Brokered

Tishman Speyer and Blackrock Hand Over the Keys to Stuyvesant Town and Peter Cooper Village

2010-01-26T20:28:00.009-05:00

By now you've probably heard that after defaulting on loan payments Tishman Speyer and Blackrock are handing over the keys to Peter Cooper Village and Stuyvesant Town (If you haven't, click here). While TSP and Blackrock could instead have tried to put the project into bankruptcy, it looks like they'd prefer to try to put this whole ordeal behind them; and an ordeal it has been.

To sum up the history, Tishman Speyer (TSP) and its backers purchased Peter Cooper Village and Stuy Town from MetLife at the top of the market for the highest price ever paid for a single real estate project about 5 and a half billion dollars. As was typical of the time, they highly leveraged the purchase with not just a mortgage, but also over a billion dollars of mezzanine debt (in a future post I'll finally get around to explaining how the capital stack works and doesn't work, and why lots of landlords are going bust, and will continue to go bust!). In order for the purchase to make any sense (i.e. make a profit on it), TSP had to be able to destabilize many of the apartments. Simply by cracking down on tenants already in violation of the rent stabilization laws, and making renovations to apartments that were vacated TSP was pretty sure they could do this. Many other landlords had done it successfully before, and TSP checked on the law and it looked good for them. Once TSP destabilized these apartments, by virtue of the work they did to them and the upgrades to the complex, they expected they could charge top dollar.

So to be clear, there were two things that needed to happen to stop this project from going bust:

1) Destabilize a lot of apartments

2) Charge a lot of money for the apartments once they're destabilized

If you read this blog or have been following the news, then you will have learned, that as a result of the J-51 ruling, Tishman Speyer's attempts to destabilize the apartments have failed. This isn't due to a lack of precedent or sound planning on TSP's account. This is because the judges decided to ignore precedent, reinterpret law, and wipe out the investment of many companies and individuals. For my take on this whole thing see: "'By Virtue Of' or Stuyvesant Town, Peter Cooper Village & J-51 - What it all means . . ." I also reported on the ultimate ruling here.

Given what TSP paid for the complex, it is possible, but unlikely that they could have survived the court decision on the J-51 matter, but then the second hammer fell - the economy. For the apartments that TSP was able to destabilize legally, or which already were destabilized, they can't charge nearly what they wanted to. The market simply isn't there to support it . . . and that's the beauty of a FREE MARKET. For why the rent regulation in New York City is a sham,see this post.

At the end of the day, the double whammy of the J-51 ruling and declining free market rents forced TSP to hand back the keys. Even if TSP could refinance, it simply wouldn't make any sense, the deal is far too lopsided. Lucky for Jerry and Rob Speyer, they didn't have too much of their personal money in the deal.

For your reference, below is the letter that residents of Peter Cooper Village and Stuyvesant Town received today.

Good News Friday from Grubb & Ellis Chief Economist Bob Bach

2010-01-15T13:34:00.000-05:00

The Inventory Story

Following a lengthy 13-month liquidation cycle, business inventories grew by 0.4 percent in both October and November. Higher inventory levels among manufacturers and wholesalers in November more than made up for a slight dip in retail inventories. The inventory/sales ratio fell to 1.28, its lowest level since July 2008. With this ratio back to pre-crisis levels, businesses are poised to increase inventories this year, which will translate into higher levels of factory production. This is one reason why the industrial market is likely to be one of the first commercial real estate sectors to begin a recovery.

Another type of inventory – the inventory of office space available for sublease – fell in the fourth quarter, closing out 2009 at just under 120 million square feet. This was the first decline following nine consecutive quarterly increases. Some of this inventory reverted back to the landlord as the leases expired and will show up as direct lease space, but much of the decline came as tenants subleased space at market-clearing prices. Falling sublease inventories typically precede the beginning of a broader market recovery.

Deutsche Bank Outlook for Commercial Real Estate and Its Implications for Banks

2010-01-15T09:54:00.006-05:00

Deutsche Bank just came out with their Outlook for Commercial Real Estate and its Implications for Banks. Here are some highlights:

– Commercial real estate faces significant challenges over the next 3-5 years

– CRE fundamentals (rents and vacancy rates) will continue to deteriorate, in some cases for several years

– Defaults on CRE debt will continue to climb over the next 18-24 months, reaching historically high levels

– CRE likely to face a severe refinancing issues over the next 3-5 years, even if CRE fundamentals improve

– In CMBS, refinancing challenges are likely lead initially to widespread maturity extensions and ultimately to widespread restructuring and foreclosures and liquidations, creating large losses for CMBS trusts

– In banks, CRE exposures are likely to lead to hundreds of billions of dollars in losses and many hundreds of failures

– The sooner losses are written-off, the sooner assets will begin to trade and the sooner the CRE market will begin to normalize

To read the full report, click here.

Robust Leasing Activity Despite Slight Increase in Availability—Grubb & Ellis New York Office Market Trends—4Q 09

2010-01-14T17:35:00.003-05:00

Fourth Quarter 2009 Office Market Highlights:

• Availability increased by 10 basis points to 14.6% despite strong fourth quarter leasing activity
• Lease renewals accounted for 60 percent of deals signed for 100,000 square feet and greater
• Generous concession packages helped drop net effective rents to a five-year low
• Availability should peak in mid-2010

Click here for the latest report!

Grubb & Ellis 2010 Real Estate Forecast

2010-01-04T13:37:00.004-05:00

Every year Grubb & Ellis publishes a real estate forecast for more than 100 local markets throughout North America. The in depth reports include predictions for all aspects of the commercial real estate market including overviews for office, retail, investment, industrial, multi-housing and land.

To view the forecast for your particular market and interest, click here.

For a link directly to the NYC forecast, click here.

For more info. on the NYC market, call me - 212.326.4955.

Increased Leasing Activity Still Outpaced by Space Returns - Grubb & Ellis New York Monthly Trends - December 2009

2009-12-11T14:25:00.004-05:00

December 2009 Office Market Highlights:

• Availability rose 20 basis points since the summer to 14.7%
• The addition of 260,000 SF of sublease space brought the sublease supply back up to 16 million SF
• Class A net effective rents remain down 40% from market peak
• A potential rise in foreclosures could be a significant issue in 2010

Click here for the latest report!

Property Spotlight - 220 East 42nd St. - Partial 31st Floor

2009-12-02T11:11:00.008-05:00

Today's availability is a beautiful high-end sublet from Phoenix Life Insurance Company. The space has spectacular view from the 31st floor of the East River and the UN campus. Used rarely for meetings and visitor space, the space is in perfect condition.

The quality of the installation is very high, with lots of glass and wood.

Here are the details on the space, click here for the full flyer.

Building: 220 E. 42nd Street

Rental Rate: Upon request

Size: 2,676 SF - Partial 31st Floor

Term: Through December 30, 2011
Possession: Immediate

Space Features:

- Strong sublessor

- Tower floor with incredible views

- Furniture available

- New, high-end installation

- Move-in condition

Building Features:

- Prime Grand Central location

- Acclaimed Art Deco lobby with revolving globe

- Easy access to Metro North, 4,5,6,7 & S Subways

Property Spotlight - 1350 Broadway - Partial 8th Floor

2009-12-01T11:32:00.007-05:00

Today's availability is a sublet from Addison Search at 1350 Broadway. The space was recently built out, is in move-in condition and includes all furniture and phones. It's 5,877 SF with 3 windowed offices, 1 interior office, an IT room, a conference room and a pantry. The views and light are great, as this is a corner unit with Broadway and 36th Street Frontage.

The building is owned by W&H Properties, a great landlord that owns the Empire State Building and One Grand Central Place (formerly the Lincoln Building), among others. They specialize in taking older Class B buildings and renovating them to Class A standard with high-end traditional finishes. They are currently finishing up a $50mm+ renovation of the building, which includes a brand new lobby, new elevators and elevator mechanicals, new corridors, new bathrooms and an exterior overhaul.

To learn more about the space and see flyers and a floor plan, download the PDF flyer here.

1350 Broadway

5,877 sf—Part 8th Floor

Features:

- Possession: Arranged
- Term: Through November 28, 2014
- New installation
- Strong Sublessor
- Corner unit with great natural light
- Furniture and phones available
- 3 perimeter offices and 1 conference room
- Prime Penn Plaza/Garment Center location
- Major building capital improvements nearly complete
- Close proximity to Penn Station and 1,2,3,B,D,F,V,N,R,Q, and W trains

Property Spotlight - 625 Ave. of the Americas - Partial 3rd Floor

2009-11-24T09:00:00.000-05:00

Today's availability is a direct listing from the landlord at 625 Ave. of the Americas. It is a beautiful 8,000 sf space originally built out for The Gap, and modified by its last tenant HOK Architects.

The building features huge windows overlooking Sixth Avenue on the historic "Ladies Mile." The beautiful landmarked building, built in the 1870s served as the B. Altman department store and still retains its original historic character with features like 13' tin ceilings, original cast iron columns, and large wood framed windows (with new double pane glass).

The space offers, wood floors, 8 offices and a conference room with glass sidelights and full height wood doors, a pantry, copy room, 2 bathrooms and ample bullpen space.

To learn more about the space and see flyers and a floor plan, download the PDF flyer here.

625 Avenue of the Americas

8,000 sf—Part 3rd Floor

Features:

- Possession: Immediate
- Term: 5-10 years
- Beautiful above-standard build out
- Creative layout and design
- Extremely efficient floor plate
- Tremendous natural light
- Premises to be delivered in move-in condition
- Close proximity to all major subway line
- Easy access to Port Authority, Penn Station, and Grand Central

Property Spotlight - 1177 Ave. of the Americas - Private Equity Sublet

2009-11-23T09:00:00.003-05:00

Today's featured property is a sublet from a private equity real estate firm. The company is still going strong, but decided not to move in to this incredible 45th floor space at 1177 Ave. of the Americas. The views from this space are some of the best you'll see in the entire city, and the building is one of the best as well. Plus, this space offers a unique opportunity to be a full floor tenant in a Class A+ building.

Did I mention that you can watch the ball drop on New Year's Eve from your corner office? As an incentive to potential subtenants, the sublandlord is offering a substantial work letter to cover the cost of building out this space to your liking.

Want to know more? Give me a call - 212.326.4955. To download a pdf flyer with a proposed floor plan - click here!

Grubb & Ellis NEW YORK | 1177 Avenue of the Americas | New York, NY 10036

Property Spotlight - 400 Lafayette Street - Limited Stores Sublet

2009-11-20T09:00:00.000-05:00

Today's featured property is a sublet from The Limited Stores. As you can see from the pictures below, this is truly cool space. 400 Lafayette - in the heart of NoHo is an incredibly unique building. In fact, it's an incredibly unique 3-4 buildings. The main building is made up of 2 buildings with frontage on Lafayette Street, and 1 building on with East 4th Street frontage. However, on some floors, notably the 3rd floor that we are offering, the space expands into yet another building known as 11 East 4th Street. The combined buildings create a very unique space with original wood floors, exposed brick walls, 13.5' tin ceilings, and floor to ceiling windows.

The space we are offering, which has served as the Limited Stores' design studio is great for creative firms looking for lots of open space with tons of light and an industrial chic feel. We can sublet one or both floors, and we will be aggressive in making a deal.

All of the details are below, and if you would like a PDF flyer with floor plan, just click here!

Grubb & Ellis NEW YORK | 1177 Avenue of the Americas | New York, NY 10036 | 212.759.9700 |

Property Spotlight - 551 Fifth Avenue - Facebook Sublet

2009-11-19T11:06:00.012-05:00

In an effort to move this blog in a new direction, I've decided to start highlighting some of the buildings and sublease properties that I represent. Since it appears that this space will likely have a "sublease out" this week . . . meaning that a sublease will be drafted for comments and signature, I will start off with a Sublet from Facebook at 551 Fifth Avenue.

As everyone knows, Facebook is rapidly growing throughout the world. In New York, Facebook has a relatively small presence as compared to its headquarters in Palo Alto. Nonetheless, the New York sales team outgrew its old space in 551 Fifth Avenue. Our team at Grubb & Ellis had the privilege of moving them into new space more than twice the size on Madison Ave., and we're now subleasing their old space through the remainder of the term.

Here's the skinny on the space. If you're interested in it, let me know quickly! Click here to download a PDF flyer.

Building: 551 Fifth Avenue

Rental Rate: Upon request

Size: 5,308 SF - Partial 6th Floor

Term: Through June 29, 2012
Possession: Immediate

Space Features:

- Fifth Avenue exposure

- Move-in condition

- Financially strong sublessor

Building Features:

- New York City Landmark Building

- EnergyStar certified

- Centrally located - close to Grand Central, Times Square and nearly all subway lines

The Latest J-51 Ruling Against Tishman Speyer, Stuy Town & Peter Cooper Village

2009-10-22T12:41:00.004-04:00

As you may have heard, the New York Court of Appeals upheld the Appellate Court's ruling on the deregulation of apartments at Stuyvesant Town and Peter Cooper Village. Besides the fact that I believe this ruling is incorrect, it clearly is not in the best interest of New York City and the economy.

Stay tuned as many landlords default on buildings as a result of this ruling, and the city misses out on lots of tax revenue. This, all thanks to an archaic and poorly written law that has been misinterpreted by the courts, and defined in a way that was not in the spirit of the way it was written.

Here's an article on what happened: http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20091022/FREE/910229993/1057

Check out my old blog post on the J-51 to learn more about the background and repercussions:

http://www.brokerednyc.com/2009/03/by-virtue-of-or-stuyvesant-town-j-51.html

To learn about NYC's rent regulation practices and why they are a sham, read The Case for Deregulation.

Leasing Activity Increases – Average Transaction Size Drops 35%—Grubb & Ellis NY Third Quarter 2009 Office Market Trends

2009-10-22T12:35:00.002-04:00

Third Quarter 2009 Office Market Highlights:

• Pent up demand translates into strong leasing activity
• More deals signed this year to-date than entire 2008
• Average transaction size at 10 year low – 11,500 square feet
• Maturing loans will cast shadow for the next three years

Availability Dips—Tenants Seek Opportunities: Grubb & Ellis Manhattan Office Market Trends—September 2009

2009-09-21T11:38:00.001-04:00

September 2009 Office Market Highlights:

• Landlords continue to offer generous concessions – net effective rents remain at 2005 levels
• Uptick in leasing activity as tenants lock in lower rents
• More than 4 million square feet was leased in July and August – 35% of this year’s activity
• Availability dropped 10 basis points to 14.6% in August

Deutsche Bank Commercial Real Estate Outlook 2Q 2009

2009-08-31T11:57:00.004-04:00

Between a Rock & a Hard Place

Here are the Highlights:

Speed of deterioration in loan performance is unprecedented, even with
relative to early 1990s
Total delinquency rate reached 4.1% in June, 2.2 times higher than in March
and 3.5 times higher than December
Delinquency rates likely to soar higher over next 24+ months on billions of
dollars of pro forma loans that never stabilized and resetting partial IO loans
With 2,158 delinquent fixed rate loans ($27.9 billion) special servicers may
soon be overwhelmed
DB CMBS Research projects term losses will reach 4.3-6.3% for the
outstanding CMBS universe ($31.3-$46.4 billion), and 8.4-12.1% for the 2007
vintage
Massive maturity default risk
64.4-72.5% of loans (400-$450 billion) would not qualify to
refinance were they to survive until maturity
With well over $2 trillion in commercial mortgages maturing between now and
2013 in CMBS, banks and life company portfolios, the scale of the potential
problem is formidable
These problems are not the result of dislocated financing markets, rather they
reflect the simple fact the majority of loans do not qualify for a loan large
enough to retire the existing debt
Improvements in rents and vacancy rates are extremely unlikely to be
sufficient to materially affect the scope of the problems

For the full report, click here.

Sublease Space Drops—Net Effective Rents Reach 2005 Levels—Grubb & Ellis Manhattan Office Market Trends—August 2009

2009-08-13T16:22:00.006-04:00

August 2009 Office Market Highlights:

• Sublease space declined for the first time since November 2007
• Direct Class A net effective rents dropped to 2005 levels – averaged $54.84 PSF through July
• Robust leasing activity led to 2.75 MSF July transactions
• Availability expected to surpass 15% in next three months

Grubb & Ellis 2nd Quarter 2009 NYC Market Update

2009-07-16T14:37:00.006-04:00

Second Quarter 2009 Office Market Highlights:
• Manhattan availability rose 90 basis points in the second quarter to 14.5%
• Direct Class A average asking rents are down 19% from their 2008 market peak
• Lack of tenant demand caused leasing activity to drop 40% compared to the same time last year
•Negative absorption totaled 6.1 MSF in the first half of 2009, 50% more than recorded in 2008

Click on the picture or click here to read the full report.

Good News Friday - Turning a Corner?

2009-07-10T17:12:00.003-04:00

Turning A Corner?

If you missed “Turning a Corner” in the July 2^nd edition of The New York Times, a trip to their Web site is worth your time, particularly because the interactive version of the article is easier to follow. The article describes research done by the Organization for Economic Cooperation and Development on the relationship between industrial production, leading indicators such as consumer confidence and the stock market, and economic cycles since 1969. Noting that leading indicators have turned higher already, the OECD concludes that industrial production is about to follow. Click here to view the interactive graphic.

Several other indicators point to a near-term rebound in production, including the Institute for Supply Management’s manufacturing and non-manufacturing indexes, durable goods orders and factory orders. All of these reports show that new orders are increasing or headed in that direction, and inventories are being depleted, a combination that points to an increase in production activity.

Nonresidential private investment in structures, equipment and software accounts for less than 10 percent of GDP while personal consumption expenditures account for 70 percent, which means that businesses can’t lift the economy out of recession by themselves; they need help from consumers. Nevertheless, business spending will play a supporting role in the coming recovery, particularly as exports to faster-growing markets around the globe begin to rebound. At some point businesses will need to add workers, which will help tip the economy back into a virtuous cycle of growing employment and increased consumer demand.

Grubb & Ellis & Alan Lurie - Five Minutes on Mondays

2009-07-09T14:25:00.006-04:00

For those of you who don't know, Alan Lurie who heads up the Project Management group for Grubb & Ellis New York, is also a Rabbi. At our Monday morning meetings, Alan shares his spiritual insights, and he just came out with a book Five Minutes on Mondays. Here's a segment on Fox News discussing Grubb & Ellis, David Arena, Alan Lurie, and Alan's book.

Good News Friday (On Wednesday) Silver Lining

2009-07-08T15:08:00.003-04:00

Silver Lining

It’s tough to find the good news in this morning’s payroll employment report from the Bureau of Labor Statistics. Employers shed 467,000 jobs (net) in June, ending the four-month string of lessening monthly losses, while the unemployment rate increased a tenth of a percentage point to 9.5 percent. Job losses since the recession began now total nearly 6.5 million. Where’s the good news in that, you say?

- Keep in mind that employment is a lagging indicator and is unlikely to turn around until next year. Today’s report does not change the outlook held by a majority of economists that the recession will end later this year as GDP turns positive in the third or fourth quarters.

- A sluggish recovery should minimize the potential for an outbreak of inflation. It should help keep interest rates and oil prices low, thereby providing some support for consumer spending, the housing market and the financial sector despite the rising unemployment rate.

- A gradual recovery will provide cover for the Federal Reserve to tighten interest rates and withdraw liquidity from the credit markets in an orderly fashion. If inflation were to flare up, the Fed might need to act precipitously, thereby increasing the potential for back-to-back recessions as in the early 1980s.

- Don’t forget that the 467,000 jobs lost in June is a net number. In the third quarter of 2008 (the most recent data available from the BLS), private employers added 6.8 million jobs and eliminated 7.8 million. Of the 6.8 million jobs added, 5.5 million were at expanding businesses, and 1.3 million were at new businesses. Employers are adding new jobs all the time, and eventually, the balance will shift back into the black with more jobs created than eliminated.

-Lastly, the health care and social assistance sector keeps chugging along with 21,000 net new positions created in June. Educational services also added 13,000.

Deutsche Bank Report: The Outlook for U.S. Home Prices

2009-06-29T18:07:00.003-04:00

While I generally don't post on residential real estate, there has been a lot of buzz regarding this recent report from Deutsche Bank on the Outlook for U.S. Home prices, so I thought I would share it with you.

I'm sure you will find this report surprising in its preditions, as DB is certainly not painting a rosy outlook. They predict that U.S. home prices will decline an additional 14% from Q1 2009, and that New York home prices will drop an additional 32% to reach an affordability level in line with other markets. The report goes on to say that factoring in othe risk factors, there will be a 40.6% decline from Q1 2009 in New York.

Without further ado, here's the report. Enjoy!

Tenant Demand Stalls; Available Space Continues to Grow—Grubb & Ellis NYC Office Market Trends—June 2009

2009-06-19T09:30:00.002-04:00

June 2009 Office Market Highlights

• Leasing velocity is down 40% through May compared to one year ago

• The professional services sector accounts for 31% of 6.3 million square feet leased this year

• Availability (13.5%) and vacancy (7.8%) continue to rise

• Generous concessions and falling prices are making transactions more cost-effective for tenants

Here's the report

Good News Friday - From Bob Bach

2009-06-19T09:17:00.003-04:00

Bob Bach, Chief Economist of Grubb & Ellis has started sending out weekly Good News Friday reports to Grubb & Ellis employees (ok, he has for a few months and I haven't been on the ball). Anyway, I've decided I'm going to start passing these on for your enjoyment. We can all use a little bit of good news right now.

Trifecta of Good News

Here are three hopeful indicators released just this week:

The Conference Board Leading Economic Index rose sharply for a second consecutive month. Vendor performance, the interest rate spread, real money supply, stock prices, consumer expectations and building permits pushed the index higher in May, outweighing negative contributions from weekly hours and initial unemployment claims. Over the past six months, the index rose 1.2 percent, the first time the index has increased over a six-month period since July 2007.
The Labor Department reported that continuing jobless claims fell by 148,000 to 6.69 million during the week ending June 6^th. It was the largest decrease in seven years and breaks a string of 21 consecutive increases. Initial jobless claims rose slightly during the week ending June 13^th, however.
The American Bankers Association's economic advisory committee, a group of economists for large banks, predicted that real GDP will turn positive in the third quarter, thus bringing an end to the recession. The committee also expects housing starts to move up later this year and home values to increase moderately in 2010. Here is a link to a Bloomberg article on the committee’s findings.

Not all recent news is optimistic, and not all aspects of these indicators are positive. But this is the norm when the economic cycle is shifting from recession into recovery. Do not be surprised if the data releases are positive one day and negative the next with a gradual migration toward positive news as the recovery approaches.

If You've Ever Wondered about 190 Bowery

2009-06-18T12:19:00.002-04:00

After walking by 190 Bowery several times, perplexed by this seemingly abandoned beautiful building covered in graffitti, I finally decided to try to find out what was going on with it. What I found was so interesting, I thought I'd share this article with all of you: New York Magazine: The 72-Room Bohemian Dream House.