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In The Pipeline: CoStar Development and Construction News For July 18-24

News and Notes on Trends, New Projects and Construction Entering Or Leaving the Commercial Real Estate Development Pipeline Around the U.S.
July 20, 2010
In this week's Pipeline, a consensus of construction industry experts delivers a sobering forecast for commercial and other nonresidential building activity for the remainder of 2010; CGA Capital has pulled together $687 million in financing for Center Point to develop a manufacturing facility for the nation's nuclear oversight agency in Kansas City, MO. In Western Michigan, one of the world's biggest manufacturers of washers, dryers and other big home appliances will build a new corporate campus; Wood Partners buys a site in Sandy Springs, GA to begin development of a 168-apartment mixed-use community. A Mesa, AZ, developer is converting a former Mervyn's store into a "collaborative market" of up to 100,000 square feet. Plus, news on a retail project in L.A.'s South Bay, an industrial development in Orange County, CA, land sales in Milwaukee and Alliance, Ohio, and a sports complex in Minnesota.

CoStar Group's In The Pipeline is a column on significant land sales, transactions and trends affecting office, industrial, flex, multifamily, mixed-use, hotel and public works developers. Send us news leads about your new project -- and sign up to be added to our distribution list to receive future In the Pipeline columns by e-mail.

Read previous columns and articles.

AIA Forecast: Nonresidential Construction To Fall More Than 20% in 2010

The American Institute of Architects’ midyear look at nonresidential construction concludes that new development spending likely to fall more than 20% this year -- significantly more than forecasters predicted six months ago -- with hotel and office construction down by more than 43% and 29%, respectively.

Even with a modest U.S. economic recovery under way, overall nonresidential spending is expected to drop 20.3% for 2010 - nearly 30% for private commercial development -- before edging up an inflation-adjusted 3.1% in 2011, according to the AIA’s semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters. Manufacturing facilities will see a 20% decline, and even government and other institutional buildings will likely fall 12%.

The AIA’s consensus forecast panel was downbeat at the beginning of the year, projecting a 13.4% decline in construction spending for nonresidential projects. However, prospects are even worse at the halfway point.

"Our construction forecast panel expects the weakness in the construction sector to continue well into 2011," said AIA Chief Economist Kermit Baker.

Editor's Note: For an expanded version of this news item, see Thursday's edition of CoStar Advisor, our weekly e-mail newsletter. It's the easiest way to stay on top of both national commercial real estate headlines and activity in your local markets, in a newsletter customized by you. Find out more.

Most nonresidential construction building categories are weighed down by some degree of oversupply, combined with weak demand, declines in commercial property values, difficulty getting projects financed and macroeconomic factors. Those combined factors have contributing to what Baker describes as "one of the steepest construction downturns in generations."

"We have businesses nervous about expanding their facilities, a fragile financial sector, excess commercial space, and general unease in the international economy," Baker said.

CGA Capital Arranges $687 Mil. Construction Financing for National Security Project

Baltimore, MD-based CGA Capital Corp. has closed $687 million in financing for construction of the National Nuclear Security Administration’s new 1.5 million-square-foot manufacturing facility in Kansas City, MO.

The NNSA National Security Campus will be a primary producer of non-nuclear mechanical, electronic, and engineered materials for the U.S. nuclear weapons arsenal and other national security missions. The total value of the new complex -- including design, construction, equipment and payments on the 20-year credit-tenant lease -- is estimated at a mind-boggling $4.76 billion.

CGA Capital, formerly Legg Mason Mortgage Corp., arranged the financing on behalf of CenterPoint Zimmer LLC, of Oak Brook, IL, an affiliate of CenterPoint Properties Trust that will develop and lease the facility back to the U.S. General Services Administration (GSA) for 20 years. Honeywell Federal Manufacturing & Technologies LLC, which manages the current facility, will also operate the new facility for NNSA.

Attorneys from Ballard Spahr LLP served as financial advisers and structuring agents in executing the complex public-private deal. Ballard Spahr also exclusively arranged the bond placement with a privately held securities firm.

The new five-building manufacturing and research facility, one of the nation’s largest construction projects on the books and among the most massive GSA projects involving the private sector in the agency’s history, will replace the NNSA’s World War II-era plant. The new facility will employ 2,500 workers.

Groundbreaking is to begin next month in a farm field near the NNSA’s current facility on land owned by the Planned Industrial Expansion Authority of Kansas City (PIEA), a Missouri-chartered development agency. Relocation is scheduled to begin in 2012 with full occupancy expected in 2014.

The CGA team was led by Managing Directors and Principals W. Kyle Gore and Richard A. Jacobs. The Ballard Spahr team was led by Fred Wolf III.

Whirlpool Corp. Announces $85M HQ Project in West. Michigan

Home appliance manufacturer Whirlpool Corp. said it will stay in Western Michigan, building a new office campus in Benton Harbor, MI, at a reported cost of $85 million as part of a five-year plan to consolidate its 15 owned and leased facilities into three centralized office campuses.

The three campuses will include an existing administrative center and the St. Joseph Technology Center locations, and a new three-building campus to be located on Main Street between River Street and Riverview Drive in downtown Benton Harbor. The company plans to also retain its Hilltop Drive South offices in St. Joseph and the Harbor Town offices in Benton Harbor.

Contingent on approval of all state and local incentives, preparation for the new office buildings is expected to begin within the next several weeks, the company said in a statement.

The changes will allow Whirlpool to reduce operating costs, provide greater operational flexibility to adjust to changing business and staffing needs and enhance productivity. The new buildings will be built to achieve Leadership in Energy and Environmental Design (LEED) Gold certification.

"With more than 4,000 individuals in our current facilities, we have simply outgrown our current space," said Jeff M. Fettig, Whirlpool chairman and chief executive officer. "This initiative is a good business decision as the new campus and related changes are expected to increase productivity and energy efficiency, and reduce operating costs."

Whirlpool's plant in Evansville, IN, finally closed its doors last month, ending more than a half century's worth of production.

"Thanks to collaboration with our four local government bodies, and with the State of Michigan, we will further strengthen our commitment to the Benton Harbor-St. Joseph communities," Fettig said.

Whirlpool is among the world's leading makers of major home appliances, with annual sales of about $17 billion in 2009, 67,000 employees and 67 manufacturing and technology centers around the world. The company markets products under the Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana, Brastemp, Consul, Bauknecht and other major brand names.


Wood Partners: New Multi-Family Development in Sandy Springs

Wood Partners LLC purchased a 2 1/2-acre site in Sandy Springs, GA, to begin development of its Alta Glenridge Springs, a 168-apartment mixed-use community. The development will be located near the intersection of I-285 and Glenridge Drive, in a cluster of hospitals and medical offices.

When completed, Alta Glenridge Springs is expected to consist of 175,000 square feet of residential space and 20,000 square feet of retail space. The one-, two- and three-bedroom apartments will have a variety of upscale amenities and are expected to be ready for the first occupants by summer 2011.

The developer will pursue Energy Star certification.

Easland Capital of Atlanta, Inc. was responsible for rezoning and site plans for the development. The firm will manage and lease the project's retail once it is completed.

The project is funded by the CB Richard Ellis Strategic Partners U.S. Opportunity 5 Fund, a co-mingled private equity real estate fund. Hank Hall, senior vice president in the Capital Markets Group of the Atlanta office of Colliers International, assisted in obtaining the construction loan. (By Brooke Fienman)


‘Collaborative Market’ Concept Debuts in Mesa, AZ

Pipeline doesn’t typically cover smaller scale conversions and renovations, but we thought this was an interesting take on the quest to reuse outmoded retail space.

Developer Brad Weinstock and land owner GRL Mesa Developments, LLC, a Los Angeles-based private investor, has converted a former Mervyn’s department store in Mesa, AZ, into a "collaborative market" called POOL, scheduled to open before the end of the month.

Commercial Properties, Inc. /CORFAC International, tapped to head leasing at POOL, describes it as an "incubator-marketplace hybrid" that brings together specialty purveyors, small businesses, artisans and merchants in a public market-like setting for shopping, eating and entertainment.

The center is modeled after well-known public markets such as Pike Place in Seattle, Oxbow Market in Napa Valley and the Milwaukee Market in Wisconsin. Owners hopes POOL will eventually bring more than 100 merchants along with a specialty restaurant to the former department store on the northeast corner of Stapley Drive and Main Street.

The first 41,000 square feet in the 100,000-square-foot building is now fully redeveloped. The remaining soft-shell space will be built out at a later date. Cary Newton, and J. Benham Malcom of CPI’s Retail Group in Tempe are heading the leasing team for POOL.

Retail Development Planned for Redondo Beach

LaSalle Investment Management purchased 9 acres at 1515 Hawthorne Blvd. in Redondo Beach, CA, for $12 million, or about $1.33 million per acre.

The property, which is part of South Bay South Center, will be developed into a new 117,585-square-foot retail center. It is already 78 percent preleased by Nordstrom Rack, Sprouts and Total Wine & More.

Adam Howells, David Disney and Kevin Catalani of UCR Investment Sales represented the buyer. (By Chelsea Bell; CoStar COMPS #1930810)


Yakult Plans Production Facility in Fountain Valley, CA

Yakult USA Inc. purchased 8.9 acres at 17235 Newhope St. in Fountain Valley, CA, from Three Star Properties LP for $5.77 million, or about $650,000 per acre.

The buyer intends to construct a bottling production facility that will produce 250,000 bottles of Yakult probiotic drink daily. Construction is estimated to complete in 2012.

Andy Walburger and Jim Snyder of Lee & Associates represented the seller. Yasushi Shiromi and Gary Allen of Grubb & Ellis represented the buyer. (By Jim Naderer; CoStar COMPS #1933973)


City of Milwaukee Sells 24 Acres

The City of Milwaukee sold 23.8 acres of land in Cudahy, WI for $1.25 million, or about $53,000 per acre. A private investor purchased the property.

The parcel is located at 4701 South Pennsylvania Ave. in the Milwaukee Southeast submarket, directly next to General Mitchell International Airport. (By Matthew Maloney; CoStar COMPS #1943644)

Mount Union College Buys Land in Alliance, OH

Mount Union College acquired nearly a half an acre of land at 715, 745 and 755 W. State St. in Alliance, OH, from Ben and Janet Favazzo for $1.5 million.

Mount Union College plans to demolish the buildings currently onsite in order to build and expand its campus. The buyer and seller were self represented. (By Jessica Bigsby; CoStar COMPS #1932708)


Vadnais Heights Sports Complex Coming in November

Community Facility Partners (CFP) purchased multiple properties along County Road East and Highway 61 in Vadnais Heights, MN, from private sellers for $4.63 million. The portfolio consists of three retail buildings and roughly 13 acres of land.

The nonprofit group acquired the properties in order to make way for a new sports complex. The new Vadnais Heights Sports Complex will consist of a 100,000-square-foot dome arena and a 90,000-square-foot double rink ice arena. The complex reflects CFP's efforts to support youth athletic programs.

The facility is scheduled to open on November 1. The NAI Welsh team of Mike Brass and Caleb Krienke represented the seller in the transaction. (By Casey Finkelstein; CoStar COMPS #1937387)
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