Sunday Summary: Stephen Ross Is Not Finished With South Florida

What does Johnny Rocco want?

That was the central question in the old John Huston picture “Key Largo” about the aforementioned gangster played by Edward G. Robinson.

The answer: He wants “more” — as articulated by the movie’s hero Frank McCloud (Humphrey Bogart).

It could be the mantra for many in the real estate business. It’s an industry with a tapeworm for the next big thing.

And Stephen Ross is currently personifying it — because the guy is not letting up. (Not that we’re comparing him to Edward G. Robinson!)

Last week Commercial Observer learned that Related Ross is finalizing a $700 million debt package for two West Palm Beach office projects in his CityPlace complex, thanks to financing from Ares Management and Monarch Alternative Capital, and would bring Related Ross’ total debt in West Palm Beach to over $1 billion.

Ross’s former partners are no slouches, either. Related Group just paid $50 million to BH Group and PEBB Enterprises for an office building in Boca Raton, Fla., which they’re planning to replace with a 500-unit multifamily project.

And, of course, there were non-Related Group or Related Ross deals in South Florida, too.

For example, Wynwood Haus’ owners — Black Salmon, LD&D and Bridge Investment Group — got $56 million to refinance the 224-unit mixed-use residential and retail building at 23 Northeast 17th Terrace. Condra Property Group nabbed a $40 million construction loan from S3 Capital to finish a 36-unit condominium on the Hollywood Beach Broadwalk. And Greystar swapped $93.5 million with Nuveen Real Estate in exchange for the 358-unit Latitudes at the Moors, at 6290 Northwest 173rd Street in Miami Gardens.

More, more, more!

Earnings season already

It might have felt like the first quarter just ended (seriously, is it already August next week??) but quarterly earnings season is starting up again, and CO has been listening in.

Blackstone was early to schedule their earnings call — and we’re not surprised. They had much to boast about.

The giant netted $7.2 billion just from its real estate funds, which included $1.1 billion from BREIT — which also happened to have the best quarterly fundraising performance in the trust’s two and a half years. And they’re poised for more!

“Because of the two-thirds decline in building in the U.S. from the peaks in terms of logistics and apartment construction, you’re going to begin as we get toward the end of this year and into next year to have a much more favorable supply-demand dynamic,” said Blackstone President and COO Jonathan Gray. “If [interest] rates come down faster, obviously the recovery is quicker. If they don’t, then new supply will continue to be muted and the recovery will take a little more time, but ultimately we know the path to travel.”

A lot of companies are seeing potential for both good and bad — and falling back on strong fundamentals. Invesco, for one, saw operating expenses increase slightly from the first quarter ($759.2 million to $760.2 million) and revenue decline ($1.529 billion to $1.515 billion).

Empire State Realty Trust did 232,108 square feet of office leasing last quarter (up slightly from the 229,000 square feet it did in the first quarter) and even saw the number of tourists coming to the Empire State Building rise.

Alexandria Real Estate Equities, the largest life sciences real estate owner in the country, reported a mixed quarter — it had $396.4 million of funds from operations ($4 million more than the first quarter) but the company suffered a net loss of $109.6 million for the last three months.

But, then, life sciences has had some ups and downs — as has logistics and industrial properties overall.

There are still big ups, like AstraZeneca announcing that it will invest $50 billion in manufacturing and R&D infrastructure.

But we also hope that a lot of owners of that asset class will start listening to tenants. Unispace, the engineering and design firm, polled some 400 biotech and pharmaceutical executives worldwide, and the results showed there’s demand for more retrofits and adaptive reuse of existing properties (in other words, enough with the new development for a while).

Also, if it feels like attention is turning away from the traditional lab spaces and going to data centers, there’s a reason for that: It’s because that’s exactly what’s happening.

Data center development more than doubled last year. In fact, it’s getting so big that other assets are beginning to have trouble finding the appropriate amount of construction workers and materials to build anything else.

“The surge in data center construction is certainly putting additional pressure on the availability of materials, labor and capital for other types of new real estate development,” Lynn McKee, director of Georgia State University’s commercial real estate program, told CO.

Forget it, Jake — it’s Inland Empire

If they’re not being built, other assets could at least be sold.

Bridge Logistics Properties just picked up a three-building industrial complex in Fontana, Calif., from a subsidiary of the Dallas-based Hillwood for $83.5 million.

In Orange County, Regency Centers, just picked up a five-property retail portfolio at Rancho Mission Viejo from developer Rancho Mission Viejo LLC for a whopping $357 million.

And this one might be on the market soon: Oscar De La Hoya’s Golden Boy Promotions missed a $21.7 million debt payment at 626 Wilshire Boulevard in Downtown L.A. sending the property into special servicing.

The kings and queens of ‘more’

Many of our readers are familiar with the Stephen Rosses and the Jonathan Grays of commercial real estate, but there is another category that is sometimes hidden.

The investors of real estate.

Who are the big names bankrolling this whole ecosystem?

Some of the family offices and the big firms are very well known. Others go out of their way to not leave a name or a face on their transactions, other than for the bankers. But there’s a big pool of capital that’s fueling everything that’s going on.

CO tried to isolate the names of the 25 most powerful investors in commercial real estate — the results of which came out in our inaugural list published last week.

We tried to tie these names to the projects that are going up around the country (and around the world) because even some of the most seasoned veterans often don’t know where the money starts. But we would advise you to take this Sunday to sit back and find out.

See you next week!