July 2008

New York’s economy hero…Tourist here for the rescue

By: Bill McCollum
Published: July 31, 2008

 

As the city is in the midst of an economic crisis and facing a recession it seems as though only one major factor is still keeping our city from a total economic meltdown, tourism. New York, mainly Manhattan, is collecting the most tourist dollars in the country. Manhattan has exceeded the big time tourist attractions such as, Orlando and Las Vegas. Last year alone a record 7.6 million visitors came to the city adding to the visitors from other states in the United States totaling an astounding 46 million visitors and spent more than $28 billion. Many foreigners are making the city a number one priority one their places to shop list. New Yorkers on the other hand, have been cutting big trips to places like Paris and England out of their program. Europeans flood the city to spend their euros and pounds daily, it seems as though they come to the U.S with one suitcase and leave the big city with a few new suitcases filled with new clothing and a small amount of new gadgets also. French sightseers have also increased in New York; with an increase of 39 percent French visitors are also helping during these rough economic times. Visitors from overseas commonly stay longer and spend way more money than visitors from other states in the U.S. Even Indian vacationers were up to 47 percent to add to the city’s economic correction. With numbers like these that steadily grow we may be able to pull our city out of this gloomy economic vortex.

Making energy pays more than saving it

By: Bill McCollum
Published: July 31, 2008

 

The subway is made to be one of the cleaner ways of riding by leaving a smaller carbon footprint in the air than cars and encourages New Yorkers to become involved in the making of a cleaner world by not driving cars and turning to subways. If subways were more appealing then maybe more people would take the subway aside from taxi’s and cars, but when The Metropolitan Transportation Authority was given a lump sum of zero dollars to run the subway, but corn farmers were given $36 billion to tend to their fields for a two year period, it definitely made things harder. To ensure that people take the subway aside from their cars the MTA would have to do a better job at keeping the stations clean along with the subway cars themselves, but without the money to pay extra workers that are going to do there jobs right.

When MTA workers sweep the subway cars I have seen a lot of them do the same thing, they would walk past a pile of trash as though they don’t even see it and sweep maybe a few items and go on to one or two more cars and repeat this same process then walk away as if they are finished. Most stations have unbearable smells and the appearance isn’t too attractive. Although the subway cars are air conditioned the stations seem to all have an exhausting heat wave that is very uncomfortable. If New Yorkers are advertised to take the subway don’t you think they should look a little more charming, comfortable, perhaps a little cushion on the hard chairs, a few air fresheners may help, and maybe even a few bright colors would brighten up the scene. These much needed upgrades will cost and the MTA won’t pull the money out of their pockets so with the federal government giving $36 billion to farmers making energy and nothing to the MTA to save energy than these upgrades won’t ever happen.

 

A Look at The Summer Residential Market

By: Jordan Crehan
Published: July 30, 2008

 

This summer unlike others has looked rather dim as the market has slowed down and capital has become more of an issue. Evaluating the recent numbers the summer market has shown us that sales activity are down by roughly one third from the same point last year. It is obvious that buyers are not able or willing to make the call on rentals/ownership due to heightened worries about job security and the market.

Most speculators believe that since prices will drop, people will hold out for this “good deal”. Where as our other consumers are just trying to be conservative with their cash along with the inability to get mortgages in wake of our housing crisis. It’s somewhat of a sad truth that our market has went from a buyers market to sellers market, and within this truth contains a pre-existent level of anxiety that comes with a bear economy. One can expect these kinds of feelings, of insecurity, pessimism, and fear over the next year. Of course if you only looked at the numbers, month to month instead of year to year, one would see that between April and May, sales increased only 1 percent.

Though one percent might seem small that is 1,070 transactions from 1,059, which is actually a lot. Yet this one percent increase is common due summer buying but not a good indicator of the where the economy is heading. The fact of the matter is that one can not survey two months and say “well Jon, things are looking mighty fine”, instead one has to evaluate the whole year and methodically analyzing the figures. Of course, if you do as instructed and look at the residential market annually, you most defiantly find our economy isn’t in the best of shape. Prices in May only had a moderate price gain, as the median price was “$967,130 in May, a 2.3 percent increase over April”. Terra Holdings, a chief economist commented on the situation to the extent that “it was probably just a monthly fluctuation”.

Anyway you cut it though, summer months will always be slow and that’s a fact, but it just so happen be that this May seemed worse than usual. Not mention that the Rental market is doing horrible as well by owners reducing rents in large quantities. Overall this is the norm for any place where the economy is not strong, it’s just that the citizens of New York have not been in this predicament (economic struggle) in years; so of course we are not used to it. The worst is yet to come.

 

A logical Way Out of The Credit Crunch?

By: Jordan Crehan
Published: July 28, 2008

 

Why is our economy so bad, nearing a recession?; it’s a rather simple phrase, “sub-prime mortgages”. Over the last year the market has been in turmoil as most finance companies have given loans to people that can not pay their mortgages back. Due to this, companies, people, and anybody involved in business has felt the backlash and suffered greatly. In Manhattan owners like Harry Macklowe accumulated so much debt that he had to sell of many of the buildings that he so proudly owned. Though within the last few months, people have made some kind of profit by looking to sellers for financing.

Over the last year financers have hatched a scheme in hopes that it will create a spur of sales. The seller financial formula is one that entails declining to offer loans along with demanding more cash in deals. In turn, this creates a situation that leaves the sellers with fewer options. A prime example of this way this deal works is the reported offer by Deutsche Bank to pay for part of the sale of seven Macklowe Properties. To be more specific, Macklowe properties would line up buyers for space in the building, but gave Deutsche Bank control after a default on payments. Additionally the buyer will assume portions of the debt with the banks assistance.

These kinds of deals are not new to the Real Estate market, as Robert Knakal, chairman of Massey Knakal Realty said that he offered to develop two sites for the $50-$80 million dollar range where the owner bankrolled 80% of the price. The fact of the matter is that these kinds of deals are being offered on a more consistent basis because financing the deals themselves has become so much harder. Said by Capin and Associates broker Lazer Sternhell “What I am seeing is, the sellers who want to get their numbers are starting to acknowledge they have to leave some paper. It is a trend that is warming up. A lot of buyers are asking for it”.

The fact of the matter is that ecnonmy is in a cycle, as this practice of seller financing were unheard of during the Real Estate boom. Though now, this type of business is common as money is hard to come by and the market nears a recession. As Jeffrey Roseman, executive vice presidenmt at Newmark Knight Frank Retail said “In a changing market, people get creative. And creative is good”.

 

Another College = More Land

By: Jordan Crehan
Published: July 21, 2008

 

Space in Manhattan is generally hard to come by, expensive, rare, and in large amounts even rarer. To get space for commercial and residential is one thing, but for a college in Manhattan its whole other ball game. When institutions like Columbia or NYU look to expand their school and create more housing complexes they typically dedicate departments just too keeping relationships with community leaders and watching the housing market. Smaller colleges like the School of Visual Arts have flown under the radar, as they to look to acquire living spaces for their students. This school is so small they don’t have to dedicate a department or a group for that matter to watching the real estate market or keeping the peace with the community.

SVA (School of Visual Arts) is known as predominantly an Art School in the lower east side of Manhattan, and contains 3,300 students. Over the last two years SVA has made some impressive purchases such as 54,000 square-foot site on West 16th Street between Eighth and Ninth avenues. They also leased the 24th-floor tower at 101 Ludlow Street and purchased 143,000 square-foot property on West 21st Street. If anything SVA would probably want to remain on a small setting with only a few thousand kids, however, in order to compete with NYU they simply need more space. SVA’s buying project known as the “under-the-radar five-year expansion plan”, is now in the third year.

 

SVA is making some sort of progress as they beat NYU for space at Third Avenue and acquired East 10th Street, a five floor 100-bed dormitory with ground floor retail. On the other hand, NYU has come far short of their set objectives as they have been unable to build developments in Alphabet city and other various areas of NYC. Luckily the School of Visual Arts has not experienced those hurdles or challenges that NYU and Columbia have faced. Perhaps due to the fact that I don’t think anyone knows this school exists. What’s more intriguing about this whole situation, is that NYU and SVA compete for the same spaces yet they have not entered any kind of bidding war. The great thing about the leases that the SVA signed is that after 30 years they are renewable.

None of these schools, NYU, Columbia, SVA, etc, are unable to come to grips that expansion means buying land in places besides Manhattan, such as Brooklyn and The Bronx. As more and more Americans and foreigners attend college each year, it will only become harder to acquire building space. Not to mention the housing market is in horrible condition; my advice-look elsewhere!

 

Are the Fed’s Figures a Realty?

By: Jordan Crehan
Published: July 21, 2008

 

The Federal Reserve has always been a dominant force in the economy as it help to bring our U.S. market out of a recession along with an in-depth knowledge of how to read the market. Recently the Federal Reserve insisted that our ecnonomy was nearing a recession due to disastrous reports of American home Equity positions. Even as the Fed tries to bail out banks and other lenders, they are still running into problems. To bring the market back to bull territory would be quite hard as Oil Prices keep rising and more companies report billion dollars write off’s. Our dollar is even weaker than the Euro, and up until a few months ago was weaker than Canada’s, CANADA!

Though not all neighborhoods were hit with foreclosure signs and grim faces it is still observe Feds foreclosure numbers on a national scale. Over the last few months the Federal Reserve stated that homeowners lost an estimated $879.6 billion in net equity wealth. They also estimated that the overall $880 billion dollar loss would not only hurt the homeowners but cripple those cities and surrounding markets as well. Yes these numbers seem absolutely horrible, world ending one could say, yet some feel the situation is blown out of proportion. Jay Brinkmann, vice president for research and economics at the Mortgage Bankers Association “I don’t think numbers like an $880 billion equity loss are all the meaningful for most individual homeowners”. The fact of the matter is that the losses for most homeowners occurred on highly concentrated areas.

 

The numbers become more inflated because in states like Florida, California, and a few others were hit the hardest, which in turn weighs the country down. For example, only 52 percent of the 292 metropolitan areas showed positive price gains during the first quarter of the year. Just because the numbers say our housing economy is in the gutter doesn’t actually depict reality, to an extent that is. Texas whose housing sales went 7.7 percent, Grand Junction Colorado whose sales went up 9.1 percent, Utah up 6.8 percent and North Carolina went up 6.2 percent.

It’s evident that not every state was suffering; it’s just that media outlets like Fox 5 news and CBS blow the situation out of proportion, not to mention make it worse. Sure some areas suffered, I mean really suffered, but in the scope of things the five-year net equity gains are still noteworthy. You’re probably thinking to yourself, that’s impossible, yet take Naples, Florida. Sure there equity rate went down 18.7 percent but this area is still up a net 61 percent over the past five years. The end result here is that if you bought at the absolute peak of the housing boom, you didn’t feel that big of loss in the end.

When numbers aren’t examined it is truly apparent that matters become worse. Though our economy suffered in wake of the credit crisis, not every area was destroyed, contrary to what every news analyst says. Once again I not stress how important it is to understand that states like California make most of our economy, so of course when they suffer people believe the same could for everyone else.

 

Aftermath of Crane Collapse, “Lets make a Sale”

By: Jordan Crehan
Published: July 16, 2008

 

The idea of a crane is usually equated with a sturdy machine, high in structure, extremely heavy, and typically involved in some type of construction. After the crane collapse, this whole idea of sturdiness and indestructibility crumbled. In the aftermath of the crane accident at the Azure condominium at 333 East 91st street, buildings were destroyed and lives were taken. Of course one must have been asking themselves “how are we going to sell condominium in a building where a quarter is missing?”. Evidently, sales did continue and reopened on June 14, 2008, actually two weeks after the crane incident. Though we are unsure of how many apartments had been sold, there is still some kind of selling going on as 17 units have gone into contract. However for prices, the same cannot be said as they are going up and down, not reaching a solid bench mark.

 

In realty Azure can’t really close on anything due to the fact that they do not have a certificate of occupancy. In turn, this so called certificate will be delayed due to the crane crash. Analyzing this situation, it isn’t all negatives as it is possible for buyers to leverage the bargaining price, in light of the construction situation. On the other hand though, any way you cut it, it’s still going to cost about $700 a square foot in NYC. The Azure condominium has to had to adjust by lowering their initial building units of 128 to 100. In hind sight, they are hoping to take these 100 units make them more luxurious expanding them from 2 bedroom to 3. Not to be nervous though; even if listing are taking off the database that can just mean that they aren’t under contract. Regardless of how many units there are and what it’s going to be sold for, construction is the real problem at hand.

 

Set to be complete by June 2009, the news finished plans are far from that date due to the fact that the stop-work order has not been lifted. Louis Vasquez, director of sales for Brown Harris Stevens, biggest concern is not so much the stop-work-order, but the time table for the investigation from the Department of Buildings and the City Department of investigations. The location of the Azure Condominiums on 1st avenue, far from any mass transit and in bad condition; will only hurt sales. It’s rumored that even to compete in this market they will have to offer brokers 4 to 6 percent in any 1 to 2 bedrooms. In a sense though, they are lucky because they just met the 421-a tax abatement, thus they are able to set prices slightly lower.

 

In the wake of the disaster by the crane its obvious this it did more than just destroy a building, but in a sense crippled a large part of the upper 90’s. What’s so interesting about this whole situation is how they were even able to sell any units at all. This place carries the shame of one of the few areas in the city were a horrific accident such as this one took place. Not only will the developers have to cope with sales but figure out how to rebuild a building. In the end it just poses the question, how much are they willing to spend?

Asking Rent Entail Much More

By: Jordan Crehan
Published: July 16, 2008

 

Rent has always been a precarious situation in Manhattan as it becomes more in demand each year. As ownership tends to be harder and harder to come by, rent seems like the only option. Significantly over the last year, the commercial rents have increased in the year’s first half, even though the space available for leasing grew. However, with an increase in people asking for rents it directly correlates to a rise in office availability as well. It is clear that there has been a increase of $0.10 per square foot from May and “up from $63.46 per square foot in June, 2007”. Just this month, the rent reached an astounding $71.35 per square.

Analyzing this situation one sees that when the asking rent rises it creates a domino effect of everything that has to do with Real Estate. For example, there was a negative absorption which reached 4.17million square feet in the first six months of 2008. These are quite the numbers for the beginning of any year as there was a positive absorption of 1.3 million square feet in 2007.

The availability rate of most office spaces, vacancies, etc, is actually set to increase over the next 12 months to 9%, a 0.9% increase from 8.1% of the same month last year. These kinds of numbers generate a large gap between sublease rents at 65.44 and direct rents of $72.46 since 2000. The fact of the matter, is that this unyielding market has created staggering statistics, to the extent that there are only 15 available blocks of space greater than $250,000 in Manhattan. Even though there were more than 20,000 job cuts from financial firms, they are still reluctant to give up office space in Manhattan, returning only 1.4million feet.

To tell you the truth I am not surprised with these kinds of number due to the situation that our country is in. As the market becomes more and more depleted, entering bear territory it is understandable the prices will become inflated and industries like real estate, finance, etc will ultimately be hurt.

NYC Office rental rates

By: Bill McCollum
Published: July 15, 2008

 

The office rental market is suffering dent but so far, no cracks. If current projections of 40,000 office jobs are actually lost citywide, the vacancy rate would go up to 9.2 percent. Currently, the average vacancy rate is 7.1 percent, while average rents are $85.18. The 5.6 percent vacancy in direct space has an asking rent of $89.45 a foot. The sublease market, which has an average asking rent of $74.76, is up by 50 percent, but that’s moving from a slight 1 percent last quarter to today’s 1.5 percent of a total 240 million feet of Class A, or top tier, office space. Meanwhile, Manhattan Class A rents are still up across the board from last year, even though spots like Times Square South, Hudson Square and the World Financial Center have asking rents that are down silver from the first quarter. We’re still in a space-starved city even though the pendulum is swinging in another direction.

Winston in the news

By: Bill McCollum
Published: July 15, 2008

 

Ronald Winston of Winston Jewelers just got some golden bricks to go along with his retirement parachute. Ronald has decided to leave the family business and is selling his 50 percent interest the company to the Canadian Mining firm. The Winston Jewelers was founded in 1932 by Harry Winston, Ronald’s father. The townhouse at Fifth Avenue and West 56th Street which has been home to the jewelers stands five stories high and is 27-feet by-100-feet. Ronald’s brother, Bruce, owns the other half of the interest in the townhouse and the edifice remains to be leased long term to the jeweler.

 

Midtown Manhattan offices at mid-range price

By: Bill McCollum
Published: July 14, 2008

 

For those tenants interested in office space in the Midtown NYC, this is the best time to do so. Years ago it was virtually impossible to get an office in the Midtown section, and to get a good deal was like finding a needle in a haystack. Believe it or not Class A office space in this section is now available and haggling wouldn’t be a problem either. Tenants have been able to negotiate with their landlords and most of which were successful in receiving a few months of free rent. Most tenants with good negotiating skills were able to talk their landlords for starting rents 9 percent below the original asking rents. The Solow building at 9 West 57th Street and 590 Madison Avenue are a few of the buildings where negotiating with the landlords won’t give them much success.

Triple Six on the Fifth

By: Bill McCollum
Published: July 14, 2008

 

Stanley Chera and the Carlyle Group closed their $525 million purchase, yesterday afternoon, of an interest in the retail portion of Kushner Companies on 666 Fifth Avenue. Kushner kicked some money back for an interest in the Carlyle-Chera joint venture, but will retain the upstairs office for itself. Kushner bought the building just a year ago for a record setting $1.8 billion for the single asset. Carlyle threw in $170 million in equity to complete the deal. Equity today is not the hard part; the hardest part is debt today. With angels on their side, Barclay’s provided $325 million for a first mortgage, and an unnamed build management corporation kicked in $135 million in a mezzanine loan. For those of you with calculator brains you would have added that to a whopping $630 million. These extra bucks will go toward costly items like, the build out of the new Abercrombie & Fitch store that will go into almost half of the current space occupied by Brooks Brothers, which is leaving the building.

 

Oil money comes back to buy assets

By: Bill McCollum
Published: July 14, 2008

 

Middle Eastern Abu Dhabi sovereign wealth fund has completed a major investment which has landed them the Chrysler Building. The Chrysler building was once the world’s tallest building until being beat by the Empire State Building the next year. Middle Eastern investors have spent $1.8 billion this year alone on commercial property in the U.S. The Chrysler building cost the Abu Dhabi fund a little over $800 million to obtain. This is the second Manhattan landmark bought by Middle Eastern investor. The first building that was purchased by the Abu Dhabi fund was the General Motors Building, which was purchased last month. The asking rents in the Chrysler building range from $94 to $112 a square foot annually.

Apple Expanding Once again

By: Jordan Crehan
Published: July 14, 2008

 

Apple is predominantly known as a technology/internet company that tends to focus on computers and music. Most of the time Apple designs their stores on bland colors such as black, white, grey that identifies the company as simple and user friendly. The occasional apple store in Manhattan is usually quite large with see through window and presides in “hip” areas such as Soho and Midtown.

Over the last few months Apple has had their eyes on a new office site, one that presides in the new Macklowe tower. Recently they started negotiations for a high end 16,500 base floor in the 510 Madison Avenue, which is in the Macklowe properties new tower. Most likely, Apple was able to get such a large space due to their relationship with Macklowe properties as they have negotiated for spaces in the past. It is even rumored the Henry Macklowe himself presented the idea of the first Apple store at the bottom of the GM building. Most have praised Macklowe for his ability to improve his real estate by implementing high end boutiques like the Apple Store and adding his own look to it. Even though Macklowe had to sell his jewel like structure(GM building) for 1.2 billion in order to pay off debt, its obvious that by injecting a Apple Store into his new project he is trying to crush any pretense the GM building had set.

On a side note, the reason Henry Macklowe is building all these new structures is due to the face that he wants to try and recoup his loses. He initially ran into problems when he faltered on massive loans on most of his buildings because of the sub prime mortgage crisis. In turn, he had to pay back massive debt so he started to sell of the various buildings which he owned. It’s said the Harry’s son Bill will take over the company as chief executive officer. Billy does have some experience though as he has been overseeing the development of the 510 Madison Avenue building.

Even most of the information is to remain confidential, one insider says that Apple in talks of a $110 per square foot deal for upper floors of office space in the building. Only a $110 dollars would a complete steal, in light of Manhattans economy woes. The space would also be utilized as offices for the company along with retail locations in the Meatpacking District and Soho If this deal does go through, it will not only make Macklowe look better but attract more tenants. There are some negatives though, as the building process has been slow, tenants that wanted space are now on hold meaning they are downsizing instead of expanding.

Lets Go East

By: Jordan Crehan
Published: July 9, 2008

 

In our small island that we call Manhattan, Real Estate has becomes a precarious topic as there is only so much land left. Over the last few years there has been rampant development, as pristine pieces of land like the West Side Rail Yard, that some thought were untouched are being taken over by commercial companies. Each year it becomes harder and harder to stop companies from growing due to the fact that most areas are becoming more commercial, thus the communities are losing more power.

In wake of this fact, new global demographics are reporting that places like Africa, Middle East, and Asia are growing in terms of market capacity and demand for Real Estate development. This new report goes in depth, as it calls for both real estate development and infrastructure for places were the population is growing exponentially in most merging markets. Africa along with the Middle East holds a whopping 39% of the world’s population and that is only set to increase by the end of the year. By 2015 alone cities such as Mumbai, Delhi, Shanhai, Dhaka, Kolkata and Jakarta will home more than 15 million people. Each one of these cities, as of now, only holds in the range of 400,000. The fact is, it that the African market is growing on a global trend do to their strong influence in commodities market along with a underlying feeling of most countries besides the U.S., to head east. Africa is said to experience 33% of the globes growth over the next quarter of this century. Within the next 30 years Africa’s civilization will undergo a rampant growth some specific areas. This includes Sub-Saharan Africa which is said to undergo 70% population boom, while the Middle East and North Africa will increase by 43%.

Interestingly, the annual report which was published last month described how there have been demographic changes in the U.S. and European population as well. By 2030 the European population will drop 8% from its current 11% world wide. Though its fascinating how the European population will decline yet the U.S. will climb due to ownership in Latin America, multifamily housing, an the Caribbean. The Caribbean along with Latin America is said to have 25 combined urban areas that have an estimated 2 million and beyond in each in of these cities by 2015. This incline in pop isn’t just in these countries but also in Indian. India’s populace is going to surpass china in 2030 thus becoming the most populace on the planet.

More than ever it is important to keep an eye on the Asian and Middle Eastern markets. Just as the colonial days when America had to expand through the Louisiana Purchase; so is the same thing happening but worldly through Eastern continents and countries.

West Side Rail Yard, a battle for the tracks

By: Jordan Crehan
Published: July 9, 2008

 

The West Side Rail Yard has been around since the city first began to industrialize in terms of buildings, parks, and transportation. Though trains do not run on these rails anymore, there is still a huge controversy about what will be done with the actual land. Known as a war that has been raging for a number of years; this year seems likely to be the last. It is expected that Tishman Speyer will receive this majestic 26-arcre yard real estate.

Though this seems like a well wrapped Christmas present for Tishman, they are still expected to face extreme scrutiny by the Western half of the site as they will have to go through the cities lengthy land-use approval process due to zoning changes. Most residents are against Tishmans bid to institute a commercial heavy building. This type of community reaction will be one of the main reasons why it will be hard for commercial real estate to develop. Though in the eyes of the community, they like any normal person, are scared of the higher financial risk of commercial buildings in a predominately residential area. As Anna Levin said “The Tishman Speyer proposal, if that’s the landuse plan we’re working on by the time it comes to the community, it’s unlikely that it would be supported by the community”.

The developers are getting some kind of push though as a letter was just signed by Council Speaker Christine Quinn. As she agreed that if the developers did adhere to a strict set of guidelines, she would “fully expect to the support the zoning change”. This letter by Quinn mind you is not binding nor would it hold as an document that could be presented in a court of law. Additionally it is expected that all of the community board will likely give nonbinding recommendations about he proposed zoning change.
Real Estate in Manhattan is generally hard to come by whether it’s half an acre of land or twenty five acres of land. Arguably this is the one area of Manhattan that has not been invaded by commercial buildings and the classic Starbucks. Though in the midst of things it seems as if people are forgetting to preserve some type of space which be community owned not corporate.

Can you Trust a Dolan?

By: Jordan Crehan
Published: July 7, 2008

 

Madison Square garden, known purely as The Garden, opened 1968 and since than has stood as one of New York City’s premiere monuments. Home to various sporting events and teams such as the Knicks, there has been a constant quarrel over whether or not the stadium will be moved. There have been efforts to rebuild the garden as there was 200 million allocated to add seats and create more luxurious suites. The Garden was taken under ownership by James Dolan chiefly in 1999. Since then he has been under heavy scrutiny in terms of management decisions along with his overall public image.

Dolan has assured most Manhantaner’s that The Garden is here to stay at its present location, and will not be moved to a different part of the city. Though this promise will be tested within the few weeks of the summer, as government entities, elected officials, etc, figure out plans for redevelopment of Pennsylvania Station. Last week on a gloomy Thursday afternoon, Madison Square garden workers called to announce that it was proceeding with a renovation of the existing area-a move that would crush the 2 billion dollars to redo Penn Station. Really though, over the last year it has been unclear of who has the power in this region as Senator Charles Schumer called for the Port Authority to rescue Penn Station yet the Dolan’s declared the plan as a death stint refusing to help. In light of this situation and no clear view of how funds will raised and spent, it seemed clear that The Garden was on its way out. Plans for renovation of the Garden were first announced in 2004 yet still unclear if there has been any kind of progress made.

These tactics are typical of any business man as it clear that Dolan wants to have complete power over his own project, and not work with others. Though this situation could become more complex as The Garden will have to go through the city’s seven-month land-use approval process, a extremely complex and grueling process. As we evaluate these plans in the following weeks, one must pay attention to key players such Council Speaker Christine Quinn and a variety of community leaders who will play crucial roles in this high acclaimed story.

Will Dolan hop on the plan to redo Penn Station and install a new stadium? It’s hard to decipher this situation, but we do know that money today is tight and if the Government gives enough to recreate Penn Station and The Garden, I am sure Dolan will hop on.

The not so mighty dollar

By: Bill McCollum
Published: July 7, 2008

 

The American dollar was once the leading currency in the nation, but since 2002 a steady decline of the American dollar is falling short compared to many of the other major currencies. Many vacationers from foreign countries are finding excellent deals in the U.S, while Americans are being clobbered by the high prices of hotels, travel, and even sidewalk cafes in many of the places that were U.S trading partners. Goods made in America is near dirt cheap to many foreigners although before it was vice versa. The dollar is losing its purchasing power and international respect. President Bush believes that the strength of our dollar is reflected by the strength of our economy. With American companies suddenly looking cheap to foreigners it may give them the opportunity to take over American companies.

 

Macklowe must watch three more buildings go

By: Jordan Crehan
Published: July 7, 2008

 

Real estate investor Harry Macklowe made a package purchase early 2007 which included; 850 Third Avenue, Park Avenue Tower,1301 Avenue of Americas, 717 Fifth Avenue, Worldwide Plaza,527 Madison Avenue, 1540 Broadway and 126 East 56th Street. Macklowe couldn’t handle the massive amount of short term debt and handed back control of the properties. Deutsche Bank was put in control of the buildings and didn’t waste any time putting the buildings back into the market. The Paramount Group, a German owned real estate firm, has acquired 1301 Avenue of the Americas in a $1.45 billion deal. 850 Park Avenue and the Park Avenue Tower were bought in a $930 million deal by Shorenstein Properties. This San Francisco based real estate investment firm already owns two buildings in Manhattan, 125 Park Avenue and the Starrett Lehigh Building on the far west side.

 

Shorenstein Makes a Comeback

By: Jordan Crehan
Published: July 7, 2008

 

Historically Lexington Avenue has always been known as one of the prime shopping sites along with magnificent buildings that overlook the city. 450 Lex, an historic building that has been under a variety of ownership, was just bought back by its original owner, Shorenstein Properties. Shorenstein properties, a real estate firm based in San Francisco recently announced that they were acquiring $250 million in loans for 450 Lexington Avenue. Shorenstein over the last year has been active in acquiring debt ridden buildings stemming mostly from a two billion fund that was raised in 2007.

Due to the credit crisis it caused most companies to falter of their mortgage loans, etc, ultimately leading into debt. Lately we have been witnessing companies like Shorenstein properties that take the real estate debts and buy them out. These scenarios are typically looked at from the lenders as a discount as they presumably saving money by not going more into debt. Though Shorenstein was able to gain their property back, one could still argue that they are the losers in the end. Accessing the situation; Shorenstein sold the Real Estate to Murray Hill Properties who actually flipped their newly owned property for a tremendous profit.

As the real estate market nears the peak of its bubble, there have been an excess amount of visitors who are willing to pick debated lenders. With funds that reach in the billions, this business venture of buying debt Real Estate is a classic move, one that is done when any economy reaches a bear market. Generally all investors in this situation have such deep pockets that they can pay for the debts of the building but also flip it for a profit. It’s clear that Shorenstein properties suffered in the beginning, losing out on a big deal however they might be the ones who ultimately profit in the end.

 

The Lay of the Land

By: Bill McCollum
Published: July 7, 2008

 

The office rental market is suffering a dent, but so far no cracks. If current projections of 40,000 office jobs are actually lost citywide, the vacancy rate would go up to 9.2 percent. Currently, the average vacancy rate is 7.1 percent, while average rents are $85.18. The 5.6 percent vacancy in direct space has an asking rent of $89.45 a foot. The sublease market, which has an average asking rent of $74.76, is up by 50 percent, but that’s moving from a scant 1 percent last quarter to today’s 1.5 percent of a total 240 million feet of Class A, or top tier, office space. Meanwhile, Manhattan Class A rents are still up across the board from last year, even though spots like Times Square South, Hudson Square and the World Financial Center have asking rents that are down a silver from the first quarter. We’re still in a space-starved city even though the pendulum is swinging in another direction.

 

Changes for Winston

By: Bill McCollum
Published: July 7, 2008

 

Ronald Winston of Winston Jewelers just got some golden bricks to go along with his retirement parachute. Ronald has decided to leave the family business and is selling his 50 percent interest the company to the Canadian Mining firm. The Winston Jewelers was founded in 1932 by Harry Winston, Ronald’s father. The townhouse at Fifth Avenue and West 56th Street which has been home to the jewelers stands five stories high and is 27-feet by-100-feet. Ronald’s brother, Bruce, owns the other half of the interest in the townhouse and the edifice remains to be leased long term to the jeweler.

 

Bearing the loss

By: Jordan Crehan
Published: July 7, 2008

 

The whole Bear Sterns fiasco signified just how hard the housing situation had hit the American market. Known as a premier financial institution, Bear Sterns had reached such a level of success that in 2006 they wanted to expand. So, in turn they bought real estate on blocks of 237 and 320 Park Avenue. However as this credit crunch hit the market Bear almost went out of business and had to allocate most of their assets to JPMorgan in a emergency acquisition.

JPMorgan has decided that with this new found real estate, they will sublease this majestic Park Avenue real estate. JPMorgan already has a castle of a home on 270 Park Avenue along with 383 Madison Avenue that it actually acquired from Bear Sterns. Its likely that JP will take most of this space and use it for profit, future growth or storage. Subleasing Park Avenue real estate, this company is giving up 120,000 square feet along with a great location. Though it cannot be disclosed of how much JP is renting each square foot for, Bear Sterns subleased it for $70 per square foot. They will also relinquish 320 Park or rather 50,000 square feet, specifically floors 15 and 16.

 

 

The 3rd Quarters hopeful blessing

By: Jordan Crehan
Published: July 7, 2008

 

Over the last year the U.S. market could be categorized as turbulent and unstable in the midst of a possible recession. As the 3rd quarter began last week, investors were hoping for a possible bull scenario; where the market value is high and investing is rampant. Though as the as the week began these hopes were as likely as flying pigs This quarter could be categorized as one that is plagued by high oil prices, steep declines in General Motor’s share price and a rise in interest rates in Europe.

A Bear market is typically a stock market where there is a significant drop in the market prices and the attitude for most investors is described as pessimistic and fearful. Reasons this quarter began so poorly are due to inflation in oil trends, a weak American dollar, global demand on the rise, peak oil and speculation. Investors are becoming so scared to the extent that they wont even invest in companies that have historically been stabilize in the market, such as GM. When companies like GM start out poorly, and end up laying off about 1000 workers it directly correlates to how our American economy is operating-poorly.

Crude oil traded at 142.87 a barrel correlating to the national average price for a gallon of gas to $4.108. To put this in perspective, a mere two years ago the average price of gas was $3.25-that’s a change of 85 cents, almost a dollar. A dollar change seems small but for a gallon of gas, it’s a tremendous amount. Think about it, just 30 years ago gas was only a $1.50 yet in the last year it’s raised almost a whole dollar.

Though there is some glimpse of light as NBC universal made a move to buy the weather Channel for a reported of three billion dollars. These kind of deals create optimism and influence investing; a rare transaction in this years American economy. The fact is that unless people start to spend money, a recession is inevitable. Any economy is fueled by consumer spending and unless people overcome this fear, who knows what will happen.

 

Source: CNN

 

Transwestern Exec Joins Board of USGBC Atlanta Chapter

By: Bill McCollum
Published: July 3, 2008

 

Tom Boeck of Transwestern has been appointed to the U.S. Green Building Council (USGBC). Transwestern is one of the largest privately held commercial real estate and development firms in the U.S. Transwestern leads the industry in sustainability and has received multiple EPA energy star awards. Boeck, who has more than 20 years of commercial real estate experience, had participated previously as a select member of the USGBC’s Portfolio Committee, responsible for developing criteria for portfolio planning and standards for the implementation of green practices across multiple-building portfolios. Tom has been considered an expert in sustainability issues for years. As a member of the Atlanta chapter’s board of directors, Boeck also will serve on its Advocacy Committee, which will advance the agenda of sustainability throughout the state of Georgia.

 

 

A Green Roof over Your Head

By: Bill McCollum
Published: July 3, 2008

 

Green Roofs, roofs planted with vegetation, improve the insulation of a building and can reduce higher temperatures in the city by absorbing the sun’s heat rather than reflecting it. Building owners in New York City who install green roofs on at least 50 percent of available rooftop space can apply for a one-year property tax credit of up to $100,000. The credit would be equal to $4.50 per square-foot of roof area that is planted with vegetation, or approximately 25 percent of the typical costs associated with the materials, labor, installation and design of the green roof. Green roofs also absorb rainwater which helps by giving sewer systems less to worry about. Each 10,000-square-foot green roof can capture between 6,000 and 12,000 gallons of water in each storm event. Soil, plants and the trapped layer of air can be used to insulate for sound. Sound waves that are produced by machinery, traffic or airplanes can be absorbed, reflected or deflected. The substrate tends to block lower sound frequencies and the plants block higher frequencies.

 

 

Despite Delays, World Trade Center Finds New (Clean) Energy

By: Bill McCollum
Published: July 3, 2008

 

The World Trade Center is the next building to benefit from the new Green Energy fad that is going around. The New York Port Authority reached a deal to put one of the largest fuel cell installations in world at the World Trade Center. The freedom tower and the three other towers rising on the site will serve to the installations of this fuel cell. These fuel cells generate energy by combing hydrogen and oxygen in a chemical reaction. This space age energy technology is to produce clean power on site. The 12 PureCell Model 400 fuel cells will be provided by UTC Power, a United Technologies Corporation company. PureCell is billed as one of the cleanest, quietest and most energy-efficient on-site power generating technologies available. They don't burn fossil fuel, produce 400 kilowatts of power, and meet the strictest air emissions requirements in the United States. The UTC power is provding the fuel cells under a $10.6 million contract.

 

 

Sustainability Checks In at Hilton Hotels

By: Bill McCollum
Published: July 2, 2008

 

The nation’s second largest hotel chain, Hilton Hotels Corporation, has recently announced its new goal to reduce greenhouse gas. The company now has plans to reduce its greenhouse gas by 20 percent in the next five years. By the year 2014 Hilton Hotels will reduce water consumption by 10 percent, waste output will be reduced by 20 percent, Co2 emissions will be lowered by 20 percent and energy consumption from direct operations will also be lowered by 20 percent. This will help provide a less smoggy future. Population growth and global industrialization are accelerating the depletion of our natural resources. Around the world, demand for energy continues to grow and fresh water scarcity is becoming a global reality. How we respond to these challenges will determine the sustainability of our future lifestyles, the sustainability of our communities as we know them, and ultimately the sustainability of our planet. The company is committed to the advancement of renewable energy as a source of power for its operations, not only to reduce its carbon footprint but to develop a commercial infrastructure for powering hotels and corporate offices and still making it livable.

A few Hilton Hotels already have sustainability projects in progress in the U.K., Ireland, New York, and in many of its European hotel locations. The European Hilton hotel’s energy and water consumption has been reduced by 10 percent within the past two years. The U.K and Ireland has reduced 56 percent of our carbon footprint by introducing carbon-free electricity. The first commercial fuel cell power system is found in the United States in the Hilton’s New York location and is providing one of the cleanest power generating technologies today.

 

 

What Plans For WTC Site

BOMA, CCI clear path for energy efficiency retrofits

By: Bill McCollum
Published: July 2, 2008

 

The Building Owners and Managers Association (BOMA) International and the Clinton Climate Initiative (CCI) introduced a blueprint, this week at a press conference in Denver, which may be an easier path for property owners to perform energy efficient retrofits on their existing buildings. BOMA and CCI collaborated to develop the BOMA Energy Performance Contract Model that is said to improve the financial and environmental performance of commercial real estate and a dramatic improvement of energy efficiency. The model provides a standardized energy performance contract that key legal council and technical provision have been examined and evaluated by top real estate companies, energy service companies as well as the BOMA legal council and experts as well as the CCI.

An energy efficient pilot project put together by BOMA, CCI and USAA Real Estate was generated in the commercial sector and is looking to improve financial performance and reduce their company’s carbon footprint. This project was launched in late January 2008 and the USAA provided two buildings to help and develop and refine an energy efficient building with added technology to reduce barriers.

Energy performance contracting has been in place for more than 20 years. It has rarely been used before due to the cost but the new model has standardized contract terms and conditions which energy service companies are committed to lowering cost. Financial institutions are committed to extending market interest for the loan.

 

 

What Plans For WTC Site

By: Ben Anapol
Published: July 2, 2008

 

Further delays in construction and major cost overruns have many wondering not only when the World Trade Center Site will be completed, but also if the original plans for the site will be upheld in the face of growing public unease about the progress and excessive construction costs. The $2.5 billion PATH station and transit hub adjacent to many of the other projects planned for the site are not only behind schedule and over budget, but the final design has not been finished. The demolition of the Deutsche Bank Tower is 14 months behind schedule. There are 26 separate but interrelated projects planned for the site, and construction on one part often interferes with progress on another. So, with further delays in store, let’s hope that the most important projects that are essential to the rebirth of downtown Manhattan will be focused on so that we can remember those we lost in 9/11 while looking ahead to the economic revitalization of the area.

 

 

NYC Westside Rail Yards

By: Ben Anapol
Published: July 2, 2008

 

With the collapse of the deal with Tishman Speyer Properties to build a large complex of apartment buildings, office towers and parks over the railyards on the West Side of Manhattan, the future of this vitally important piece of Manhattan real estate is uncertain. The Hudson rail yards, considered the last large site available for large scale development on the island of Manhattan, is currently owned by the Metropolitan Transportation Authority. This area on the Westside of Manhattan borders the Hudson River. The Hudson rail yards are seen as the key to the city's future. The development of the land will have costs in the billions. The land has the possibility to have up to 24 million square feet of office space, an additional 13,000 apartments and condominiums, a school, an arts center and parkland. The possibility to start from the ground up, and develop a space with few restrictions, will allow for the most ideal development of the area. This will force companies to pay high rents. But, since the deal has collapsed, New York City will most likely be forced to wait until the current economic downturn ends before we see any development on the Westside rail yards.

 

 

1350 Ave of Americas

By Jordan Crehan
Published: July 2, 2008

 

Prime Manhattan Realty recently brokered a 10-year lease at 1350 Ave of Americas for AC Investment Management, a leading financial company in the financial market. AC investment is known as a private based New York company which specializes in advising in hedge funds for customers around the world. This company is reputed as one of the top firms in the city as they place a distinct emphasis on active commodity plans within a global standpoint. AC investment management operates on three vehicles in order to support their foundation. These vehicles are committed to global power trading, emerging markets and commodities.

Scott Bennett of Prime Manhattan Realty represented the interests of AC Investment Management while Elaine Ananzagasty represented the landlord of 1350 Ave of Americas in the transaction. Categorized as a class A building by websites like Costar, this structure represents a pivotal piece of real estate in Manhattan as it stands in the center of the East and West Side. Known for its unique architecture with remarkable glass windows and modern building structure, it is one of the first buildings in the city to solely implant a glass configuration. Located specifically in the Plaza district, it is surrounded by an array of famous buildings. Some of these buildings include the Rockefeller and Time Warner building along with a variety of premiere restaurants. Known widely as the MGM building it contains 35 floors and has a spectacular height of 416 feet. This prime location will defiantly increase business as they stand in a location where most companies share a particular interest-finance.

Prime Manhattan realty is proven to be a versatile firm, dealing in commercial along with residential real estate. This is group is so distinctive because they approach each deal with their tenants wants and needs in mind. Working with Prime Manhattan, one knows that day in and day out they are receiving “100% Confidentiality”, “100% Devotion”, “100% Satisfaction”, and an overall “Team Approach”. They perceive the tenant relationship as a confidential one, using their knowledge of current lease terms, financial conditions, internal business situations, and budgeting requirements. Their dedication, service, and performance will convince you that you have selected the best commercial real estate brokerage firm.

 

June 2008

GM building, a Godsend?

By Jordan Crehan
Published: June 24, 2008

The GM building stands as one of the most expensive buildings in Manhattan as it sits a near junction between central park and midtown. Home to exclusive tenants and high rents, this building is arguably one of Manhattan’s finest landmarks. The building value only stands to increase as 900,000 of the buildings 1.8 million square feet will become available in only two years. The GM building was owned by Harry Macklow, but due to recent problems he decided to sell it to Boston Properties who is headed by Mort Zuckerman. Known as an entrepreneur type figure in the real estate figure in the real estate world, he expects big returns from the GM Building. Zuckerman along with several other investors expects the cash flow during that period to jump. Rent alone costs $84 per square foot now, yet that’s only on an average. Nonetheless, most of the time we see that some spaces can go for as high as $160 to $250 a square foot.

The fact is that within this urban paradise land such as this one is hard to come by, which a possible reason is why Zuckerman and his investors took it. Though the economy is not in stellar condition, Boston properties alone projects a 5% yield from the building next year; and that is not even factoring the tax breaks. The fact is that this investment has a plethora of possible cash deals. There have even been talks of selling the GM (General Motors) name, as the American car company only operates on three floors within the building. Furthermore, as the Buildings first owner, GM, stands move out to the Citigroup Center, there are even talks of changing the actual name of the building itself. Looking at this from a birds eye view, Zuckerman, the Boston Properties Chairman made such a drastic move, because he knew that a 2.8 billion buy is an investment which in the future would only double; perhaps, another historic move from the Harvard graduate.

 

South Street Seaport Expansion comes to an Abrupt Halt

By Jordan Crehan
Published: June 23, 2008

The South Street Seaport has stood as one of the few areas in our sprawling city which is not solely inhabited by the occasional Starbuck’s and signature high-rises of the Big Apple. Though recently, in the past year General Growth Properties of Chicago has tried to green light plans to install a 42-story, 495-foot hotel apartment on the bulk of the seaport, at Pier 17. This building is said to contain a luxury hotel on one side and a restaurant along with event space on the other. This new complex has a created a strong backlash in the community, as councilman Alan J. Gerson recently sited that these arrangement’s would undoubtedly not pass. Mr.Gerson stands as the dominant voice in a fight to stop not only this high rise but to preserve some kind of waterfront view of New York City. Mr.Gerson has support from the Community board as well. Headed by Julie Menin, she raises the question, of how these new developments are ignoring the need for community establishments such as parks and schools.

Interestingly Mayor Bloomberg favors the General Growth plan as his administration believes it will create an enhanced look to some vacant lots of the Seaport area. A rather peculiar stance from a Mayor who historically has favored conservation of history parts of the city. Mr.Gerson agree with some points of the project such as the dividends the building would create in terms of “greenmarket stalls and a desperately needed community center”. However, only time will tell upon whether these blue prints will be become flexible enough to adhere to the needs of the General Growth Properties Company and the community.

421-a: a Haunting Number: June 23, 2008

By Jordan Crehan
Published: June 23, 2008

The 421-a tax abatement signifies not only a change in the policies of real estate but also confirms an underlying problem-developers are abandoning their projects. This so called “rush” to finish projects immediately has become omnipresent in the real estate world because so much money is at stake; as most are trying to meet the tax breaks in order to save capital. However this new abatement has come under question, in regards to how far along in the construction the project would have to be to qualify for this government tax. The 421-a over the past year has been revised to be more meticulous to the extent that owners of Brooklyn, Manhattan, and areas around the city have to devote “one-fifth of their units to low-income housing”.

The reason why this particular tax abatement has become so relevant in the community is because it serves as a tool to finance gentrification by applying to million dollar condos in various parts of Harlem. Furthermore this abatement entails that builders will not be allowed to buy certificates sold by other developers outside of the GEA. Really, this hammer becomes a crucial tool to restoring the heat beat in our economy by inserting a cash flow into poorer communities. This tax is particularly focused on the rebuilding on the lower east side since the apparent of fall out of 9/11 and the after effects on the economy. Real estate agent, Mark Fischer of Fischer Properties commented on the situation of “what would recently have been $10,000 in annual taxes had turned to $60,000, and without a tax abatement, such a project would no longer be worthwhile”. Most of time one has to ask themselves how these half-finished houses effect a community. One landlord commented on the situation that “There’s no doubt that there are some places where if you get a couple of those sites on one block and a few foreclosures, you definitely could see blocks sliding back into hard times”. With the recent drop in the economy and tightened lending practices, it creates a ubiquitous feeling in the tri state area-“maybe this isn’t the right time to build”. The real problem here is that developers aren’t free to do what they want in these fringe neighborhoods because they have to abide by the 421-a law. As the economy nears inflation and the real estate market starts to struggle it will become harder and harder for investors and buyers to adapt to new tax laws and government provisions. This only hints to the inventible changes that are taking place due to the recent collapse of the market because of the sub-prime mortgage fiasco and the domino effect it has created.

Summer Streets

By Ben Anapol
Published: June 19, 2008

With Mayor Bloomberg’s decision to create a car-free zone along a 6.9 mile stretch of Manhattan streets, how will the real estate market along these city streets be affected by the experimental zone? The region is along the east side starting at the Brooklyn Bridge up to Park Avenue on the Upper East Side. Cars, trucks, and buses will be prohibited from using the route from 7:00 in the morning until 1:00 in the afternoon on August 9th, 16th, and 23rd. This experimental plan, named Summer Streets, will certainly have an effect on the businesses along the route. Will the absence of cars destroy business during the closed times, or will companies see an increase in sales due to an influx of pedestrians and cyclists as Mayor Bloomberg predicts? If Summer Streets is deemed a success, the program could be expanded for future dates. Only time will tell if this program will transform the commercial and residential spaces on this route into the next hot real estate market.

World Markets

By Ben Anapol
Published: June 18, 2008

As the U.S. Dollar continues to fall to other foreign currencies such as the Euro, how will the real estate market be affected? Already, the market has seen an influx of Europeans seeking to expand their businesses and buy second homes in New York City. As the U.S. Dollar becomes weaker will this trend continue? Upper West Side and Upper East Side condominium apartments are being sold to Europeans with much greater frequency. If you take a ride down an elevator in any of buildings in these neighborhoods you are bound to overhear French, Spanish or any other international language. European and Middle Eastern businesses are opening up New York City offices in the Flat Iron, Chelsea, Tribecca, and Midtown neighborhoods of Manhattan. At the end of the day what will the manhattan real estate market look like in a few years, only commerce will tell...