The Real Deal New York

Industry pros predict mixed commercial market, talk note-buying at summit: PHOTOS

April 27, 2012 03:00PM
By Katherine Clarke and Guelda Voien

Professionals from each corner of the commercial real estate world provided insights on the market and forecasts of what is to come yesterday at the 2012 Commercial Real Estate Investment Summit, presented by Massey Knakal Realty Services. The day-long conference held at the Association of the Bar, New York City, brought together brokers, owners, operators and financial professionals for an update on the state of real estate investing, as the industry continues its sometimes spotty recovery from the 2008 collapse of Lehman Brothers Holding Company (see slide show above).

In the morning, at “Office Leasing All-Stars,” an event moderated by Jeffrey Lenobel, head of the real estate practice at law firm Schulte Roth & Zabel, with a true all-star panel including Bruce Mosler, chairman of Cushman & Wakefield and Mitch Rudin, president and CEO of Brookfield Properties, the consensus was that “there was no consensus,” as Lenobel put it. Panelists agreed that while office leasing activity has dropped, the market has one clear bright spot: Midtown South.

Mosler noted that historically Manhattan’s major markets have always been linked in terms of pricing and activity. But not anymore — “Midtown South is operating independently [in the market]… because of the stampede of tech tenants,” Mosler said. And in terms of investment sales, while activity is constrained due to a lack of supply, New York City remains “the premier destination [globally] for investment capital,” he said. “It’s a safe haven.”

And while the deluge of commercial mortgages up for refinancing in the next year or two is still a source of stress for some property owners, debt capital experts at the “Debt Financing for CRE Acquisitions” panel insisted there are ways to find financing, often through mezzanine debt or bridge loans. Panelists agreed that while lenders may not be willing or able to provide mezz debt directly, they are increasingly facilitating its provision when they want to get a deal done.

“There has been a significant increase in the number of loans that have mezz debt on them,” said Roy Chin, regional director of commercial real estate at TD Bank.

At the “Note Acquisitions and Distressed Situations” panel moderated by Massey Knakal’s own director of sales, Stephen Palmese in the afternoon, executives such as DelShah Capital CEO Michael Shah and Jonathan Schultz, managing member of Schultz, whose company is focusing on “vintage” notes far along in the foreclosure process, said pent-up desire for acquisitions post-recession is driving up prices for notes and real estate-owned properties. A lot of people are buying who don’t have the “sophistication” or expertise to follow through the process of taking the deed successfully, he said. Meanwhile, Shah said his firm is actively sourcing off-market deals by keeping abreast of the inventory of notes held by local community banks.

Scott Rechler, CEO of RXR Realty, made an appearance late in the day to deliver the closing keynote address, saying the next 24 to 36 months would be “an exciting time for real estate.” RXR is planning to invest around $50 million in its recently acquired Starrett Lehigh building in the next few years, he said, and is targeting unique properties that will appeal to “creatives.”

The firm is also in negotiations with several potential tenants for two floors at 620 Sixth Avenue, a building it purchased late last year from an investor group that included developer Yair Levy. Approached by The Real Deal after the event, Rechler said he could not comment on which companies were interested in the space due to a confidentiality agreement.

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