Sunday Summary: Call Your Mother!
By The Editors May 12, 2024 9:00 am
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If you’re reading this, we hope you called your mother. Because today is the mother of all Hallmark holidays. Today is the day you honor the woman who cared for and put up with you no matter what (and you know what). Today… is Mother’s Day. If you haven’t yet called to wish her the best, she’s probably waiting by the phone as you read these very words.
And if you really want to show off your good son/daughter credentials, you should send her a gift.
A handbag is always nice. Preferably something with a little pizzazz. May we suggest something from Maison Goyard?
We thought of them because the luxury leather goods brand is on the move to a new, 9,000-square-foot New York City outpost at 690 Madison Avenue, as the brokers from Retail by MONA told us. After all, it’s way too late at this point to order something from QVC, even if they also took a lease (for an office, not a store) at 1450 Broadway.
Of course, Vornado Realty Trust (VNO) received the best Mother’s Day gift of all… Namely, a 946,815-square-foot, 11-year renewal at 731 Lexington Avenue from their beloved tenant Bloomberg. (Indeed, we’ve heard many in real estate say wistfully over the years, “Why can’t they all be like Bloomberg…?”)
At the very least write something on her Facebook wall. Mom’s waiting.
Speaking of social media…
Late last month a number of real estate’s most ardent social media followers gathered at The Peak in Hudson Yards for the first ever Real Estate X Gala — a big party for the influencers and tweeters of commercial real estate.
The party was hosted by CRE legend Bob Knakal and the aptly named “Strip Mall Guy,” aka Don Tepman, the president and founder of TownCentre Capital and University Avenue Partners, and a plethora of Tepman and Knakal followers showed up.
Remarks were given by Related’s Jeff Blau, and seen carousing were Adrian Carbone and Chris Bakke from Twitter (whoops — we mean X), the New York Giant and apparent real estate social media fanatic Justin Pugh, Eric Weatherholtz of Atlanta’s Healey Weatherholtz Properties, and Kyle Matthews of Matthews Real Estate Investment Services.
CO was on the ground to catch it all, so you can watch our recap here.
But that wasn’t the only event CO was live and in-person for; we hosted our eighth annual Spring Finance CRE Forum at the Metropolitan Club of New York, and the mood was…. pretty optimistic! At least from some.
“You’re starting to see the early signs of recovery within the real estate capital markets,” said Tim Johnson of Blackstone (BX) in conversation with CO Executive Editor Cathy Cunningham. “It feels to me and to us at Blackstone that we’re generally on a path toward recovery.”
Others were a little more measured in their outlook. (Hey, we can’t all be Blackstone.)
“Everyone is trying to survive to buy time and hope that rate cuts come so they can salvage some equity,” said Elliot Markus of Cerberus Capital Management. “The game theory of that isn’t it doesn’t come. What ends up happening is that sponsors think their equity is sunk cost and they move on, or is there opportunity for people who’ve been patient with the capital? And all of that is TBD.”
California dreaming
For those who are searching for the market’s bottom, it certainly seems like prices are getting pretty low in Los Angeles.
Oceanwide Plaza, the 1.5 million-square-foot megaproject that has been de facto abandoned for ages and left to the graffiti artists of Southern California, is getting ready to be marketed by Colliers (CIGI) and Hilco Real Estate… although an appraisal estimated that the project would need another $865 million of expenditures before it was finished.
And Clarion Partners (CPREX) sold their apartment complex at 5710 East Crescent Park in Playa Vista, Calif., to DivcoWest for $122 million… which is not a whole lot more than they paid for it back in 2018 ($117.5 million), but, hey, it’s not like it’s being given over to its lender or something. (Which is essentially what happened last week with Clarion’s Portrait Building at 701 Eighth Street NW in Washington, D.C.)
Sunday reading
All of these stories about values and appraisals have made us curious. How is appraisal being managed in a post-COVID landscape?
Indeed, there has been a big adjustment.
“Buildings that were trading at $800 to $1,000 per square foot have traded at $300 to $500 per foot,” said Rod Kritsberg, managing partner at KPG Funds. “There’s few trades and it’s very limited, but values have dropped precipitously — not just in the office sector, but across the market.”
And, while COVID was undoubtedly the match that touched off the current conflagration, the fire was accelerated by something — and that something was clearly interest rates.
“The interest rate hike has diminished values in a way that I’ve never seen in my 20-year career,” said Kritsberg. “Not even during the Global Financial Crisis have I ever seen a loss of overall values on paper like I’ve seen during this interest rate hike.”
These shifting values have a lot to do with rent rolls — and, while rents have flattened or fallen, cities haven’t looked at it that way from a tax perspective. Landlords are certainly not comfortable paying the kind of tax they were accustomed to when vacancies were low.
As they contest their assessments, this could mean very bad news for city treasuries nationwide. Something to think about after you call your mother.
Happy Mother’s Day!
