select-service properties in upscale and
mid-scale segments. In the case of a portfolio, it can include a small percentage of
extended-stay and economy assets.
Walker says Ashford has “keyed up” a
number of deals, including several portfolios. On average, he says loans will be $25
million to $50 million or up to $75 million
for portfolios. The agreement specifies a
60% to 85% loan-to-value range.
The program will focus on existing
hotels, but new developments aren’t being
ruled out. Under the agreement, PREI’s
equity stake has given it a senior position
in each investment. The JV has a first right
of refusal, but Ashford isn’t prevented
from soloing if it wants to.
Ashford has seeded the program with a
$21.5-million mezz loan it funded last
December for secured interests in the
487-room Westin La Paloma Resort & Spa
in Tucson and 412-key Westin Hilton
Head Resort in Hilton Head, SC. Ashford
has long been a lender for the sector, but
scaled back about 18 months ago due to
pricing, according to a REIT spokesman.
“Pricing is coming back their way. It’s the
right time to be in the market,” he says.
The JV will buy or originate first and second mortgages, stock-secured loans, guarantees or preferred equity financing. Terms
are three to five years for floating rate vehicles and three to 10 years for fixed rates.
Loeb says Ashford had indicated in last
year’s earnings calls that it was actively
looking for joint venture partners. “It
never said mezzanine, but this certainly
fits,” the analyst says. “It’s a very attractive return for Ashford. There’s no additional leverage in the JV, so there’ll be no
debt in this venture.” He adds it’s essentially a way for Ashford to add assets without taking on additional debt.
Loeb, referencing his 2008 hospitality
outlook, says the timing is now right to
launch a mezzanine lending program
because CMBS financing has practically
dried up for the sector. “The reality is there
is very little capital available to the industry,” he says. “Ashford is saying our doors
are open.”—Connie Gore, GlobeSt.com
Strong Fundamentals
Shape Outlook, Says NAI
Despite the credit woes rippling through
the commercial real estate investment market, healthy demand and tight supply in
most global markets will likely attract
strong investment in the year ahead. This
was the prevailing sentiment of NAI
Global’s 2008 Global Outlook presentation, held earlier this month in Manhattan.
“We have solid fundamentals throughout
the world with high construction and land
costs and more stringent criteria limiting the
pace of development,” related Jeffrey M.
Finn, president and CEO of Princeton, NJ-based of NAI Global. “We are generally
seeing cap rates move up about 50 basis
points across all categories. That’s pushing
prices down, but it’s
counterbalanced with
increasing rents to
hold values.”
Global economic
expansion is driving
job growth and FINN:
demand for commer- “Investors are
cial space at a pace going further
that exceeds supply. into secondary
This, said Finn, has and tertiary
fueled a rapid expan- markets.”
sion of lease rates,
particularly in the
office sector. Several European cities,
including Budapest, Madrid and Moscow,
are experiencing office rent growth above
17%. And retail rates in markets like
Moscow are recording a 45% increase.
Though this exceptional growth is likely to
slow in the coming months, demand will
still outpace supply, Finn predicted.
Some of the most attractive investment
prospects reside in emerging markets of
GRUBB
continued from page 12
made the company what it is today.
When a lot of others are laying off and
leaning down, we’re beefing up.”
Hanson will also continue to serve as
chief investment officer of Grubb &
Ellis Realty Investors, the role he has
filled since joining the former Triple
Net Properties in 2006. Prior to that, he
was an SVP in Grubb & Ellis Co.’s
institutional investment group.
“The Grubb & Ellis name is 50 years
old and one of the best known in the
commercial real estate industry,” company president and CEO Scott D.
Peters said in a statement. “The renaming of Triple Net Properties leverages
the power of the established Grubb &
Ellis brand name and allows Grubb &
Ellis Realty Investors to improve the
distribution and market-awareness of
its investment programs.”
Thompson says the time is right for
him to exit, with the merger closed and
a new management team in place. He
leaves the “new” Grubb & Ellis “in
great hands. It was very difficult for me
to leave, but I’m leaving on a high.” He
also remains the company’s second
Asia and Latin America, where product is
least available. But the bustling economic
growth in China and India, for example,
has ushered in lofty land and labor prices in
the major cities. As a result, Finn has
noticed that, “Investors are going further
inland into secondary and tertiary markets.
People are also moving out into burgeoning
economies like Vietnam, where we’re seeing fantastic growth.” Foreign direct investment in the country in the first seven months
of 2007 rose by an about 55% and forecasted GDP growth in 2008 stands at 8.5%.
In Latin America, there is great enthusiasm surrounding the rise of Argentina and
Brazil as regional economic leaders.
“These two larger economies have taken
hold with stable inflation and lower interest
rates,” noted Finn. “Now they are attracting
tremendous capital and supply can’t keep
up with the demand for space.”
With regard to the state of the domestic
markets, NAI Global’s chief economist,
Peter Linneman, agreed that underlying
property fundamentals are still healthy,
especially in top-tier cities. But, he suggested that property players would likely
take a wait-and-see approach in the first
half as the capital markets settle. “Debt
markets will start to function and as they
do, cap rates will start moving back down.
By the end of 2008, cap rates will proba-
largest shareholder and says he “will
continue to be Grubb’s biggest fan.”
Don’t expect to see Thompson disappear from the real estate scene just
yet, though. The executive reveals he
will continue to be an active buyer.
“I’m a real estate junkie,” he says. “It’s
a great time to be in the business.”
Thompson adds that he is exploring
many options and, while offering few
specifics, did suggest he could focus on
industrial assets. “There are a lot of
ways to play in the real estate space,”
he says. “There’s a lot of pain and
agony out there right now due to the
credit crisis.”
Glenn L. Carpenter has been appointed non-executive chairman of Grubb.
He is the president, CEO and chairman
of FountainGlen Properties LP.
“We are indebted to Tony for his
many years of extraordinary service to
NNN Realty Advisors and its predecessors,” Peters said. “Tony is an acknowledged visionary in our sector of the real
estate investment universe, having led
us to transaction volumes of over $8.5
billion. We wish him only the best in his
future endeavors.”—Michelle Napoli,
TIC Monthly
