The Real Deal New York

National market report

Commercial and residential real estate news briefs from the most active U.S. markets

March 31, 2009

Atlanta

There were no bidders for former Atlanta Falcons quarterback Michael Vick’s 20,000-square-foot, eight-bedroom mansion in Duluth when it went up for auction early last month, the Atlanta Journal-Constitution reported. The bankruptcy court chose to hold an auction rather than taking one potential buyer’s $3.2 million offer two months ago. That offer became the auction’s starting bid. Vick, who is in federal prison on felony charges related to dog fighting, is slated to be released next month to confinement in his Virginia home.

Boston

Developer Ted Raymond filed plans with the city last month for a $2.2 billion development on the current site of the Government Center Garage, the Boston Globe reported. Raymond plans to build two glass office towers on the site, one 42 stories tall and the other 52 stories, as well as a hotel, retail, restaurants and two residential buildings. Despite the economic downturn, Raymond has financial partners who have agreed to finance him if his project is approved by the city, said a representative for the developer.

Chicago

The Tribune Company has postponed selling off its Tribune Tower, one part of the company’s plan to pay off creditors, because the market for large real estate deals has slowed so much. Real estate professionals said there hasn’t been a building sold in downtown Chicago since August, when 211 East Ontario sold, according to the Chicago Tribune. Other deals in the works this year, such as the sales of Congress Center and 180 North LaSalle, have collapsed because of a lack of financing. Stephanie Pater, Tribune Company’s director of real estate, said the company is currently marketing office and retail space for rent.

Las Vegas

Sales volume in Las Vegas will improve by 2010, after another 5 to 10 percent decline in prices this year, Marta Borsanyi, a real estate analyst with California-based Concord Group, told the Las Vegas Review-Journal. By 2011, there will be enough demand for 23,500 new homes, Borsanyi said. Home sales in Las Vegas tend to depend most on the number of new hotel rooms opening, because new hotels mean increased employment and population growth, which translate to home sales activity. About 15,000 hotel rooms are scheduled to come online in Las Vegas in 2009.

Los Angeles

Lots that were going to be the sites of new residential and retail developments in the Los Angeles area are now half-finished wastelands. Nearly 250 residential developments, with a total of 9,389 units worth nearly $3.5 billion, have halted development, and many are now facing foreclosure or bankruptcy, according to the Los Angeles Times. Developers have stopped sales at another 370 new developments with about 30,000 units worth $11.9 billion.

Amid a struggling commercial real estate market, Los Angeles office landlord Maguire Properties more than doubled its losses in the fourth quarter of 2008. The company lost $96.3 million, compared to a loss of $44.5 million in the fourth quarter of 2007, the Los Angeles Times reported. The loss included a $50 million write-down for a 20-story office tower, 3161 Michelson Drive in Irvine, which Maguire built in 2007. Occupancy in all of the company’s buildings has fallen. The company has $260 million worth of debt maturing in 2009.

Philadelphia

The University of Pennsylvania announced early last month that it would convert 14 acres of former U.S. Postal Service parking lots into athletic fields, tennis courts and open space. The park will cost the university $40 million, the Philadelphia Inquirer reported. Michael Van Valkenburgh Associates will design the space. The athletic fields will be used by university athletes but also will be accessible to the public at specific times, and the rest of the park will be open for public use. The project is scheduled to begin this spring and finish in spring 2011.

Mayor Michael Nutter announced last month that the city hopes to spur home buying by expanding Home-Buy-Now, a program that gives prospective home buyers help with down payments. The city plans to provide $1.5 million to match housing assistance that employers give to their employees, the Philadelphia Daily News reported. The Home-Buy-Now program began in 2002 and has given $690,000 in funds to 189 homebuyers so far. The program will match up to $5,000 in employer contributions, up from the previous matching maximum of $3,000.

Phoenix

Bethany Group, a large apartment investor in the area, is in dire financial straits, and the company’s apartment complexes are facing utility shutoffs. Lenders are taking over the operations of the Bethany buildings. Bethany’s corporate employees were fired at the end of February, the Arizona Republic reported, and property managers at the California-based company’s Arizona buildings have been working without pay since late January. All of the company’s Valley apartments have gone into foreclosure, according to one fired employee.

San Francisco

Construction has stalled in San Francisco neighborhoods that were expected to boom, leading to unemployment for construction workers and city personnel who deal with building permit applications. About 25 percent of the 16,000 building trades workers in the region were out of work as of early last month, compared to nearly full employment a year ago, the San Francisco Chronicle reported. The city’s Building Inspection Department laid off 48 employees last month after permits dropped by more than 1,000 between July and January, and the size and complexity of proposed projects also declined. The city is trying to create incentives for developers who are still hoping to break ground on projects.

Charles Schwab Corporation will leave its San Francisco headquarters and consolidate its operations in two buildings downtown in an effort to cut expenses, the San Francisco Chronicle reported. The company hopes to sublease its 375,000 square feet of space at One Montgomery Tower and leave another 55,000-square-foot space at the Corporate Commons business park. Most of the leases at these locations will expire in 2010, according to Glenn Cooper, head of real estate at Schwab. The company will consolidate employees at 215 Fremont Street and 211 Main Street in San Francisco.

Seattle

Single-family homes in King County sold for a median price of $375,000 in February, the lowest price since May 2005, according to a report released in early March by the Northwest Multiple Listing Service. The number of closed sales was 42 percent lower than in February 2008, and the median single-family home price was 12.8 percent lower, the Seattle Times reported. But attendance at open houses has increased, agents and brokers said, and some first-time buyers are making purchases. Some homes are even attracting multiple offers for the first time in more than a year.

Washington, D.C.

No office buildings have started construction in Washington, D.C., since October, as the financial crisis that hit the suburbs begins to take a stronger hold in the city. This is the longest span of time without a ground-breaking in nine years, according to Cushman & Wakefield. More than 200 architects and engineers and 25,000 construction workers in the area have lost their jobs, the Washington Post reported. Developer Douglas Jemal has not been able to get financing to develop restaurants, retail, office space and housing next to a new convention center. Developer Vornado and PNC Bank have had to put more cash into their own development at 17th and H streets NW because it was difficult to secure a loan.

Compiled by Sara Polsky

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