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Category ArchiveBrookfield Property Partners

Video: Pop Damn! How Pop-Ups Are a Year-Long Phenomenon

It’s not just for the holiday season. Love ’em or hate ’em, pop-ups are here to stay. Retail Details looks at why they’re advantageous for tenants and landlords. We check in with Los Angeles’ jewelry retailer Vrai & Oro as they build out a space that they got on Mott Street via Appear Here.


Source: commercial

Bank of America to Take Entire 386K-SF HBO Building Across From Bryant Park

Bank of America has signed a deal to occupy the entire 386,000-square-foot office building at 1100 Avenue of the Americas, replacing HBO.   

The bank will move into the 15-story building (also known as the HBO Building) between West 42nd and West 43rd Streets when the cable network relocates to 30 Hudson Yards in 2019 with its parent company, Time Warner, as The New York Post first reported.

A spokeswoman for Bank of America declined to comment or provide additional details on the lease agreement. It was not immediately clear which brokers handled the transaction on behalf of the financial institution and the landlords, Brookfield Property Partners and California-based The Swig Company.

Multiple spokespersons for Brookfield did not return Commercial Observer’s inquiries, and a spokeswoman for Swig did not immediately return a request for comment.

Bank of America will keep its offices across the street at the nearly 2.4-million-square-foot One Bryant Park (also known as the Bank of America Tower), setting up a “campus” with the new digs, the Post reported. At One Bryant Park the company has nearly 1.6 million square feet of space, according to CoStar Group.

Brookfield and Swig acquired the leasehold on 1100 Avenue of the Americas in March from the Nickerson family’s Eugene A. Hoffman Management, as Crain’s New York Business reported at the time. The deal was worth $370 million, as CO previously reported. The partners plans to renovate the entire building following HBO’s exit.


Source: commercial

As PropTech Industry Grows, Seed Funding Is Drying Up

Efforts to get seed funding for real estate technology companies looks like it might be going to seed.

Recently, investors such as venture capital firms or traditional real estate development companies are looking for companies past the series A funding round and towards later rounds, according to real estate tech accelerator MetaProp NYC’s bi-annual Global PropTech Confidence Index.

The fourth quarter report, which was provided first to Commercial Observer, highlighted that 31 percent of investors are making investments past the series A level, which is up from just 19 percent of respondents for the second quarter 2017 version of the bi-annual survey. (There were 185 startup chief executive officers and venture capital firms that responded to the fourth quarter survey.)

“PropTech growth is escalating rapidly around the world, particularly in Europe, with Asia not far behind,” MetaProp NYC co-Founder and Managing Director Aaron Block said in prepared remarks. “Despite the overall continued confidence, enthusiasm and growth in real estate technology, we are seeing startups having greater difficulty in obtaining early stage funding.”

This might be a problem, but it no doubt speaks to the overall strength of the amount of money in the industry. In the past four years property tech companies have raised about $6.2 billion in funding worldwide, according to a recent report by Altus Group, an advisory services and software provider for real estate companies that has invested in real estate tech companies. Last year there was a record of nearly $2.7 billion invested in property tech companies. And the report expects there to be even more funding next year.

The field of real estate tech companies has ballooned in the last four years, and real estate tech incubators—such as MetaProp NYC—have spawned a new generation of innovative companies. For 2018, 86 percent of startups expect there to be more competition in the real estate tech industry compared with 2017, according to MetaProp’s survey.

As investors have become savvier about real estate tech the entrepreneurs building the software have become more realistic about the competition; only 29 percent of startups expect raising venture capital will be easier next year than this year, which is a decline from 41 percent during the second quarter of 2017.

“I think it’s the classic evolution of venture capital. Because of the success of [property technology incubators] there is so much demand at the seed level for funding that it naturally creates tension for the available capital,” said Robert Courteau, chief executive officer of Altus Group. “Two or three years ago, you could show up with a good idea and you’ll get funding. Now your idea better be strong and the [management team] better be good, because there is so much competition for that funding.”

The other reason why seed funding will be difficult to obtain is because today there are clear stars in the field, such as project management resource Honest Buildings, property management platform VTS and real estate investment firm Cadre. And most investors want to get on board with winning companies that will clearly become profitable, rather than take a chance with a smaller startup.

In addition, much larger venture firms and traditional real estate players, such as Brookfield Property Partners and Rudin Management Company (via Rudin Ventures), are getting in on the action, as CO recently reported.

Some of the more notable recent later funding round transactions in real estate tech includes a $65 million series C round in Cadre led by venture capital firm Andreessen Horowitz; Brookfield and Rudin were part of a $13 million series B funding round in Honest Buildings; VTS scored a $55 million series C led by Insight Venture Partners; self-storage tech startup Clutter gained $64 million in series C funding led by venture capital company Atomico.

“If you are an institutional investor with hundreds of millions to invest, putting half a million into seed funding is not a whole lot of money to deploy,” said Mike Sroka, co-founder and CEO of deal management platform Dealpath. “There are bigger investors that have to deploy more capital and [they’ll fund] bigger and more mature companies.”

This doesn’t necessarily mean that wide-eyed entrepreneurs won’t have a chance; at least one expert thinks the slowdown in seed funding won’t change much of anything for the techies looking to disrupt real estate norms.

“It’s always been hard for early stage real estate tech startups to get capital in this industry, because the stakeholders are notoriously slow-moving adopters,” said Susannah Vila, co-founder and CEO of leasing marketplace Flip, which completed a seed funding round of $2.2 million in June led by Union Square Ventures. It’s has always been and will always be harder for early stage tech companies trying to disrupt the industry.”

And there are a number early funding investment firms, such as New York Angels, Soundboard Angels and Empire Angels, that could lead seed funding rounds.

“Early-stage startups shouldn’t be too discouraged,” said Connell McGill, co-founder of Enertiv. “Several family-owned real estate portfolios have recently launched venture arms as well as syndicates to invest in earlier stage companies as well.”


Source: commercial

The Construction Industry Should Brace Itself for a Rollercoaster 2018: Experts

Coming off a few booming years, New York City’s real estate industry—including the construction sector—has been suffering a bit of a setback this year.

The New York Building Congress forecasts at year end, $45.3 billion will have been spent on construction in 2017, the second-highest-ever total dollar amount committed to construction in the city’s history, according to the organization.

But it would mark a 13 percent decline from last year’s record $52.2 billion. At the same time, the number of jobs in the industry increased to 149,800 in 2017 from 146,200 in 2016. And the organization expects it to rise to 151,200 jobs next year.

Construction permits, which indicate the level of future work in the city, meanwhile are up slightly this year, although the pace is slowing. The New York City Department of Buildings issued 109,724 permits in fiscal year 2017, ending in July, a 0.4 percent increase from 109,277 in 2016, according to the city’s annual Mayor’s Management Report released in September.

What does all of this mean for the construction business in 2018?

Commercial Observer spoke with five experts about what to watch for. Overall, they forecast a decline in housing construction, but an increase in work in the public sector and the office market. The jury is out on construction costs. And then there is the elephant in the room: tax reform, which has been passed by the Senate but not the House of Representatives. Republicans cheer it as a win for jobs (and big Wall Street businesses are chomping at the bit as it would cut the corporate tax rate by nearly a half). Democrats are against it, claiming it serves wealthy individuals and corporations. As for New York City construction experts, they are split on the impact to their segment of the industry.

Housing

Over the past few years, there has been a surge in housing development, which many experts say has led to an oversupply. And in turn, construction of new homes slowed down this year by 41.2 percent and that is expected to continue for the foreseeable future. There were 37,700 new housing units added in 2016, just 26,700 this year, and the Building Congress expects 24,000 new housing units in 2018.

In terms of dollars and cents, $11 billion will be spent on residential construction this year, the Building Congress forecasts, a 31.3 percent drop from $16 billion last year. In 2018, the figure will rise to $11.6 billion.

“I think on the residential end—apartment complexes and condominiums—I think that it’s is a little overheated,” said Richard Lambeck, the chair of the construction management program at New York University’s Schack Institute of Real Estate. “There will be a slow down. The products that have been produced have surpassed the absorption rate. The amount of apartments that are going to be purchased is going to be slowed and it will have an impact on the industry.”

In addition to the oversupply problem, there are a lot of people crying “Not in my backyard,” a.k.a. NIMBY. Community organizations are rallying against large skyscrapers such as SJP Properties’ 200 Amsterdam Avenue on the Upper West Side, Gamma Real Estate’s planned 67-story building at East 58th Street between First Avenue and Sutton Place, and Extell Development Company’s 69-story tower at 50 West 66th Street.

The fear is that these projects could be forced to scale back or canceled altogether due to community opposition, which will lead to less work for construction companies and subcontractors.

“I worry about community to reaction to projects,” Louis Coletti, the president and chief executive officer of contractor association umbrella Building Trades Employers’ Association. “We are going to go back into the 1990s where NIMBYism just takes over and stops the city. You see this opposition to as-of-right projects, that’s crazy. You see the general direction of the city becoming progressive. You just wonder if it is the natural course of things as people become more politically active.”

Public works

Government spending for public infrastructure projects climbed this year for projects of note around the five boroughs, such as the redevelopment of LaGuardia Airport and the expansion of the Jacob K. Javits Convention Center and the new Kosciuszko Bridge.

Spending on similar projects is expected to reach about $16.9 billion in 2017, according to the Building Congress report—a 16 percent increase from 2016’s $14.6 billion. And the organization expects a further increase to $18.8 billion next year.

“Our infrastructure and transportation systems are the key,” Coletti said. “They are the real foundation to continued growth in the city. Those systems have lacked appropriate level of investment for many, many years. That’s the reason why the governor has to move billions of dollars for the [John F. Kennedy International Airport] and LaGuardia [Airport] [redevelopment projects].”

He added: “There is going to be a real focus on how to finance and really build our infrastructure to allow New York City to have continued growth.”

On the horizon, major infrastructure projects such as the redevelopment of JFK, the next phase of the Second Avenue subway and the Gateway Tunnel project—which would build another tunnel to New Jersey—lay in wait.

And some are questioning the viability of the next phase of Second Avenue subway project in the short term, as the calls to repair and fix the existing subways grow louder, meaning dollars would go to maintenance. While that could be great for commuters, maintenance produces less construction work than new projects.

“I don’t know if the [Metropolitan Transportation Authority] has sufficient funds to start that early,” Lambeck said. “At least from the MTA psperspective, they have been getting a lot of pressure, primarily in maintenance.”

Office   

All across the city there has been an abundance of construction on office projects in 2017. Just along the Far West Side alone there is Related Companies and Oxford Property Group’s Hudson Yards, Brookfield Property Partner’s Manhattan West and Moinian Group’s 3 Hudson Boulevard.  

In Brooklyn, Two Trees Management Company is building an 380,000-square-foot office tower at 292 Kent Avenue in Williamsburg; Rubenstein Partners and Heritage Equity Partners is working on the 500,000-square-foot 25 Kent Avenue in Williamsburg; Tishman Speyer and HNA Group is converting the upper floors of the Macy’s at 422 Fulton Street into 620,000 square feet of office space in Downtown Brooklyn; JEMB Realty and Forest City New York are building a 500,000-square-foot building at 1 Willoughby Square; and Thor Equities is working on Red Hoek Point in Red Hook, a nearly 800,000-square-foot office development. And in Queens, Tishman Speyer is building a 1.2-million-square-foot two-building office and retail project called The Jacx in Long Island City.

Construction work on all of these projects, as well as others, will continue into next year, keeping contractors busy.

“You have a lot happening with Midtown West products. You have a lot of activity in Lower Manhattan and upgrades to office buildings [across Manhattan],” said Carlo Scissura, the president and CEO of the Building Congress. “Office is a strong part of the market. And you are seeing [large office developments] happen in Brooklyn and in Queens.”  

Looking forward, the demand for office space in Manhattan is high (as CO recently reported), and there is a need to renovate a crumbling older stock of buildings. Redevelopments of towers and expansions are an area that could see growth next year. Midtown East—thanks to its new rezoning—will allow for larger projects and developers could look to redevelopment projects in the area, which would create more work for construction companies.

“Hudson Yards has proven that there is a tremendous need for new space and much of the city’s current product needs to be replaced,” said Kenneth Colao, the founder and CEO of CNY Group. “If you had another large sector of town that was wide open for development, I think it would be in play. The [Midtown East] rezoning I think will support more redevelopment.”

Construction costs

In May, Turner & Townsend released its annual construction market survey that pegged New York City as the world’s most expensive city for construction. The average cost of a building was at $354 per square foot, surpassing Zurich, Switzerland which came in at $328 per square foot.

Rising costs has become a problem in the industry due to a variety of factors, including the cost of labor. Construction companies have blamed union’s high hourly wages and an abundance of regulations.

On the latter point, unions have been making compromises in contract negotiations and lowering hourly wages as more developers demand general contractors take bids from nonunion companies in order to increase profit margins. Some construction leaders expect this trend to continue as the competition between organized labor and other subcontractors heats up further.

“I think the unions have to recognize that in order to be viable they need to work with their development clients and figure out ways to reduce costs,” said Richard Wood, the CEO of Plaza Construction.

Another reason for inflated construction costs is high insurance rates. New York is the only state with a law that allows a worker injured on a construction site to sue everyone—construction companies and individual superiors. This increased liability raises insurance premiums.

But regulations for the industry have increased towards the end of the year, as the City Council tried to improve safety on construction sites. The council passed a number of bills this year targeting construction safety, including one polarizing one: Intro-1447-C. The legislation will require workers to have at least 40 hours of safety training. Opponents to the bill claimed that it will force contractors to fund courses for their workers, increasing the bottom line. And the council also passed yesterday Intro-1399, which gives most industry employees, including construction workers, the right to “flextime” or two days off from their regular schedules.  

One construction watchdog said losing workers could disrupt work flow on projects.

“This isn’t a store or a restaurant—this is a construction site,” Coletti said. “We have schedules and budgets we have to make.”

Tax reform

As of publication, Congress’ tax reform bill had not been signed into law. But it looks extremely likely that it will as Republicans in the Senate passed a final version of the bill early today and their counterparts in the House of Representatives will re-vote on the legislation today after approving it yesterday with some errors.

The legislation will cut the corporate tax rate to 21 percent next year from 35 percent, which could mean a boon for companies. With extra money on their balance sheets, companies could reinvest in their offices. And real estate developers may use those funds to upgrade facilities in their assets. This will lead to more construction projects.

“I think indications are that it will be good for the construction industry,” Colao said. “If in fact the tax reform results in corporate tax reductions, corporations may start sprucing up facilities, then there would be an uptick in activity. Corporations—and entities that are tenants in office buildings—if they are looking at an improved bottom line at the same revenue—they might look to increase their capital expenditures.”   

However, as a part of the regulation, individuals will be limited in deducting state and local income taxes, sales taxes and property taxes to $10,000. Homeowners will be able to deduct mortgage interest on debt up to $750,000, down from $1 million. These segments of the bill don’t bode well for real estate interests in New York City, which has an average home sales price at $987,000 as of the third quarter, according to the Real Estate Board of New York. If people can’t reduce their taxes it will add to Gotham’s living expenses and could mean less people wanting to relocate to the city—lowering demand for more housing and impacting construction.  

“New York and especially the New York City area is one of the highest areas for state and local taxes,” Wood said. “I think there is going to be a tendency for people to want to move to states that don’t have high state taxes, and with that, many corporations may think in order to get a good labor pool they’ll want to move their offices to those low-tax states.”

He added: “I personally think that people are going to have to stay focused on solutions to that problem, because it could have long-term adverse effects on the real estate industry and the construction industry in New York.”


Source: commercial

Brookfield Back to the Drawing Board After GGP Rejects Takeover Bid

The fate of Brookfield Property Partners’ bid to takeover mall landlord GGP appears uncertain after GGP reportedly rejected Brookfield’s initial $14.8 billion overture earlier this week, with analysts split on whether Brookfield will return to the table with an improved offer and the market for retail assets potentially altered by European giant Unibail-Rodamco’s massive $15.7 billion acquisition of Westfield Corporation.

The two sides are expected to continue discussions after GGP rejected the Nov. 11 bid, Reuters reported Sunday. Brookfield’s proposal consisted of a cash-plus-stock offer valued at $23 per share—a premium on GGP’s “unaffected” pre-offer share price, which hovered north of $19 per share in early November, but well under the real estate investment trust’s consensus net asset value (NAV) of around $28 per share.

The bid was deemed unsatisfactory by an independent board comprised of five of GGP’s nine directors, which excluded three Brookfield executives on the board and Sandeep Mathrani, GGP’s chief executive officer. Brookfield has played a sizable role in GGP’s governance since helping the Chicago-based company emerge out of bankruptcy in 2010; it already owns 34 percent of the company, and the $14.8 billion takeover offer would have seen Brookfield acquire the other 66 percent.

Real estate investment and development firm Brookfield—a subsidiary of Toronto-based investment giant Brookfield Asset Management—is expected to reevaluate its offer before potentially returning with another bid. Bruce Flatt, the CEO of Brookfield Asset Management, described the proposal as “a fair offer” in an interview with Bloomberg this week but added that such negotiations “are long, long processes,” and sources with knowledge of the discussions told Commercial Observer that the two sides are still engaged—noting that GGP has yet to formally reject Brookfield’s overture in a public manner.

Brookfield’s takeover effort has come in the midst of heightened buzz surrounding the governance of the nation’s major publicly traded retail landlords, which have faced mounting headwinds affecting the brick-and-mortar retail sector and have traded at significant discounts to underlying value of their assets.

Macerich and Taubman Centers—two of GGP’s fellow mall REITs specializing in the high-quality, Class A mall sector—have both seen activist investors increase their ownership positions in recent months, while the Brookfield bid prompted further speculation around potential mergers and acquisitions in the retail real estate sector that has fueled a recent run-up in mall REIT stocks.

That buzz was realized via Paris-based Unibail’s enormous deal for Sydney-based Westfield, which was announced Tuesday. The transaction sees Europe’s largest commercial landlord gain a foothold the U.S. and U.K. markets and creates a company with 104 retail assets and a gross market value eclipsing $72 billion.

The Unibail-Westfield deal may well have changed the calculus for a Brookfield acquisition of GGP, according to some analysts. In a research note this week, investment banking and brokerage firm Boenning & Scattergood said Unibail’s acquisition of Westfield “should boost the share price of all ‘A’ mall owners in the U.S.”—adding that the deal enhances the “irreplaceable” nature of Class A mall assets.

“No independent [GGP] board could sign off on a transaction valuing ‘A’ mall owners at a discount without significant pushback from shareholders,” Floris van Dijkum, a senior REIT analyst at Boenning, said in the note.

Alexander Goldfarb, a managing director and senior REIT analyst at investment banking firm Sandler O’Neill + Partners, told CO that the Unibail deal shows how, as far as consolidation in the retail sector, “there’s an appetite for malls [among investors] but also very few buyers” capable of lodging offers persuasive enough to get a deal done.

Goldfarb said that while it’s likely Brookfield returns with an improved takeover proposal for GGP, it’s also possible that the company backs away from negotiations and looks for GGP’s share price to return to its pre-offer levels before reevaluating the situation.

“You can see Brookfield saying, ‘No dice—we’re going to let the stock cool down for a bit,” he said. “What you’re seeing is there are very few natural buyers for malls, and you just saw one of them [Unibail] make a deal for another [Westfield].”

Brookfield’s $23-per-share offer was widely seen by analysts as merely an opening salvo similar to the firm’s initial offer for mall owner Rouse Properties. Brookfield eventually acquired Rouse for $18.25 per share last year after having previously offered $17 per share for the company.

“Brookfield is a value buyer and certainly not going to but their best offer forward [first],” according to Haendel St. Juste, a managing director and senior equity research analyst at Mizuho Securities USA. “If Brookfield doesn’t budge on $23 [per share], then the deal is dead. At $23, at least you know what GGP’s independent board thinks of the offer.”

St. Juste and other observers noted that GGP shareholders have largely been turned off by the cash-plus-stock composition of Brookfield’s initial offer, which sees half of the offer comprised of Brookfield Property Partners (BPY) stock. Unlike GGP, BPY is not traded as a REIT but as a limited partnership—lessening its appeal to REIT investors drawn to the sector’s tax and dividend structure—and as a publicly traded entity is relatively illiquid compared to GGP, with sizably lower trading volume and market capitalization

“REIT investors I talk to don’t want that [BPY stock],” St, Juste said, noting that “more cash, less stock and a slightly improved improved offer likely gets [the deal] done” for Brookfield. “The mindset of investors is, ‘We hope there will be a second offer, and hopefully that offer is more attractive,’ ” he added.

Sources said that while GGP has already expressed its desire for an “altered mix” in the compensation being offered by Brookfield, extending a bid that goes beyond the $7.4 billion in cash it already put forward could be an unappetizing proposition for the investment giant.

But that could be what it takes if Brookfield wants to realize its dream of creating one of the world’s largest property companies—one with more than $100 billion in global real estate assets and a net operating income of roughly $5 billion annually.


Source: commercial

Street Retail Looks to Malls in Figuring Out Ways to Cope With Big Rents

While malls and shopping centers are looking for ways to save themselves from crushing retail headwinds, at least one group thinks they’ve got something to learn from them: street retail.

The guys with the shops on the sidewalk are taking a page out of their playbook when it comes to structuring deals.

Young retail companies, e-commerce brands and even some legacy retailers looking for a brick-and-mortar presence are asking for terms long found in shopping centers—low base plus a percentage rent (meaning the retailer pays the landlord a certain percent of every dollar in sales over a certain threshold).

“That shopping center formula has morphed onto certain streets—not all streets—around the country. [It] sometimes bridges a gap between what a landlord is looking to achieve with his overall rent and what the tenant feels they can pay with respect to what their sales projections are,” said tenant representative Virginia Pittarelli, a principal of Crown Retail Services (an affiliate of Crown Acquisitions).

These percentage-rent-plus-base deals allow retailers to test out the market with minimal risk by not being locked into a guaranteed rent and give landlords an activated space along with some income. Such deals are being done across the retail spectrum and around New York City for leases as long as 10 years.

Typically in base-plus-percentage-rent deals, the landlord gives a 20 to 50 percent discount to market gross rent, plus a percentage of sales between 8 and 12 percent, according to Christopher Conlon, the executive vice president and chief operating officer of real estate investment trust Acadia Realty Trust.

Robin Abrams, a vice chairman of retail at Eastern Consolidated, explained the percentage-rent formula as follows: If the rent is $500,000 per year and the tenant agrees to a percentage rent of 8 percent above a natural breakpoint (where the base rent equals the percentage rent), the calculation is $500,000 divided by 8 percent with that 8 percent equaling the natural breakpoint above which the tenant pays. So a tenant would pay 8 percent of sales in excess of $6.3 million annually. As the rent increases over the term, the natural breakpoint increases.

“Sometimes the landlord requires an unnatural breakpoint,” she added, “and might say to the tenant that he wanted a million [dollars] in rent, and he won’t wait till sales are $6.3 million but wants the percentage rent over sales of $5 million, or whatever minimum sales figure landlord and tenant agree.”

Abrams and her team are submitting an offer for a restaurant space in an “unchartered neighborhood” where the asking rent is $1.4 million per year. The offer includes a base rent of less than half of the asking rent along with a percentage rent at lower than the natural breakpoint.

These deal structures aren’t confined to less trafficked and less high-profile areas of the city.

Lee Block, an executive vice president at Winick Realty Group, said that while he hasn’t closed any deals that incorporate a percentage-rent component, “we’re considering it on a handful of spaces that we represent.” That was the message conveyed by many brokers and landlords with whom Commercial Observer spoke.

The reason? A surplus of space and a changing retail climate.

Jared Epstein, a vice president and principal at real estate developer Aurora Capital Associates, said his company is negotiating a few deals in Soho with a “slightly reduced base rent and feature a percentage rent above a natural breakpoint, which we believe will enable the landlord, our entity, to attain market rent and likely exceed market rent so long as the store does the volume that we believe it will.”

And that is because of the high vacancy rate in Soho, Epstein said.

“In general,” Epstein said, “in any deal that features a percent rent in lieu of an amount of fixed rent, the landlord hopes to set a low break point and a large enough percent above that, which will make it probable that the landlord will achieve the total base rent it hoped to achieve. The landlord has to believe the retailer will do the business to get the landlord back to its base rent. Sophisticated landlords will offer the downside protection of a discounted base rent in this market but will also want to participate with the tenant on the upside as their business outperforms.”

For most deals to get done, then, landlords need to be flexible.

“In the last 12 to 24 months I think owners that can be more creative with percentage deals are doing it,” said Jeffrey Roseman, a founding partner of Newmark Knight Frank’s retail division. “Not every owner has the ability to do it because they may have certain restrictions from their bank or they may have paid too much for the property. [But] it’s a new creative way to get deals done.”

True, landlords need to be open to different deal structures, Conlon said. While Acadia hasn’t done deals for a low base plus percentage rent, it is “considering them now,” he said, adding that Acadia would only do them for short-term deals, or those less than three years.

Not all landlords, though, are biting.

gettyimages 520141660 Street Retail Looks to Malls in Figuring Out Ways to Cope With Big Rents
SOHO STRUCTURES: In today’s market, landlords across the city, including in Soho (above) are considering retail leases with a small base plus a percentage rent rather than just a gross rent. Photo: Getty

Triangle Assets doesn’t plan to do any percentage-rent-involved deals, according to Benjamin Stavrach, the director of leasing and property management at the company.

“New tenants have talked to us about percentage-rent deals, and we have held back,” Stavrach said. “It’s a different business model. It’s not something we want to get our hands dirty with. [And] as a landlord I don’t have to give it.”

With percentage-rent deals, he noted, a landlord has to “trust” the tenant will be successful and is honest with its sales records. “You are almost investing in the tenant,” he said.

Instead, to get deals done, Triangle Assets—with its 83,000 square feet of street retail space—may lower the rent in a gross-rent deal.

Michael Brais, a food-and-beverage retail broker with Douglas Elliman Commercial, who is leasing up the F&B component at the BFC Partners-led Empire Outlets outdoor shopping center on Staten Island, said he is working a lot with the percentage-rent structure.

Indeed, at Empire Outlets, the F&B component totals 50,000 square feet, of which 5,000 square feet remains available. Almost all the deals were negotiated with a combination of base plus a percentage rent, and the same goes for the majority of Brookfield Property Partners’ retail agreements.

That structure can be a win-win for both sides of a deal, some brokers said.

“It is fairly established, particularly in shopping centers with base and percentage rent,” Brais said. “Lower base helps the operator hedge against lower sales and helps the landlord participate in the upside.”

Malls and shopping centers historically have implemented the percentage-rent formula as a “hedge against inflation,” Conlon said. Without such clauses, rent increases are typically a “modest 1 to 2 percent annually or 10 percent every five years.”

Thomas Dobrowski, an executive managing director with Newmark Knight Frank based in New York City, handles regional mall investment sales nationally. He said the formula started to become more popular after the 2009 recession, “when dozens of malls were foreclosed on by lenders and special servicers. To placate tenants and keep them at these properties that were distressed and transitioning, percent-rent deals, along with short-term leases, became more common and enabled new owners of these malls to keep many national tenants that would have closed open and operating. The trend continues today and is becoming more common at stabilized properties as well.”   

This model is good for tenants in a market where rents are outrageously high, but it’s good for landlords when the tenant does gangbusters business. In this market, it is more beneficial for the tenant. 

“The tenants have the upper hand these days,” Dobrowski said. “These national retailers have a lot more leverage than they did in the past, and they are exercising whatever rights they have or proposing structures that are benefitting them.”

One of the things holding landlords back from doing too many percentage-only deals, which are very common in enclosed malls, is they can make the real estate difficult for lenders to underwrite. The underwriters “don’t like to see zeros anywhere,” Brais said.

While Conlon doesn’t think inclusion of percentage-rent will become the new “norm for deal-making,” Brais said he expects percentage-rent deals to “become more prevalent” because of the difficulty of getting spaces rented.

For now at least, deal terms are changing.

“Across the board, all streets, all landlords are being creative because we have an abundance of available space in the market,” Pittarelli said. “And the best for any type of market like this is to fill those spaces and if you can fill those spaces by being creative and working with a credit-worthy, great-image-quality retailer, why wouldn’t you?”


Source: commercial

Brookfield’s Takeover Bid Is the Latest Chapter in Mall Giant GGP’s Turbulent History

When Brookfield Property Partners lodged a $14.8 billion takeover bid for GGP last month, it raised the possibility of one of the biggest real estate mergers and acquisitions seen in recent years—one that would create a massive company with nearly $100 billion in assets globally and annual net operating income of roughly $5 billion, Brookfield said in announcing the bid.

It also marked the latest chapter in the tumultuous history of the Chicago-based real estate investment trust formerly known as General Growth Properties. The past decade, in particular, saw GGP emerge from the wreckage of one of the biggest real estate bankruptcies in history in 2009—when it was unable to refinance more than $27 billion of debt in the wake of the financial crisis—to re-establish itself as one of the nation’s major players in the Class A mall space, with assets ranging from prestigious shopping centers in Honolulu and Southern California to high-street storefronts on Fifth Avenue.

GGP’s renaissance has come under the guidance of Sandeep Mathrani, who left his role as head of Vornado Realty Trust’s retail division to become the REIT’s chief executive officer in 2010, when the company was just getting back on its feet after the bankruptcy. With the help of investment from the likes of Brookfield and hedge fund investor Bill Ackman’s Pershing Square Capital Management, GGP shed dozens of properties, rid itself of burdensome holdings by spinning off Rouse Properties and the Howard Hughes Corporation into standalone companies and exiled to the past the legacy of the Bucksbaum family—which founded General Growth Properties in the 1950s but also oversaw its descent into financial ruin. Today, GGP has regained its status as one of the largest publicly traded owners and operators of retail properties in the U.S., with a portfolio of more than 120 properties spanning roughly 123 million square feet.

Yet, the Brookfield takeover proposal comes at a significant juncture for both the company and the market in which it specializes. The challenges facing the brick-and-mortar retail sector today have been well documented, with the Amazon-fueled rise of e-commerce having contributed to store closures at a rate unseen since the Great Recession.

Though GGP’s profile as an owner of high-quality, Class A malls has insulated it somewhat from headwinds that have most heavily impacted Class B and Class C malls and shopping centers throughout the country, the company has not been altogether immune from the great retail apocalypse of 2017. The struggles of department stores like Sears, Macy’s and J.C. Penney, which historically were counted on as mall anchor tenants capable of driving customer traffic, have prompted GGP to spend more than $2 billion to redevelop roughly 9 million square feet of space across its portfolio—mostly “anchor boxes” formerly occupied by such department stores that it has sought to reposition into restaurants, cinemas and other uses more relevant to the current retail market climate.

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Sandeep Mathrani. Photo: GGP

Like fellow Class A mall REITs Simon Property Group, Macerich and Taubman Centers, GGP has seen its stock price undertake a slow and steady slide over the last 12 months as investors have increasingly subscribed to the doom-and-gloom narrative surrounding the retail sector. Market conditions have meant that GGP (also like its peers) has found itself consistently trading at a discount to its actual net asset value (NAV); by Nov. 6, the day before news broke of the Brookfield takeover talks, GGP’s share price had fallen to $19.01, down from its 52-week high of $26.63 and well below the company’s consensus NAV of more than $28 per share (analysts who spoke to Commercial Observer for this story pegged GGP’s NAV at anywhere from $26 per share to $35 per share).

Brookfield’s initial bid for GGP, meanwhile, came in at $23 per share, or $14.8 billion in total, and took the form of a 50-50 cash-equity offer comprising $7.4 billion in cash and another $7.4 billion in Brookfield Property Partners (BPY) stock. BPY, a subsidiary of Toronto-based investment giant Brookfield Asset Management, has held a sizable stake in GGP since helping bring the company out of bankruptcy in 2010, and the deal would see it acquire the 66 percent of GGP that it does not already own. (In the third quarter of this year, Brookfield exercised stock warrants to increase its ownership interest in the REIT from 29 percent to 34 percent by purchasing 68 million GGP shares for $462 million.)

“Brookfield’s access to large-scale capital and deep operating expertise across multiple sectors, combined with GGP’s high-quality retail asset base, will allow us to maximize the value of these irreplaceable assets,” Brookfield Property Partners CEO Brian Kingston said in a statement announcing the bid.

Brookfield noted that its takeover offer constituted a 21 percent premium on GGP’s “unaffected closing share price” of $19.01 on Nov. 6, as news of the proposal immediately pushed GGP stock to north of $22 per share the next day and above $24 per share on Nov. 13, when Brookfield officially announced its offer. In the wake of the bid, GGP said it had formed a “special committee” of independent directors—excluding Mathrani and directors affiliated with Brookfield, such as Kingston, BPY Chairman Ric Clark and Brookfield Asset Management CEO Bruce Flatt—to review and consider Brookfield’s proposal and “pursue the course of action that it believes is in the best interests of the company.”

Representatives for both GGP and Brookfield declined to comment for this story.

With the offer coming in well below most analysts’ valuation of GGP, many are split on whether the deal provides good value for GGP shareholders at a challenging time for the retail sector at large, or if it undervalues one of the top publicly traded commercial landlords in the country and could prove a mere starting point in negotiations between the two sides.

“I’m sure everyone would like to get a deal done; the question is, What is the price Brookfield is willing to pay?” said Alexander Goldfarb, a managing director and senior REIT analyst at Sandler O’Neill + Partners, who noted that the initial Brookfield bid “undervalues” GGP below Brookfield’s own internal net asset valuation of the company of around $30 per share.

Goldfarb and other analysts also called into question whether GGP investors would be willing to accept BPY stock as part of any deal. In a note released last month, BTIG equity research analysts James Sullivan and Ami Probandt described BPY’s stock, which has been trading between $21 to $24 per share for most of this year, as “relatively illiquid with very low average trading volume.”

“Our assumption is they’ll have to improve their offer; no one ever throws in their best offer first,” Goldfarb said. “I think Brookfield sees the real story, which is the company being undervalued by the Street.”

Anita Ogbara, a director and credit analyst at Standard & Poor’s, described the Brookfield bid as “opportunistic” at a time when there is “a lot of pressure on valuations” in the mall REIT sector. “We don’t know what the ultimate outcome is going to be, but there’s a clear sign that [Brookfield is] trying to take advantage of the discount versus the true value of [GGP’s] assets.”

While Brookfield’s first crack at a GGP takeover may have been “an underwhelming offer” for many stakeholders, Haendel St. Juste, a managing director and senior equity research analyst at Mizuho Securities USA, said that challenging conditions in the retail space could end up having outsized sway over whether a deal gets done or not. He noted that, speaking to participants at the National Association of Real Estate Investment Trusts’ annual REITworld convention last month, there is a sense that an offer of around $25 per share “would maybe carry the day.”

“People are disappointed [in the $23-per-share offer], but then again I think there’s been a resignation among folks—that maybe it’s not great on its face, but given the current dynamic, maybe it’s as good as you could hope for or expect,” St. Juste said.

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Brookfield Place in Battery Park City, Manhattan. Photo: Getty Images

Should a deal go through and Brookfield acquire GGP, it is unclear what will become of the company’s leadership and whether the likes of Mathrani will remain in some position or capacity. What appears more certain, according to analysts as well as sources with knowledge of Brookfield’s operations, is that the combined company would look to leverage Brookfield’s exposure in nonretail sectors, such as office and residential, to potentially reposition underperforming properties in the GGP portfolio.

“We are excited about the opportunity to leverage our expertise to grow, transform or reposition GGP’s shopping centers, creating long-term value in a way that would not otherwise be possible,” Kingston said in his statement announcing the bid.

While GGP has already made steps toward pursuing such repositionings—having recently announced a partnership with residential REIT AvalonBay Communities to build apartments at one of GGP’s malls in Seattle—Brookfield would likely seek to further that approach, as it did with select Rouse Properties assets in New Jersey and Vermont in the wake of its $2.8 billion acquisition of the mall landlord last year.

Mizuho’s St. Juste said the integration of a more diverse array of uses at malls and shopping centers is warranted in an environment where “there’s too much retail in the United States” and landlords are seeking new ways to drive traffic.

Sources also said that while Brookfield would almost certainly look to hold long-term onto GGP’s premier retail assets—such as the Ala Moana Center in Honolulu, Glendale Galleria in Glendale, Calif., and Tysons Galleria in Washington, D.C., suburbs—it would probably seek to offload other lower-quality properties either through outright sales or joint-venture partnerships.

It would also remain to be seen what happens to GGP’s high-street retail portfolio, a market in which former Vornado executive Mathrani upped the REIT’s exposure via the acquisition of pricey storefronts along luxury retail strips like Manhattan’s upper Fifth Avenue corridor.

Sandler O’Neill’s Goldfarb noted that GGP’s foray into the luxury street retail space was one of the few areas where Mathrani “got pushback” from investors and observers, given that the REIT entered that market “right at the peak” of New York City property values—via deals like its nearly $1.8 billion acquisition of the Crown Building at 730 Fifth Avenue, which GGP acquired alongside retail magnate Jeff Sutton of Wharton Properties.

“[Mathrani] had done [street retail] at Vornado and he saw an opportunity at GGP,” Goldfarb said. “It was just that the prices he was paying were top of the market.” While GGP has found success with its street retail assets—most notably signing luxury fashion brand Bulgari to a pricey lease to maintain its presence at the Crown Building—depressed Manhattan street retail rents could contribute to a change in approach.

Whatever direction is in store for a new Brookfield-helmed GGP, it is almost certain that a successful takeover would shake up the market as far as publicly traded retail landlords are concerned—and very well signal a time of heightened consolidation as the industry takes on virtually unprecedented headwinds.

“It’s created an M&A tailwind and brought some investors back in the space,” St. Juste said, citing how the likes of Simon, Macerich and Taubman have also seen their share prices run up in the wake of the Brookfield bid. “Next year is going to be tough from an operational perspective; without this M&A buzz, the stocks would be down. They’re not trading on fundamentals right now.”


Source: commercial

Coworking Company Spaces Establishing NYC Flagship in 100K SF at Manhattan West

Brookfield Property Partners six-building Manhattan West megaproject is getting a major coworking tenant.

Amsterdam-based workspace provider Spaces has leased 103,000 square feet across seven floors in a building known as The Lofts at 424-434 West 33rd Street, the landlord told Commercial Observer. The coworking company will take the seventh through 13th floors in the top half of the former printing loft building between Ninth and 10th Avenues.

The asking rent in the 10-year deal was in the high $70s per square foot, according to David Cheikin, an executive vice president at Brookfield. Spaces will get its own private entrance and lobby, as well as a 2,000-square-foot rooftop and multiple terraces. The building has 15,000-square-foot floor plates, exposed steel beams, and high ceilings, plus newly revamped elevators, lobbies and mechanicals.

“Our average tenant size at Manhattan West is 200,000 square feet,” Cheikin said to CO. “We wanted to provide those tenants with the ability to grow and shrink a bit and provide them WITH the resources for conferencing and flexible work environments.”

He also explained that the loft building will connect to Manhattan West’s 250,000 square feet of retail, anchored by a 60,000-square-foot Whole Foods.

Brookfield had originally planned to knock down 424-434 West 34th Street in order to amass a larger site that would allow for a big retail and hotel project, Cheikin said. “But when we actually got into the building, we realized it was a really good turn-of the century printing loft building that added some authenticity to our site of what the neighborhood used to be.”

Spaces is planning to make The Lofts its flagship outpost in the five boroughs, where it already has 44 locations and 1.3 million square feet of offices, according to Michael Beretta, the vice president of network development in Spaces’ Americas division. This will also be its largest space in the city, where typical Spaces locations average 30,000 to 50,000 square feet apiece.

JLL’s Jim Wenk, Brannan Moss and Kirill Azovtesv represented Spaces. Cushman & Wakefield’s Bruce Mosler, Josh Kuriloff, Robert Lowe, Ethan Silverstein, Matthias Li and Whitney Anderson worked on behalf of Brookfield.

Mosler declined to comment on the deal, and a spokesman for JLL didn’t immediately respond to a request for comment.

The seven floors will be constructed with movable walls, prebuilt suites, large coworking areas, conference rooms and event spaces. The interiors are going to be renovated with a “cool and contemporary design that’s European in nature and a mix of casual and interesting while still remaining a very professional place where companies can do business,” Beretta said. He added that the company chose The Lofts because it’s a building with “character” but the project will offer all the amenities of new construction, including a significant retail component.

Spaces already rents at a few other Brookfield properties, including 245 Park Avenue, 1 Liberty Plaza and Brookfield Place. It expects to open at Manhattan West in late 2018.

Pioneering, Luxembourg-based coworking provider IWG Plc (formerly Regus) owns Spaces, which has tried to pitch in urban markets as a trendy competitor to WeWork

The lower half of 424-434 West 34th Street is currently home to several small office tenants. All of them will be vacated by 2021, when Brookfield plans to put the building’s remaining 100,000 square feet of office space on the market.


Source: commercial

Ryan Simonetti and Christopher Kelly on the Evolution of Event Space Provider Convene

In early 2011, William Elder, an executive vice president and the managing director of RXR Realty in New York City, received a call from Ryan Simonetti, a young real estate executive he knew.

Simonetti wanted to tell him about his new business: on-demand conference and event space provider Convene, which he co-founded with Christopher Kelly. Elder and Simonetti met at RXR’s 1336 Avenue of the Americas, where Simonetti was hoping to open a Convene outpost, but Elder wasn’t convinced.

“I didn’t get the conferencing thing,” Elder said. “And I said no.”

Elder’s rejection wasn’t exactly crazy. Six years ago, it was still pretty unquestioned that companies needed conference rooms and boardrooms in their offices. But within the next year, Elder started seeing a change. More firms started cutting back on these kinds of spaces. The idea of outsourced meeting rooms became intriguing. In 2012, he decided to work with Convene at 237 Park Avenue, where RXR was spending $50 million to upgrade the building.

As Elder took Fortune 100 companies on tours of the building, anytime he mentioned Convene, the company’s executives eyes would light up.

“Just having Convene working through [tenants’] plans, it just changed the conversation,” Elder said. “The 10 times a year they need that big boardroom, they can use Convene. So not only do they save on the buildout cost, but they save on the real estate cost for having to lease that extra space.”

When RXR bought 32 Old Slip in April 2015, which had a Convene in place, Elder accepted how popular the company was becoming.

“[Simonetti] is very future focused,” Elder said. “He sees things well before [others]. He identified a place in the market where there was a real need and no competition.”

But the vision never changed for Convene’s founders.

“Chris and I have had the same picture in our minds of an office building—the ideal experiential office building—since before we even first started the company,” said Simonetti, the chief executive officer of Convene.

Today, Convene has about 1 million square feet of event, meeting and conference space in the country—between Washington, D.C., Boston, Philadelphia and New York City—that services 25 million square feet of office buildings. The company plans to open another 2 million square feet by the end of next year within another 50 million square feet of real estate.

And over the next five years, Convene is looking to expand into Atlanta, Chicago, Houston, Los Angeles, Miami, San Francisco and Toronto. Internationally, the 340-person company also has plans for a London location in 2019.

“Tenants don’t need to take that [extra] space, and landlords don’t need to build common conference areas, and it’s of such high quality that it will help them attract tenants,” said Jeff Lessard, a senior managing director of strategic consulting at Cushman & Wakefield. “It’s a different angle into the industry than like a WeWork, but I would say it’s compelling.”

Convene will soon open a new location in RXR Realty’s 75 Rockefeller Plaza. (The specifics of this new space are not yet set.)

Although Convene’s roots are in on-demand meeting spaces, it has evolved in phases to become a complete hospitality company that transforms an office building into sort of a “lifestyle hotel”—something Simonetti claims was the goal all along. (The evolution of Convene is something that is very much on his mind. “There was a time when Amazon only sold books,” Simonetti told CO.)

After launching in 2009, Convene progressively added new divisions including an in-house architecture and design team, a workplace strategy team and a culinary group led by Regional Executive Chef German Villatoro, who creates menus for onsite kitchens at Convene spaces. Each location has a lead chef and culinary team, and some have cafés, too.

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DOUBLE UP: Convene currently has nine active locations in New York City, including at 1 World Trade Center. Photo: Convene

Next, Convene plans to build technology and apps to connect tenants to its services. Recently, it launched Convene Workplace, a service that will provide working suites at Convene locations for companies with up to 100 employees.

But by getting into the office-space-providing business, Convene is now directly butting heads with companies like WeWork and Regus.

“As WeWork and Regus start catering to companies with 50 or 100 people [and not startups], they are moving into the landlords’ business,” Simonetti said. “So I think landlords are viewing them as competitors, meaning that they now have to respond. We have become the landlords’ response.” Convene’s model is closer to that of a property manager.

And now that the appetite for this kind of service seems to be proven, landlords like RXR, Durst Organization and Brookfield Property Partners are jumping aboard.

“There was a moment in the last six months where adopting agile and flexible work space went from being an opportunity for the landlords to not adopting it being a risk,” said Kelly, the president of Convene. “They want to make sure that they are mitigating risk.”

There are now nine active Convene venues in Gotham with four more under development or in the planning phase.

Convene recently opened on the 64th floor at the Port Authority of New York & New Jersey and Durst’s 1 World Trade Center, where the location features a café, meeting spaces, lounges and game rooms. It is accessible to all the tenants of the 3-million-square-foot building.

The company also has a location at Durst’s 117 West 46th Street, where the landlord first got acquainted with Convene in a typical owner-tenant relationship last year.

“We are of the opinion that the trend of greater hospitality in commercial buildings is a trend that will continue to grow and, over time, will become even more important,” David Neil, a principal at Durst, said. “Ryan and Chris have tapped into this trend and are well positioned to help landlords like ourselves be at the forefront of this movement.”

A year and a half ago, Brookfield Property Partners led a funding round for Convene that raised $20 million. And the landlord was among other established companies—including Durst and venture capital firms—that pulled in another $68 million in May 2017. To date Convene has raised about $119.2 million since 2009, according to the last announcement of funding. It is hoping to bring in $150 million in another funding round in early 2018.

Brookfield took a step further in its relationship with Convene in September, when it announced a partnership that will allow Convene to design, manage and operate workspaces and on-demand meeting and event spaces at the landlord’s downtown Los Angeles properties, starting with 333 South Grand Avenue and expanding to others in the future.

“Successful landlords will be those that work to provide solutions to their tenants’ desire for efficiency and flexibility,” Ric Clark, the senior managing partner and chairman of Brookfield, said in prepared remarks provided to CO. “Convene helps owners do that by offering flexible meeting, social and coworking spaces, significantly enhancing the consumer-facing experience within a property.”

It was probably always destined that Simonetti and Kelly would found a thriving business together.

Simonetti, 36, grew up in Hillsborough, N.J., as an only child. His father runs a bread delivery route that hauls Martin’s Famous Potato Rolls and has woken up at 2:30 every morning to deliver bread for 27 years (and still does today). It taught Simonetti the value of hard work.

He played basketball in high school and went on to Villanova University, where he met Kelly during freshman orientation, and the pair started hatching plans for extra cash almost immediately. They worked at restaurants, tended bars, bought used textbooks from their fellow students and sold them online and organized ticketed parties and spring break events.

“We were the only two guys at Villanova that didn’t have our parents’ credit cards,” Kelly said.

Kelly, a 35-year-old Armonk, N.Y., native, grew up as one of four boys.

ryanandchris 110 Ryan Simonetti and Christopher Kelly on the Evolution of Event Space Provider Convene
CONVENING WITH CONVENE: Ryan Simonetti, left, and Christopher Kelly launched Convene in 2009. Photo: Yvonne Albinowski/for Commercial Observer

His grandfather, the son of Greek immigrants, sold nuts on street corners in Manhattan as a child and became a screen door salesman as an adult. Later he ran a hardware store and got into the construction business, passing on his entrepreneurial spirit to Kelly.

While he was in grade school, Kelly’s family would go to Costco and buy items wholesale, including candy for the youngster, who would turn around and peddle it to other children on school buses.

“I always had a hustling mentality,” Kelly said.  “I still remember; Blow Pops were my first product.”

Kelly studied marketing and international business at Villanova. Following graduation in 2004, he took two years to travel around the globe, visiting about 30 countries and living on an average of $20 a day, he said. His travels took him to Asia for six months, one month in Africa, and six months in South America before he ended up in Costa Rica in Central America, where he opened a bar on the beach called Coconuts. (While in Costa Rica, he learned how to speak Spanish and to surf.)

As for his future partner, Simonetti interned for Goldman Sachs in college, and after graduating in 2005, he worked at Lehman Brothers Real Estate on the structured products side until 2006. Then he joined Gramercy Capital. At 26 years old, he was running a $3 billion portfolio that focused on office buildings and hotels.

When the financial crisis hit in 2008, Simonetti received many calls from tenants saying they needed to give back space as they were forced to cut costs.

That was when the idea struck about incorporating flexible conference and meeting spaces with services in office buildings, which became Convene.

“The first opportunity that I identified was why are office buildings not being run more like hotels and is there a way to think differently about how office buildings are built designed and operated,” Simonetti said.

A big problem, he realized, was the companies sign long-term sheets but don’t have crystal balls.

“How could a CEO of any company predict 10 years from now what their business is going to look like, how many employees should they have, what is the design going to be, [and] what that experience is going to be,” Simonetti said. “And I thought, if given a better option, would companies actually outsource a portion of their real estate strategy?”

To help start his business, Simonetti called Kelly, who moved to Colorado in 2006 to start a private jet charter business called evoJets. He had a house, a car and a girlfriend, now his wife.

But he decided to take a vacation and travel to New York and meet with Simonetti. “I had coffee with Ryan, and he explained to me the vision for the company, and I literally never went home [to Colorado] from vacation,” Kelly said.

Convene was born the following year in November 2009, and today Simonetti and Kelly currently live down the street from each other in Tribeca.

Kelly, a married father of two young children, has run a few marathons, a biathlon and a half ironman. He recently completed the New York Marathon in November in a personal best: 2:57:59.

Simonetti, a married father of a 3-year-old boy, practices Muay Thai and boxing and has taken part in two amateur mixed martial arts fights as well as a boxing match. (He won the two Muay Thai bouts, but his boxing record is 0-1, he admitted. He declined to say anything other than the fighter he lost to has more experience in the ring.)

“For me, [martial arts] becomes a great counterbalance to the pressures and stresses of being a husband and father and obviously running a high-growth business,” Simonetti said. “And you learn a lot about yourself when you step into a ring.”

When Convene opens its largest location yet—58,000 square feet at Cove Property Group’s 101 Greenwich Street in Lower Manhattan—early next year, it will be more than just on-demand meeting and event space with concierge service and a kitchen. There the company plans to officially launch Convene Workplace to provide flexible office suites for companies. The service will also open in Convene’s new Los Angeles locations and in the Philadelphia outpost as well.

The recently formed Convene technology department is hard at work on a mobile app for next year that will connect tenants to Convene services within buildings so they can do things like order food from the Convene kitchen for delivery to their office. This app will also be introduced at 101 Greenwich.

“As a landlord, we want to ensure that we cater to tenants’ need to attract and retain the best and brightest talent,” said Kevin Hoo, the founder and managing partner of Cove. “And partnering with someone like Convene, [which] has a competitive advantage and insight into this paradigm, made sense for us.”


Source: commercial

MAPIC 2017: Retail Headwinds Can’t Cloud the Vibe in Sunny Cannes

At this year’s MAPIC in Cannes, France, there was a mix of concern as well as optimism.

Fred Posniak of Empire State Realty Trust told Commercial Observer that there was “no doom-and-gloom” vibe at the international retail property trade show—and if attendance at MAPIC was any indication, things aren’t so bad. This year’s attendance was up 100 people to roughly 8,500 participants from 2016, according to MAPIC Director Nathalie Depetro. Like last year, attendees hailed from 260 countries around the world.

In New York City specifically, deals are starting up again after a dry spell, as evidenced by the recent transactions involving Levi’s, which is moving its Times Square store to a new 17,250-square-foot location at 1535 Broadway, and Vans, which agreed to take 8,573 square feet for its second Manhattan location at 530 Fifth Avenue.

“I think there is momentum,” said Lee Block of Winick Realty Group.

Still, in order to get deals done, tenant rep Virginia Pittarelli of Crown Retail Services said that “for the right kinds of tenants across the board, all landlords are being creative because of the abundance of space.” That means more tenant improvement allowances and less traditionally structured terms, such as lower base rents plus percentage rents (as in percentage of retailers’ sales).

And landlords have also been more open to doing pop-up deals, according to Cushman & Wakefield‘s David Gorelick.

But there is no arguing that there are issues facing retailers in the U.S., with department stores cited as a serious case in point.

“I see department stores going in a downward spiral,” said Salvatore Ferrigno of Newmark Knight Frank. As many have noted, “the writing is on the wall” for department stores and they “have to evolve,” said C&W’s Gene Spieglman.

The same applies to individual retail brands. Brookfield Property PartnersMark Kostic said it is “important for each store to be relevant,” while Robin Abrams of Eastern Consolidated advised that retailers need to key in on their vibe and brand, among other things.

But the retail situation isn’t as grim internationally, according to one market watchdog. While the U.S. is experiencing a “collapse [in] retail activity,” the downturn is “less dramatic” in other countries,  said Mohamed Haouache, the founder of online short-term retail leasing platform Storefront.


Source: commercial