Commercial Breaks

Yet another outfit is positioning itself to take advantage of what is expected to be a deluge of distressed property assets in 2009.

K&L Gates, the corporate law firm recently named by the National Law Journal the nation’s 10th largest, with more than 1,700 attorneys worldwide, including 100 in New York, is forming a group that will, in what is becoming all too familiar language, focus on “the restructuring of distressed real estate loans and the positioning of foreclosed assets for successful sale.”

“I think everyone is forming a distressed-asset group at this point,” said Dan Fasulo of Real Capital Analytics.  read more »

The Belgian Nico De Swert, the prodigal arranger of flowers, will open a flower school and flower shop at 81 Front Street in Dumbo.

Mr. De Swert is, in the arcane world of flower arrangement, a rare orchid. He has appeared in countless magazines, published a book called Living With Flowers and, in perhaps his crowning achievement to date, has his own line of flower arrangements in partnership with 1-800-Flowers.

Mr. De Swert has made his nut in flower sculptures—like his bursting melons made from red Berlin roses and lemon leaves, and his gorgeous arrangements, like the $950 “bleached Salix, pink Ranunculus, blue Muscari, and white Zantedeschia” bouquet featured in New York magazine last year.  read more »

Brace yourself. We have some pitiful numbers for you.

So far this quarter—and the quarter ends on New Year’s Eve—only two Manhattan building transactions worth more than $90 million have occurred. Count them. Just takes two fingers. 

No. 1: 1372 Broadway, which sold to Lloyd Goldman in October for $274 million. No. 2: 95 Morton Street, which private-equity firm Brickman picked up last week in a pre-Thanksgiving deal for $96.5 million.

It’s probably worth pointing out that 1372 only got done because the seller, Wachovia Bank, financed it.

According to Real Capital Analytics, Manhattan has seen only nine “office” space transactions of more than $2.  read more »

We’ve got a steaming mugful of good news for New York landlords and coffee junkies (and some bad news for Starbucks haters): The Seattle coffee concern is still expanding in New York City, economic maelstrom be damned.

“There are still opportunities to be profitable here, which is great news,” said Dan Lewis, Starbucks’ group marketing manager in the Northeast Atlantic region, who, in keeping with the firm’s crunchy image, had just “inhaled” a veggie burger before chatting with us.

Mr. Lewis wouldn’t say where Starbucks is looking to expand, or how many new city stores it’s planning to open, but one of our favorite retail brokers tells us that, following a couple of quiet months, Starbucks is once again busy touring potential locations.  read more »

The New York-based real estate private equity firm Brickman has dropped $96.5 million on 95 Morton Street, an eight-story pile of bricks at the corner of Morton and Washington streets. The Fifth Avenue firm signed the deed on Nov. 21.

The Hudson Square building dates back to 1911, has 203,412 square feet and is home to tech clients like SAP and SpiralFrog.  read more »

Poor, downtrodden New York City has fallen three spots since last year in CB Richard Ellis’ rankings of the world’s most expensive office markets, getting squeezed out by none other than Dubai and Abu Dhabi (ranked Nos. 6 and 11, respectively).

Per usual, the West End of London remains the most expensive office market in the world, with occupancy costs averaging an eye-popping $248.66 a square foot per year. Moscow, for its part, moved up the ranks from four to two, with costs averaging an almost-as-galling $234.73 a year.

Midtown, meanwhile, ranked a pitiful No. 15, New York’s first entry on the ranking, with  read more »

Donald Cogsville, the unusually attractive real estate developer, former pro soccer player and one of the two remaining bidders for Starrett City, sought to downplay reports that the sale of the nation’s largest federally subsidized housing complex is at a standstill, saying the transaction could still be completed by the end of 2008.

“The sale is not on hold,” he told The Observer last week. “Everyone is moving forward to complete it.”

But a source close to the negotiations later directly contradicted Mr. Cogsville, saying unequivocally that the negotiations are in fact “on hold.”

Talk about mixed messages!

 read more »

If their paper trail is any evidence, the ungodly economy is not preventing Mort Zuckerman and Stephen Ross from moving forward with plans to build an enormous office tower at 740 Eighth Avenue.

Word of the tower has been seeping into the news since last year, when Boston Properties and Related Companies revealed they were putting together the project’s footprint by buying out about six property owners at a reported price of $350 million.

The tower—on the east side of Eighth Avenue, between 45th and 46th streets, alongside the Imperial Theater and the Music Box—could rival the neighboring SJP Properties’ 11 Times Square and the New York Times tower in size at a possible 1 million square feet.  read more »

On Sept. 19, a full six months after Wall Street began its catastrophic decline with the demise of Bear Stearns, and just four days after Lehman Brothers, New York real estate financier extraordinaire, collapsed, two publicly traded real estate companies rode high on the stock market, functioning, apparently, in an alternate universe.

That Friday, SL Green, New York City’s largest commercial property holder, traded at $73.75 a share. AvalonBay Communities, which has luxury residential developments downtown and in Long Island City, traded at a stunning 52-week high of $113.07.

They weren’t the only REITs defying the gravity of the situation.  read more »

In the paralyzed commercial real estate market, where panicked brokers wring their hands as deals founder, a number of nimble New York pros are looking to claim their share of the emerging submarket that surrounds distressed property assets.

It’s not a new business, mind you. It’s more like an old one that reemerges when there’s a financial crisis, when landlords can’t pay creditors, when real estate firms go bankrupt, when a strong firm buys a weak one. Real estate investors in trouble need advice, after all, just like the rest of us.

“Did I think this would happen again? Yeah,” said Anthony McElroy, a managing director at Colliers ABR who’s heading its New York distressed-asset team, formed in September, and who worked with distressed assets in the ’90s, back in the days of the Resolution Trust Corporation, birthed by the savings-and-loan crisis.  read more »

Things aren’t looking all that promising for General Growth Properties’ two Manhattan mega-projects, and not just because the company is foundering so badly that it was last week delisted from the Standard & Poor’s 500.

Though let’s not kid ourselves: A corporation in such dire straights that its stock has been deemed nearly worthless doesn’t seem in the best position to move forward with either a 1.7 million-square-foot mixed-used complex on East 125th Street, or a brand-new tower and retail complex at the South Street Seaport.

But there are, believe it or not, other reasons to be concerned.  read more »

Wait for it. All the stomach-churning news notwithstanding, that much-anticipated deluge of sublease space has yet to descend on the Manhattan market, according to new numbers from Jones Lang LaSalle wonk-in-chief James Delmonte.

Rather, much as the commercial real estate industry waits, and waits, and waits for the market to hit this so-called bottom, sublease space and the vacancy rate continue to creep upward only ever so slowly. Or “incrementally,” as Mr. Delmonte, JLL’s vice president and research director, would have it.

In October, sublease space in midtown Class A properties amounted to 4.4 million square feet, just 28.2 percent of all available Class A space.  read more »

Pryor, Cashman, a mid-size entertainment law firm resplendent with B-list clients, has announced it will take 100,000 square feet at Times Square Tower, the Boston Properties building on 42nd Street between Broadway and Seventh Avenue. It will relocate from Eastgate Realty's 410 Park Avenue, which has housed the firm since 1971.

The firm, whose clientele includes, among others, a number of American Idol contestants, and Bob Guccione Sr., the founder of Penthouse, signed a 15-year lease for the 39th, 40th, and 41st floors of the 48-story tower, beginning in mid-2009.  read more »

Camper, the Majorca-based shoe retailer, has purchased an appropriately stylish little one-story building at the corner of Prince and Greene streets for $16 million.

Camper closed the deal on Nov. 13, according to city records, buying the building from Charles Rosenblum.

Heather Ryan, Camper's U.S. retail manager, told The Observer that for the time being, Camper intends on acting merely as a landlord. Right now, the one-story building is home to two tenants -- including Face -- both of which have long-term leases.  read more »

Comcast has signed a mega-lease for nearly 100,000 square feet in the Ernst & Young building at 5 Times Square, according to sources familiar with the transaction.

The cable company will relocate in May 2009 to the ninth, 10th and 11th floors of the 1.1-million-square-foot tower, owned by the Yonkers-based AVR Realty, from Brookfield Properties' Grace Building at 1114 Avenue of the Americas.

This is just the latest bad news for Brookfield, which has 4.2 million square feet at its World Financial Center leased out to Merrill Lynch. Bank of America, which recently bought out Merrill, has just moved into fabulous new headquarters at One Bryant Park, and the fate of Merrill's space downtown remains murky.  read more »

Stylish and poorly financed Brooklynites, rejoice! Swedish retailer H&M has officially signed a 15-year lease at Al Laboz’s 497 Fulton Street, in the Fulton Mall.

The sizable, 29,600-square-foot store, between Hoyt and Bridge streets, will be H&M’s first street location in the outer borough, and Brooklyn’s second location (the other is in the Kings Plaza mall). “H&M’s commitment is a testament to Downtown Brooklyn’s resurgence,” Mr. Laboz, who’s also chairman of the Fulton Street Mall Improvement Association, said in a statement.

Cushman & Wakefield’s Robert Gibson, Thomas Citron and Molly Beal represented H&M in the transaction.

Sadly, thanks to a planned reconstruction of the building, H&M won’t open its doors until the end of 2010.

drubinstein@observer.com

Go south, young broker! Washington, D.C., is, believe it or not, the new New York City.

“It’s kind of the tale of two cities with New York City and D.C., to use a tired term,” said Robert Sammons, the managing director for research at Colliers ABR, during its Tuesday morning Capital Markets Overview on the 11th floor of 40 East 52nd Street.

Or rather, it’s the tale of two brothers. New York is the hard-partying, high-flying younger brother who pulls in reams of money in good times and comes begging for loans in bad. D.C. is the dull, staid, sensible older brother who, in good times and bad, just keeps plugging along.  read more »

In an apparent effort to raise cash, the struggling iStar Financial has put its $224 million Drake Hotel site mortgage on the block, according to a knowledgeable source.

“They’re a mortgage REIT and they need cash,” said the source. “The development is not going anywhere today. It’s in default. It’s not paying interest currently.”

The development site in question is the plot bounded by 56th and 57th streets and Park Avenue, once home to the Drake Hotel. Macklowe Properties has long had plans to erect some sort of tower there—reports bounce back and forth between residential and office tower plans. Either way, the project looks increasingly unlikely to materialize.  read more »

Odd timing. That’s what New York investment brokers are saying about Halstead Property’s recently announced plans to open a commercial real estate investment arm during one of the worst markets in recent history.

“I don’t think it’s a great idea,” said an investment broker from a rival and well-established firm, which, though it has a good name and strong client relationships, has seen activity plummet. “We will crush them.”

Others were similarly dubious, though more diplomatic.

“If you’re selling in the $500,000 to $5 million range, if you’re doing very localized markets, like Main Street in Flushing and certain areas in Brooklyn, great,” said another broker.  read more »

Some hoteliers buck received wisdom, taking chances on fringe neighborhoods in far-away boroughs (see Sam Chang). Others trust blindly in the perpetual worth of a brand called Manhattan (see Sam Chang?). Only time will tell which group the following three developers fall into, all of whom filed plans with the Buildings Department in the past two weeks to build new hotels in Manhattan.

First, there’s the apparently unstoppable Mr. Chang, who filed plans on Oct. 30 to bestow yet another Gene Kaufman-designed gem on Manhattan, this one an 11-story pension at 538 West 48th Street.

Mr. Chang has over the past few years flooded New York City streets with suburban-style inns.

 read more »

The building once home to Mo Pitkin's House of Satisfaction has been sold for $4 million, according to city records.

The restaurant/bar/performance space known as Mo Pitkin's, which closed last year, was part of East Village entrepreneur Phil Hartman's now apparently disintegarting empire. Earlier this month, Mr. Hartman announced that he was closing his Two Boots Pioneer Theater nearby.

The squat edifice, at 34 Avenue A, was sold to an entity called LAMNG Corporation. The building has been on the market for more than a year, with an initial listing price of $5.5 million.

As recently as July, Mr. Hartman told Observer reporter Chris Shott that times were tough, but that his entertainment empire would survive: "It's not easy for anyone doing business in NYC these days.  read more »

The Real Estate Board of New York issued an oddly upbeat appraisal today of the Manhattan retail market. According to REBNY, which based its report on analysis of data through Sept. 30, asking rents for retail space on Tribeca’s Hudson Street, in Herald Square, and on the Upper West Side increased since 2007.

“[T]he increases in asking rents in prime areas like TriBeCa, Herald Square and the Upper West Side, demonstrates that retailers still want to be in Manhattan,” REBNY President Steven Spinola said in a statement. “Despite the turmoil in the marketplace, asking prices for prime retail space in Manhattan’s most recognizable shopping areas have not been impacted.  read more »

Ever since Chase snapped up WaMu’s assets, the fate of the bank’s 148 storefronts in New York City has hung in limbo. Now, the plot thickens.

It turns out that Chase has to turn over those Washington Mutual branches it doesn’t want to the Federal Deposit Insurance Corporation. That’s right, the F.D.I.C. will become a New York City landlord.

A legalese-heavy paragraph in Section 4.6a on page 14 of the Purchase and Assumption Agreement between the F.D.I.C., WaMu and Chase gives Chase 90 days to take over whichever WaMu branches it wants, according to a real estate attorney who translated for this story.  read more »

In yet another example of a bank eager to liquidate its real estate assets ASAP, Banco Popular of Puerto Rico in September sold a nine-story building across from Rockefeller Center to the Parkoff Organization in an all-cash deal that took—get this—just 48 hours.

The Parkoffs bought the 67-year-old building, at 7 West 51st Street, for $28 million. In so doing, they may have inadvertently started a trend. This October, Wachovia was so eager to liquidate its building at 1372 Broadway that it issued Lloyd Goldman a $235 million loan so that he could take it off its hands. The massive loan amounted to a full 86 percent of the full $274 million price tag.  read more »

New York real estate is so beleaguered that it can’t support a one-time commercial real estate section in The New York Times. According to sources, the Gray Lady has scrapped plans to publish a stand-alone commercial real estate section, dubbed the “Commercial Real Estate Annual Review,” on Nov. 18, due to a lack of ad revenue.

Charles Bagli, New York Times real estate reporter extraordinaire (and onetime Observer staffer), was tapped to write the section’s cover story, which was to focus on the industry elite and how the economic crisis would affect its makeup. Mr. Bagli, who was to be paid separately for the story, was even used as a marketing tool by The Times’ ad department.  read more »

Kent Swig has refinanced Sheffield57, the controversial condo conversion that has earned him reams of bad press, including the recent news that his business partner Yair Levy conked him on the shoulder with an ice bucket.

“We just re-upped all the lenders, which is a complicated, complicated deal in today’s world, where there are so many layers of people who have sold off loans in different pieces,” said Mr. Swig of his $104.7 million loan from KeyBank. “We extended for 18 months, so we’re in very, very good shape.”

KeyBank had put the loan on a watch list of potentially risky deals, according to an August Standard & Poor’s report.  read more »

The Wolfson Group, landlord of 25 Broadway, appears to have some sort of connection with the big guy upstairs. What short of divine intercession could explain why its office building continues to fill up with buyers during what is surely one of the most hellishly slow commercial markets in recent memory?

It was only a few weeks ago that the Borough of Manhattan Community College took 40,000 square feet at the old Cunard Steamship Line building. Even better, the Wolfson Group’s newest tenant is none other than the chosen people! The United Jewish Communities, an umbrella organization that covers 155 Jewish federations and 400 Jewish communities nationwide, has signed a lease for 65,000 square feet at 25 Broadway, for a bit under $40 a square foot.  read more »

There’s a mantra in commercial real estate that industry types repeat ad nauseam, as though the mere enunciation of the words will render them true: The Manhattan market is protected because it is on an island. The scarcity of space, and our general aversion to building new palm-shaped islands à la Dubai, is, in other words, a built-in safety measure.

But like so many sacral beliefs, this one doesn’t always jibe with the facts. It didn’t hold true in the 1990s, when real estate developers built up as job growth fell down. And if the recession lasts long enough for the World Trade Center towers to add to the growing excess of office space on the market, it might not hold true this time, either, glutting the market with unleased space and upending the fragile psyche of an industry that wants to already believe it’s in recovery.  read more »

Ladder Capital -- the fledgling financial firm that aims to underwrite big projects in New York City, perhaps one day filling the vacuum left by Wall Street's demise -- has hired seven executives with extensive experience in commercial mortgage-backed securities, according to Commercial Mortgage Alert, an industry trade magazine.

Brian Harris, the head of Ladder Capital who at one point led UBS' global commercial real estate team, has hired Mark Fox, formerly at Capmark, as chief financial officer; Ed Peterson, formerly of Eurohypo, as head trader; Lee Warshaw and Jack Weisselberg, formerly of UBS, as loan originators; and Mike Casavant (Lehman Brothers), Michael Scarola (UBS) and Micah Goodman (Credit Suisse) as underwriters.  read more »

It's back to the future in commercial real estate!

Howard Michaels, chairman of The Carlton Group, is bringing the live auction back to the industry.

Mr. Michaels will now hold what are known as "oral outcry" auctions for commercial real estate assets--bricks-and-mortar properties and loans--through a new entity called Carlton Auctions LLC.

This is not Mr. Michaels first foray into the live auction format. Back in the 1990s, in the days of the RTC, spawned by the savings and loan crisis, Mr. Michaels auctioned off thousands of real estate assets using live auctions.

Experienced auctioneers Oren Klein and Josh Olshin will lead the auctions.  read more »

Ivana Trump will party tonight with the elite from her native Czech Republic at the rechristening of Bohemian National Hall, which the Czech government purchased in 2001 from the Bohemian Benevolent and Literary Association for a symbolic $1. The Czech government has since poured $45 million into rehabbing the historic building.

The five-story Upper East Side, more than century-old edifice, at 321 East 73rd Street, has served as a center for Czech and Slovak culture for decades, but had in recent years fallen into disrepair.

 read more »

The Trump International Hotel & Tower in Chicago, one of the few projects in recent memory that the Trump Organization has undertaken without partners, was done with traditional Trump bravado. When the condo and condo-hotel project tops out at 92 stories, it will be the tallest new building in the United States.

But oh! The timing! The building is nearing completion during what is possibly the worst market conditions in a decade, and according to today's Wall Street Journal, Trump may soon run into trouble with his creditors:  read more »

Brookfield Properties, which, along with its holdings in Canada and across the States, owns the World Financial Center downtown and is developing two sleek skyscrapers on Ninth Avenue, held its third quarter earnings conference call this morning.

While there was plenty of talk about the impact of Hurricane Ike on its Southwestern holdings and its massive lease transaction with Petro-Canada in Calgary, the topic likely most on New Yorkers' minds is the status of Merrill Lynch's 4.2 million-square-foot headquarters at World Financial Center. The firm was recently bought by Bank of America, which, along with the Durst Organization, just completed its new headquarters at One Bryant Park.

The phone call did little to sate anyone's curiosity.  read more »

Mort Zuckerman's Boston Properties held its third-quarter investor call this morning. It was, as such events are these days, a somber affair. But, as far as REITS go, Boston Properties has so far capitalized on the unstable markets better than many, maintaining strong cash reserves and acquiring the GM Building and other distressed Macklowe properties just as the market started to dip.

Mr. Zuckerman expressed confidence that he wouldn't have to sell any of those assets, or even acquire joint venture partners.

"We sold a lot of buildings, as you know, almost $4.2 billion [of property] in the last half of 2006 and first half of 2007," Mr. Zuckerman said. "There isn't a building that we own at this stage of the game that we wouldn't want to hold for the longer term."

Yet, the firm has also suffered some setbacks, most notably its exposure to the collapse of Lehman and the demise of Heller Erhman, tenants at 399 Park Avenue and Times Square Tower, respectively.  read more »

Why so glum? We know. It’s been the worst real estate year in recent memory. But didn’t Papa ever tell you there’s opportunity in disaster? It’s just like what HSBC’s pervasive ad campaign says: It’s all about your “point of view.” Where some see chaos, others see opportunity.

Those “others” come in two sizes. First are the small regional banks that you’ve probably never heard of. And then there are the big guys, the ones forming funds with the sole purpose of originating new debt.

Let’s start with the small fry: $3.8 million, the average size of a loan from New York Community Bank  read more »

WPIX-TV—better known as New York’s CW11, broadcaster of addictive junk food like Gossip Girl—has renewed its lease for 104,000 square feet at 220 East 42nd Street through 2012. The rent was not disclosed, but the building’s asking rents are $58 a square foot.

It was a rare note of good news in landlord SL Green’s otherwise sober third-quarter Tuesday afternoon investor conference call, during which executives sought to allay concerns about the real estate investment trust’s $141.5 million investment in beleaguered real estate financial firm Gramercy Capital Corp. and SL Green’s exposure, along with other major landlords, to New York’s uncertain office market.  read more »

In 2007, after selling the Financial Times Building on Sixth Avenue to Harry Macklowe for a sizable $498 million, DekaBank receded from the New York real estate scene. Now the German bank is coming back, and not just to New York. The bank is actually reclaiming some of 1330 Avenue of the Americas—this time as tenants, not landlords.

DekaBank has signed a seven-year, 3,760-square-foot lease on the 23rd floor of the 40-story tower at an undisclosed rent. Given the tower’s primo Plaza district location at 54th Street and its recent $30 million renovation, rent is likely to be well over $100 a square foot annually.  read more »

Debt markets be damned! Wachovia was so eager to unload its 21-story pile of bricks at 1372 Broadway, despite the general unavailability of large real estate loans, that the bank financed its own building’s sale to real estate mogul Lloyd Goldman.

The Carlton Group’s Howard Michaels put the financing scheme together, and it’s an ingenious (if confusing) one. Essentially, Wachovia issued a mortgage of $235 million—86 percent of the full $274 million price tag—to Mr. Goldman, at a very low rate.

Now, banks don’t own a lot of bricks. But they do own a lot of commercial real estate loans that are looking increasingly risky.  read more »

New York’s own organic-farming real estate mogul Douglas Durst is getting into the distressed asset-buying business, with plans to invest up to $300 million of his own moolah in a fund that he’s creating with his frequent collaborator, developer Sidney Fetner Associates. 

“The purpose of the fund will be to invest in distressed properties,” Mr. Durst said. “Bricks-and-mortar [properties].”

The fund should be active by spring 2009, around the time Mr. Durst expects a bunch of financially troubled properties, in the city and elsewhere, to finally be coming to market.

“It just takes a while for these things to get to the level where they are available,” Mr.  read more »

In an apparent bid to restore investor confidence, Gramercy Capital Corp. has appointed Roger Cozzi its new CEO. Mr. Cozzi will replace Marc Holliday, CEO of SL Green, Gramercy's biggest investor.

Mr. Holliday has headed up Gramercy, a real estate finance and investment company, since its inception in 2004. The firm has taken a beating in recent months. A recent Wall Street Journal article reported that, "the real-estate investment trust has seen its access to capital curtailed by the credit crunch. It also is suffering from a scarcity of property transactions and rising defaults."

The Journal went so far as to conclude that the firm's survival is in doubt. Since January, the firm's stock price has dropped nearly 97 percent.  read more »

The Village Voice building at 36 Cooper Square will become just another building. Hartz Mountain Industries has decided, as part of its renovation of the building, to take down the black-lettered "Village Voice" from the facade of the building, according to the alt weekly's blog.

If the paper's blog is anything to go by, staffers are less than pleased:

The plan is to make the place look "like it did years ago," [Hartz Mountain Assistant Vice President Brian] Chabrunn told the blog. He also says the removal of our name is "no secret" though, as we mentioned earlier, nobody told us.