Tuesday, October 21, 2003

GSA Awards $15 Million Build-to-Suit for New DEA Offices in Pittsburgh

Bizjournals.com - October 10, 2003

The General Services Administration has awarded Oxford Development Co. a $15 million contract to construct a 50,000-square-foot building at the Thorn Hill Industrial Park. Sources say the building will be used by the federal Drug Enforcement Administration.

The two-story DEA building will have 24,000 square feet of office space on the upper floor with the ground floor serving as garages, said Kevin Silson, Oxford's director of development. Plans call for construction to begin early next year with completion set for late 2004. GSA has a 15-year lease on the property.

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U.S. Tax Shelters Benefiting Europeans

WASHINGTON - Reuters - October 21, 2003

American taxpayers are subsidizing bridges, subway systems and other infrastructure in Europe and elsewhere through corporate tax shelters that cost the U.S. Treasury billions of dollars, industry experts told a Senate panel on Tuesday.

Testifying before the Senate Finance Committee from behind a screen, a former leasing industry executive described complex transactions that involve companies paying lump sums to foreign towns and cities to lease bridges, dams, subways and other infrastructure. They then lease the property back to the town or city for the sole purpose of cutting their U.S. tax bill by depreciating the asset. No lease payments are ever made and the town or city is in no danger of losing control of the subway or other asset, he explained. "The only risk in the overall transaction is whether the IRS will attack the depreciation deductions of the U.S. investors," he said.

With his voice distorted, the former leasing industry executive described by the committee only as "Mr. Janet," said the transactions are arranged by some of the biggest financial advisors in Europe and the United States. Participants include major U.S. banks and Fortune 500 companies, he said. "This scheme is so pervasive that much of the old and new infrastructure throughout Europe has been leased to, and leased back from, American corporations," he said. He told the panel that the tax shelter scheme has been so successful that U.S. cities are now doing the same, with the subway systems of Boston, Chicago and Washington having been leased back to U.S. corporations. He said he had reason to believe that New York and Chicago water authorities were about to lease the waterlines under their streets.

Senate Finance Committee Chairman Charles Grassley is pushing to clamp down on abusive tax shelters. A measure inserted into a business tax bill the committee passed earlier this month would discourage firms from engaging in transactions that have no business purpose other than to avoid taxes. "I say to the hucksters (of abusive tax shelters) it is time to find an honest living," said Grassley, an Iowa Republican. Sen. Max Baucus of Montana, the top Democrat on the committee, said abusive tax shelters cost the federal treasury about $14 billion to $18 billion a year. Sphere: Related Content

O'Charleys Completes $50 Million Sale and Leaseback of 23 Restaurants

NASHVILLE, TN - BUSINESS WIRE - October 21, 2003

O'Charley's Inc., a leading casual dining restaurant company, today announced the completion of a $50 million sale and leaseback transaction involving 23 of its O'Charley's restaurants for $50 million. The terms of the agreement provide for an initial 20-year term with renewal options for up to an additional 20 years and provide for minimum average annual lease payments of $4.2 million for the initial 20-year term.

The Company has used the net proceeds from this transaction to pay down amounts outstanding under its senior credit facility. The Company intends to enter into additional sale and leaseback transactions pursuant to which the Company may sell and lease back up to 20 O'Charley's restaurants, which the Company expects will generate gross proceeds of up to approximately $35 million.

O'Charley's Inc. is one of the leading casual dining restaurant operators in the Southeast and Midwest operating 206 O'Charley's restaurants in 16 states. Sphere: Related Content

Monday, October 20, 2003

Huffman Koos Offering Sale-Leaseback of Two Retail Locations

GREAT NECK, NY - MARKET WIRE - October 20,2003

Huffman Koos has retained Keen Realty, LLC to market for long term sale-leaseback two of the company's best retail properties located in East Brunswick and Livingston, NJ. Huffman Koos has been in business for over 86 years and operates 20 furniture showrooms located in NJ, NY and CT featuring quality, value priced brand name furniture.

The two prime retail properties include a 49,627 sf building on 2.75 acres located at 651 State Highway 18 in East Brunswick, NJ, and a 56,738 sf building on 3.59 acres located at Route 10 Circle in Livingston, NJ.

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Friday, October 17, 2003

Realty Income Pursuing $135 million Single Tenant Property Portfolio

ESCONDIDO, CA - October 16, 2003 - BUSINESS WIRE

Realty Income Corporation today announced that it anticipates substantially exceeding its previously planned target of approximately $150 million in new property acquisition activity during 2003.

The Company announced that, in addition to its planned $95 million acquisition of the Golden Gallion portfolio, it is negotiating the acquisition of an additional $135 million portfolio of properties in an industry in which the Company has previously invested. Realty Income is also actively evaluating other acquisition opportunities and one or more of these acquisitions may close during the fourth quarter of 2003.

The Company further stated that it anticipates that the majority of properties that may be acquired during the balance of 2003 will be held for long-term investment within Realty Income's real estate portfolio and the remainder of the properties will be allocated to Crest Net Lease for subsequent sale. Sphere: Related Content

The Pantry Completes $94.5 Million Long Term Lease Financing of 114 Convenience Stores

ESCONDIDO, CA - BUSINESS WIRE - October 17, 2003

Realty Income Corp. announced today that it has provided $94.5 million in sale-leaseback financing to The Pantry Inc. by acquiring 114 convenience store properties under 20-year, triple-net lease agreements.

The stores average 2,700 leasable sf and are situated on a lot size of 1.14 acres. Each location has multi-pump gasoline dispensers and are seasoned stores with an average 14-year operating history. The average purchase price for each property was $829,000. Realty Income will announce its blended lease rate and lease terms on a cumulative basis in the company's quarterly press release on operations.

The Pantry Inc. will use the financing proceeds to partially fund their previously disclosed acquisition of Golden Gallon Stores from Ahold, USA. The properties are existing, high volume, profitable convenience stores operating under the "Golden Gallon" brand name and are located in Tennessee and Georgia. Golden Gallon was founded in 1959 and currently operates 138 convenience stores.

The Pantry Inc. is the leading convenience store operator in the Southeastern United States. Upon completion of the Golden Gallon acquisition, The Pantry's market presence will significantly increase to approximately 1,400 stores in ten Southeastern states. Sphere: Related Content

Thursday, October 16, 2003

CarrAmerica Acquires Cell Genesys HQ in San Francisco, CA

WASHINGTON - October 15, 2003 - PRNewswire-FirstCall

CarrAmerica Realty Corporation today announced that it has acquired 500 Forbes Boulevard, a two-story, 155,685 square foot office and biotech building located in South San Francisco, CA, for $51 million ($327/sf), with an expected year one yield on the investment of 14.7%. The building is currently 100% leased to Cell Genesys, Inc. under a long-term lease. Cell Genesys researches, develops and commercializes new therapies for the treatment of cancer.

The property was built in 2003 and features state-of-the-art lab and office construction. It is proximate to research institutions such as Stanford University; the University of California, San Francisco; and the University of California, Berkeley; and is adjacent to the biotech firm Genentech. Other nearby amenities include hotels, public transportation (including CalTrain and BART), a marina and the San Francisco International Airport. Sphere: Related Content

Wednesday, October 15, 2003

NASD Sanctions Wells For Non-Cash Compensation Rule Violations

NASD Website - WASHINGTON, DC, October 13, 2003

NASD announced today that it has sanctioned Wells Investment Services, Inc., a sponsor of real estate
investment trusts (REITs), for rewarding broker/dealer representatives who sell their REITs with lavish entertainment and travel perquisites, in violation of NASD rules. NASD censured Wells Investment and its President, Leo Wells, and fined them $150,000. NASD also suspended Leo Wells from acting in a principal capacity for one year.

NASD prohibits REIT sponsors from rewarding broker/dealer representatives from other firms with entertainment, gifts or other non-cash compensation. These practices create point-of-sale incentives that may undermine a representative's ability to objectively recommend suitable investments to customers.

In 2001 and 2002, Wells Investment sponsored conferences in Scottsdale, Arizona, and Amelia Island, Florida, which were attended by broker/dealer representatives from other firms who sold its REIT products. Although Wells Investment represented to NASD that these conferences were "strictly educational," they actually constituted lavish affairs that did not meet the standards of NASD rules. For example, Wells Investment provided broker/dealer representatives with a Friday night "sock hop," a "beach bash," and dinner at a Civil War fort with costumed Civil War heroes, fireworks, fife and drum players, skydivers, and a cannon reenactment. Wells Investment also invited the representatives' guests to many of these events, and paid for the guests' food, transportation, lodging and golf fees. Wells Investment provided less than 13 hours of training and education during the three full days of each conference.

In settling this matter, Wells Investment and Wells neither admitted nor denied the allegations, but consented to the entry of findings and imposition of sanctions. Sphere: Related Content

Thursday, October 09, 2003

Duke Energy Seeks Sale Leaseback of Charlotte, NC Offices

Real Estate Alert reports that Duke Energy is seeking to sell and lease back two office buildings in Charlotte, NC valued at $70 million. A 2,200 unit parking garage is included in the sale. The two buildings total 377,000 sf and consist of a 260,000 sf office/flex building and a 117,000 sf office building. Duke will sign a 20 year lease on both buildings at a triple net rent of $13 and $12 per sf respectively. Duke hopes to close by year-end. Staubach has the listing. Sphere: Related Content

Marriott HQ Near Washington, DC Selling For $80 Million

Real Estate Alert reports that Freemont Group has agreed to sell Marriott International's 288,000 sf headquarters at Two Washingtonian Center in Gaithersburg, MD to GLL Real Estate Partners. The Marriott lease for the entire building runs through 2015 at triple net rents of $21 per sf. The offering price would provide the buyer a 7.5% initial annual return. The six story building was designed with two wings, an atrium and a 1,150 car garage on a 5-acre site. The first wing and atrium totalling 155,000 sf were completed in spring 2002. The second wing is scheduled for completion by next summer. Hewlett Packard subleases 71,000 sf. Sphere: Related Content

AON Offices Near Chicago For Sale at $85 Million

Real Estate Alert reports that Prudential Real Estate Investors (PREI) is offering a 416,000 sf office building in Glenview, IL that is net leased to AON Corp through 2017. The 27 year old building was fully renovated by Blackstone in 2001 and purchased by PREI on behalf of a foreign-client. The offering price would provide the buyer a 7.1% initial annual return but rents escalate at 3.5% per year. Sphere: Related Content

Charles Schwab Campus Near San Francisco on Market for $180 Million

Real Estate Alert reports that Hines is marketing a recently completed office campus in suburban San Francisco that is fully leased to Charles Schwab. The 596,000 sf Pleasanton Corporate Commons is valued at $180 million, or about $300/sf, giving a buyer an initial annual yield of approximately 8%.

Schwab has two long-term leases on the property at an average rent of roughly $36/sf. Schwab occupies 60,000 sf and subleases 118,000 sf to E-Loan. Schwab is currently trying to sublease the remaining space at an asking rent of $22/sf. The vacancy level in the market is about 22% including sublease space. Sphere: Related Content

Wednesday, October 08, 2003

Zions Bancorp Signs Long Term Lease for Salt Lake City HQ

Deseret Morning News - October 7, 2003

Zions Bancorp.'s 18-story downtown Salt Lake headquarters is about to get a makeover. Plans call for refacing the building with a stone-and-glass facade. The interior also will be reworked with structural upgrades, including seismic reinforcement. Zions Bancorp. has committed to a long-term lease of the entire building and will expand its occupancy from 60 percent to 100 percent.

Built in 1965, the former Kennecott Building goes by the Gateway Tower East Building moniker now, but that will switch to the Zions Bank Building when construction is completed. Construction is expected to last about 18 months. Zions Bank, which operates more than 400 full-service banking offices in Utah and seven other Western states, will continue to occupy the building during the work. Sphere: Related Content

Tuesday, October 07, 2003

Couche-Tard Buys Circle K For $830 Million - Sale & Leasebacks Planned

National Post - October 7, 2003

Alimentation Couche-Tard Inc. has announced an $830 million deal to buy more than 2,000 Circle K convenience stores in 16 states. The agreement to purchase the retail outlet and gas chain from ConocoPhillips Co. will vault Couche-Tard to the No. 4 spot from No. 7 in North American convenience store rankings. Over 75 percent of the company's sales will be in the United States. Couche-Tard is Canada's largest convenience store operator, with 1,800 locations.

The Circle K outlets acquired include 1,663 corporate and about 350 franchised or licensed stores concentrated in the sun belt states, with 523 stores in Arizona, 360 in Florida, 158 in California and 151 in Louisiana. Couche-Tard's existing U.S. stores, under the Mac's, Handy Andy and Dairy Mart banners, are concentrated in the Midwest. The Circle K deal would boost its total number of stores in North America to 4,630 from 2,575.

Couche-Tard will pay for the deal with a new C$1.2-billion credit facility and a private placement of 13.5-million subordinated voting class B shares for proceeds of C$223-million. The company plans to immediately cut debt by C$300-million by selling 300 of its stores and leasing them back.
Sphere: Related Content

Monday, October 06, 2003

Freshfields HQ in London Sells for £99.2 Million

Freemans News - October 6, 2003

DB Real Estate has purchased Northcliffe House, Tudor Street, London EC4, from an affiliate of US financial services provider TIAA-CREF, and Clerical Medical. The price of £99.2m reflects a net initial yield of 6.4%.

Completed in 2001, the 191,000 sq ft Northcliffe House was developed by Hilstone and funded by TIAA-CREF and Clerical Medical. Northcliffe House is currently let to Freshfields Bruckhaus Deringer at £37.64 per sq ft under leases until August 2021, with a break in 2018. The tenure is long leasehold from the Folkstone Estate for 151 years, at a rental gearing of 5%. Sphere: Related Content

Friday, October 03, 2003

Be Afraid, Be Very Afraid!

The Economic Times - SEPTEMBER 26, 2003

Business process outsourcing is a hot topic in real estate circles lately. Office jobs being shipped overseas to employees who work for a fraction of the wages of their US counterparts. A recent article in Forbes (Giant Sucking Sound) discussed the trend in light of a decision by EDS to lay off at least 2,750 higher-paid workers, mostly in the U.S. and Europe. But most professionals have not been concerned because the trend did not directly affect them. Their industry, or their highly skilled professional job was not at risk. Well, things have changed.

A new company, Global Realty Outsourcing, has already hired 350 real estate staff in India. Over 50 per cent are Chartered Accountants or MBAs. The firm has anounced that they will hire 1,000 more by June 2004. This total includes more highly skilled professionals. The services to be provided range from low level financial analysis such as developing discounted cash flow models, title support and mortgage processing, to higher-level services such as loan underwriting.

And who is behind this company? The company is funded by Capital Trust (Sam Zell), CDC Capital Partners, Citigroup Investments and Wachovia Securities. Need I say more?

Ocwen Financial Corp. has hired over 800 workers in India over the past two years while their headquarters staff was cut from a high of 1,000 to less than 500 today. The firm was recently awarded a $95 million contract to manage the U.S. Department of Veterans Affairs' foreclosed homes. A furor erupted when lawmakers heard work on the contract might be handled by the newly hired workers in India.

Another firm, OfficeTiger, founded by two youthful American partners Jo Sigelman and Randy Altschuler, has targeted the major US investment banks for highly skilled investment banking outsource assignments. A third of it's 1,000 staff have Masters degrees and average age 26. Requests are typically processed at a rate of $15 an hour rather than $50-$60 here. The company's staff operate in three shifts around the clock so that bankers, lawyers and their staff who no longer have to work late, running up fees, overtime and taxi costs.

Companies like Morgan Stanley, JP Morgan Chase and Moody's Investor Service are already contracting out research tasks or setting up their own support centers in India. All are wary of revealing it for fear of alienating clients, the public and their own staff in the US. But the pace of offshore outsourcing is increasing as evidenced by a quick review of dozens of recent hiring announcement published by the Indian press and listed at BPOIndia.org. Brings new meaning to the term "jobless recovery", jobless in the US only.

An article in PropertyWeek, notes that 23 million sf of speculative office space is being built on the outskirts of Delhi. In fact, it was speculative space, but much of it is now prelet. Around 3 million sf of demand from London occupiers now exists in India. Up to 150,000 existing and future UK office jobs could end up in India within five years, equating to 15 million sf of office space according to the article.

The implications for the US office market are far more dire. A Deloitte Research forecast report released in April reported that the world's top 100 financial companies will move 1 million mainly back-office and technology-related jobs to India by 2008. Using a conservative per sf/per employee ratio of 220 sf, that translates to a demand drop of 220 million sf in the US office sector over the next 5 years solely from the move of jobs overseas.

The silver lining to the dark cloud of offshore job movement is that companies are cutting costs and becomming more competetive. But this may be small consolation to investors in the U.S. office sector, particularly those with holdings in secondary and tertiary markets and in large back-office-type real estate like call centers. Sphere: Related Content

Thursday, October 02, 2003

Lexington REIT Forms Net Lease Investment JV With Clarion Fund

PRNewswire - NEW YORK - October 2, 2003

Lexington Corporate Properties Trust ( NYSE:LXP), a real estate investment trust, today announced that it has formed a Joint Venture program with Clarion Lion Properties Fund, LLC to invest in single-tenant net-leased real estate throughout the United States.

Under the terms of the Joint Venture, Lexington and the Lion Fund plan to contribute $30 million and $70 million, respectively, to the Joint Venture. The Joint Venture will acquire single tenant office, industrial and retail properties and intends to acquire $250 million in real estate. The Joint Venture is Lexington's third such partnership with a major institutional investor and will enable Lexington to expand its operating platform, grow its asset management business and broaden its access to capital. Sphere: Related Content

German Fund Acquires Milan Office Complex for $234M

GlobeSt.com - October 1, 2003

In one of the largest sales in Europe this year, the German open fund Deutsche Gesellschaft für Immobilienfonds (DEGI) has paid USD$234 million (200 million Euro) for Bodio Center, a 700,000-sf (65,000-sm) office development in the central Milan district of Bovisa.

The three-building, 384,000-sf first phase of the project, completed last year, is fully leased, with one building leased by the insurance and financial services firm Marsh McLennan, and the two others leased by Unicredito Italiano SpA, one of Italy's largest banks.

Bodio Center is one of first master-planned, urban business parks. The seller was the developer, Doughty Hanson & Co Real Estate of London. It acquired the Bodio Center property, a former Alcatel office and production facility, in December 2000 and proceeded to turn the site into a business center with underground parking for 700 cars.The second phase is under construction and slated for completion for January 2004. Sphere: Related Content

Wednesday, October 01, 2003

Pierre & Vacances Closes E440 Million Sale & Leaseback of 8 Center Parc Villages

Pierre & Vacances Web Site - September 29, 2003

On September 26th 2003, Pierre & Vacances acquired the stake held by MidOcean in Center Parcs Continental Europe, becoming the exclusive owner of the entity. The Group thus reinforces its European leadership in leisure residences with a turnover of E1.1 billion.

Prior to the deal, and in accordance with the Group's policy of not owning the freehold of the property assets under its management, Center Parcs Continental Europe sold the eight Center Parcs villages on which it owned the freehold.

The sale of 7 villages was finalised on September 26th 2003 with Nomura International plc for a total amount of E440 million (E415 million net of costs and tax). In addition, a consortium led by the Dutch company Zeeland Investments Beheer agreed to acquire another village in the Netherlands for a price of E90 million (E80 million net of commissions and tax). This sale should be done by the end of October 2003. Sphere: Related Content

Canary Wharf Enters £753.5 Million Finance Lease With Barclays

Freeman News - LONDON (AFX) - September 30, 2003

Canary Wharf Group PLC said it has entered into a finance lease transaction on 1 Churchill Place to accelerate the refinancing of the building, with a unit of Barclays Bank PLC. The transaction is expected to generate approximately 299 mln stg in additional liquidity for the group, which will be used for general corporate purposes.

The gross amount of the financing is 753.5 mln stg cash, of which 743.5 mln was received today and 10 mln payable on practical completion. On completion and the expiry of the 5 month rent free period, an occupational lease rent of 41 stg per sq ft will be payable by Barclays Bank.

The property is presently under construction and scheduled for a June 2004 completion. The bank was initially expected to occupy 60,385 sq m (650,000 sq ft), with options on the remaining space.
Sphere: Related Content

Sunrise Senior Living Completes $252 Million Sale/Manage Back Transaction

Sunrise Senior Living Web Site - September 30, 2003

Sunrise Senior Living, Inc. (NYSE: SRZ), has completed sale/long-term manage back transactions for 21 consolidated communities valued at approximately $252 million.

The closings occurred in two separate transactions including the sale/long-term manage back of a 100 percent interest in 16 communities for $158 million to CNL Retirement Properties, Inc ('CNL'). In a separate transaction, Sunrise completed the sale/long-term manage back of five consolidated senior living communities for $94 million to investment entities advised by Macquarie Capital Partners, LLC, which acquired a 90 percent interest in the venture with Sunrise retaining a 10 percent interest. Sunrise will continue to operate all 21 communities under long-term management agreements.

Sunrise Senior Living is the nation's largest provider of senior living services with over 360 senior living communities either open or under construction in the United States, United Kingdom and Canada. Sphere: Related Content

Office Market On The Road To Recovery?

PRNewswire-FirstCall - October 1, 2003

Myth or reality: Commercial office rental rates have hit bottom in most markets? Answer: MYTH. A new study by PNC Real Estate Finance and Grubb & Ellis Company finds that rents continue to fall, but that the rate of decline is slowing. It clearly remains a tenants' market, and will remain so well into 2004, according to the report.

Other findings reported by PNC Real Estate Finance and Grubb & Ellis in "Myth or Reality: No Worse, No Better, No Hope? Catching Up With the Office Market," include:

- Myth or reality: The market faces a problem of under-demand, not
oversupply. REALITY, but does it matter? The bottom line is that,
nationally, vacant space has increased by 245 million square feet over
the past 2 1/2 years -- the equivalent of emptying every office
building in Chicago and then some.

- Myth or reality: Tenants are taking advantage of low rates to upgrade
their space. MYTH, so far. Tenants have remained fiscally
conservative and the gap between "A" and "B" rents has not narrowed to
the point to encourage mass migration.

- Myth or reality: Lease terms are lengthening as tenants use their
bargaining power to lock in longer terms at lower rates. Myth.
Although great deals are available, tenants remain opposed to signing
long-term leases at a time when the direction and stability of the
economy is still questionable.

- Myth or reality: Smaller tenants are more active than their larger
counterparts. REALITY. The average lease size has declined by 40
percent over the past three years. Large companies are still more
likely to consolidate or downsize space requirements, while smaller
tenants are more agile, acting as leaders in recovery.

While an economic recovery may be underway, it remains a jobless recovery. Getting back to a 10 percent vacancy rate (from today's 17.6 percent) will require absorption of about 250 million square feet of office space. A normal annual absorption pace is about 50-60 million square feet. Several quarters of job growth will be required to determine how the office market will respond.

A complete version of the office market report is available online at either:
http://www.pncrealestatefinance.com/REMarketResearch.htm or

Sphere: Related Content

Potomac Electric Sells HQ in Washington DC for $151 Million

Pepco Holdings, Inc. Web Site - September 30, 2003

Potomac Capital Investment Corporation, a wholly owned subsidiary of Pepco Holdings, Inc. (PHI), (NYSE: POM), has sold its ten-story, 360,000 square-foot headquarters office building in downtown Washington, D.C. to Wachovia Corporation for $151 million. The sale which closed on September 30, 2003 was handled by Cassidy and Pinkard.

Known as Edison Place, the building is located at 701 Ninth Street N.W., in the highly desirable East End section, and has served as the corporate headquarters of PHI and its utility subsidiary Pepco since 2001. The current, long-term Pepco lease in the building will remain in place as part of the terms of the sale. PHI's ongoing lease of the building demonstrates its continued commitment to remaining in the District of Columbia.

Pepco Holdings' principal operating utilities, Pepco and Conectiv, deliver 50,000 gigawatt-hours of power to more than 1.8 million customers in the District of Columbia, Delaware, Maryland, New Jersey and Virginia. Sphere: Related Content

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