Sunday Summary: A Week of Ups and Downs

Actually, make it that they have too much recreational property on their hands.

Host Hotels & Resorts offered the global behemoth $725 million for its 450-key, 1,300-acre Turtle Bay Resort on the north shore of the Hawaiian island of Oahu with the hopes of turning the lush spread into a Ritz-Carlton.

The eye-catching price was more than double what Blackstone paid for the property in 2018 ($332 million). So (no surprise) Blackstone said yes to the offer — and they’re undoubtedly spending some of that sweet, sweet Oahu money on something really luxe. Something indulgent! Like, say, a new industrial distribution center near Miami International Airport?

Well, nevertheless, hats off to Blackstone. Because it would be really bad if it went the other way — if, say, the property they shelled out hundreds of millions of dollars for lost half its value instead.

That’s sort of what’s happening at the Gas Company Tower in Downtown Los Angeles, except it’s not seen its value cut by half. It’s worse than that.

Three years ago, the 1.4 million-square-foot property was appraised at a healthy $632 million.

Last summer Trepp delivered the blow: It was, according to the rating agency, worth only about 57 percent of that 2021 figure: $270 million.

But Trepp wasn’t done.

Last week the agency pegged the value of the skyscraper at $215 million, a 21 percent fall from last year. (Maybe it’s time to think about adaptive reuse? Downtown L.A. apartments, anyone?)

The Gas Company Tower wasn’t the only Southern California property to be hit with cold, unfeeling repricing.

LaSalle Investment Management is offloading two of its offices in Playa Vista for $74.3 million, which is a little more than half of the $140 million LaSalle paid for the properties back in 2017.

We can understand why some might look at the market and say, “Thanks, but no thanks.”

That’s essentially what Lendlease did this week. The Australian-based global construction giant bid adieu to 45 years of operations in the U.S. to focus instead on “lower-risk business.” This might come as a shock to those who have done business with the firm, especially in New York, but its New York and New Jersey operations will be handed over to Consigli Building Group.

One leaves, another comes

Which is actually pretty good news for Consigli!

“Expanding our New York and New Jersey portfolio with the addition of Lendlease, a highly complementary business to ours, signifies our dedication to growth and excellence in this core market,” said Anthony Consigli, the CEO of the eponymous firm, in a statement. “As we leverage our combined strengths, expertise and capabilities, we’re poised to deliver heightened value to our clients with the greater ability to tackle more complex and ambitious projects.”

And there are plenty of others who haven’t been cowed by the U.S. market.

One new entrant of late has been Azorim, a top Israeli development firm — which, since 2013, has been making their bones in Yonkers with no signs of slowing down.

“We believe we found our niche and it works for us,” said Jack Klein, chief operating officer of Azorim and director of Azorim Israel. “We’re building something slowly, we’re in this for the long run, and we’ve identified an amazing city that’s very pro-development.” Azorim is currently building hundreds of housing units in the New York City neighbor.

Speaking of multifamily, in Miami’s Wynwood district Bazbaz Development filed a proposal to build a 544-unit residential tower, which at 48 stories would make it the tallest building in the neighborhood (it was proposed under the auspices of the Live Local Act).

And (Gas Company Tower aside) there was even some positive news for offices overall last week.

First, Savills put out a report saying that law firms are growing bolder in their space needs.

Leasing activity for law firms went up by as much as 500,000 square feet per quarter in 2023 and 2024 as opposed to the three years preceding it.

“Our sense is that we are deep into the ‘new normal’ with law firms making real estate decisions, for the most part, as they did prior to the pandemic,” said Savills’ Tom Fulcher. “They are committed to office space as integral to their long-term health as organizations and, as leases expire, are making long-term occupancy decisions.” 

And it certainly didn’t hurt the office market that three of the big banks — Citigroup, HSBC and Barclays — essentially gave a big middle finger to the WFH deadenders when they announced that they would require in-person work for five days a week from select employees.

So, enjoy your Sunday — because it sounds like a lot of Citi, HSBC and Barclays readers are going to be in the office tomorrow.

See you next week.