Sunday Summary: Will We Have Any Fingernails Left?
By The Editors November 3, 2024 9:00 am
reprints
For New Yorkers, Wednesday night was a heartbreaker.
With a commanding five-run lead going into the fifth inning, the New York Yankees blew easy out after easy out, handing the Los Angeles Dodgers the fifth game of the World Series and with it the championship. New Yorkers were biting their fingernails down to a nub the whole way. Los Angelenos were popping champagne corks.
But some in L.A. were celebrating for reasons other than Freddie Freeman’s home run prowess (four homers in five games?)
At least those in the studio business were happy that Gov. Gavin Newsom announced a proposal to raise California’s film and television tax credit from $330 million to $750 million. Since it was first implemented, the credit has generated an estimated $26 billion in economic activity and some 197,000 jobs.
Needless to say, the move was heartily cheered by owners.
“This is an important step to help keep production in Hollywood and support the thousands of Angelenos and ancillary businesses who rely on the entertainment industry,” said Zach Sokoloff of Hackman Capital Partners, the biggest independent studio owner in the world and which also hosted Newsom at Raleigh Studios to announce the proposal.
Even beyond the studio business, there was other interesting news in the Golden State.
Toy-maker Mattel just grabbed 60,000 square feet at 831 South Douglas Street in El Segundo, Calif., with Continental Development.
Jaime Lee’s Koreatown-based Jamison and Arc Capital Partners plan to convert the 13-story, 233,000-square-foot 3325 Wilshire Boulevard into 236 apartments and another 15,000 square feet of retail space.
Strategic Value Partners and Lincoln Property Company purchased The Bluffs, the Playa Vista office campus that boasted tenants Google and Fox from Edward J. Minskoff Equities for $187.5 million.
And, finally, The Muller Company sold the 220,500-square-foot 2677 North Main Street in Santa Ana to the Orange County Transportation Authority for $54.5 million, which they plan to turn into their new HQ.
If office is trading in Southern California, that’s a bigger reason to pop champagne than Tommy Edman’s postseason batting average.
Is the same true in Florida?
The Florida office market has certainly been having a better run than Southern California for the last four years. The question, however, is whether it’s sustainable.
Back at the beginning of the pandemic, many were touting Florida as an emerging cryptocurrency and tech hub as Miami hosted a Bitcoin conference in 2021 and even created a digital coin for the city. Never mind that Miami-Dade County awarded the naming rights for the Miami Heat’s basketball arena to the doomed FTX crypto exchange.
“Let’s just be frank about it: We were mixing the Kool-Aid without the capital,” said Miami-based venture capitalist Jeff Ransdell. “It’s like having a Ferrari in your garage with no gas.”
There was a prominent defection over the summer when Andreessen Horowitz reversed its plans to open a South Florida office.
And, while big tech firms have swallowed up hundreds of thousands of square feet of space in established urban markets (sometimes to their regret), South Florida is a little different.
“Miami is not a market that routinely signs 200,000-square-foot office leases. It’s not like New York City or Chicago,” said 13th Floor Investments’ Arnaud Karsenti at CO’s South Florida development and investment event. “A big lease in Miami is 40,000 square feet.”
All that being said, last week CO learned that one of the biggest prizes of all — Amazon (AMZN) — is nearing the finish line on a 60,000- to 80,000-square-foot lease at Miami’s Wynwood Plaza.
Moreover, we suspect that Florida will be just fine with or without tech. (The state’s baseball stadiums are another story.)
For instance, the Reuben Brothers are purchasing the 175-key W South Beach at 2201 Collins Avenue for a whopping $425 million, which includes a Mr. Chow and 173 condo units, which W manages.
Moreover, the eponymous family behind Mas Group of Companies is proposing a $500 million, 147-acre development at 20000 Northwest 47th Avenue in Miami-Dade’s Opa-locka that would include athletic fields, an indoor rec center, 65,000 square feet of retail, 1,000 rentals, a 100-key hotel and another 1 million square feet of industrial space.
It’s easy being Green
Gotham might come up short in baseball, but it can still do leases.
The big mamou of the week was the announcement that private equity giant TPG was taking 301,276 square feet at Tishman Speyer’s The Spiral — now, that should make Los Angeles jealous.
And there were at least four other deals that cracked the 50,000-square-foot mark.
Law firm Hecker Fink doubled its existing space at Empire State Realty Trust’s Empire State Building to 53,779 square feet.
And SL Green Realty reeled in three big leases: Hedge fund Verition Fund Management took 72,512 square feet at 245 Park Avenue; global consulting firm Berkeley Research Group leased 51,960 square feet at 810 Seventh Avenue; and Gov. Kathy Hochul’s office grabbed 53,000 square feet at 919 Third Avenue.
Speaking of SL Green, they just completed an impressive refinancing of the $1.3 billion loan they had on 5 Times Square with their partners on the deal, RXR and Apollo Global Management.
They’re certainly having a better run than RFR.
A judge finally took the keys to the Chrysler Building away from RFR and handed them back to Cooper Union. (To really get into the saga, check out our in-depth story from last month.) If that wasn’t enough, RFR’s $104.5 million mortgage at 90 Fifth Avenue is now delinquent.
Report card time
Here’s a good rule of thumb about bringing value to your shareholders: Be a data center owner.
Because if you’re the Redwood, Calif.-based Equinix, you just reported $2.2 billion in revenue on your earnings call, marking the 87th consecutive quarter of revenue growth.
Yes, it’s earnings season and report cards are coming in. And the news has been pretty darn sunny.
BXP — previously known as Boston Properties — reported that leasing had grown 25 percent from the third quarter of 2023, including some 74 leases amounting to 1.1 million square feet of office space.
Senior living owner Welltower said it closed $2.2 billion worth of transactions last quarter (not bad!) and saw its net operating income increase 23 percent in the third quarter.
And, while not all earnings calls were equally rosy, even those with less-than-positive news could keep it in check. Paramount Group might have lost J.P. Morgan Chase as a tenant at One Front Street in San Francisco, but they reported they have 250,000 square feet of leases in their pipeline. Mall giant Simon Property Group saw increased leasing volume and occupancy rates (they’re at an enviable 96.2 percent!) but earnings from operations dipped slightly to $1.07 billion (the previous quarter it was $1.09 billion). And major multifamily presence Equity Residential saw its new leasing rates drop 1.2 percent during the third quarter of 2024.
Hopefully, that will keep you real estate junkies sated until next week. And, if you can’t get enough real estate/political stories (now that will run your fingernails ragged — no matter which side of the aisle you fall on), what’s unfolding with the Adams administration’s Department of Citywide Administrative Services is certainly something to keep an eye on if you want a long Sunday read.
See you next week.
