As some real estate markets of the world are beginning to rebound, and others continue their path to recovery, Orrick’s international team of real estate practitioners has been at the center of much of this activity advising on some of the largest, most complex and interesting deals in those regions. While the flurry of distressed loan and asset transactions of the past three years helped spurn sluggish markets, this year has seen a return of significant core and value-add investments and increasingly complex finance structures that bode well for the industry at large. Illustrating some of the key trends in the international markets, we wanted to share with you a cross section of the real estate transactions that our teams have been involved in around the globe this year.
Multi-Tranche Acquisition of Mezzanine Debt for Distressed Seattle Office Portfolio. We have been advising a Walton Street Capital fund on its significant investment and possible restructure and/or foreclosure in multiple tranches of roughly $900 million of debt secured by a portfolio of 12 office buildings in Seattle, Washington. The portfolio is being offloaded by Goldman Sachs’ Whitehall Fund which is unwinding its troubled assets in light of the maturity of a $922 million loan, a sluggish office market and the loss of the portfolio’s largest tenant, Washington Mutual. Whitehall had purchased the portfolio for almost $1 billion during the buoyant real estate markets of 2007. We have been assisting the Walton Street Capital fund in its multi-step acquisitions of the most junior participating interest in mortgage debt and all of the five tranches of mezzanine debt. We have also been advising on Whitehall’s maturity default, including the proposed UCC foreclosure of the lender’s mezzanine debt interests and an extension of a $435 million portion of the senior securitized mortgage debt.
Sale of Foundry Square IV. In a highly anticipated deal that in all likelihood marked a turning point in the recovery of the San Francisco commercial real estate market, an Orrick team assisted Utah Retirement Investment Fund (URI) in its $184.5 million sale of Foundry Square IV to Chicago-based investment firm Heitman for approximately $800 per square foot, the market’s highest priced office sale since the market downturn in 2008. Orrick’s Real Estate Group has been advising URI since 2003 on its activities in connection with this building. We initially advised URI on its approximately $500 per square foot acquisition of the building in 2003, at the time considered a record purchase price, and have advised on post-acquisition tax and leasing matters since then.
IPO for Single-Family Rental REIT. We are advising Silver Bay Realty Trust, a newly organized corporation which is seeking to be one of the first publicly traded REITS focused on the acquisition, renovation, leasing and management of single-family rental properties for rental income and long-term capital appreciation, in its currently pending IPO. Silver Bay filed a Form S-11 Registration Statement on September 11, 2012 seeking to raise up to $287.5 million and in connection with its IPO would concurrently acquire two large existing portfolios of single-family rental properties
Formation of $250 Million "Green" Fund. We assisted Gerding Edlen, one of the leading "green" project developers in the United States, with the formation of its second fund, a $250 million value-add fund for the acquisition and redevelopment or development of green office and multi-family properties.
Joint Venture Investment in Brooklyn Development Project. We advised a joint venture between MacFarlane Partners, a major insurance company and a local developer in a $200+ million joint venture investment in a large multifamily development project in the Williamsburg section of Brooklyn, NY.
Sale of Manhattan Server Building. We represented Bristol Group, a national real estate investment and development firm, in the $110 million sale of an office/server building at 325 Hudson Place in lower Manhattan.
$455 Million NIP Restructure. In Decemer of last year, after two years of negotiations with Citigroup, a Normandy-sponsored real-estate fund, a separate account investment managed by Starwood Capital Group, KBS REIT I and multiple Oaktree Capital-sponsored funds, we advised a joint venture between a Hackman Capital-sponsored syndication and KBS REIT I, as the borrower, on the successful restructuring of a $455 million, six tranche financing secured by 26 industrial properties located primarily in the U.S. Northeast. This transaction resulted in a new joint venture between the former borrower and the Oaktree Capital funds which had acquired the financing tranches at significant discounts with the borrower’s assistance, with the former borrower retaining a profit participation interest in the joint venture. Subsequent phases of the transaction which concluded in August 2012 included the old Hackman Capital-sponsored syndicate, a new Hackman Capital-sponsored syndicate, and KBS Strategic Opportunity REIT, making $20 million of additional new investments in the new joint venture, and the new joint venture obtaining two separate nonrecourse CMBS financings.
Acquisition and CMBS Financing of Ohio Industrial Portfolio. We advised a Hackman Capital-sponsored syndication on (i) the $40+ million acquisition of a portfolio of 11 industrial properties comprising more than 2.8 million square feet on over 280 acres of land in Ohio and Virginia and (ii) the concurrent $30+ million CMBS acquisition financing secured by 8 of the 11 properties from a Deutsche Bank affiliate.
€650 Million Refinancing for One of Europe’s Largest Shopping Centers. Our Düsseldorf Real Estate group closed a landmark refinancing on behalf of the owners of CentrO Oberhausen in Western Germany. The financing was secured by CentrO and provided to a joint venture of the Stadium Group and the Canadian Pension Plan Investment Board who jointly own the €1.3 billion shopping and leisure center. The transaction was the largest single asset real estate refinancing for the entire German market in 2012 and marked the first major real estate lending in Germany financed by a combined lender consortium of insurances and banks. German insurance giant Allianz provided €325 million of the overall facility as lender and German banks Aareal Bank, acting as facility agent and lender, and Helaba, acting as co-agent, security agent and lender, each provided €162.5 million. The transaction set new market standards as one of the first international real estate refinancings with a structure fully in line with the rules on German covered bonds (full "Pfandbrief"-eligibility). Orrick has a longstanding relationship with the owners of CentrO and advised on the sale of a 50 percent stake in CentrO to Canada Pension Plan in 2011 and on the resulting joint venture between Canada Pension Plan and the remaining shareholders.
€300 Refinancing of European High Income Real Estate Portfolio. We represented Valad Property Group in the refinancing of the European High Income Fund Real Estate Portfolio. The secured senior debt facility has a volume of €300 million and is jointly underwritten by an international consortium of banks led by Deutsche Pfandbriefbank and Helaba Landesbank Hessen Thüringen. The refinanced real estate portfolio comprises 63 light industrial assets located in Germany, France, and the Netherlands with a total gross leasable area of approximately 766,000 square meters. Valad, whose shareholder is the Blackstone Group, is a real estate investment manager with an international network of local offices managing real estate with a value of about €4 billion.
Sale of Moscow’s Ducat Place III. We represented Hines International in its $370 million sale of Ducat Place III, one of the most prestigious business centers in Russia, to O1 Properties, an emerging major player on the Russian real estate market.
Immofinanz Takeover of Major Shopping Center in Moscow. A cross-border team advised Immofinanz, one of the leading listed property companies in Europe, in one of the largest real estate transactions in Europe this year. The team, made up of lawyers from our Berlin, London and Moscow offices, counseled Immofinanz with their buyout of the remaining 50 percent stake in Golden Babylon Rostokino, the most profitable shopping center in the Immofinanz Group portfolio and a flagship for Moscow's retail sector as well as one of the largest shopping centers in Continental Europe. Orrick also advised with respect to the necessary approvals by Russian antitrust authorities.
Regeneration of London Housing Estate. Our London real estate team closed a complex transaction that was two years in the making on behalf of longtime client Notting Hill Housing Group, a UK affordable housing developer. We advised on our client's acquisition of 146 residential units as part of a major regeneration of a rundown housing estate in south London. The acquisition formed part of a complicated PPP scheme combining the redevelopment of council housing and the provision of a privately financed maintenance program for the new council housing for 25 years. The project will provide 300 new units overall and an environmentally friendly district heating system for the entire estate.
Palazzo Aporti Long-term Lease Contracts. Orrick’s Italian team assisted Business Port, a company owned by a Hines-managed real estate fund and TIAA-CREF, in negotiating long-term lease agreements with fashion and beauty houses M Missoni, MCS Marlboro Classics, Tessilform and Coty as well as with State Street Bank, for retail and office space in Milan's historic Palazzo Aporti. Originally built in the 1930’s by architect Ulisse Stacchini to house Milan's Post Office headquarters, Palazzo Aporti has recently been redeveloped as one of the premier retail and office centers in the heart of Milan.
Disposition of Premier Property Interests in Tokyo. We represented an international opportunity fund in its disposition of a trust beneficiary interest in Tokyo’s landmark Yebisu Garden Place, one of the city’s premier office, shopping and retail centers, to Sapporo Holdings, the holder of the remaining interests, with the concurrent redemption of the fund’s TMK bond financing therefor. We also assisted the same fund in the disposition of one of the largest office-use projects in Tokyo, with a concurrent redemption of the fund’s TMK bond financing therefor.
Multi-Billion Yen Loan Acquisition. We assisted a Fortress Investment Group managed opportunity fund with the acquisition of a multi-billion yen performing loan secured by a portfolio of business hotels in Japan, together with the acquisition financing for the portfolio.