June 19, 2014 | Issue 279
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Newcastle To Spin Off Seniors Housing Business Into Separate REIT 

Wesley Edens, chairman of the board of Newcastle Investment Corp. (Photo credit: nba.com)


NEW YORK -- The Board of Directors of Newcastle Investment Corp. (NYSE: NCT) has approved a plan to spin off its seniors housing business into a publicly traded real estate investment trust that primarily targets seniors housing related investments. The new company will be called New Senior Investment Group and trade on the New York Stock Exchange under the symbol SNR.



The approval by the board occurs six months after Newcastle purchased a 51-property portfolio from an affiliate of Holiday Retirement for more than $1 billion.


"The spin-off of New Senior from Newcastle will be a key step towards optimizing the future growth of each standalone company," said Newcastle CEO Kenneth Riis in a prepared statement. "As two separately traded public companies, both Newcastle and New Senior will be better positioned to capitalize on respective market opportunities and further enhance shareholder value creation."


An affiliate of Fortress Investment Group LLC will manage New Senior Investment Group.


In an investor call on Monday, June 16, Newcastle Chairman of the Board Wesley Edens said the reasons for the spin-off include the expected growth of the U.S. senior population, the cost of capital both on the equity side and the debt side that will create better pricing and shareholder value, as well as the fact that spinning off will land the new REIT into the top 10 of senior living-focused REITs.


The New Senior portfolio will be 95 percent private-pay independent living and assisted living with no direct Medicare exposure. Newcastle's current portfolio includes 99 properties with 12,400 beds in 28 states.


Following the spin-off, Newcastle will continue to manage its existing collateralized debt obligations and debt businesses, including the buying back and liquidation of assets.


Newcastle filed for the spin-off with the U.S. Securities and Exchange Commission yesterday and expects it to be complete in the third or fourth quarter of this year.


The stock price of Newcastle closed at $5 per share on Wednesday, June 18, down from $5.48 per share on June 18, 2013.


-- Scott Reid

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Construction To Begin On 750,000 SF Industrial Facility In Berks Park 78

The 750,000-square-foot industrial property is located within
the 323-acre Berks Park 78 in Bethel Township, Pa.

BETHEL TOWNSHIP, PA. -- Dermody Properties and Granite Real Estate Investment Trust will start construction on a 750,000-square-foot industrial facility at Berks Park 78 in Bethel Township. Located at 41 Martha Drive, the state-of-the-art industrial warehousing and distribution facility will feature 36-foot clear heights, 316 car parking spaces and 322 trailer parking spaces. Dermody Properties is serving as developer and operating partner, and Granite is the majority equity partner on the project. Located off Interstate 78 in the heart of the Pennsylvania I-81/I-78 Industrial Corridor, the 323-acre Berks Park 78 is currently home to distribution operations for Dollar General and PetSmart. Gerry Blinebury, Pat McBride and Adam Campbell of Cushman & Wakefield are marketing the new facility. 


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KeyBank Provides $16.3 Million

in Financing For Apartment Project  

Mass Ave Community Homes will offer
46 affordable multifamily units in Buffalo, N.Y.

BUFFALO, N.Y. -- KeyBank has provided $16.3 million in financing for the construction of Mass Ave Community Homes, an affordable multifamily development in Buffalo. The community will include 46 units across a total of 16 scattered sites with nine newly constructed buildings and seven rehabilitated buildings. The buildings will feature one-, two-, three- and four-family residences. Additionally, the community will feature an on-site management office, community space, a computer lab, a laundry facility and a community kitchen.


The development is slated for completion in the third quarter of 2015. The total development budget for Mass Ave Community Homes is $13.4 million. KeyBank provided approximately $10 million in Low Income Housing Tax Credit equity and $6.3 million in a construction loan. Project partners include PUSH Buffalo and Syracuse, N.Y.-based Housing Visions. When complete, the project will provide housing options to families with incomes ranging from 40 to 80 percent below the area median income.


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Grainger Purchases Land To Build 

1.3 Million SF Facility In New Jersey


BORDENTOWN TOWNSHIP, N.J. -- Grainger has purchased 96 acres of land in Bordentown Township for an undisclosed price. The company, which is a leading broad line supplier of maintenance, repair and operating products, plans to build a 1.3 million-square-foot distribution center on the property. Once opened in 2016, the facility will employ more than 400 individuals, primarily in warehouse operations. Grainger currently operates 11 locations in New Jersey, including 10 branch locations across the state and a distribution center in Robbinsville.


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How The War For Talent Effects
The Commercial Real Estate

By Scott Reid

One of the largest challenges facing the business world in the upcoming decades will be recruiting the right talent to help the organization compete and innovate and providing them with the amenities necessary to retain them, according to a recently released report by Cushman & Wakefield. The report is titled "Human Capital: The War for Talent and Its Effect on Real Estate." 
In The Conference Board's 2014 annual survey, The CEO Challenge, human capital ranked as the most critical challenge facing today's global CEOs, before customer relationships and innovation. According to the "Human Capital" report, 35 to 55 percent of an organization's costs go to recruiting, training and compensating employees, whereas real estate costs typically range from 5 to 15 percent. 
Meanwhile, the growth of the working-age population in the United States is slowing significantly, experiencing a 58 percent drop between 2011 and 2012, according to the U.S. Census Bureau. As the Baby Boomer generation retires, the economy is on the verge of a prolonged period where the supply of labor will not match the level of demand. The millennial generation will eventually fill this gap, accounting for 51 percent of the workforce by 2020, but until it becomes the dominant working-age population, recruiting skilled workers will be an expensive and challenging process.
To read the full report, click here.
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161,000 SF Shopping Center Sells
For $35.7 Million In West Chester
The 161,000-square-foot Bradford Plaza is 88 percent occupied by Giant Foods, Petco, Walgreens and a Giant fuel station.

WEST CHESTER, PA. -- New York Life has acquired Bradford Plaza, a shopping center located at 700 Downington Pike in West Chester, for $35.7 million. The 161,000-square-foot center is 88 percent occupied by Giant Foods, Petco, Walgreens and a Giant fuel station. The 22-acre site also includes a 4,300-square-foot proposed pad site for future development. Karen Iman and Gary Gabriel of Cushman & Wakefield handled the transaction.


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HFF Secures $50.6 Million Refinancing For Six-Property Retail Portfolio



WARWICK, R.I.; BURLINGTON, PEABODY, FALL RIVER, READING AND WESTFORD, MASS. -- HFF has secured a $50.6 million refinancing for a six-property, 224,001-square-foot retail portfolio in the New England area. The firm placed the fixed-rate loan with Allianz Real Estate of America LLC for the borrower, Burlington, Mass.-based Linear Retail Properties. The portfolio consists of 1000 Bald Hill Road in Warwick, Burlington Marketplace in Burlington, Peabody Gardens in Peabody, Flint Village Plaza in Fall River, 345 Main Street in Reading and One Carlisle Road in Westford. Overall, the properties are 97.7 percent leased to a variety of tenants, including Trader Joe's, CVS/pharmacy, Rite Aid, Starbucks Coffee, Panera Bread, Chipotle Mexican Grill, Bank of America and Dunkin' Donuts. Riaz Cassum and Brett Paulsrud of HFF represented the borrower in the transaction.


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CBRE/NE Brokers Sale Of 108-Unit Metro At Wilmington Station 
Core and Value Advisors LLC has purchased
Metro at Wilmington Station in Wilmington, Mass., from a joint venture.

WILMINGTON, MASS. -- CBRE/New England's Capital Markets team has brokered the sale of Metro at Wilmington Station, a 108-unit apartment community located in Wilmington. A joint venture between EA Fish Development and Real Estate Capital Partners sold the property to Core and Value Advisors LLC, an affiliate of Stockbridge. Built in 2013, the transit-oriented property is adjacent to the MBTA train platform.  


The community consists of two three-story apartment buildings with one detached single-story garage structure with 35 enclosed garage spaces. The property offers a mix of 30 one-bedroom and 78 two-bedroom apartments with an average unit size of 1,067 square feet. Pursuant to Chapter 40B, the property is required to maintain 30 affordable apartments, or 28 percent of the total project, governed by both income and rent limits. The affordable apartments are set aside for households earning up to 80 percent of area median income. Simon Butler and Biria St. John of CBRE/New England represented both parties in the transaction.


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HAP Investment Acquires Vacant Corner Lot For $13 Million in Harlem 

NEW YORK CITY -- HAP Investment Management has acquired a development site at 2211-2217 Third Ave. and 214-216 E. 121st St. in Harlem. Tahl Propp Equities sold the property for $13 million. Located on the southeast corner of 121 Street and Third Avenue, the 17,661-square-foot site includes 100 linear feet of Third Avenue, ideal for retail, and is zoned for 91,600 residential buildable square feet. Matthew Sparks of Eastern Consolidated arranged the transaction. Brian Beller of Phillips Nizer LLP and Neda Barzideh of Tahl Propp Equities provided legal services for the buyer, while Adrian Zuckerman of Seyfarth Shaw advised the seller.


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Northmarq Arranges $11.58 Million Loan For 121-Unit Multifamily Property
Center Point at Radisson features 121 apartment units.

BALDWINSVILLE, N.Y. -- NorthMarq Capital has arranged an $11.58 million refinancing loan for Center Point at Radisson, a 121-unit multifamily property located in Baldwinsville. The loan features a 10-year term and 30-year amortization schedule. Sam Berns of NorthMarq Capital's Rochester, N.Y., office arranged the loan for the borrower through its seller/servicer relationship with Freddie Mac.


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Arm Real Estate Arranges $2.4 Million Mixed-Use Property Sale



NEW YORK CITY -- ARM Real Estate Group has arranged the sale of 476 Union Ave. in Brooklyn's East Williamsburg neighborhood. 476 Union Avenue LLC, a local design and development firm, purchased the mixed-use property from a local family for $2.4 million. Constructed in 2004, the two-building, 4,243-square-foot property features three units in the front three-story building and one unit in the rear building.  


The buyer plans to demolish the rear building and extend the depth of the front building and add an additional floor or two to the existing structure. The property's zoning allows for a retail use on the ground floor so the new owner plans to convert the ground-floor apartment into retail space. Anand Melwani and Harrisson Zavala of ARM Real Estate Group represented both parties in the transaction.


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AVANT Capital Originates $3.28 Million Bridge Loan For Brooklyn Apartments   


NEW YORK CITY -- AVANT Capital Partners has originated a $3.28 million bridge loan on an apartment building in Brooklyn's Prospect Lefferts Garden neighborhood. The interest-only, 24-month loan carries an interest rate of 8 percent and refinanced the first mortgage. The 11,943-square-foot property has four ground-floor retail units and five second-floor apartments. Adam Luysterborghs of AVANT originated the loan, which was brokered by Marko Kazanjian of Meridian Capital Group.


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Rosewood Realty Brokers $1.2 Million Apartment Building Sale



NEW YORK CITY -- Rosewood Realty Group has brokered the sale of 795 Flatbush Ave. in Brooklyn's Flatbush neighborhood. Built in 1931, the three-story, 5,000-square-foot walk-up apartment building sold for $1.2 million. The property, which has 3,400 square feet of air rights, features four apartments and one commercial unit. Michael Kerwin of Rosewood Realty Group represented the buyer, 795 Flatbush Realty LLC, and the seller, Tanya And Angels LLC, in the transaction.


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Nedde Real Estate Brokers 25,405 SF Office Lease In Burlington



BURLINGTON, VT. -- Nedde Real Estate has brokered the lease of 40 Sears Lane in Burlington. Champlain College has leased the 25,405-square-foot building for an undisclosed price. The tenant plans to use the building for campus-wide physical plant maintenance. Doug Nedde of Nedde Real Estate represented the landlord, RFC Realty LLC, in the transaction. 


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Pittsburgh Expects Multifamily Rent Growth Despite Increase in Supply
By Joshua Raggi, Marcus & Millichap

Joshua Raggi

PITTSBURGH -- Over the last few years, tight conditions in Pittsburgh's multifamily market have allowed operators to aggressively push rents among all class levels. This year, a surge in multifamily completions will put elevated pressure on vacancies, but more jobs and new households will keep across-the-board operations in positive motion, supporting another year of rent growth. Developers are expected to build more than 1,600 multifamily units in 2014, the largest expansion of supply in more than 10 years. 
Most new multifamily projects in Pittsburgh are located north and south of the central business district (CBD), where construction costs are lower. For example, in Cranberry Township in the north many units are strategically situated around the newly announced $72 million UPMC Lemieux Sports Complex. In southern Pittsburgh, added drilling activity in the Marcellus Shale region and energy-related company expansions encouraged demand for rentals, spurring construction of several multifamily and residential communities. A minor overstock of brand-new rentals and single-family homes will move vacancy up somewhat in select submarkets, slowing down the previous year's persevering rent growth. 
An improving economy in Pittsburgh and further rent gains will sustain strong buyer demand throughout 2014. Employers are expected to add 24,600 jobs in 2014 to expand employment in Pittsburgh 2.1 percent. This is an increase from the addition of 17,300 jobs in 2013. Meanwhile, transaction velocity is moving slowly due to a limited supply of for-sale properties on the market.

Owners who have retained properties for generations continue to be disinclined to sell when the market is strong. In an effort to acquire properties, investors are expanding their acquisition criteria, targeting Class B and C assets under $10 million. Properties listed in Oakland and Shady Side near the University of Pittsburgh are in demand. As the year moves forward, buyer competition and the risk of rising interest rates will motivate owners to sell. 
New inventory is expected to raise vacancy 40 basis points to 3.8 percent by the end of 2014. In 2013, vacancy rose 30 basis points. Effective rents are projected to rise 2.1 percent to $1,041 per month in 2014, following a 2.6 percent increase last year. Many investors who took advantage of bargain sale prices during the downturn will bring these assets to the market, while buyer competition keeps cap rates compressed. Investors are looking for properties with potential for steady rental growth over extended holding periods.
This article originally appeared in the May 2014 issue of Northeast Real Estate Business magazine. 
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Residential Ethics Course
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Overview: Required non-credit course for new REBNY members. Registration is required.
When: June 24, 9 a.m. to 10:30 a.m. 
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Overview: Sponsored by REBNY, the two-day course is for real estate professionals looking to obtain CNE certification or continuing education credits.
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