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Category ArchiveMorgan Stanley

Cheezus: Artisanal Is Not Returning to Park Avenue (South)

Artisanal Fromagerie Bistro, which filed for bankruptcy in March 2017 shortly before it was slated to open at its new home on Park Avenue South, is no longer bowing.

Its 10,550-square-foot TF Cornerstone space (7,550 square feet at grade and 3,000 square feet—usable—in the basement) at the base of the 12-story office building at 387 Park Avenue South is now back on the market with an asking rent of $225 per square foot, a spokeswoman for the landlord told Commercial Observer. She declined to respond to questions about Artisanal but signage for the bistro was dismantled recently.

Winick Realty Group’s Aaron Fishbein, who is the broker for the retail space at the 215,000-square-foot building along with colleague Steven Baker, said they got possession of the Artisanal space in the beginning of January. He, too, declined to talk about Artisanal except to say that Barry’s Bootcamp took 4,600 square feet of the 12,150-square-foot ground-floor space and Artisanal took the balance of it, as well as the basement.

In February 2015, the landlord of 2 Park Avenue, Morgan Stanley, decided not to renew Artisanal’s lease, the same month Artisanal formed a new ownership entity with Artisanal owner Stephanie Schulman, who is romantically linked to the previous owner Vincent S. Bonfittodrory, a.k.a. Sarid Drory. As CO reported in November 2015, Artisanal signed a lease to relocate to 285 PAS from 2 Park Avenue.

The cheese-focused brasserie was initially going to open in the new digs on Park Avenue South between East 27th and East 28th Streets in summer 2016. The company filed for Chapter 11 bankruptcy in August 2016 and then again in March 2017. The latter one—in which Artisanal allegedly owes its former landlord over $3 million for unpaid rent, etc.—is still ongoing. The summer 2016 opening date got delayed to June 2017, and those plans have faded away. Meanwhile, Artisanal’s website doesn’t reflect a change in plans.

“Their plan to leave all their liabilities with the old entity did not work,” weighed in Adam Stein-Sapir, a co-managing partner of Pioneer Funding Group, which specializes in analyzing and investing in bankruptcy cases, and who is not involved in the case. “Also because of the controversy over the first filing they may have had trouble raising new money to open the second restaurant.”

The developer acquired the pre-war building in 2005 and gave it a makeover in early 2015, including a glass facade from the base to the third floor, and renovations to the lobby, elevators and roof deck featuring a glass penthouse.

A. Mitchell Greene of Robinson Brog Leinwand Greene Genovese & Gluck, the attorney for the eatery during the March 2017 bankruptcy, didn’t respond to requests for comment.

Source: commercial

Four Reasons Why Oxford Properties’ Big Bet on St. John’s Terminal Will Pay Off

Oxford Properties Group and the Canadian Pension Plan Investment Board (CPPIB) announced yesterday that they closed on the $700 million St. John’s Terminal redevelopment project in Hudson Square.

The acquisition of the south portion of the site at 550 Washington Street from Westbrook Partners and Atlas Capital Group was major news, with Oxford owning a 52.5 percent interest in the project and control of the development and Canada Pension taking the remaining stake.

The City Council granted a zoning variance in December 2016 for the 3.3-acre project, which is supposed to include 1,500 rental apartments along with a mix of office and retail, when it was completely under Westbrook and Atlas. Westbrook and Atlas landed $300 million in financing from Morgan Stanley last year and used $100 million to acquire 200,000 square feet of development rights, as CO previously reported. (Westbrook and Atlas Capital will continue to own the northern portion of the site.)

St. John’s Terminal is not Oxford’s first rodeo on the Far West Side of Manhattan; the company is currently working with Related Companies on the Hudson Yards megaproject.  

We talked to real estate experts to get their takes of why spending $700 million for this project was a savvy move for Oxford and CPPIB.

primaryphoto44 Four Reasons Why Oxford Properties’ Big Bet on St. John’s Terminal Will Pay Off
550 Washington Street.  Photo: CoStar Group

Hudson Square is ripe for redevelopment (and close to cool neighborhoods)

Hudson Square hugs up next to Greenwich Village and West Village to the north and Tribeca to the south. Not to mention Soho is to the east. It would be difficult to find four trendier neighborhoods on the island of Manhattan.

“What’s the old real estate adage—location, location, location, and this location has a tremendous amount of untapped potential,” said Daria Salusbury, the president and CEO of Salusbury & Co., which works on branding and consulting for developers.  “And Oxford is very, very smart, and they are very well financed.”

Salusbury was a senior vice president with Related Companies and worked on the development of the firm’s 261 Hudson Street project in the area before she left in 2016. The Robert A.M. Stern-designed rental building features approximately 200 apartments.

She added, “In three minutes you are sitting in Tribeca at a restaurant. And in five minutes you are in Soho sitting in a restaurant. In six minutes you are in West Village sitting in a restaurant. How can you go wrong?”

Plus, while the area was long known for its extensive warehouses, as development has thrived in the surrounding neighborhoods, Hudson Square has come into its own.

“Ride your bike down the West Side Highway and you’ll see the amount of development right off the highway on the West Village,” Steven Kaufman, the president of Kaufman Organization, said. “This is just south of all of that. It’s in between the West Village and Tribeca. And it’s like a hole in a doughnut there. It’s very ripe for development.

He added, “And it’s a big site. It’ll be a city of it’s own. It could be like Battery Park City.”


…And has no landmark issues!

Plus, it’s not like the New York City Landmarks Preservation Commission can get involved like in other neighborhoods nearby.

“Greenwich Village, Tribeca and Soho are protected because of the landmark issues. [But] it’s something that they don’t have to worry about, and here they can build something of scale and size,” said Robert Dankner, the president of Prime Manhattan Residential. “The fact that it is not landmarked and it’s one step to the left—it’s a very obvious next step.”

primaryphoto43 Four Reasons Why Oxford Properties’ Big Bet on St. John’s Terminal Will Pay Off
A rendering of other residential properties that could be constructed at the site. Rendering: CoStar Group

The Hudson River Park is a perfect amenity for future tenants.

The 550-acre park that extends from Battery City to the West 59th Street offers a plethora of activities for locals. It attracts 17 million visits each year, according to the Hudson River Park Trust’s website.

‘[St. John’s Terminal] is a two-minute walk to the esplanade. And there are a lot of possibilities there,” Salusbury said. “Look how much money the city put in to create that esplanade. You can bike with your kids or take a walk.”


They’re not going into Hudson Square alone.

Oxford Properties is certainly not the only ones working on projects in the area. Hines, Norges Bank Real Estate Management and Trinity Church Wall Street has an 11-building portfolio of 5 million square feet in the area, the majority of which is office space. They have CBRE and Newmark Knight Frank leasing up the buildings, as CO reported in 2016.

“Hudson Square has undergone an exciting evolution from New York City’s printing district to a vibrant mixed-use neighborhood with an impressive mix of creative companies, new residential opportunities, local eateries and other businesses that call Hudson Square home,” said Ellen Baer, the president of the Hudson Square Connection. “A waterfront community, amazing access to public transportation and lower west side location, Hudson Square is taking its place as a truly great New York neighborhood.”


But one note of caution for the developers trying to outdo other trendier areas nearby:

“As long as [Oxford and CPPIB] don’t get too ambitious with pricing and they recognize that it’s one step to the left, they should have a home run,” Dankner said. “They can’t get too ambitious because they have to look at [other projects] like Greenwich Lane, which is in the heart of the Village. That’s where everyone wants to be. In Hudson Square, there are still some spotty streets. You are not just there yet. It doesn’t have the neighborhood cleaners. It doesn’t have restaurants. It’s not old enough. It’s new. History has to be created there. It doesn’t have personality [yet].”

Source: commercial

NKF’s Regional Mall Guru Thomas Dobrowski Is Taking Retail Doom and Gloom in Stride

Thomas Dobrowski might be one of the reasons why malls are not actually dying. And it’s not just because he sells regional malls, but because he arguably has been to more malls than anyone else (60 in 2017 alone), and whenever he visits one, he shops (that’s 60 purchases last year).

No, he’s not buying anything big—“just a couple small items I can throw in the bag,” the executive managing director at Newmark Knight Frank, said—but he’s still shopping at malls. And just that fact alone, he said, “inherently speaks to—when you get people in the mall they’re going to spend money.”

Dobrowski, who handles regional mall investment sales nationally, sold 13 regional malls last year. (Whenever he gets an assignment, not only does he tour the property he’s selling; he check out the mall’s competition.)

While there’s no doubting that malls, and retail in general, face headwinds—only five malls have either opened or are under development since 2007, while about 200 have closed in that time Dobrowski said—the broker remains optimistic about the future of the industry. “The news does not help pricing. However, it does help bring attention and interest to mall properties for sale,” Dobrowski said, “because savvy investors recognize that this could be a once-in-a-lifetime opportunity to pick up malls at good prices.”

Dobrowski didn’t start his career in the mall business. After graduating with a bachelor’s degree in finance from Villanova University he worked in Morgan Stanley’s real estate investment banking group. He got into the mall business at the now-defunct Rockwood Real Estate Advisors, where he worked from 2002 through 2014, before NKF came calling. The brokerage was looking to “grow a capital markets platform and grow a national brokerage business,” Dobrowski said.

Since then, Dobrowski has been NKF’s lone regional mall investment sales broker. With the help of a support staff of three who handle underwriting, analytics, materials preparation and research, he sold 13 out of the 30 brokered mall deals last year, making the sellers’ representative’s market share nearly 50 percent.

Being in a business that is not territory based, Dobrowski can be based anywhere in the country, but prefers New York City, his home for the last 18 years or so. (He, his wife and their 3-and-a-half year old son live in the East Village.)

As people continue to speculate about the future of malls, CO sat down with the 39-year-old broker at NKF’s digs at 125 Park Avenue last week to make sense of it all.

Commercial Observer: What’s your take on the doom-and-gloom mall headlines?

Dobrowski: My opinion is, it’s very overblown—the “death of the mall” headline.

Do you only deal with noncore assets?

Look, all the REITs want to hold onto their good assets obviously, or assets that they feel they can add value to so our business today is really split 50-50—50 percent of our sales come from the REITs that are shedding their non-core assets and then the other 50, plus or minus, come from [commercial mortgage-backed securities] special servicers and lenders that have taken back a lot of these malls over the last decade that were overleveraged and now are in many cases distressed. I grew this business out of the distressed mall market [back] in 2011, 2012 when malls started to sell again. A lot of the mall REITS, when these loans came due, and even today, when they come due, if they can’t refinance out of them, they’ll just give the keys back to the lender and that obviously is the beauty of CMBS financing. One of the best sources of lending for regional malls is CMBS debt.

Why is that?

I think because that’s where there is the biggest appetite for that type of loan. A lot of the insurance companies and a lot of the balance-sheet lenders typically have shied away from regional malls, just given the complexities behind them. They’re relatively illiquid in markets. And CMBS historically was the go-to source of financing [for regional malls]. That’s started to change now because obviously the headlines about malls are pretty tough. So that’s really why you see, [with] a lot of the sales today, the valuations are much lower than people ever really anticipated, even though we’re obviously in a really great economic cycle and there’s growth and retailers are doing well in many cases. But buyers are just underwriting out all of the risk associated with most malls. The proof is in the pudding. The reality is a lot of these malls are suffering around the country.

Have the mall owners found financing materially more difficult?

Yes. In the last 24 months, in particular, I would say financing has become one of the major hot points or constraints with respect to really selling bigger malls that require real financing. Because the equity check gets bigger, the number of players gets smaller who can stroke a big check to take down a $50-plus-million-dollar mall, which is a big deal today. Ten, 15 years ago, we were selling malls at $100 [million] and $200 million valuations. If you look at 2017, most malls were, call it between $20 million and $60 million, plus or minus, that sold.

How would you characterize lenders’ level of caution?

Well, much like buyers—but even more. They’re much more cautious where they are really concentrated on two or three main aspects. One is who the sponsor is: Do they have a track record? Do they have an expertise in the space? Because there are a lot of new owners and new buyers starting to enter the mall field today. Next, it’s starting to get into the property: Who are the anchors? What’s my anchor risk? Do I have a Sears, Bon-Ton, JCPenney, a Macy’s, kind of a lot of the anchors that are worrisome today for a lot of folks, and what does that risk look like in relation to really the rest of the mall and what are the options of re-tenanting those spaces? The third one is really then, Who’s the competition for that mall in that given market?

What are the most essential differentiating factors between malls with a positive outlook and those with more cause for concern?

I always give the comparison: It’s like a custom suit. From 50 feet away, your navy blue suit that you buy off the rack at Macy’s could look the same as the one you buy at Brioni, right? So when you look at a mall from an aerial, it could have Macy’s, Dillard’s and JCPenney and Sears and have very similar tenants on the inside, and that mall could be 10 miles outside Manhattan, and it’s killing it. But then you could take that same mall and put it in the middle of Ohio with the same tenant makeup: Once you get closer into it, [it’s floundering]. So what do we look at? I would say the big driver…is what are the options for that consumer in that market and what’s going to continue to drive them to continue to go to that mall into the future. If that mall is in a market that has two or three other malls but the market really only needs one…it’s going to be hard to make a case that [all three] need to exist. They may keep going for a while. Malls don’t die of heart attacks. They don’t die overnight. It takes a very long time for a mall to go away. It could take five years, it could take 10, it could take 15. Once you’re comfortable knowing that that mall can survive in that market, it’s then, What can I do to improve upon the tenant mix that is there today?

There’s enough there you don’t need to sell open-air shopping centers?

Correct. I can comfortably say we’re the only team probably in the country that can say we focuws 100 percent of our time and efforts on covering the regional mall market, which is why we have, arguably, the biggest market share, because we’re just ingrained in this sector. 

What would you say is impacting malls besides e-commerce?

It’s changes in shoppers’ habits I would say and changes in the shopper demographic. I can give the example of, when I was growing up [in Holmdel, N.J.], it was always the mall where you bought everything, from soup to nuts. Right? Malls were woven into the social fabric. You hung out there. It was always where you sort of went shopping for back to school and holidays and everything in between. You first date at the movie theater was at the mall [and] you maybe ate at the food court.

screen shot 2018 01 09 at 12 10 56 pm NKF’s Regional Mall Guru Thomas Dobrowski Is Taking Retail Doom and Gloom in Stride
MALL FOR ONE: Dobrowski has had his hand in selling dozens of malls in his career, including Foothills Mall, at top, Mesa Mall, in the middle and College Square Mall, at the bottom.

What’s the biggest deal you’ve ever done?

The largest mall sale I ever worked on was a mall out in California called Stonestown Galleria, right outside San Francisco. We sold it for $312 million at the peak of the market [in August 2004]. It’s still a great asset. It’s still owned by [General Growth Properties].

What’s the last mall you sold?

Moreno Valley Mall in Moreno Valley, Calif. The all-in purchase price was $63 million. It was one of the bigger sales of 2017. It’s one of the best malls I’ve sold in the last five years.


It’s a complete contrarian story. This mall was foreclosed and taken over by CWCapital, a special servicer, in 2011. It’s one of the few malls, since they took ownership, it has only steadily improved year over year. And, it’s just a great case study in execution in terms of they brought in Round1 [entertainment company], they brought in Crunch Fitness, they brought in cool retailers that weren’t in that market before, and a lot of it has to do with Inland Empire California, which got hit really hard in the recession but has since emerged and exceeded expectations you can say in terms of population growth. And the mall stood to benefit from that. And we sold it to a private owner outside of Beverly Hills, [International Growth Properties]. This closed on Nov. 28, [2017].

How long does a mall typically take to sell?

Three to six months I would say is average. The time to sell them is not necessarily the part of selling malls that is most challenging.

What is?

It’s just the sheer complexity of the properties and the amount of time and effort that has to go into preparing offering materials and underwriting the asset that I think a lot of brokers would shy away from that, plus it’s a national product type and most brokers focus on regions, and that’s how most brokerage offices are set up. So we don’t sell anything in the immediate New York metro because there’s not really a mall market there.

Are you worried, with the death of mall stuff, about your future with this slice of the market?

I get that question a lot. A lot of people are like, Why do you put all of your chips in this basket, focus on this one product type? The answer is no. If you look at the peak of the market, there were 1,300 malls in the U.S., a well-established fact in 2007. Today, there are around 1,100. We’ve only lost 200 malls in 10 years’ time. If it took 10 years to get rid of 200 malls, is it another 10 or 20 of sales, trades, transactions to get these malls into the right hands of people that will really redevelop them, close them down and have them developed into something else? So, I think there’s a lot of runway left in terms of the number of sales that will happen over the next, call five to 10 years, and candidly, I think it’s only going to ramp up and increase. I think there’s going to be more transactions in 2018 than there were in 2017.

Source: commercial

Law Firm Bryan Cave Renews Its 100K SF in Midtown West for 15 Years

Bryan Cave is staying put in its 100,000 square feet on the 34th through 37th floors at 1290 Avenue of the Americas between West 51st and West 52nd Streets.

A company spokeswoman told Commercial Observer, “We have been very happy with our prime New York City location and look forward to continuing to welcome our clients from New York City and around the world who visit our offices.” The law firm has been in the space since 1989. The renewal commences in 2019.

According to Crain’s New York Business, which first reported on the news, rents for the firm’s space were in the high $80s per square foot. The deal is for 15 years, the Bryan Cave spokeswoman told CO. The law firm “will be undertaking a complete renovation of our space,” she said, noting it will become a “beautiful new work environment.”

Other tenants in Vornado Realty Trust‘s 41-story, 2.1-million-square-foot building office tower include investment management firm Neuberger Berman, with its global headquartersCushman & Wakefield, which last month expanded its offices to more than 200,000 square feet, and Morgan Stanley.

Glen Weiss and Edward Riguardi of Vornado represented the landlord in-house. Lewis Miller’s team at CBRE represented Bryan Cave, the law firm’s spokeswoman said. A spokesman for Vornado declined to comment and a spokeswoman for CBRE didn’t immediately respond to a request for comment.

Source: commercial

Amid Flat Market, Wells Fargo Ekes Out First Prize for 2017 NYC Commercial Lending

The Wells Fargo wagon pulled ahead of its Big Apple competition this year, as the global bank slid into first place among originators of commercial loans in New York City, according to new data from CrediFi.

The San Francisco-based institution wrote 49 commercial real estate loans cumulatively worth about $4 billion in New York City in 2017, edging out Morgan Stanley and Deutsche Bank, which held the top spot a year before. Signature Bank and JPMorgan Chase, which each originated nearly 400 commercial financings with much smaller average loan amounts, rounded out the top five.

The achievement represents less of a resounding Wells Fargo success than a slide in the fortunes of its competitors, the data show.

“In terms of raw dollar amount, Wells Fargo isn’t originating more in New York City now than it did in the first nine months of 2016,” the CrediFi report says. “But while financing by Wells Fargo remains stable, several other top lenders saw their origination decline this year, pushing Wells…to the top.”

While overall commercial lending in city was flat for the year, residential lenders found fewer opportunities to dig out their checkbooks. Compared with 2016 numbers, multifamily lending was down 19 percent to $26.3 billion in the city, according to the report.

Wells Fargo’s claim on the ranking’s No. 1 spot will come as a welcome counterpoint to an embarrassing stretch of bad headlines for America’s third-largest financial institution. Last September, the Consumer Financial Protection Bureau charged the bank $100 million in fines for creating around 2 million unauthorized consumer bank and credit accounts. Just two months later, Wells was forced to reach a $50 million settlement in response to accusations it had overcharged residential borrowers for post-default appraisals.

A spokesman for Wells did not immediately respond to a request for comment.

Meanwhile, two fresher faces had banner years of their own. LoanCore Capital Credit REIT, an investment vehicle of privately held LoanCore Capital, saw originations balloon nearly sevenfold during the year, growing to $400 million in the third quarter from just $60 million in the first.

And Madison Realty Capital found a home on CrediFi’s quarterly top-10 list for the first time in the third quarter, inching ahead of Bank of the Ozarks and Citigroup for the eighth slot in the standings.

“It’s been an active year, and we’ve definitely been filling the void in the market in terms of speciality finance and construction financing,” said Josh Zegen, one of the firm’s co-founders. “We’ve been finding some unique opportunities.”

Zegen cited Madison’s $300 million loan on Ceruzzi Holdings138 East 50th Street and a $270 million construction financing on All Year Management‘s apartment project in the old Rheingold Brewery building in Bushwick as two of the deals that rocketed his company onto the top-10 list.

Source: commercial

$79M CMBS Loan on Nebraska Shopping Center Sent to Special Servicing

A roughly $78.6 million loan backed by the Shadow Lake Towne Center in Papillion, Neb.—just 10 miles outside of Omaha—has been sent to special servicing, according to an alert last week from Fitch Ratings.

The loan was transferred to special servicer C-III Asset Management due to imminent maturity default as it neared its November 1, 2017 maturation date, after first being placed on the servicer watchlist in June. The borrower is currently marketing the property for sale and is negotiating with a potential buyer, according to watchlist commentary from Trepp.

The 10-year-term loan, which carries a fixed rate of 6.2 percent, was originated by the now-defunct Bear Stearns in October 2007, a month after Shadow Lake was constructed. It had an original securitized balance of $83.8 million, and the note comprises just under 15 percent of the roughly $537 million MSC 2008-T29, Morgan Stanley-sponsored mortgage backed securities transaction, according to information from Trepp. This marks the loan’s first trip to special servicing.

Bear Stearns provided J.P. Morgan Strategic Property Fund with $125.8 million to purchase the sprawling shopping center in 2007, according to a report from Commercial Real Estate Direct. Regional full-service real estate company RED Development—with offices in Phoenix, Ariz., Kansas City, Mo. and Dallas, Texas—leases and operates the property.

The 769,183-square-foot shopping center (636,297 square feet of which is security for the original acquisition loan), located at 7775 Olson Drive in Papillion, is anchored by troubled retail chain JC Penney, which occupies 102,593 square feet (or 16 percent of the building) on a lease set to expire in March 2027, according to tenant information provided by Trepp. In March, JC Penney released news that it planned to shutter 138 locations across the country. The company said in a release detailing the move that the store closures represent approximately 13 to 14 percent of its current store portfolio, but less than five percent of total annual sales.

The loan was placed on the servicer watchlist for the first time in June due to tenant occupancy concerns surrounding the bankruptcy announcement of one of its tenants, Omaha, Neb.-based Gordmans Stores, which filed for Chapter 11 protection in March 2017, listing $131 million in debt in its federal court filings. Gordmans occupied 50,271 square feet on a lease that was set to expire in 2020. The borrower is currently attempting to lease the vacant space and has received interest from several parties, according to Trepp watchlist commentary.

In April, Houston-based Stage Stores announced it bought out Gordmans from bankruptcy, closing on the roughly $40 million acquisition of inventory and selected assetsincluding a minimum of 50 Gordmans store leases and the rights to assume the leases of an additional seven stores and a distribution center, according to a press release from Stage.

Dick’s Sporting Goods is currently the locations next largest tenant, having leased 50,000 square feet on a lease that ends in January 2023. The mall also houses a TJ Maxx, a Best Buy and a Bed, Bath & Beyond—all on leases set to expire in 2023.

Source: commercial

What’s Happening With Chinese Investment in New York City Commercial Real Estate?

There was a lot of nail-biting from the New York real estate community heading into this year after hearing that the biggest whale in terms of investment might not be allowed to swim in our waters. We’re talking, of course, about China.

With China’s capital controls in place, the country was expected to tamp down outbound investment in 2017. While the number of New York City investment sales deals involving the country has dwindled significantly this year, China still represents the biggest cross-border player, according to Cushman & Wakefield.

Chinese investments dropped to 16 percent, or six, of the 38 foreign capital deals (excluding debt deals) in New York City in the first three quarters of the year, versus 28 percent, or 16, of 58 acquisitions at the same time last year, C&W data indicates.

Francis Greenburger, the chairman and chief executive officer of Time Equities, explained the issue in Commercial Observer’s survey for this year’s Owners Magazine: “Although there are exceptions, Chinese investors are subject to government restraints in arranging to transfer funds out of China. This has caused a reduction in transactions by one of the most active group of New York City buyers.”

But in terms of dollar volume the dip in Chinese investment in New York City hasn’t been dramatic, and the country still has spent more than its competitors. Chinese investments made up 11 percent of the $24.51 billion spent on commercial real estate in New York City this year through September compared with last year’s 13 percent of $45.87 billion.

Despite a slowdown in deal flow and a reduction in investment sums, the Chinese have been going for big deals in New York City.

“Starting in 2016 through the first half of 2017, China surpassed Canada as the largest foreign investor in New York City,” said investment sales broker Douglas Harmon of C&W. “Capital controls caused Chinese buyers to participate in less transactions, but the capital was consolidated into the larger deals.”

Harmon and colleague Adam Spies are representing SL Green Realty Corp. in the sale of a 49 percent stake in a 54-story office tower at 1515 Broadway between West 44th and West 45th Streets to China Investment Corporation (CIC), a Chinese sovereign wealth fund. It is a property valued at $2 billion. A spokesman for SL Green said the deal has not closed.

In the priciest foreign property acquisition of the 12 months ending in October, Chinese conglomerate HNA Group paid $2.21 billion for 245 Park Avenue between East 46th and East 47th Streets. The sellers were Canada-based Brookfield Property Partners and the New York State Teachers’ Retirement System. The deal represents one of the highest prices ever paid for a Manhattan office property. (HNA also bought a mansion at 19-21 East 64th Street for $79.5 million this year.)

At the end of last year, CIC bought a 45 percent interest in the former McGraw-Hill Building at 1221 Avenue of the Americas between West 48th and West 49th Streets from Canada Pension Plan Investment Board. The property was valued at $2.29 billion.

Two other large Chinese acquisitions in the last year include WanXin Media’s $68 million buy of an office building and vacant lot at 7-15 West 44th Street and office developer Soho China picking up the landmarked John Pierce Residence at 11 East 51st Street for $30 million.

Alex Foshay, a senior managing director in Newmark Knight Frank’s capital markets division, said the Chinese government’s restrictions have “really strangled all major investment out of mainland China.”

Foshay cited as an example, China’s Anbang Insurance Group’s pulling out of an investment in 666 Fifth Avenue. Kushner Companies was planning to redevelop its flagship New York office tower with Anbang but talks terminated in March.

Terrence Oved, the head of the real estate department and a partner in the law firm Oved & Oved, said he has seen the drop off in acquisitions generally, and those that are closing are taking longer to complete.

“That rapid-fire tennis-match-like quality that we saw in 2016 [between players] is glaringly absent in the foreign transactions in 2017,” Oved said. “The perception of foreign money is that New York is in the later stage of the cycle.”

Also, Oved said, New York City is facing global competition from other world cities that weren’t as competitive the last few years. He pointed to Silicon Valley’s appeal to the tech company likes of Amazon, Facebook and Microsoft.

HFF’s Andrew Scandalios said that deal flow is down this year because properties are overpriced.

“Buyers are less enthusiastic to pay 2015 prices, and the sellers aren’t going to move [them],” he said. “We haven’t seen the offshore capital abate. It’s just they’re waiting for better pricing opportunities.”

Scandalios worked on the deal in which Singaporean sovereign wealth fund GIC picked up a 95 percent stake in the 50-story office tower at 60 Wall Street from Paramount Group and Morgan Stanley with a $1.1 billion valuation. (He also helped secure GIC’s $550 million acquisition loan from German bank Aareal Capital.)

In the summer, Germany-headquartered Allianz SE contributed the 18-story, 352,000-square-foot office building at 114 Fifth Avenue (which it acquired in 2015 with L&L Holding Company) into a then-new joint venture with Columbia Property Trust to buy and manage U.S. trophy properties. Columbia contributed a Palo Alto and San Francisco property to the venture. The three properties were valued at $1.3 billion and HFF negotiated the deal.

Commercial real estate deal volume is down this year for all foreign buyers in New York City as of the third quarter to 28 percent of all investment sales, C&W found, from 34 percent a year prior. (A look at foreign investment in New York City is limited to investment sales deals because debt and equity transactions are harder to track.) The findings parallel the nationwide trend. As of mid-2017, foreign investors represented 13 percent of all U.S. transactions by volume versus 16 at the same point in 2016, Real Capital Analytics data indicate.

Foshay said that a number of overseas buyers are “skeptical” about plunking down large sums of money (over $150 million) in the U.S., out of concern about “where we are in the cycle.”

This doesn’t mean, of course, that foreign investors aren’t seeking out deals nationwide. And Canada heads the procession.

Canada has sealed 255 U.S. commercial real estate acquisitions in the last year, followed relatively closely by China with 215 before dropping off significantly with Singapore and its 36 deals, RCA data show.

In the last year, Canadian entities have closed some notable purchases in New York City. Oxford contributed $65 million in a $130 million deal for 427 10th Avenue and Brookfield Property Partners input $185 million of $370 million for 1100 Avenue of the Americas. In addition, Canadian pension fund Ivanhoé Cambridge and Chicago-based Callahan Capital Properties paid $652 million for Goldman Sachs’ former headquarters at 85 Broad Street (Ivanhoé Cambridge invested $326 million in the deal).

Finally, Canada-based Oxford Properties Group is in the process of purchasing the St. John’s Terminal site at 550 Washington Street from Westbrook Partners and Atlas Capital for $700 million.

In New York City specifically, foreign investment has been dropping because of a dearth of trophy property on the market, according to a couple of brokers.

“There just wasn’t as much property available this year as there was last year,” said CBRE’s William Shanahan, who along with CBRE’s Darcy Stacom brokered the 245 Park Avenue deal.

The duo also sold the 31-story office building at 685 Third Avenue for TH Real Estate and Australian sovereign wealth fund the Future Fund, to Japanese real estate firm Unizo Holdings for $467.5 million.

Foshay concurred about the lack of inventory.

“I would say there has been a lack of trophy product to be purchased,” he said, but “there’s been quite a lot of availability in investment sales of non-trophy assets, meaning Class B product, and it is that trophy investment product that particularly appeals to overseas investors.”

Going forward, Shanahan expects to see “more participation” from Japanese investors.

Harmon said, “We think Chinese investment should pick back up in the first quarter of 2018. Additionally, South Korea, Japan, Norway, Saudi Arabia and Canada make for plenty of competition for domestic investors in 2018.”

Source: commercial

Related Purchases Pacific Center in the South Bay of Los Angeles for $107 Million

Related Fund Management, a subsidiary of Related Companiespurchased the Pacific Center in Torrance, Calif. earlier this month, Commercial Observer has learned. The 306,765-square-foot office building located in the South Bay—part of the Los Angeles metropolitan area—was nabbed from Stream Realty for $106.8 million, according to a source familiar with the deal.

“This is the undisputed nicest property of this kind in the area,” Ryan Gallagher of HFF, who represented Stream Realty, told CO, pointing to its location as well as property upgrades. Stream, headquartered in Dallas, with offices in Sansunk, spent over $6 million for a full exterior landscape, lobby, bathroom and corridor upgrades after purchasing the property in 2015 for $68.5 million.

Proximity to the far costlier and in-demand coastal communities of Santa Monica, Venice and Playa Vista—dubbed “Silicon Beach” for the confluence of major tech companies like Google and Facebook and startups setting up shop there—also adds to its marketability according to Gallagher, who said vacancy rates in Silicon Beach are a miniscule 6 percent.

The Center at 21250 Hawthorne Boulevard sits at the heavily trafficked intersection of Hawthorne and Torrance Boulevards across from the Del Amo Fashion Center, the 2.3-million-square-foot super-regional shopping center which recently underwent a $500 million renovation.

The eight-story building is currently 91 percent leased and counts Bank of America, Morgan Stanley, Wells Fargo and Barrister Executive Suites among its tenants.

“We viewed the Pacific Center as a great asset with a diverse roster of marquee tenants and an excellent location,” a spokeswoman for Related Fund Management told CO, which plans on upgrading amenities including the addition of a fitness center and on-site café.

The Real Deal first reported news of the sale.

Source: commercial

A Slimmed Down Clinton Foundation Heading to 1633 Broadway

The Clinton Foundation is moving its offices from 1271 Avenue of the Americas to 1633 Broadway, Commercial Observer has learned, months after the shutdown of the foundation’s Clinton Global Initiative.

“Our lease is up at the end of the year, and as part of major renovations to our current building, all tenants have been asked to vacate,” a foundation spokesman said.

According to sources with knowledge of the deal, the 20-year-old charity took 36,393 square feet, or the entire fifth floor, via a sublease from ad delivery firm Extreme Reach at 1633 Broadway. The deal is for 11 years, with an asking rent of $58 per square foot.

Extreme Reach occupies the fifth and sixth floors of Paramount Group’s 48-story, 2.6-million-square-foot building between West 50th and West 51st Streets, and will consolidate onto the sixth floor.

Another tenants in the building includes law firm Arent Fox, which inked a deal for 76,000 square feet in August. Other tenants include Allianz Global, Morgan Stanley and Warner Music Group.

The Clinton Foundation is relocating from the 42nd floor at 1271 Avenue of the Americas between West 50th and West 51st Streets as the building undergoes a $325 million renovation, as The Wall Street Journal previously reported. CoStar Group indicates the foundation’s office there is 30,044 square feet.

Former President Bill Clinton created the foundation in 2001 as a way to fund his presidential library, The New York Times reported. Created in 20015, the Clinton Global Initiative served as a networking platform for The Clinton Foundation. In January, a Worker Adjustment and Retraining Notification Act (WARN) notice filed with the New York State Department of Labor indicated that 22 people would be losing their jobs due to the discontinuation of the Clinton Global Initiative, as Observer previously reported. The layoffs were to be effective as of April 15, according to the WARN notice, but a New York Times article dated Feb. 2 indicates the shutdown had been completed by that point.

The foundation spokesman assured: “The Clinton Foundation’s work has continued strong in 2017.”

CBRE’s Keith Caggiano and Roshan Shah represented the foundation in the deal and Mark Weiss and Seth Hecht of Cushman & Wakefield worked on behalf of Extreme Reach. CBRE’s spokeswoman declined to comment and a spokesman for C&W didn’t immediately respond to an inquiry.

Source: commercial

RXR, SL Green to Buy 49 Percent Stake in $1.7B Worldwide Plaza

 RXR Realty and SL Green Realty Corp. have entered into an agreement to purchase a 48.7 percent stake in Midtown West’s Worldwide Plaza from New York REIT with an agreed-upon property value of $1.7 billion, sources familiar with the transaction told Commercial Observer.

New York REIT will maintain a 50.1 percent equity interest, and George Comfort and Sons will continue to own the remaining 1.2 percent that it currently owns, sources said.

The deal on the trophy asset is expected to close in the fourth quarter. Further details regarding how the acquisition will be financed could not immediately be gleaned. 

The Real Deal first reported in July that the RXR-SL Green partnership was the front-runner to purchase the trophy asset.

Worldwide Plaza is a mixed-use building at 825 Eighth Avenue between West 49th and West 50th Streets. Its 2.1 million rentable square feet includes approximately 1.8 million square feet of office space.

Harry Macklowe owned Worldwide Plaza before defaulting on his loan and handing the asset over to lender Deutsche Bank in 2007, The Wall Street Journal reported at the time. The bank sold it two years later to George Comfort & Sons and RCG Longview for the bargain price of $600 million.  

In November 2013, New York REIT—then known as American Realty Capital New York Recovery—bought a 48.9 percent stake in the property for $220 million. The deal faced backlash from RXR at the time, which filed a lawsuit against the REIT for $200 million—alleging that RXR was promised the stake in the tower.

New York REIT marketed its almost-49 percent-stake in Worldwide Plaza in January, before choosing to exercise its equity option to buy an additional 49.9 percent stake in the property in June (bringing its equity interest up to 98.8 percent).

Both RXR and SL Green have been actively closing deals on trophy properties recently.

In July, RXR closed a $850 million refi for 237 Park Avenue. As previously reported by CO, a $477.8 million portion of the $693.2 million whole loan on the property—co-originated by Morgan Stanley (65 percent) and Société Générale (35 percent) was securitized by the lenders in the MSSG 2017-237P single-asset, single borrower commercial mortgage-backed securities deal. (A further $87.8 million in mezzanine debt is also in place on the property, with up to $69 million in future subordinate mezzanine financing permitted, bringing the total debt on the building to $850 million.)

And SL Green and Vornado Realty Trust recently closed a $1.2 billion refinancing of 280 Park Avenue, also with a securitization execution, with lenders Deutsche Bank, Goldman Sachs, Citi Real Estate Funding and Barclays Bank.

Spokeswomen for RXR and SL Green declined to comment.

Source: commercial