Monday, November 30, 2009

BARCLAYS, GOFF JV ACQUIRES CRESCENT REAL ESTATE EQUITIES

A joint venture between Barclays Capital and Goff Capital has acquired Fort Worth-based Crescent Real Estate Equities from Morgan Stanley Real Estate Funding II. As part of the transaction, John Goff, who co-founded Crescent and served as vice chairman and CEO until its sale to Morgan Stanley in 2007, will re-join the company as chairman and CEO. Terms of the deal were not disclosed. Crescent Real Estate Holdings owns or manages approximately 17 million square feet of office space, including Houston's 4.3 million-square-foot Greenway Plaza office complex.

Tuesday, November 24, 2009

TEXAS BOUND FOR FAST RECOVERY?

Texas’ four major metros are in the top ten fastest-recovering cities nationwide, according to Forbes magazine.
Forbes ranked San Antonio the second fastest recovering city in the country, Austin the third, Dallas–Fort Worth–Arlington the sixth and Houston–Sugar Land–Baytown the eighth.
The magazine attributed their relatively quick recovery to San Antonio’s and Austin’s high number of municipal jobs, Dallas’ thriving technology industry and Houston’s energy sector, as well as the state housing market’s ability to remain stable while other states’ markets crashed.
“Texas didn’t have as big of a boom,” said Dr. Jim Gaines, research economist at the Real Estate Center at Texas A&M University. “So we’re not having anywhere near the kind of bust.”
El Paso and McAllen-Edinburg-Mission were also placed within the 100 fastest-growing MSAs, ranking 43rd and 48th, respectively.
Forbes ranked the country’s 100 largest MSAs according to each area’s September unemployment rate and foreclosures, gross metropolitan product, home prices and sales rates. Forbes.com

Dallas-area commercial real estate executives foresee a stagnant lending picture

Freeze. Crunch. Collapse. Whatever you call it, commercial real estate credit markets are stuck on slow. A lack of debt and equity has all but halted new deals and put many existing projects in danger of default. After little property lending in 2009, real estate and investment industry execs are pondering where the credit markets go from here.

The consensus is that the turnaround will be slow and painful. Craig Hall, founder and CEO, Hall Financial Group: “Anecdotally, what I am hearing and seeing is that debt continues to be very, very hard to come by. That said, I would expect it would get somewhat better as time goes on. “The problem is even if — which I think will happen — commercial debt and equity thaw a bit, for many it will be too little too late. “The problems are so extreme that values are down 20 percent to 40 percent. And if and when lenders start making loans, they will want loans at more conservative ratios than in the past; i.e., 65 percent instead of 80 percent.” Stuart Wernick, senior vice president, Grandbridge Real Estate Capital: “For thawing to occur, we need to see some sort of stability in governmental intervention, an increase in lending confidence and asset re-evaluation in the marketplace. “The re-emergence of new debt and equity to commercial real estate will begin as asset re-evaluation speeds up. The timing depends on whether or not there is a need by the owners to sell their assets. “A significant amount of the loans have serious refinancing risks. Most of our intellectual talent in 2010 will be used on modifying and restructuring those loans.” Susan R. Gwin, executive director, Capital Markets Group, Cushman & Wakefield of Texas Inc.: “The verdict is out as to whether or not we will see a slow-moving upward trend or whether we will see the kind of vacillations we have seen in the stock market over the last few years. I agree that conditions will continue to weaken into 2010 as lenders face capital shortfalls. Will more banks likely stop the ‘pretend and extend’ on loans and finally be forced to shed troubled assets?

“I also believe we will see creativity step in, largely due to the fact that if conventional lending sources withdraw, other capital will step in at some point. On a weekly basis, we are seeing new private equity firms or commercial mortgage companies or mortgage REITS come on the scene.” Scott R. Lynn, director and principal, Metropolitan Capital Advisors Ltd.:

“In the past 60 to 90 days, there has been some evidence that life insurance companies have started to come off the sidelines providing very conservative loans on high-grade, top-quality properties.

“Players seeking loans and equity are surprised at the higher cost of capital. The traditional model of pricing capital over a predetermined spread is out the window. Most capital providers are naming their price based on the dynamics of the transaction, property type and leverage along with sponsor track record plus the sponsors’ willingness to commit their own capital.

“Bottom line: There’s always money available; it’s just a question of price.” Mark Dotzour, chief economist, Real Estate Center at Texas A&M University: “The Office of the Comptroller of the Currency is turning up the heat on banks of all sizes all over the U.S. to reduce their lending exposure to every aspect of commercial real estate. Credit for homebuilders and subdivision developers will be even more hard to come by in 2010 than it was in 2009.

“A sizable default in commercial real estate mortgages on properties all over America is inevitable. Prices nationally have fallen somewhere between 30 and 40 percent. Most properties purchased in 2006 and 2007 had way too much leverage, and now the values are well below the mortgage amount.” Jack Eimer, president, Central Region, Transwestern:“It’s interesting to me that many people in our industry forecast recovery of our commercial real estate sector beginning as early as mid-2010. These same professionals will quickly agree that the dynamics of this recession are significantly worse than the late ’80s and early ’90s. Do we forget that we suffered through six to seven years of malaise before we experienced a recovery?

“With property values already decreasing 30 percent to 35 percent from 2007 highs and net income continuing to be hammered by rising unemployment, a significant portion of this debt will have to be recapitalized with new debt. Where is it coming from?” Jack Crews, managing director, Capital Markets Group Jones Lang LaSalle: “We expect new equity raises to continue for the next few years as investors work to get back in the game on assets that have had their values adjusted to the new underwriting and economic conditions. Private investors, directly or through broker dealer networks, lead the efforts to date. “Additionally, real estate investment trusts have raised some $16 billion through secondary offerings in 2009 and are positioned well to take advantage of a market where cash will be king.

“Debt is still limited to better-quality assets and borrowers. We do not expect traditional life insurance company lenders to come back quickly and with a lot of debt, but we do expect them to come back. Commercial mortgage-backed securities providers will come back slowly and at a much smaller size as the overall financial markets rebound on Wall Street.” Mark D. Gibson, executive managing director, Holliday Fenoglio Fowler LP: “In terms of capital in general, there is abundant capital in both the equity and debt markets for assets which meet the buyer and lender underwriting. However, the real lack in commercial real estate is not capital but product; i.e., assets to sell or to lend against. “We are forecasting continued monetary defaults and therefore more product coming to market over the next eight quarters, and we believe there is adequate capital to absorb same. “The capital markets have healed, there is ample liquidity for well underwritten assets but a shortage of product. And finally net operating incomes will be declining over the next two years or until job growth emerges.”

Dallas commercial property likely to drag in 2010, panel says

Top commercial real estate executives aren't looking for a sharp rebound next year.

That was the consensus Friday at a real estate outlook panel organized by The Dallas Morning News. "I don't think next year is going to be much different from this year," said Clay Smith, chief executive of retail property firm SRS Real Estate Partners. "You are going to see very little, if any, new retail development for a while. "When you build it hoping they will come – well, they are not coming," Smith told several hundred commercial real estate industry members at the meeting. The commercial real estate market has struggled from the ill effects of a national recession and credit crunch, and higher-than-predicted local job losses.

"Real estate depends on job growth," said D'Ann Petersen, a business economist with the Federal Reserve Bank of Dallas. She estimates job losses at nearly 115,000 in North Texas this year. "Our forecast doesn't bode well for housing and commercial real estate."

Commercial real estate is heavily reliant on major retailers, which Smith said are bracing for a dismal holiday shopping season. "Clearly, there are some retailers that are hanging on," Smith said. "They have been betting on the holiday season to bring them out of it, and it's not going to do it." Overall, he said, local and regional merchants are doing better.

Still, Smith said, Texas is in the best shape of any market across the country where his firm does business.

A recent flurry of office building leases in the Dallas area is a good sign of what businesses are expecting, said Jim Yoder, managing director of Jones Lang LaSalle.

"The panic has ended, and people are trying to position their business," Yoder said. "Unfortunately for us, there is not a lot of velocity in the market. Many tenants are still pushing off decisions."

Yoder said he had been hopeful that Dallas would "dodge the bullet" in the national recession. "But our rents are down 10 percent, and 13 to 15 percent in some markets," he said. "We expect building vacancies to peak in mid to late 2010."

Larry Hamilton, one of the few developers in town still looking for loans to do deals, said the credit market remains frozen. "We think we got close to the last construction loan in America in 2008 for our Aloft hotel," which just opened in downtown Dallas, Hamilton said. Hamilton, whose company is the largest developer of downtown residential space, is trying to borrow about $20 million to kick off redevelopment of downtown's historic Lone Star Gas buildings. That's about half of what the project will cost. "A lot of bankers are tempted – they'd like to do it," Hamilton said. "But something is blocking them."

Dallas Morning News

Fitch downgrades Galleria towers debt; owner vows not to default

A high-profile Dallas office project has made the list of major U.S. properties that credit analysts are scrutinizing.

MILTON HINNANT/DMN
Cannon Commercial CEO Kam Mateen says, 'We have never defaulted before and are going to pay our loans.' Fitch Ratings singled out the Galleria office towers – three buildings with more than 1 million square feet next to the shopping mall – in a recent report.

Fitch downgraded and revised its outlook on the towers' financing when it looked at commercial mortgage debt held by a JPMorgan Chase Commercial Mortgage Securities Trust.

But the California-based owner of the properties said Friday that the loan is not in jeopardy.

"What the bond rating agency is saying is baseless," said Kam Mateen, CEO of Los Angeles-based Cannon Commercial Inc. "We are a very big company with lots of reserves.

"We have never defaulted before and are going to pay our loans."

Wall Street rating firm Fitch said in its report that the debt payments on the Galleria buildings are current and that the buildings have a high occupancy rate.

But Fitch also said in the report, issued last month, that it expects the interest-only loan to default and "incur losses of approximately 20 percent."

The loan matures in 2017.

Fitch based its forecast on anticipated declines in cash flow from the Galleria buildings and falling values.

The towers are considered among the most successful properties in the area around the Dallas North Tollway and LBJ Freeway.

Constructed between 1981 and 1990, they were purchased in mid-2008 by Cannon Commercial, which also owns other properties in Texas. The deal was one of the largest in North Texas in a decade and was estimated to be worth more than $300 million.

The buildings are about 90 percent leased, and major tenants include Fedex, Highland Capital and Invesco.

Mateen said that when the Galleria loans come due, his company will pay them off.

Cannon Commercial owns and manages more than 12 million square feet of real estate in six states.

With the shakeout in real estate values and lack of credit for refinancing, thousands of commercial properties around the country are facing debt problems.

It remains to be seen how much of this real estate will ultimately wind up in default or face foreclosure.

"The foreclosure activity has actually been slower than we anticipated," Jim Yoder, managing director at Jones Lang LaSalle, said Friday during a panel discussion sponsored by The Dallas Morning News.

The debt on the Galleria buildings was among 29 "loans of concern" that Fitch detailed in its October debt downgrade.

Uptown's Mondrian tower won't be sold despite foreclosure posting


One of Uptown's most prominent residential towers is posted for foreclosure. But the owners and lenders of the 20-story Mondrian Cityplace apartment high-rise say it won't be sold at next month's foreclosure auction.


FILE/DMN
The Mondrian Cityplace high-rise was built in 2003.
View larger Photography Photo store
Built in 2003, the eye-catching rental building at McKinney Avenue and Blackburn Street is a landmark overlooking the West Village complex.

The 218-unit building is owned by ZOM Cityplace LP, a partnership organized by Florida-based developer ZOM Inc.

Dutch lender SNSPF Interim Finance BV said in foreclosure filings this month that the building owner is in default on a $41.9 million loan made in August 2003, accord to the latest foreclosure data collected by Addison-based Foreclosure Listing Service.

The threatened foreclosure is an "unfortunate misunderstanding," ZOM officials said Thursday. A spokesman for the developer said the filing was made while "negotiating terms of an extension to an existing loan on the property."

Dallas attorney Bruce Coleman, who represents SNSPF, confirmed the status of the building.

"They have told me not to plan on foreclosing," Coleman said late Thursday. "The lender has instructed the trustee not to proceed with the December foreclosure sale pending an amicable resolution of the issues."

The Mondrian posting is the largest of 227 current foreclosure postings made against Dallas-Fort Worth area commercial and investment properties, Foreclosure Listing Service reports.

Monday, November 23, 2009

Texas gains jobs even as unemployment rate still rises to 8.3%

The Texas economy threw off mixed signals in October, with expanding payrolls but a rising unemployment rate.

Employers boosted payrolls by a preliminary count of 41,700 jobs last month – a significant piece of good economic news after a year of nearly uninterrupted monthly job losses.

But the unemployment rate edged up to 8.3 percent from 8.2 percent in September, the Texas Workforce Commission said Friday.

The state has lost more than 300,000 jobs over the last year, and Waco economist Ray Perryman described the October report as a "pleasant surprise." He warned, though, that it's too early to say the positive number marks the beginning of sustained job growth.

"It is certainly too early to call this number a trend," he said. "I do not think we are yet at a point where we can count on job growth every month, but we should begin to see an overall pattern of gradual increase with more up months than down."

How could the jobless rate rise when the economy added jobs?

Payroll employment and the unemployment rate tend to track each other over time, with the jobless rate typically going down when job creation increases.

But the two indicators are based on separate surveys, and it's not uncommon for them to move in seemingly contradictory directions in a particular month.

Moreover, if employers continue to add jobs, more people could come back into the labor force to look for work. That could cause the unemployment rate to rise even while the economy is recovering.

In October, job gainers included education and health services, where employers added 14,900 positions, and professional and business services, up 10,800 jobs. Employers added 4,500 jobs in financial activities.

Employers cut only 200 manufacturing jobs in October, after slicing much more deeply earlier in the year. But the construction industry shed another 9,400 jobs last month.

Texas was not the only state to add jobs in October – in fact, two of the nation's most economically troubled states also posted employment gains. Michigan picked up 38,600 jobs, while California added 25,700, according to the U.S. Bureau of Labor Statistics.

New York lost 15,300 jobs, Florida shed 8,500 and Georgia dropped 7,500.

Whether or not Texas is close to sustained job growth, a top local economist said North Texas job losses this year could end up topping 100,000 – significantly more than current estimates.

"Our numbers are showing that we've lost almost 115,000 jobs this year," D'Ann Petersen, an economist with the Federal Reserve Bank of Dallas, said at a real estate outlook panel Friday organized by The Dallas Morning News.

"We are actually performing worse than the other Texas metro areas," she said.

According to Texas Workforce Commission data, the Dallas-Fort Worth area lost nearly 60,000 jobs between October 2008 and last month.

But Petersen said those statistics understate employment losses in North Texas.

"The reason it hurts so bad here is it happened so quickly and we weren't ready for it," Petersen told several hundred commercial real estate industry members at the meeting. "We had been one of the fastest-growing markets in the country."

Once a year, government statisticians use comprehensive unemployment insurance records to revise their estimates of recent job growth. The revisions can be large.

Since the Dallas Fed uses such records to update its employment data more frequently, its job tally sometimes differs significantly from the Texas Workforce Commission's.

Petersen is the second local analyst in two days to forecast a local job loss of 100,000 or more this year.

Greg Willett, vice president of research for apartment analyst MPF Research, said Thursday that local employment declines are much larger than what has been reported.

"We think when the revisions for the data come out in 2010, they will reveal the D-FW area is struggling more so than the numbers have actually suggested," he said.

But he added that the worst will be over this year for the local economy, with job gains likely in 2010.

"The forecast for the employment numbers suggests we are pretty close to the bottom at this point," he said.

By BRENDAN CASE and STEVE BROWN / The Dallas Morning News

Fed economist: Dallas-Fort Worth job losses will top 100,000

North Texas job losses will top 100,000 this year – more than current estimates, a top local economist warns.

“Our numbers are showing that we’ve lost almost 115,000 jobs this year,” D’Ann Petersen, business economist with the Federal Reserve Bank of Dallas, said Friday at a real estate outlook panel organized by The Dallas Morning News. “We are actually performing worse than the other Texas metro areas.”

The latest local employment statistics from the Texas Workforce Commission show that the Dallas-Fort Worth area lost about 60,000 jobs in October compared to a year earlier. The non-seasonally adjusted numbers say that the area shed another 9,800 jobs just between September and October.

But Petersen said those statistics understate employment losses in North Texas.

“The reason it hurts so bad here is it happened so quickly and we weren’t ready for it,” she told several hundred commercial real estate industry members at the meeting. “We had been one of the fastest-growing markets in the country.

Petersen is the second local analyst in two days to forecast a job lost of 100,000 or more for D-FW this year.

Greg Willet, vice president of apartment analyst MPF Research, said at a Thursday meeting that employment declines here are much larger than what is being reported.

“We think when the revisions for the data come out in 2010, they will reveal the D-FW area is struggling moreso than the numbers have actually suggested," Willett said.

That’s bad news for the commercial real estate market, which is already struggling with a national recession and credit crunch.

“Real estate depends on job growth,” Petersen said. “Our forecast doesn’t bode well for housing and commercial real estate.

Top commercial real estate executives aren’t looking for a sharp rebound in 2010.

“I don’t think next year is going to be much different from this year,” said Clay Smith, CEO of retail property firm SRS Real Estate Partners. “You are going to see very little if any new retail development for a while.

“When you build it hoping they will come – well, they are not coming,” he said.

Smith said most major retailers are bracing for a dismal holiday shopping season.

Overall, he said the local and regional merchants are doing the best.

“Clearly there are some retailers that are hanging on,” Smith said. “They have been betting on the holiday season to bring them out of it, and it’s not going to do it.”

Still, Smith said, Texas is in the best shape of any market across the country his firm works in.

A recent flurry of office building leases is a good sign of what businesses are thinking, said Jim Yoder, managing director of Jones Lang LaSalle.

“The panic has ended and people are trying to position their business,” Yoder said. “Unfortunately for us, there is not a lot of velocity in the market.

“Many tenants are still pushing off decisions.”

Yoder said he had been hopeful that Dallas would “dodge the bullet” in the national recession.

“But our rents are down 10 percent, and 13 to 15 percent in some markets,” he said. “We expect building vacancies to peak in mid to late 2010.

Larry Hamilton – one of the few developers in town still looking for loans to do new deals – said the credit market is still frozen.

“We think we got close to the last construction loan in America in 2008 for our Aloft Hotel,” which just opened in downtown Dallas, Hamilton said.

Hamilton, whose company is the largest developer of downtown residential space, is trying to borrow about $20 million to kick off redevelopment of downtown’s historic Lone Star Gas buildings. That’s about half of what the project will cost.

“A lot of bankers are tempted – they’d like to do it,” Hamilton said. “But something is blocking them.”

By STEVE BROWN / The Dallas Morning News

Construction to start on huge northeast Dallas shopping center

After almost four years of planning and preparation, construction will start next week on Trammell Crow Co.'s huge Timbercreek Crossing shopping center in northeast Dallas. Walmart, Sam's Club and J.C. Penney stores will anchor the 40-acre retail development at Northwest Highway and Skillman Street. An additional 60,000 square feet of shops and restaurants will also be built in the complex, which opens in 2011.



SONYA N. HEBERT/DMN
Ground will be broken next week on Timbercreek Crossing, which will include Walmart, Sam's Club and J.C. Penney stores. Developer Trammell Crow endured a long, sometimes contentious zoning debate on the 40 acres that once held apartments. "We are excited to bring such a unique opportunity to the market, especially now, when value is in such demand," said Denton Walker, Crow's senior managing director. "This will be one of North Dallas' highest-traffic retail locations when the anchors are open for business.

"East Dallas is an underserved market and has seen very little retail investment," Walker said. "This is a natural retail corner with good access."

Construction will start first on the Walmart and Sam's stores in a two-story building that includes a parking garage.

"It's not your typical Walmart," Walker said. "This will be unlike anything this area has seen as far as design and quality.

"We have to do a parking garage to accommodate all the customers – there is just not enough land," he said.

The Walmart and Sam's building will fill about 320,000 square feet.

"This unique two-story design that features a Sam's Club on the first level and a Walmart store on the second level gives us the ability to meet the needs of all our customers," Walmart spokeswoman Kellie Duhr said.

J.C. Penney will break ground next year on a 104,000-square-foot store, Walker said.

Most of the development should be open by late 2011.

"Bank of America has already committed to the project, and we are talking to some small shop retailers," Walker said.

The Timbercreek Crossing shopping center replaces almost 1,100 apartments that were demolished last year. Trammell Crow sent lease termination notices to about 600 families who lived at the 30-year-old complex at the end of 2007.

Crow got approval for the retail development after a long and sometimes contentious zoning debate.

"We are coming up on our fourth-year anniversary of owning this property," Walker said. "We've had some ups and downs along the way, but it is going to prove to be a huge success."

The shopping center will be the largest retail project started in North Texas this year. Most other developments have been put on hold because of economic and credit problems.

But there has been a flurry of recent retail expansions in the area around the new Crow center.

The site is east of the NorthPark Center shopping mall, which was almost doubled in size in 2006. And developers are completing the nearby Park Lane retail and mixed-use complex on North Central Expressway.

Friday, November 20, 2009

7-Eleven ramping up in DFW

If it seems like there’s a 7-Eleven on every corner now, just wait a few years.

The Dallas-based convenience store giant will add more than 75 stores in North Texas over the next three years, as part of a fast-track plan triggered by opportunities created in the commercial real estate downturn. The company will add 550 stores nationwide and about 4,000 worldwide during the same period, CEO Joe DePinto said.

“We’ve really positioned ourselves for this,” DePinto said. “We have a strong balance sheet, real estate values are down, and a lot of other retailers aren’t growing right now, so there’s a lot of real estate available that would have been cost-prohibitive in the past.”

The new North Texas stores will be built in Dallas, Tarrant, Collin, Denton and Rockwall counties, with new-store investment valued at about $50 million through 2001. The Slurpee retailer has 266 stores in the area now.

“We’re seeing a lot of good opportunities for growth,” said Dan Porter, 7-Eleven’s vice president of real estate and new store development. “With the market being what it is, landlords want a national, [solid] credit tenant, and we bring that to the table. In today’s environment, they want someone they can trust to pay the bills every month.”

7-Eleven has increased its real estate staff in Texas and hired CB Richard Ellis Inc. as its local brokerage. This is the first time the company has used an exclusive broker for its expansion plans.

Mike Friedman, CBRE senior vice president and Naveen Jaggi, senior managing director for CBRE’s national retail group, will lead the site selection efforts in North Texas and Southern California, where CBRE also has an exclusive agreement with 7-Eleven.

7-Eleven looks for prime, high-profile corners with easy access and preferably a right-hand turn-in for drivers headed to work, Friedman said. Competition for those corners was fierce until about a year ago, with banks and drug stores vying for the same space. That’s not the case anymore, he said.

“(7-Eleven has) a corporate mandate that they want to open more stores, so the timing is perfect in this market,” Friedman said. “They’re one of the very few national retailers that are on a massive expansion program.”

The local growth will include new development, leases, acquisitions and conversions of other retail outlets to 7-Eleven operations, Porter said. In addition, the company is looking for sites in shopping centers and downtown buildings for urban-walkup locations.

About half of the growth will come from converting or acquiring existing stores, 10% will come from ground-up development and the rest will be leases, Porter said.

The company also plans to remodel 3,000 stores nationwide, including many in North Texas, over the next two to three years, at a cost or $160,000 to $180,000 per store.


Strong balance sheet

Porter said 7-Eleven is able to expand in this economy because the company has reduced its debt and remained profitable despite the economic downturn. Though the private company does not release specifics about its finances, 7-Eleven’s total debt is about one-third what it was in 1999, Porter said.

“Strong companies continue to grow and take advantage of the market opportunities whether the economic times are good or bad,” Porter said. “We’ve brought down our debt over the years, and, with real estate values down and other retailers contracting, it’s a very good time to grow.”

The number of convenience stores in the United States fell by about 1,000 last year to 144,875, said Jeff Lenard of the Alexandria, Va.-based National Association of Convenience Stores. It was only the third time in 15 years that the store count has dropped, he said. Lenard expects store count will be flat or down slightly in 2009.

The drop in 2008 was caused by skyrocketing gas prices, which cut into retailers’ profit margin in the first half of the year, and the recession and credit crisis, which intensified in the second half, Lenard said. Now, companies that have cash and relatively little debt, including 7-Eleven, are positioned to grow, he said.

“With 7-Eleven and other companies, we’re seeing that since they have a clean balance sheet and they have some capital, they’re able to either acquire stores in distress very economically, or build their own new stores,” Lenard said.

Another advantage for 7-Eleven is that it doesn’t rely heavily on gas sales, like many of its competitors, Lenard said. Nationwide, convenience store sales, excluding gas, have increased slightly during the recession.

“That’s because convenience stores, above all, sell immediate consumption, and that’s the last thing to be affected,” Lenard said. “When you’re thirsty, you get something to drink. You don’t look at your retirement fund.”

Despite the real estate slowdown, 7-Eleven will face competition for sites from other convenience stores that are growing, including QuikTrip and RaceTrac, said Earl Harris, senior vice president and director of project leasing for Dallas-based retail real estate firm The Weitzman Group.

“7-Eleven’s biggest challenge will be finding locations,” Harris said. “They’re a great tenant to have. I think landlords will get creative to get them into their centers.”

Credit analysts: Dallas' Galleria office towers in danger of default

A high-profile Dallas office project has made the list of major U.S. properties that credit analysts predict will wind up in default.

The Galleria office towers – three buildings with more than 1 million square feet of space next to the Dallas shopping mall – were singled out in a recent report by Fitch Ratings.

Fitch downgraded and revised its outlook on the financing for Galleria towers when it looked at commercial mortgage debt held by JPMorgan Chase Commercial Mortgage Securities Trust.

The Wall Street rating firm said the debt payments on the Galleria buildings are current and they also have a high occupancy rate. But Fitch said in the report issued last month that it expects the interest-only loan to default and “incur losses of approximately 20 percent.”

The default forecast is based on anticipated declines in cash flow from the Galleria buildings and falling values.

The Galleria office towers are considered among the most successful properties in the area around the Dallas North Tollway and LBJ Freeway.

The buildings -- constructed between 1981 and 1990 -- were bought in mid-2008 by investor Cannon Commercial of Los Angeles. The deal was one of the largest in North Texas in a decade and was estimated at more than $300 million.

The buildings are about 90 percent leased. Major tenants in the project include Fedex, Highland Capital and Invesco.

Dallas-based John Bowles Co. handles leasing of the project. Founder John Bowles said the Fitch report was news to him and that he was unaware of any problems with the debt on the buildings.

Bowles said Friday that the owner “was here last week and gave us marching orders to keep doing what we are doing.”

With the shakeout in real estate values and lack of credit for refinancing, thousands of commercial properties around the country are facing debt problems.

It remains to be seen how much of this real estate will ultimately wind up in default or face foreclosure.

“The foreclosure activity has actually been slower than we anticipated,” Jim Yoder, managing director at Jones Lang LaSalle, said at a Friday morning panel on commercial real estate sponsored by The Dallas Morning News.

The debt on the Galleria buildings was among 29 “loans of concern” Fitch detailed in its October debt downgrade. The loans all mature by 2017.

Barclays takes over Crescent Real Estate partnership

Ownership in some of the Dallas area’s most prominent office towers has changed hands.

Barclays Capital said Friday that it has taken ownership of Fort Worth-based Crescent Real Estate Equities Limited Partnership.

Crescent has stakes in 36 office buildings nationwide, including Dallas’ Crescent complex in Uptown and the Trammell Crow Center and Fountain Place towers downtown.

Barclays took over ownership of the Crescent assets after a unit of Morgan Stanley Real Estate was unable to meet debt payments on the properties.

Barclays said it has formed a partnership with former Crescent vice chairman John C. Goff to operate and own the real estate.

“Given his extensive knowledge of the Crescent portfolio, John is well suited to manage the company going forward,” Barclays executive Haejin Baek said in a statement.

Wall Street firm Morgan Stanley paid $6.5 billion two years ago to buy Crescent. But the investor was unable to meet $2 billion in debt payments due to Barclay’s this month.

Morgan Stanley had already taken hundreds of millions of dollars in value write-downs on the Crescent properties.

Crescent doesn’t hold all of the ownership in its high-profile Dallas buildings.

In 2004, it sold a 60 percent stake in the Crescent complex to a JPMorgan Chase & Co. subsidiary. JPMorgan Chase also bought a 76 percent share of downtown's Trammell Crow Center and Fountain Place.

Thursday, November 19, 2009

Empty Signature Pointe apartment complex for sale in Dallas

A northeast Dallas apartment site that was taken over by lenders last month is for sale.

The 12.85-acre Signature Pointe apartments on Lovers Lane are being marketed by Marcus & Millichap Real Estate Investment Services.

Compass Bank took ownership of the empty apartments after plans stalled to develop retail and rental housing on the prime site just east of North Central Expressway.

Three years ago, the bank lent more than $19 million on the property, which borders the Central Market grocery store.

Developer Fairfield at Lovers LP had fought a hard zoning battle for the ability to demolish the aging apartments to make way for new construction.

But the recession and global financial meltdown stalled the deal, prompting Compass to take back ownership.

"Compass wanted to put it quickly on the market," said Marcus & Millichap senior Will Balthrope. "They have put an asking price on it of $19 million."

Balthrope said he expects to sell the property to one or more developers who will demolish the buildings.

Kroger plans Cityplace store if it can sell alcohol there

Kroger wants to build a supermarket near downtown Dallas on the site of the former Loews Cityplace, across from a Target that just got a food makeover.

But before it commits, Kroger said it needs to be able to sell beer and wine.

That would require a variance from the Dallas City Council because the property is within 300 feet of Alex W. Spence Middle School, a violation of city alcohol codes.

Inland Group, developer and owner of the 12-acre site, asked the council's economic development committee Monday to allow a variance. If the council approves the variance, the store could open by the end of 2010 or early 2011.

Kroger has been searching for a downtown location for some time. The area has an Albertsons on McKinney Avenue in Uptown and a Walmart Neighborhood Market on Central Expressway. Nearby in East Dallas, Whole Foods built a new store, and Newflower Market opened in a former Carnival.

The Cityplace Target is one of 100 stores nationwide – but the first in Texas – to get Target's expanded grocery department. It now has about 90 percent of what a SuperTarget stocks, said Kerry Davenport, store manager.

Next year, Target plans to convert 14 more stores in the Dallas area. Within three years, all stores will be converted.

In 2003, Target added more dry food, dairy and frozen food to its discount stores to compete with Walmart Supercenters. But the latest food expansion goes beyond convenience items.

The Cityplace Target now sells beer, and its wine department was expanded. The nearby Albertsons also sells beer and wine.

Kroger hasn't purchased the rights to the property but wants to build a 50,000- to 60,000-square-foot supermarket on about 4 acres. The developer is planning additional retail and condos on the site, said spokesman Gary Huddleston.

"We're not looking at other pieces of property right now," Huddleston said. "This would be a great store if we have the ability to sell beer and wine."

Wednesday, November 18, 2009

Solution Depot Leases 51,883 SF in Dallas

Solution Depot, a financial services provider, signed a five-year lease for 51,883 square feet in the Skillman Office Tower at 9550 Skillman St. in Dallas.

The five-story building totals 65,000 square feet. The property was completed in 1985, and sold to Skillman Investment Group in 2007, according to CoStar information.

Solution Depot’s lease includes space on floors one through five. It will move into the space in three waves: Dec. 31, 2009, Feb. 15, 2010, and then finally March 31, 2010. There are tentative plans for renovations and built-outs.

Deepak Jaisinghani of Skillman Investment Group provided in-house representation.

George W. Bush Presidential Center design is unveiled

The design of the George W. Bush Presidential Center at SMU, which will be formally unveiled today, is a showcase for exhibits, not a monument to the 43rd president, former first lady Laura Bush said this week.

In an exclusive interview with The Dallas Morning News, Bush described an active year of planning the design for a 225,000-square-foot building to house her husband's presidential papers. Bush said the library center, which will include a museum and a policy institute, will not be a shrine.

"One of the things we discussed with all of the design team was that we did not want this to be monumental like some other libraries are," Bush said. "We're very aware that the presidents are men. They are people. We wanted it to be human in scale."

New York-based architect Robert A.M. Stern, agreed: "It doesn't say anything specific about President Bush. It's not a portrait or a defense of his policies. It is about the presidency, the dignity of the office."

The design debut is the latest of several signs that the Bushes are venturing back into the spotlight after a relatively quiet year in Dallas. Last week, they filled an auditorium with 1,000 supporters to announce plans for the Bush Institute, the policy arm of the library center. The institute will begin hosting forums on campus next semester, even before construction begins.

The Bushes' presidential aura at the event drew national headlines and provided a temporary distraction from the difficulties of trying to build the library in a dense and congested area. It will be on a tract of land on the eastern edge of SMU at North Central Expressway.

The Bush Foundation, which is raising money to pay for the project, must get University Park officials to rezone the library land – over the objections of some nearby residents – to proceed with construction. Residents have raised concerns about traffic and parking lots situated to the north of the library.

And Southern Methodist University is still in court battling for title to a sliver of land south of the library, where grounds are planned. Both sides say they are trying to reach a settlement of the four-year lawsuit.

Assuming the legal and zoning hurdles are cleared, there's still the matter of the land itself. It's on the edge of campus, with the main access planned from Central's service road.

Landscape architect Michael Van Valkenburgh called the site an "albatross."

But Laura Bush said situating the archive, museum and institute on the pie-shaped tract next to Central Expressway was not as difficult as it may seem. The National Archives, which will operate the library and museum, has ironclad rules about setbacks and other matters.

"It was not difficult. Those security rules are just a fact of life," she said. "You just know that that's what it is."

The library design has evolved, with Laura Bush working to produce a building that reflects the 43rd president's Texas roots and sensibilities.

Limestone at the base of the building is from Midland, where the Bushes met and married. Van Valkenburgh, the landscape architect, was selected because Laura Bush enjoyed working with him on the Pennsylvania Avenue plaza in front of the White House.

The land south of the library building will be reminiscent of a prairie, not unlike 50 acres of native prairie the Bushes have reclaimed on their Crawford ranch.

The building itself is compatible with SMU's Georgian architecture but contemporary in style.

"I think it's a forward building, a modern building, which I wanted it to be since George was president during the first decade" of the century, Laura Bush said.

Visitors will pass a limestone retaining wall as they proceed into the building and enter a grand hall. From there, they'll be able to see an inner courtyard.

The library includes space for permanent and temporary exhibits, and a small auditorium. There will also be classrooms and offices for fellows at the Bush Institute. Both the former president and his wife will have office space upstairs, along with a dining and living area for entertaining museum guests.

The experience is designed to counter "museum fatigue" by allowing visitors to wander into a courtyard or an outdoor model of the White House Rose Garden once they are in the building.

The Bush Foundation hopes to raise $300 million by the time groundbreaking is scheduled in about a year. So far, it's reported to have raised more than $200 million. The names of donors have not been released, but officials say none of the money has come from foreign contributors.

The National Archives will operate the library and museum. The Bush Foundation will operate the institute, which will host visiting scholars, conduct research and convene seminars.

Architecture critic David Dillon contributed to this report.



By LORI STAHL / The Dallas Morning News

Adolphus Tower gains The Berry Firm as tenant

The Adolphus Tower has gained a new office tenant in The Berry Firm PLLC.

The firm will be moving in January from its current location at Market-Ross Place on Market Street.

The law firm will be moving into the Adolphus Tower’s 23rd floor and a portion of the 22nd floor, which sits adjacent to the Adolphus Hotel in downtown Dallas. Adolphus Tower offers 182,000 square feet of space in a 26-story office tower.

The building will become the law firm’s Dallas-Fort Worth headquarters.

“Our client liked the building and we were able to hand him a package of terms that were aggressive and satisfied not only his immediate needs, but also the firm's needs well into the future,” said Stephen LaMure of Dominus Commercial, who handled the transaction for the tenant.

Mark Boynton served as a leasing agent for the Adolphus Tower.

Dallas economist: Commercial real estate sector will experience decline, but not as deep as in the 1980s

Vacancies in the commercial real estate sector are high, and weak cash flows do suggest that Federal Reserve Chairman Ben Bernanke’s warning this week about the commercial real estate market is a valid one, but North Texas won't see a repeat of the late 1980s, a Dallas-Fort Worth area economist said Tuesday.

Federal Reserve Chairman Ben Bernanke said in a speech this week that demand for commercial property is down, causing a “sharp deterioration in the credit quality of commercial real estate loans on the banks' books and on loans that back commercial mortgage-backed securities.”

Bernanke said smaller regional banks and community banks that have higher concentrations of commercial real estate loans may feel a deep pinch, and the market for securitization backed by CRE loans has pretty much closed. Bernanke warned of banks facing decisions on whether they will have to roll over maturing debt or foreclose on loans.

Economist Bernard Weinstein of Southern Methodist University said Tuesday, “I don’t think there’s any question commercial real estate will be struggling for the next year.”

He added that lenders and regulators are going to have to come up with some type of forbearance -- or some type of program to deal with some of the troubles brewing for mortgage backed securities on the commercial side of the market.

“I don’t think the overhang of commercial real estate is as threatening to the economy or to financial institutions as all the residential mortgage backed securities, but it is still a big number," he said.

Chuck Dannis, president of Dallas real estate appraisal firm Crosson Dannis Inc., elaborated on the sector's struggles saying the problem lies in the fact that many mortgage-backed securities will be maturing in the next year or two. Generally, when they mature, someone comes in and refinances the loan, Dannis said. But a dilemma has developed in that the market for refinancing has essentially dried up, he added.

"The borrower has two options: Put a bunch of money in there to make up the gap or give the property back," he said. "What lenders are trying to do is give borrowers time ... extending the loan."

He added that Dallas-Fort Worth has less to worry about than other reasons. Dannis said D-FW will feel pain in the commercial sector, but not as much because the area is still better when it comes to providing jobs, which is what eventually lifts activity in the commercial sector.

Going forward, Weinstein said he hopes to see the economy growing again by 2011, which will allow commercial properties to benefit from more businesses demanding leasing arrangements and new activity in the commercial market.

Despite some of the gloom and doom, Weinstein said the commercial real estate sector will not face what the Dallas-Fort Worth market experienced in the 1980s. He remembers banks getting hit hard and closing down in the late 1980s when commercial loans became a problem. Looking forward, he says it’s “not as bad as it was back then. The commercial real estate sector will recover ... as the economy improves, demand for commercial real estate will improve.”

Tuesday, November 10, 2009

Design District building bought

A local investor has purchased a commercial building in the Dallas Design District at Edison Street and Interstate 35E.

The building is across the highway from Victory Park and next to a new apartment community.

Bill Tinsley of Ellis & Tinsley negotiated the sale.

The 27,824-square-foot building at 1550 Edison St. is on just under an acre of land.

The Dallas Morning News

lauckgroup leases downtown space for HQ

Dallas-based interior architecture firm lauckgroup has signed a long-term lease in downtown Dallas for its headquarters.

The firm recently signed a lease for an 8,400-square-foot, first-floor office in Energy Plaza at 1601 Bryan St. The firm had been subleasing space on the 12th floor of Energy Plaza before moving to the first floor this week, said Anne Kniffen, principal-in-charge. Before moving to Energy Plaza, lauckgroup was at 2828 Routh St. in Uptown Dallas for seven years.

The new office is designed to house up to 25 employees.

lauckgroup has moved several times in its 25-year history. In 1984, it was located at 1900 N. Akard St. on the edge of downtown.

The completion of projects in the city's Arts District and the construction of the Woodall Rodgers Deck Park have created new excitement about being downtown, Kniffen said.

“It feels very good to be back in Dallas’ downtown core," Kniffen said. "This move really reflects our culture and personality."

lauckgroup’s new office is directly off of Energy Plaza’s central lobby and has views of Thanksgiving Square. The new space has been designed to serve as a test lab showcasing various product finishes, lighting and other elements used in office design, Kniffen said.

lauckgroup also has an office in Austin. The firm has recently completed interior spaces for Energy Future Holdings Corp., Sonnenschein Nath & Rosenthal law firm and Lincoln Property Co. in Dallas, as well as Hunton & Williams LLP in Austin and Dallas, and Caris Diagnostics Inc. in Irving.

Dallas Business Journal

Pre-owned home sales score double-digit gain

North Texas pre-owned home sales surged in October – up 11 percent from a year ago.

It was the first double-digit gain in more than two years and the best sign yet that the local housing market has turned the corner.

Real estate agents sold more than 6,300 single-family homes last month through the Multiple Listing Service, according to numbers released Monday by the Real Estate Center at Texas A&M University and North Texas Real Estate Information Systems.

The number of pending transactions is up almost 30 percent from a year ago, and median home sales prices were up 1 percent from a year earlier to $142,000.

At the end of October, just fewer than 34,000 homes listed for sale in the area, a decline of 16 percent from 2008. That works out to just under a six-month supply, which is considered a balanced market.

By STEVE BROWN / The Dallas Morning News

Monday, November 02, 2009

Prescott Realty leases half of The Shelby

Within 30 days of its official opening, the residential living portion of The Shelby mixed-use development on SMU Boulevard is 50 percent leased, according to commercial real estate investment firm, Prescott Realty Group.

The Shelby is located near Southern Methodist University between Central Expressway and Greenville Ave. in Dallas.

The five-story mixed-use development has 55 apartments located above retail units. The concept was launched to deal with the local demand for mixed-use upscale apartment living.

First Baptist Dallas details $130M building plan


First Baptist Dallas announced plans Sunday for a $130 million capital campaign that would pay for what it claims will be the largest church construction project in U.S. history. Plans call for a state-of-the-art campus in the heart of downtown.

Sketches of the planned facility were revealed to members of First Baptist Dallas for the first time during Sunday services.


Dr. Robert Jeffress, senior pastor of First Baptist Dallas, told church members that prior to the Sunday launch of the capital campaign the church already had secured $62 million in pledges from donors—nearly half of what is needed to complete the project.

Dallas Mayor Tom Leppert, a member of the congregation, started Sunday services with a prayer session. During a press conference after the service, Leppert told members of the media the church is an integral part of the city’s plan to rejuvenate downtown Dallas.

“This is an important investment in downtown Dallas,” Leppert said. “It will be part of what we are trying to accomplish in creating an urban setting.”

Plans call for a new 3,000-seat worship center complete with state-of-the-art audio-visual technology, a fountain plaza with a highly visible cross at the center of a cascading fountain, a sixth-floor education building, two gymnasiums, an outdoor patio, green areas and a skywalk connecting the campus’ buildings.

Other facets of the project include a new parking garage with more than 500 additional spaces, a roof-top green area for outside concerts and events and a transparent glass-design that will illuminate the church’s various walkways and the historic First Baptist Church sanctuary. That worship area will remain standing and in full view of members walking inside the church as well as to downtown visitors who are driving past the campus.

Artist renderings and plans also indicate the original sanctuary’s steeple will be rebuilt to highlight the historical relevance of First Baptist, which was founded in 1868, to downtown Dallas.

The deacons of the church and the planning and development committee unanimously voted for the project, Jeffress said.

During Sunday’s services, Jeffress highlighted the benefits of building a significant structure in a down economy. Pricing in the current economy is attractive, he indicated, with the church estimating that for every $1 spent it will be getting $1.30 in construction value.

Jeffress said church leadership will present the final project to the congregation only if it meets capital goals by spring 2010. Anything short could result in some type of phasing in the project, Jeffress said. But with half the money already secured, Leppert and fellow First Baptist member Dr. Ron Anderson, who is CEO of Parkland Health & Hospital System, told the Dallas Business Journal in an interview they’re confident the church will be able to complete the project in one phase.

Anderson described the current down economy and the lower construction costs associated with it as a “window of opportunity” for the church, just as it is for Parkland Hospital, which is in the midst of rebuilding its campus in an effort scheduled to total more than a billion dollars.

“Phasing may end up costing more” for the First Baptist project, Anderson said. With this in mind, Anderson said the church thought carefully and decided it would be best to complete everything in one phase.

Citing research from an independent consultant, Jeffress said the largest church capital campaign in U.S. history had been valued at $80 million, making First Baptist's effort the largest.

The plan is coming at a time when downtown Dallas is rebuilding itself, with a new performing arts center now open for residents and visitors and plans in the works for the redevelopment of the Trinity River corridor.

But size and scope aren't First Baptist's only objectives.

“First Baptist’s building program is not an end in itself,” said Jeffress. “It is a means to an end — to better minister to and meet the needs of the community. First Baptist is firmly committed to spreading the message of God’s transforming love downtown.”

The Dallas-based architectural firm The Beck Group is designing the project and expects that, when completed, the First Baptist project will be certified to meet Leadership in Energy and Environmental Design's silver standard.