Sunday Summary: Elon Musk: Wagons East!
By The Editors July 21, 2024 9:00 am
reprints
Remember when California was the envy of the country? When it was the place where “bowers of flowers bloomed in the spring”? Where everyone from Tony Bennett to the Mamas & the Papas sang anthems to its greatness? When the Joad family would risk life and limb to escape into it?
Don’t say any of this to Elon Musk. He is so over it.
He made it official last week when he said that SpaceX and Twitter (er, sorry, X) were picking up stakes and heading east.
“This is the final straw,” Musk posted on X shortly after a new state law was passed preventing schools from informing parents about their children’s gender identity changes. “Because of this law and the many others that preceded it, attacking both families and companies, SpaceX will now move its HQ from Hawthorne, California, to Starbase, Texas.”
Of course, not everyone shares Musk’s frustration with California or skepticism about its future.
Worthe Real Estate Group, QuadReal Property Group and Stockbridge Capital Group, for starters, seem to believe in the state.
The trio have plunked down $375 million to buy the 27-acre Burbank Studios from Warner Bros. Discovery, which purchased the property from those very owners last year for $300 million. (Warner Bros. will also be putting up $281.3 million in cash as a sale-leaseback part of the deal.)
“We never really wanted to sell the Burbank Studios,” Jeff Worthe of the eponymous firm told Commercial Observer. “We had to sell it in order to buy The Ranch Lot” another studio in Burbank “which we really wanted, too. [Warner Bros. Discovery] ultimately decided it’s better if we operate it and they stay on as a tenant. … We’re big believers in Burbank and have been since the late 1970s.”
Speaking of nine-figure sales
There were a few other interesting ones last week in several different locales.
In New York City, J.P. Morgan Chase went to contract to buy 250 Park Avenue from AEW Capital for $300 million, right next to its planned headquarters at 270 Park Avenue.
About 10 blocks away, Barry Sternlicht’s Starwood Capital sold its 1 Hotel Central Park at 1414 Avenue of the Americas to Host Hotels & Resorts for $265 million.
And in Washington, D.C., Tishman Speyer sold 2000 K Street NW to Spear Street Capital for $140.2 million.
Not every nine-figure deal is a good deal
While $140 million is nothing to sneeze at, unfortunately for Tishman Speyer, they didn’t quite break even on the above-mentioned deal.
And, yes, a lot of real estate headaches were also on display last week, too.
Blackstone (BX) and Rialto Capital began foreclosure proceedings against Deco Towers Associates on the McGraw-Hill Building, where the aforementioned parties had loaned Deco $140 million for a planned office-to-residential conversion.
They weren’t the only ones. Flagstar Bank also began the foreclosure process against Gary Barnett’s Extell Development for defaulting on the $100 million mortgages on the retail condos at The Belnord on the Upper West Side.
And one of New York’s most iconic properties, the Helmsley Building, is apparently mulling an office-to-residential conversion after a $670 million loan on the property went into special servicing late last year.
Put on a happy face!
But despite those problem properties, if you cared about office leasing there was a million-plus-square-foot lease last week. So there’s that.
Specifically, we’re talking about Blackstone finalizing the renewal and expansion to 1.06 million square feet at Rudin’s 345 Park Avenue, which added more than a quarter of a million square feet to Blackstone’s already sizable footprint at the property.
“We are expanding our commitment to our New York-based workforce, Midtown Manhattan and New York City with this extension,” Michael Chae, chief financial officer of Blackstone, said in a statement.
They’re not the only ones.
On any other week we’d be touting Ares Management’s 15-year, 307,336-square-foot monster lease at SL Green Realty and Mori Trust Company’s 245 Park Avenue as the deal of the week.
It would have even been respectable beyond that: There were law firms (like Faegre Drinker renewing 42,394 square feet at 1177 Avenue of the Americas, and Golenbock Eiseman Assor Bell & Peskoe renewing 38.050 square feet at 711 Third Avenue); there were restaurants (Brasserie Cognac and Unapologetic Foods both signed leases); there were even gyms signing this week (TMPL is going to Williamsburg, Brooklyn).
And leasing is only one reason to be happy. If you’re cold-storage company Lineage, you have 19.2 billion reasons to be happy about your upcoming IPO.
Political upset
While we try to keep our eyes focused on CRE, it was impossible not to note the sort of really, really big political upheaval happening over the past week. (Hey, Elon Musk just made some serious real estate moves almost entirely due to political considerations, so the two cannot really be divorced.)
And while national issues tend to drown out everything else, they say that all politics is local.
One political arena we’ve been keeping our eye on has been San Francisco.
Historically, the city has a place in the heart of the NIMBY crowd, but that might be fading as San Francisco voters head to the polls in November.
“From both the real estate industry, and the voters, you hear a rejection of the status quo,” said Jay Cheng, executive director of Neighbors for a Better San Francisco, a local political group which has been pouring money into an initiative to reduce red tape, and which counts Nick Podell and Brandon Shorenstein among its supporters. “I think it’s unique, the level of real estate engagement on the local level this year.”
One should read all about it this Sunday, which would offer a welcome respite from the chaos on the presidential trail.
See you next week.
