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Category ArchiveNewmark Knight Frank

Premium Merchant Funding Leaving Trump Building for 16K SF at 55 Water

A financial institution for small businesses, Premium Merchant Funding, has sub-subleased 15,965 square feet from foreign exchange trading firm Forex Capital Markets in the Financial District, Commercial Observer has learned.

Premium Merchant Funding will occupy 15,965 square feet on the 50th floor at 55 Water Street via an eight-year sub-sublease, as per a source. The asking rents were in the mid-$50s per square foot. Premium Merchant Funding will relocate from the Trump Organization‘s Trump Building at 40 Wall Street next month.

Forex took the 60,000-square-foot 50th floor in the 52-story, 3.6-million-square-foot building between Old Slip and Coenties Alley in a 2011 sublease, according to Real Estate Weekly at the time. At this juncture, Forex had excess space to give up, and Premium Merchant Funding had grown out of its 10,000 square feet at 40 Wall Street. The new sub-sublease transaction closed last week.

David Ofman of the Lawrence Group represented Forex in the deal. Newmark Knight Frank’s Paul Ippolito and Cushman & Wakefield’s Stephen Burke represented Premium Merchant Funding. Ofman and a spokeswoman for NKF didn’t immediately respond to a request for comment, and Burke declined to comment via a spokesman.

The Class-A office building is owned by Retirement Systems of Alabama. Tenants include S&P Global, New York City Department of Transportation and Teachers’ Retirement System.

Source: commercial

ACORE Lends $97M for JV Purchase of NJ Corporate Center

ACORE Capital provided $97 million to a joint venture of Rubenstein Partners and Vision Real Estate Partners (VREP) to facilitate the acquisition and capitalization of the Morris Corporate Center East & West in Parsippany, N.J., Commercial Observer can exclusively report.

Terms of the financing weren’t disclosed. The loan went towards the acquisition of one of the adjoined office buildings as well as to fund capital improvements aimed at adding amenities and attracting and leasing future tenants at the location.

The financing was arranged by Newmark Knight Frank’s Jordan Roeschlaub and Dustin Stolly, vice chairmen and co-heads of the firm’s debt and structured finance division, along with Managing Director Nick Scribani, sources told CO. NKF declined to comment on the transaction.

morriscorpcenter credit nkf 2 ACORE Lends $97M for JV Purchase of NJ Corporate Center
Entrance to Morris Corporate Center IV. Courtesy: Newmark Knight Frank

“Morris Corporate IV is the newest and highest quality asset within Morris Corporate Center. The superiority of the property, coupled with Rubenstein and Vision’s track record with office repositioning strategies, made this a great lending opportunity for ACORE,” ACORE Managing Director Jason Hernandez told CO. “ We are confident that we have best-in-class local sponsorship and a thoughtful, well-capitalized business plan to make the property the premier option for tenants (both large and small) in the market.”

NKF—out of it’s New Jersey office—also represented Intercontinental Real Estate Corporation and Ivy Realty in the sale of the property, which is also referred to as “Morris Corporate Center IV phase two.” Intercontinental and Ivy first purchased the building from MetLife in 2015, Globe Street reported in January.

Rubenstein and Vision purchased the other building in the assemblage—called “Morris Corporate Center IV phase one”—from SJP Properties, which is the original developer of the buildings, and Northwestern Mutual earlier this year. Cushman & Wakefield brokered the deal for the sellers and announced the transaction on February 28.

Built in 2000, according to the campus’ website, the two four-story office buildings are a combined 702,707 square feet and are situated at 389 & 399 Interpace Parkway within the Morris Corporate Center campus. The buildings are connected by a large, glass atrium lobby. “Morris Corporate Center IV phase one” is currently 71 percent occupied by four tenants, including U.K.-based Reckitt Benckiser and New Jersey-based management services company Skanska USA Building, Inc., according to information from C&W.

A spokeswoman for Rubenstein Partners did not immediately return a request for comment. Vision Real Estate Partners declined to comment on the deal.

Source: commercial

Financial Firm B. Riley Inks 29K-SF Deal at 299 Park Avenue

Financial services firm B. Riley Financial has agreed to a lease for 29,173 square feet at Fisher Brothers299 Park Avenue, Commercial Observer has learned, in a deal that will see the tenant remain in the Midtown East building while relocating to a new full-floor space.

B. Riley signed a 10-year deal for the entire 21st floor at the 42-story, 1.2-million-square-foot office tower between East 48th and East 49th Streets, according to sources with knowledge of the transaction. Asking rent was $95 per square foot.

The firm is expected to move into its new offices this August from its current 28,320-square-foot location spanning the entire seventh floor of the building. Los Angeles-based B. Riley inherited the seventh floor footprint through its June 2017 acquisition of investment banking and brokerage firm FBR & Co., which had occupied the space since 2004.

“After considering other alternatives in the area, [B. Riley] determined this location provided the level of quality and service best suited for their needs,” Fisher Brothers Partner Winston Fisher said in a statement. Bryant Riley, B. Riley’s chairman and CEO, added in a statement that the company was seeking an environment for clients and employees that “meets our standards” and that “299 Park Avenue proved to be the right fit for us.”

Jared Horowitz and Justin Pollner of Newmark Knight Frank represented the tenant in the deal, while Marc Packman and Charles P. Laginestra represented Fisher Brothers in-house. Representatives for NKF did not immediately provide comment.

The deal with B. Riley takes 299 Park Avenue to more than 90 percent leased, according to Fisher Brothers. The landlord has signed a slew of financial services tenants at the property in recent months, including commodities trader Traxys Group, which agreed to take nearly 30,000 square feet; hedge fund King Street Capital Management, which inked a 60,000-square-foot deal; and asset manager Varagon Capital, which signed a roughly 28,000-square-foot lease. Other tenants at the property include major banking firms UBS and Capital One.

Fisher Brothers is set to kick off a $20 million capital improvement program at the 1967 building later this year. The Rockwell Group-helmed renovation will yield a redesigned lobby and building entrance and an illuminated plaza backed by a new exterior lighting system, according to the landlord.

Source: commercial

Arch Companies Nabs $45M for Development of SoHo Rental Building

Still fresh off a New Year’s launch, Arch Companies has secured a $45 million loan from Maxim Capital Group for the development of its first New York asset—a planned six-story, mixed-use residential building at 11 Greene Street in SoHo—the borrower announced Wednesday.

Arch has joined a consortium of investors on the project, taking over from Thor Equities, which previously spearheaded the project’s development, Jeff Simpson, a co-founder of Arch and the former CEO of Greystone Development, told Commercial Observer. Simpson declined to identify the project’s investors or provide specific loan details.

The deal closed last week, and construction is slated to wrap sometime next year.

“I think generally, a rental in SoHo is very unique,” Simpson—who left Greystone to start Arch in December 2017 with colleague Jared Chassen, who was Greystone Development’s director of acquisitions—told Commercial Observer. “There really aren’t any high-end rental and luxury products in the area, but there are condominiums. We’re—generally, at this point in the cycle—very selective in the market and we’re a little more reserved on condominiums.”

Thor was bought out of its partnership in the deal and Arch Companies was brought in to manage the development, eventually obtaining a construction lender to capitalize the project, according to a spokesperson for Arch.

A spokesman for Thor declined to comment on the company’s past involvement in the project or when exactly it exited the partnership.

11greenestreet dev site Arch Companies Nabs $45M for Development of SoHo Rental Building
The development site at 11 Greene Street. Courtesy: CoStar Group

The project—designed by Gene Kaufman and already underway—will feature 31 luxury rental apartments across roughly 54,648 square feet as well as 11,650 square feet of ground-floor retail space along 240 feet of frontage on Greene and Canal Streets.

“We are currently going vertical and the steel’s being erected,” Simpson said. He said that the retail portion of the project is already garnering attention from several possible suitors but declined to provide specifics.

In May 2014, Jason Pruger, an executive managing director at Newmark Knight Frank, told The Real Deal that some are banking on the transformation of Canal Street into a draw for high-fashion-brand tenants, saying,“it will take a pioneer to make that happen.”

“Arch has made its mark with new acquisitions and ground up development, and it hasn’t taken the company long to demonstrate its entrepreneurial spirit,” Brian Steiner, principal and co-founder of Maxim Capital Group, said in prepared remarks. “At Maxim, we appreciate pioneers, and in our commitment to lending, visionary companies like Arch are top-priority on our list of potential partners.”

This project marks the fourth addition to Arch’s portfolio since the company’s January launch. The firm has closed on the acquisitions of a value-add multifamily property and a single-tenant office building in Los Angeles and has picked up a development assemblage in a Miami suburb.

Maxim Capital could not immediately be reached for comment.

Source: commercial

Knotel Takes More Office Space in NoMad, Penn Plaza

Office provider Knotel is opening another two Manhattan locations spanning a combined 16,000 square feet, the company announced today.

At 102 Madison Avenue, Knotel signed a 10-year lease for the entire 10,000-square-foot fifth floor at the 12-story, 128,000-square-foot building on the northwest corner of East 29th Street in NoMad.

Broker Andrew Weiss of Signature Partners represented the firm in the transaction, while Robert Silver and Anthony Sciacca of Newmark Knight Frank represented the landlord, Westchester County-based family-owned firm A. Ruth & Sons Real Estate. Weiss confirmed the deal but declined to provide additional comment, while a spokeswoman for NKF did not immediately provide comment on the transaction.

Additionally, at 115 West 30th Street in the Penn Plaza area, Knotel announced a five-year “management agreement” that will see it take 6,000 square feet on the fifth floor of the 12-story, 166,000-square-foot building between Avenue of the Americas and Seventh Avenue.

It was not immediately clear whether or not the management agreement at the property also took the form of a lease. Eugene Lee, Knotel’s global head of real estate and business development, said in a statement that such management deals “enable owners to immediately increase income from their spaces by introducing flexibility into their buildings, while allowing Knotel to expand its footprint quickly on favorable terms.”

The transaction at 115 West 30th Street was a direct deal between Knotel and landlord Justin Management, the office provider said. Representatives for Justin Management could not immediately be reached for comment.

Asking rents in both agreements were not immediately clear. Knotel—which provides flexible, short-term office arrangements to companies who take their space from the firm—said it expects both locations to open in the early second quarter of this year.

Source: commercial

In Gateway Cities, Are Investors Seeking Pure Yield—or Something More Subtle?

New York is often called a global gateway city, a phrase that calls to mind its status as a mecca of international commerce: one among a select group of critical nodes in the world economy with an unquestionable rank among the most magnetic destinations for real estate investment. The Big Apple, London, Paris, Tokyo—it seems almost self-evident that these hubs of finance and culture ought to be international investors’ can’t-miss first choices for buying real estate abroad.

But is New York City’s prime place on the list of sought-after real estate markets a simple matter of dependably eye-catching yields?

According to New York-based financial indexer MSCI, not necessarily so.

In research published late last month, the firm studied 10 years of data to suss out whether those four cities—outstanding by so many measures—consistently outperformed their peers in the returns they offered to real estate investment. The authors’ findings defied the conventional wisdom that gateway cities are a surefire bet for solid returns.

“Our analysis found the office sector in global gateway cities did not provide superior unadjusted returns over the decade ending 2016, based on annualized total returns,” Amit Nihalani, the paper’s lead author, wrote.

Instead, it’s a collection of deeper, less tangible virtues that keeps cities like New York the world’s most compelling investment opportunities.

Beyond the gateways

Pure capital growth in gateway cities did indeed outshine price increases in lesser markets over the last decade, a trend that was likely driven by barriers to supply creation in big cities as demand for well-located professional office space recovered following the financial crisis. But income returns in gateways tended to lag behind what regional and third-tier cities offered, making a rank-order list by annualized total returns of the 81 locations studied a muddle of gateway cities, regional centers and surprising competitors.

Three South African cities, Durban, Johannesburg and Cape Town—none of which is considered a global gateway—were the top global performers between 2006 and 2016, each with an office market earning annualized total returns above 12 percent. Vancouver, Canada, and Melbourne and Adelaide in Australia—three cities that don’t even make MSCI’s third tier of global significance—rounded out the top six.
By contrast, London—the highest-ranked global gateway—came in at No. 26, with an annualized total return just more than half those of the highest-performing metropolises.

That makes a catholic attitude towards capital allocation essential for those seeking yield at a time whenever more investors are considering deals abroad.

“Amongst our client base, we see a general interest in investing more globally,” said Will Robson, MSCI’s London-based head of real estate research, in explaining what prompted the study. “Pan-regionally, you also see a lot more investors talking about city-based strategies, as opposed to national markets.”

Traditionally, investors have been less facile with adopting foreign real estate than they have been at exploring corporate equities across borders. And when buyers do venture into real estate markets farther from home, they might be too intimidated to feel comfortable with spending in any but the most well-understood markets—which might impede them from finding better prospects that lie far from the beaten path.

“If you compare real estate to equities, there’s a much stronger domestic bias in investors’ [real estate] portfolios,” Robson said. “Understanding the dynamics in a large number of cities is operationally difficult.”

Adjusting total return for national effects dampened the researchers’ results, suggesting that within a given country, gateway cities could well be the best bet. Once national growth rates were subtracted from the data, San Francisco was tops in the world, with real estate assets growing nearly 3 percent faster than the broader U.S. London came in sixth, outpacing the overall U.K. rate by about 2 percent.

But the data suggest that country-agnostic investors looking for yield should give second- and third-tier cities the world over a careful look. Ten smallish cities in North America, Africa and Australia—places like Perth, Australia; Winnipeg, Canada and the South African trio already mentioned—outpaced even Europe’s best performing market, Stockholm.

The problem is that that strategy often runs up against what investment boards and credit committees need to hear before becoming comfortable enough to give international spending the okay.

When foreign equity funds and sovereign wealth funds “are trying to appeal to investors at home, they can sell New York, and they can sell Chicago. But in Shanghai, they might not know what Charlotte, [N.C.] is,” said Michael Wolfson, who researches capital markets for Newmark Knight Frank. “A lot of international investors, after they do a couple deals in safe-haven markets, they move onto where the yield is.”

To be sure, some do. GIC—Singapore’s sovereign wealth fund—and the Canada Pension Plan Investment Board have teamed up to become major equity players in U.S. student housing markets from Arkansas to Minnesota, laying out nearly $3 billion over the last 12 months in an effort to gobble up assets with good income returns. (Neither company offered a comment for this article.)

But in general, foreign real estate investors may hew to a traditional gateway-city approach because they are not as single-mindedly yield obsessed as some of their domestic-focused counterparts. Instead, other perks not on offer closer to home may entice them towards marquis real estate hubs like New York City.

Steady as she goes

Indeed, a remarkable confluence of factors—not just yield—would appear to have produced a golden moment for foreigners to invest in real estate in America’s biggest cities. For one thing, investors are attracted by the idea that New York City real estate is permanently enticing.

“There is a tremendous amount of liquidity [in New York City], which you don’t have in secondary and tertiary markets,” said Robert Knakal, the head of New York investment sales for Cushman & Wakefield. “While your yields may be higher [in smaller markets], your exit may be less certain. Here, over the past 50 years, the peak of each successive cycle has exceeded the peak at every prior cycle.”

Wolfson agreed, pointing out that wealthy individual investors from abroad treat their New York real estate holdings like cash deposits. The prime virtue in holdings there is in value that can dependably be withdrawn in a pinch, regardless of how well it appreciates.

“If you’re a high-net worth individual overseas, [investment in gateway cities] is more of a bank account,” Wolfson said. “It’s more or less about keeping the cash at the levels they bought it at.”

Of course, a liquid savings balance counts for little if the bank holding it isn’t reliable, so relative stability is another crucial mark in America’s favor. As volatile and gridlocked as American government has grown, it still may compare favorably to local practices abroad.

“If you look at America from an American’s perspective, we think our political system is dysfunctional. But if you look at us in the context of a global economy—and from a global political perspective—we offer significant political stability,” Knakal said. “We offer economic stability relative to most places around the world.”

Indeed, the U.S. might appear a stable investment destination not in spite of today’s raucous political environment, but because of it.

“I actually think that some of the turmoil in Washington has demonstrated the stability of the institutions [of government],” said Doug Duncan, the chief economist at Fannie Mae. He pointed out that on inflammatory political and social issues like immigration reform, gun control and corruption, politicians still defer to courts’ legal rulings and interpretations, demonstrating that the rule of law still holds more sway here than any interest group or political initiative.

That might be more than you could say of China, which recently, by all appearances, detained Wu Xiaohui, the head of one of its largest insurance companies, Anbang, for six months before even indicting him on ill-defined charges of “economic crimes.” Anbang maintains significant U.S. real estate holdings—New York’s Waldorf Astoria and Essex House are among more than a dozen American hotels the company controls—positions rumored to be up for sale now that the Chinese government has seized control of the firm.

The lack of transparency with which the Chinese government has proceeded only underscores the comfort that America’s legal foundation offers foreigners.

“If you are a very wealthy person somewhere around the globe, you have [good reason] to feel very, very confident about deploying capital into the U.S.,” Knakal said.

Even the most basic quality-of-life issues, largely taken for granted in New York and other gateway cities, may be less of a sure thing in some of the high-growth markets MSCI singles out. Cape Town, South Africa, for example—one of the cities that performed the best over the past decade in MSCI’s data—has been suffering through a calamitous drought since 2015, creating a water shortage exacerbated by a swift population expansion that has outpaced the city’s infrastructure. Without a deluge of summer rains or a massive new effort to desalinate seawater, the city is expected to run dry of potable water by mid-July. BusinessTech, a South African website for business news, found in interviews with local companies and government officials that many fear that if “Day Zero” (the date on which the municipal taps get switched off and Cape Town dwellers are allocated a daily ration of 25 liters) arrives, the economy could grind to a halt.

To make matters worse for property investors, South African lawmakers are moving towards a constitutional amendment that would grant the government permission to seize privately owned land without compensation at will, raising a long-term threat to the sanctity of the nation’s property rights.

And Cape Town isn’t the only city where impressive returns to real estate coexist alongside existential risks. Seoul, South Korea’s real estate market has yielded higher returns than any American city other than San Francisco over the last 10 years, but its position just 25 miles from the North Korean border would likely make the South Korean capital North Korea’s first target if tensions between the countries boil over into a military conflict.

America’s immense military power helps ameliorate similar concerns when investors look at opportunities here. Their interest in U.S. real estate as a stable place to park assets is decidedly manifest “in terms of international security,” Duncan affirmed. “The U.S. has bar none the world’s strongest military. [That represents] an investment in maintaining lines of trade.”

It’s the macroeconomy, stupid

For all the political factors undergirding foreign investment in America’s premier gateway city, the underlying economic environment the United States can pitch to international financiers today may be the most compelling attraction of all.

Although some monetary economists argue that the Federal Reserve was less proactive in counterbalancing the financial crisis and the subsequent recession than the conventional wisdom suggests, none can deny that America’s central bank responded far more aggressively than its European counterpart. From the second half of 2007 through the end of 2008, as the U.S. banking system threatened collapse, the Fed cut the federal funds rate 97 percent to nearly zero from a hair above 5 percent. The European Central Bank (ECB), on the other hand, responded much more gradually: its 4.25 percent headline rate in mid-2007 didn’t fall below 1 percent until five years later.

As a result, a relatively strong U.S. economy recovered much more quickly, enough so that the Fed became willing to begin raising the federal funds rate again at the end of 2015—before the ECB’s rates had even bottomed out.

That economy-wide strength has translated into dependably positive returns on U.S. investments at a time when benchmark rates in Europe and Japan remain negative. And, somewhat curiously, the dollar has simultaneously weakened against each of those region’s currencies over the last six months, further sweetening the deal for foreign buyers.

At press time, a dollar bought about four-fifths of a euro, down about 14 percent from this time last year. And at the greenback’s high in early March, 2017, one dollar cost about 115 yen. In January of this year, the dollar fell to a discount of about 8 percent off that level, though it has retreaded slightly since then.

That’s a counterintuitive shift that economists like CME Group’s Blu Putnam don’t see a single easy explanation for.

“It is interesting—[former Federal Reserve Chairman] Alan Greenspan would have called it ‘a conundrum,’ ” Putnam said. “You would have expected to see some strengthening in the dollar.” He suggested that foreigners may fear that recent U.S. expansion is accelerating into territory where continued price increases will be fueled by inflation rather than by real growth, somewhat curbing their eagerness to climb aboard.

Or, it could reflect waning confidence in an up cycle going on 10 years old.

“This is approaching the second-longest expansion we’ve ever had,” Putnam noted.

Experts hasten to point out that cross-border investors arbitrage currency imbalances only at their own peril. Money prices evolve in a random walk, they say, making it nearly impossible to time trades like real estate deals to advantageous dips in the value of the target country’s currency.

“If you want an opinion in which direction is the dollar going to go, that’s very, very hard to do,” said Thomas Mertens, an economist at the San Francisco Federal Reserve. “Exchange rates are just inherently hard to forecast.”

Somewhat less opaque are the effects that the real estate world expects from December 2017’s fiscal stimulus—in the form of corporate and individual tax breaks—to have on the business cycle. Seyfarth Shaw’s February survey of more than 150 owners, developers and investors found that 58 percent believed the tax cuts would extend the current cycle for another year or two, while 17 percent more thought the effects would be even longer lasting than that.

“In the general scheme of things … we’re seeing that the cycle should continue through 2019 and 2020 based on the tax act, growth factors [in the United States] and international growth,” said Ron Gart, a partner at Seyfarth Shaw. He added that the investors believe the federal funds rate this year looks likely to hit a sweet spot, rising enough to reassure the market of solid economic growth while keeping financing loose enough for deals to get done.

An enduring role

All those variables combine to bestow upon western gateway cities a comfortable niche within global asset managers’ portfolios, said Ted Willcocks, the global head of asset management for Manulife, the insurer that gobbled up John Hancock Financial in 2004.

“We invest the majority of our funds on behalf of our general accounts, and we need to backstop the liabilities,” Willcocks said. “Real estate is traditionally an alpha to a fixed-income portfolio, meaning it might return 9 percent over 30 years.”

That’s a long-run niche that investing in stable growth markets can fulfill for Manulife with aplomb. Strong fundamentals—not volatile spikes—fit the bill best.

“The economy is rapidly changing throughout the U.S., with a number of cities becoming tech hubs,” Willcocks said. Now, he said, investors are most interested in asking, “ ‘Where’s the talent? Where are the jobs?’ ”

To the extent that New York and San Francisco answer that question more dependably than Durban, the city that MSCI found offered the highest returns, investments in those U.S. cities should remain attractive, even if exposure to income comes with a steeper price of admission.

Granted, MSCI found that over its 10-year horizon, returns in British, American and Irish cities were more volatile than in Asia or Continental Europe, but that statistic may actually mask an indication of strength. Those countries experienced the most severe banking crises in the late 2000s—but also recovered the quickest, leading to higher standard deviations than elsewhere.

The bottom line is that “over the very long term, many investors expect capital appreciation,” Robson said. “If there is a long-term investment horizon, the investors may be less concerned with year-by-year volatility as long as the long-term trajectory still looks good.”

Source: commercial

Changes Afoot at Savills Studley 

There’s a bit of musical chairs going on at Savills Studley, Commercial Observer has learned.

Facing retirement within the next few months, John Pantazis has stepped down from his COO post at the firm and has become an executive vice president and director as the firm transitions to a new COO, Mitchell Steir, the chairman and CEO of Savills Studley, told CO. Savills Studley former CFO Al Petrillo has become the COO.

No new CFO has been named, but Vic Russo, who was the senior vice president of finance under Petrillo, has assumed his former boss’ duties, Steir said.

“These are just personnel changes that happen within a company,” Steir explained.

The firm has also promoted Patrick McGrath to a newly created position of CIO and head of client technologies. He was the head of cross-border transactions at Savills Studley, executing traditional commercial real estate transactions and developing best practices, technology solutions and analytic tools for companies with multi-national footprints, a company press release about the new position provided exclusively to CO indicates.

In a more sweeping measure, Savills Studley—which came out of the 2014 acquisition by international real estate adviser Savills of U.S.-based tenant representation firm Studley—has promoted 87 professionals throughout the United States in all service offerings. Of them, 39 were made vice chairman, 17 of them in New York City, a spokeswoman said. One broker speculated that this move was done to try and retain its talent. Steir said that he didn’t think a title would “lead anyone to stay some place they don’t want to stay.”

Steir said the 800-person company is always promoting people, and naming people vice chairman for the first time “in many ways was long overdue.”

He added: “The vice chairman promotions is because if you look around at our peer group you’ll notice that there are hundreds of vice chairman that are employed and we have had none. So, the fact that we haven’t had any has been the anomaly. “

On the West Coast, Savills Studley suffered a blow with the loss of a big retail investment sales broker.

At the end of January, power broker Bill Bauman, who co-headed Studley’s national retail services group in Los Angeles, left for Newmark Knight Frank, as The Real Deal reported. He took with him his four team members, including Kyle Miller, according to Mark Sullivan, the regional manager of Savills Studley in Southern California. (Bauman and Miller didn’t immediately respond to requests for comment.)

Sullivan explained the Bauman team, which specialized in retail investment sales, as such: “It was a self-contained, self-sufficient team who for the most part worked together, closed deals together [and] didn’t have a lot of interaction with other professionals in the company.”

The team has already been replaced.

“The hole we need to fill was [retail] investment sales and we have filled that hole,” Sullivan said. The five “replacement” agents hail from CBRE and Colliers International.

Source: commercial

WeWork Ups Pay for Brokers at Trio of Firms Who Find and Fill Coworking Space

WeWork has signed agreements with CBRE, Cushman & Wakefield and JLL in North America, offering brokers at the firms greater compensation if they find and fill coworking space, Commercial Observer has learned.

“WeWork is unique in that as we become more sales driven with our real estate approach we can partner with real estate firms on both sides—on the site selection and lease sourcing side and the client member introduction side,” Julia Davis, the head of transactions and analytics for WeWork, told CO. “We are hoping to leverage those relationships.”

Brokers at CBRE, C&W and JLL will get a 20 percent fee on a one-year lease and 5 percent on expansions and renewals. That compares to the sums WeWork has been offering individual brokers across the board for the last year: 10 percent on year one of a lease and 2 percent for expansions and renewals, Davis said.

“WeWork will partner with these firms on a non-exclusive basis to source a set (i.e. agreed upon) square footage for WeWork locations in North America, and in return, the [commercial real estate] firms will introduce new clients to WeWork, leading to more closed sales and strengthened relationships,” according to bullet points WeWork provided to CO. Davis declined to provide the square footage.

The idea is that the CBRE, C&W and JLL brokers will be “ambassadors” for the brand, Davis said. WeWork will “reward those CRE firms that introduce new members to WeWork with additional real estate sourcing assignments,” the company promises.

It seems that WeWork’s efforts to ingratiate itself in the broker community are working.

“One-and-a-half years ago, there was little [broker] contribution,” Davis said. “Now it’s 20 to 25 percent of desks on a monthly basis due to brokerages across all markets company-wide.”

The partnership initiative is starting in North America and if successful, WeWork will scale it globally and establish other such relationships.

A broker at one of the partner firms said of the agreements: “It is a minor development. Not even sure what it means other then we will get a few assignments as will the others to find them space and offer WeWork [spaces] to our clients as an option.”

Another broker, at a different partner company, said that while he would put a tenant in a WeWork space if it was appropriate, the increased payout would not compel him to do so.

The office-space provider business has been getting increasingly crowded, and one broker suggested WeWork has upped the ante to one-up the competition.

But WeWork is not the only office space provider forging relationships with brokerages. Knotel has partnered with Newmark Knight Frank and secured an undisclosed investment from NKF’s Barry Gosin. (Gosin is also an adviser to Knotel.)

NKF “is a very valuable partner of ours. In addition to the partnership, they made a financial investment,” Eugene Lee, Knotel’s global head of real estate and business development, told CO. “It’s an integration between Newmark and Knotel where they’re helping us find spaces and bringing spaces they represent into Knotel.”

According to a January press release from Knotel: “The partnership will allow NKF’s audience of owners and other clients to have streamlined access to Knotel’s footprint across New York City, San Francisco and London.”

Lee said that unlike WeWork, Knotel is not increasing the pay for NKF brokers.

“We are paying them standard rates as they would get compensated in a standard lease format,” he explained.

So why would a NKF broker be inclined to put a tenant in a Knotel space?

Knotel will “give preference to the company we have a relationship with,” Lee said, when faced with multiple companies competing for floors.

As for what WeWork is doing, Lee said, “When you’re having to give promotional commissions and pay brokers to bring you members, that’s generally a sign of weakness. In general if you’re discounting and giving out promotional incentives, it’s not a good sign for the business.”

Spokespeople for CBRE and C&W declined to comment. A spokesman for JLL didn’t respond to a request for comment and a NKF spokeswoman didn’t respond with a comment.

Source: commercial

Company That Owns Jessica Simpson and Ellen Tracy Brands Grows at Starrett-Lehigh

Sequential Brands Group has leased more space at the Starrett-Lehigh Building, Commercial Observer has learned, bringing its footprint in the Far West Side property to 75,000 square feet.

The company, which owns, promotes, markets and licenses a portfolio of consumer brands in the fashion, active and home categories, has been in the 19-story building at 601 West 26th Street between 11th and 12th Avenues since August 1999. Sequential—with brands like Jessica Simpson and Ellen Tracy—initially leased the entire ninth floor, reduced its space to 63,000 square feet and is now tacking on an additional 12,000 square feet on that floor, according to information provided by the landlord, RXR Realty.

The new lease is for 15 years and asking rents at the property are in the low $60s per square foot to the mid $90s a foot depending on the view and whether the office has a terrace.

Newmark Knight Frank’s Lance Korman and Brian Cohen brokered the deal for the tenant and RXR’s Bill Elder and Denise Rodriguez represented the landlord in-house. A spokesman for NKF didn’t respond to a request for comment.

RXR has sealed 130,000 square feet of deals in the building since Thanksgiving including a 20,000-square-foot expansion and relocation for OXO (to 41,000 square feet) and a deal with the Collected Group, which moved into 16,572 square feet on Feb. 12.

Elder said in a statement: “We have constant interest in this property, coming from the most demanding and discerning tenants, and with very large requirements. Tenants appreciate the building not only for its iconic nature, but for the amazing community within the building, and robust upgrades to the asset to meet state-of-the-art needs for the companies occupying space here.”

Source: commercial

Natixis Lends $86M for Development of UES Medical Center

Natixis has provided approximately $86.25 million in financing to Joy Construction and Maddd Equities for the development of a Class-A office building at 330 East 62nd Street on the Upper East Side to be used as administrative offices for a cancer center, the lender announced.

The 24-month, interest only and floating-rate construction loan satisfies previous debt and provides additional capital to complete the development of the 110,727-square-foot office property, which was leased out in full to Memorial Sloan-Kettering Cancer Center for an initial term of 30 years in August 2017, according to records filed with the New York City Department of Finance. MSKCC intends to utilize the building for its administrative offices, according to information from Natixis. 

Kathy Anderson and Brad Domenico of Progress Capital negotiated  with Natixis to arrange the financing.

Justin DiMare and Howard Kesseler of Newmark Knight Frank were tapped to find the tenant for the building. Karl Fischer Architects is heading up the building’s design, according to The Real Deal.

“It’s the strongest medical neighborhood in the country, almost all the major hospitals in New York City have space on the Upper East Side,” DiMare told Crain’s in February 2014, just a few days after the borrowers acquired the property for $21 million from the Roman Catholic Archdiocese of New York, as Commercial Observer previously reported.

After the acquisition, the development group left the door open to possible uses for the building, announcing it was planning a project catered toward medical office, education use or student and resident-doctor housing, according to a news release from NKF. At the time, Eli Weiss, a principal of Joy Construction, estimated that the project would take 24 months to complete but declined to comment on asking rents, although Weiss later told CO the asking rents were in the $60s per square foot.

“Expansion space within Upper East Side is limited given the strength of its great institutions and the residential market,” Mr. DiMare told CO in an email in July 2015. “This new building will likely be occupied by more than one user as deals are pending for about half of the project.”

The Upper East Side site—situated between First and Second Avenues—formerly housed a six-story church, called Our Lady of Perpetual Help Church, which was erected in 1887 for Czech immigrants until the church was demolished in 1998, as CO previously reported.

Officials at Joy Construction did not immediately return a request for comment, and Maddd Equities could not immediately be reached.

A spokeswoman of Natixis did not immediately provide comment on the financing.

Source: commercial