Agents of change: Last week proved real estate is anything but boring
TRD’s new website launches, top brokers find a new home and office market gets a much needed boost
As a rule, we don’t do shameless self-promotion in this weekly column.
But rules are made to be broken, and, if you haven’t noticed already, our snazzy new website that we fully launched Tuesday is certainly worth a look. We believe this new iteration of The Real Deal website is more navigable, cleaner — and better highlights our regional coverage. We hope you agree.
That said, there were also other seismic shifts in real estate last week, starting with the shocker that super brokers Doug Harmon and Adam Spies have moved from Cushman & Wakefield to Newmark.
The duo will be co-heads of Newmark’s U.S. capital markets business, the Wall Street Journal first reported. They will be joining Kevin Shannon and Robert Griffin, who already hold the same title.
Their departure leaves a void at Cushman during a time when rising interest rates have slowed commercial sales. Newmark CEO Barry Gosin said the brokerage plans to go into buying mode this year, targeting companies with reduced valuations in a slow commercial real estate market. Stay tuned.
Meanwhile, the commercial real estate market continues to show signs of cratering, with Vornado reporting that its joint venture with Crown Acquisitions and other investors defaulted on a $450 million non-recourse loan at 697-703 Fifth Avenue that matured in December.
Vornado’s President and CFO Michael Franco said the asset was “not refinanceable,” and that negotiations with the lender to restructure the loan were ongoing. If that’s unsuccessful, Vornado will hand over the keys to the property, an increasingly common move by commercial landlords. Still, Franco said he believes it is also in the lender’s best interest to work something out. Elsewhere, Erno Bodek, the owner of 541 West 21st Street, is putting his conversion project there into bankruptcy to stop foreclosure proceedings initiated by mezzanine lender SME Capital
New York isn’t the only place feeling the commercial sting.
In Los Angeles, Brookfield defaulted on $784 million of loans connected to two office towers in Downtown L.A.
The fallout doesn’t end there, according to analysts.
“We believe DTLA’s decision to default on these two assets increases the risk for the remaining loans in their portfolio,” Barclays research analysts Lea Overby and Anuj Jain said in a note cited by Bloomberg.
In San Francisco, Slack, now owned by Salesforce, is moving its South of Market headquarters into the 61-story Salesforce Tower. The space dump serves as another blow to San Francisco’s office market, which has a vacancy rate of 27.6 percent, according to CBRE, with many tech companies moving into smaller quarters.
In San Jose, Google — after laying off 1,600 workers across the Bay Area and announcing a $500 million cost to exit offices worldwide — is reassessing its timeline for its Downtown West megaproject. The search giant says it’s still committed to the project, which is the centerpiece of the city’s plans. But, like most metropolitan areas, shifting work patterns have led the company to examine its overall real estate strategy.
This isn’t to say the office pain is being felt everywhere.
After fits and starts, the unfinished supertall at 125 Greenwich Street in Manhattan has been resurrected. Earlier this month, the partners restructured and scored $313 million in financing from Northwind Group to finish construction. Fortress Investment Group, the powerful distressed investor who held the debt on the tower, is now an equity partner and sales are expected to relaunch this year.
In South Florida, air conditioning company owner Douglas Anthony Perera jumped into commercial real estate, after paying $14.3 million for a five-story office building in Broward County.
On the development side, in a move that should surprise absolutely no one, Alden Global Capital put a snag in Bally’s efforts to bring Chicago its first casino at the site of the Chicago Tribune’s former printing press. Alden, which owns the Tribune, inked a 10-year lease extension on that building, likely making Bally have to pay a lot more in the buyout to proceed with the project.
And we’ll close out with some celebrity news. Football season may have ended with a 58-and-a-half-minute Super Bowl classic (thanks, ref), but we still mapped out where newly (again) retired quarterback Tom Brady and his ex-wife supermodel Gisele Bunchen owned properties in the Miami area.