Developer eyes new site for Moore County outlet shopping center

By Todd Leskanic Staff writer
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SOUTHERN PINES – A California developer has picked a different site, near U.S. 1 and Midland Road, for a proposed retail outlet center with hotels and a golf course.

Bob Sonnenblick of Sonnenblick Development said he is no longer interested in a 114-acre property on Morganton Road that he had previously discussed.

His new focus for a 335,000-square-foot outlet center, three high-end hotels and a golf course is 550 acres near the Pine Needles Lodge & Golf Club. The same site was previously proposed for the controversial 800-home Pine Needles Village development, which the Southern Pines Town Council voted down in 2008.

“The U.S. 1 site has a huge amount of highway frontage and visibility and much better access than the other properties we looked at,” Sonnenblick said. “So we’re really thrilled to have finally landed in the right spot within the Pinehurst-Southern Pines marketplace.”

Sonnenblick said potential tenants also were uncomfortable with traffic issues at the Morganton Road site and feared that high infrastructure costs would drive up rents at the outlet center.

An outlet center would be the first of its kind in the Cape Fear region. The closest centers for outlet shoppers are in Smithfield, Charlotte, Burlington, the Triangle and Myrtle Beach, S.C.

No property has changed hands. The 550 acres are owned by the Bell family, who own Pine Needles and the Mid Pines Inn & Golf Club, which is across Midland Road.

Kelly Miller, president of the resorts, said the family has acquired a bulk of the property since the late 1980s.

“We knew we were going to develop this acreage somehow or other,” Miller said. “We had attempted to to do this with Pine Needles Village several years ago, so now we think it makes sense to master plan the entire tract and move forward.”

Sonnenblick said the outlet center would be built first. He said he plans to bring in four-star hotel brands for the 300-room hotels, and he described the golf course as “championship high-end.” Roughly 100 acres would be kept vacant for wetlands and include a horse trail, he said.

The goal is to have the outlet center open in time for the 2014 U.S. Open Championship and U.S. Women’s Open Championship.

Sonnenblick was in Moore County for three days last week and met with officials from Southern Pines and the county to discuss the proposal.

“We got very positive feedback,” he said. “The reason for that is we’re going to create in excess of 1,000 jobs and millions of dollars of sales and bed tax from a property that is now vacant.”

Staff writer Todd Leskanic can be reached at or 486-3511.

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Feeding frenzy coming as banks dump distressed hotel loans

Europe’s banks are going to be forced into selling more distressed property loans in the coming year as borrowers default, a major Bloomberg real estate summit in New York was told this week.

“There’s going to be a feeding frenzy soon” for European loans, said Robert Blumenthal, a managing director at Deutsche Bank Securities Inc. “Someone’s going to have to take those loans out at a significant discount” and inject “huge amounts of equity” to recapitalise the assets.

European lenders have 151.4 billion euros ($204.8 billion) of commercial real estate loans in default, compared with $121 billion at U.S. banks, according to New York- based data provider Trepp LLC, and the hotel and resort sector is a major risk.

The first quarter of 2012 is going to be “grim” the conference heard, and because the CMBS market isn’t coming back fast enough to help borrowers refinance debt coming due, there will be a “huge increase” in U.S. hotel foreclosures next year, said Robert Sonnenblick, a hotel developer.

About $21.7 billion in CMBS (Commercial Backed Mortgage Securities) loans on 232 hotels are coming due in the next 12 months and need to be refinanced, according to Realpoint, a securities ratings firm now owned by Morningstar Inc. At best, a third of that will be refinanced, with many properties being taken over by lenders, Sonnenblick said.

Private-equity firms and real estate companies over the past six months have been staffing up in London in anticipation of bidding for distressed debt in Europe, said Glenn Rufrano, president and CEO of Cushman & Wakefield.

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Huge increase in hotel foreclosures expected in 2012

Developer are increasingly talking about how the U.S. hotel world will see a “huge increase'” in foreclosures in 2012 as debts come due and financing remains hard to come by, Bloomberg reports.

A foreclosed hotel is one in which the owner is unable to make mortgage payments.

The lack of money means greater odds that guests will notice cost cutting or signs of a lack of investment, although hotel managers typically try to do the best they can to make sure guests won’t notice their property’s financial troubles.

“You’re going to see a huge increase of hotel foreclosures,” Robert Sonnenblick, chairman of Sonnenblick Development, said during the Bloomberg Commercial Real Estate Summit in New York.

According to another developer, boutique hotel pioneer Ian Schrager, the expected flood of hotel foreclosures is also ruining some plans to build new hotels. Here’s what he told Bloomberg:

“It’s very difficult to build when everybody’s anticipating there’s going to be a flood of existing assets at opportunity costs to buy,” said Schrager, who estimates he can build new hotels in New York City for as little as $400,000 per room.

High-end hotels in major U.S. cities such as New York, Boston and San Francisco have recovered more than other markets so far during the recovery, the piece notes.

In the past couple of years, we’ve seen a range of foreclosures especially at high-end and luxury properties including Starwood’s W Atlanta-Downtown and Capella Telluride hotel in Colorado’s ski country.

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Debt maturities loom over hotels in 2012

05 January 2012
By Shawn A. Turner
Finance Editor

REPORT FROM THE U.S.—There’s a big bill coming due for the hotel sector in 2012. Billions of dollars of debt (comprised of commercial, mortgage-backed securities, credit facilities, bank and finance company loans and others) matures this year, much of it written during frothier days when underwriting terms were much less stringent than today. In CMBS, for one, there is US$9.1 billion of hotel CMBS debt maturing in 2012; much of it originated in 2007, according to Trepp LLC, a company that tracks the CMBS market. It’s not clear how much balance sheet debt will mature in 2012, though Mathew Comfort, executive VP of global real estate services firm Jones Lang LaSalle, puts that number at roughly twice the size of the CMBS market. Modifying loans

Bob Sonnenblick, principal of real-estate development firm Sonnenblick Development LLC, said all the debt coming due in 2012, particularly the CMBS debt, could prove a distraction to the industry as executives spend more time figuring out ways to refinance and less time focused on their own operations. “It takes your eyes off the ball,” he said. Sonnenblick said “there is no way” the lenders in the market will be able to refinance all the CMBS coming due. “At best you will see a third (of maturing CMBS) refinanced,” he said. Still, with the debt shadow looming over the industry, hotel companies are scrambling to refinance and restructure. For example, Ashford Hospitality

Trust in December restructured its US $203.4-million securitized mortgage loan that was to mature in December.

Ashford also is working to refinance future maturities, too. The Dallas based real-estate investment trust has US $167.2 million of debt coming due this year; the REIT is in the early stages of restructuring or refinancing the debt.

“We’ve tried to keep a balanced maturity schedule,” Ashford president Doug Kessler said. Joe Epstein, president and founder of First American Realty Associates, a Fairfield, New Jersey-based mortgage lending source for the hotel industry, said debt restructuring in 2012 will be done on a “deal-by-deal, case-by-case basis.”

“The type of lender and the reasonableness of the borrower’s request normally determines the outcome,” he said via email. CMBS outlook The CMBS market saw plenty of fits and starts during 2011, said Jon Winick, president of Chicago-based Clark Street Capital Management LLC, a full-service bank advisory, disposition and asset management firm.

“I think the real-estate market has been very much distracted by CMBS,” he said. “CMBS has been very erratic. It’s in, it’s out. It’s back, it’s not back.”

The stop-and-go nature of CMBS, however, might come to an end in 2012, according to Huxley Somerville, group managing director of Fitch Ratings’ U.S. CMBS group.

During a webinar last month, Somerville said it appears the CMBS market is stabilizing; Fitch noted a slight month-over-month increase in hotel CMBS late pays for November. The delinquency rate for the hotel sector edged up to 12.66% in November from 12.54% during August.

“It, along with multifamily (sector CMBS), is expected to perform the best” in 2012, Somerville said of hotel CMBS.

The biggest threat to AAA-rated CMBS in 2012, Somerville said, would be a loss of liquidity in the market lasting six to nine months. Such an event inevitably would lead to an increased rate of defaults and a decline in property values. Financing availability

Compounding the issue for hotel companies is the general lack of financing availability in the industry for the better part of the last 18 months. Kessler said Ashford’s mortgage loan restructuring was made all the more difficult by the inactive CMBS market that ruled the latter part of 2011. “It’s less available than it was six months ago,” Kessler said of debt. JLL’s Comfort said debt available though underwriting terms have tightened. Helping the U.S. market are foreign lenders who have jumped into the debt market.

Globally, the European market still is a year or two behind where U.S. lending is, Comfort said.

“Europe is obviously in a state of emergency and is trying to figure out the best way to salvage their currencies and economies,” he said. Winick said there should be some loosening of the credit markets in 2012, though.

“Hotel financing is going to get better,” Winick said. “It can only get better.”


Bob Sonnenblick

BobMr. Robert Sonnenblick, Principal of Sonnenblick, LLC, is a graduate of the Wharton School of Finance of the University of Pennsylvania with more than 30 years of experience in various aspects of real estate and real estate finance. From 1981 to 1991 Mr. Sonnenblick was the driving force and power behind Sonnenblick-Goldman Corporation of California. Mr. Sonnenblick completed over $1.5 Billion of commercial real estate transactions on the West Coast and as a result is regarded as one of the West Coast’s leaders in the field of commercial real estate. Among the more notable projects for which Mr. Sonnenblick personally structured the financing for are The Beaudry Center, Los Angeles, California ($197 million), the Ritz Carlton Hotel, Pasadena, California ($97 million), One Waterfront Plaza, Honolulu, Hawaii ($100 million), and the Los Angeles World Trade Center, Los Angeles, California ($55 million).

In 1991 Mr. Sonnenblick was appointed Director of Development for the New Jersey and L.A. MetroMalls, with the responsibility for oversight and direction of the design, financing and leasing programs for two proposed $250 million enclosed regional malls totaling 1.2 million Sq. Ft. each. Mr. Sonnenblick personally oversaw more than 1 million Sq. Ft. of leases in connection with this position as well as arranging the necessary debt and equity financing. The New Jersey project opened to one of the strongest starts in the history of the United States mall industry. In addition, Mr. Sonnenblick was an original development partner of the Loews Santa Monica Beach Hotel. This 360-room, $90 million hotel was recently sold for $125 million.

Prior to forming Sonnenblick Development, LLC, Mr. Sonnenblick was the senior partner in a Los Angeles-based real estate development firm (Sonnenblick Del Rio Development) which specialized in public-private partnerships, specifically the development of four major government-leased office buildings throughout the Los Angeles basin. During this tenure, Mr. Sonnenblick successfully developed nearly 1 million square feet of government leased buildings, occupied by such tenants as U.S. Department of Homeland Security, Federal Bureau of Investigation (FBI), Los Angeles County Sheriff’s Department, Los Angeles County Department of Public Social Services and Los Angeles County Department of Children and Family Services.

Mr. Sonnenblick is a frequent speaker at various real estate-related functions, such as those hosted by Deloitte Touche, ICSC, Value Retail News, Crittenden, USC, UCLA Real Estate Program, IMN Real Estate Conferences and the Institute for International Research, The Opal Group, iGlobal Forum Group, Globe Street/Realshare Conferences and Bloomberg Conferences.

Mr. Sonnenblick is a member of the Advisory Board of the Golf Development Institute, a member of the Board of Real Estate Council of the Century City Chamber of Commerce and is a published author on subjects ranging from architecture to general real estate market conditions. In addition to Mr. Sonnenblick’s expertise in development, finance, joint ventures and equity structuring, Mr. Sonnenblick has also been certified as an expert in the area of real estate bankruptcy/foreclosure. Mr. Sonnenblick is a qualified expert witness in the area of Commercial Real Estate Finance and Interest Rates for the United States Federal Court System in numerous jurisdictions.

1976 to 1980     Wharton Business School at the University of Pennsylvania, B.S. in Economics and Finance
1980 to 1982   Real estate financier, Sonnenblick-Goldman Corp., New York NY
1983 to 1992   Real estate financier,  Sonnenblick-Goldman Corp., Los Angeles CA
1993 to 1998  Co-developer and Director of Leasing and Finance, NJ Metromall (now “Jersey Gardens”) a 1.2 million square foot factory outlet mall located on the NJ Turnpike in Elizabeth NJ
1986 to 1998  Development Partner and Director of Finance, The Loews Santa Monica Beach Hotel, a 360 room luxury oceanfront 4-star hotel
1987 to 1997  Equity Partner, The Boca Raton Resort Hotel, a luxury 4- star, 1000 room resort hotel
1999 to 2001  Developed DPSS El Monte #1 (a $39 million class-A office building 100% leased to the County of Los Angeles)
2001 to 2003 Developed DPSS West LA (a $36 million class-A office building 100% leased to the County of Los Angeles)
2003 to 2005  Developed DPSS – El Monte #2 (a $46 million Class-A office building 100% leased to the County of Los Angeles)
2006 to 2007  Developed Flair Plaza Shopping Center in Los Angeles on the I-10 freeway at the Rosemead Blvd. off-ramp
2007 to present   Redeveloped Norwalk Government Center, a 500,000 sq. ft. Class-A office building on Imperial Highway, anchor tenants are State of California (Board of Equalization, Small Business Administration), the County of Los Angeles (Dept. of Public Social Services, Dept. of Children & Family Services, Mental Health Dept., Sheriffs’ Dept.), and the Federal Government (the FBI, Social Security Administration, and Dept. of Homeland Security – Los Angeles County Headquarters)
2011 to present Established Sonnenblick Development LLC, a multi-faceted real estate development company specializing in 4-star oceanfront resort hotel developments across the United States, with a particular focus on high-end golf resorts.  The company also has a secondary focus on development of airport on-property limited service hotels. Bob Sonnenblick is a featured speaker at many global development, hospitality and funding conferences. [Click for upcoming events]