Sunday Summary: Orange You Glad It’s Almost Over?
We feel a little bad for ousted CNN chief executive officer Chris Licht — he was put out to pasture on a week when the ratings were probably terrific.
Because the week sure “wasn’t boring” to borrow Licht’s phrasing, news-wise.
Yet the Licht story, which seemed like a big deal when it broke on Tuesday morning, was soon eclipsed by surprise Supreme Court decisions, the first federal indictment of a former president of the United States (former President Trump is also under indictment in New York), a catastrophic large-scale attack in Ukraine, and Kelis’s Page Six-reported relationship with Bill Murray…
And there was also the little matter of the yellowish-orange, apocalyptic smoke that had settled over New York.
While there’s little question that this was probably the last thing office landlords wanted to see right now, and probably kept a dispiriting number of workers home, air quality is something that the prudent office owner had actually been thinking about since COVID-19 hit.
“Our assumption is that the weather is not going to become nicer,” said Silverstein Properties’ Guy Vardi, whose 120 Broadway is a model of good air-filtration systems. “We are enjoying a relative calm period, but it is not going to be like this moving forward.”
The haze was not the only piece of big, showstopping news that affected real estate. It looks like the New York legislative session will end without a deal on housing.
Assembly Speaker Carl Heastie and state Senate President Andrea Stewart-Cousins held a press conference on Thursday blaming Gov. Kathy Hochul for rejecting their proposals on housing and good cause eviction.
“Unfortunately, it was clear that we could not come to an agreement with the governor on this plan,” Heastie and Stewart-Cousins said in a joint statement. “All three chambers must immediately redouble our efforts, and come up with a plan that the governor will sign into law.”
Gov. Hochul in turn blamed Heastie and Stewart-Cousins’ side for the impasse.
“We have a housing crisis that is among the worst in the nation,” Hochul told a gathering of the New York Real Estate Chamber, which was celebrating its 10th anniversary Friday. “We’d love to be the best, but this is one area where we are among the worst.”
Actually … some pretty good news, too
While all this was happening, there were plenty of real estate people who kept to their knitting and produced some exciting results.
Blackstone (BX) surprised us with its $800 million sale of JW Marriott San Antonio Hill Country Resort & Spa to Ryman Hospitality Properties — a considerable profit from the $650 million Blackstone paid for it in 2018, and making it the second-largest U.S. hotel deal since March of 2020.
And check out this if you want an interesting dive into the most expensive hotel deal: The Diplomat Beach Resort in Hollywood, Fla., was sold for $835 million to Hawaii-based Trinity Investments. (Park Hotels & Resorts, on the other hand, had not nearly as good a week.)
Those who say that the money spigot has dried up also have to regain their faith after Artemis Real Estate raised $2.2 billion in equity commitments for its newest fund, leaving it some $3 billion to sink into distressed assets, as well as health care real estate. (Speaking of health care, if you missed Commercial Observer’s design and construction health care forum, you should check out the highlights here.)
Over at 110 William Street, Pacific Oak Capital Advisors and Savanna Real Estate Fund struck a deal to restructure some $334 million of debt and found a tenant for 640,000 square feet of space at the building. (Who exactly the tenant is remains unknown, but CO learned it is an unnamed city agency.)
And another real estate asset that looks like it’s on the mend (or at least attracting some big dollars) is a surprise: retail.
When comparing cap rates for, say, multifamily or industrial real estate, retail has been remarkably steady, TIAA Bank’s Ellen Comeaux told CO.
“Retail’s cap rates didn’t drop significantly; thus they have not seen the relative movement up in cap rates either,” Comeaux said. “This has made retail — particularly those neighborhood strip centers — a source of stability in what is otherwise a relatively volatile market. Stability is attractive.”
Prices on big retail properties have also come down to the point where these kinds of deals are attractive, if you’ve got the capital. On the West Coast, Stan Kroenke just laid out $81.5 million for the Malibu Village Shopping Center — which is about two-thirds of what the seller, Jamestown, paid for it back in 2014. (Certainly, pricing is more attractive in retail than in, say, industrial, which is still going the other way. LBA Realty, for instance, just spent $20.4 million on a last-mile distribution facility. That is two-thirds more than the seller purchased it for back in 2020.)
And, anecdotally, the regular old retail leasing market didn’t do bad last week, either. Famed restaurateur Andrew Tarlow, of Diner and Marlow & Sons renown, signed a lease for a 10,000-square-foot space at 295 Front Street in Brooklyn’s Vinegar Hill. The New Jersey-based Patis Bakery signed leases in Chelsea and Downtown Brooklyn. And in Miami, Paris Saint-Germain (PSG), the store that sells soccer jerseys, gear and accessories, opened a 1,500-square-foot location at 1024 Lincoln Road in Miami Beach — its third such location since the French soccer club established a beachhead in the U.S. in 2021.
But more than just a store or a restaurant, a lot of retailers are thinking creatively about luring in customers.
Experiential retail destinations can charge as much as $45 per ticket just to get you in the door — and in New York numerous places are doing just that.
On that note, we’ll leave you for the week. We’d say you should stay in, avoid the orange haze, and watch some premium TV … but the writers strike has left us sadly bereft of fresh content.
How much longer can this go on? And, more relevantly for this crowd, what’s it all mean for real estate?
Until the writers are back, you’re stuck with reading. May we suggest CO’s interview with PGIM’s Cathy Marcus? Or, if South Florida’s more your speed, you can check out our talk with Edgardo Defortuna.
Or you can just go for a drive and listen to CO’s new podcast series.
See you next week!