Sunday Summary: The Quick and the Fed

Last Sunday night a political and legal bombshell went off that reverberated deeply throughout commercial real estate.

The chairman of the Federal Reserve, Jerome Powell, put out a video saying that he had been served with a grand jury subpoena pertaining to renovations of the Eccles Building in Washington, D.C., headquarters of the Fed.

“This unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure,” Powell said, dismissing the idea that the threat of indictment was about misleading Congress on what the renovations would cost.

“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public rather than following the preferences of the president,” Powell said.

While congressional Republicans acted swiftly to curtail this journey into unchartered monetary waters, in real estate, however, the reaction was somewhat more muddled.

Yes, there were plenty of CRE professionals who sensed a naked political ploy. “I think this is all about Trump not wanting to lose the midterms,” Chad Carpenter, founder and CEO of Reven Capital, told Commercial Observer. “What does he have to do to not lose the midterms? He needs to keep GDP up, keep employment and the stock market up, and bring costs down, and, right now, short-term interest rates are still relatively high.”

Others, however, had built up resentment against Powell for a very long time, and they didn’t see anything wrong with a high-pressure campaign against him.

“Everyone knows what’s been going on: Trump has wanted an easing of monetary policy, and, frankly, that’s good for commercial real estate,” said Glen Kunofsky, founder and CEO of the investment firm Surmount. “On the political and criminal indictment side, my view is that anything that puts pressure on the Fed to lower rates is a good thing.”

Adelaide Polsinelli, a vice chair at Compass, held little back in her assessment of the Fed chairman: “Did Powell do such a good job? Eleven interest rate hikes in 12 months doesn’t sound rational to me. Look at the repercussions of Federal Reserve policies: They’ve devastated the housing market and gutted real estate. How can you argue the actions of someone in his position were intelligent, or were consistent with historical analysis?”

The battle was on the minds of many at CREFC in Miami, which was in full swing when the news broke. “Regardless of the range, I think stability is good for the industry,” Peter Szewczyk, head of CRE East Coast originations at Capital One, told CO. “Stability is good in terms of being able to forecast what we can underwrite.” True that.

Business as usual?

Whatever jitters might have been felt didn’t seem to have much effect on leasing, selling or financing.

In New York City, there were two monster office leases that crossed the 100,000-square-foot mark: Kroll Bond Rating Agency announced it was taking 121,000 square feet at Harbor Group International’s  51 West 52nd Street (aka Black Rock), and PayPal nabbed an even bigger 261,000-square-foot lease at Hines, Trinity Church and Norges Bank’s 345 Hudson Street.

Both deals are impressive, but, if we’re talking strictly size, they’re dwarfed by the 615,000-square-foot lease that Amazon signed last quarter (making it the largest in Greater Los Angeles for those three months) for a logistics and distribution space, not to mention another 500,000 square feet that the company leased in Simi Valley.

Sales were happening everywhere: In Miami, Ken Griffin’s Citadel along with Goldman Properties laid out $180 million to purchase the 298,000-square-foot 545 Wyn office in Wynwood.

Also in South Florida, Lennar just spent $164.5 million for a 152-acre development site in Sunrise, which is already entitled for a master-planned community consisting of 500 townhouses and 400 single-family homes.

We also learned of a big 2025 sale that we missed in Los Angeles: Ashkenazy Acquisition picked up a two-block parcel in Beverly Hills, which consists of a 184,000-square-foot Neiman Marcus building at 9700 Wilshire Boulevard for the price of (checks notes) $50 million? (Well, Neiman’s parent company, Saks Global, is going through a bankruptcy that they made official last week, so we can see why they’d be taking a haircut on properties.)

And, in New York, RXR took $150 million in debt to buy a 45 percent stake in a multifamily portfolio consisting of a residential tower and 20 townhouses on the Upper East Side.

In financing, the money sloshing around last week remains head-spinning.

Stiles and Shorenstein Investment Advisers refinanced The Main, an office in Downtown Fort Lauderdale, to the tune of $185 million.

Jamison grabbed $195 million in construction financing for 1055 West Seventh Street, a 33-story, 620,000-square-foot multifamily tower they’re building in Downtown L.A.

And a lot of the capital was connected to retail. In Midtown Manhattan, Apollo Global Management snapped up $218 million of existing loans on the retail condo at the St. Regis hotel at 2 East 55th Street. Farther east, in Flushing, Acadia Realty Trust and TPG Real Estate picked up $289 million in acquisition financing for the 550,000-square-foot The Shops at Skyview Center.

But the big money news of the week was Bain Capital closing its open-air retail center-focused Bain Capital Real Estate Fund III, for $3.4 billion!

Multifamily on our minds

Question: Is it possible that Measure ULA (Los Angeles’ so-called “mansion tax”) is … not as bad as its critics have charged?

Maybe or maybe not, but nearly three years after implementation it has finally yielded $1 billion in tax revenue — and there was much rejoicing.

It’s not so surprising that houses would be transacting again. At least we saw some of that in last week’s multifamily issue. And on this long weekend our coverage is worth a nice, careful read.

We looked at the pending privatization of Fannie Mae and Freddie Mac. (Lots of unknowns to ponder.) We looked at the tough insurance market for owners. (Oof.) We learned of Brandon Kearse’s promotion to president and chief investment officer at Jonathan Rose Companies. (Yay!) We profiled Mark Moskowitz and Ameesh Agarwal, and talked about their (relatively) new company University Place Asset Management. (Ambitious!)

And, finally, we sat down with Tredway founder and CEO Will Blodgett to talk affordable housing. (“Don’t forget the mission,” is his mantra. Which is a healthy one.)

See you next week!