NCREIF Summer Conference

Transcription

1 NCREIF Summer Conference Presented by: Brian D. Berry July 2012

2 Tishman Speyer Global Who We Are Privately held global real estate fund manager and developer with a 112 year legacy. Today, the company has approximately $65 billion of assets under management and holds over 85 million SF internationally. TS has 1,300 employees in its regional offices in more than 25 global cities located in the US, Europe, China, India, and Brazil. Rockefeller Center, New York Sony Center, Berlin Ventura Towers, Rio de Janiero Proven Development Track Record In the last 5 years, Tishman Speyer has delivered approximately 20 million SF of development globally including 3 million square feet in the Greater Washington, DC Region. Other notable projects include the Yankee Stadium development and headquarters office tower buildings such as Hearst Tower in New York and OpernTurm in Frankfurt. Experience and Knowledge in Fundraising and Joint Ventures Since 1978 Tishman Speyer has raised over $10.4 billion of equity capital for project specific joint ventures, working with major global institutional investors and developers. This joint venture equity is in addition to the $9.5 billion of equity in 14 funds raised through our investment funds business. Passion for Environmental Sustainability We continue to be a global leader in sustainability with over 12 million SF of new construction, 22 million SF of existing buildings and 15 million SF of commercial interiors LEED certified through Q With a board seat on the US Green Building Council, we are implementing real time energy monitoring at all properties in our US portfolio. 2

3 Tishman Speyer Private Equity Fund Manager Investment and Capital Market Activity Since January 2010 Capital Raising Milestones Legacy Investing $4.2 billion in global equity raised; 50% from legacy investors 50% from new investors Tishman Speyer became the first foreign real estate company to raise onshore capital in China, a landmark transaction in China's capital markets $0.7B New Investors Committed To One Investment 16% $1.4B New Investors Committed To More Than One Investment Global Totals Since 2010 Acquisitions (Gross Value) Dispositions (Gross Value) Total Equity Raised Co-Investment Equity Fund Equity $4,602.2 $4,621.8 $4,209.1 $3,155.3 $1, % 50% $2.1B Legacy Investors US Acquisitions (Gross Value) $1,959.6 Dispositions (Gross Value) $2,639.2 Total Equity Raised $2,410.6 EUROPE Acquisitions (Gross Value) $1,066.4 Dispositions (Gross Value) $1,274.3 Total Equity Raised $263.6 BRAZIL Acquisitions (Gross Value) $424.6 Dispositions (Gross Value) $599.7 Total Equity Raised $499.9 CHINA Acquisitions (Gross Value) $1,090.5 Dispositions (Gross Value) $108.6 Total Equity Raised $1,035.0 INDIA Acquisitions (Gross Value) $61.1 Note: Information is as of June 30, 2012; All amounts in US$ millions, acquisition and disposition figures include pending transactions and all future budgeted development costs for current/pending development projects 3

4 Tishman Speyer Washington, DC Region 1.7 MSF leased in 2011, including 1 MSF of new and expansion leasing Own regional asset base of $3 Billion in 31 buildings containing 7 MSF Approximately 2/3 of property value in downtown Washington, DC with properties spread over 9 submarkets Manage and/or lease 47 buildings containing over 10 MSF Developed 10 properties containing ~3 MSF 2 MSF of future development potential at Woodland Park and NoMa Arlington Tower One Metro Center 1100 First Street, NE 1775 Pennsylvania Ave., NW Woodland Pointe 4

5 Washington, DC Region The Future of the DC Market: So which way are we headed? 5

6 Washington, DC Region Investment Sales Investment Sales Market Trends Core Assets (Top 10-15% of Inventory in Market) Valued as scare commodity, despite being nearly 2/3 of sales volume Cap rates continue to stay near historic lows (~ %), even in emerging markets (i.e. NoMa) Pricing proximate to peak ($ psf for trophy) Bidders continue to be liquid between institutional and international source, however the number of bidders has begun to dwindle Is this related more to tepid market economics or investors having satisfied core appetite? Value-Add / Core-Plus Assets (Repositioning or Significant Leasing Risk) Much fewer opportunities offered on market approximately 10-15% of sales volume Pricing has remained high due to competitive buyer pool in region Vacancy is being priced differently by value add buyers due to market fundamentals and large block tenants being out in market 2-3 years early Limited Near Term Rental Growth (0% in 2013 and 0-3% in 2014) Slower absorption timing (minimum 2 year lease-up of substantial vacancy) Due to high core asset pricing, buyers are willing to take near term risk and lease to core Homer Building (leasehold) 65% leased with substantial rollover, $740 psf initial basis, $850+ psf stabilized 2099 Pennsylvania Avenue (fee simple) 10% leased (YE 12), $750 psf initial basis, $900+psf stabilized, <5.5% 5% stabilized yield 6

7 Washington, DC Region Investment Sales Investment Sales Market Trends (2011 vs 2012) 2011 Volume - $8 B in regional office sales Asset Type - Core (65%); Core Plus / Value Add (35%) Location DC (50%); VA (40%); MD (10%) 2012 Volume - $2 B in regional office sales thru midyear Asset Type - Core (50%); Core Plus / Value Add (50%) Location DC (80%); VA (15%); MD (5%) Core Asset Sales Market Square (4.6% cap, $904 psf) Liberty Square (4.8% cap, $820 psf) Core Asset Sales th St (4.8% cap, $818 psf) Hamilton Square (4.5% cap, $809 psf) US Mint (4.6% cap, $625 psf) Core-Plus and Value-Add Asset Sales rd St (6.5% cap, $400 psf) 2099 Penn (4.7% cap, $750 psf initial, iti $900+ psf stab.) th St [ABA] ($400 psf initial, $550 stab.) Core-Plus and Value-Add Asset Sales Homer Building (3.5% cap, $748 psf initial, $850+ psf stab.) th Street ($525 psf initial, $700 psf stab.) Republic Place (5.7& cap, $560 psf initial, $625 psf stab.) 7

8 Washington, DC Region Investment Sales Investment Sales Comps Trophy: % Cap Rates; average at ~$850 psf Class A Core: % Cap Rates; average at ~$600 psf Class A Inside the Beltway: % Cap Rates; average at ~$500 psf Class A Outside the Beltway: % Cap Rates; average at ~$300 psf Source: Eastdil Secured and Tishman Speyer

9 Washington, DC Region Market Overview Downtown DC Market experienced modest positive absorption in 2011 (~50% of the 10 year average) followed by modest negative net absorption in YTD 2012 Decrease in demand in Emerging Markets due to Federal government budget constraints, less available inventory, and a new emphasis by the President and Congress to reduce real estate costs Development pipeline continues to be limited with 1.9 million RSF under construction, with ~55% pre-leased (including LOI) Northern Virginia Negative net absorption in 2012 largely due to ~1M+ SF of known move-outs in Crystal City related to BRAC and large private sector consolidations into existing locations (including Boeing in Crystal and Booz Allen in Tysons Corner) Rosslyn vacancy increases 4% during the last 4 quarters to 14% (negative absorption ~ 400k SF) with continued limited demand Tysons Corner continues to struggle from lack of demand and inconvenience created from Metro and highway construction Speculative deliveries of 1.8M SF anticipated in 2012 Q (13% pre-leased overall), including 475K SF in Tysons (0% preleased) and 975K SF in R-B Corridor (24% pre-leased) WASHINGTON DC REGION STATISTICS Inventory Under Vacancy Rates Net Absorption 2Q 2012 Construction Q YTD 2012 TOTAL Washington, DC 121,991,353 1,944, % 10.4% 10.4% 3,873, ,645 (45,352) 4,626, % Virginia Inside Beltw ay 55,515, , % 11.6% 16.4% 662,081 (935,443) (1,654,036) (1,927,398) Outside Beltw ay 99,670,990 1,324, % 15.6% 15.8% 1,096, ,907 (94,253) 1,818,590 Virginia Subtotal 155,186,376 2,158, % 14.2% 16.0% 1,759,017 (119,536) (1,748,289) (108,808) 1.4% Maryland Montgomery County 53,731,962 1,416, % 13.2% 13.5% 239, ,692 10, ,084 Prince George's County 17,725, , % 19.6% 21.5% (132,727) (134,570) (39,022) (306,319) Maryland Subtotal 71,457,828 1,685, % 15.1% 15.5% 107, ,122 (28,600) 631, % Total 348,635,557 5,788, % 13.1% 13.9% 5,739,455 1,232,231 (1,822,241) 5,149,445 Source: Cassidy & Turley Second (2nd) Quarter 2012, Vacancy Rates include sublet space 9

10 Washington, DC Region Market Overview Downtown DC - Historical and Projected Deliveries, Absorption and Vacancy With net absorption of space expected to remain low to moderate in 2012 & 2013, and limited new deliveries of 1.9M RSF, vacancy rates are likely to remain near current levels Even with no net absorption in DC through 2014, the vacancy rate would only increase to about 12% 7 Washington, DC Historical and Projected Deliveries, Absorption and Vacancy 14% 6 5 Vacancy Rate at which Rents are Stable ~8.0% - 9.0% 10.4% 12% 10% are Feet illions) Squ (m 4 3 8% 6% 2 4% 1 2% Year End / Year-to-Date Data New Delieveries i Net Absorption Vacancy Rate 0% Source: Cassidy & Turley Second (2nd) Quarter

11 Washington, DC Region Market Overview Northern Virginia - Historical and Projected Deliveries, Absorption and Vacancy Limited deliveries over the next months Rental growth stabilizing in select Inside the Beltway submarkets; Outside the Beltway rental rates are leveling off, but concessions continue to increase Northern Virginia Historical and Projected Deliveries, Absorption and Vacancy 10 20% 8 Vacancy Rate at which Rents are Stable ~8.0% % 16% % 12% Squa are Feet (mil lions) % 4% 0% -2-4% -4-8% Year End / Year-to-Date Data New Delieveries Net Absorption Vacancy Rate -12% Source: Cassidy & Turley Second (2nd) Quarter

12 Washington, DC Region Market Overview DC Regional Office Market Trends 1. Base Realignment and Closures ( BRAC ) Government relocations from leased space to bases/ owned space Hardest hit submarkets will be Crystal City (3.5M SF), Skyline/ Eisenhower (2M SF) and R-B Corridor (1M SF) How will the vacancy in older, vacated BRAC buildings impact Class A properties? 2. GSA Stagnant Demand Government austerity, focus on efficiency, budget deficit and change in leadership causing lack of demand Will the GSA find the money to relocate to newer, efficient, LEED space? Will GSA allow landlords to pay for such additional moving costs and amortize into rent over the lease term? 3. Sequestration and Contractor Demand Ripple effect from budget deficit forcing contractors into wait and see approach until more clarity on focus of actual budget cuts With DoD cuts looming, will contractors successfully realign their business to serve the private sector? 4. Law Firm Contraction and Demand Recent focus on space efficiencies; impact of firm dissolutions Will investors begin to underwrite law firm credit differently? When will law firm growth return to market? 5. Tepid Near Term Tenant Demand DC job growth below averages due to modest private sector growth and flat public sector How much pent up GSA demand will there be post election? What sectors will drive private sector growth? 6. Silver Line Metro Extension (and related upzoning) through Reston and Dulles Airport into Loudoun County Will Metro generate new growth? Will Metro development pull tenants from non-metro served submarkets? 12