Social Media in CRE No Longer Just for Socializing - CoStar

MARK HESCHMEYER, EDITOR

FEBRUARY 23, 2012

WWW.COSTAR.COM

A WEEKLY NEWSLETTER FOCUSING ON CHANGING MARKET CONDITIONS, COMMERCIAL REAL ESTATE, MORTGAGES AND CORPORATIONS PUBLISHED BY COSTAR NEWS

IN THIS WEEK'S ISSUE: Social Media in CRE No Longer Just for Socializing ......................................................................................................................... 1 Grubb & Ellis Files for Chapter 11, Agrees To Sell Nearly All Assets ................................................................................................ 4 Tranzon Auction Resolutions: 250-Unit Multifamily Lender REO ...................................................................................................... 6 Retail Market Purges Fear of Double Dip .......................................................................................................................................... 6 Capdominus: CRM for a Capital Raise .............................................................................................................................................. 8 Equity Residential Raises Bid In Latest Move For Archstone ............................................................................................................ 8 W.P. Carey Converting to a Public REIT ........................................................................................................................................... 9 Tranzon Alderfer: Bank Owned Properties: 4 Big Box Retail Sites in PA, NJ & DE ........................................................................ 10 Bank of America Gives Away a 282,000-SF Office Building............................................................................................................ 10 CRE Loan Prices Regaining Pre-Recession Values ....................................................................................................................... 11 Is Tech All Tuckered Out? ............................................................................................................................................................... 11 Property Valuation Fraud Risk Rises Nearly 8% ............................................................................................................................. 13 Real Money: More Capital Expected To Flow to CRE ..................................................................................................................... 13 Upcoming Corporate Facility Closures & Downsizings .................................................................................................................... 15 Loans and Properties Under Surveillance ....................................................................................................................................... 16 Distressed Properties Potpourri ....................................................................................................................................................... 17 Watch List: Newest Specially Serviced Loans ................................................................................................................................. 18

Social Media in CRE No Longer Just for Socializing With An Audience of a Billion, CRE Industry Adopting Social Networks for Business Outreach Commercial real estate brokers and companies are slowly shrugging off their aversions to social media platforms and are engaging more frequently in online marketing, information gathering and client building. While late to the social networking scene and still in a fledgling state of using websites such as LinkedIn, Facebook and Twitter, many in the CRE industry have started trying to harness their reach in hopes that one day it will lead to deals and dollars. At the same time, many others still refuse to join the fold and flat out state they will resist until they're the last ones online. "Clearly social media is still a divisive issue in commercial real estate – the difference in sentiment between enthusiastic adopters and major detractors parallels the sentiments in other industries driven by client relations, such as nonprofits and law firms," said Angela Brown, external communications manager for CoStar Group. "What is interesting in the similarities is the fact that many of the perceived challenges involved with social media are not insurmountable – platform selection, time management and measuring ROI are actually relatively simple with a bit of education and practice." "I also think there is a misperception out there that social media is a magic wand that is meant to replace traditional relationships. It doesn't work that way," Brown said. "It should be seen as an inroad to establishing new online relationships and as a bridge to building offline relationships." Brown and Coy Davidson, senior vice president of Colliers International – Houston will be hosting a live webinar on costar.com entitled Social Media for Brokers next Wed. Feb. 29 at 12 noon EST. The two will tackle many of the issues raised in this story and techniques for success in social media. Register here to participate. In preparing for that webinar, CoStar updated an informal poll it did a year ago to find out what successes, challenges and strategies the industry has adopted in the past year.

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"The commercial real estate industry still seems to be trying to get its arms around the basics of social media," Brown said. "It is not surprising then that the default use of social media is marketing and public relations - social media lends itself to broadcast messaging and people aren't quite sure how to use social media for business development purposes and that's the sweet spot. Promoting news and listings are one thing, but people want dollars and sense. That's why education and information are so important. Most marketers and salespeople know how to evaluate ROI for traditional channels like email campaigns and phone calls, but measuring social media return is a special skill." CRE marketing and communications executives have become huge advocates for social media. Amy Schenk, marketing manager for Cassidy Turley in Cincinnati has the firm all over the Internet on sites such as Facebook, LinkedIn, Twitter, YouTube, Google+ and is researching the use of Pinterest. "Over the past year, I have seen a huge increase in CRE professionals accepting social media and becoming more open to utilizing it for business," Schenk said. "The CRE industry as a whole is very conservative and set in its ways of operating and therefore usually follows behind other industries when it comes to adapting to new business tools. However, it seems there is finally consensus that social media is here to stay which created a sudden rush to become involved." "Referrals are a huge source of business in CRE and social media is all about referrals," Schenk said. "By sharing, tweeting, posting, liking and pinning, people have built a universe of over a billion people that could be referring your services. At Cassidy Turley we have found social media to be a vital part of our CRE business development, customer service and marketing platform. The statistics prove that it's critical to have a place in the social media arena since it is now where the majority of people spend their time to socialize with friends and business acquaintances, find the latest news, research companies and professionals, and share information. Gail Donovan, director of communications at Ariel Property Advisors in New York, said commercial real estate professionals will be more effective if they can reach a wider audience of buyers and sellers. "We believe in reaching members of our target audience of current and potential clients and investors by using the communication tools they are most comfortable with. For this reason, we use a full menu of delivery options - email, mail, fax, Twitter, Facebook, LinkedIn, RSS news feeds, and LoopNet," Donovan said. "At Ariel Property Advisors, we see social media as another distribution tool with which to sell properties for our clients, share our research, and market and brand our firm." Alicia Miller, director of marketing at Rock Commercial Real Estate in York, PA, said social media allows instant conversations to take place. "We have had direct property inquiries and referral leads come from social media," Miller said. And "social media is a wonderful way to pitch news to media and promote clients successes." "Brokerage advisors use their own LinkedIn accounts for social networking and as a referral source. Marketing uses LinkedIn and Twitter to communicate settled listings, ratified leases, available properties, changes to available properties, client success stories, CRE research trends, team updates and successes and carry on conversations regarding CRE interests, both local and national," Donovan said. "We currently integrate several easy to use tools that allow marketing to monitor, publish and analyze our social media channels allowing more time for content creation." Caitlin Luebbe, lease and marketing administrator for Ironwood Investments in Shoreline, WA, said social media can be an advantageous method of expanding your network, increasing brand awareness, and deepening your customers' sense of brand loyalty, especially if your company's drivers are aimed at directing business to your company website. "A focused online marketing strategy that's aimed at effectively engaging commercial property owners and real estate investors within the target market can help a company to access hard-to-reach market consumers and generate favorable word-of-mouth advertising," Luebbe said. "Every post and blog update is ultimately an opportunity to reinforce your company's official brand and corporate identity and differentiate yourself from the


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competition. Such online activity also helps to positively impact your placement in organic search-engine rankings and make sure that you get noticed on sites like Google." Real estate executives and brokers too provided feedback on their individual experiences using social media. We present those here. SOURCING CAPITAL In short, I feel strongly that social media impacts my business in four major ways: it boosts visibility, fosters relationships, leverages media dollars, and builds brand equity. Recently we connected with a new capital source looking to invest in distressed properties as a direct result of a "re-tweet" from one of our followers on Twitter. The principals of our firm, Kinetic Companies, take a very hands on approach to using social media. Our biggest challenge has been training brokers, stakeholders, and employees to "think before they click" and recognize the impact blast style via social media messaging has on our company brand. Joel Moyes, Principal, Kinetic Companies, Phoenix, AZ AN EVERYDAY TOOL Our team currently uses multiple social media mediums as both an informational gathering tool as well as a way to build awareness of our brand / market activities that demonstrate good implementation of our service lines. We regularly rely on social media like Twitter, LinkedIn and Facebook for everyday activities in order to improve our business development and maintain existing client awareness. I do not believe you can quantify the gains on a specific basis as our experience has been more abstract as a research tool in-order to connect dots or some type of PR regarding information about an industry sector. Albert Ellis, Senior Associate, Colliers International, Southfield, MI FINDING US IN NEW WAYS Social media is changing how America does business. It has a greater effect on the millennials, and Gen Y that are the early adopters when it comes to how they are handle consumption. At Velocity Retail Group we use social media to reach the smaller growing percentage of the population that tweets and follows. But we still have to rely heavily on traditional methods because so many in the industry, mostly baby boomers are obtuse to the newer tools. One of the main successes is the power of the Internet and search engines allows people to have access to the information that we put out there on blogs, tweets and our Facebook page, and LinkedIn and enables them to find us in ways that were not as likely before. Dave Cheatham, Managing Principal, Velocity Retail Group, Phoenix, AZ CONNECTING WITH INFORMATION I am a newbie to social media. I use it but try not to let it run my life. I use social media (Twitter) to feed information which I find interesting and important to what I do. It has allowed me to connect with some pretty interesting information sources when I need information. Greg Rutten, Principal, GRu Ventures Inc., Del Mar, CA SUCCESS IS MEASURED BY AMOUNT OF NEW INFORMATION Social media has enabled me to casually "meet" new CRE members and have enabled me to exchange meaningful ideas and find information about trends, fact, articles and information about software products that I may have never been aware of or known about the capabilities of the same. My successes have been measured by the advice, information and experiences that I have shared and received by others in CRE, that I may not have had access to before. Howard Applebaum, President, Corporate America Realty & Advisors, Rutherford, NJ KEEPING TRACK OF CONTACTS Social media provides an easy way to see what people are up to and a great way to get introductions to people you may want to meet and discuss things with. I have used it to make people aware of new listings and real opportunities I have. But mostly I use it in just getting my name out and letting people know what I do. I have over 600 LinkedIn contacts and release information to them on a very selective basis. Undoubtedly the biggest challenge for social media in a business application is the lack of time most people have to learn something new. Ray Rosado, Broker Associate, Cassidy Turley Fuller Real Estate, Denver, CO THE INTERACTION SHOWS YOU'RE INTERESTED IN YOUR CLIENTS


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Social media isn't important just to CRE but to any business looking to expand their client base and reach more customers. As far as social media directly relates to CRE, you aren't going to find a head of real estate for very large companies that will be following you on Twitter or something, but you can use social media as a way to keep clients more updated on the news and trends in the market place as well as deals big and small that have closed in the marketplace. Lastly, I think the more you have your own social media interacting with your own client's (because they almost 100% will have their own as well), it shows that you are interested in their expansion and their business doing well too. Joshua D. Arcus, Broker & Managing Director, The Siderow Organization, New York, NY GENERATING BUZZ In my area of specialty (multifamily), I figured out early on that social media is a great tool for generating buzz about a particular property. Using my Facebook page, I have been able to secure additional listings or at least generate conversations with owners and lenders regarding either the property I am highlighting or one of their properties near mine. I don't think it will ever replace direct communication but it will reduce the need for paid advertisements. Kevin Rocio, Broker, @properties, Chicago A FOOT IN THE DOOR I am an avid user of LinkedIn and use it to actually drive business not just see how many contacts I can get. Whenever I am trying to break into an account I will try to research LinkedIn accounts to see who works at that company. I'll scan through each employees profile and look for common ground. Once I can find common ground, reaching out is usually easier. I also reach out on the phone, not through LinkedIn as it's so much warmer. I simply use LinkedIn to do the research, not to try to conduct business. This can be an excellent way for tenant/landlord rep brokers to get their foot in the door with companies they are trying to secure business with but don't know many employees. Marty Busekrus, Senior Associate, CBRE | Capital Markets, Boca Raton, FL AS CLOSE TO FREE ADVERTISING AS YOU CAN GET I am an active blogger as well as contributing columnist to the Savannah regional business journal. The ROI in social media specifically, being recognized as a local industry expert, is by far a better investment than the traditional route. That is the great thing about social media, if you have the time to commit, it is as close to free advertising and as you can get. J. Rex Benton, III, Principal/Business Manager, NAI Savannah, Savannah, GA

Grubb & Ellis Files for Chapter 11, Agrees To Sell Nearly All Assets By: Randyl Drummer Grubb & Ellis Co., one of the country’s most recognizable CRE services brands which fell on hard financial times during the economic recession, has agreed to file for Chapter 11 bankruptcy protection and sell nearly all of the company's assets in a bankruptcy transaction to BGC Partners, the parent of Newmark Knight Frank. In a statement, Santa Ana, CA-based Grubb & Ellis said it believes the acquisition by the investment firm headed by Cantor Fitzgerald CEO Howard Lutnick "will bring the much-needed scale and resources the company had been seeking through its strategic process” and will position Grubb & Ellis to "become part of a well-capitalized global platform." "Following a thorough and rigorous process and the evaluation of all available options, we determined that a partnership with BGC provides the best platform for our brokerage professionals, employees and clients," said Thomas P. D'Arcy, president and chief executive officer of Grubb & Ellis. "We believe the transaction will be seamless for our clients and we expect no disruption to the company's operations. "Furthermore, we believe our professionals and clients will benefit greatly by being part of the BGC organization, which, with its recent acquisition of Newmark Knight Frank, will bring together two strong brands to create a powerhouse in the commercial real estate space. BGC's purchase of the company's senior debt and its willingness to provide incremental financing to ensure the smooth execution of the sale process demonstrate its commitment to the success of the Grubb & Ellis business."


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To execute the bankruptcy sale, BGC said it has acquired the outstanding secured debt of Grubb & Ellis and has committed to provide debtor-in-possession financing to fund Grubb & Ellis operations during the sale and bankruptcy process. Grubb & Ellis has filed motions requesting that the bankruptcy court approve sale procedures and set a hearing date to approve the sale. Under the voluntary petition, Grubb & Ellis has entered into a letter of intent in which BGC Partners, acting as a stalking horse buyer, will submit a minimum bid to acquire substantially all of Grubb's assets and provide a senior-secured debtor-in-possession loan of $4.8 million to facilitate a successful sale. "The expeditious sale of the assets is critical to continuing the debtors' businesses as a going concern, providing uninterrupted services to their valued customers and clients, preserving the jobs of thousands of employees, and maximizing value for all stakeholders," the parties argued in court documents. The proposed sale will resolve the uncertainties of the debtors' present economic condition by stabilizing its businesses and client base, Grubb & Ellis CFO Michael Rispoli said in a declaration filed with the court. The parties are executing the transaction under Section 363 of the U.S. Bankruptcy Code, in which a bankruptcy trustee or debtor-in-possession may sell the bankruptcy estate's assets "free and clear" of any interest in such property. Lutnick, chairman and CEO of BGC, said the deal reflects the "deep and unwavering commitment" of BGC to build a premier position in real estate services. "We agreed to acquire Grubb & Ellis because we believe Newmark Knight Frank's and Grubb & Ellis' broad knowledge and extensive brokerage expertise, combined with BGC's powerful proprietary technology and our strong financial backing, will enable Grubb & Ellis to thrive and grow as part of the BGC family of companies." Barry M. Gosin, CEO of Newmark Knight Frank, pointed to the "tremendous" synergies between NKF's consultative approach to clients and Grubb's transactional and management services capabilities. James D. Kuhn, NKF president, added that Newmark Knight Frank's business model has been "dramatically strengthened" upon becoming part of BGC and believes Grubb & Ellis's brokers, employees and clients would find the same opportunities to grow. The announcement comes a week after longtime Grubb & Ellis Co. director C. Michael Kojaian resigned from the company's board of directors, in part to "avoid actual or apparent conflicts of interest" in connection with his affiliated companies. Negotiations with several prominent companies in recent months, including BGC, C-III Capital Partners and Colony Capital, had failed to yield an agreement that would infuse enough cash into the company to continue operations. However, talks continued with BGC after exclusive negotiations expired in January, culminating in the Tuesday announcement. If competing bidders emerge by March 9, an auction would be held March 21. However, Brandon Dobell, an equity analyst with William Blair & Associates who follows commercial real estate services firms, does not expect other bidders to emerge and said BGC will likely end up with control of Grubb. Although it remains to be seen what will happen to the Grubb & Ellis brand, the company still has a decent-sized brokerage platform and property management business, Dobell said in a research note. BGC Partners is among a handful of players, including C-III Capital Partners and UGL, that are most likely to take the leap in building a global real estate business in coming years and join the already established global brands of CBRE, Jones Lang LaSalle, and Colliers, he said. "With a human capital-focused business model, two major U.S. CRE brands and broker platforms, and a smaller CRE platform in the United Kingdom through U.K. partner Knight Frank’s presence there, we believe BGC will continue to grow its CRE services presence," Dobell said.


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Tranzon Auction Resolutions: 250-Unit Multifamily Lender REO

Retail Market Purges Fear of Double Dip Retail properties went through a see-saw swing last year with strong leasing during the first half of the year surging upward only to deflate later in the year as several economic shocks threatened to derail the economic recovery. However, the industry is starting to regain some momentum as 2012 progresses, according to new retail outlooks from Marcus & Millichap, Savills US and Colliers International retail groups. With retail sales now exceeding pre-recession highs following a generally positive holiday retail season, performance improvements in the retail property sector have begun to spread, according to John J. Kerin, president and CEO, and Hessam Nadji, managing director research and advisory service of Marcus & Millichap in their 2012 National Retail Report. According to the report, low interest rates and attractive returns ahead of an eventual recovery in rents are expected to keep transaction velocity on a rising trend line in 2012. Risk aversion will be a factor for the foreseeable future with stable assets in high-density locations fetching a premium and experiencing further cap rate compression. However, the appetite for contrarian and more value-add opportunities is also expanding given the better-thanexpected economic performance, Marcus & Millichap reported. These favorable conditions will entice more owners to list assets that no longer meet their broader investment strategies while the wide gap between interest rates and cap rates will draw increased buyer activity.


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Gerry Mason, head of Savills US retail group, also sees an improving market ahead. He noted that the retail property market is continuing to purge tired concepts and inefficient business models, which will ultimately lead to a recovery in the sector - albeit a slow one. "Marginal improvements in second half of 2011 leave most cautiously optimistic about 2012," Mason said in the Savills report, adding though that "slow recovery is expected as most companies will look to improve balance sheets and strengthen core portfolios." "Double-dip recession still lingers in the minds of some," Mason said. "Many retailers are still pulling back the reins on expansion and growth plans amidst fears that fundamentals could erode again." Segments on the upswing include grocery-anchored and outlet center category, Mason said as he noted that retail landlords such as CBL & Associates and Tanger Outlets are among the most active developers scheduled to break ground in 2012 on new projects. In a third newly issued report, Ann Natunewicz, national manager of U.S. retail research for Colliers International's Retail Services Group, said that 2012 is shaping up to be a pivotal year for the industry. "2012 is a huge year for retail and for real estate in general. How landlords and retailers respond to mobile commerce, their ability to partner and innovate, will determine how well they monetize shoppers who are already in their physical space-a huge advantage over earlier e-commerce, which was all transacted somewhere else." Colliers said investors can expect "a wild ride for equities" in retail real estate investments: U.S. equities markets will continue to react to news on any and all economic indicators, including ongoing news of store closings. The angle of these reports will vacillate between opinions of "smart consolidation of poor-performing assets" to a possible harbinger of corporate economic trouble. Colliers also said it expects that the distressed retail property asset pipeline will begin to move in 2012: Data shows that more than $350 billion in commercial real estate loans will mature both this year and in 2013. The opportunity for retail investment lies between the trophy assets still trading at low cap rates, and the large pool of marginal, low- or no-cash flow assets that can't be refinanced, which will either default on maturing debt or be transacted in a "fire sale." Also, more institutional players will be scouting around for retail portfolios (public REITs are sitting on huge capital reserves). Foreign investors will also turn to retail property in U.S, Colliers reported. "Yield-seeking investors need places to park their money, and the stability of U.S. property markets still make them attractive destinations for 'flight capital,'" the company reported. Retailers seeking urban sites-, including big boxes, will come back in force this year, too. "The economic crisis hit suburban communities much harder than their urban counterparts, so as retailers seek out lower-risk growth opportunities, underserved urban areas fall firmly within the crosshairs," Colliers reported. Blocked out of urban areas in the past because their stores were too big, big-box retailers now have two options. They can go in with their large-format stores, as renewed interest in urban locations coincides with municipalities' worsening fiscal problems, or Retailers can test small-format store options, take infill space, and co-opt share from smaller local operators.


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Capdominus: CRM for a Capital Raise

Equity Residential Raises Bid In Latest Move For Archstone By: Randyl Drummer The high-stakes match for control of Archstone continues, with Equity Residential (NYSE: EQR) making the latest move. Keeping its options alive to acquire at least a piece of the Denver-based apartment company, EQR reached an agreement this week with Barclays PLC and Bank of America on a 60-day extension of its deadline to make a formal offer to acquire the banks' remaining interest in Archstone. Equity Residential, one of the nation’s largest owners and developers of apartments, and its chairman and founder, Sam Zell, faced a Feb. 19 deadline to exercise its option to acquire the remaining 26.5% interest in Archstone. Rather than make an offer, EQR strategically opted to negotiate an extension until April 19 -- and significantly, to negotiate an increase in the minimum price at which the banks are obligated to sell their interest from $1.33 billion to $1.485 billion. That means that if EQR’s offer for Archstone matches or exceeds the minimum price, and BofA and Barclays decide to sell their stake to majority owner Lehman Bros. Holdings Corp. under its right of first offer, Equity Residential would receive the maximum transaction breakup fee -- a hefty $80 million, according to a Securities and Exchange Commission filing by the Chicago-based apartment REIT. Equity Residential has not yet made a formal offer. If and when it does, Lehman -- which now owns 73.5% of Archstone after paying $1.325 billion in January for half of a 53% stake held by BofA and Barclays -- has a right to match the offer. However, it would come at a higher cost for Lehman, which is also facing a time clock that is winding down as the investment bank tries to exit one of the largest bankruptcies in history as early as this month.


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In a research note, Sandler O'Neill + Partners REIT analysts Alexander Goldfarb and James Milam said they expected EQR to raise its bid to more than the $1.45 billion that allows it to collect the maximum breakup fee, in order to drive up Lehman’s cost of matching the offer and give it a smaller window of time to put together a deal. Given that EQR's driving objective is to own all or part of Archstone rather than simply collect the breakup fee, Goldfarb and Milam opined that the Chicago REIT will probably continue to keep its options open to buy the banks' remaining stake. However, given Lehman's strong desire to own all of Archstone, bolstered by its first-offer rights, "it is tough to envision a situation where EQR walks away with the banks' 2nd tranche without bidding so much that [Lehman] exercises its tag-along rights," the analysts wrote.

W.P. Carey Converting to a Public REIT Investment firm W.P. Carey & Co. LLC plans to convert into a publicly traded real estate investment trust (REIT) and in doing so will acquire its non-traded REIT affiliate, Corporate Property Associates 15 Inc. The transaction values CPA 15 at $2.6 billion, including the assumption of debt of $1.2 billion, as of Dec. 31, 2011. The new REIT, to be named W.P. Carey Inc., will continue to trade on the New York Stock Exchange under the symbol WPC. Following the merger, W.P. Carey Inc. will control a portfolio of 42.78 million square feet of corporate real estate net leased to 135 companies around the world. About 70% of the portfolio is in the United States and the rest in Europe. The portfolio generates $326 in annualized base revenues and is 95% occupied. By property type, the portfolio breaks down as follows. Office, 25% Warehouse/Distribution, 17% Retail, 15% Industrial, 15% Self-storage, 13% Other, 15% For the nine months ended Sept. 30, the largest tenant base in the portfolio based on rent was as follows. U-Haul Moving Partners Inc. and Mercury Partners LP, $ 24.3 million Carrefour France, $15.3 million Life Time Fitness, $13.7 million OBI A.G., $13 million Hellweg Die Profi-Baumarkte GmbH, $12 million True Value Co., $10.84 million The REIT is expected to have a total equity market capitalization of $3 billion, total market of $5 billion. W.P. Carey Inc. will continue to manage the firm's other Corporate Property Associates series of publicly held, non-traded REITs. "This transaction will enhance our strength and flexibility, with a larger balance sheet and more diversified portfolio," said Trevor Bond, president and CEO of W.P. Carey. "Over the long-term, we believe it will allow us to capitalize on new opportunities that are consistent with our established investment parameters and our overall business strategy of growing assets under ownership and enhancing shareholder value." W.P. Carey said it believes that the benefits of the proposed merger and conversion to REIT status include: Significant increase in W.P. Carey's scale and real estate under ownership; Increased financial strength and flexibility to access capital for growth;


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Enhanced cash available for continued dividend growth; Simplified tax reporting for shareholders; and Further diversification of its shareholder base over time, including from active and passive REIT investors.

Tranzon Alderfer: Bank Owned Properties: 4 Big Box Retail Sites in PA, NJ & DE

Bank of America Gives Away a 282,000-SF Office Building Bank of America, which in the past couple of weeks, has announced plans to sell three high-rises in New York and Charlotte, N.C., and others in Boston and Chicago, has come up with another way to downsize its real estate portfolio. Bank of America is donating one of its four office buildings in Wilmington, DE, to a new non-profit organization supported by the Longwood Foundation. The donation of the nine-story, 282,000-square-foot facility at 1200 N. French St. expands Bank of America's ongoing commitment to improving educational opportunities in Delaware. The value of the transaction was not disclosed. The Longwood Foundation will create a new non-profit, the Community Education Building (CEB), to receive the bank's donation and operate the facility. The final transfer is expected by early 2013.


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Bank of America employees who work in the Bracebridge IV facility will move to other parts of the Wilmington campus and other locations in the Delaware market.

CRE Loan Prices Regaining Pre-Recession Values The aggregate value of bank and CMBS real estate loans sold last year rebounded to levels not seen since 2008. Whole real estate loans both commercial and residential offered by the Federal Deposit Insurance Corp. (FDIC) last year sold at 84% of their book value compared to 34% in 2010 and 72% in 2008. What's more, performing commercial real estate (CRE) loans the FDIC sold last year went for 91% of book value. Performing residential loans in 2011 also went for about 91% of their book value. The FDIC also pools sub- and nonperforming real estate loans from failed banking institutions and sells them through structured transactions. In these cases, the winning bidder purchases a portion, typically ranging from 20-40%, of the equity in the mortgage pool. To date all such transactions have included some form of FDIC financing. Typically, these deals include a number of construction and development loans and hence tend to have lower valuations. The implied value on the winning structured loan bids in 2011 held steady at an average in the low 40% range to book value. The average value of these types of transactions in 2008 and 2009 were in the low to mid 30s. Some of the most active buyers of FDIC loans last year included Colony Capital Advisors and Oak Tree Capital, which each purchased structured interests in $1.78 billion of sub- and nonperforming residential and CRE loans in FDIC-financed transactions. Kansas City, MO-based Bank Midwest was the largest buyer of FDIC-sold whole real estate loans. Bank Midwest acquired $174 million of loans, 75% of which were CRE loans. In total, the FDIC sold $3.1 billion in real estate loans in 2011. In 2010, FDCI real estate loan sales totaled $12.7 billion. CMBS loans priced by online debt trader DebtX also climbed to 86.1% as of Dec. 31 from 85.2% as of Nov. 30, 2011. Loan values were 79.4% as of Dec. 31, 2010. "CRE loan prices in December rose to their highest level in more than two years," said DebtX CEO Kingsley Greenland. "The price increases are the result of a decline in treasury yields, a decrease in credit spreads and improving CRE fundamentals." In December, DebtX priced 51,895 CRE loans with a $621.5 billion aggregate principal balance.

Is Tech All Tuckered Out? By: Adrian Ponsen During late 2009 and 2010, businesses poured their newfound profits into IT investments, choosing to boost productivity over headcount. We spotted this trend in our May 2010 Daily Update, "High Tech to Housing and Back," and predicted the upswing in tech hiring that followed, which eventually led to a surge in Bay Area office leasing. Seven quarters later, the tech industry has had a great run, but the same leading indicators we examined back in 2010 are no longer looking as encouraging.


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Since the beginning of 2011, business investment in IT has grown at a much slower rate than it did during late 2009 and early 2010 (see Exhibit 1). This is significant, because IT investment has been a reliable leading indicator of hiring in the tech sector, and the recent deceleration in IT spending probably means that tech hiring will also slow to a more moderate pace at some point during 2012–13. We don't mean to suggest that tech office markets are now headed for a double dip. That looks very unlikely. While IT investment isn't growing as rapidly as it did during 2009–10, it continues to grow. This should keep the tech industry rolling, and the sector's prospects for above-average long-term growth remain intact. Furthermore, many tech markets have simply had so much space leased in recent quarters that they are already very tight. Given the low availability in these markets, rent growth should continue to beat the U.S. average by a wide margin, even if demand growth slows down. Exhibit 2 shows the current availability rates in a select group of markets and compares the current numbers to the rate that spurred 5%+ rent growth during the housing-boom years. Because tech markets such as San Jose, San Francisco, and Austin have improved so much in recent quarters, their availability rates are closest to the sweet spot that was needed to push rents aggressively during the last CRE expansion phase. As long as availability rates don't shoot back up in these markets in the near term (they aren't expected to; even in tech markets new construction is still minimal), their forecast rent growth should continue to outperform. On the other hand, since it's not likely that another late '90s-style tech boom will happen in 2012, investors should be wary of paying through the nose to buy into tech markets such as San Diego, East Bay, or Orange County, where fundamentals are still out of sync. Aggressive rent growth will still be difficult to achieve in these markets over the next one or two years.


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Property Valuation Fraud Risk Rises Nearly 8% Across the U.S., property valuation fraud increased 8% in the fourth quarter of 2011 over the previous quarter. The rise follows a period of decline and stability in valuation-related fraud, according to Interthinx's most recent Mortgage Fraud Risk Report. Property valuation fraud is perpetrated by manipulating property value to create false equity, which is then extracted from loan proceeds by various means. According to the most recent analysis, certain regions of the New York Tri-State area have moved into the "very high risk" category for valuation fraud. With a mortgage fraud index value of 247, Arizona overtook Nevada (with an index value of 242) as the nation's "riskiest state." Nevada had held the top spot since the first quarter of 2010. Florida is the third riskiest state for mortgage fraud and is home to Zip code 33993, currently the riskiest ZIP code in the nation. "Valuation fraud continues to be a problem for lenders intent on mitigating overall fraud risk," said Mark Chapin, chief valuation officer for Interthinx. "Lenders must take great care with their collateral valuation process in this environment, as many areas around the country are still experiencing home value declines."

Real Money: More Capital Expected To Flow to CRE A wide swath of lenders see capital coming back into commercial real estate in 2012 in much greater volumes across multiple lending sources. Of 20 institutional lenders with whom Jones Lang LaSalle held private meetings with in the past couple of weeks indicated a stronger appetite or allocation for placing commercial real estate mortgages in 2012. Jones Lang LaSalle also partnered with Penton Media Research on a proprietary survey that compiled feedback from 186 borrowers and 136 lenders that together comprise a total median $73.3 million in commercial real estate asset value. In the survey, lenders reported positive expectations for 2012 funding aims including a 12% uptick in expected capital placement this year. "We expected to hear bold predictions from all of the lending sources along the capital stack and they didn't disappoint with strong inclinations to place commercial real estate debt," said Tom Fish, co-head and executive managing director of Jones Lang LaSalle's real estate investment banking business. "We were pleasantly surprised with lenders' acceptance of risk as more indicated they had cash flow for the secondary markets and property types, indicative of lenders moving up the risk curve." "While absolute borrowing rates are at historic lows, lenders view commercial real estate mortgages as attractive investment opportunities versus alternative bonds or other fixed-rate alternatives. That should result in larger allocations to commercial real estate this year from life companies, commercial banks and CMBS originators," added Mike Melody, the other co-head and executive managing director. The lenders Jones Lang LaSalle surveyed agreed, indicating an increasing trend that has been on the move the past two years. Lender financing in 2011 increased an average 11% over 2010. Lender respondents expect 2012 financing to increase even more with a 12% improvement over 2011. 2012 lender expectations highlights were as follows. Financing in 2011 increased an average 11% from 2010. Respondents expect 2012 financing availability to increase 12% over 2011. Apartments represent the best investment opportunities as 76% chose the product type. Another 48% of lenders worry the most about hotel loans.


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Lenders indicated that 62% of loans closed are for long-term and 38% are for short-term loans. Those percentages aren't expected to move much with 2012 long-term expectations at 64% and short-term at 36%. Following a volatile 2011, CMBS originators are back in the market in a big way in 2012, as volumes are expected to rise as high as $50 billion this year. CAPITAL RAISINGS & PROPERTY FINANCINGS National Retail Properties Inc. in Orlando is raising $287.5 million through the sale of 6.625% Series D Cumulative Redeemable Preferred Stock. The company intends to use the net proceeds to redeem its outstanding preferred securities and repay debt. Corporate Office Properties Trust in Columbia, MD, entered into a $250 million term loan agreement with the option to expand the amount by $150 million, for a maximum loan of $400 million. The loan has a 5-year term and a variable interest rate of LIBOR plus 1.65% to 2.4%. The company is using proceeds to repay debt. Equity One Inc. in North Miami, FL, closed a $200 million unsecured, 7-year term loan. The loan can be increased to $250 million through an accordion feature and bears interest at the annual rate of LIBOR plus 190 basis points subject to a pricing grid for changes in the company's credit ratings. The company also entered into interest rate swaps to convert the term loan's LIBOR rate to a fixed interest rate of 3.46%. Proceeds from the financing are being used to pay down outstanding amounts on the company's $575 million revolving credit facility and for acquisitions. Rouse Properties Inc. in New York launched a rights offering of common stock. An affiliate of Brookfield Asset Management Inc., which together with its consortium partners, beneficially owns approximately 37.53% of the company's common stock, has committed to purchase all of the unsubscribed shares such that the gross proceeds to Rouse will be $200 million. Franklin Street Properties Corp. entered into a loan of up to $106.2 million with its FSP 50 South Tenth Street Corp. subsidiary. The loan includes a term component in the amount of $76.2 million, which was used to repay a loan from Bank of America. The loan also includes a revolving line of credit of up to $30 million. The proceeds are to be used for lender-approved tenant improvement costs, leasing commissions and other incentives necessary to lease space at the 12-story, 486,000-square-foot office building in Minneapolis. The loan matures Dec. 31, 2013. Brookdale Senior Living Inc. in Nashville secured $77.9 million of first mortgage acquisition financing and $15 million of seller-financing. The $77.9 million first mortgage facility has a 10-year term; 75% of the facility bears interest at a fixed rate of 4.21% and the remaining 25% at a variable rate of 30 day LIBOR plus a margin of 276 basis points. The $15 million mortgage loan has a two year term and bears interest at a fixed rate of 7%. Brookdale used the proceeds to acquire nine communities with a total of 1,295 units for $121.3 million. The communities had previously been operated by the company under long-term leases that were accounted for as operating leases. In addition, the company obtained a $63 million first mortgage loan secured by one of the company's communities. The loan has a 5-year term and bears interest at a variable rate of 30 day LIBOR plus 300 basis points. The company repaid a $62.8 million first mortgage loan that was scheduled to mature in 2013. Pebblebrook Hotel Trust in Bethesda, MD, executed a $47 million non-recourse, secured loan with PNC Bank at a fixed annual interest rate of 4.25%. The loan has a term of five years and is secured by a first mortgage on the company's 252-room Argonaut Hotel in San Francisco. Proceeds from the loan will be used to pay down debt. KBS Legacy Partners Apartment REIT Inc. entered into an early-rate loan lock application with CBRE Capital Markets Inc. and secured an interest rate of 3.93% on a seven-year $32.5 million mortgage loan. It submitted a good faith deposit of $650,000, which amount will be refundable upon closing of the loan. Payments under the loan will be interest-only for the first two years of the loan followed by payments of interest and principal with principal calculated using an amortization schedule of 30 years for the balance of the loan. The loan will be secured by a 504-unit Class A apartment complex in the Valley Ranch community of Irving, TX. Hudson Realty Capital LLC and RXR Realty LLC both in New York have launched a commercial real estate lending platform to originate and/or purchase commercial real estate debt assets. They will focus on first-


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mortgage bridge loans as well as B-Notes, mezzanine and preferred equity opportunities in the New York TriState region. The joint venture will generally target loans or make investments in amounts between $10 million and $50 million throughout the capital stack.

Upcoming Corporate Facility Closures & Downsizings Abercrombie & Fitch Co., which has closed underperforming 135 stores in the past two years, has identified another 180 stores for closure by 2015. A big chunk of the closings are expected to occur in the U.S. "Our results for the fourth quarter were below our expectations in an extremely challenging environment," said Mike Jeffries, CEO and chairman of Abercrombie & Fitch Co. of the company's fourth quarter performance. "However, we are confident that we are on track with our long term strategy of leveraging the international appeal of our iconic brands to build a highly profitable, sustainable, global business." Total comparable store sales for the quarter were flat last year. By brand, comparable store sales decreased 4% for Abercrombie & Fitch, decreased 3% for abercrombie kids and increased 2% for Hollister Co. Perry Ellis International is planning on streamlining operations after fourth quarter revenues and gross margin were disappointing. Results were pressured due to retail partners requesting later deliveries of goods, as well as a significant increase in promotional markdowns and sales allowances for the holiday season. The company has launched a strategic review of its brand portfolio that will be completed during the first half of the year. In addition, the company expects to increase efficiency by consolidating distribution facilities and foreign sourcing offices and streamlining operational support functions. Company MetLife THQ Xoma (US) Bandai Namco Games America Sanyo Solar USA Sanyo North America Corp., Digital Solutions Lakeview Farms Momentive Specialty Chemicals Time Warner Cable Schenker MetLife Marfred (Amcor Packaging Distribution) Bloomfield Bakers Bank of America Cedars-Sinai Medical Center Dawn Food Products Zodiac Pool Systems Milprint Inc. (Bemis Company Inc.) Staples Target CVS Pharmacy Store Priority One Medical Transport Harbor Freight

No. Impacted 54 80 78

Impact Date 3/30/2012 3/26/2012 3/6/2012

Layoff Closure

37 114

3/6/2012 3/22/2012

Rent

21605 Plummer St., Chatsworth, CA 5743 Smithway St., Commerce, CA

Closure Closure

74 93

3/30/2012 3/26/2012

Rent Rent

41100 Boyce Road, Fremont, CA 7441 Chapman Ave., Garden Grove, CA 2815 W. El Segundo Blvd., Hawthorne, CA 310 Commerce St., Irvine, CA

Closure Layoff Layoff Closure

14 82 56 118

3/31/2012 3/10/2012 3/2/2012 3/30/2012

Own Rent Rent Rent

12450-12500 Foothill Blvd., Lakeview Terrace, CA 10711 Bloomfield St., Los Alamitos, CA 1000 W. Temple St., Los Angeles, CA

Closure Closure Layoff

33 456 60

3/23/2012 2/29/2012 3/31/2012

Rent Rent Own

8700 Beverly Blvd., Los Angeles, CA 2407/2455 Tenaya Drive-737 Riverside Drive, Modesto, CA 6000 Condor Drive, Moorpark, CA

Layoff

127

3/9/2012

Own

Closure Layoff

265 125

3/10/2012 3/30/2012

Own Rent

6590 Central Ave., Newark, CA 6610 Overlake Place, Newark, CA 400 Newpark Mall, Newark, CA 5100 Broadway, Oakland, CA 740 S. Rochester Ave., Suite E, Ontario, CA 1440 East Third St., Oxnard, CA

Closure Closure Closure Closure

123 74 139 67

3/3/2012 3/15/2012 3/6/2012 3/10/2012

Own Rent Own Rent

Layoff Closure

76 23

3/30/2012 3/19/2012

Rent Rent

Address 28632 Roadside Drive, Agoura Hills, CA 29903 Agoura Road, Agoura Hills, CA 2910 Seventh St., Berkeley, CA 1740 Technology Drive, Suite 600, C. San Jose, CA 970 E. 236th St., Carson, CA


Closure or Layoff Closure Layoff Layoff

Rent or Own Rent Rent Rent

15

Company MetLife MetLife Sony Electronics McKesson Pharmaceutical Corp. Garden City Casino Philips Electronics North America Radiology Medical Group of Santa Cruz County Abercrombie & Fitch Kaiser Foundation Health Plan Exelis Aero-Electric PMI Mortgage Insurance Co. Morgans Hotel Group Management (Skybar)

Address 4256 Hacienda Drive, Pleasanton, CA 3825 Hopyard Road, Pleasanton, CA 16530 Via Esprillo Drive, San Diego, CA

Closure or Layoff Closure Closure Layoff

No. Impacted 88 59 80

Impact Date 3/30/2012 3/30/2012 3/9/2012

One Post St., San Francisco, CA 360 S. Saratoga Ave., San Jose, CA 3860 N. First St., San Jose, CA

Layoff Closure

83 418

3/31/2012 3/26/2012

Rent Rent

Closure

108

2/29/2012

Rent

Layoff

21

2/29/2012

Own

Closure

70

3/24/2012

Rent

1305 Tommydon St., Stockton, CA 3500 Willow Lane, Thousand Oaks, CA 568 Amapola Ave., Torrance, CA

Closure Closure Closure

162 147 72

3/30/2012 3/30/2012 3/19/2012

Own Rent Rent

3003 Oak Road, Walnut Creek, CA

Layoff

155

3/6/2012

Own

8440 Sunset Blvd., West Hollywood, CA

Layoff

58

3/1/2012

Rent

1661 Soquel Drive, Building G, Santa Cruz, CA 1555 Simi Town Center Way, Suite 610, Simi Valley, CA

Rent or Own Rent Rent Own

Loans and Properties Under Surveillance


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Distressed Properties Potpourri JLL PROPERTY TRUST AFFILIATE DEFAULTS ON SEATTLE OFFICE BUILDING A wholly owned subsidiary of Jones Lang LaSalle Income Property Trust Inc. defaulted on its mortgage loan collateralized by Metropolitan Park North, a 179,000-square-foot office building in Seattle, WA. Nordstrom recently signed a 2-year lease extension at the property but reduced its space by 49,000 square feet to 86,000 square feet and reducing its rent by $14 per square foot. Given the reduced rent and occupancy by the building's primary tenant, revenue from the property no longer covers debt service payments on the mortgage loan, the subsidiary reported. The property is currently valued at less than the outstanding debt. The outstanding amount of the mortgage loan is approximately $56.5 million, bearing interest at a fixed rate of 5.73%, and is scheduled to mature in April 2013. The loan contains an acceleration clause pursuant to which the Lender may, in the event of a default and without notice, declare the outstanding loan balance immediately due and payable. During the time the default exists, the Lender may charge default interest at a rate of 9.73%. The loan is non-recourse to the company. Jones Lang LaSalle Property's borrowing entity ultimately intends to relinquish its ownership of the property to AXA Equitable Life Insurance Co. in a deed in lieu of foreclosure transaction. AMREIT GIVES BACK SHOPPING CENTER An affiliate of AmREIT Realty Investment Corp. turned over the keys on Olmos Creek Shopping Center, a 102,178-square-foot at 14602-14610 Huebner Road in San Antonio, TX. The loan on the property had matured without payoff. The borrower and the noteholder were unable to come to terms on an extension of the loan. As of Feb. 6, 2012, the outstanding balance of the loan was $11.2 million. BANK FORECLOSED PROPERTY SOLD Schneider Industries in St. Louis, working on behalf of Whitney Bank in New Orleans, negotiated the bankruptcy approved sale of a South Louisiana Ethanol plant in New Orleans. South Louisiana Ethanol filed a motion with the United States Bankruptcy Court for approval of a private sale and public auction of real estate and all available assets to pay expenses owed to Whitney Bank. Whitney retained Schneider Industries as the firm to dispose of the plant including 49 acres, with dock building capabilities on the Mississippi River, as well as half the rights of adjoining 4.5 acres on the river front property, 129,000 square feet of buildings and structures and all equipment. The appraised value of all available assets totaled $5.6 million. The real estate and equipment was offered through a sealed bid sale. Schneider Industries was able to obtain three bids and chose the highest offer of $6.8 million. TRIGILD APPOINTED RECEIVER ON FLORIDA GOLF COURSE Trigild – a San Diego-based distressed real estate, loan recovery and receivership specialist – was appointed receiver for Oak Hills Golf Course and Country Club, a championship course 45 miles north of Tampa, FL, in Spring Hill. As court-appointed receiver, Trigild will manage the property, at 10059 Northcliffe Blvd., which includes an 18-hole, 6,935-yard layout designed by Chuck Almony Sr. to challenge high and low handicap golfers. DELSHAH CAPITAL RESOLVES TWO NYC BANKRUPTCIES DelShah Capital LLC in New York purchased 101 W. 126th St. in New York through a New York State Bankruptcy Court ordered sale for $11.24 million. In 2010, a DelShah affiliate purchased the non-performing senior mortgage note for the 32-unit multifamily apartment building, with a ground floor commercial space. DelShah was poised to purchase the property in May 2011 when the debtor declared bankruptcy.


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Separately, at 639 W. 46th St., the former home of H & H Bagels, in Manhattan, DelShah Capital purchased the senior note in May 2010 and began a foreclosure on the building. Helmer Toro, the owner of the property, then filed for bankruptcy. DelShah and other creditors converted the case into Chapter 7 liquidation. This month, the property was sold to the second mortgagee MKF Management and DelShah Capital received payment in full on its senior lien position, inclusive of default interest at 24%.

Watch List: Newest Specially Serviced Loans The following information for these lead listings was provided by Trepp LLC, an industry leader in providing surveillance data on loan and commercial real estate performance underlying the CMBS market.

Property

Address

John Hancock Center

875 N. Michigan Ave., Chicago, IL 1311 Executive Center Drive, Tallahassee, FL

Property Type

Cur. Bal.

Office

$182,400,000

Office

$115,500,000

909 A Street National Conference Center Entrata di Paradiso Apartments

909 A St., Tacoma, WA

Office

$48,000,000

18980 Upper Belmont Place, Lansdowne, VA

Hotel

$41,632,596

CMBS Lehman 2007 LLFC5 CSMC 2007-C1 BSCMS 2007TOP26 Lehman 2006 LLFC5

2701 N. Rainbow Blvd., Las Vegas, NV

Multifamily

$39,000,000

WBCMT 2007-C30

Cerritos Corporate Tower The Retreat at Stonebridge Ranch

18000 Studebaker Road, Cerritos, CA

Office

$37,500,000

MLCFC 2007-5

1920 Grassmere Lane, McKinney, TX

Multifamily

$29,410,100

FREMF 2011-K704

Palisades Village Center

881 Alma Real Drive, Pacific Palisades, CA

Office

$29,200,000

Hotel

$28,940,970

COBALT 2007-C2 JPMCC 2007LDP10

Industrial

Koger Center

National Hotel

Central Florida Research Park Portfolio Corporate Gateway Center The Prescott Hotel & Postrio Restaurant

1677 Collins Ave., Miami Beach, FL 2800-2850 Discovery Drive, 12661 Challenger Parkway & 2603 Challenger Tech Court, Orlando, FL 21660 & 21700 East Copley Drive, Diamond Bar, CA 545 Post St., San Francisco, CA


Special Servicer TriMont Real Estate Advisors LNR Partners

Comment Maturity default Imminent default

C-III Asset Management TriMont Real Estate Advisors CWCapital Asset Management CWCapital Asset Management

Imminent default

Wells Fargo CWCapital Asset Management

Other

C-III Asset Management

Maturity default

$24,778,451

MLMT 2006-C1

CWCapital Asset Management

Imminent default

Office

$20,593,109

CSMC 2006-C1

Situs Asset Management

Hotel

$20,580,331

WBCMT 2005-C21

LNR Partners

Imminent default Imminent maturity default Imminent default

Monetary default

Imminent default Non monetary default

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