NEWS FRONT
District Hotels See Price Stabilization
WASHINGTON, DC—Pebblebrook Hotel Trust,
a Bethesda, MD-based REIT, has closed
on its pending acquisition of Hotel
Monaco in the nation’s capital for $74
million. That comes as little surprise to
industry watchers: after a dearth of deals
for nearly two years, a recent flurry of
acquisitions have established the
$400,000-per-key price point as a floor
for full-service hotels. LaSalle Hotel
Properties’ $95-million acquisition of
Sofitel Lafayette Square kicked off the
activity.
Other trades that have since followed
include the sale of the Fairview Park
Marriott to a partnership organized by
Thayer Lodging Group. And the infamous Watergate Hotel traded for $45 million, acquired by Euro Capital Partners.
“Activity in the metro area is still very
strong,” observes Marc Magazine, who
recently opened McLean, VA-based
Humboldt Hospitality Advisors with for-
mer CB Richard Ellis colleagues Tom
Baker and Dave Durbin. “There is more
money looking for assets than there are
assets available.” He points to the recent-
closing of Hampton Inn on Sixth Street
and Massachusetts Avenue, which sold
for $325,000 per key, as another
example.—Erika Morphy
Executive Moves
PHILADELPHIA—Kenneth R. Zirk has joined
CB Richard Ellis’ global corporate services group as an SVP, focusing on
Pennsylvania, New Jersey and Delaware.
For more executive moves, please visit
www.globest.com/executivewatch.
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Jul. 06 Jan. 07 Jul. 07 Jan. 08 Jul. 08 Jan. 09 Jul. 09 Jan. 10 Jul. 10
3.92% 3.95% 4.24% 4.15%
5.21%
6.86%
8.18% 8.11% 8.16%
DC Distress Eases
Source: The Goldstein Group
As of July 2010, the overall retail
vacancy throughout Northern and
Central New Jersey remained little
changed from the prior year, registering 8.16% in July 2010 versus 8.18%
12 months prior, according to the
Goldstein Group’s midyear survey of
New Jersey’s retail marketplace.
New Jersey Retail
Vacancy Rate
Property Tax Caps Bode Well for Garden State
Many define pure capitalism as an institution in which business models and interests drive the economy, spur growth and
ultimately benefit the greater good. With the recent economic
struggles, many in business feel that it is essential for public
and private interests to work together to address economic
challenges. In New Jersey, government is
starting to play a supporting role, as the
property tax cap Gov. Chris Christie signed
into law on July 13
is poised to benefit
the region’s business and commercial real estate market.
In the realm of industrial properties and,
more recently, data centers, which require
large blocks of space, New Jersey benefits
from New York City’s proximity and can serve Manhattan’s
dense concentration of businesses and residents. Now, New
Jersey is armed with some new competitive negotiating power
to lure office tenants and owner-occupiers to the state as well.
A 2% annual cap on property-tax increases, especially combined with lower property valuations that can be gained
through appeals, is certainly a step towarad attracting office
users back to the state.
Lower taxes spur economic activity and directly benefit
owner-occupiers. But as landlords struggle to compete for tenants and lock in leases, they are more inclined to pass those tax
savings along to prospective tenants in an effort to stabilize their
properties and portfolios with an eye on greater return on
investment and revenue stream in the longer term.
“Now is the time to act,” Christie indicated in his budget
By Jeff Hipschman
proposal to the 214th state legislature in March, referring to
New Jersey’s dire financial standing. According to the Tax
Foundation, the proposal noted that New Jersey residents pay
the highest property taxes in the country, at 11.8% of income,
and the state and local tax burden percentage is also the highest in the country, well above the national average of 9.7%. As
evidence of an issue growing out of control, Christie added
that the New Jersey Department of Community Affairs pegged
the 2004 property-tax average at $5,617 and the 2009 figure at
$7,281, an increase of almost 30%. The proportional burden
shouldered by commercial property owners has been only that
much more difficult to bear.
Christie signed the final $29.4-billion budget on June 30, and on
July 13 he signed into law a 2% annual cap on property-tax
increases. Municipalities can indeed store unused levies for a rainy
day, and local governments can petition voters for permission to
exceed the state cap. The final law does include exceptions, though
only for employee pension and healthcare costs, as well as increased
school enrollment, emergencies and debt payments.
Overall, given the state’s historical reputation as one of the
most expensive and least business-friendly states, Christie is sending a contrary and positive message to business owners: New
Jersey is serious about reducing its tax burden for businesses and
residents in order to stimulate economic activity and ultimately
generate new business. This is music to the ears of commercial
real estate professionals throughout the Garden State.
Jeff Hipschman is senior managing director at CB Richard Ellis in Saddle
Brook, NJ. He may be contacted at jeff.hipschman@cbre.com. The views
expressed here are the author’s own.
