PRESS RELEASE: NAI/Merin Hunter Codman Completes $18,525,000 Sale of Palm Beach Gardens Office Building
Neil E. Merin, SIOR, CCIM, Chairman of NAI/Merin Hunter Codman represented the Seller, Admiralty Acquisition Co. LLC, in the sale of the 80,300 square foot, 10-story office building to Dr. A. John Merola, of Jupiter, Florida, who was represented by Summit Commercial Real Estate Group of Syracuse, New York for $18,525,000 ($231 per sf).
The Seller, an entity formed by Ray Celedinas of Celedinas Insurance Group and local investors, acquired the property in September of 2013 from a CMBS trust that had foreclosed on the property. At the time of acquisition, the property was just 21% occupied after losing a number of tenants including homebuilder Taylor Woodrow and Fifth Third Bank during the real estate downturn.
Upon acquiring the property, Celedinas Insurance moved its headquarters to the building and hired NAI/Merin Hunter Codman as property manager and leasing agent. Over the past three years NAI Merin Hunter designed and implemented a capital improvement and marketing program that resulted in increasing occupancy at the property to its current 99% occupancy level with a high credit quality tenant roster that includes Celedinas Insurance Group, A Marsh & McLennan Agency, Pulte Homes, the US Army Corps of Engineers, the Scott Harris law firm and GAI Consultants.
Jordan Paul, Chief Executive Officer of NAI/Merin Hunter Codman stated “Neil Merin and Jason Sundook did an outstanding job in overseeing the renovations, rebranding, and re-tenanting of this project. We are very happy to have helped our client create significant value and turn 4400 PGA into a premier property on the PGA corridor.”
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West Palm Beach, Fla. – It has been a busy few months for NAI/Merin Hunter Codman. Since June of this year, Palm Beach County’s largest privately held commercial real estate services firm has represented buyers and sellers in approximately $250 million of commercial real estate sales. The investment properties included office, retail and multifamily properties and ranged in size from just under one million to over seventy million dollars.
NAI/Merin Hunter Codman’s Investment Sales Team led by Chairman Neil E. Merin, SIOR, CCIM, Capital Markets Specialist Christian J. Johannsen, CCIM, Retail Specialist Spencer Grossman and Multi-Housing Specialist Wendy Pierre, CCIM, facilitated almost a quarter billion dollars of investment sales transactions representing a variety of institutional and private equity clients. NAI/Merin Hunter Codman accomplished its clients’ goals over what is normally a sluggish summer period in a year which has been notable for a nationwide slowdown in investor demand. In several cases NAI/Merin Hunter Codman’s Capital Markets team was also able to assist its clients by arranging financing for the properties. The firm which also manages and leases approximately 5 million square feet of office, retail and industrial property throughout Palm Beach County has established itself as one of Palm Beach County’s premier investment sales brokers.
Jordan Paul, Chief Executive Officer of NAI/Merin Hunter Codman stated, “Florida, in general, and Palm Beach County, in particular, have continued to be very attractive investment targets in a year where we have seen investors pull back due to economic and political uncertainty. Notwithstanding that perception, our area has benefitted from steady growth in rental rates and absorption along with positive demographic trends that should allow that growth to continue. We are very pleased that our team has been able to effectively convey all that is positive about Florida and Palm Beach County on behalf of our clients. We have a diverse and experienced group of brokers who have done a tremendous job this year representing our clients on a wide variety of investment sales. Our team has combined our market knowledge with the access we have to investors worldwide through our affiliation with the NAI Global network, which has over 375 commercial real estate offices located throughout the world, to provide our clients with an extraordinary level of exposure and outstanding transaction executions for their commercial properties.”
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Please enjoy an excerpt from the Fall issue of The Linneman Letter by Dr. Peter Linneman, PhD, Chief Economist for NAI Global and Principal of Linneman Associates. Mr. Linneman will also be the featured speaker of the upcoming 2017 NAI Florida Forum.
“How “at risk” are different property investments to an economic downturn? To address this question, we examined a variety of simplified investment profiles. Specifically, we simulated the returns for an 8-year hold period for 3 hypothetical multifamily investments: a class A property with a low yield and high NOI growth in a Gateway market (“Gateway A”); a class A property with a mid-range yield and medium NOI growth in a secondary market (“Secondary A”); and a class B property with a high yield, but low NOI growth, in a tertiary market (“Tertiary B”). We chose to model multifamily because of the simplicity of mark-to-market rents, though our insights can be generally applied to other property types. Each investment is analyzed for a Base Case with constant (but different for each property) NOI growth. For all investments, we assume a purchase price of $100 million, cash flow margins of 83% of NOI (reflecting on-going capex), and exit transaction fees of 3%.
The Gateway market A investment has a going-in cap rate of 4%, NOI growth of 4% per annum for 8 years, and an exit cap rate of 4.5%. The Secondary market A investment has a going-in cap rate of 6%, NOI growth of 2.5% per annum, and an exit cap rate of 6.5%. The Tertiary market B investment has a going-in cap rate of 7.5%, NOI growth of just 1.5% per annum, and an exit cap rate of 8%. For each property, we overlay 3 leverage scenarios: no leverage, 50% LTV, and 75% LTV. This yields a total of 9 “Base Case” scenarios. In both the 50% and 75% LTV scenarios, we assume 10-year debt with a 3.5% interest rate and 30-year amortization.
We also simulated how returns and (interest and debt) coverage ratios are affected by reduced NOI growth due to a cyclical downturn. We refer to these 9 scenarios as the “Realistic” scenarios, as NOI never grows smoothly upward forever. These scenarios assume -6% NOI growth in years 3 and 4 (that is, an aggregate 11.6% NOI decline spread over 2019 and 2020) of the investment horizon. Thereafter, the originally modeled growth rates resume through year 8. In total, we simulated 18 investment scenarios and their corresponding return profiles: 3 different investments, with 3 leverage ratios and 2 economic environments.
While highly simplified, this analysis is fairly realistic and provides insights on the impacts of leverage, property type, and the economy. As to leverage, as long as original pro-forma growth occurs, increased leverage increases both the equity IRR and the equity multiple. For example, the Gateway A property generates an equity IRR of 5.2% with no leverage, 6.3% with 50% leverage, and 8.5% with 75% leverage, while the equity multiple increases from 1.4x to 1.6x to 2.0x over the 8 year hold.”
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PRESS RELEASE: Christian J. Johannsen, CCIM of NAI/Merin Hunter Codman Completed $38,650,000 of 1031 Exchange Investment Sales and Secured $25,825,000 of Financing
West Palm Beach, Fla. – NAI/Merin Hunter Codman, Inc., Palm Beach County’s leading commercial real estate services firm, is proud to announce that Christian J. Johannsen, CCIM, Managing Director of NAI/Merin Hunter Codman has executed three acquisitions to complete the outbound leg of an IRS Section 1031 Exchange totaling $38,650,000. Mr. Johannsen also placed $25,825,000 financing for the three sale transactions. All three acquisitions were NNN (Triple Net) leased to creditworthy tenants.
Christian J. Johannsen, CCIM is a commercial real estate veteran who specializes in capital advisory services at NAI/Merin Hunter Codman. Utilizing his expertise, he was able to defer his client’s immediate tax liability by taking advantage of a provision in the tax code (Section 1031) that permits property owners to exchange like properties, under certain criteria, to defer recognition of gain or loss and therefore defer the tax that may have occurred in an outright sale.
Representing Garner Advance, LLC, Mr. Johannsen advised his client on the purchase of White Oak Crossing, an 87,446 square foot retail plaza containing signature national tenants Burlington Coat Factory, Staples and Dollar Tree. White Oak Crossing is located at 1210-1230 Timber Creek Drive in Garner, NC and was purchased for $12,300,000 from NC Garner White Oak, LLC. Mr. Johannsen also secured a 10-year, non-recourse loan in the amount of $7,380,000 at an interest rate of 2.64% on behalf of the purchaser. The seller NC Garner White Oak, LLC was represented by J. Tyson Glasser, CCIM, of Realty Link, Greenville, SC.
In Florida, Mr. Johannsen represented Celebration Advance, LLC in the purchase of Celebration Office Center III, a 100,924 square foot, 3-story office building located at 1390 Celebration Boulevard, Kissimmee FL for $17,200,000. Mr. Johannsen also secured a $12,040,000, 10-year loan at 2.64% interest on behalf of his client, Garner Advance, LLC.
On the Treasure Coast of Florida, Mr. Johannsen identified a 51,627 square foot office / call center located at 300 Business Center Drive, Port St. Lucie, FL as an investment for his client PSL Advance LLC. Mr. Johannsen’s client purchased the property from QVC St. Lucie for $9,150,000. In order to complete the acquisition, Mr. Johannsen secured the $6,405,000 financing in a 10-year, 2.64% non-recourse loan.
Jordan Paul, CEO of NAI/Merin Hunter Codman said, “Christian J. Johannsen, CCIM personifies the signature brokerage service and customer service for which NAI/Merin Hunter Codman is known. Utilizing the NAI Global platform Mr. Johannsen was able to select 1031 Exchange properties in and outside of the state to fit each of his client’s unique needs. Mr. Johannsen, did not stop there, he also asked, “How can I help you next?”, and secured the financing needed to finalize the deals”. Continuing Mr. Paul stated, “Congratulations to “CJ” for a job well done.”
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“The Linneman Real Estate Index (LREI) monitors the supply of real estate capital, as proxied by the aggregate flow of commercial real estate debt (the numerator), with the fundamental demand for space, as measured by nominal GDP (the denominator). Excluding the net real estate equity flows from the numerator modestly understates capital oversupply situations and overstates an undersupplied market. The LREI captures whether debt for commercial real estate is growing more quickly or slowly than the economy. When the index is rising, it means that mortgage debt available for commercial real estate is rising more rapidly than the economy, and vice versa. The index is set to 100 with a base year of 1982, when the supply of real estate capital was roughly in balance with demand.
The index rises when mortgage debt rises more rapidly than the economy grows (“easy money”), and declines when money is tight relative to economic growth. The LREI peaked at 171 in 2009, but steadily declined before hovering between 136-139 from 2012 through 2014 as the Financial Crisis reverberated. The index increased to 143 in the first quarter of 2016, a clear indication that a new capital cycle is underway. As banks expand their mortgage lending, the era of massive real estate deleveraging has come to an end. Our research shows that, historically, the best investment periods for real estate have occurred while the LREI is declining or in the first 2 years of rising.
The LREI tends to run in long cycles, and we believe we are still in the early phases of another capital boom. We expect lending to outstrip the growth of the economy, resulting in huge capital flows to real estate for the next three years. This bodes well for prices over the next couple of years. The risk is that if you are looking to sell 3-4 years from now, you could hit the side of the mountain. When capital is being taken out of a capital intensive business, values go down far more than NOI goes down. If you are a long-term holder (10-30) years and can see your way through the valleys, you will do quite well, but if you are a 2-3 year holder, note that we are actually entering a dangerous window. That is, yes, there is a lot of capital flowing, but investors could find themselves having a difficult time exiting if the capital cycle reverses in 3-4 years.”
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In a resounding repudiation of the political class, on June 23, 2016, the citizens of the U.K. overwhelmingly voted to leave the European Union by a margin of 52% (17.4 million voters) to 48% (16.1 million). The “British exit”, commonly known as “Brexit”, was opposed by all 5 U.K. political parties, as well as President Obama, Chancellor Merkel, and almost every political leader around the globe. The vote was framed as a choice between maintaining economic and political stability (the “stay” camp) versus national sovereignty (the “leave” camp).
CLICK HERE to read the rest of The Linneman Letter.
“Wall Street is in a panic, supposedly worried about a rising dollar, slowing Chinese growth, plummeting oil prices, a U.S. recession, and increasing interest rates. While these supposed rationales are more cover stories than real reasons, this panic caused stock prices to fall by 12% between year-end 2015 and February 11th, hitting a low not seen for two years. And as Wall Street jitters caused a flight to safety, 10-year Treasury yields fell by 20 bps and mortgage spreads widened by 100-200 bps. In addition, nervous lenders pulled back on mortgage origination growth, especially for commercial mortgagebacked securities (CMBS), and loan proceeds fell by 5-10%.
Yet while Wall Street is in a complete tizzy, Main Street continues to move forward: consumer confidence remains largely unchanged near its historical average; the economy continues to add jobs at a healthy pace; wages are growing faster than inflation; unemployment claims are low; the unemployment rate and the duration of unemployment are falling; and consumer spending remains solid. Thus, while Wall Street fears apocalypse, Main Street merrily dances onward.
This disconnect raises the question, “Who is right: Wall Street or Main Street?”
To find out the answer and read the rest of the excerpt, CLICK HERE.
“You all took a macroeconomics course in college, and some of you (presumably those who also enjoyed “50 Shades of Gray” and the Marquis de Sade) took more than one. You manipulated ISLM (a.k.a. Investment-Saving and Liquidity Preference-Money Supply) curves and simplistic mathematical equations, which elegantly demonstrated how the economy is a well-oiled macro entity. You were also taught that the economy’s failings can be easily corrected by the beneficent and perfectly timed actions of benevolent and omnipotent government officials, who know exactly what to do, and when, while mere mortals (including the same people before they became government officials) flounder hopelessly. The amazing thing is that these courses pretend to describe the economy, yet never once mention entrepreneurship, or creating a predictable and stable environment for decision making, or allocating scarce resources from less to more productive players. And you bought it (even though you got poor grades in it). What nonsense!
Here are a few simple truths about the economy that they forgot to teach you. First, temperate risk-taking generates growth by moving resources to enterprises that create future jobs and consumption opportunities. The second truth is that without stable and transparent economic rules that allow and encourage a reasonable return to risk taking, growth will not occur, as even raw entrepreneurs will refuse to take risks. It is intuitively obvious that ever changing rules of the game create uncertainty, which discourage action, while high taxes discourage risk taking. Similarly, low interest rates do not encourage creative risk taking but rather create just more highly leveraged investments in low risk instruments. Hence the leveraged risk taking created by the Fed’s low rate policies does not result in productivity. It just distorts temperate risk taking.”
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NAI/Merin Hunter Codman’s executives, brokers and staff are back in the saddle after attending our annual NAI Florida Forum and NAI Florida Chapter Meeting which took place October 27-28, 2015 in the Treetop Ballroom of Miami’s Jungle Island. Although, the NAI Chapter Meeting offered a fantastic opportunity to collaborate and learn from our fellow NAI Global, NAI Latin America and NAI Florida members, I must admit this year’s Second Annual NAI Florida Forum stole the show.
The NAI Florida Forum is quickly becoming “the” annual economic event of South Florida. Dr. Charles Bohl, an associate professor and the director of the graduate program in Real Estate Development and Urbanism (MRED+U) at the University of Miami’s School of Architecture, welcomed a packed house of local, national and international business leaders, as well as commercial real estate professionals. Dr. Bohl, who is also an accomplished author and current chair of ULI Southeast Florida/Caribbean District Council, focused on mixed-use development, placemaking and community building in Florida, the US and abroad.
Next, Al Lewis, of the South Florida Business Journal lead, our very own, local expert, and NAI/Merin Hunter Codman, Chairman Neil E. Merin, SIOR, CCIM in an vibrant and insightful panel discussing the current state and future projections of the Latin America, Miami-Dade, Broward and Palm Beach Counties’ real estate markets.
Following our vivacious panel, was my favorite part of the NAI Florida Forum (sorry, Neil), keynote speaker Dr. Peter Linneman. Dr. Linneman is the principal of Linneman Associates, the CEO and founder of American Land Fund and of KL Realty, and the chief economist of NAI Global. Within the first 30 seconds of his presentation, Dr. Linneman captured the audience with his fresh and perceptive take on how the current national economic trends and predicted future outcomes, affect our local markets today and tomorrow.
NAI/Merin Hunter Codman is very fortunate to have been a part of this dynamic industry event and we would like to thank all of those who helped make this event a success. A very heartfelt thank you to our generous sponsors, fellow-event underwriters (NAI Global, NAI Miami and NAI Rauch Weaver Norfleet Kurtz & Co.), and most importantly, Jackie Larkin, NAI Miami’s marketing manager and her assistant extraordinaire, Elizabeth Calderin for all of their hard work in planning such a successful event. We’re looking forward to next year!
CLICK HERE to get the answers to those questions in an excerpt from the Spring 2015 issue of The Linneman Letter by Dr. Peter Linneman, PhD, Chief Economist at NAI Global and Principal of Linneman Associates.