News
Intercontinental Raising $ and Roofs
June 6, 2011
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| Intercontinental Real Estate Corp raised $170M this year (impressive, even if it is on top of managing $2.4B in CRE assets nationwide). While its Boston base still accounts for nearly 21% of its industrial, retail, and office properties, it's planning developments in New Jersey and wants to acquire assets in the Northwest, the one region not in its portfolio. (Forget grad school; playing Risk sounds like the best prep for a CRE career.) Here's the financial team: CFO/COO Paul Nasser, research director Chris Boehm, controller David Carrella, and CEO/chairman Peter Palandjian whose father started the company 50 years ago as a New England-based engineering and construction firm. Peter tells us that US pension funds and sovereign wealth funds are stepping up investments in real estate because values are attractive. The infatuation with multifamily is behind us, he says,except for public REITs comfortable with 5% returns. Now,investors are gravitating back to core office properties, bidding up prices to levels reminiscent of ?05 and ?06. |
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| The acquisitions front line of Mike Rie, A.J. Bowan, Mike Keyes and Steve Centrella are scoping out places like Seattle, Tacoma, and Portland. Their last two deals were core properties including student housing in California and a medical office in Garden City, NY. They?d like to find more medical or lab deals, especially those in which hospitals back stop the leases. The firm's first four funds were closed end but its newest, Fund V, is an open ended US REIF that allows for quarterly entry and redemption and now has $1.1B under management. The investors include public pension plans and union retirement funds, some Mid East sovereign wealth funds, university endowments, and some eleemosynary funds, which are charitable or religious (i.e, the ability to spell it requires a leap of faith). |
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| The development team of Nick Haney, Kendall Brook, and Scott Kelly are shepherding the firm's latest projects through due diligence —both are in Jersey. One, a $240M, 700k SF build-to-suit office in southern NJ is Intercontinental?s largest deal so far. Peter says the spec element is minimal because the user is committed and the building to be renovated is in a very strong market replete with Fortune 100 companies, a pharma presence, and nearby university. The other, in northern Jersey near Hoboken with views of the NYC skyline, is 270 rental apartments with 100k SF of retail, including a supermarket anchor. Peter says he's comfortable with the risk because it's located in a strong market, which is a bedroom community for Manhattan. Blended rents are about $3/SF. |
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| We snapped part of the 17-person asset management team: Bill Bonina, Paul Charos, Joe Sweeney, and Sabrina DiStefano under a favorite piece of junk art, a giant hammer made of discarded equipment parts. They oversee the 3.1M SF of hometown assets: 660 rental apartments, 1.5M SF of offices, 186k SF of life science, and 162k SF of retail. In terms of new Boston deals, Peter says he's waiting for ?value diminution to play out.? It's still early for a new residential project, although Intercontinental controls six acres in the Seaport District, fully permitted for a $220M development with 584 apartments. Recently, though Peter?s been re-examining construction pricing. Thank you Vertex Pharmaceuticals—two weeks ago it agreed to spend nearly $2B to lease two build-to-suits nearby. |
