National market report

<span style="font-style: italic;">Commercial and residential real estate news briefs from the most active U.S. markets</span>

Atlanta

A downtown Atlanta office building housing a Department of Housing and Urban Development office sold for $7 million at a foreclosure auction in early September, the Atlanta Journal-Constitution reported. Richard Bowers & Company, the commercial real estate firm that controlled the Five Points Plaza building, had to sell it at auction when an attempt to refinance failed. A $13.4 million loan on the building came due in July. The lender, an REMIC trust, placed the winning bid at the auction. HUD is the only tenant of the 17-story building.

Boston

Mall operator General Growth Properties plans to auction off 42 units at Nouvelle at Natick, a luxury condominium attached to its Natick Collection mall, in early October, the Boston Globe reported. Since the project opened last year, only 37 of the 215 units have sold or entered contract. General Growth has hired Accelerated Marketing Partners to auction the units, with minimum bids starting at $160,000, a 70 percent discount from the most recent asking prices, in the hope of kick-starting sales at the project. General Growth filed for bankruptcy protection in April.

The percentage of Boston residents, women and minorities working on city construction projects has fallen in the years since Mayor Thomas Menino took office, despite the construction boom that brought jobs to the city. Boston residents did 32 percent of the city’s construction work in 2008, compared to 44 percent in 1993, when Menino took office, according to the Boston Globe. Last year, women did 2 percent of the construction work, a drop from 2.8 percent in 1993. Minorities performed 30 percent of the work in 2008, down from 38 percent in 1993. City law requires that construction projects employ city residents for 50 percent of the positions, minorities for 25 percent and women for 10 percent.

Chicago

Rents are falling and vacancy rates are rising in Chicago, according to a DePaul University Institute for Housing Studies report released around the start of September. In buildings with two to four apartments, more than 6 percent of units were vacant in the second quarter, and the vacancy rate hit nearly 10 percent in some neighborhoods, the Chicago Tribune reported. Rents also declined in every neighborhood except the North Side, as landlords offered discounts in an attempt to attract tenants. During the second quarter, 0.8 percent of multifamily mortgages in Chicago were foreclosed on, double the number a year previously.

The former Chicago Post Office sold for $40 million at auction in late August, the Chicago Tribune reported. International Property Developers North America purchased the massive 3 million-square-foot, 14-story building at 433 West Van Buren Street. The company gave few hints as to what it has in mind for the building, but Alderman Robert Fioretti said that the company had proposed a mixed-use development with commercial and retail space, condos and a hotel. It could cost up to $1 billion to redevelop the site, Fioretti said.

Las Vegas

In one of the first distressed commercial sales since commercial defaults began to increase last year, Panattoni Development purchased an office and industrial project in the southwest valley area. Panattoni, a major Las Vegas commercial developer and landlord, paid $7.3 million for the Nevada State Bank-owned property, plus about $500,000 in liens. The transaction was a short sale to help the property avoid foreclosure, a Panattoni executive told the Las Vegas Review-Journal. The developer is marketing four office and eight industrial buildings at the site for sale or lease, starting at about $100 per square foot.

Los Angeles

Hotel developer Lowe Enterprises is facing an increasing number of financial challenges, the Los Angeles Times reported. Lowe has defaulted on loans with Corus Bank and Cascade Investment for the 582-room Terranea Resort in Rancho Palos. Lowe has also had to stop making mortgage payments on the Sheraton Universal Hotel in Universal City, which the developer purchased for $122 million in 2007. Lowe is far from the only hotel developer in California to face financial difficulties. About 275 hotels in the state have received default notices or faced foreclosure, said consultant Alan Reay of Atlas Hospitality Group.

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Actor David Hasselhoff’s family home in Encino has been placed on the market for close to $4.2 million, the Los Angeles Times reported. The 8,947-square-foot house has five bedrooms, five bathrooms, a screening room, a pool and spa, two guesthouses and a tennis court. Hasselhoff serves as a judge on “America’s Got Talent” and starred in “Baywatch” and “Knight Rider.” He co-owns the house with his ex-wife, Pamela Bach Hasselhoff.

New Orleans

A Florida contractor hired to oversee the finances of the Housing Authority of New Orleans embezzled more than $900,000 over the past three years, according to charges filed at the end of August. Federal prosecutors charged Elias Castellanos with a count of embezzlement and said they would try to recover $876,917, the Times Picayune reported. During that three-year period, Castellanos purchased a $1.6 million Florida mansion and five cars, including a Lamborghini, a Ferrari and a Porsche. The head of the housing authority was also recently reported to be using a Section 8 voucher to pay his rent.

Philadelphia

Vacancies have spiked on Walnut Street, a luxury shopping strip in Philadelphia’s City Center, the Philadelphia Inquirer reported. A dozen stores have closed on one four-and-a-half-block stretch of the street. All of those retail spaces were leased two years ago, brokers said. Rather than decrease rents, landlords on the street are choosing to leave storefronts vacant until the economy improves. The first Walnut Street lease of 2009 was signed in August for about $120 per square foot, down from $145 or more before the recession began.

Phoenix

Rents in Phoenix are likely to drop steeply in the next several months as investors purchase troubled apartment complexes, local real estate analysts told the Arizona Republic. Average rents have already dropped at least 15 percent over the past year, and analysts said they could fall another 15 percent in the next year. Rent decreases don’t pose as much of a problem for cash investors, since they have no mortgage payments to meet, said local analyst and investor Jim Kasten. To compete with the rents set by cash investors, landlords with mortgages will also have to lower their rent prices.

San Francisco

City officials and private landowners are exploring creative uses for sites that have sat empty through the downturn. Possibilities include creating art installations or farms, the San Francisco Chronicle reported. Rebar Group, a local design collective, will create artwork for a fence around 45 Lansing Street, a vacant lot for which a 40-story residential tower was planned during the boom. Matt Jacobs of Turnberry Lansing, the owner of the property, said leaving the site empty would invite blight. At another vacant site, a series of city-owned lots along Octavia Boulevard, the city is considering installing portable structures that could house retail or restaurants.

Seattle

Despite the recession, the ritzy Bravern at Bellevue shopping center opened in early September. The 305,000-square-foot shopping center will include Nieman Marcus, Jimmy Choo, Louis Vuitton, Brooks Brothers and Anthropologie stores, among others. The Bellevue is part of a larger mixed-use development that includes Microsoft offices and condo buildings, the Seattle Times reported. So far, 24, or about 85 percent, of the mall’s 35 retail spaces have been leased. Ten of those tenants signed their leases this year. A quarter of the 455 units in the adjacent condo project have been presold.

Washington, D.C.

The federal government has awarded Bethesda-based Clark Construction Group a $435 million contract to build a new Coast Guard headquarters, the Washington Post reported. The Coast Guard headquarters is the first part of a $3.4 billion initiative to redevelop the campus of St. Elizabeths Hospital into headquarters for the Department of Homeland Security. The Coast Guard is slated to move to the new facility in late 2013 or early 2014, and the whole campus redevelopment project, which is expected to create 26,000 construction jobs, is scheduled for completion in 2016.

Compiled by Sara Polsky