Elsewhere: Landmarks on Sale

The building used as a venue of internationally famous auctions, Sotheby’s HQ, itself went under the hammer. On February 19 Jones Lang LaSalle, a company included in Forbes magazine’s list of “400 Best Big Companies” was appointed exclusive broker for the sale of Sotheby’s headquarters at 1334 York Avenue. The 43,700-square-meter property was built in 1921 and refurbished in 1999 to 2000. The 11-storied edifice is 52 meters tall. Originally, the area of the building measured only 14,900sqm, but was increased to 43,700sqm as a result of a refurbishment project designed by Kohn Pedersen Fox Architects and Swanke Hayden Connell.

The building is estimated to be worth $500 million. Tom Beneville of Jones Lang La Salle notes, “Manhattan offers investors one of the most exclusive, stable, sought after, and supply-constrained real estate markets in the world. The property is surrounded by the world’s leading medical facilities and some of Manhattan’s most expensive residential real estate. Together these market conditions and lease characteristics will drive valuation of the property.”

The owner of the building, RFR Holding, acquired it back in 2002 at $175 million on lease-back terms. J.P. Morgan Securities brokered the deal for Sotheby’s. “This is an outstanding opportunity for Sotheby’s,” Bill Ruprecht, Sotheby’s President and Chief Executive Officer, said then. “The attractive price of $175 million reflects the high asset quality, desirable location and Sotheby’s bright future prospects. Sotheby’s, similar to other major corporations, has decided to enter into a sale-leaseback transaction as a means of financing to provide long-term liquidity for our business. It will also allow Sotheby’s to pay down $100 million in short-term debt as well as antitrust fines, which strengthens our balance sheet.”

Cash is More Important

Only three years after it was opened, London's most distinctive landmark, the 180-meter high Gherkin, was sold by Swiss Re, its Zurich based owners. Built on the site of the old Baltic Exchange, badly damaged by an IRA bomb in 1992, it was believed to have cost Swiss Re Sfr 500 million. It has now changed hands for Sfr 1.47 billion (600 million pounds). Designed by architect Norman Foster, the Gherkin's won Britain's top prize for architecture in 2004.

Swiss Re first opened its doors in Zurich in 1863. It now has 11,400 employees and 30 offices worldwide. Its chief executive, Jacques Aigrain, said of the sale of the Gherkin: "We have found a future owner who will maintain and preserve the superior quality of this outstanding property. We are proud to have built what has become a popular landmark in the City of London." The landmark was taken over by IVG Asticus and Evans Randall. But Swiss Re – the world's largest re-insurer – is not changing its London address. It will remain the building's largest tenant, occupying 14 of the 41 stories, and it is estimated it now be paying its new owners more than ?27 million a year in rent. Other tenants are Royal Bank of Scotland Group, Deutsche Bank, Accenture, Norton Rose, and Lloyd’s of London.

In April of this year London & Regional Properties announced a landmark acquisition of the Rondo 1 office building located in the heart of the Central Business District of Warsaw, marking the largest single asset real estate transaction in Central Europe to date at over 260 million euros. The acquisition is London & Regional's first foray into the Central European real estate market. The distinctive 40-story, 192-meter high Rondo 1 office building, designed by renowned American architects Skidmore Owens & Merrill, is considered to be the highest quality office building in the region, with tenants such as Ernst & Young, Baker & Mackenzie and Calyon.

The transaction involved multiple parties including seller Hannover Leasing, and was financed by Aareal Bank AG. London & Regional was represented by the Warsaw, London and Paris (German Desk) offices of SALANS, led by partners Ralf Nitschke, Paula Howard and Eric Rosedale. Eric Rosedale, Co-chairman of Global Real Estate at SALANS, remarked "this was an extremely complex acquisition which involved three jurisdictions and required close coordination between our cross border real estate, M&A and finance teams."

In the U.S. Hines, the international real estate firm, announced in late 2006 that a subsidiary of Hines-Sumisei U.S. Core Office Fund, L.P. (Core Fund) has acquired Riverfront Plaza in Richmond, VA, from Commerz Grundbesitz-Investmentgesellschaft mbH. The Core Fund is an investment vehicle organized by Hines and Sumitomo Life Realty (N.Y.), Inc. to acquire a geographically diverse portfolio of core office buildings in the U.S.

Riverfront Plaza consists of two, 21-story office buildings – 901 and 951 East Byrd Street – that overlook downtown Richmond's James River. Designed by HKS, Inc. Architects of Dallas, Riverfront Plaza was completed in 1990. The buildings, which contain a total of 950,475 rentable square feet, are 99 percent leased and serve as headquarters for the investment banking firm Wachovia Securities, and the law firm Hunton & Williams.

“The acquisition of these premiere assets will allow Hines to become a part of one of the fastest growing metropolitan areas in the Mid-Atlantic region,” said Hines Vice President John Harned. “We especially look forward to participating in the continued transformation of the Richmond CBD into a vibrant live-work environment.”

“Riverfront Plaza has the superior tenancy, location, design and construction that we seek,” said Charles Hazen, president of the Core Fund. “We are very pleased to add these prominent buildings to our portfolio.”

Commerz Grundbesitz-Investmentgesellschaft mbH was represented in the sale by Eastdil Secured. Hines represented the Core Fund.

The Core Fund also has an interest in 101 Second Street and the KPMG Building in San Francisco; Golden Eagle Plaza in San Diego; 600 Lexington, 499 Park Avenue and 425 Lexington in New York; One and Two Shell Plazas in Houston; 1200 19th Street NW in Washington, D.C.; Three First National Plaza and 333 West Wacker in Chicago; 720 Olive Way in Seattle; One Atlantic Center in Atlanta; and LNR Warner Center in Los Angeles.

Commerz Grundbesitz Group (CGG), founded by Commerzbank AG – Germany's second largest bank – is one of Europe's largest real estate investors. CGG handles all of Commerzbank's indirect real estate investment activities, including open-ended property funds, REITs, as well as other listed and non-listed real estate vehicles. CGG manages a global real estate portfolio in excess of Euro 13 billion comprising approximately 3.5 million m? across 200 commercial properties in 14 countries. Commerz Grundbesitz-Investmentgesellschaft mbH (“CGI”), one of the Group's capital investment companies, manages the open-ended property funds hausInvest europa and hausInvest global, which have collectively in excess of Euro 9 billion in real estate investments. Riverfront Plaza was held through hausInvest global.

Hines is a privately owned real estate firm involved in real estate investment, development and property management worldwide. With offices in 64 U.S. cities and 15 foreign countries and controlled assets valued at approximately $13.5billion, Hines is one of the largest real estate organizations in the world.

Playing Big

To be on the safe side investors focus not only detached landmark buidlings but also on gigantic mixed-use facilities, tapping into fast growing sectors of commercial real estate. In late February, W. P. Carey International LLC, an affiliate of investment firm W. P. Carey & Co. LLC (NYSE: WPC), announced the acquisition of a portfolio of 61 French logistics properties through a sale and leaseback transaction with the Fraikin Group, a portfolio company of CVC Capital Partners, for approx. 48 million euros (US$68 million). Totaling more than 1 million feet, the properties are situated throughout France, including locations in Paris, Lille and Marseille. The facilities are generally located in prime industrial parks outside of large cities, with convenient access to major road networks. They represent the majority of Fraikin’s French operating assets. Founded more then 60 years ago, Fraikin has grown to become Europe’s largest commercial truck and industrial vehicle leasing company. Active in France, Spain, Poland, Switzerland and Slovakia, Fraikin serves the commercial fleet leasing needs of many of Europe’s most well-known companies.

Edward V. LaPuma, President of W. P. Carey International LLC, said: “This recent transaction with Fraikin has allowed us to expand our coverage in France, a region in which we are committed to growing our presence. Fraikin is a market leader in Europe with the potential to serve as a platform for industry consolidation. We are also delighted to be serving the long-term financing needs of a portfolio company of CVC, as they are one of Europe’s most experienced and reputable private equity groups."

In a separate development, Hines, the international real estate firm, announced today that Hines Real Estate Investment Trust, Inc. (Hines REIT) has acquired its first international property, Atrium on Bay, an approximate 1.1 million-square-foot mixed-use complex in Toronto’s Downtown North submarket. It was acquired from a joint venture between Brookfield Properties and The Ellman Companies. The complex contains three office towers, a two-story retail mall and a two-story parking garage. Located on Bay and Dundas Streets, the property is situated directly above one of Toronto’s busiest subway stations and is adjacent to Toronto’s largest mall, a 23,000-student university and a seven-hospital campus.

The three office towers contain approximately 913,000 square feet and are eight, 13 and 14 stories, respectively. The retail mall contains approximately 142,000 square feet. Atrium on Bay was developed in the early 1980s, was renovated in 1999 and 2000, and is currently 86 percent leased. The Canadian Imperial Bank of Commerce occupies roughly 34 percent of the total rentable area, with an array of prestigious tenants occupying the balance. Hines will manage the property and oversee leasing on behalf of Hines REIT.

On its part, GE Commercial Finance Real Estate France (“GE”) has acquired Fonci?re Ariane and GAGI, its 100% owned asset management company based in Toulouse, from GA (ex Giraudy Auff?vre). GA's shareholders are DB Real Estate Global Opportunities Fund, Five Mounts Properties and Highridge Partners.Through the acquisition, GE has acquired 85 buildings on 71 sites which generate a rent of approximately 25 million euros per annum. Half the portfolio is office buildings, with the remainder equally divided between industrial, retail and logistics assets. The assets are located in Toulouse, Roissy, Saint Quentin, Lyon and Strasbourg.

In Russia, London & Regional Properties and VVV recently announced an ambitious plan to establilsh a joint vernture that will build prime warehouse space and logistics facilities in 10 major Russian cities including Moscow, St Petersburg, Rostov, Novosibirsk, Yekaterinburg and Krasnodar. London & Regional Properties has pledged to spend $750 million on its projects in Russia. VVV Company will act as developer for warehouse facilities. Commenting, Michael Mamontlivi, Executive Director of Strategic Development for VVV Company, said: "We are pleased to have entered into a partnership agreement with London & Regional Properties. Their commitment to Russia and efficient execution strategy are an enormous asset for accelerating our rapid development. Consumer spending in Russia has been increasing by approximately 10% annually for the last five years, but the regional transportation and distribution infrastructure are far from adequate to support such growth. Our “Network of Regional Warehouses” will benefit tenants by decreasing transport costs, offering them efficient modern warehousing solutions and providing them with a single, reliable partner for all their regional logistic needs".

What is the outlook for the market of landmark properties? Undoubtedly, relatively new or refurbished buildings have better prospects. Such buildings are usually sold at prices considerably exceeding their market value. As regards rundown and obsolete buildings, they still may be attractive for investors who may take interest in plots beneath them or valuable interiors.

The S&P/CitiGroup BMI Property Indices provided to ResearchWorldwide.com for analysis on a regular basis, shows that Europe at 73% growth for listed property companies and 62% growth for REITS, measured in US$, was the star continent in 2006. "Specific countries in Europe that saw strong price performance in their listed property companies sector in 2006, in local currencies, were Poland 132%, Greece 102%, Spain 96,5%, France 63%, Finland 58,5%, United Kingdom 47,5% and Germany 47%. Strong European REIT performances in 2006 came from France 63,5% and Netherlands 35%" says ResearchWorldwide.com, Commercial Real Estate Information Portal. The 2006 top 10 performing countries, measured in local currency, was led by China showing 141% growth in their listed property companies sector. China was followed by Poland 132%, Greece 102%, Spain 96,5%, Singapore 68%, France 63,5% for REITS and 63,3% for listed property companies, Israel 59%, Finland 58,5%, Taiwan 57% and Thailand 52%. The largest listed real estate market place worldwide, the United States, saw REITS price performance increase by 30,6% and listed real estate companies rise by 29,9% in 2006, according to the S&P/CitiGroup BMI Property Indices supplied to ResearchWorldwide.com. "Overall, investors in listed real estate worldwide fared very well in 2006, with Asia Pacific's growth at 41% for REITS and 32% for listed property companies, joining the very strong Europe average results of 67% and US's 30% average results. Only the Middle East and Africa lost ground in 2006 with listed property companies showing only 0.8% growth and REITs dropping by 2.75%" says ResearchWorldwide.com.

30 St Mary Axe in the City of London, widely known by the nickname "The Gherkin",is 180 m tall, making it the second-tallest building in the City of London, after Tower 42, and the sixth-tallest in London as a whole. The design is by Pritzker Prize-winner Sir Norman Foster and ex-partner Ken Shuttleworth and Arup engineers. It was constructed by Skanska of Sweden between 2001 and 2004.