The sharp decline in asking rents in Manhattan over the past year is
beginning to force lenders to reduce principal mortgage balances in
some buildings, one of the city’s top brokers told an audience in
Midtown this morning. Citing as an example a 200,000-square-foot building in Midtown South,
Robert Freedman, executive chairman at FirstService Williams, said the
lender reduced a loan to allow a major tenant his firm was representing
to sign a 40,000-square-foot lease. In that market, CB Richard Ellis
data shows average asking rents have fallen by 20 percent since their
highs in August 2008. “What we are doing is legislating a cramdown,” he said, referring to
the forced reduction of mortgage principal. It is “a haircut the lender
is going to have to take to restore the rent to a rational basis.” Freedman was part of a real estate panel organized by publisher Bisnow
in Midtown this morning. The other panelists were Robert Alexander, CBRE chairman of the New York region, and Peter Riguardi,
president of the New York office of Jones Lang LaSalle. The event was
moderated by Marc Shapiro, partner with law firm Orrick, Herrington
& Sutcliffe. [more]