining proceeds for general corporate purposes, including capital expenditures and future acquisitions.
Workspace Property hopes to capitalize on the outperformance of suburban office properties relative to CBD properties in recent years, with company executives telling CoStar in October 2016 “the prediction of the death of the suburbs is greatly exaggerated.”
A year ago this month, the company acquired 108 office and flex buildings and 26.7 acres of land in five markets from Liberty Property Trust (NYSE: LPT). The $969 million purchase with partners Safanad, a Dubai-based global principal investment firm; and affiliates of diversified investment firm Square Mile Capital Management LLC, was the company’s second major transaction with Liberty Property and expanded Workspace’s holdings to 149 properties totaling 10 million square feet.
In the first half of 2017, 72% of U.S office leasing activity was concentrated in suburban markets, despite suburban markets representing only 69% of inventory.
The spread between average suburban office and CBD vacancy rates is at its lowest point since 1999. Construction as a percentage of inventory continues to increase in the CBD, even though suburban office vacancy rates have declined significantly faster than CBDs since 2011.
Meanwhile, construction has been constrained in the suburban office markets relative to the CBD, while downtown asking rents have been more volatile than suburban rents. Demand for suburban properties has ramped up recently as investors have begun to recognize the widening spread between suburban and CBD valuations, driven in part by investors’ willingness earlier in the recovery to pay more for CBD trophy buildings and other assets with a perceived lower risk.
As the largest landlord in the Horsham/Willow Grove, PA submarket, Workspace has 536,994 square feet of flex and tech-flex space and 1.8 million square feet of low-rise office space in 40 properties, with retail development and other amenities providing opportunity for growth near several Workspace assets.
Workspace Properties is further positioned to benefit from continued demand and rent increases for its properties in the King of Prussia/Valley Force submarket, where the company owns 30 properties totaling about 2 million square feet of office and flex space.
The company also owns assets in South Florida, Tampa, Minneapolis and Phoenix.
By Eric Myers on Monday, October 16th, 2017
The Minneapolis Area Association of REALTORS® local RPAC Committee has decided to endorse the following candidates for public office. MAAR’s local candidate support process is available for member review. The Committee recommends these candidates and considers them pro-REALTORS® and pro-private property rights. Members who live in jurisdictions who are legally eligible to vote are encouraged to consider these candidates, as they are good for their business. However, MAAR respects individual members votes. Click on their name below to read their survey.
Suburban Supported-Endorsed Candidates
Minneapolis Supported-Endorsed Candidates
By Erin Milburn on Monday, October 16th, 2017
The red-hot Twin Cities housing market is starting to cool off just a bit. While June 2017 marked an all-time record for Twin Cities home sales and prices, purchase demand declined from last year for a third consecutive month. New listings decreased 5.2 percent from September 2016 to 6,472, and pending sales dipped 1.7 percent. The number of homes for sale decreased 16.7 percent to 12,502. Excluding the limited number of foreclosures and short sales, traditional new listings fell 3.6 percent while traditional pending sales increased 0.1 percent.
Since competition over limited supply remains intense, prices kept firm. The median sales price rose 7.3 percent from last year to $246,900. Home prices have now risen for the last 67 consecutive months or over 5.5 years. At 50 days on average, homes went under contract 12.3 percent faster than last September. Sellers who choose to list their properties are averaging 98.1 percent of their original list price, 0.6 percent higher than September 2016. The metro area has just 2.5 months of housing supply. Generally, five to six months of supply is considered a balanced market where neither buyers nor sellers have a clear advantage.
“There’s no other way to say it: sentiment out there may be starting to change,” said Cotty Lowry, Minneapolis Area Association of REALTORS® (MAAR) President. “Sometimes shifting markets can bring out a lot of pessimism, which can become a self-fulfilling prophecy. The likely scenario may be a brief pause in the trend we’ve seen. That’s not a bad thing, since it allows incomes a chance to catch up and takes the intensity down a notch.”Sometimes market-wide figures mask important segment-specific realities and other indicators that buyers and sellers should be aware of. For example, closed sales only fell for homes under $250,000. Sales increased for homes priced between $250,000 and $500,000, $500,000 and $1,000,000 and for properties over $1,000,000. Market times and the ratio of sales price to list price both improved for each of the above four price ranges.
The most recent national unemployment rate is 4.4 percent, though it’s 3.4 percent locally—the third lowest unemployment rate of any major metro area. A thriving and diverse economy has been conducive to housing recovery, as job and wage growth are key to new household formations and housing demand. The Minneapolis–St. Paul region has a resilient economy with a global reach, a talented workforce, top-notch schools, exposure to the growing technology and healthcare fields, and a quality of life that’s enabled one of the highest homeownership rates in the country.
The average 30-year fixed mortgage rate has declined from 4.3 percent to 3.8 percent recently, still well below its long-term average of around 8.0 percent. One additional rate hike may be in the cards this year, but the Fed is focused on unwinding its large portfolio. Additional inventory is still needed in order to offset declining affordability brought on by higher prices and interest rates.
“Throughout the recovery, the affordable end of the market has been the focus,” said Kath Hammerseng, MAAR President-Elect. “For homes above $250,000, the market is better supplied, less competitive and is still expanding—it’s really the bottom-end of the market that’s feeling the most inventory and therefore sales pressure.”
Questions? Contact David Arbit, MAAR’s Director of Research + Economics | firstname.lastname@example.org
The investment sales team at Colliers International|Minneapolis-St. Paul recently negotiated the sale of the 4000 Lexington office building at Shoreview Corporate Center. The office building is located at 4000 Lexington Avenue in Shoreview, Minnesota.
The building was purchased The Shoppes of Osgood, LLC, of Fargo, North Dakota. The buyer closed on the 104,463-square-foot property on Sept. 26.
The building is 100 percent occupied. Major tenants include Ally Bank and Aerotek.
Shoreview Ridge is a joint venture between Eagle Ridge Partners and CarVal Investors. Shoreview Ridge acquired Shoreview Corporate Center in 2015.
The Colliers International team of Bob pounds, Tim Prinsen, Amy Senn and Lori Pounds represented Shoreview Ridge in this deal.
The Excelsior Group (TEG) is thrilled to announce that Andy Finn has joined the firm as Senior Vice President, Commercial Investments. In this role, Andy will oversee TEG’s pursuit of commercial real estate investments as well as the execution of the strategic plan for those investments. Additionally, Andy’s role will include responsibility for acquisitions, development, asset management and capital formation activities.
“We are very excited to have Andy onboard, he brings many years of great experience, energy and relationships to our organization,” said Ted Glasrud, President.
Most recently, Andy was Vice President of Acquisitions and Investments for Founders Properties, LLC where he was responsible for several hundred million dollars in real estate transactions which included acquisitions, development joint ventures and dispositions. Additionally, he was involved in the formation and capital raising of various Founders real estate funds.
Prior to Founders, Andy spent several years with Ryan Companies as Vice President in their Capital Markets Group where he was responsible for sourcing debt and equity capital for real estate development deals, day-to-day oversight of the Ryan Real Estate Funds as well as dispositions. Earlier in his career Andy gained acquisition, asset management and leasing experience in New York City, with both L&L Holding Company and Monday Properties.
It’s time to update those contact managers with People of Note, reporting significant new CRE hires and promotions.
The following companies announced personnel moves this week: ML Realty, Sack Properties, Avison Young, SIOR, Cushman & Wakefield, Phillips Edison & Co., Transwestern, CBRE, Sierra Pacific, Next Realty and Romer Debbas.
Hesch joined ML Realty Partners in 2003 and most recently served as a senior vice president. He succeeds recent retiree and ML Realty Partners founder Mike Luecht, who will remain on the firm’s board of directors along with Hesch. Kozinski will oversee the day-to-day operations of the company, which manages more than $1 billion in assets, and will also serve on the firm’s board of directors.
In his new role, Smith will take on a leadership position in the growth of the company as it expands its multifamily portfolio in the region. Prior to joining Sack, Smith worked for Ernst & Young, where he was responsible for on-site management of all phases of the audit process. Before that he worked for The Walt Disney Co., the Los Angeles Dodgers and North American Honda Corp.
CoStar’s People of Note is published each Friday covering the latest commercial real estate executive level promotions and new hires. Click on the headline of each article to jump to full coverage. Follow the news on Twitter @TheCoStarGroup and @JSumner2.
Send new executive hires and promotion announcements to email@example.com.
Wesley Boatwright, Jonathan Goldstein and Michael Yavinsky previously served as managing directors within JLL’s capital markets group before transitioning to Avison Young to focus on mortgage brokerage, project-level equity raises and recapitalizations across all asset types. Collectively, the trio brings more than 60 years of experience to Avison Young. Since 2012, the team has negotiated more than $6 billion in transactions.
The SIOR designation is a professional accomplishment for highly-qualified commercial real estate experts with a strong and sustained transactional history in brokerage, fee-based services, or executive management.
Hooks has nearly 10 years of commercial real estate experience, specializing in leasing and development of creative office space. He most recently served as a vice president with Lincoln Property Co. in Los Angeles. He graduated from the University of Southern California.
Hausfeld joined the company in 2010 as a financial analyst. He earned promotions in 2011 and 2012 to underwriting analyst and director of acquisitions, respectively, before joining the portfolio management team in 2015 as a regional director.
Kraus spent the last four years with Duff & Phelps as a senior associate, where he specialized in commercial real estate valuation. Before that he was a landlord rep with H&R Retail in Baltimore.
Parsons has more than 15 years of commercial real estate experience, including the past five years as a ‘VAS Top Producer’ while expanding CBREs data center business line by acquiring new clients and maintaining client care for existing major accounts. He is a certified general real estate appraiser, an associate member of the Australian Property Institute and a candidate for Appraisal Institute designation.
Swanson brings nearly 40 years of commercial real estate experience, most recently as a partner at Treadwell Franklin Infrastructure Capital LLC. Before that he held leadership positions at real estate investment firm Odebrecht USA and with Flagler Development. Throughout his career, Swanson has worked on such projects as the Beacon Center in Doral, Beacon Pointe in Weston and the IBM expansion in Boca Raton.
Promisco joins Sierra Pacific Mortgage from Stearns Lending, where he served as executive vice president of joint ventures. He brings 17 years of experience to the firm.
An experienced retail broker in the greater Washington, D.C. metropolitan area, Thiell is a 25-year industry veteran and former co-founder and managing partner of Madison Retail Group. He would later help launch First Retail Partners as a principal before the company’s merger with Colliers International, where he served as a managing director with its retail services division.
NEW YORK CITY|
Daglieri has experience advising clients on both sides of the transaction table, representing lenders and borrowers in the New York City area and nationally on more than $1 billion in loan transactions throughout his career. Before accepting the role at Romer Debbas, Daglieri was a partner at Montgomery McCracken Walker & Rhoads LLPs New York office.
Grandbridge Real Estate Capital recently originated a $14.4 million acquisition loan secured by Seven Hills Preparatory Academy in Richfield, Minnesota.
The transaction was originated by Grandbridge Minneapolis vice presidents Tony Carlson and Brett Olson.
BB&T Capital Markets closed the $13.3 million Series 2017A (tax-exempt) and a $1.08 million Series 2017B (taxable) fixed rate bond transaction for SHPA ABC. Proceeds of the Series 2017 Bonds will be used to acquire a 60,000-square-foot facility in Richfield, Minnesota., that is leased to Seven Hills Preparatory Academy.
A portion of the proceeds will also be used to expand the facility with the construction of a gymnasium, renovate interior space and provide exterior improvements. Other proceeds funded a debt-service reserve fund, capitalized interest and will pay costs associated with issuing the Series 2017 Bonds.
Seven Hills Preparatory Academy began operations for the 2006-07 school year and, for the 2017-18 school year, serves students in grades K-8.
According to Minnesota Compass, 48.4 percent of Minneapolis households are overburdened by housing costs. To explain, these households pay more than 30% of their gross income towards housing. Just for reference, a house in Minneapolis is averaging around $200,000 which for a first time home buyer with 10 percent down payment amounts to a monthly mortgage around $1,400 including an estimates for coverages and taxes.
There are many factors affecting this overburdened number. According to a Minneapolis City Council housing report, the city’s current population [approx. 412,000] has not been this high since the 1970’s which is still lower than the peak seen in 1950 [reported 521,718]. Further exacerbating the issue is the fact that there are about the same amount of units today as in 1950 in conjunction with a decrease in average household size. In 1950, it was roughly 3.3 persons per household compared to today’s 2.3 persons per household.
The most recent residential housing report from the University of St. Thomas and the 2017 Housing Market Comprehensive Analysis by HUD, give evidence that the cost burden is a result of the simple economic principle of supply and demand. The influx of demand for housing within Minneapolis has increased the risk of displacement. Housing prices are up year over year and there remains record low vacancy levels of 4 percent. Talks with a political liaison, Mark Stenglein, and local developer and founder Bob Lux of Atalus, LLC, reinforced the challenges to affordable housing from both a public services and private venture perspective due to the strength of the real estate market. We were told that during and right after the recession, homes and land prices in conjunction with construction costs allowed for both new construction and redevelopment projects to maintain affordability without gap financing. Mr. Lux and his team started and maintain an affordable housing initiative, My Home Source which has brought to the market over 500 affordable homes to date. From 2000 to 2006, Minneapolis averaged housing unit increases of 1,200 units per year. As of 2015, the Minnesota Compass reports there are 168 thousand occupied units in Minneapolis. Despite the lower population of the city, occupied units outnumber the units occupied in the 1950 Census by 13 thousand.
These statistics suggest a changing in consumer housing preferences. The city of Minneapolis recognizes the need for housing and the need to minimize housing disparities. There are multiple programs which are aimed at creating home ownership and other affordable options for at risk residents. Further, the city has proposed plans which would approve higher density buildings to be built which would aim at increasing supply and providing more affordable options. A conversation with a Minneapolis CPED Finance officer told us that there are 15 proposed projects approved for funding which will could add up to 1,271 units of affordable housing.
However even with the funding, market conditions are putting pressure on these programs’ ability to bridge the gap for affordability. The average project takes 2-3 years to get funding assembled before construction starts. Our correspondence with CPED stated in reference to recent reductions in federal funding for affordable housing programs, “There is not enough resources in multifamily or single family housing programs to fully address the need.”
The pressure put on Minneapolis from increases in population is not isolated. Many other cities around the nation are facing similar issues. Unfortunately, due to housing’s capital intensive nature it is not as adaptable to market changes as the flavor of candy bars.
The Shenehon Center for Real Estate of the University of St. Thomas is dedicated to advancing public and private interest in real estate issues as a resource and platform to the commercial, residential and corporate real estate segments. To learn more, please visit the Shenehon Center site at www.stthomas.edu/centers/shenehon or email us at firstname.lastname@example.org
Sources and Notes:
Mortgage Payments calculated using online calculator
5% loan, 0.5% PMI, $3,000 Annual tax, and $1,500 on insurance.
Demographic & Income data: Minnesota Compass
Minneapolis City Council
1950 Minneapolis Housing Census
Rob Kost has joined Minneapolis’ Upland Real Estate Group as director of commercial services. Kost brings more than 25 years of commercial real estate experience to his new position.
Kost will work with Upland on business development and brokerage in all areas of commercial real estate.
Kost spent the last 12 years marketing the commercial property portfolio for Sherman Associates. During his career, Kost has leased or sold more than 3 million square feet of commercial space.
Fred Hedberg, principal, and John Young, vice president, both with Paramount Real Estate Corporation/TCN Worldwide, recently represented MMC Property in the sale of a 98,000-square-foot office-warehouse/manufacturing building in Waconia, Minnesota.
The property is located at 1400 Mill Lane and sits on 16.62 acres of land. It is fully leased to one tenant.
The building sold for $4.35 million, with the sale closing on Sept. 27. Paramount also found the buyer, Eden Trace Corporation, a private-investment entity from Minneapolis.