These CRE Transactions Typify an Interesting 2024
These weren’t the biggest deals, but we didn’t want the year to close without highlighting these interesting deals and the dealmakers behind them.
Commercial real estate dealmaking looks a bit different than it did pre-pandemic. Retail is hot again, the office is a destination if you do it right, and alternative lenders are making deals happen that otherwise wouldn’t happen. The following transactions are not the largest of 2024, but each is impressive because of what it says about the opportunities for the taking in CRE and for the challenges the parties overcame current.
Lessen Relocates Chicago Office to Growing Tech Corridor
In the largest new office lease in Chicago’s Central Loop for 2024, Lessen, a tech-enabled, end-to-end solution for real estate property services, signed a 77,000-square-foot lease at 203 N. LaSalle St., a 27-story, 624,724-square-foot, Class A mixed-use building in Chicago’s Central Loop.
Transwestern brokers were able to leverage the building’s full set of amenities, direct access to nearly every CTA line and its debt-free owners to stand out among other Central Loop office buildings. They also received a boost from Google, which is renovating the James R. Thompson Center office building at 100 W. Randolph St. into its new Chicago headquarters. Once the project is complete by 2026, it will house about 2,000 Google employees.
Transwestern’s Kathleen Bertrand, Eric Myers and John Nelson represented the building’s ownership, Sumitomo Corporation of Americas, in the June transaction. Jake Ehrenberg and Brian Means of JLL represented Lessen.
“There is new momentum and potential revitalization in the Central Loop thanks to Google’s purchase of the James R. Thompson Center,” Bertrand told Commercial Property Executive. “Tech companies such as Lessen are being drawn to buildings like 203 N. LaSalle St. that are close to the Thompson Center.”
Davis Acquires Minnesota MOB in Complex Deal
In a “complicated” transaction that took nearly a year to complete, Davis, a Minneapolis-based real estate firm, acquired WestHealth, a three-building, 201,000-square-foot outpatient medical center in Plymouth, Minn., for $72 million in October from Harrison Street Real Estate.
It was one of the largest single-asset sales in the Minneapolis/St. Paul market this year. Located at 2805, 2855 and 3005 Campus Drive, the portfolio anchored by Allina Health comprises two outpatient buildings, an ambulatory surgical center and emergency/urgent care facility.
Financing was arranged by Healthpeak and Eric Gundersen of Alerus Financial. Stewart Davis, executive vice president of acquisitions at Davis, led the Davis team. Brian Bruggeman of Colliers represented Allina Health. Chris Bodnar, Cole Reethof and Brannan Knott of CBRE marketed the property for Harrison Street.
CEO Mark Davis cited capital market instability and fluctuating interest rates and the building’s restrictive ground lease with limited term remaining as challenges in getting the deal across the finish line.
“A prospective buyer for WestHealth had to have significant confidence in the anchor tenant to believe that these issues could be resolved smoothly,” Davis told CPE. “Otherwise, the deal risked falling apart. Ultimately, Allina found the right partner in Davis and after considerable effort, we successfully reached an agreement with HSRE.”
$21M C-PACE Loan Kicks Off HQ in Kansas City
Bayview PACE of Coral Gables, Fla., played a key role in the capital stack for Kansas City-based Masters Transportation to build a new 324,000-square-foot corporate headquarters and flex/industrial facility, providing $20.5 million C-PACE funding in July for the development.
The Commercial Property Assessed Clean Energy financing from Bayview PACE complemented other funding, including a $31 million construction loan and $20 million in sponsor equity. Bayview PACE also worked with the Port Authority of Kansas City to structure the PACE assessment to allow for a bond lease providing the property with a real estate tax exemption and a ground lease.
Marco Lainez, senior vice president of originations for Bayview, arranged the transaction. Alex Hilton and Jake Frodyma of Walker & Dunlop in Overland, Kan., represented the borrower.
The C-PACE financing represented 28 percent loan-to-cost. The 20-year non-recourse loan was structured with three years of interest only. The financing provided the sponsor a unique structure at 70 percent costs whereby C-PACE was coupled with Simmons Bank.
“As is the case with many C-PACE transactions, it can take some time getting the bank comfortable with consenting to the financing, although it’s been in use for over a decade,” Lainez shared.
Walker & Dunlop spearheaded discussions between Simmons Bank and Bayview PACE, Lainez said, so the Bayview team could answer all of the bankers’ questions about C-PACE financing.
Adding to the deal’s complexity, the borrower entered into a ground lease with the Port Authority as part of an economic development incentive package.
“There have only been a few C-PACE transactions with ground leases completed, but it’s a growing trend in the industry, particularly as ground-lease dominated markets like New York City get more active in C-PACE,” Lainez said.
Wingstop Lands on New HQ in Uptown Dallas
When successful restaurant chain Wingstop outgrew its corporate office space near Addison Airport in the Dallas suburb of Addison, they made the bold decision to leave the “burbs” behind. Working with CBRE for about a year, Wingstop executives wanted a cool walkable location in the city loaded with amenities to appeal to workers.
The end result: CBRE arranged for Wingstop to lease 112,000 square feet on the top four floors of the four-story 245,961-square-foot One West Village in Uptown Dallas on the west side of US 75. It became the second largest office lease transaction in Dallas this year.
CBRE Vice Chairman Josh White and Senior Vice President Ryan Buchanan represented Wingstop and CBRE’s Trey Smith served as a strategic advisor. The CBRE brokers worked with representatives of building owner OliveMill Holdings: Ryan McManigal, Peter Yates and Chris Selbo.
Amenities at the iconic glass building now dubbed “One Wing Village” include open floors for collaboration, creative space with a podcast studio, a test kitchen, free catered lunches and a fitness center.
White said the transaction is an example of what he calls an underreported trend: companies creating office spaces that employees are compelled to come to.
“They knew exactly what they wanted from their office space and what they wanted to offer their employees. We were able to work closely with them to find the space and get the transaction done within a year,” he shared.
“It also bucks the trend of companies moving to the suburbs, and we expect more companies to follow in Wingstop’s move to the urban core,” White stated.
Gantry Secures Construction Takeout for LA Creative Office Campus
Independent commercial mortgage banking firm Gantry secured a $21.4 million construction takeout loan in August for Redcar Ltd.’s two-building creative office project located at 3520-3524 and 3512-3516 Schaefer St. in Culver City, Calif.
Gantry Principal Tony Kaufmann and Andrew Ferguson, an associate with Gantry’s San Francisco production office, represented Redcar in the transaction.
The loan was provided by Standard Insurance, a life insurance company and one of Gantry’s correspondent insurance company lenders. It features an attractive fixed rate with a three-year initial term and 30-year amortization. According Kaufmann, the loan has no structure on it, giving the borrower the flexibility to run its business plan.
The newly built Class A buildings have a total of 35,000 square feet and feature dramatic 18-foot ceilings, extensive glass, open-floor plans with modern interiors and landscaped exteriors with gathering spaces. The buildings are fully leased. Kauffman said Culver City, located in Los Angeles County, has a substantial creative and entertainment-driven industry base.
He noted office leasing in select Los Angeles boutique markets is performing well vs. office buildings in the traditional hotspots.
“Not all office space is struggling in the current market cycle and a flight to quality has kept many newer properties on track,” he said.
NJ Regional Power Center Changes Hands for $117M
Institutional Property Advisors, a division of Marcus & Millichap, brokered the $116.5 million sale of Hamilton Marketplace, a 485,000-square-foot regional power center anchored by a 65,155-square-foot ShopRite grocery store near Princeton, N.J., to Paramount Realty in September. It was the largest single-asset open-air shopping center transaction to trade in New Jersey since 2017.
Marketed for the first time since it was developed in phases during the early 2000s, the center includes major retailers like Kohl’s, Ross, Staples, Barnes & Noble, Michaels, Old Navy, Ulta, Burlington and PetSmart. Located on more than 128 acres at Route 130 and Interstate 195, it is one of the nation’s best performing grocery-anchored power centers.
Brad Nathanson, IPA executive director and JP Colussi, IPA senior director, represented the seller SITE Centers, and procured the New Jersey-based buyer.
Hamilton Marketplace is one of numerous shopping centers SITE Centers has been selling in the past year across the country as it prepared a spinoff of Curbline Properties Corp. into the first and only public REIT focused exclusively on convenience retail assets.
Hamilton Marketplace drew a pool of private and institutional investors that hasn’t been seen since before the pandemic, Nathanson said, noting that retail fundamentals are the strongest he has seen in 20 years. Investors are attracted to vintage power centers with strong tenant bases because of the lack of new construction and high costs of re-tenanting.
Stos Enters Salt Lake City With $35M Industrial Buy
Stos Partners, a San Diego-based privately held commercial real estate investment and management firm, entered the growing Salt Lake City industrial market in July with the acquisition of a three-building 279,233-square-foot industrial complex for $34.99 million in an off-market transaction
Alex Harrold of Matthews Real Estate Investment Services represented Stos Partners in the transaction. Eli Priest, Jeff Heaton and Kyle Roberts of Newmark are overseeing leasing.
Led by Principal and Founder CJ Stos, Partner Jason Richards, Executive Vice President Jay Boyle and Vice President of Acquisitions Morgan Hill, the company is implementing a capital improvement program, stabilizing and re-tenanting the asset.
Stos said the team identified the property and began working to acquire it even though it was not on the market. He cited the prime location and functionality of the park, wide range of suite sizes and tenant diversification opportunities for the team’s interest.
Property features include 22-foot clear height, 49 dock-high doors and 18 drive-in ground-level doors.
Located on 14.5 acres at 900 W 2900/2950/3100, the property is near the I-15, I-80, I-215 and SR 201 freeways and about 10 miles from Salt Lake City International Airport.
“With the growth of ecommerce, logistics and manufacturing, Salt Lake City continues to strengthen as a key market for industrial users,” Stos said.
Wellness Tenant Joins the Mix at West Side NYC Property
If you want to have a relaxing spa day after a game of pickleball or shopping for a new car, a high-end luxury spa will be opening on the fourth and fifth floors of 660 Twelfth on Manhattan’s West Side thanks to a new 23-year lease for 43,027 square feet of space arranged by Avison Young.
Avison Young Principals Peter Gross and Nicola Heryet represented the landlord, 677 11th Avenue Realty LLC. Kenneth J. Moore and Loy Carlos, principals at Classiques Modernes International Realty, represented the tenant.
Other tenants at the property at 660 12th Avenue along the West Side Highway between 48th and 49th streets are the Bram Auto Lexus/Toyota dealerships, Glass Houses event space and Hell’s Kitchen Pickleball Club. The asset is now full with a diverse mix of unique tenancies that complement each other, Gross noted. Originally built in 2002, the seven-story, 300,000-square-foot asset was redeveloped in 2019. It has unobstructed views of the Hudson River, terraces on the fifth and seventh floors and 24/7 building security.
The brokers declined to identify the tenant at this time, noting only that it is considered New York City’s premier Asian-inspired spa. The modern, fully equipped spa will offer a Japanese/Korean service experience with outdoor amenities. Gross said the spa’s space will include one of the building’s wraparound, usable terraces.
The Avison Young team specifically targeted a specialty-use tenant for the property “given the dynamic make-up of the building.” “The deal, which is very complex, was achievable in large part due to the tenant’s vision of what the space will eventually become, but also to the ownership’s creative and flexible deal-making ability,” Gross told CPE. “There was a great deal of due diligence that was required by both parties prior to finalizing and, if it wasn’t for the owner and tenant feeling comfortable and trustworthy, this would have been just another prospective deal that came and went.”
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