The Four Food Groups – May 2008

RESIDENTIAL
Urban unrest
Dawnay Day Group’s first deal in the US real estate market hasn’t been as smooth as the UK investment bank might have hoped. Earlier this year, the firm paid $225 million (€168 million) for 47 buildings in East Harlem and seven condominiums units in the East Village. The properties in upper Manhattan, historically one of the more affordable neighborhood on the island, reportedly comprise more than 1,000 residential units and 55 commercial outlets.

The UK investment bank’s entry into the US was greeted with street protests from residents concerned about being priced out of their neighborhoods. One resident in the historically Hispanic neighborhood proffered a sign reading “Bienvenidos a El Barrio.”

“They have a plan to gentrify East Harlem. And that means rent increases,” Juan Haro, head of the Movement for Justice in El Barrio, told the Associated Press. The investment bank responded through its New York-based lawyers that “the company cannot displace tenants nor increase rents above the legal regular increases if they are legitimate tenants in occupation,” according to the wire service.

As the city tries to keep Manhattan housing somewhat affordable, investors looking to acquire large residential portfolios have had mixed success in recent years. Last year, Tishman Speyer acquired Stuyvesant Town and Peter Cooper Village for $5.4 billion. The complex, originally built as middle-class housing, has around 11,000 apartments.

But earlier this year, federal authorities quashed a deal that would have seen a New York real estate group buy Starrett City, the largest federally subsidized housing complex in the US. The government said there were concerns that the buyer would not keep the housing project affordable.

INDUSTRIAL
Docking in Vietnam
Chinese conglomerate China Merchants Group is working with Vietnam-based shipping company Vinalines to upgrade the Vietnamese port of Ben Dinh-Sao Mai into a modern facility with oil and gas services, logistics, container-handling capacity and a petroleum depot. The project will require more than $637 million (€470 million) in capital. Upon completion, the new port will be able to handle 25 million to 50 million tons of cargo per year, according to local press reports. Shipping company Vinalines is also looking to upgrade the Van Phong port in Vietnam, as well as expand its activities into the finance, real estate, infrastructure and tourism sectors. Ben Dinh-Sao Mai has been tagged by the Vietnamese government as being one of 30 national infrastructure projects to be completed by 2010. China Merchants has been making a push into Vietnam, signing two other cooperative agreements in the days leading up to the announcement of the Ben Dinh-Sao Mai deal.

OFFICE
Skin transplant
One Indiana Square, the first high-rise building built in Indiana, is getting an extensive makeover after being severely damaged in a storm last year. The rehabilitation of the building in downtown Indianapolis will give the office tower a more contemporary profile, making it “appear more vertical, introducing a new geometry to the Indianapolis skyline,” according to a press release. The architectural makeover will also encase the building in an “energy-efficient curtain wall” made of glass and stainless steel, which will extend 18 inches off of the original building. In April of last year, a severe thunderstorm rolled through town, damaging the 36-story building’s facade and blowing out dozens of windows. “Our main objective was to make upgrades that would stand the test of time both architecturally and in design,” Todd Maurer, principal of building lessor Halakar Real Estate, said at a news conference last month.

RETAIL
Shopping behemoth
Last month, France’s largest real estate investment trust, Unibail Holding, acquired Dutch shopping center owner Rodamco Europe NV for €11.2 billion ($15 billion), becoming Europe’s biggest landlord by market value in the process.

The transaction, which is worth €14.6 billion with debt, will give Paris-based Unibail 73 additional malls across Europe. Upon closing, the combined company will own 95 malls with almost 36 million square feet of retail space. According to the two companies, they have a combined €6.1 billion worth of development projects on the drawing board for the next five years, which have the potential to add €530 million to its annual rental revenues. The world’s largest retail landlord is Australia’s Wakefield Group, which has a market value of A$38.3 billion ($32.1 billion; €23.6 billion), according to Bloomberg.