Property Values: Real Estate for $1 Million

A cabin compound in Wisconsin; a co-op in Wash. D.C.; and a house on the Maine coast.



Office-Building Recaps Surged in 2011

Some of the nation’s biggest real-estate investors took stakes in major office properties in 2011, a year that registered a record amount of recapitalizations for that sector, according to Real Capital Analytics.

“There were a lot of white knights coming to help recapitalize” buildings that had mortgage loans coming due last year, said Dan Fasulo, managing director at real-estate data firm Real Capital. Recapitalizations in 2011 were at the highest level since RCA started tracking them in 2001.

Such deals usually involve an investor buying a big stake in a property by injecting additional equity or taking over a loan and restructuring borrowing terms. The sheer volume of $13.3 billion in office recapitalizations last year underscored the massive amounts of debt office landlords had accumulated on their buildings during the boom times. This recapitalization volume also surpassed the last peak of $11 billion in 2007.

The number of recapitalizations is “the function of the market fixing itself,” Mr. Fasulo said. To be sure, each property owner’s decision to recapitalize could be driven by a number of factors outside of maturing loans.

The largest recapitalization in 2011 was Paramount Group and Beacon Capital’s purchase of a 49% stake in a New York building, 1633 Broadway, from a Morgan Stanley joint venture. The deal valued the building at $1.62 billion and the interest at $793.8 million. The next largest recapitalization was by Vornado Realty Trust’s acquisition of a 49.5% stake, valued at $646 million, for 666 Fifth Ave in New York. (Eight of the 10 largest deals were in New York; the other two were in Houston.) Paramount and Vornado officials were not available for comment Wednesday.

Real-estate companies, especially publicly traded real-estate investment trusts, have been raising massive amounts of capital over the past year via equity raises and debt issuance in order to pounce on these kinds of acquisitions, which are expected to continue to rise this year.

In general, private investors have been less successful at raising debt and equity over the past six months amid concerns that Europe’s debt crisis could filter down to hurt U.S. credit markets by raising the cost of capital.

Foreigners Snap Up Swiss Houses

With average house prices nearing 800,000 francs, the Swiss residential real-estate market continues to boom.

Foreigners Snap Up Swiss Property

With average house prices nearing 800,000 francs, the Swiss residential real-estate market continues to boom. Market participants say there is no end in sight as cash-rich Europeans and Russians keen to protect their assets fuel demand.

Storage REITs Enjoy a Boom

One of real estate’s least-exciting businesses—warehouses that allow people to store their household goods—have become a hit with investors.