E-commerce fuels industrial REIT growth

A Walmart.com fulfillment center (Wal-Mart)

From the Los Angeles website: Online shopping addiction seems to have an upside for industrial real estate investment trusts.

Thanks to the rapid growth of e-commerce, industrial REITs have been performing exceptionally well. Shares rose 17.3 percent this year - compared to 6 percent for all equity REITs and 1.7 percent for the S&P 500, according to Green Street Advisors.

The growth is driven by online retailers' rising demand for distribution centers, the Wall Street Journal reported.

Tenants in the top 47 markets occupied about 102 million more square feet by the end of 2015 than in the beginning of that year, up from 93 million in 2014. 

In the first quarter of 2016, industrial REITs like Prologis and Duke Realty have posted strong earnings.

But beyond the numbers, investors are beginning to realize that online retail will be an irrevocable driver for industrial square footage demand, as online distribution usually requires more inventory space and logistics coordination than brick-and-mortar stores.

“If you look at major retailers like Wal-Mart, warehouses are set up to send truckloads of goods to individual stores,” James Connor, chief executive of Duke Realty, told the Journal. Online distribution centers, however, “are set up exactly the opposite,” he added. “Everything goes out in onesies and twosies.”

But it won't always be smooth sailing for industrial property owners, analysts warn. Dimmed consumer spending would raise the vacancy and lower rents, and things may fluctuate as online distribution processes grow more sophisticated.  

On the other hand, retail REITs are also doing pretty well as modern mall operators such as Simon Properties thrive. In the past five years, as The Real Deal reported in the retail special market report, retail REITs have outperformed eight of the nine other types of REITs, including industrial, office, residential and mortgage. [WSJ] - Cathaleen Chen

The Wrap: Demo approval clears way to divide former Kluge estate in Palm Beach, AirBnB might have to divulge secret owners to Keys tax collector…and more

Kluge estate in Palm Beach

1. Demo approval clears way to divide Kluge estate in Palm Beach [Palm Beach Daily News]

2. AirBnB might have to divulge secret owners to Keys tax collector [Miami Herald]

3. New Metropolitan apartment complex opens in Wilton Manors [Sun Sentinel]

4. Monroe County considering a settlement for construction dispute [Florida Keys News]

- Sean Stewart-Muniz

Downtown Miami's iconic Southeast Financial Center is for sale

Southeast Financial Center (Credit: Marc Averette)

Downtown Miami's tallest office tower, reportedly valued at nearly $500 million, is on the market.

J.P. Morgan Asset Management – Global Real Assets is listing the Southeast Financial Center, a 55-story, 1.3 million-square-foot tower at 200 South Biscayne Boulevard, according to published reports.

The iconic building, second in height only to the Four Seasons Miami, was developed in 1984 by Hines and designed by Skidmore, Owings & Merrill.

Commercial Real Estate Direct first reported that the property was up for sale in May, with Commercial Property Executive reporting that it could sell for more than half a billion dollars.

In May, the nearby Miami Tower sold for $220 million to Sumitomo Corporation of the Americas. The 47-story tower is the eighth-tallest in Miami.

The Southeast Financial Center includes a 15-story annex building with a David Barton gym and 1,200 parking spaces, and a 30,000-square-foot outdoor plaza. Zest, a restaurant by chef Cindy Hutson, opened in the plaza in March.

The J.P. Morgan asset manager acquired a 50 percent interest in the Southeast Financial Center in 2007, when it was known as the Wachovia Financial Center. It bought out Macquarie Office Trust's stake for $182.5 million in 2008, according to Commercial Property Executive, bringing the building's value up to $385 million.

JLL's Don Cartwright has handled office leasing for the building since 2009. Office tenants include Stroock & Stroock & Lavan LLP, Goldman, Sachs & Co., Merrill Lynch, and Morgan Stanley. [CP Executive] – Katherine Kallergis

The Wrap: Apeiro Kitchen & Bar closes temporarily for design repairs, GL Homes nearing completion of Tuscany development near Delray…and more

The now-closed Apeiro restaurant in Midtown Miami

1. Apeiro Kitchen & Bar closes temporarily for design repairs [Miami New Times]

2. GL Homes nearing completion of Tuscany development near Delray [Sun Sentinel]

3. Just-sold Royal Poinciana Way buildings had Saudi royal link [Palm Beach Daily News]

4. Paramount Miami unveils slick basketball court rendering [Curbed Miami]

- Sean Stewart-Muniz

Filling Station Lofts goes condo in Miami's A&E District

Filling Station Lofts

Filling Station Lofts, the 10-story, 81-unit apartment building in Miami's Arts & Entertainment District, is converting to condos, The Real Deal has learned. The move comes amid a slowdown in condo sales in South Florida. But developer Ron Gottesmann, principal of NR Investments, said the switch is being spurred by demand from existing tenants and local buyers who are drawn to the area.

“I really believe the end-user is the market,” Gottesmann told TRD. “You don't need to look outside the country for buyers.” 

Filling Station Lofts, at 1657 North Miami Avenue, has 81 apartments, all with 20-foot tall ceilings. Rents have ranged from $2,400 to $5,700, or an average of $2.80 per square foot, he said. The building, built in 2014, is now 75 percent occupied.

Ron Gottesmann

As condos, sales will launch at $400,000 to $1.2 million, Gottesmann said. The average price will be $565 per square foot.

Existing tenants will have the option to stay until their leases expire, or even renew their leases, he said. So far, 12 tenants have verbally agreed to purchase units. Another six domestic buyers have also expressed interest in units, he said.

And unlike the vast majority of condo projects in Miami, buyers will have to put down 20 percent deposits - 10 percent at contract signing and 10 percent 45 days later - rather than the usual 50 percent, Gottesmann said.

Financing options are also available. The project already has received approval from Fannie Mae. Buyers will have access to financing with 5 percent down - for the smallest units with Fannie Mae approval - or 20 percent to 30 percent down for larger units. “The leading bank for end-users is City National Bank, and they came in with a very aggressive program for the buyers,” he said.

“The market today is selling with 50 percent deposits that the end-user cannot afford,” Gottesmann added. “Because of the uniqueness and quality of people we have in the building, we want to help them buy the units, and the only way is to get the banks to approve.”

Units in the building have 34 different layouts. Amenities include a renovated pool deck, barbeque area, gym membership.

Three new restaurants are also opening in ground level space in addition to Vice City Bean, which is already open. Taula, a Mediterranean restaurant, has signed a lease for 2,400 square feet and will begin building out its space. Two other restaurant tenants are currently in contract negotiations, Gottesmann said.

NR Investments is also developing Canvas Miami a block away, which has Fannie Mae approval. Canvas, a 513-unit tower that is currently under construction, is now 64 percent under contract, he said.

Check out Terrace, Dubai's newest outdoor hot spot

Terrace at Burj Al Arab Jumeirah Hotel in Dubai

From Luxury Listings NYC: Burj Al Arab Jumeirah Hotel in Dubai has just debuted the ultimate outdoor hot spot. Terrace, a newly constructed extension of the hotel, is a 10,800-square-foot luxury deck which juts out 330 feet into the Persian Gulf. [more]

Cher and Eddie Murphy's former home is for sale for $85M (and it's a fixer-upper)

Cher (credit: Emett Mcginty), Eddie Murphy (credit: David Shankbone) and the home (credit: Matt Momberger)

From Luxury Listings NYC: A Beverly Hills mansion that has been called home by quite a few celebrities, including Cher and Eddie Murphy, has hit the market for $85 million. [more]