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Hi Folks! This is the week of February 22nd, 2016. I’m Miles Bloom coming to you from Bisnow Headquarters in New York and this, is BisnowTV.
We’re here, in partnership with leading accounting and advisory firm EisnerAmper, do give you everything you need to know about the last week in NY CRE news as quickly as we can, so let’s get to it!
After months of speculation, Citadel (one of the world’s largest hedge funds) just signed what’s believed to be the most expensive lease in NYC history—maybe even the country—at L&L Holdings’ planned 425 Park Ave office building. The deal, which spans 200k square feet, averages out at $175/square foot, including what could be record-setting pricing of $300/SF for the penthouse level
Speaking of setting records, January saw the biggest monthly drop every recorded in CMBS delinquencies, which dropped by 109 basis points from 4.02% to 2.93% according to Fitch Ratings The biggest chunk of the drop comes from the resolution of Peter Cooper Village/StuyTown’s CMBS debts stemming from Tishman Speyer’s default back in 2010. All in all January saw $4.8B in CMBS delinquency resolutions, compared to a modest $637M in new delinquencies. Fitch expects delinquencies to hover between 2.5% and 3% throughout 2016 as maturity defaults increase on 2006 loans and liquidation of delinquent assets continue.
Staying on the topic of CMBS, Dodd-Frank reforms requiring Wall Street firms to reinvest in their own CMBS packages go into effect in December, which is forcing a number of major CMBS players to make some tough decisions. Giants like Wells Fargo, Deutsche Bank, and JP Morgan can either do the investing themselves or have 3rd party “B-Piece” buyers do it for them (so long as those buyers do so with 5-year commitments) The new rules could lead to lenders being pickier about the loans they issue, as they serve to force CMBS originators to maintain a stake in their own securities.
Jumping from CMBS to Hard Assets, Vornado Realty Trust announced plans this week to combine its One and Two Penn Plaza office towers into a 4 million sq ft plus office complex in an effort to increase amenity offerings and ultimately command higher rents. Vornado owns a total of 9M square feet around Penn Station, which demonstrates significant high-payoff potential as Hudson Yards, Manhattan West, and other massive projects in the area come to fruition. With Governor Cuomo continuing to push for a revitalized Penn Station, Vornado is pouring hundreds of millions of dollars into modernizing its buildings in the area.
Jumping from CMBS to Hard Assets, Vornado Realty Trust announced plans this week to combine its One and Two Penn Plaza office towers into a 4 million sq ft plus office complex in an effort to increase amenity offerings and ultimately command higher rents. Vornado owns a total of 9M square feet around Penn Station, which demonstrates significant high-payoff potential as Hudson Yards, Manhattan West, and other massive projects in the area come to fruition. With Governor Cuomo continuing to push for a revitalized Penn Station, Vornado is pouring hundreds of millions of dollars into modernizing its buildings in the area.
Speaking of massive development projects, the partnership between Forest City Ratner and Chinese RE company Greenland Holdings (referred to as Greenland Forest City) is exploring efforts to pursue necessary approvals to build what would be Brooklyn’s largest office tower. The plan, which would transfer over 1MM square feet of air rights across the street from Barclays Center to 590 Atlantic Avenue, would feature a 1.5MM sq ft tower directly across from Brooklyn’s largest transit hub. A spokesperson from Greenland Forest City stated that “Pacific Park was always meant to include modern office space” and that “the time is right for the borough to have an iconic office building.”
Finally this week, a breaking items concerning one of the most controversial topics in the industry: construction costs. The basics? Expect costs to continue to rise. The Independent Budget Office revised its estimates last week concerning the impact of a prevailing wage mandate for construction workers at Affordable Housing projects. Where previous estimates featured a 13% increase in construction costs, new figures have climbed all the way up to a 25% increase.
