The Daily Dirt: Private equity’s very good (but also bad) day

An analysis of New York's top real estate news

TRD NEW YORK /
Jan.January 31, 2020 12:43 PM
Citi Habitat president Gary Marlin and Corcoran CEO Pam Liebman (Credit: Corcoran)

Citi Habitat president Gary Marlin and Corcoran CEO Pam Liebman (Credit: Corcoran)

Blackstone and Apollo’s earnings last quarter blew past investor expectations. But their stocks took a hit Wednesday.

Sometimes even a whiff of uncertainty can damper the rosiest of earnings calls. Blackstone reported $483 million in net income for the fourth quarter of 2019 and $2 billion for the year. Apollo logged $166 million in net income last quarter. But the two companies’ share prices, along with that of other private equity firms, dipped Thursday. According to the Wall Street Journal, that’s because Apollo reported that performance fees from certain transactions were applied to the fourth quarter rather than the first quarter of 2020 (as was initially anticipated).

The drop stuck out because share prices have climbed considerably for private equity companies in the past year or so. Like Apollo, Blackstone recently converted to a corporation, which CEO Stephen Schwarzman noted on Thursday opened Blackstone up to “a vastly wider universe of investors to own our stock.” (It also meant lower taxes, thanks to the 2017 tax law.)

Meanwhile, Blackstone’s assets under management jumped by 20 percent in the past year to $163.2 billion, and private equity AUM grew 40 percent to $182.9 billion — both new records, Kevin Sun reports. Blackstone president and chief operating officer Jonathan Gray noted that it can be challenging to find investments, but “scale” is still Blackstone’s “calling card.”

“There are opportunities even in a challenging market, and I would not compare this to the excesses of ’06, ’07,” he added. “I can see that it’s a tough time to deploy capital, but at the same time the things that we believe in are still giving us the opportunity to put out money.”

It’s not your imagination: Condos and co-ops are getting smaller.

The average Manhattan apartment sold between 2010 and 2019 was just under 1,135 square feet — the smallest in more than three decades, according to Douglas Elliman’s latest market report.

At the same time, prices for these smaller units rose at a higher rate than their larger counterparts on a percentage basis, Erin Hudson reports. Median sales prices for studio apartments rose by roughly 23 percent over the 10-year period, while four-bedrooms saw median prices drop by about 3 percent. Sales volume by dollar amount grew over the decade by nearly 32 percent, from $14.6 billion in 2010 to $19.3 billion in 2019.

Steven James, Elliman’s New York CEO and president, pointed to lower mortgage rates at the end of the decade as part of the reason for increased demand for properties below $5 million. “That combination has worked well for entry-level [buyers],” he said.

What we’re thinking about: Who’s your favorite mayoral contender so far? Send a note to [email protected].

CLOSING TIME

Residential: The priciest residential closing recorded Thursday was for a condo unit at 205 East 85th Street in Yorkville, at $4.7 million.

Commercial: The most expensive commercial closing of the day was for two commercial condo units at 1635 Lexington Avenue in East Harlem, at $8 million.

BREAKING GROUND

The largest new building filing of the day was for a 57,049-square-foot commercial and community facility at 35-57 35th Street in Astoria. AKI Development filed the permit application.

NEW TO THE MARKET

The priciest residential listing to hit the market was for a condo unit at 432 Park Avenue in Midtown, at $25 million. Sotheby’s International Realty’s Mae Bagai filed the permit application. — Research by Mary Diduch

Word of the day

Estovers – The right of a life tenant or lessee to cut timber on the property for fuel or to use in making repairs.

A thing we’ve learned…

The only project Oceanwide Holdings still owns in China is in Wuhan, where the deadly coronavirus outbreak occurred. On Tuesday, the company donated 10 million RMB ($1.4 million) to the Wuhan city government to support its efforts in combating the virus. Thank you to Kevin Sun, for providing this information.

Elsewhere in New York

— Lawmakers are skeptical about Gov. Andrew Cuomo’s proposal to close a $4 billion Medicaid deficit, Gothamist reports. During a hearing Wednesday, state legislators sounded the alarm on sweeping structural changes the governor is attempting to push through, alleging that Cuomo and healthcare officials are using the April 1 budget deadline as an excuse to make the changes with little transparency.

— Shaun Donovan, who served as Bloomberg’s HPD commissioner and Obama’s secretary of Housing and Urban Development, is expected to throw his hat into the mayoral race, City & State reports.

— Following a report by The City revealing that Staten Island officials don’t compile demographic information on community boards, Borough President James Oddo promised to start doing so. As part of changes to the City Charter, the borough is required to track such information.


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