Sunday Summary: Changing of the Guard

Few institutions are as vital to commercial real estate as J.P. Morgan Chase, and so it’s big news when Chase announces a new head of commercial real estate.

That new chief is Michelle Herrick.

The bombshell landed on Wednesday, along with the news that the bank’s current CRE leader, Al Brooks, will become a vice chair for commercial banking.

“It’s really hard sometimes to keep a long-term view in this business,” Herrick told Commercial Observer, which broke the news. “It’s easy to be reactionary, but I’m very happy to be at a firm that has one of the longest views in the market, and always is running a variety of scenarios to make sure our balance sheet stays acceptable to our clients and sets us up to be incredibly well positioned in our client relevance and relationships. Wherever we are in the cycle, we bank a lot of clients with that same long-term view.”

There were personnel shifts at other institutions, too.

Morris Betesh, a veteran senior managing director at Meridian Capital Group, is striking out on his own, starting a new capital markets advisory platform called Arrow Real Estate Advisors — and he took 12 Meridian team members with him. 

“We’re a 13-person team, we’re fully intact, and we’re super excited about our potential growth and the market impact we can make,” Betesh told CO. “We’re going to continue doing what we do best, which is capital markets advisory, and specialize in sourcing debt and equity for our clients around the country.”

Somehow, we have the feeling that they won’t have trouble picking up clients, given the state of the market, which has been picking up tremendously. (Want proof? Would a $3.5 billion CMBS deal convince you?)

Shop ’til you drop

Black Friday isn’t for another month, but it looks like a number of landlords and real estate investors aren’t waiting to go on shopping sprees.

While, yes, there were plenty of good leases last week (like Tesla’s 150,000-square-foot one in College Point, Queens, and Mark Zuckerberg and Priscilla Chan’s life science lease from Columbia University) the number of properties permanently changing hands was simply crazy.

For example, Acadia Realty Trust just picked up the retail condominium that houses brands such as Givenchy, Adidas, a Yohji Yamamoto sportswear/high fashion store, and menswear store Hive & Colony at 92 and 94 Greene Street from Continental Ventures for $44 million. Acadia also just bought three retail properties in achingly hip Williamsburg, Brooklyn, for $35 million (the sites are ripe for redevelopment, too).

Canvas Property Group, Declaration Partners and Tokyu Land U.S. are purchasing 210-220 East 22nd Street in Gramercy for $104.5 million from PGIM Real Estate. (Speaking of PGIM, did we mention that they formed a $500 million joint venture with Citymark Capital to buy performing and nonperforming multifamily loans? Well, they did!)

Nathan Berman’s Metro Loft Management and David Werner Real Estate Investments purchased the ground lease for the old Pfizer headquarters at 235 East 42nd Street for $18 million, right next to a property Metro and Werner already control. (Anyone familiar with Berman can take a wild guess what Metro and Werner plan to do with the combined 1.2 million square feet of space. If not, here’s a hint. It rhymes with “subversion.”)

And KKR secured $145 million in acquisition financing to purchase The Paxton, a rental in Downtown Brooklyn that KKR is buying with Dalan Management from Jenel Real Estate for $240 million.

However, it should be noted that the buying spree was not confined to New York. In fact, we counted at least four significant sales in Southern California.

In Beverly Hills, Oscar Engelbert, the founder of Oscar Properties, and Jens Grede, co-founder and CEO of Kim Kardashian’s shapewear brand Skims, plunked down $61 million for 331 North Maple Drive (a 26 percent discount from when it last traded in 2018) from DivcoWest.

Perhaps taking a page from Nathan Berman, Dwight Manley is spending $31.5 million on a 164,908-square-foot office complex (and an accompanying three-story parking garage) at 1698-1700 Greenbriar Lane in Brea that he plans to convert into 180 apartments.

Prime Residential, on the other hand, isn’t waiting to convert — they want their apartments now! Hence the $115 million they shelled out for The Gabriel, a four-story, 312-unit building at 2771 North Garey Avenue in Pomona, which Prime picked up from CP Capital and Greystar, making it the one of the most expensive multifamily deals of the year in Los Angeles County.

Finally, if there’s a slowdown in warehouse space, nobody told Rexford Industrial Realty, because the logistics giant just bought a 278,650-square-foot property in San Bernardino County for $70.1 million from Cabot Properties.

Of course, not all of the exchanges of keys were done voluntarily. CIM Group took back a distressed office property at 88 University Place near Union Square from Arch Companies for $48.6 million. 

Likewise, Isaac Hera’s Yellowstone Real Estate Investments, which owned the $233.6 million note on the 697-key Maxwell Hotel at 541 Lexington Avenue, bought the property at auction for $140 million.

It hasn’t been sold yet, but the legendary Friars Club at 57 East 55th Street is being put up for sale after having defaulted on a $13 million loan.

And, in our nation’s capital, Blackstone Mortgage Trust picked up the four-property portfolio of L’Enfant Plaza — consisting of Nos. 470, 490, 955 and 429 L’Enfant Plaza SW — at auction for $83.7 million. (Which, it should be noted, was considerably less than the $365.6 million it was most recently appraised at.)

It’s a living

One thing you might have noticed about a lot of the aforementioned deals: They were multifamily, which is still a pretty underserved asset class in a lot of metro areas.

Despite the fact that New York Mayor Eric Adams is under indictment for alleged bribery and much of his administration is reeling, his City of Yes zoning proposals are still broadly popular.

The City of Yes “should be best understood as a housing supply strategy rather than a housing affordability strategy,” said Brooklyn Borough President Antonio Reynoso.

Even political rivals like City Comptroller Brad Lander are advocating for City of Yes. “The proposals would also help us catch up with cities across the country that are working to end exclusionary zoning and further fair housing goals, correcting for dozens of rezonings over the past 20 years that limited new development in neighborhoods with strong access to public services,” Lander said in a statement. “In particular, allowing new development in transit-rich neighborhoods will help increase New Yorkers’ economic mobility and access to opportunity.”

One has begun to see a lot of transactions and multifamily deals brewing, particularly in the Bronx — some 33 sites sold there in the first half of 2024 for $166.4 million. (Which is a 50 percent jump over the first six months of the previous year.)

“The Bronx has great underlying fundamentals,” said Karen Hu of Camber Property Group, which is working on a $1 billion project in the borough, “including transportation, culture, food and entertainment and open space, so it’s no surprise that development has taken off in the borough.”

Think about that when the Bronx Bombers return to their hometown tomorrow night!

Earnings season

We can’t believe it’s come around so soon, but it’s earnings time. And the earnings news has been pretty decent!

Blackstone (BX) Mortgage Trust, Blackstone’s originations business, reported $1.8 billion in loan payoffs and another $600 million in resolutions on impaired assets on its earnings call.

Alexandria Real Estate Equities reported a healthy $791.6 million in revenue during the third quarter, which is up almost 11 percent from the third quarter of last year.

CBRE said revenue rose even higher (15 percent quarter-over-quarter) to $9 billion, and cash flow increased to $573 million.

Empire State Realty Trust announced its hunger for retail on its recent call. ESRT is currently in the process of making a buy in Williamsburg.

“We will be very opportunistic in terms of opportunities that come about from this point on,” said ESRT President Christina Chiu. “We have a lot to work with and we feel very good about this very prime retail portfolio, especially in a market where there hasn’t been a ton available in the marketplace.”

Incidentally, Williamsburg retail isn’t attractive solely to ESRT. We just stumbled upon the new high-end mall targeting ultra-Orthodox Satmar Jews for its customer base. Check out our story here.

See you next week!