General Growth Sells Management Portfolio to Jones Lang LaSalle

 

General Growth Sells Management Portfolio to Jones Lang LaSalle

Jul 15, 2010 10:22 AM, By Daniel Beaird, NREI Senior Associate Editor

General Growth Properties (NYSE: GGP) has sold the management and leasing responsibilities for its third-party management division to Jones Lang LaSalle (NYSE: JLL) as General Growth attempts to emerge from Chapter 11 bankruptcy protection.

The five-year agreement calls for General Growth and JLL to share management revenues on a portfolio of 18 regional shopping malls and community centers across 11 states. The agreement is on an earn-out basis with no upfront price, and takes effect immediately.

The 200 employees comprising the management teams of the 18 properties plus 30 General Growth corporate employees will become Jones Lang LaSalle employees.

The portfolio adds more than 11 million sq. ft. to JLL’s retail portfolio of 84 million sq. ft. in the Americas and 265 million sq. ft. worldwide.

“It fits very well into our existing structure,” says Greg Maloney, president of Jones Lang LaSalle Retail, based in Atlanta. Along with the 230 employees JLL is adding, 16 new clients are also coming on board with this deal.

“The people that we’re bringing in are moving just down the street or only within a few miles from one office to another,” says Maloney. “The benefit to JLL is the new talent and new clients as this deal solidifies our position as a third-party provider of regional mall real estate in the country.”

Another benefit to JLL is any possible additional contracts that General Growth might send its way due to this alliance.

“If they decide to sell some properties, we’ll get a shot at the investment sale piece,” adds Maloney. “We are positioned to offer our services for a variety of transactions.”

Chicago-based General Growth’s third-party management arm is a separate business from the mall owner’s main processes, and therefore, wasn’t protected from bankruptcy. The alignment with JLL will allow General Growth to remove top tier management from its payroll in its efforts to reorganize.

“This strategic alliance with Jones Lang LaSalle also allows our clients to leverage the resources and talents from GGP and Jones Lang LaSalle and, ultimately, create a broader range of services for our clients,” says Tom Nolan, president and chief operating officer for General Growth.

Reorganization Plan
General Growth has filed a reorganization plan that would implement a recapitalization of between $7 billion and $8.5 billion of new capital and create two publicly traded companies. Under the plan, one group would include completed properties and the other would oversee planned communities.

GGP also landed a $500 million equity investment from the Teachers Retirement System of Texas this week in another step to help the REIT emerge from bankruptcy protection.

General Growth owns or manages more than 200 regional shopping malls in 43 states.

General Growth Sells Management Portfolio to Jones Lang LaSalle

Jones Lang Lasalle operates as a nationwide Real Estate Development, sales and consulting group. They do have an office in our marketplace of Cincinnati. They have been responsible for the marketing of several commercial building in Norwood and Middletown recently.

Published in: on July 16, 2010 at 07:37  Leave a Comment  
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Industrial Sector Lags Despite Manufacturing Gains

 

Industrial Sector Lags Despite Manufacturing Gains

Jul 14, 2010 10:02 AM, By Daniel Beaird, NREI Senior Associate Editor

Widespread improvement in the industrial sector won’t occur until 2011 and 2012 despite recent economic and manufacturing gains. That is according to a new report issued by Encino, Calif.-based Marcus & Millichap Real Estate Investment Services.

While the manufacturing sector grew for the tenth consecutive month in May on the strength of new orders and production, industrial vacancies will remain elevated throughout 2010 as tenants have more space than they need. However, some industrial markets like Houston, a port city, are better positioned to rebound faster as tenant demand rises and greater employment growth is expected.

“Manufacturing continues to post gains, which will bolster a 2011 recovery in the industrial property sector,” says Alan Pontius, managing director of Marcus & Millichap’s national office and industrial properties group. “Future economic expansion will also be driven by personal and corporate spending.” Both were the primary drivers of GDP growth during the first quarter of 2010.

“As private consumption resumes, business will be encouraged to replenish depleted inventories in anticipation of further increases in demand, albeit at a slow pace,” says Pontius.

Employment growth will be a crucial component in stabilizing consumer sentiment and supporting spending, according to Marcus & Millichap. More robust economic and employment growth won’t take hold until 2011 and 2012.

As the industrial sector begins its slow rally, investors are hoping that cheaper turnover costs and growing competition for available assets will help to stabilize cap rates. Cap rates for best-of-class assets or those located in top industrial markets with credit tenants and long-term leases in place will likely end 2010 in the high-6% to mid-7% range, according to the report.

More buyers will move off the sidelines and compete for deals, while investors will demand higher returns for riskier assets in less desirable locations, Marcus & Millichap predicts. Initial yields for single-tenant properties in secondary and tertiary markets should settle in the 8% to 9% range this year.

Texas Two-Step
Houston, Los Angeles and Denver ranked as the strongest U.S. industrial markets in Marcus & Millichap’s report. The firm ranked 27 national industrial markets on various factors including projected employment changes, construction, net absorption, revenue change and vacancy.

Dallas-Fort Worth made the largest jump in the rankings, up eight spots to fifth. Meanwhile, Tampa, Atlanta and Detroit bottomed out the list.

Top-ranked Houston benefits from its port city status. Tenant demand from port traffic and modest industry growth drove Houston to the top of Marcus & Millichap’s rankings for the second consecutive year. The city’s vacancy rate is expected to dip below the 10% mark by year’s end, recording only one of a few declining vacancy rates nationwide.

However, much like other industrial sectors, Houston’s recovery is dependent on job growth. According to IHS Global Insight, an economic and financial analysis firm, the port city is expected to return to better job levels than other top industrial markets in 2011.

Another metropolitan Texas area has seen its fortunes rise in the industrial sector too as Dallas-Fort Worth cracked the top five of the report’s rankings. Vacancy in the Metroplex is still considerably higher than most top markets, ranging from 12% to 13%, but the rate only slightly exceeds the area’s long-term average. However, demand drivers have moved Dallas-Fort Worth into the top five.

The Dallas-Fort Worth area is positioned to meet future demand with the continued evolution of intermodal facilities at the Alliance Global Logistics Hub and the Dallas Logistics Hub. Employment in the region is expected to pick up by year’s end, with increased industrial leasing activity to follow. Landlords are then expected to rein in concessions.

Industrial Sector Lags Despite Manufacturing Gains

Published in: on July 16, 2010 at 07:31  Leave a Comment  
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National Economic Update Mid-July 2010

Weekly Economic Summary – July 9, 2010

OVERVIEW ~ June 28 through July 2 ~ The psychology of the economic marketplace, to the extent that it can be measured, shows up in the numbers. Over the course of the week, for example, the Dow Jones Industrial Average (DJIA) fell from 10143.81 at the opening on Monday to 9640.69, presumably on growing concerns about the apparent weakness in the American economy. Until recently, it has generally been agreed that the economy would stumble forward for several months and then, at the beginning of the next year, begin to grow in a sustainable way. By Friday, however, after the release of the June employment figures, the DJIA dropped and most other data edged lower. Even the manufacturing sector, which has been one of the brightest lights in the economy in recent months, showed a weakening with the Institute of Supply Management (ISM) Index dropping from a strong 59.7 in April to 56.2 in May, and a 1.4% fall for May factory orders. In such an environment, interest rates are likely to fall, and indeed the 10-year Treasury note declined from 3.110% to 2.956%.

FOCUS ~ The employment report was treated as if it were a mid-term report card for the economy in our nation. The Thursday report of 472,000 new claims for unemployment insurance worried most investors and then the larger employment report, released Friday, caused analysts to doubt their earlier hopes for recovery and caused the markets to fall significantly.

There were 125,000 jobs lost in June. Analysts had hoped for a furthering of the positive numbers reported in the prior month. We need at least 150,000 new jobs each month to just keep up with the employment needs in our nation. In June, the economy failed even to tread water.

The unemployment rate actually declined from 9.7% to 9.5%, but this was not good news either, because the survey indicated that 652,000 capable workers had simply stopped looking for work, pulling themselves out of the so-called “labor pool.” Thus, the unemployment rate declined, not because more people found jobs, but because fewer people are looking for them.

The May employment report apparently lulled investors and analysts into a more optimistic view than it should have, largely because of the many census jobs that increased employment numbers and then swiftly fell away. A survey of American economists had resulted in a median expectation of 110,000 new jobs in June. Thus, the markets reacted strongly to the decline.

If there is any good news to be found in the week, it is the fact that overall mortgage interest rates remain even more attractive than they were before.

Published in: on July 16, 2010 at 07:27  Leave a Comment  
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