From the September issue: In the last few weeks, as many of the city’s big banks have been besieged by bad news, and the stock market has seesawed sharply in a short span of time, the question on many analysts’ minds is: Could a new round of pain on Wall Street trickle down to New York’s already vulnerable commercial and residential real estate markets?

Indeed, the thinking goes, the financial services industry and its numerous offices keep commercial occupancy rates high in Manhattan, while its well-paid executives buoy the high-end residential market. Meanwhile, its lower-rung workers drive demand for rental units, sources say. Wall Street has served as an economic engine of the city for decades,
ever since major manufacturing and energy companies — like Mobil, Exxon
and chemical company Union Carbide — abandoned their New York
corporate headquarters in the 1970s and 1980s for other (cheaper)
addresses. [more]
[more]

Illustration by David ColeJuly 27 was a dark day for commercial mortgage-backed securities, or CMBS.
On that day, Goldman Sachs and Citigroup were set to begin selling a $1.5 billion batch of CMBS, secured in part by some New York City properties.
But at the last minute, Standard & Poor’s essentially put the kibosh on the deal. The rating agency said it had discovered a “glitch” in its methodology and would need more time to vouch for the worth of the mortgages at the heart of the bonds. Without the blessing of S & P, the deal died. And with that, the CMBS market — in which pools of real estate loans are bundled together and sold to investors — hit a major snag few had anticipated when the year began.
S & P’s move — along with wild stock market fluctuations, concerns about the debt crisis in Europe and the renewed round of economic problems — helped knock the wind out of the sails of the CMBS market and confirmed the industry’s worst fears of a slowdown. Many expected the CMBS market to quadruple in value from $13 billion in 2010 to $50 billion by the end of 2011, as investors started to regain faith in the strength of the commercial real estate market. Instead, they now expect CMBS issuances to be just $30 billion this year, which calls into question reports of the market’s recovery. [more]

The Federal Housing Finance Agency plans to sue Bank of America,
JPMorgan Chase, Goldman Sachs and Deutsche Bank, accusing them of
misrepresenting the quality of mortgage securities they assembled and
sold at the height of the housing bubble, and seeking billions of
dollars in compensation, the New York Times reported. The lawsuits
follow subpoenas the FHFA issued a year ago. The timing of the suits
is related to a statute of limitations that expires next Wednesday.The
lawsuits will allege that the banks did not fulfill their duties under
securities law, and didn’t pay attention to the fact that borrowers’
incomes were infalted or falsified. [more]

Bank of America will try today to persuade a California state court judge in San Francisco to dismiss yet another suit that seeks to make it repurchase $19 billion in mortgage-backed securities. If the bank loses out, Bloomberg News said, it may open the floodgates for investors to be able to access internal bank files and correspondence about the loans for pre-trial evidence.

This marks the latest in a flood of suits against Bank of America and other underwriters such as Goldman Sachs to force the buyback of downgraded mortgage securities, according to Bloomberg. So far, investors have defeated efforts by the banks to have cases dismissed before trial.

In several rulings over the past few months, a Washington state judge has berated banks for citing faulty data from appraisers or expired statutes of limitation to avoid Federal Home Loan Bank of Seattle’s claims.
[more]

A $1.5 billion commercial mortgage bond sale between Goldman Sachs and Citigroup has been scrapped, the companies said, because Standard & Poor’s would not rate the notes. According to Bloomberg News, the deal had been slated to close today but was delayed because S&P is reviewing its criteria for rating commercial mortgage-backed securities.

“Ratings are a condition precedent to closing and settlement,” Goldman Sachs and Citigroup said in the statement to Business Wire. “Standard & Poor’s had previously informed Goldman and Citi that they were prepared to rate” the transaction, they said.

The risk assessor explained the change in a separate statement.

S&P ’’is reviewing the application of our conduit/fusion CMBS criteria in relation to the calculation of debt service coverage ratios,” it said yesterday. [more]

In a sign of Wall Street’s recovering interest in commercial property, banks such as Deutsche Bank AG, Goldman Sachs and JPMorgan Chase are weighing bids for parts of Anglo Irish Bank’s $9.5 billion U.S. real estate portfolio, according to the Wall Street Journal.
The portfolio, the largest to hit the market since the start of the recession, offers a relatively low risk opportunity to jump back into commercial property, the Journal said, as the majority of debt is concentrated in large cities such as New York, California and Chicago. There are around 250 properties in total.
“It’s the first foreign bank to sell its entire U.S. loan portfolio, and it will be a good test of the market,” said Robert Ivanhoe, head of the global real estate practice for the law firm Greenberg Traurig. [more]

Carver Federal Savings, the nation’s largest bank founded and run by African Americans, has avoided collapse by raising $55 million in new capital, Crain’s reported. The bank had recently moved into large commercial real estate lending, veering away from its tested strategy of lending to one- to four-family homes — the move backfired. Earlier this year, faltering under a load of delinquent real estate loans, the bank was ordered by regulators to raise additional cash.
The new investors include Goldman Sachs and Morgan Stanley, which have agreed to invest $15 million each, while Citigroup and Prudential Financial have agreed to put in $10 million, according to an announcement from Carver’s parent, Carver Bancorp. [more]

Two Grand Central Tower, a 667,000-square-foot office building at 140 East 45th Street between Lexington and Third avenues, has hit the sales market and could bring in more than $370 million, the New York Post reported. The building is currently owned by Boston Properties, Goldman Sachs and Meraas Capital, which is controlled by Dubai’s ruler, Sheikh Mohammed bin Rashid. Darcy Stacom and Bill Shanahan of CB Richard Ellis have been hired to market the property. As The Real Deal previously reported, the 44-story tower was built in 1982 and later sold by developer Harry Macklowe to the team led by Boston Properties for $237 million and the assumption of $190 million in mortgage debt in 2008.

[more]

Goldman Sachs’ Whitehall real estate fund lost substantial money on Monday Properties’ recent recapitalization of 230 Park Avenue. According to the Wall Street Journal, Goldman is abandoning its stake in the building following the transaction, with the building’s valuation hundreds of millions of dollars less than what it was bought for at the height of the bubble. Goldman partnered with Monday Properties on the $1.15 billion purchase of the 34-story office tower near Grand Central Terminal in 2007, and admitted at the end of 2010 that the property’s value had sunk some $300 million. [more]

1. Half-finished Brooklyn condo just one of many stalled city projects
[NYDN]
2. “Super Size Me” director Morgan Spurlock shops for a house in Park Slope
[NYMag]
3. National sales hurt as lenders hold homes in foreclosure
[NYT]
4. U.S. cracks down on loan security
[WSJ]
5. Cousin of George W. Bush octuples his investment in Soho penthouse
[NYO]
6. Police supervisor recieves threat over Hamptons’ beach vendors decision
[Patch]
7. More on Eric Schneiderman’s mortgage investigations
[WSJ]
8. A sneak peak at Union Square’s new Pavilion restaurant
[Curbed]
9. Media frenzy outside Dominique Strauss-Kahn’s 71 Broadway digs
[WNYC]
10. Meanwhile, building manager tries to reassure residents at Strauss-Kahn’s temporary residence
[WSJ]
[more]