GE investment makes Lafayette a major player in the aviation industry

ge aviation

by Dan Rafter

Thanks to a $100 million investment by GE Aviation, Lafayette, Ind., has just become a bigger player in the aviation industry.

GE Aviation, which manufactures jet engines and aircraft systems, is building a 225,000-square-foot, $100 million jet engine assembly facility in LaFayette. Workers at the facility will build the new LEAP engine of CFM International, a 50/50 joint company of GE and Snecma in France.

The engine is already in demand. CFM has logged orders and commitments for more than 7,500 of the LEAP engines, even though the engine won’t enter into service until 2016. The engine will power new Airbus, A320neo, Boeing 737 MAX and COMAC C919 aircraft for airlines around the world.

The facility itself will have a positive impact on the Lafayette area.

“The Lafayette plant will contribute greatly to Indiana’s economy through high-paying jobs and new opportunities for our workforce,” said Indiana Sen. Dan Coats. “I am thrilled that GE Aviation has put its faith in Indiana.”

GE could begin hiring employees at the GE plant as early as 2015. Within five years, the workforce at the plant is expected to exceed 200.

These will be skilled jobs. The Lafayette facility will include an advanced assembly line that incorporates several new technologies, including automated-vision inspection systems and radio-frequency parts management to allow workers to easily find parts on the shop floor.

GE worked closely with the state of Indiana to select the Lafayette location. The state of Indiana, the Indiana Economic Development Corporation, the city of Lafayette and Tippecanoe County have all provided technical support and incentives to bring GE to the area. GE officials will work with Ivy Tech at Lafayette and Purdue University to help train the plant’s new employees. The company recently celebrated a ceremonial ground-breaking at the site of the plant.

Indiana Gov. Mike Pence says that it’s little surprise that GE chose Lafayette for its new plant. Indiana residents, after all, have a long history of taking on complicated manufacturing work, the governor said.

“Hoosiers have developed and built some of the world’s most advanced manufacturing technologies,” Pence said. “I know that Hoosiers have the skills needed to make these jet engines soar.”

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Dayton ready for its first Costco Wholesale store

Village Rendering

by Dan Rafter

The Dayton market will soon get its first Costco Wholesale store thanks in part to Oberer Companies.

The new store, which will include 148,000 square feet and a gas station, is scheduled to open in November of 2014 at the Cornerstone of Centerville retail development in Centerville, Ohio, a suburb of Dayton.

The Costco will anchor the first phase of the Centerville development. The store will also provide an employment boost in the region, providing jobs for about 200 people.

Chris Conley, president of Oberer Realty Services, brokered the deal to bring the new store to the area. Conley says that the new Costco will attract a crowd as soon as it opens its doors.

“Costco customers will come from 30-plus miles to visit this location,” Conley said.

Oberer is also working with two additional large-format retailers, in addition to a variety of national and regional restaurants and retailers, to fill the Cornerstone of Centerville. When complete, the first phase of this development will add more than 460,000 square feet of retail and restaurant space to the market. The development should also create about 1,200 permanent jobs.

Cornerstone of Centerville will also offer a 15-acre office park, 15 acres for single-family townhomes and about 300 multi-family units.

Oberer Realty Services is no stranger to this type of development. The company has developed nine Kroger-anchored retail centers and have leased and sold millions of square feet of retail and office space in the Dayton and Cincinnati markets.

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The trend continues: CBRE Group acquires Chicago’s U.S. Equities

Chris Connelly

Chris Connelly

Robert Wislow

Robert Wislow

by Dan Rafter

Last week, Midwest Real Estate News met with Jeffrey Rinkov, chief executive officer of Lee & Associates. During this meeting, Rinkov said that mergers and consolidations remain a hot trend in the commercial real estate world.

As if on cue, CBRE Group earlier this week announced that it had acquired U.S. Equities Realty, LLC, one of the most-active real estate firms in Chicago.

“Consolidations continue to generate major news in our industry,” Rinkov told Midwest Real Estate News last week. “And I don’t see that trend ending any time soon. That’s the nature right now of our business.”

In the CBRE/U.S. Equities move, both companies will now combine their Chicago-area operations. This is a significant acquisition on CBRE’s part: U.S. Equities leases and manages about 17 million square feet of properties in Chicago, including some of the city’s iconic buildings. This includes the Willis Tower — better known still to Chicagoans as the Sears Tower, the John Hancock Center, Harold Washington Library and Millennium Park. The company’s U.S. portfolio includes more than 500 properties across the office, retail, institutional, dormitory and residential sectors.

“With today’s announcement, we are re-defining excellence in Chicago real estate services,” said Chris Connelly, executive managing director for the Chicago region of CBRE. “We’re bringing together two of Chicago’s most highly regarded and successful firms.”

U.S. Equities was founded in 1978. And its top officials said that they were excited about joining CBRE.

“Throughout our 36-year history, U.S. Equities has aggressively pursued every opportunity to anticipate the changing needs of our clients,” said Bob Wislow, chairman and chief executive officer of U.S. Equities. “CBRE’s global platform along with its extensive service offering and broad expertise will expand and enhance our ability to serve clients.”

U.S. Equities principals Camille Julmy and Nancy Pacher join CBRE Chicago as vice chairmen. U.S. Equities’ Katie Scott and Marty Stern will join CBRE as senior managing directors. Wislow will serve as chairman of CBRE Chicago. In all, U.S. Equities boasts about 400 commercial real estate professionals in Chicago.

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Lee & Associates’ Rinkov: This is a great time to be in commercial real estate

Jeffrey Rinkov

Jeffrey Rinkov

Brian Tader

Brian Tader

by Dan Rafter

The top managers with Lee & Associates gathered earlier this month at the Langham hotel in Chicago’s River North neighborhood to discuss the state of the commercial real estate market and the company’s plans for the future. Jeffrey Rinkov, CEO of Lee & Associates, and Brian Tader, managing director with the company, took the time to speak with Midwest Real Estate News about the strength of the Midwest’s industrial markets, the role technology is playing in commercial real estate and the best-performing markets in the Midwest.

Midwest Real Estate News: How strong is the industrial market across the Midwest today?
Brian Tader: It’s been on fire. From Southeast Wisconsin to Kankakee, the industrial market throughout the Chicago area has been amazing lately. Northwest Indiana has been strong. We are seeing the return of spec building in the Chicago area. That is a good sign, and it doesn’t look like the industrial market is going to slow any time soon.
Jeffrey Rinkov: One of the core strengths of Lee & Associates has always been industrial. That certainly hasn’t changed, and we’ve benefited from the growing strength of the industrial market across the country. We’re committed, though, to all the commercial sectors, not just industrial. And we’re seeing good activity in all the sectors, from office to retail to industrial. It’s just a good time right now in the commercial real estate business.

MREN: You mentioned that Lee & Associates is committed to all the commercial sectors. That being said, what kind of growth do you expect to see in the coming years?
Rinkov: We have definite plans for expansion. We do plan to open our 50th office in the Midwest later this year. There are other Midwest markets that definitely interest us. We’re looking at markets such as Milwaukee and Minneapolis, for example. These are strong markets that we think would be great ones for Lee & Associates. That’s a big part of my plans for the future. I’d like to see Lee & Associates expand from 50 offices to 65 to 70 offices.

MREN: Brian mentioned the return of spec construction in the industrial market. Are you seeing a new push from developers for spec construction in this sector?
Tader: The numbers are starting to make sense for more spec construction. There isn’t a lot of industrial product out there in the Chicago market today. But the demand is high for quality industrial sites. It just makes sense that more spec construction will be coming here.
Rinkov: This is an exciting time in the industrial market. As you move to the next six, 12 or 18 months, I think you’ll see even more activity in industrial. It is going to be a very good time. I’m confident about that. For a while it was hard to be a developer. Now people are ramping up their activity again.

MREN: Jeff, you’ve been in the commercial real estate business for a long time. And you’ve been at Lee & Associates for 17 years. What has kept you at the company for so long?
Rinkov: Being at Lee has truly been a life-changing opportunity for me. Working at Lee has given me the opportunity to be an entrepreneur. At Lee I can attack my market. No one is micromanaging how I do things. At the same time, we have tremendous resources available to us from Lee & Associates. The quality of the professionals that work here is so high. I think that gives us an advantage.

MREN: I know that technology is an important part of your vision for the future of Lee & Associates. How important do you think tech is for the agents working at Lee?
Rinkov: The agents who are in their late 20s or early 30s think this technology fell from the sky. They think it’s always been there. They think anyone who isn’t a smartphone is hopelessly behind the times. So we don’t have to sell them. But the senior agents might be a little more resistant to new technology. Our goal, though, is to use technology to better serve our clients. We don’t want to use it just because it’s cool or interesting. It has to have a real impact on the way we work with our clients. The good news is that our senior agents are more than willing to embrace technology when they see that it has a positive impact on the their efficiency.

MREN: What is it about the industrial market that you both like so much?
Tader: I like the entrepreneurial nature of it. I like the fact that you are in charge of your own career and your own success. The agents who succeed are the ones who work the hardest. In that respect, it’s a business that rewards hard work and dedication.
Rinkov: In a previous career, I worked for a textile manufacturer. It was a family business. I think that’s helped me to better understand the industrial side of the business, having sat in that seat. I’ve always felt comfortable in the industrial market.

MREN: Lee & Associates’ Chicago market now offers property-management services. How important has that part of the business been to the company?
Tader: A few years ago we introduced property management to better service our clients. If a client had a need for property management, we were then able to offer it. We have a good group in this market offering that service. We’d like to grow that part of our office. At the end of the day, it’s about serving our clients. If we are not willing to branch out and add something like property management, there is always someone else who will.

MREN: One final question: Jeff you are a visitor to Chicago this week. What do you plan on doing while in the city, anything unusual?
Rinkov: I can’t yet say if I’m going to enjoy it because I’ve never done it before, but my wife and I are going to take a Segway tour of Chicago. I’ll have to report back on whether it was a good experience or not. My wife and I are also foodies, and Chicago is a great town for that. So we do plan on eating some good food while we’re done here. I’m a runner, too, so I’m looking forward to taking some runs through downtown Chicago. And being here at this networking event, of course, is a great chance for me to network and socialize with 40 or 50 of the members of the leadership at Lee & Associates.

Posted in Chicago Commercial Real Estate, Illinois, Illinois real estate, industrial real estate, Milwaukee commercial real estate, Minneapolis commercial real estate, Minnesota real estate, Wisconsin commercial real estate | Tagged , , , , , , , , | Leave a comment

Nationwide Realty: Making a big investment in Grandview Yard

GVY Nationwide Campus 2by Dan Rafter

Nationwide Realty Investors is ready to make a big commitment to the Grandview Yard mixed-use development in Grandview Heights, Ohio.

Nationwide plans to build a 500,000-square-foot campus for its employees, a 135-room hotel and 13,000-square-foot conference center at the site.

Nationwide officials unveiled their plans earlier this month to the members of the Grandview Heights City Council. Anthony Panzera, president of the city council, said that he and the other members of the body are looking forward to working with Nationwide to make the new plans a reality.

“This proposal represents a great win for our entire community,” Panzera said. “We are thrilled that Nationwide is willing to make this commitment.”

Plans call for the new Nationwide campus to include three four-story interconnected office buildings with three adjacent four-level parking structures. The first building would include 320,000 square feet of space and open in 2016.

The 160,000-square-foot second building would open in 2017, with the third building opening its doors in 2019. The new campus, once it is completed, will be able to accommodate more than 3,000 Nationwide associates.

The hotel and conference center are scheduled to open in 2016. NRI would own the hotel, which would be operated by Columbus Hospitality.

Plans also call for 2.5-acre public park that, Nationwide officials say, would serve as a gathering place for the neighborhood.

Grandview Heights’ officials said that the Grandview Yard development, and the new additions proposed by Nationwide, will be a positive for the community.

“It is an important day in the history of Grandview Heigths,” said Ray DeGraw, mayor of Grandview Heights, in a press release. “Nationwide’s new campus fulfills our city’s community planning vision that called for a vibrant mixed-use district offering professional jobs, an enticing residential lifestyle, vital businesses and an expanded tax base.”

The Grandview Yard mixed-use project sits on the former Big Bear warehouse site at the intersection of State Road 315 and Interstate 670 in Grandview Heights. It is also just minutes from downtown Columbus and The Ohio State University.

Grandview Yard covers more than 100 acres. When complete, it will include offices, restaurants, grocers, retail and hospitality uses.

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Cushman & Wakefield: Office vacancies hit lowest point in five years

Maria Sicolas

Maria Sicola

by Dan Rafter

Office vacancies across their country dropped to their lowest point in five years in the second quarter of this year.

That’s the good news from the second-quarter office snapshot released by Cushman & Wakefield.

And even better news? Cushman & Wakefield officials say that the office vacancies should continue to fall in the coming months.

“We continue to see positive trends in the nation’s office market, and we anticipate that will continue throughout 2014,” said Maria Sicola, Cushman & Wakefield Research for the Americas.

According to the Cushman & Wakefield report, the nation’s 44 major office markets continue to see falling vacancies, stable asking rents and strong leasing activity.

Sicola points to a national economy that is finally generating more jobs. This has resulted in greater demand for office space across the country, Sicola said.

The combined CBD office vacancy rates across the nation fell to 12.7 percent in the second quarter, according to Cushman & Wakefield. That’s a dip of 70 basis points when compared to the same quarter in 2013. In suburban markets, the vacancy rate on year-over-year basis fell 60 basis points to 16.8 percent.

Net office absorption year-to-date totaled 10.5 million square feet in the nation’s CBDs, Cushman & Wakefield reported, and 10.3 million square feet in the suburbs in the second quarter.

The increased office demand has led to stronger rents. Cushman & Wakefield reported that asking rents were up 3.1 percent in the second quarter whem compared to the same quarter one year earlier, averaging $47.39 a square foot. In the suburbs, asking rents jumped by 3.9 percent from the second quarter of last year to the second of 2014, hitting $29.51 a square foot.

Sicola said that she expects the recovery in the office market to continue throughout 2014 “contingent upon the absence of any unforeseen economic or geopolitical events. But we are optimistic that the economy will continue to add jobs for the foreseeable future.”

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Student-housing trends in the Midwest, a closer look

Matthew Lund

Matthew Lund

Michael Lee

Michael Lee

Guest column by Matthew Lund and Michael Lee
Walker & Dunlop

In the world of commercial financing, the student housing product is unique, especially in the Midwest. It takes a comprehensive understanding of the current trends in the Midwest market and a full-service platform with access to a large market of lenders to achieve the owner’s goals. This means partnering with the right commercial real estate financing company.

The student housing difference

The student housing product in the Midwest is unique in several ways from more traditional apartment building and other areas of the country. As many Midwestern colleges are located in urban settings, the location of the development is of key importance. Students want to be in close proximity to the campus. They also want convenient access to restaurants, retail and nightlife. This often requires a developer to secure conveniently located existing properties for redevelopment into student housing. It is less common to see off-campus student housing that requires students to bus or drive to campus.

Purpose-built student apartments have higher bedroom counts than traditional apartment buildings. It is common to see new developments with a mix of two-, three-, four-, five- and six-bedroom units. The floor plans are typically smaller than market-rate apartments, but have significantly more bedrooms. This offers students their individual space while the developer works to maintain an affordable rent per occupant. The requirement to redevelop in an urban location contributes to high site and overall development costs.

Traditionally in the Midwest, indoor amenities such as study and social lounges played a more significant role than outdoor amenities such as pools commonly present in properties located in warmer climates. However, some recent Midwest developments are beginning to offer outdoor amenities such as outdoor/rooftop pools, seating/gathering areas and volleyball/bocce ball courts, among other touches. Additionally, developers and operators are focusing on convenience for students. This includes offering furnished units that make it easier for students who may be moving into their first apartment. Some operators also provide internet and cable TV service to the tenants. This allows for residents to easily move into their unit without the hassle of setting up these services on their own.

Trends in the Midwest market

Today’s student housing bears little resemblance to yesterday’s. Students demand high-end accommodations that seem more like their parents’ residence or a luxury apartment community instead of the disarray most imagine when conjuring up an image of student housing.

From granite counter tops to wall-hung flat-screen LCD televisions, these buildings are upscale properties from beginning to end. Other high-end amenities commonly offered include secured entry with video-camera surveillance throughout, wood floors, custom cabinetry, built-in closet storage, ceiling fans and leather furnishings.

For anyone building in the Midwest, it is no surprise that there is a lack of land available in the more urban areas in which most universities are located. Due to the lack of land and the high cost to assemble a developable parcel, developers are seeking to maximize the density within each project. As a result most of the newer projects are going vertical.

These new properties are tailored to fit the student profile. They come with higher rents and the loan per unit is higher than with the traditional apartment unit. While student housing requires a special skill set to operate and receives more wear and tear than a typical conventional apartment, student projects have demonstrated a resilience to market aberrations and have historically experienced stronger occupancies and achieved higher rent growth compared to conventional apartment product.

What to look for in a commercial real estate finance company  

In order to successfully finance student housing today, a skilled commercial real estate finance company must be able to educate and convey the nuances of student housing to provide lenders with the information they desire to make a good mortgage investment. Each capital source within the industry has a different perspective on student housing, and the mortgage banker must understand these perspectives to secure a capital source that will achieve the borrower’s objectives. Access to a variety of lending sources will enhance the ability to achieve the desired structure. A finance company with access to all lending platforms including Freddie Mac, Fannie Mae, insurance companies, CMBS and bridge financing can better deliver custom financing structures that fit the client’s goals.

Several matters to consider when evaluating a refinance may include forward rate-lock options to eliminate interest rate risk when refinancing a maturing loan or construction loan, secondary flexibility, prepayment flexibility and loan duration.

In an example of a recent deal that Walker & Dunlop secured, an owner of a 10-year-old student housing project was seeking to refinance a CMBS loan that was maturing in 10 months to take advantage of historically low interest rates. This was a family-owned asset and therefore the borrower sought a long fixed-rate term.

Walker & Dunlop secured a 10-month forward commitment from a life insurance company for a 22-year fully amortizing loan. The borrower was thrilled that he was able to lock in the interest rate 10 months prior to his existing loan maturing. Similarly, several life companies have an ability to lock an interest rate 6 to 12 months prior to construction completion for projects under construction. Loan funding would typically occur when the property has achieved leasing to provide a debt coverage ratio of 1.25x and would require some type of credit enhancement until the property achieves stabilization. Common enhancements include a holdback, earn-out or a personal guarantee that burns off at the time stabilization is achieved. This feature may be compelling to developers to eliminate interest rate risk while their project is still under construction.

Another item to consider when using longer term financing may be the ability to obtain a secured secondary loan. Fannie Mae and Freddie Mac have programmatic guidelines to allow secondary financing beginning after a loan has seasoned for one year. As a general rule, life companies prefer to prohibit secondary financing. A borrower greatly enhances their ability to secure secondary financing rights by using a finance company that has access to a large market of lenders and the appropriate structuring knowledge.

At the end of the day, working with a finance company that has experience and knowledge in the student housing market and a full service platform with access to banks, insurance companies, CMBS, Freddie Mac, Fannie Mae and bridge financing, will allow a borrower to significantly increase the financing options and achieve the most competitive terms being offered in the market.

Matthew Lund, vice president, and Michael J. Lee, vice president, with Walker & Dunlop are responsible for financing income-producing properties including office, apartments, hotels, industrial and retail in the Midwest region. Lund can be reached at mlund@walkerdunlop.com and Michael Lee can be reached at mlee@walkerdunlop.com.

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