Sunday Summary: Welcome the New Big Players in CRE

There’s no shortage of capital in the U.S. economy right now. There’s a lot of real estate. The real estate is being sold at a steep discount.

So when are the big real estate players going to start deploying that oft-chanted “Dry powder, dry powder, dry powder…”?

Well, in case you haven’t been noticing, we’ve been detecting a lot of sales lately. They’re not necessarily of the $1 billion-plus variety, but a sale is a sale.

Just in the last week (and it was a short week!) we reported about modest deals like Behrooz Hedvat picking up a property next to Amazon’s Manhattan headquarters for $18 million. A slightly bolder one was that Hogwarts Capital (great name) bought a 70-key hotel at 373 Fifth Avenue for $30 million. And the Gerschel family just made a cool $80 million for The Park at Cross Creek Shopping Center in Malibu.

But there have been plenty of deals that have cracked the nine-figure barrier, like Inkga Group (which is connected to Ikea) buying a stake worth anywhere from $300 million to $500 million from Extell Development in 570 Fifth Avenue. Or there’s the Texas-based Milestone Group plunking down $111.6 million for the 488-unit Axis Delray Beach. And one shouldn’t forget Starwood Capital Group’s $108 million score in selling the 444-unit Turtle Cove in West Palm Beach, Fla., to Brookfield (BN) Properties. (Speaking of Starwood, did you hear that Job Warshaw left his position at Starwood’s LNR Partners after 32 years? Whoa!)

And, while there are still traditional real estate players making these transactions, some of the figures who have been watching from the sidelines and ready to finally use their own powder are wealthy figures who made their money elsewhere.

We mean family offices of tech moguls or otherwise obscenely wealthy individuals who are looking to park their money in something that can throw off a return.

“Family offices have always been part of our bidding pools,” CBRE’s Kevin Aussef said in Commercial Observer’s look at the phenomenon last week, “but now they’re the lead singer because they’re looking at real estate as a long-term investor, and we’re seeing them show up and win those bids.”  

Zach Redding of Colliers told CO that he’s currently executing half a billion dollars worth of deals from high-net-worth investors.

And, given market conditions, there’s probably a lot more to come.

Speaking of market conditions…

The reason real estate is such a good deal right now is because the foreclosures are happening, and we saw evidence of that last week, as well.

CO learned that Igal Namdar, the shopping mall magnate, and Empire Capital Holdings are in talks to hand back the keys to 345 Seventh Avenue to lender Benefit Street Partners.

Plus, a few steps ahead of a UCC foreclosure auction, it looks like Silverstein Capital Partners took control of Brooklyn Tower, JDS Development’s condo at 9 Dekalb Avenue, after defaulting on a $240 million mezzanine loan (Silverstein was the lender).

We can’t pretend there aren’t office markets that are plain godawful. (We’re looking at you, D.C.) Or that there are sectors like proptech that are always feeling one step forward, one step back every time you take a broad look.

And, yes, yes, yes — we were all disappointed when Jerome Powell served as the proverbial wet blanket last week when he said he wasn’t ready to cut rates yet.

But that doesn’t mean that good things aren’t happening, too. Powell notwithstanding, loans are happening. Big ones.

Like, for example, the $295 million construction loan Kushner Companies scored from Apollo and RXR for 1 Journal Square, the $1 billion, 2 million-square-foot project that when complete will be the largest multifamily development in the history of New Jersey.

Or the $148 million refinancing provided by PGIM for Gio Midtown, the 32-story luxury apartment building in Midtown Miami. (Speaking of PGIM, it also scored a good sale when EQT Exeter purchased its six-facility industrial portfolio in Baltimore for $140.5 million.)

Not to be outdone, Gary Barnett’s Extell Development coaxed a $1.2 billion refinancing out of JVP Management for 50 West 66th Street.

And there were some six-figure leases, like Orrick, Herrington & Sutcliffe’s 144,312-square-foot renewal at Harbor Group International’s 51 West 52nd Street. And, even bigger, Paul Singer’s Elliott Investment Management is taking 149,000 square feet at Vornado Realty Trust and SL Green Realty’s 280 Park Avenue.

Nice rebound

One of the reasons we get excited when we see leases and sales like the ones above is because we love a comeback story.

For example, few industries had quite so bad a flameout as cryptocurrency — and they’re now walking on sunshine.

Well, sort of. According to JLL, crypto firms leased 300,000 square feet in San Francisco in the first half of the year, and there’s another 175,000 square feet of demand.

“The next wave of whatever crypto is has been finding an epicenter in San Francisco,” said Newmark’s Steven Golubchik. “If you look at the amount of crypto funds that have recently started up, many of them are based in San Francisco. One of the things the data isn’t showing is there’s a challenge for crypto firms looking for space.”

Something to think about as you recover from your Fourth of July hot dog and fireworks extravaganza.

See you next week!