Sunday Summary: The End of 421a as We Know It?


After wishin’ and hopin’ and thinkin’ and prayin’… 421a was not included in Gov. Kathy Hochul’s budget on Thursday. Nor was there a replacement for the tax incentive for affordable housing development.

This will be a bitter pill for a lot of real estate developers to swallow. Back in January a number of owners and developers believed that Hochul would advance a replacement in the new budget. It looks like that didn’t really happen, and now 421a is set to expire in mid-June.

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However, $800 million for tenants struggling to pay rent did manage to find a way into the budget, along with casino licenses, $600 million for a new Buffalo Bills stadium, take-out cocktails (for the next three years, anyway) as well as new funding for child care and a gas tax reprieve.

This doesn’t necessarily mean that all hope is lost, as far as a 421a replacement is concerned; Hochul’s replacement (called 485w) will be put up for debate in the coming months, as well as good cause evictions. But for those who were hoping to remove uncertainty we have to disappoint you.

Did we say “uncertainty”?

Of course, there’s been a lot of thinking and rethinking about usage of office space since COVID-19 hit. And there will continue to be fits and starts about coming back to work, signing longer leases, and a WFH policy.

Well, JPMorgan Chase (JPM)’s Jamie Dimon attempted to remove some of the uncertainty this week in his letter to shareholders in which he said that the behemoth bank is “moving full steam ahead” on its gargantuan new 2.5 million-square-foot headquarters at 270 Park Avenue.

But … did he really remove the uncertainty? In the same letter Dimon conceded “it’s clear that working from home will become more permanent in American business,” with roughly half the bank’s workforce working on site, another 40 percent of employees working under a hybrid model, and the last 10 percent or so working full-time from home.

Uh … OK?

Beachy keen

Last week there was a sick amount of sales and financing activity in South Florida, and it appears that the fever hasn’t broken! (BTW: we mean that as a good thing. Fever equals hot, which equals good, right? Not fever equals bad. (We might have lost the thread on this “sick” / “fever” metaphor. Sorry.)

Related Group landed another big loan ($99 million) for yet another big project, namely a 349-unit, 36-story high-rise called New River Yacht Club II at 401 SW 1st Avenue, on which it’s partnering with Rabina Land.

Related also landed a $80 million acquisition loan from Rockpoint and Cerberus Real Estate Capital to finance its purchase last year of the oceanfront condo in Bal Harbour called Carleton Terrace.

Berkshire Residential Investments dropped $202.5 million to purchase the Sophia at Abacoa, a two-building, 390-unit apartment complex in Jupiter in a deal which works out to an impressive $519,231 per unit.

Davis Companies (like Berkshire, another Boston-based company) plunked down $52.3 million on a four-story office building at 555 Washington Avenue from East End Capital and GreenOak Real Estate.

Crescent Heights secured $224 million in loans from Blackstone (BX) for its 39-story, 588-unit mixed-use project called NEMA in Edgewater at 2900 Biscayne Boulevard, which in addition to the housing is planning a Whole Foods and should run 911,895 square feet in total.

And, beyond the sales and financings, South Florida continues to impress in leasing: Marsh, the insurer, leased 25,000 square feet at 830 Brickell; Australian denim retailer Ksubi picked up a 2,250-square-foot spot in the Design District; Quest Workspace, the flex office provider, renewed its 13,164-square-foot presence at Northbridge Centre in West Palm Beach.

Finally, while it’s not South Florida, we would be remiss if we didn’t mention that the happiest place on earth is going to make employees even happier: Walt Disney World is planning to build 1,300 units of affordable housing, the company announced. 

Some of the details were murky (like what would be available for employees and what would be available to the public, or just how much affordable units would cost) but Jeff Vahle, president of Walt Disney World Resort, definitely shunned any trace of Scrooge McDuck in his announcement: “The lack of affordable housing is affecting many people across our country, including right here in central Florida,” Vahle said. “With this initiative, we’re lending a hand to make a real and meaningful impact in our community by tapping into the best of our company’s strengths.” 

Looking to the West

There’s no easy way to spin it when one-fifth of a major city’s office stock is sitting unused. And that was the figure revealed this week in a Newmark report about Los Angeles.

In the first quarter of 2022 there was about 452,549 square feet of net absorption in the 215 million-square-foot office market, and rents have remained unmoved from a year ago. Plus, the amount of sublease space for rent is up to 9.7 million square feet (an all-time high) with companies like Farmers Insurance, Sweetgreen and Yahoo! dumping hundreds of thousands of office square footage onto the market. (In Washington, D.C., a similar stink bomb landed about the vacancy rate in a new CBRE report: the rate for Northern Virginia was 21.3 percent in the first quarter and suburban Maryland and Washington, D.C., weren’t much better with vacancy rates of 17.7 percent and 18.4 percent, respectively.)

Not good. But that doesn’t mean that high-profile deals aren’t happening in L.A.; as the first quarter wrapped up, Lionsgate signed a two-year extension for its 192,584-square-foot headquarters at 2600-2800 Colorado Avenue and Google grabbed 52,782 square feet at The Bluffs at Playa Vista.

And outside of the realm of office space activity has been wildly robust; just this week Best Buy signed a lease for a 500,000-square-foot distribution facility at the LogistiCenter at Eastvale industrial park in the Inland Empire and, even more eye-popping, Home Depot picked up a 1.1 million-square-foot Class A warehouse space at Ontario Ranch, a 52-acre master plan consisting of seven buildings (also in the Inland Empire).

Looking to the northeast

Gotham had plenty to boast about in terms of leasing; software company Global Relay snagged the penthouse at the Durst Organization’s 1155 Avenue of the Americas, taking 77,000 square feet; PDT Partners, the hedge fund, ditched its location at 1745 Broadway and is going to a whopping 110,000 square feet at 10 Columbus Circle; Signature Bank (SBNY) added 32,927 square feet to its already existing office space at 1400 Broadway, bringing its total up to 313,109 square feet. And at 7 World Trade Center alternative investment manager Capstone Investment Advisors, and Mansueto Ventures (which publishes Fast Company) each took 40,000 square feet at the Silverstein Properties-owned property.

There was interesting retail news too. Raising Cane’s Chicken Fingers, the fast-food purveyor, gobbled up a 4,358-square-foot lease at 10 Astor Place for one of its first New York locations; health care provider Summit Health revealed plans for a new clinic at Muss Development’s new Forest Hills condo at 7000 Austin Street; and Stoned Pizza, a weed-infused pizza joint (heh, joint!) announced plans to open a location at 302 Broome Street on April 20. (Get it? 4/20?) Hey, Stoned Pizza guys: Helmsley Spear might be able to help if you need a broker!

And, while we’re not exactly reporting a lease, the retail/sports fanatic in all of us has much to marvel at in the relatively new NHL store at One Manhattan West. CO got a peek.

The real retail question is what’s going to happen at the Oculus, because we learned that mall giant Unibail-Rodamco-Westfield is apparently making plans to sell off the $13 billion worth of real estate that it has in the U.S. and is going to focus, instead, on Europe. That strikes us as kind of a big deal.

But, really, one should take one’s mind off the foibles of retail and commercial real estate with … a trip to the American Dream mall! Because Live Nation just signed a multi-year deal at the 3.1 million-square-foot New Jersey mega-mall, and have already lined up performers like Ludacris,  J.I., Two Friends, Lil Tjay, Shek Wes and Band-Maid.

Cooley operator

Is it possible that … today’s weather … will be … nice?

The weather weirdness that we’ve been experiencing for the last couple of weeks (we suppose the last few days have just been normal April showers) has gotten us thinking about climate, weather and the future.

Alexandra Cooley has been thinking about the same thing, but for way longer.

Cooley is the CIO of Nuveen Green Capital, who did a stint at the Connecticut Green Bank (the nation’s first green financial institution) before starting Greenworks Lending in 2015 with Jessica Bailey and before landing at Nuveen.

She shared her thoughts on C-PACE lending, climate investment and more here.

It makes for great Sunday reading. And speaking of the Sabbath, you might want to get to the West-Park Presbyterian Church at 165 West 86th Street while you still can.

Faced with empty coffers, the church is appealing its landmarked status … so it can sell itself to a Alchemy Properties, which is planning on putting up an apartment building. Hey, the Lord is everywhere even in market-rate housing.

See you next week!