Company News: Granite Acquired (September 2007)

The new name is: Savills Granite LLC

LONDON-BASED REAL ESTATE FIRM ACQUIRES GRANITE PARTNERS FOR $54 MILLION

By John Mugford

Ever since its founding in 1996, New York-based Granite Partners LLC has been well-connected to the capital markets and has executed more than $21 billion worth of commercial real estate transactions – many involving large institutional investors.

Granite continued to use its reach and connections when it began a healthcare concentration within the firm in 2003. Since then, the healthcare effort, which has been led by Jeffrey H. Cooper and Philip B. Mahler, has advised on healthcare transactions totaling $1.4 billion and including 8.2 million square feet. As institutional money became interested in MOBs in recent years, Granite was one of the firms ushering them into the medical real estate marketplace.

Now, the company’s reach and resources are being extended even more, as Granite Partners was acquired by London-based Savills Plc on Aug. 1. Savills acquired a 75 percent stake in Granite for an initial investment of $54 million – a figure that could increase to $84.6 million should Granite meet certain financial performance incentives during the next five years.

Savills is an international property services firm with 180 offices and 17,000 employees throughout the world, including the U.K., Europe, the Americas, Asia Pacific, Africa and the Middle East. It is publicly traded on the London Stock Exchange (LON: SVS) and has a current market capitalization of $1.36 billion. Revenues in 2006 were $1.05 billion.

Granite’s new name is Savills Granite LLC and not much will change at the firm’s headquarters in New York, according to Mr. Cooper. Except, that is, that some executives from Savills will soon join the office, and the company should grow quite a bit. As noted, the merger could extend Granite’s reach and bring the firm’s healthcare executives into contact with new buyers and sellers throughout the world.

“We already have some healthcare clients exploring options overseas,” says Mr. Cooper. “There’s a client involved in MOB development in the United States that’s looking seriously at opportunities in Europe. They have a trip planned to explore those possibilities. Savills does quite a bit of work in healthcare. MOBs are a newly developing business in the United Kingdom.

“There’s no doubt we’re excited about the prospects because we’ll have so many more resources at our disposal and the access to Savills will provide our clients with even greater access to global capital markets.”

Savills’ U.S. platform

The acquisition of Granite Partners was prompted by the dissolution Savills’ partnership with Dallas-based Trammell Crow Co. in November; Trammell Crow had a 20 percent stock stake in Savills. But when Los Angeles-based CB Richard Ellis (NYSE: CBG) acquired Trammell Crow, the deal left Savills without a platform in the United States.

And while officials with Savills consider its newly acquired market share in the United States to be “small” – when compared to its share with Trammell Crow – as reported by Reuters in early August – the firm plans to double the size of Granite Savills within a year. In fact, Savills’ Chief Executive Aubrey Adams was quoted by Reuters as saying that the company plans a “significant investment” in Granite Savills.

In a press release, Mr. Adams addressed the current subprime and commercial credit crunch in the United States, saying: “I think we’re all concerned about subprime, but the underlying factors in the commercial real estate business haven’t really changed. There is still a lot of money out there. The U.S is still a very active market.”

“This is a long-term strategy play and if you believe that these markets will turn around by September 2008 then this business will be well-placed to take advantage.”

L&B Realty medical

fund reaches goal,

second fund started

DALLAS – L&B Realty Advisors, a Dallas-based institutional investment advisory firm, recently announced that it has successfully concluded fundraising for its new fund: L&B Medical Properties Partners LP.

Clients in the fund include government entities and private pension plans, as well as high-net worth individuals. The fund invests in the development and acquisition of a variety of medical properties, such as surgical hospitals, community hospitals, MOBs and ambulatory surgical centers. Expected gross assets are between $250 million to $300 million. To date, 50 percent of the fund’s equity has been invested in Alabama, California and Texas, according to a press release from the firm.

“Healthcare is the largest industry in the U.S. with continued growth expected as the Baby Boomers enter their peak spending years related to healthcare costs,” said L&B’s Christine Mullis, VP, portfolio management. “We are investing in real estate best suited for the delivery of healthcare to the consumer as we expect this product to provide superior risk-adjusted returns.”

So far, the response has been strong and a second fund, L&B Medical Properties Partners II LP, was launched earlier this summer. Fund II has already received its first commitment from the State of Michigan’s Department of Treasury.

L&B officials say their firm has been successful in partnering with healthcare developers by providing the equity needed to develop and redevelop medical real estate, typically projects with anchor tenants that are either owned by a physician group or that has an affiliation with a healthcare system.

The company, according to its Web site, manages a portfolio of more than 19 million square feet of office, retail, medical, industrial and multifamily properties valued at $3.4 billion.

For the Record

Sacramento, Calif.-based Sutter Health, which faces huge seismic replacement or retrofit projects at many of its Northern California hospitals, has selected Minneapolis-based HGA Architects and Engineers to implement a prototype “hospital of the future.” HGA also has offices in San Francisco; Los Angeles; Sacramento, Calif.; Rochester, Minn.; and Milwaukee. HGA officials, in a press release, noted that the template “will be adapted as Sutter Health develops multiple replacement hospitals over the next several years.” The slimmed-down design is intended to make acute-care facilities more efficient and less costly to build. The design could slash the $2.5 million-per-bed cost in California by as much as 40 percent, according to Sutter officials. The single-story prototype design would be used to build 60-bed to 120-bed community hospitals. The projects would require sites of about 20 acres, which includes space for a parking lot, not a parking structure… Memphis, Tenn.-based Morgan Keegan & Co. Inc. recently announced that it has acquired a $16.65 million community facilities loan through the U.S. Department of Agriculture to help fund a new 25-bed hospital in Booneville, Ark. Community facilities guarantee loans were created to provide an incentive for lenders to finance essential facilities in rural communities. Jason Thomas, a first VP with the company’s office in Little Rock, Ark., stated in a press release: “With a more traditional type financing, the city faced less desirable options, such as using an existing sales tax for the construction debt or going to the voters to request a new tax.” Booneville Community Hospital is slated for completion in 2008… Hoar Construction LLC of Birmingham, Ala., was recently chosen to do a renovation at 346-bed Gadsden Regional Medical Center in Gasden, Ala. The plan calls for adding more than 60,000 square feet of clinical space to the hospital and renovating the surgical services department. The project would entail building a new patient tower as well as a new entrance, lobby, waiting area, catheterization suites, surgical intensive care unit and space for future expansion. The project is slated for completion in spring of 2009… Tellepsen Builders LP has been chosen to build Texas Children’s Hospital’s new campus in West Houston. Tellepsen, by the way, built the first Texas Children’s Hospital in Houston more than 50 years ago. The new hospital campus is slated for a 55-acre parcel at Interstate 10 and Barker Cypress. The campus will include a 336,000 square foot, 96-bed hospital, a 100,000 square foot ambulatory care center, and an 80,000 square foot MOB. Houston-based PageSoutherlandPage has been selected to provide program and design services for the initial phase of construction, which is set to begin in early 2008. The ambulatory facility and the MOB are slated for completion in 2009 while hospital is scheduled for completion in 2010. Tellepsen is also building the Texas Children’s Neurological Research Institute in the Texas Medical Center, which will have more than 425,000 square feet of research laboratory and vivarium space when completed in 2010. q