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GGP Reorganization Results in CRE Fundraising Surge

Investors Targeting Health Care Real Estate Also Attract Big Bucks
December 15, 2010
Companies and funds reported raising $13.2 billion in November for commercial real estate-related investments and financing. The amount was about $5 billion more than was raised in October - all of which was to be used to complete the financial restructuring of General Growth Properties, which exited Chapter 11 bankruptcy reorganization last month.

The monthly amount raised brings the total inflow for the first 11 months of the year to more than $91 billion from about 1,583 entities.

CoStar Group tracks the fundraising activity of almost 2,000 investment entities on an ongoing basis and adds about 125 new entities per month.

For November, 143 investment entities in all reported newly raised amounts of money. Thirteen different funds and firms reported raising $6.77 billion earmarked for debt repayment; another 11 entities raised $346 million for non-property-related investments, including debt, mortgage or securities purchases.

That leaves 119 entities raising approximately $6.08 billion available for property investments - about twice as much as available from October fundraising efforts. At a conservative 65% loan-to-value ratio, the money raised in November that could go towards property purchases would fund $17.4 billion in deals.

Property sales of $1 million or more have averaged about $11.6 billion in the previous four months, according to CoStar Group's COMPs database. (November sales deals have not yet been completely tallied; however, so far CoStar has verified $9.5 billion already in such sales.)

Of the total amount raised in November, $9 billion of it was from publicly offered shares in REITs and real estate operating companies with about $6.8 billion specifically to be used for debt repayment or refinancing.

The other $34.2 billion came from private fund raising efforts and is all earmarked for new investment. Pooled investment funds including private equity and hedge funds raised $926 million.

Funds targeting office and health care investments each raised 15% of the total; funds targeting industrial properties raised about 10% of the total. Land-related investment amounts equaled about 7% of the total; and hotels, multifamily and debt, mortgage-related investment each accounted for about 3%.

The highest percentage of funds raised (approximately 43%) was earmarked primarily for retail-related investments. The financial restructuring of GGP accounted for almost the entire amount raised in this category. Outside of the GGP deal, money raised for retail investments totaled about $420 million.

Apart from the money raised in the GGP restructuring, the top three money raisers in November were: ProLogis, Boston Properties Inc. and Health Care REIT Inc.

ProLogis closed a common stock offering Nov. 1 raising $1.1 billion. A portion of the proceeds were used to repay borrowings through the repurchase of its senior notes. In addition, ProLogis is in the process of selling a portfolio of 180 properties with 23 million square feet for $1.02 billion and has begun began actively pursuing the disposition of its retail and certain mixed-use properties and certain land subject to ground leases. It expects a deal to be completed early next year.

Boston Properties sold $850 million of senior unsecured notes and intended to use all or a portion of the net proceeds to repay, redeem or repurchase outstanding debt.

Health care-related REITs were among the most active players in November.

In November, Toledo, OH-based Health Care REIT sold $450 million in senior notes. It followed up that offering on Dec. 1 selling $503 million in common stock. The proceeds of both were to be used for investing in health care and senior housing properties.

Stealing the show this week, though, HCP Inc., the nation's largest health care REIT, agreed buy all the real estate assets of Carlyle Group-owned HCR ManorCare for $6.1 billion. It also agreed to acquire its partner’s (CNL Retirement Properties) 65% interest in a joint venture that owns 25 senior housing assets. In November, HCP raised $486.5 million in a common stock offering. Then HCP announced this week it had launched another common stock offering that would raise proceeds of $1.28 billion.

Other Successful November Fundraisings

AMB Property Corp. in San Francisco raised $175 million from the sale of notes. The REIT's operating partnership intends to use approximately $140 million of that to reduce borrowings under its unsecured revolving credit facility. The remainder was set aside for general corporate purposes, which the company said could include acquisitions, development or redevelopment activities.

AvalonBay Communities Inc. in Arlington, VA, raised $250 million through the sale of unsecured notes. AvalonBay intends to use the net proceeds for development and redevelopment of apartment communities and repayment and refinancing of other debt.

Corporate Office Properties Trust in Columbia, MD, $246 million through the sale of common stock to be used to repay debt.

Developers Diversified Realty Corp. in Cleveland sold $350 million of senior notes. It expects to use the net proceeds to reduce balances on its corporate revolving credit facilities.

Emeritus Corp. in Seattle raised $73 million in a common stock offering to fund completed acquisitions.

First Potomac Realty Trust in Bethesda, MD, raised $170.4 million from the sale of common stock with the proceeds going to repay debt.

Kilroy Realty Corp. in Los Angeles completed an offering of $325 million in senior unsecured notes. Proceeds from the offering were to be used to fund completed and pending property acquisitions.

Terremark Worldwide Inc. in Miami raised $75 million from note sales. Terremark intends to use the proceeds to build out facilities.

Ventas Inc. in Chicago, sold $400 million of senior notes to be used repay debt under its unsecured revolving credit facilities.

Keep up weekly on national news, trends and property leads with the Watch List Newsletter,, a weekly pdf that includes other news items not found on the CoStar Group web news pages. Sign up for the Watch List E-Mail Alert. A new issue is published late each Wednesday. It's the quickest way to link directly. Just e-mail your name, title, company, company business, city, state, and e-mail address to Mark Heschmeyer

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