News
BEST BIRTHDAY EVER
September 22, 2011
| What greater way to spend our third birthday in New York than with 400 of our favorite readers, who joined us this morning at Eleven Times Square for Bisnow's annual New York Real Estate Summit. Even better than chocolate cake with candles: two prestigious panels on the US and NYC real estate markets. |
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| CRE never fell off a cliff. On our US panel, Harbor Group International chairman Jordan Slone said his firm is investing right now. “If you buy good properties in good locations and don't leverage to the hilt, you'll weather the cycle.†And better properties in secondary markets are a stable buy, he adds. Multifamily has outperformed—he cited Texas, the Mid-Atlantic, Nashville, and Indianapolis markets as particular bright spots. “Unless we see a real downturn, it will continue to do well.†|
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| One part of the market did fall off a cliff—CMBS. Ladder Capital managing director of originations Peter Smith says it slowed down in July; there weren't enough AAA buyers, and Kimco and BlackRock bought most of those pieces. “Everyone went into a non-risk position and things didn't move.†Today, CMBS isn't looking as much at multifamily (given strong agency bids) but has been looking at retail, office, and hospitality. Freddie and Fannie have been competitive on the multifamily side and have been great turning things around quickly, Jordan adds. On the commercial side, balance sheet lenders are the place to be. |
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| Clarion Partners SVP Gary Rufrano (bright and chipper, despite coming in from Houston last night) says that as a low buyer (40% to 50% leverage), his firm's been going with life companies for the past three months. And while strong secondary markets are a sweet spot, it's not moving into tertiary just yet. In first-tier markets, Clarion likes to keep around 55% to 60% and will work with partners it knows. |
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| Michael Medvin says that in this economy, AIG Asset Management-Mortgage Capital (where he's managing director and head of originations) is playing defense rather than offense. CRE has been durable, but he warns that cap rate compression and values make our sector feel inflated, so he's cautious and concerned for the future. But multifamily has benefited from the lack of supply and dwindling homeownership, and he says he's been seeing rent pro formas citing 10% rent growth with subsequent growth years of 6% to 8%. |
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| The panelists with moderator Andrew Jagoda, partner at Katten Muchin Rosenman. Where will the market perk up next? Michael says employment centers with multiple driver s (like tech and education) and intellectual capital—think spots like Albany. And some markets aren't as dire as some people think, like California, Arizona,Charlotte, and even submarkets of Detroit, Peter adds. Investors should consider secondary markets, Jordan urges—rewards may be fewer than New York, but the volatility is much less and you can see eight caps for best-in-market assets. |
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| In New York, those with money will thrive, grow, build, lease space, and ride the market (albeit with some hiccups), says Ironhound Management Co principal Robert Verrone, who kicked off the local panel. If you don't have money, you'll have to partner. New York City is New York City, and you never know where a building will trade. He's concerned by the zero job growth, economic situations in Greece and Europe, and the US credit downgrade—there are some negative things going on right now. |
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| SL Green co-chief investment officer Isaac Zion was a bit more upbeat—you would be too if your firm had done $4B in transactions year-to-date (including the recent 70-year leasehold at 1560 B'way and $137M fee interest purchase in 1552 B'way). But if you're going to invest, you need a long-term view, he says. On the rental side, TI and free rent have been reeled in. He says SL Green has signed over 1M SF in Midtown alone and has an active pipeline, with occupancy in its buildings between 95% and 97%. Net effective rents are trending upwards. |
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| After signing the 900k SF lease with Nomura at Worldwide Plaza, activity went quiet, says George Comfort & Sons CEO Peter Duncan. But that's changed since Labor Day, he says; this week alone, he had seven showings for a 25k SF offering. He says TIs and free rent have also gone down for his firm, and there's less resistance from tenants on asking rents. But he warns that tenants have no real time to mess around with real estate: “Landlords need to make it as easy as possible for them to move in.†|
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| 2010 was a robust leasing market for Manhattan, with 7M SF of absorption, CBRE vice chairman Howard Fiddle points out. And we've surpassed last year's leasing activity, although absorption has dropped off—thank a game of market musical chairs. Midtown has been flat, but Downtown is a positive story. Overall, the larger the block you're looking for, the fewer opportunities there are. |
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| New York has a geographical advantage, says Credit Suisse managing director Bill Mott— rents are holding steady, even if it's a bit quiet. “But I'm bullish on New York and fired up about financing.†Banks are more on the sideline, but if life companies want to do financing, they'll smoke out CMBS bids, he says. Hedge funds are subordinate buyers. |
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| Royal Abstract president Martin Kravet (third from right), ever the generous moderator, offer hypothetically to give each panelist a $100M fund, asking what they would buy that would show some appreciation in five years? Rob joked, “Give the money to Jeff Sutton,†who's been partnering with SL Green on some strategic buys, but also said he'd look to recap a distressed opportunity or two. Isaac said he'd partner with someone for Class-A but would look out for “tremendous opportunities†in Class-B and C assets. Peter is also sweet on Bs and Cs “with a real story and can be repositioned to B+/A- assets.†|
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| It certainly wouldn't have been a birthday without you. Thanks to each of our 23,000 subscribers who've made the New York publication what it is today. |
