Q1 2013 | INVESTMENT SALES
COLLIERS INTERNATIONAL | WISCONSIN
Investment Sales
Market Report
2012 Year End Rush Leads to Slow First
Quarter, Stage Set for Second Quarter Boom
As of February of 2013, preliminary unemployment in the Milwaukee-Waukesha-West Allis Metropolitan Statistical Area (Milwaukee MSA) stood at 8.4% compared with state unemployment of
7.1%. Both State and Milwaukee MSA unemployment have crept off their 2012 year-end lows and
show mixed signs moving forward. Caterpillar has announced that it will lay off 300 employees at
its South Milwaukee plant by June while Quad Graphics plans to hire 125 workers at a newly
leased 91,000 SF facility in New Berlin. Vacancy rates continue to trend lower across the board
with industrial leading the way. Industrial vacancy decreased 22 basis points quarter over quarter
to 6.63% while office decreased 32 basis points to 20.65%.
ECONOMIC INDICATORS
QtQ
YoY
OFFICE USING JOBS
MILWAUKEE EMPLOYMENT
WISCONSIN EMPLOYMENT
WISCONSIN UNEMPLOYMENT
MIDWEST UNEMPLOYMENT
Absorption was mixed across asset categories in the first quarter of 2013: Retail (-49k), Flex
(+20k), Industrial (+852k), Office (+86k). With the exception of slightly positive trends in Class ’A’
office and industrial and end-cap retail, rents remain relatively flat across asset categories as
landlords continue to opt for fewer concessions and tenant improvement allowances as opposed
to higher rents. Overall, the marketplace remains stacked in the favor of tenants and buyers but
that view is eroding quarter over quarter. As previously reported in the Colliers fourth quarter
2012 investment market report, key product types experiencing strong demand continue to include
stable flex and warehouse properties with 18’-24’ ceiling heights, apartments, grocery-anchored
retail, and net leased credit retail. Additionally, the 1031 exchange market has seen recent signs of
life.
US UNEMPLOYMENT
Source: Bureau of Labor Statistics
National Avg Cap Rates by Sector
10.5%
10.0%
9.5%
9.0%
8.5%
8.0%
In February 2013, Trepp reported the lowest CMBS delinquency rate in a year at 9.42%. This
represents a 92 basis point drop from the 2012 peak of 10.34% in July. One possible explanation
as to this decrease may be the increased refinancing activity in 2013 now that federal tax uncertainty has been resolved. Borrowing rates and CMBS spreads continue to remain at or near record lows, providing attractive opportunities for refinancing. The retail sector continues to outperform the five major sectors (industrial, lodging, multi-family, office, and retail), posting a CMBS
delinquency rate of 7.91% in March. Inversely, the multi-family sector sits on the highest delinquency rate of 12.73%. However, one year ago the multi-family sector reported a delinquency
rate of 15.39%, representing an impressive delinquency rate drop of 266 basis points over the last
year.
7.5%
7.0%
INDUSTRIAL OVERVIEW
6.5%
6.0%
5.5%
5.0%
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Retail
Industrial
Suburban Office
Source: Real Capital Analytics
www.colliers.com/wisconsin
Apartment
CBD Office
The industrial market in Wisconsin continues to outperform the national market and several of its
Midwestern peer markets. The southeastern Wisconsin market (Milwaukee) has witnessed eleven
consecutive quarters of positive absorption. The vacancy rate for Milwaukee is currently 6.6%
(please refer to Colliers first quarter 2013 industrial market report).
Colliers International has a pending sale of five investment grade buildings, totaling 420,000 SF,
located in Southeast Wisconsin that is set to close in the summer of 2013. In the 1st quarter, Colliers packaged and sold the two building, 72,510 SF, Gateway Business Center in Brookfield
RESEARCH & FORECAST REPORT | Q1 2013 | INVESTMENT SALES | WISCONSIN
The merchant development business showed signs of life in 2012 and early 2013.
Two smaller strip centers were built and sold in infill locations on Milwaukee’s near
south side submarket. In January, a 5,828 SF fully-leased Target out lot strip center
located at 1403 S. Miller Park Way was sold for $2,170,000 or $372 PSF. This sale
equated to an 8.5% cap rate on existing tenant income. In a similar development and
sale, a joint venture between Frontline Real Estate and Terraco (both of Chicago, IL)
sold a net-leased 8,034 SF strip located at 3640 S. 27th Street to a private investor
for $2,060,000 or $256 PSF. This equated to approximately an 8.25% cap rate on a
building leased to Mattress Firm, Great Clips, and T-Mobile. Colliers represented the
Seller in the sale of the S. 27th Street property. Generally speaking, cap rates for
strong retail product in high demand areas have compressed to the 7.5% to 8.5%
range.
Inland Real Estate Corporation (Oak Brook, IL) and Ramco-Gershenson Properties LP
(Farmington Hills, MI) were two REITs that led market acquisition activity in 2012.
Their acquisitions included the $21M Mt. Pleasant Shopping Center in Racine (Inland),
the Kohls-anchored $15M
Shops at Nagawaukee in
Delafield (Ramco), and the
$10.4M
OPUS-developed
Shoppes at Fox River in
Waukesha (Ramco).
Cap
rates for the above transactions were generally in the
mid 7% range.
3640 S 27th St., newly constructed and net-leased,
sold on February 26th at an 8.25% cap rate. Colliers
International represented the seller, Frontline Real
Estate Partners.
P.2 | COLLIERS INTERNATIONAL
continued on page 4…
$2 00
$40
$100
$20
$0
P rice P SF
To tal Sales Vo lume (mil)
$60
**
$0
Q1
'07
Q1
'08
Q1
'09
Q1
'10
Q1
'11
Q1
'12
Q1
'13
Average Price PSF
Office
$6 00
$2 50
$2 00
**
$4 00
$150
$300
$100
$2 00
P rice P SF
$500
$50
$100
$0
$Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
Q1
'11
Q1
'12
Total Sales Volume - 12 mo. Rolling
Q1
'13
Average Price PSF
Retail
$500
$2 50
$4 00
$2 00
$300
$150
$2 00
$100
**
$100
P rice P SF
RETAIL OVERVIEW
$300
$50
$0
$Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
Q1
'11
Q1
'12
Total Sales Volume - 12 mo. Rolling
Average Price PSF
Multi-Family
$2 50
$150
$2 00
$100
**
$150
$100
$50
**
$50
$0
P rice P er U n it (thou)
The office sale market had very few data points in the first quarter of 2013. There
was a year end rush in 2012 for investors to acquire office assets under a familiar
federal tax policy. That caused a hangover for transactions in the early part of 2013.
However, one significant Madison east side (Interstate 94) office property did trade.
Wells Real Estate Funds, Inc (Norcross, GA) sold the 101,726 SF, 81% occupied building at 5117 Terrace Drive to a joint venture between Alex Brown Realty (Baltimore,
MD) and Fulcrum Asset Advisors (Chicago, IL). The building traded at a 10% cap rate
and is anchored by U.S. Cellular (NYSE: USM). They occupy 75% of the building
under a shorter term lease (4-5 years). The building, built in 1996, has had a longstanding full floor vacancy. Fulcrum has been very active over the last 24 months,
and they have purchased assets in both the Milwaukee and Madison markets.
$80
Total Sales Volume - 12 mo. Rolling
To tal Sales Vo lume (mil)
OFFICE OVERVIEW
$4 00
Q1
'06
To tal Sales Vo lume (mil)
A few key institutions
(Clarion, Liberty, Northwestern Mutual Life, etc.) have recently divested their investment holdings in Wisconsin,
therefore creating an attractive opportunity for a new wave of investors. Yields in
Wisconsin are 100-300 BPS higher than several peer markets on the coasts. Greenfield/Somerset, Fulcrum Asset Advisors, Sara Investment, and Hendricks Commercial
Properties are active groups that are strategically acquiring properties.
Industrial
To tal Sales Vo lume (mil)
The Gateway Business Center sold for $6.1 million on
April 24th. At the time of sale the properties were
87% leased. Colliers International represented the
seller.
(Milwaukee west submarket)
for just over $84 PSF at a
9.18% cap rate. This highimage flex property had five
technology industry tenants,
and it was anchored under a
long term lease with network
and data solutions provider
TW Telecom, Inc (NASDAQ:
TWTC).
$Q1
'06
Q1
'07
Q1
'08
Q1
'09
Q1
'10
Total Sales Volume - 12 mo. Rolling
**Insufficient data
Source: Real Capital Analytics
Q1
'11
Q1
'12
Q1
'13
Average Price Per Unit
RESEARCH AND FORECAST REPORT | Q1 2013 | INVESTMENT SALES | WISCONSIN
RECENT INVESTMENT SALE ACTIVITY
INDUSTRIAL SALES
BUILDING
CITY
BUYER
SELLER
Gateway Business Center
Brookfield
Hendricks Commercial
Properties
SALE DATE
PRICE
PRICE PSF
ACTUAL CAP
Westminster Funds
4/24/2013
$6,100,000
$84.13
9.18%
5612 95th St.
Kenosha
Venture One
Cenveo Inc.
12/20/2012
$5,000,000
$31.19
Not Disclosed
W226 N758 Eastmound Dr.^
Waukesha
Badger Wire Inc.
Sabal Financial Group LP
3/20/2013
$2,500,000
$25.68
10.00%
12/14/2012
$2,061,903
$46.50
8.55%
12/10/2012
$2,000,000
$40.82
11.75%
SALE DATE
PRICE
PRICE PSF
ACTUAL CAP
1711 Paramount Court
Waukesha
Ogden & Company, Inc.
First Industrial Realty Trust,
Inc.
S82W19125 and S82W19151
Apollo Drive
Muskego
The Carey Group
LuAnn Lanke
OFFICE SALES
BUILDING
CITY
BUYER
SELLER
Riverwood Corporate Center
II
Waukesha
Capital Square Realty
Advisors
Meridian Riverwood II LLC
12/7/2012
$20,800,000
$185.71
8.00%
5117 W Terrace Drive
Madison
Alex Brown Realty, Inc.
Wells Real Estate Funds
3/13/2013
$8,175,000
$80.36
10.00%
Squires I and Squires II
Brookfield
Hakaduli Properties LLC
The Palmisano Company
12/21/2012
$4,300,000
$51.27
10.75%
Stone Ridge III
Pewaukee
David Winograd
Klements Sausage Co. Inc.
1/7/2013
$3,000,000
$40.00
Not Disclosed
7020 N Port Washington Rd.
Glendale
David Winograd
Scott Revolinski
3/28/2013
$3,000,000
$100.00
Not Disclosed
Sky Plaza Office Center
Waukesha
Wisconsin Hospitality Group
Foundations Bank
1/15/2013
$2,100,000
$55.26
Not Disclosed
CITY
BUYER
SELLER
SALE DATE
PRICE
PRICE PSF
ACTUAL CAP
12/21/2012
$6,600,000
$112.15
Not Disclosed
2/22/2013
$4,180,000
$184.38
Not Disclosed
1/23/2013
$2,170,000
$372.34
8.53%
RETAIL SALES
BUILDING
Roundy’s Pick n’ Save
Saukville
Executive Capital Group
Barry Geller Mortgage and
Investments
1801 Milwaukee Avenue
Burlington
Campbell Properties LP
Malcolm David & Associates
1403 S Miller Parkway
Milwaukee
Gregory A. Maciel Living
Trust
Wilson Creek Crossing
Milwaukee
Private Investor
Wisconsin Auto Title Loans,
Inc.
Frontline Real Estate Partners
2/21/2013
$2,060,000
$256.41
8.25%
5077 S 27th St
Greenfield
Rockin Ribs LLC
Cricdom-iii Madison LLC
2/12/2013
$1,960,000
$494.95
Not Disclosed
Milwaukee Ale House
Grafton
Ryan Mallery
Robert Tenges
1/11/2013
$1,625,000
$180.56
8.86%
CITY
BUYER
SELLER
SALE DATE
PRICE
4454 N Wilson Drive
Shorewood
David and Kathryn
Karademas
Daniel W Bruckner
1/4/2013
$16,125,000
$69,410
Not Disclosed
Dale Creek Apartments
Greendale
Ripp Properties
Continental Properties
Company, Inc.
12/14/2012
$8,500,000
$92,391
Not Disclosed
Parkside Commons
Milwaukee
Capitol Square Investors
Steadfast Companies
3/22/2013
$4,700,000
$47,000
Not Disclosed
Waterview Senior Housing
Sheboygan
Meyer M. Appel
Horizon Development Group
10/19/2012
$4,200,000
$62,687
7.59%
1303-1309 W Kilbourn Ave
Milwaukee
Cedar Square Management,
LLC
UNIVESCO
12/20/2012
$3,150,000
$101,613
7.50%
River Heights Apartments
West Allis
Riverview Real Estate
Thomas J Rhoda & Associates
12/12/2012
$2,240,000
$62,222
6.45%
SALE DATE
PRICE
PRICE PSF
ACTUAL CAP
11/1/2012
$75,000,000
$199.62
Not Disclosed
MULTI-FAMILY SALES
BUILDING
PRICE PER UNIT ACTUAL CAP
MEDICAL AND SPECIAL USE
BUILDING
CITY
BUYER
SELLER
Newcastle Place*
(Cont. Care/Ret. Comm.)
Thiensville
Westminster Funds
Milwaukee Protestant Home
for the Aged
Seven Oaks
Glendale
AVIV
Seven Oaks Frontage, LLP
10/31/2012
$7,600,000
$138.27
14.40%
1825 N Prospect Avenue
(Assisted Living)
Milwaukee
Dominion Properties
Community Care Organization
12/28/2012
$1,300,000
$36.62
Not Disclosed
*Includes the value of the business. ^Distressed property purchased via conventional sale
Sources: CoStar, Colliers International
COLLIERS INTERNATIONAL | P.3
RESEARCH & FORECAST REPORT | Q1 2013 | INVESTMENT SALES | WISCONSIN
continued from page 2…
MULTI-FAMILY OVERVIEW
Demand for multi-family investment property continues to gain strength quarter after quarter. Quality
listings have become scarce, thereby driving sales further upstream. The market’s insatiable thirst can
be partially supported by a handful of facts. At just 3.1%, Milwaukee boasts the second lowest multifamily vacancy rate in the Midwest according to MPF Analytics. Additionally, rents grew by 80 basis
points from the third quarter to the fourth quarter of 2012, a sizable increase for the Milwaukee market.
Summarily, record low interest rates and relaxed lending standards are growing the investor pool and
heightening the competition.
Class ‘A’ properties with 32 or more units are consistently trading at sub 7% cap rates and, according
to local underwriters, life companies are underwriting Milwaukee assets at 6% cap rates. Lower quality
properties, such as Waterview Senior Housing in Sheboygan, which traded at 7.59%, and 1303-1309 W
Kilbourn Avenue (adjacent to Marquette University), which traded at 7.5%, are trading at slightly higher
cap rates. Four to eight unit properties are consistently trading above 8% cap rates.
482 offices in
62 countries on
6 continents
United States: 147
Canada: 37
Latin America: 19
Asia Pacific: 201
EMEA: 118

2 billion in annual revenue

1.12 billion square feet under
management

Over 13,500 professionals
SPECIAL ASSETS OVERVIEW
Milwaukee continues to see a steady flow of special assets to the marketplace. Most notably, partially
entitled residential development sites have seen increased activity. Many builder/developers anticipate
a shortage of single family lots as bank financing for infra-structure in the last four years has been
scarce. Additionally, multi-family parcels that had been entitled are cycling through sufficient writedowns to become valuable as apartment land. Typically, a down-zoning from PUD or condominium is
required and pursued under due diligence once the property is under contract.
Scarcity of listings has apartment investors frustrated as assets are primarily trading off-market. Colliers recently listed a 64 unit apartment complex, “River Rise”, located in the Riverwest neighborhood.
Pricing is set at approximately $32,000 per unit at an 8.5% cap rate.
COLLIERS INTERNATIONAL
WISCONSIN
Corporate Office
1243 N. 10th Street
Suite 300
Milwaukee, WI 53205
TEL: 414 276 9500
FAX: 414 276 9501
400 North Richmond Street
Appleton, WI 54911
Investment Services | Wisconsin
Tom Shepherd, CCIM
Partner | Wisconsin
Direct +1 414 278 6815
tom.shepherd@colliers.com
Joe Eldredge
Senior Broker | Wisconsin
Direct +1 414 278 6825
joe.eldredge@colliers.com
Jennifer Bullock
Investment Analyst | Wisconsin
Direct +1 414 278 6867
jennifer.bullock@colliers.com
Tyler Jauquet
Research Analyst | Wisconsin
Direct +1 414 278 6811
tyler.jauquet@colliers.com
www.colliers.com/wisconsin
Brandon Sacia
Senior Broker | Wisconsin
Direct +1 414 276 9509
brandon.sacia@colliers.com
Copyright © 2013 Colliers International.
The information contained herein has been
obtained from sources deemed reliable. While
every reasonable effort has been made to
ensure its accuracy, we cannot guarantee it.
No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
professional advisors prior to acting on any of
the material contained in this report.
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