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Category ArchiveSales

Google Closes $2.4B Acquisition of Chelsea Market

Google, which already occupies a significant portion of the 1.2-million-square-foot Chelsea Market building, has sealed a deal to buy the mixed-use property from Jamestown for $2.4 billion. The transaction was finalized today, according to a press release from Jamestown.

Jamestown will continue to manage the retail and food hall at Chelsea Market, a former Nabisco factory at 75 Ninth Avenue that occupies the full block between Ninth and 10th Avenues and West 15th and West 16th Streets, the release indicates. And according to The Wall Street Journal, Jamestown will retain the branding rights and intellectual property connected to the Chelsea Market name outside of Manhattan.

“For Jamestown, this is the highest-profile example to date of our unique approach to creating value, but it’s consistent with transformative projects we’ve successfully undertaken across the country,” Michael Phillips, the president of Jamestown, said in a statement. “It’s a combination of identifying underutilized locations, creative and visionary repositioning, value-creating management, rigorous financial analysis and patience.”

Jamestown purchased a 75 percent stake in Chelsea Market in 2003 for $280 million, according to property records. Then it bought out its partners in 2011, spending a total of $795 million, records indicate. Office tenants in 75 Ninth Avenue include Google in 400,000 square feet, as well as Major League Baseball and the Food Network.

Google has been growing its footprint in Chelsea. In 2010, the tech giant bought 111 Eighth Avenue from Jamestown, Taconic Investment Partners and the New York State Common Retirement Fund for $1.77 billion. That property, which houses Google’s headquarters, is across from Chelsea Market. Last year Google expanded by 60,000 square feet to 240,000 square feet at 85 10th Avenue between West 15th and West 16th Streets, as CO previously reported. And at Pier 57, Google plans to tack on 70,000 square feet for offices and 50,000 square feet for public engagement space to the 250,000 square feet it has already leased.

Google, a unit of Alphabet Inc., said in an official statement: “This purchase further solidifies our commitment to New York, and we believe the Manhattan Chelsea Market will continue to be a great home for us and a vital part of the neighborhood and community.”

Cushman & Wakefield‘s Douglas Harmon, Adam Spies, and Kevin Donner represented Jamestown in the deal. Harmon declined to comment. Darcy Stacom of CBRE represented Google. Stacom’s assistant said the broker is on vacation.

Source: commercial

Thor, Premier Equities Sell Three-Story Meatpacking Retail Condo for $87M

Thor Equities and Premier Equities have closed a deal to sell their three-story retail condominium at 412 West 14th Street for $87 million, sources with knowledge of the deal told Commercial Observer.

The buyer is Union Investment, the investment arm of DZ Bank, as The Real Deal reported last month when the deal was in contract.

Lexus leases the entire 16,500-square-foot condo, plus 5,500-square-foot rooftop at the property between Ninth Avenue and Washington Street via a 10-year deal that expires in April 2024, the sources said. The luxury carmaker is still building out the space for a concept store.

Cushman & Wakefield’s Adam Spies, Kevin Donner and Marcella Fasulo represented Thor and Premier. A spokesman for Thor declined to comment, as did Spies. A Premier representative wasn’t immediately reachable. RKF’s Brian Segall represented the buyer. Segall declined to comment.

Premier and Thor bought the commercial condo in April 2012 for $18 million.

Source: commercial

Gatsby Enterprises Buys Harlem Commercial Building for $19.5M

Real estate investor Nader Ohebshalom’s Gatsby Enterprises has acquired a Harlem office and retail building at 75 West 125th Street from owner and sole tenant Carver Federal Savings Bank for nearly $19.5 million, Commercial Observer has learned.

Gatsby is paying just shy of $700 per square foot for the four-story, 27,933-square-foot property between Fifth and Lenox Avenues, which currently houses Carver Federal Savings Bank’s headquarters in its office portion and a bank branch in its ground-floor retail space. The two sides entered contract late last year and closed on the transaction on Feb. 22, according to sources with knowledge of the deal.

The bank is expected to vacate its offices at the building before the end of this year but maintain its retail presence on the ground floor by leasing back the space, sources said. The arrangement allows Gatsby to re-tenant the office space at higher rents while removing the risk of having to find a new street-level tenant in a challenging retail environment.

In addition, the Harlem property features unused development rights that take its total buildable square footage to around 70,500 square feet, the sources added—enabling Ohebshalom’s firm to potentially redevelop the site into a larger building in the future.

Gatsby was represented by broker Joshua Nazar of Venture Capital Properties, while a Colliers International team of Eric Yarbo, Christopher Turner and Sam Hamlin represented Carver.

Representatives for both Colliers and Venture Capital Properties confirmed the transaction but declined further comment. Neither Gatsby nor Carver Federal Savings Bank returned requests for comment.

Source: commercial

Anbau Plotting Condos at Verizon Parking Garage Site in Hamilton Heights

Residential development firm Anbau has acquired two adjacent parking garages at 620 West 153rd Street in the Hamilton Heights section of Upper Manhattan for $22.5 million with the goal of building residential condominiums on the site, Commercial Observer has learned.

Anbau closed on its purchase of the two-story garages between Broadway and Riverside Drive earlier this month after entering contract late last year. The seller, Verizon, has been using the facilities to park and house its service vehicles.

Having finalized its acquisition of the site, which features approximately 150,000 buildable square feet, the NoMad-based development firm has drawn up plans for two luxury residential condo buildings, designed by architecture firm DXA Studio, that will be connected via a landscaped courtyard and feature views of the Hudson River.

“We see [Hamilton Heights] as the next logical emerging neighborhood,” Anbau Founder and President Stephen Glascock told Commercial Observer. He cited how prices have “shot up substantially” for both condos and rentals in areas like the Manhattanville section of West Harlem, to the south of Hamilton Heights.

Glascock said the two planned condo buildings would likely hold around 150 units combined, with prices for the all-market-rate units likely to range from below $1 million to up to $3 million. Anbau, which financed its acquisition of the site with a pre-construction bridge loan from Goldman Sachs, expects to begin work on the project within the next six months with a view to completing the development in the next two to three years, he added.

Anbau will also provide parking for Verizon and its service vehicles at the property, Glascock said, with those accommodations to be separate from the parking provided to residents at the condo development.

Representatives for Verizon could not be reached for comment.

Verizon had retained Cushman & Wakefield’s Bob Knakal, Josh Kuriloff, Jonathan Hageman and Patrick Yannotta to market the property. Anbau had no broker in the deal.

Knakal told CO that C&W received “extremely robust budding activity on the property” from prospective buyers, which he attributed to “the positive changes that the [Hamilton Heights] neighborhood has experienced over the last 10 to 20 years.”

“It’s a very desirable location,” Knakal said, pointing to rising interest in the market for Upper Manhattan development sites at large—including at 4109 Broadway in Washington Heights, where C&W has been retained to sell a four-story church building with nearly 90,000 buildable square feet on behalf of Christ Church, United Methodist of New York City.

That property will likely be converted into residential condos as well, Knakal added, noting that developers are increasingly looking uptown to take advantage of lower land costs “that make it a lot more feasible to build condos”—particularly at a price point more appealing to prospective residential buyers.

Glascock agreed, noting that the Anbau “can pass on that low land cost to translate to lower prices for condos” at its new site and that the firm believes there is “strong demand” for units in the $1-million to $3-million range that will be served by the new Hamilton Heights development.

Anbau specializes primarily in the Manhattan condo market, with recent projects including Citizen360, an 84-unit SHoP Architects-designed building at 360 East 89th Street in Yorkville, and 207W79, a 19-unit Upper West Side property at 207 West 79th Street designed by Morris Adjmi Architects.

The firm also owns several multifamily rental properties in the borough; in December 2017, Anbau acquired two five-story buildings holding a combined 22 apartments at 53-55 First Avenue in the East Village for $16.2 million.

Source: commercial

As Regulators Close in, Anbang Claims It Will Retain International Holdings

Anbang Insurance Group, the Chinese insurance holding company that owns the Waldorf Astoria, Essex House and a dozen other U.S. hotels, said today that it will stand by its international investments even after the Chinese government seized control of the company last week.

“We will continue to be committed to our overseas subsidiaries’ business and investment, and will provide necessary support to their healthy development,” a spokesman for the company said, as per Reuters.

The government’s takeover prompted speculation that Anbang—one of China’s largest insurance companies—would be forced to sell some of its international assets, billions of dollars of which it purchased on a buying spree that has spanned three continents over the last five years. And The Wall Street Journal reported yesterday that the Chinese government is already entertaining buyers’ offers for parts of Anbang’s portfolio.

It wasn’t immediately clear how Anbang would be able to retain its investments.

After Anbang’s chairman, Wu Xiaohui, was detained in China in June 2017 on suspicion of economic crimes (and indicted last week), the government asked Anbang to sell off overseas assets and to bring the proceeds back home. At the time, Anbang said it had “no plans to sell its overseas assets at the moment” and that it had “ample cash and abundant ability to pay back” its obligations.

The government agency that will control Anbang until at least February 2019, the China Insurance Regulatory Commission, is in the midst of a broader crackdown on offshore investments. Last month, China’s official news outlet reported that CIRC will “put a brake on” insurers’ overseas spending on “real estate, hotels, cinemas and entertainment” beginning on April 1. (That decree appears to fall short of an outright ban, however: investment in casinos, by contrast, will be fully prohibited.)

The government news report, from the government-run media company Xinhua, tied risky overseas spending unrelated to the core insurance business to Chinese insurers’ rising premiums, saying that such spending does not “serve the real economy.”

As of last Friday, Anbang’s three-year, $2 billion gut renovation with AECOM Tishman, including a project to turn some rooms into condominiums, appeared to proceed uninterrupted. Blackstone sold the Waldorf to Anbang in 2014 for just shy of $2 billion, but Bloomberg reported this month that the private-equity giant has been talking to the Chinese insurer about buying back the famed hotel. A source familiar with the company told Commercial Observer today that such a move would be highly unlikely.

In addition to its American real estate holdings, Anbang owns high-profile real estate in Canadian cities, as well as European and Korean insurance firms.

Wu, who is married to a granddaughter of former Chinese leader Deng Xiaoping, became a billionaire running Anbang since its founding in 2004. His legal trouble throws the insurer’s international holdings into particular uncertainty, because media reports describe him as the sole mastermind behind the Waldorf and Essex House acquisitions, as well as Anbang’s failed $13 billion bid for Starwood Hotels & Resorts in 2016.

And it is an especially bad time to be arrested for public crimes in China. A law enacted last week expands the Communist Party’s abilities to detain those it suspects of abusing power even as it continues to investigate their alleged crimes.

“This recent change reflects, among other considerations, the party’s paranoid fear of serious weakening by corruption and its deep commitment to control over Chinese society,” Mercy Kuo, the president of the Washington State China Relations Council, wrote in a column in The Diplomat, a website devoted to Asian foreign affairs.

A representative for Blackstone declined to comment, as did a spokesman for AECOM. No one from Anbang was immediately reachable due to the time difference.


Source: commercial

Intercontinental Bets Big on Burbank

Boston-based Intercontinental Real Estate Corporation, a national real estate investment, development and management firm, acquired Connexion Burbank for $123.5 million in mid-February, according to an official release.

Intercontinental’s purchase—on behalf of its managed fund U.S. Real Estate Investment Fund—includes a three-building urban campus totaling 337,904 square feet in downtown Burbank. It marks the fourth office investment and sixth overall investment for Intercontinental in the Los Angeles area. Previous office deals for Intercontinental were the Apollo at Rosecrans in El Segundo, Bristol 61 in Culver City and 6300 Wilshire in Miracle Mile.

Jessica Levin represented Intercontinental in-house. NKF Capital Markets’ Kevin Shannon, Rob Hannan, Michael Moll and Laura Stumm represented the seller—a joint venture between Lincoln Property Company and Angelo Gordon—along with Kent Handleman of Lincoln Property Company and Doug Marlow of CBRE.

Shannon told Commercial Observer that the property was attractive to Intercontinental Real Estate corporation because it provided newly renovated creative office product—a hot property type in Los Angeles—and the likelihood that it will benefit from the “Blackstone Effect” from Blackstone’s 2017 recapitalization of Jeff Worthe’s extensive Burbank portfolio. Between Blackstone’s “mini-monopoly” and a vacancy rate at less than 10 percent in the area (9.4 percent), Shannon said he expects market rents in Burbank to increase.

According to CBRE’s Greater Los Angeles office report from the fourth quarter 2017, asking rents in the Tri-Cities market, which includes Burbank, Pasadena and Glendale, average $3.04 a square foot.

The Connexion sale comes four months after Blackstone paid $1.7 billion for a majority ownership of six office properties totaling 3.3 million square feet in Burbank’s media district. Blackstone said it wanted to be in one of the key cradles of content creation, especially as big Web-based firms such as Amazon and YouTube’s owner, Google, are rapidly expanding their entertainment businesses.

Located at 303 North Glenoaks Boulevard, 333 North Glenoaks Boulevard and 300 East Magnolia Boulevard, the properties were built in 1983, 1978 and 1984, respectively. They recently underwent a major capital renovation and rebranding, which totaled nearly $8 million, and included an extensive plaza renovation, new common areas, significant upgrades to all three lobbies and the addition of two outdoor decks. The buildings are situated on just over three acres of land and provide direct access to an abundance of walkable amenities within downtown Burbank.

Collectively, Connexion Burbank is 91 percent occupied by a diverse set of tenants like Turner Broadcasting (Cartoon Network), Regus, Citibank, Blackmagic Design and University of Redlands.

“With a foundation of long term credit tenancies and a diverse mix of media/entertainment, legal, healthcare, government and non-profit firms, the property currently benefits from excellent proximity to a wide variety of amenities and a creative labor pool,” Levin said. “The building will continue to perform well due to its central location within downtown Burbank, and we expect it to outpace the market as a result of numerous development plans underway nearby.”

The business plan for the property includes minor updates to the lobby and other common areas of the building, she said, but declined to provide how much was earmarked for the purpose.

Source: commercial

5 Reasons Why Outer-Borough Multifamily Properties Should Dominate Demand In 2018

The New York City investment sales market appears to be rebounding in the first quarter of 2018 in terms of volume and the number of transactions. Prime outer-borough locations will likely capture more demand from institutional and international investors in 2018 compared to previous years as an array of factors, both fundamental and technical, heighten their appeal.

During 2017, dollar volume in the multifamily market slowed considerably, falling 48% year-over-year, according to our company’s newly released report: “Multifamily Year In Review.” To view, click on: http://arielpa.com/report/report-MFYIR-2017

We believe the outer-boroughs will garner greater attention in 2018, driven by the following five key factors:

Strong Rent Fundamentals In Outer-Boroughs

Rent affordability and easy commutes to Manhattan have made neighborhoods in the outer-boroughs, such as Williamsburg, Long Island City, and the South Bronx, hotbeds for tenant migration and rental growth. To that end, the average monthly rent for an apartment in Manhattan was $4,158 as of December 2017, according to Douglas Elliman. That is substantially higher than the median rent in Brooklyn and Queens, where apartments fetched $3,001 and $2,831, respectively,

During 2017 rent concessions have been reported at 36.2% for Core Manhattan, while outer-borough neighborhoods, such as Flushing, experienced increases in rents, rising 2.9% in 2017. While we are not concerned about the long-term viability of Core Manhattan’s rents, investors are finding the short-term fundamentals challenging.

Scant Institutional Capital Opportunities 

Institutional investors’ appetite for Manhattan properties, has been voracious. For investors, Core Manhattan presents “gateway city” status, large-scale opportunities, and rental upside. However, rent concessions create uncertainty about rent growth, and increased competition from foreigners has left investors with fewer opportunities.

However, the outer-boroughs, specifically Brooklyn, present unique opportunities that were once exclusive to Core Manhattan. Invesco’s involvement with Kushner in DUMBO made plenty of headlines, but they are far from alone. Between 2016 and 2017, TIAA-CREF, World Wide Holdings and Bentall Kennedy (U.S.) LP have collectively invested more than $425 million in the borough.

Relative Price Per Foot Cost

The valuation metrics used for the multifamily asset class include: Capitalization Rate (Cap), Gross Rent Multiple (GRM), Price Per Unit (PPU) and Price Per Square Foot (PPSF). When comparing Cap and GRM for Core Manhattan versus outer-boroughs the difference is 27%, according to our “Multifamily Year In Review.” This means investors expect to receive a higher current yield in the outer-boroughs.

On a PPSF basis, the average difference is much wider. The average multifamily building in the outer-boroughs sells for $334 PSF, representing approximately 1/3 of the cost of the $945 PSF for the same assets in Core Manhattan. Lower price per square foot provides a big advantage when discussing replacement cost and suggests that this wide pricing gap could allow for significant room for growth in the outer-boroughs.

Uberization Of Outer-Boroughs & Local Economic Growth

Access to mass transportation has always been a factor when buying real estate, but two main factors have lowered this need. First, the ability to travel economically and second, that all of the boroughs have been experiencing local economic growth, with less reliance on Core Manhattan and commutes. Uber and Lyft, for example, have made inconveniently located areas, such as Industry City in Brooklyn and Cornell Tech in Queens, more desirable. Less reliance on subways and buses has also benefited Northern Manhattan, where Columbia University has attracted many new businesses.

Rezoning Poses Significant Upside

Mayor Bill de Blasio’s administration has rabidly rezoned large swaths of New York City, with their sights squarely set on outer-borough regions. East Harlem, East New York, and Far Rockaway have recently been approved for rezoning, while Inwood, The Bronx’s Jerome Avenue and Gowanus are in the pipeline. In Inwood, for example, proposed rezoning is expected to spur the creation of 4,348 new apartments by the year 2032. The building of thousands of apartments should lure a large inflow of tenants, landlords and developers, posing significant upside for owning a multifamily asset in these areas.

In conclusion, based on the five points stated above – whether it be relative affordability or the massive influx of institutional capital – we believe outer-borough multifamily assets are positioned to perform extremely well versus Core Manhattan in 2018, and investors are already taking heed.

Source: commercial

Slow Season: NYC’s Investment Sales Brokers Are Optimistic Despite a Challenging 2017

Two thousand seventeen “was still good—it just wasn’t great.”

Those are the comforting words that Aaron Jungreis, the co-founder and president of brokerage Rosewood Realty Group, offered to Commercial Observer last week when asked about the state of the New York City investment sales market.

Yet one could be forgiven for considering that a rather optimistic assessment, given how the numbers depict a commercial property market that has experienced a significant downturn since the halcyon days of 2015.

Two years after eclipsing an all-time high of $80 billion, total commercial real estate investment sales in the city fell just shy of $35 billion in 2017, according to a recent Cushman & Wakefield report on the state of the New York City real estate market. Transaction volume (the total number of property sales across the city) fell more than 30 percent in that time, and perhaps most damningly—after nearly a decade of unrepentant property value appreciation in the wake of the Great Recession—the average price per square foot for Manhattan commercial real estate sales (excluding the blighted retail market) fell for the first time since 2010, to the tune of 5 percent.

Even the outer boroughs—which have emerged to an unprecedented extent as viable markets in their own right—saw a 17 percent decline in the number of properties sold and a 27 percent dip in dollar volume (albeit from a record high of $18.2 billion in 2016) to $13.3 billion, per the C&W report. And while property values in the boroughs continued to climb last year, Robert Knakal, C&W’s chairman of New York investment sales, warned of “contagion” from the slipping Manhattan market leaking into the property markets of Brooklyn, Queens and the Bronx.

Numbers aside, talk to the commercial real estate brokers who are taking the calls and making the deals, and they’ll virtually all agree that the market for New York City real estate simply isn’t anywhere near the frothy peak of a few years ago, when one could procure buyers galore for virtually any parcel or property that hit the market. But despite this slowdown, most investment sales brokers are trying to paint a more positive picture of a market in a state of correction—with property values and transactions still at relatively high levels historically and signs of strengthening conditions heading into, and during the early part of, 2018.

“It’s still a good market,” Jungreis said. “The fundamentals are still strong, and people still want to come to New York. I just think we’re so spoiled with the market having gone up and up. I’m really not that concerned.”

Jungreis and other brokers who are active in the multifamily investment sales market attributed lower deal and dollar volumes to headwinds that have hindered investor appetite for both rent-regulated and market-rate residential buildings, as well as development sites that would have proven attractive for ground-up residential projects in years past.

Rent-stabilized properties have long been considered among the safest investments in New York City real estate due to their high occupancy rates and embedded upside once units become deregulated and landlords are able to charge higher, market-rate rents. But thanks to the de Blasio administration, multiple sources said, a more stringent regulatory environment has made it increasingly difficult for landlords to realize that upside and has consequently dampened investor enthusiasm for the asset class.

“De Blasio has won; the perceived upside is locked, and [property] taxes are going up every year,” Marcus & Millichap’s Shaun Riney, one of the brokerage’s leading Brooklyn-focused investment sales brokers, said of the market for rent-stabilized multifamily properties. “To keep up with the Joneses, you have to vacate units. That’s the dilemma [investors] have—you have to believe people are going to leave [their units] unless you’re a long-term investor, and long-term investors aren’t the ones paying 20 times the rent roll [for buildings].”

Chad Sinsheimer, a senior director at Eastern Consolidated, echoed the sentiment—noting that prospective buyers have become “a lot more passive and cautious in buying stabilized properties” due to regulations that have made it harder for landlords to approach tenants about buyouts and “unlock that upside” at rent-stabilized properties. “With all these tenant harassment lawsuits and headlines, there’s a little bit of fear on behalf of these landlords now,” he said. “They don’t know how long they’re going to be stuck with these tenants.”

While describing rent-stabilized assets as “still the darling of the market,” Bestreich Realty Group Founder and President Derek Bestreich cited the “administrative burden” of landlords having to deal with “layers and layers of government bureaucracy overseeing everything you do.”

“For owners, it’s like you’re guilty until you’re proven innocent—it’s evolved into a ‘gotcha’ type of environment where owners are on the defense, even if they’re operating their buildings admirably. It puts a bad taste in investors’ mouths,” the investment sales broker said. “People want to be able to grow the value and make a return, and I think there’s less confidence in their ability to do that nowadays.”

Beyond heightened regulatory scrutiny, Bestreich pointed to shifting fundamentals that have meant “cap rates have gone up, prices have dropped and there’s less demand [from buyers] than there was in the past” for multifamily assets. “Five or six years ago, I’d have 100 buyers wanting to buy a rent-stabilized building, while today I’d have 20,” he said. “There’s far less demand, but still enough that prices haven’t come down a whole lot.”

But like other brokers, Bestreich stressed that the market is still performing well overall despite having lost some steam. “We’re coming off a period where rents grew for so many years and interest rates dropped, and that combination led to really high property values,” he said. “Today, property values are still high; rents have dipped in a lot of areas from their peak, but there’s been such tremendous rent growth over the last seven years that, for rents to pull back 10 percent, I don’t find that to be an earth-shattering thing.”

Flat to falling rents are arguably the biggest issue facing the city’s market-rate rental properties—a condition exacerbated by the sheer number of free-market units that have arrived across the city in recent years, through developments like the swaths of luxury high-rise buildings that have cropped up in neighborhoods like Williamsburg and Downtown Brooklyn, in Brooklyn, and Long Island City, Queens.

As Jeffrey Levine, the chairman of Douglaston Development, told CO, the city is now experiencing a market-rate rental supply glut that was partially exacerbated by developers rushing to take advantage of the 421a tax abatement prior to its expiry in 2016.

“You had an abundance of product going into the ground, primarily in Downtown Brooklyn and Long Island City, and that product is now being delivered to the market and creating a real distortion in the marketplace,” Levine said. That dynamic, coupled with high construction costs and land prices that “have not yet fallen sufficiently,” has made it “very hard to pencil new [rental] development in the five boroughs,” he added—even with the new Affordable New York housing plan designed to replace 421a.

Landlords are now resorting to handing out tenant concessions, such as months’ worth of free rent periods, to attract renters to their buildings, further affecting investor appetite for market-rate properties as well as development sites that would house ground-up rental projects.

“There are a lot of amenitized buildings [on the market], and there are only so many young people who can pay $6,000 a month to split up a three-bedroom [apartment]. That’s why you’re seeing these concessions spike,” Sinsheimer said of the luxury rental space, noting that it’s not uncommon to see landlords dole out two to four months of free rent at some buildings, depending on the length of lease.

As such, developers are now targeting certain asset classes that are perhaps underserved in certain areas of the city. While the ultra-luxury residential condominium market’s recent travails have been well documented, brokers are finding strong demand for condo projects in outer-borough neighborhoods like Williamsburg and Long Island City—traditionally rental market strongholds with relatively low for-sale inventories, and areas where condos would sell at a price point more reasonable than that of, say, Billionaires’ Row in Midtown Manhattan.

Marcus & Millichap broker Jakub Nowak said that his team has seen an increase in land sales in Queens driven by “a surprising uptick in activity” from condo developers. “Any residential development site that my team is selling in Long Island City at the top level, the bidders are all condo developers,” Nowak added.

Bestreich, meanwhile, cited a similar trend in areas of Brooklyn: “Well-located development sites in Williamsburg, we can’t keep that stuff off the market,” he said, pointing to “seven to nine” parcels sold by his firm in the north Brooklyn neighborhood in the last several months that he said will virtually all become condo projects. “There’s so much concern over the L train shutting down, but condo developers are saying, ‘Let me buy something now, and when I’ve built it in two years, the L train won’t be an issue anymore.’ ”

Across other asset classes, the retail apocalypse has been highlighted ad nauseam, while the market for trophy office properties has also taken a hit in the wake of the record-breaking deals for Class A Manhattan properties seen in 2015 and 2016. On a recent conference call discussing Cushman & Wakefield’s 2017 real estate market statistics, Knakal noted that declining retail property values have made it difficult to find buyers for mixed-use properties with a retail component. His colleague Douglas Harmon—co-chair of C&W’s capital markets division and one of the city’s top brokers in the market for major trophy properties—pointed to a lack of such major deals in 2017 as a key contributing factor to the investment sales market’s declining dollar volumes.

But other asset classes, such as industrial properties, are booming to an unprecedented extent. Industrial assets are in enormous demand given the rise of the increasingly influential e-commerce sector and the relative scarcity of warehouse and manufacturing properties remaining in the five boroughs (particularly in more central, well-located areas with access to bridges and highways).

“Industrial has probably been the most exciting asset class in the past year and a half,” Eastern Consolidated Senior Director Andrew Sasson said. “There’s not a ton of industrial buildings in the city that have 25-foot-high ceilings and that are being kept for that use, or can be repositioned as distribution centers.”

Likewise, Marcus & Millichap’s Nowak noted that as “so much of the legacy industrial space in New York City has been repurposed in recent years”—usually either redeveloped as loft-like office and light manufacturing buildings targeting creatively minded tenants or razed to make way for new residential projects—the supply-constrained industrial market has “benefited tremendously.”

All things considered, investment sales market participants are now dealing with an altogether spottier market than they have in recent years. But overall sentiment is the market remains in a position of strength, with many noting a pickup in activity toward the end of 2017 and macroeconomic developments—particularly the passage of the Trump administration’s business-friendly tax reform bill—as reasons for optimism.

“In December of 2016, I was not enthusiastic about 2017,” said David Schechtman, a senior executive managing director at Meridian Investment Sales. “In December of 2017, I felt excited to get back to my desk on the 2nd or 3rd of January, and I haven’t been proven wrong.”

As Schechtman pointed out, the market may very well be getting its legs back as property owners come to terms with the correction that has taken place, and as the discrepancy between the prices that sellers seek and prospective buyers are willing to pay—commonly cited as another reason for the drop-off in investment sales—is reconciled.

“It’s a very difficult environment when, each day for several years, you’re reading as an owner that your property is worth more,” he said. “It takes time for an owner to recognize that they may be selling below the zenith. Not every deal is going to set a new benchmark—for many assets, the high-water mark has been hit—and as long as the seller is willing to receive below that, there will be a buyer.”

Source: commercial

TIAA Selling HQ Building at 730 Third Avenue

National financial services organization the Teachers Insurance and Annuity Association, also known as TIAA, is putting its Midtown headquarters building at 730 Third Avenue on the market, Commercial Observer has learned. The decision to sell is purely financial, according to a source briefed on TIAA’s plans but not authorized to discuss them publicly.

An investment sales broker who is not involved with the property weighed in on the building’s value.

“I would say, off the cuff, without knowing the [net operating income] or occupancy, it should trade for more than $600 per square foot and even as high as $850 a square foot given its proximity to the [United Nations],” the broker said. That amounts to as much as $462.5 million.

TIAA, known as TIAA-CREF until 2016, is expected to keep its headquarters at the 1959-built 28-story, 665,110-square-foot office structure between East 45th and East 46th Streets. TIAA bought the property in January 1973, property records indicate. The source said that the company intends to remain in the building after the sale.

Tenants include Roosevelt Investments, law firm Tofel & Partners and retailer Men’s Warehouse.

A spokesperson for TIAA didn’t immediately respond to a request for comment.

Source: commercial

Castellan Sells East Flatbush Pair of Rental Buildings for $19.3M

Castellan Real Estate Partners has sold a pair of Brooklyn apartment buildings with a combined 92 residential units to the Sterling Group for nearly $19.3 million, just five years after it acquired the buildings for $8.6 million, the seller told Commercial Observer..

The East Flatbush properties include 1084 New York Avenue for $13.8 million and 3506 Newkirk Avenue for roughly $5.5 million. The entire portfolio is rent-stabilized.

3506 Castellan Sells East Flatbush Pair of Rental Buildings for $19.3M
3506 Newkirk Avenue. Photo: CoStar Group

The 47,680-square-foot New York Avenue building has 62 residential units and a 1,600-square-foot retail component that is leased to a grocery store. There are 46 one-bedrooms, 12 two-bedrooms and three three-bedroom apartments and one studio. The average rent is around $1,175 per month.

And 3506 Newkirk Avenue comprises 30 apartments in a 26,126-square-foot structure. It features two studios, 16 one-bedrooms and 12 two-bedrooms. The average monthly rent is $1,020.

“As the East Flatbush neighborhood continues to thrive, the ability to acquire 93 units in this area appeals to many multifamily purchasers,” seller Etan Slomovic, a managing director of Castellan, told CO via email.

The deal was completed directly between the buyer and the seller.

Manhattan-based Castellan, which acquires valued-add properties among other things, has more than doubled its money in the five-years since picking up the properties. The firm purchased the building at 3506 Newkirk in February 2013 for $2.5 million, according to property records. The company renovated the apartments, installed a new boiler, new camera and intercom systems and emergency exit signs.

A month later Castellan acquired 1084 New York Avenue for $6.1 million out of bankruptcy. The company restored the building’s facade and installed a new intercom and camera systems among other upgrades.

An executive at Sterling Group, a Brooklyn-based investor in multifamily buildings, did not immediately return a request for comment.

Source: commercial