28 Aug 2017

Commercial Property Executive

Commercial Property Executive

Cushman & Wakefield Arranges New Leases at FL Business Center

Sep 20 2017

Port 95 Business Center, Dania Beach, Fla.
Port 95 Business Center, Dania Beach, Fla.

A team of brokers from Cushman & Wakefield represented MSG Port 95, the owner of Port 95 Business Center, in closing long-term agreements with two Broward County businesses. General Insulation, an insulation distributor and supplier, is relocating from Pompano Beach to Dania Beach with a move-in date scheduled for the fourth quarter of 2017. The other business is Kaman Industrial Technologies, a subsidiary of Kaman Corp., which is planning to consolidate several locations in a single one. The company plans to move into the new space in September.

Executive Directors Chris Metzger, Richard Etner, Christopher Thomson and Matthew McAllister arranged the deal which brought the business center to 92 percent occupancy. The leases total 47,182 square feet, leaving less than 20,000 square feet still available at the site.

Access to South Florida market

Located at 2650 SW 36th St., the 230,036-square-foot property consists of three buildings, two of them used as warehouses and one as a distribution center. The Fort Lauderdale-Hollywood International Airport is in the immediate vicinity. The site can be easily accessible from Interstates 95, 595, 75, Florida’s Turnpike and Sawgrass Expressway.

Port 95 Business Center features energy-efficient lighting, 32-foot clear heights, an ESFR fire sprinkler system and built-to-suit office spaces. One of the new tenants, General Insulation, is awaiting a custom build-out of the space it leased.

After buying the property at near-complete occupancy, Cushman & Wakefield is getting ready to start leasing the building adjacent to Port 95. Upon completion, I-595 Business Center will offer approximately 150,000 square feet of warehouse and showroom space. The brokerage firm is also currently conducting leasing efforts at The Times Building in Tampa, Fla.

Image via Google Street View   

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Enerkem Begins Commercial Production of Cellulosic Ethanol

Sep 20 2017

A picture of Enerkem's state-of-the-art Edmonton biofuels facility, the world's first commercial-scale plant to produce cellulosic ethanol made from non-recyclable, non-compostable mixed municipal solid waste. (CNW Group/Enerkem Inc.)
Enerkem’s Edmonton biofuels facility, the world’s first commercial-scale plant to produce cellulosic ethanol made from non-recyclable, non-compostable mixed municipal solid waste.

Enerkem Inc., a Canadian producer of biofuels and renewable chemicals, started the commercial production of cellulosic ethanol at its facility in Edmonton, Alberta, Canada. The plant is the first commercial-scale manufactory in the world to produce cellulosic ethanol from non-recyclable, non-compostable mixed municipal solid waste.

The company has been producing and commercializing biomethanol since 2016. The methanol-to-ethanol conversion unit was installed earlier this year. The ethanol global market is anticipated to reach 124 billion liters per year by 2030, according to the International Renewable Energy Agency.

Advanced biofuels, such as cellulosic ethanol, are made from non-food sources like residual forest biomass, agriculture waste, energy crops and urban waste. Through new technologies, these sources are transformed into transportation fuels that replace a portion of gasoline. In addition, aside from the benefit of a clean transportation fuel, Enerkem’s technology also disrupts the traditional waste landfilling and incineration models.

“The commercial production of cellulosic ethanol at our facility in Edmonton marks a landmark moment for our company as well as our customers in the waste management and petrochemical sectors, and confirms our leadership in the advanced biofuels market,” Vincent Chornet, president & CEO of Enerkem, said in prepared remarks. “We will now progressively increase production in Edmonton, while preparing to build the next Enerkem facilities locally and around the world.”

Image courtesy of Enerkem Inc.

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Dubai Awards $3.9B Contract to Shanghai Electric, ACWA Power

Sep 20 2017

Dubai’s officials awarded a consortium of Shanghai Electric and Saudi Arabia’s ACWA Power a $3.9 billion contract for the construction of a 700-megawatt solar power plant at the Mohammed bin Rashid Al Maktoum Solar Park. The facility has a leveled tariff of $7.3 cents per kilowatt/hour in an IPP tender without the benefit of any subsidy, including any carbon credit.

Construction of the solar project is estimated to begin in 2018. Once finalized, the renewable energy plant will avoid the emission of 2.4 million tonnes of carbon dioxide, while providing green electricity to roughly 568,000 households. The plant is part of the Dubai Clean Energy Strategy 2050, launched in late November 2015, and includes projects designed to produce at least 7 percent of the country’s power from renewable sources by 2020, at least 25 percent by 2030 and 75 percent by 2050. 

This new plant is the fourth phase of the solar park, which is touted as the largest single-site concentrated solar power (CSP) facility in the world. Upon completion, the massive solar park will cover more than 9,266 acres (3,750 hectares), the equivalent of more than 4,500 football fields, mostly covered with mirrors concentrating the sunrays. Moreover, it will use an 853-foot central tower and parabolic trough CSP technologies. The trough is the solar thermal collector: the troughs will collect heat and store it in a molten salt medium, enabling a supply of electricity on demand both day and night.

Solar park components

  • The first phase of the solar park, a 13-megawatt farm built by First Solar, opened in October 2013, but will be commissioned by year-end 2020.
  • The second phase, a 200-megawatt solar farm built by ACWA Power and Spain’s TSK, began operations in March 2017.
  • The third phase is an 800-megawatt solar facility developed by Abu Dhabi Future Energy Co.
  • The fourth phase is the recently approved 700-megawatt facility.

“This project is a game changer in our quest to decarbonize electricity generation by making available renewable energy at a price that competes with fossil fuel generated electricity without subsidy not just when the sun is shining but at any time of the day and night. This project at this scale and cost level is a cause celebration not just for the renewable energy industry but for each and every person in the world who is concerned about preserving the planet for future generations. The visionary courage of the Government of the Emirate of Dubai has enabled ACWA Power to set the scene to make 100 percent of electricity through renewable energy in the not distant future not just a dream but a reality. We are privileged and proud to be partnering with such pioneers as the Emirate of Dubai and the utility DEWA,” Paddy Padmanathan, president & CEO of ACWA Power, said in a prepared statement.

Video courtesy of DEWA

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InvenTrust Acquires $115M LA Shopping Center

Sep 20 2017

River Oaks
River Oaks

In a $115 million deal, InvenTrust Properties Corp. acquired River Oaks, a grocery-anchored center in Los Angeles. 

“We are excited to acquire this institutional-quality retail destination positioned at the epicenter of the Valencia retail hub,” said Michael Podboy, executive vice president, chief financial officer & chief investment officer of InvenTrust, in prepared remarks. 

Premier retail asset

The 275,000-square-foot shopping plaza features tenants such as Target, buybuyBaby, Total Women Gym & Spa, Big 5 Sporting Goods, Sprouts, ULTA and Pier 1 Imports. 

“The acquisition of River Oaks further highlights our continued progress enhancing our portfolio with premier open air retail assets,” added Christopher Covey, senior vice president of transactions for InvenTrust, in prepared remarks. “By expanding our presence in the Los Angeles submarket, we expect to benefit from favorable population demographics in the region and gain operational efficiencies with the nearby InvenTrust-owned Stevenson Ranch Plaza.”

Last month, the company acquired The Parke, a 404,000-square-foot, grocery-anchored power center in Austin for $112 million. 

Image courtesy of InvenTrust Properties Corp. 

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Chinese Investment in US Real Estate Likely to Slow

Sep 20 2017

Samantha Ahuja, Partner at Morris, Manning & Martin LLP
Samantha Ahuja, Partner at Morris, Manning & Martin LLP

Following the Chinese government’s announced restrictions on outbound capital flow, the country’s investors have been finding it more difficult to purchase U.S. real estate. The effects are already showing, as total volume of Chinese foreign investment in the first six months of the year declined 46 percent to $48 billion, after total volume hit a record high of $101.4 billion in 2016, according to China’s Ministry of Commerce data. Aimed at strengthening China’s economy, the restrictions were formalized and updated in July, and they’re likely to significantly curb Chinese investment in U.S. real estate even further. Samantha Ahuja, partner at Morris, Manning & Martin LLP, discussed with CPE the updated regulations and what impact they could have on the U.S. real estate industry.

CPE: China has traditionally been a top foreign investor in U.S. real estate, particularly high-end properties in primary markets. How will these restrictions affect Chinese investment in U.S. real estate? 

Samantha Ahuja: In late July, Chinese governmental agencies released their updated “list” on restricted and permitted outbound investments. This release modified their previous release from 2015, which puts real estate over $1 million and other property and hotels in the restricted category. Essentially and simply put, this will limit the ability of the Chinese to invest in real estate in the U.S. (and other locations) and will require scrutiny and approval by the relevant Chinese agencies. These restrictions are stated to curb “irrational” or “non-genuine” investments, including acquisitions in real estate to entertainment. 

The policies that were modified reflect the government’s prevailing view on current economic, political and socioeconomic goals and strategies. This includes curbing currency outflow and limiting risks in the financial sector. The type and number of high-end, trophy or other large commercial real estate purchases will now be subject to additional scrutiny and therefore be very limited in nature, at least in the short-term. While the measures do not address investments by Chinese insurance companies, it is expected that there may be additional guidelines or regulatory framework released at a later date for such companies. 

CPE: China was the largest foreign investor in U.S. real estate last year in terms of volume. Should we expect this to change?

Ahuja: In short, yes. With the restrictions and higher scrutiny now expected on large dollar real estate purchases, the number of transactions will fall dramatically. The revised list and guidelines were expected, and we had already seen a decrease in the availability of Chinese outbound currency, so some of the decrease in volume has already been absorbed by the market. While real estate investments are not prohibited, there will be greater scrutiny with respect to all transactions over $1 million, therefore we will also see sellers more hesitant to enter into contracts with Chinese investors due to fear of their deal being subject to additional regulations or scrutiny and the concern of not being able to meet the deposit and closing deadlines. 

CPE: What types of assets would you advise Chinese investors to target when looking to deploy capital in the U.S.?

Ahuja: The revised guidelines include those investments which are encouraged. The investments that align with the current political and socioeconomic goals of the Chinese government, include, without limitation:

  • oil, gas, renewable energy, mineral and other energy resources, exploration and development
  • promotion of construction in infrastructure and overseas investment and development of the same, in conjunction with the “One Belt and One Road Initiative”
  • high-tech and manufacturing industries and cooperation with foreign high-technology and advanced manufacturing enterprises
  • promoting and enhancing China’s production capacity and quality for goods to be exported

interview-quote-Samantha-Ahuja

CPE: How will these restrictions affect pricing? Do you expect increased pricing pressure due to the reduced ability to export currency?

Ahuja: The restrictions will have some effect on the market, with many factors coming into play. However, there is still plenty of capital and other money players in the market, so it may take some time and some re-balancing before we see the pace of transactions pick back up or stabilize. We have already seen a slowdown in real estate transactions, especially in the high-end real estate sector (both residential and commercial). I imagine this trend will continue over the next two years along with the downside of the natural real estate cycle.

CPE: How do you think these restrictions will impact the U.S market in general?

Ahuja: We are arguably in the advanced beginning stages of the downward end of what we typically see in a real estate cycle of seven to 10 years. There is interest rate pressure and fears of inflation, combined with tightening of the CMBS loans risk retention rules, interest in the way the current administration will modify the tax code and the downward trend of traditional retail. The combination of all of this and other typical variables in investing will have a negative impact on the sales numbers and transaction volume over the next 12 to 36 months.

That being said, there are a lot of equity funds, REITs and other investors that have capital stockpiled and can jump into action when they feel that assets are properly valued and they can add value or capitalize on the income flow. So, I would not anticipate the slowdown to be anything like we saw in 2008, but given the rate in which we saw transaction volume flow from 2010 through last year, it will feel like a major slowdown.

CPE: What are the effects of these new regulations on Chinese and U.S. investors?

Ahuja: Sellers will be hesitant to work with Chinese companies, fearing hold ups with regulatory issues and intervention. There will be less available capital and buyers for high-end residential real estate, which will slow building and development of those luxury towers we have been seeing in Manhattan at neck-breaking pace. The slowdown of foreign capital and the natural real estate cycle now being on the declining end will result in more bid/ask gaps and a dearth of inventory. Historically, we saw a lot of transactions take place at astronomical numbers with foreign buyers at play (many of them Chinese) and now with a slowdown in availability to export currency, pricing will stagnate and possibly fall in some markets.

CPE: Chinese investors prefer residential properties in the U.S. in favor of commercial assets. Should we expect a different ratio?

Ahuja: With the restriction in place, it will be harder to close on transactions greater than $1 million. In addition, there are restrictions on the amount and volume of currency than can be exchanged at any one time or by one person. All of this will make it more challenging to make outbound investments. A lot will change, it’s just a matter of time before we better understand the ways in which the new restrictions will be enforced.

Image courtesy of Morris, Manning & Martin LLP

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