REITs actively buying and selling properties in the second half of the year

A number of locally based real estate investment trusts (REITs) have been very active in buying and selling real estate during the second half of the year.

Vornado Realty Trust one of the largest owners and managers of commercial real estate in the U.S. with a Manhattan portfolio of approximately 28 million square feet in over 50 properties, including Class A office buildings, street retail, showroom and residential assets and the Hotel Pennsylvania has traded over $ 1 billion in assets.

In August, the company announced that it had entered into a lease with Host Hotels & Resorts, the owners of the Marriott Marquis, one of the largest hotels in Manhattan with 1,900. Under the lease, Vornado will redevelop the retail and signage components of the New York Marriott Marquis Times Square Hotel. The hotel is located in the heart of the bow-tie of Time Square and spans the entire block front from 45th Street to 46th Street on Broadway. The site is directly across form Vornado's 1540 Broadway iconic retail property leased to Forever 21 and Disney flagship stores.

The REIT plans to spend as much as $140 million to redevelop and substantially expand the existing retail space, including converting the below grade parking garage into retail, and creating six story, 300 feet wide block front dynamic signs.

During the third quarter the REIT was very active in acquiring trophy retail properties. It announced plans to acquire the 33,400 leasehold interests in the retail component at 680 Madison Avenue for $280 million, or $8,386 per square foot. It also entered a contract to acquire the 114,000 square foot retail condominium leased to Uniglo, Hollister and Swatch at 666 Fifth Avenue for $707 million or $6,202 per square foot.

In October, Starwood Property Trust and Starwood Capital Group (on behalf of Starwood Distressed Opportunity Fund IX) announced the sale to Vornado Realty Trust of a 25 percent participation in both the first mortgage and mezzanine loan on 701 Seventh Avenue in Times Square.

One week earlier, Starwood Property Trust (the REIT) and Starwood Capital Group, announced the co-origination of a $475 million first mortgage and mezzanine financing for the acquisition and redevelopment of a 10 story retail building located in Times Square.

Also in October, Vornado announced it had entered into an agreement to sell the Green Acres Mall in Valley Stream, Long Island to Macerich Company (another REIT) for $500 million. In addition, Vornado will realize a financial statement gain of approximately $181 million and a tax gain of approximately $202 million from the sale of the Kings Plaza Mall in Brooklyn, New York. This mall, which is owned by Alexander's, Vornado's 32.4% affiliate, is being sold to The Macerich Company for $750 million.

The REITs third transaction announced in October was an announcement that it has entered into an agreement to sell three office buildings in suburban Fairfax County, Virginia, for approximately $136 million. Vornado has also entered into an agreement to sell a building on Market Street in Philadelphia which is part of the Gallery at Market East for approximately $60 million.

SL Green Realty, New York City's largest office landlord, REIT, which has ownership interest in 77 Manhattan properties totaling 39.3 million square feet.

In October, the REIT announced an agreement to sell a 49.5% equity interest in the office building at 521 Fifth Avenue for $72 million to Plaza Global Real Estate Partners, a venture between Quantum Global Real Estate and LaSalle Investment Management. Earlier in the month, the REIT announced that it acquired properties at 635 Sixth Avenue and 641 Sixth Avenue for a total of $173 million, or $648 square foot from Atlas Capital Group.

In August, the REIT announced that it had formed a joint venture with Harel Insurance and Finance and the Naftali Group to develop a dormitory tower for Pace University at 33 Beekman Street in downtown Manhattan. In early 2011, the Company in collaboration with Harel began construction of a 609 bed dormitory and retail condominium at nearby 180 Broadway, with delivery scheduled for January, 2013.

The REIT is also involved in the residential rental market and announced this summer that it had formed a joint venture with Stonehenge Partners that will enter into a 99 year ground lease covering a 20 story, 82,250 square foot residential building at 1080 Amsterdam Avenue.

The REIT has been a joint venture partner with Jeff Sutton and in July, the REIT announced the restructuring and recapitalization of their joint venture at 717 Fifth Avenue. In these transactions, SL Green has sold 50% of its interest to Sutton and retains a 10.92% stake in the venture retail condominium property at a price that values the asset at $618 million, or $5,105 per square foot.

In July, the REIT and its joint venture partners closed the sale of One Court Square in Long Island City to a private investor group for approximately $481 million, or $343 per square foot. SL Green was a 30% owner in the joint venture of the 1.4 million square foot office building which is 100% leased to Citibank, N.A.

Mack Cali Realty Corporation one of the largest owners of suburban office buildings in the metropolitan area closed on its acquisition of real estate development and management businesses of Roseland Partners, a premier multi-family residential community developer and operator in the Northeast, and Roseland's interest in six operating multi family properties totaling 1,769 apartment, residential condo properties, and a variety of other developments which extend from New Jersey to Massachusetts. The majority of the properties are located in New Jersey and other urban in-fill and transit oriented locations.

This summer, the grand opening was held for Equity One's shopping center Gallery at Wesbury Plaza, Westbury, New York. Equity One is a leading shopping center developer and owner focused on urban communities. Since 2009, the company has acquired or developed nearly $2 billion in retail asset, concentrated in New York, San Francisco, Los Angeles and South Florida. The current portfolio of 165 shopping center has a market value of approximately $3.5 billion.

In the fall, the company announced that it has acquired, or is under contract to acquire, four properties for a total investment of $260 million. Three of the assets are located in the New York Metropolitan Region and one is located in Bethesda, Maryland.

The company acquired Clocktower Plaza, a 78,820 square foot shopping center located in Queens, for $56 million. The center is anchored by a high volume Pathmark grocery store and is 1005 leased. The property is situated on seven acres of land with excess parking which is expected to provide development and expansion opportunities in the future.

The company also closed on Darinor Plaza, a 152,025 square foot shopping center on The Post Road in Norwalk Connecticut. It also purchased 1225 Second Avenue, an 18,474 square foot retail condominium covering a full city block on Second Avenue between 64th and 65th Street. It is anchored by CVS and 7-11.

Hospitality real estate investment trusts continue to be active over the past months. Hersha Hospitality Trust, which owns 64 hotels in major urban gateway markets including New York City, announced that it had entered into a purchase and sale agreement to acquire the 205 room Hilton Garden Inn located on East 52nd Street near Third Avenue for $74 million, or approximately $361,000 per key.

Hong Kong based Great Eagle which currently manages 28 hotels, including three in the U.S in Boston, Chicago and Pasadena announced that it agreed to purchase The Setai Fifth Avenue, a hotel with 157 rooms and 57 suites for $229 million, or $1,070,093 per key.

Strategic Hotels & Resorts completed the $362.3 million purchase of Manhattans' Essex House and formed partnership with KSL Capital Partners to fund the acquisition. The REIT, purchased the 44 story hotel from the same company it sold the Essex House the Dubai Investment Group.

Self storage real estate investment trusts have been a treasured asset by investors. In August, self storage real estate investment trust CubeSmart completed the second phase of its $560 million purchase of a 22 property portfolio form Storage Deluxe. The properties comprise approximately 1.6 million, with facilities in Connecticut, New York and Pennsylvania, though most of the sites are with New York's five boroughs. The completed acquisition means CubeSmart is now the leading self storage operator in New York City with 27 facilities.    

Posted on November 21, 2012 .