WORLD PROPERTY CHANNEL ®

Andrew I. Merin

(EAST RUTHERFORD, NJ) -- Andrew I. Merin, head of  Cushman & Wakefield Inc.'s East Rutherford-based Metropolitan Area Capital Markets Group, isn't wearing rosy spectacles these days but he still expects more commercial sales volume this year for these reasons:

• Underwriting is conservative, at 50 to 60 percent loan-to-value.
• Lenders are active again'
• Life companies are back in the market
• There have even been a couple of non-TALF CMBS deals completed.
• Everyone seems to be getting more realistic on valuations.
• More institutional money coming into the market.

"That's a good sign," he says in his company's year-end overview for 2009.

"We think that certain banks and holders of assets will be able to sell more readily next year because they have built up enough reserves or written down their assets far enough to take the sale," Merin reasons.

"While this year has been strongest for private players, the public markets are opening up," he adds.  "This will result in a balancing out to include more institutional money. This is more positive news for 2010."

The Metropolitan Area Capital Markets Group specializes exclusively in real estate sales, joint ventures and financing in Northern New Jersey, Fairfield County, Conn.; and Long Island and Westchester County, N.Y.

The team has completed more than $13.7 billion worth of transactions since 2000. Over the past four years, this included an average of more than $1.5 billion annually, reaching $2.7 billion in 2007.

With $1.7 billion in closed transactions (counting deals larger than $5 million), real estate investment sales activity in the New York tri-state area suburbs through December 2009 remains approximately 60 percent off volume from 2008 and a staggering 86 percent below volume from 2007.

Within this context, Cushman & Wakefield Inc.'s East Rutherford-based Metropolitan Area Capital Markets Group has closed 20 deals with a cumulative value of $751 million - nearly 43 percent of this year's total activity.

David Bernhaut

"Last year, sales fell due to a disconnect between buyer and seller, and a general lack of available financing," notes Merin. His team associates are David Bernhaut, Gary Gabriel and Jose Cruz.

"This year, the market has been hindered by a lack of property available for sale.," says Merin. "We are seeing a significant amount of capital out there from many sources, including wealthy individuals, raised funds and foreign investors.

"It is frustrating - they have the money but no place to put it."

Merin says the limited trading taking place in 2009 in many instances included assumable financing.

Sellers that transacted in 2009 have either accepted the reality of the market or have been faced with an absolute need to dispose of a particular property.

"In many cases, properties are distressed," he commented. "In others, the sale stems from the end of a fund or the need for investors to rebalance their debt and equity ratios."

85 Challenger road office building

The Metropolitan Area Capital Markets Group's 2009 activity includes 4.9 million square feet of office, industrial, retail and multi-family sales.

"Our diversified business practice in terms of product type has contributed greatly to our success in challenging times," Merin says.  "We also benefit from our longevity and professional integrity.

"Our team has been specializing in suburban investment sales for 22 years, and we have established strong working relationships with both buyers and sellers in the region."

The Metropolitan Area Capital Markets Group has been involved in a number of high-profile transactions this year. Among them, the team orchestrated the REO sale of 85 Challenger Road in Ridgefield Park, N.J., which represented the tri-state area's first post-Lehman large vacant Class A office building investor sale. KABR Real Estate Investment Partners, LLC purchased the 235,000-square-foot asset from AIG.

"The key to this trade was AIG being a realistic seller," Gabriel says. "This client was a lender - not in the business of carrying and leasing office buildings. KABR saw this as a great opportunity to purchase a high-quality, well-located property at a mutually agreeable price."

Shortly after the purchase, KABR appointed the Cushman & Wakefield leasing team to market the building for multi-tenant use. Subsequently, Samsung Electronics America, Inc. signed a 193,000-square-foot office lease there in which Cushman & Wakefield represented KABR.

55 Corporate Drive, Bridgewater

The team also orchestrated the sale of 55 Corporate Drive, the 670,000-square-foot, three-building, sanofi-aventis USA Inc. headquarters campus in Bridgewater.

(Please see Real Estate Channel posting, "SL Green and Gramercy Sell 55 Corporate Drive in New Jersey for $230M,"  Feb. 2, 2009)

Inland American Real Estate Trust, Inc. purchased the asset from SL Green Realty Corp. and Gramercy Capital Corp. for $230 million. "Credit net leased Class A trophy assets continue to be highly sought after in the suburban markets," Gabriel added.

The Metropolitan Area Capital Markets Group oversaw six retail trades as well.

"At present, retail is not a favored product type on the acquisition side because fundamentals are weak, and consumers are not spending," Merin says. "The number of retail sales that we completed this year is both unexpected and interesting."

The Marketplace at Rockaway

Among them, an undisclosed institutional client opted to sell The Marketplace at Rockaway - a stabilized, 241,000-square-foot shopping center with credit tenants such as Wal-Mart, Bed, Bath & Beyond and a DSW Shoe Outlet. Friendwell Group of Companies acquired the property for $29 million, assuming an existing seven-year loan.

On the multi-family front, the Metropolitan Area Capital Markets Group arranged New Jersey's largest multi-family rental property sale to date in 2009. A joint venture of Vantage Real Estate and Angelo, Gordon & Co. acquired the 776-unit Fox Run Apartments in Plainsboro from AIMCO.

"More than two dozen tours for this offering testified to the appeal of quality multifamily product," Cruz noted. "This asset type has remained the most active sector nationally."

Fox Run Apts., Plainsboro

In a year with relatively few industrial trades, the Metropolitan Area Capital Markets Group orchestrated one of the largest sales in New Jersey. TIAA-CREF Global Real Estate sold three properties located within the NJ Turnpike Exit 8A market to Boston-based Cabot Properties. The 826,000-square-foot, fully leased portfolio includes  329-333 Herrod Blvd. in South Brunswick, and 21 S. Middlesex Ave. and 4 S. Middlesex Ave. in Monroe Township.

"The quality and occupancy profile of these assets were the keys to making this deal happen," Bernhaut noted. "Cabot took advantage of pricing that was significantly below replacement cost."

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