NY Tristate Area Office Market Slows [Housing Tracker]

Includes: BCF, BXP, DS, FPO, KEY, LEH
by: Judy Weil

Quote Of The Day 

"Clearly, of the New York tristate-area office markets, Stamford and Greenwich are more susceptible to the financial and hedge-fund industries.”- Scott Rechler, CEO of RexCorp Realty, which owns more than 11.5 million-sf of commercial property in the tristate region of New York, New Jersey and Connecticut. (WSJ, Aug. 13)

Commercial Real Estate and Real Estate Investment Trusts [REITs]

Developer Avoids Foreclosure On Manget Community Loan. “A new development in Marietta has avoided foreclosure on a loan used to help pay for construction of the Manget community near the Marietta Square. Pam Sessions, of Hedgewood Properties, said Branch Banking & Trust decided to work with her company to resolve a $4.7 million loan that is part of the funding of Manget. Manget is a development of homes that are within walking distance of the Marietta Square… In April, Hedgewood avoided foreclosure on a $5.7 million loan for a portion of Woodstock Downtown when that lender took back the loan on retail space and left Hedgewood in charge of the project.” (Atlanta Journal Constitution, Aug. 14) 

Boston Properties Completes Acquisition of Two NY Properties from Macklowe. “Boston Properties (NYSE:BXP) and its partners have closed on the acquisition of 540 Madison Ave. and Two Grand Central Tower in NYC for about $705 million, a major part of the $3.95 billion, four-property portfolio deal that it struck with beleaguered seller Macklowe Properties earlier this year. The larger deal also involved the sale of the iconic GM Building in New York, which closed in June. Its purchase price, $2.8B, included the assumption of $1.9B in debt maturing in 2017.” (Commercial Property News, Aug. 13) 

Office-Rental Market Feels Wall Street's Ripples. “CB Richard Ellis: The change in momentum was underscored in Q2 as a number of financial companies dumped vacant office space into the [tristate NY, NJ, Connecticut] market. Among them: investment management firm AQR Capital Management… which decided against moving into an additional 60,000-sf… in Greenwich. And FirstLight Financial Corp., a commercial-finance company, put back on the market about 48,000-sf of space it leased in Greenwich… Moody’s.com: Even with the slipping financial sector, the two-county region of Connecticut that stretches northeast of New York's Westchester County still posted job growth of 0.3% in May compared with the year-earlier month, just above the national rate of 0.1% for the same period.” (WSJ, Aug. 13) 

Lehman Negotiating With BlackRock About Asset Sale. “Sources: Lehman Brothers Holdings Inc. (LEH), seeking to restore investor confidence after a $2.8 billion second-quarter loss, is negotiating to sell commercial real estate assets to a group including BlackRock Inc… Lehman is seeking to sell about $14 billion of its $40B in commercial property and related securities by the end of the year, according to two potential buyers approached by the firm.  The sale would bolster capital as analysts… raise questions about Lehman's ability to withstand further losses on mortgage securities.” (Bloomberg, Aug. 13) 

Georgetown Mall Foreclosure Auction Delayed Again. “The foreclosure auction of the Georgetown Mall on Packard Road in Ann Arbor has been delayed another week. Originally scheduled for July 31, the sheriff's auction has been pushed back twice by New York lender Compass USA, according to its Southfield lawyer Robert Bolton. According to the legal foreclosure notice, developer Craig Schubiner and his Harbor Georgetown LLC owe $15.1 million on the property at an interest rate of 20%. Schubiner purchased the 83,000-square-foot shopping center in 2001 for $6.1M. County records show the loan that is being foreclosed on was for $8.8M and was made in 2004.” (Ann Arbor Business Review, Aug. 12) 

Vantage Pays $40.2M In Washington Heights. NY: Companies affiliated with residential apartment owner Vantage Properties bought two adjacent, six-story buildings in Washington Heights for $40.2 million from a real estate company based in Woodmere, N.Y. The larger property, a 186-unit elevator building located at 34 Hillside Avenue, sold for $23.1M. The other, a 155-unit elevator building next door at 2 Ellwood Street, sold for $17.1M.” (The Real Deal, Aug. 12) 

First Potomac Refinances $72M Debt. Bethesda, Maryland: “First Potomac Realty Trust (NYSE:FPO) has refinanced a $72 million first mortgage loan secured by 14 properties in suburban Maryland. This is the REIT’s remaining debt maturity for 2008, leaving it well positioned to address its $14M and $38M in mortgage debt that will be maturing in 2009 and 2010, respectively.  The refinancing is a package consisting of a new secured term loan provided by KeyBank (NYSE:KEY) and supplemented by what is left on the company's unsecured revolving credit facility.” (Globe St., Aug. 12)

Newcastle Posts Funds Loss In Q2. REIT Newcastle Investment Corp. (NCT)… swung to a loss in second-quarter funds from operations as it took a charge on its holdings of subprime securities. Newcastle reported a loss in funds from operations of $87.7 million, or $1.66/share, in the April-June period, compared with a gain of $34M, or $0.64/share, in Q2’07. Funds from operations, which adds such items as amortization and depreciation back to net income, is considered a key measure of strength for real estate investment trusts because it provides a more accurate picture of cash performance. Newcastle booked a $63.2M charge related to its subprime securities portfolio.” (AP via Forbes, Aug. 11)

Big Blocks Of Space Go Begging. “Colliers ABR Inc.: As of June, there were 54 blocks of large space—defined as 100,000-sf or more—available in Manhattan. That figure is up 35% from the year-ago period. Colliers also reports that in June there were 15 totally empty buildings, eight with large blocks of space. A year earlier, there were only six vacant properties, four with large blocks of space… Meanwhile, several real estate brokers estimate that there are only 15-20 tenants scouting for such large spaces. That imbalance between supply and demand in the large-space market is expected to push rents lower in the long term and make tenants more reluctant to rush into new leases in the near term.” (Crain’s NY Business, Aug. 9)

Global Commercial Property Sales Halved: Study. “Real Capital Analytics: World sales of major commercial properties fell 49% to $306 billion in H1’08 from H1’07, as sales in developed countries were hit hard by the credit crisis and slowing economies. Dramatic shifts in the capital flows for commercial property became evident in H1’08 as Tokyo overtook London and New York as the most active sales market and investors began favoring Asian markets. Sales activity fell sharply in many developed Western economies while Brazil, Russia, India and China, and most other emerging markets posted gains.” (Reuters, Aug. 8)


Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Get Seeking Alpha's housing market coverage by email -- it's free and takes only seconds to sign up.