Philip Blumberg Blog

Hancock Tower Sells at Auction for $661M

Normandy Real Estate Partners and Five Mile Capital Partners won the auction for Boston’s John Hancock Tower, grabbing the property for $661 million, about half of the price paid by Broadway Partners less than three years ago. The companies agreed to pay $20.1 million for the mezzanine debt on the 60-story building and assume the mortgage of $640.5 million, according to a Wall Street Journal article.

The building went into foreclosure in January after Broadway Partners defaulted on the mezzanine loans it used to finance the $1.3 billion sale in late 2006. "This is exactly what is happening with many other buildings across the country," Chris Stanley, an analyst at real estate research firm Reis Inc in New York told Reuters. "Now that things have started to deteriorate, they will deteriorate at a much faster rate because of all the leverage in the system."

For more news and information, visit Blumberg Capital Partners.

$61.6M Lease Renewal in Los Angeles

The Century City-based lawfirm of Greenberg Glusker Fields Claman & Machtinger LLP, just signed a $61.6-million lease extension for its headquarters on Avenue of the Stars, according to a CoStar Group article. The full service law practice renewed it's lease for 61,806 square feet of office space at 1900 Avenue of the Stars in Los Angeles, CA for 15 years. Gary Weiss of Madison Partners and Clay Hammerstein of CB Richard Ellis represented the lawfirm in the transaction.

"There was a full-court press to try to induce us to leave this building and move," said Dennis Ellman, a partner at Greenberg Glusker. Faced with the potential loss of a large tenant, the landlord offered better terms, Ellman said. Topa Equities Ltd. acquired the building in 2002 with Topa Management Co. providing on-site property management. Other tenants include Jeffer, Mangels, Butler & Marmaro LLP, Ezer & Williamson LLP and Lieberman Research Worldwide.

For more news and information, visit Blumberg Capital Partners.

First Lease Signed for One World Trade Center

Vantone Industrial Co. has signed a lease at One World Trade Center, also known as the Freedom Tower, which will create the China Center, a 190,800-square-foot business and cultural facility, according to a CoStar Group article. The Port Authority of New York and New Jersey and Vantone signed the 20 year and nine month lease, commencing when the building is completed in late 2013, to establish the China Center on portions of the 64th floor and the entire 65th through 69th floors. Immediately following the lease signing, China Center provided the Port Authority with a $10 million letter of credit.

Tianjin Teda Group Co., Ltd., is the biggest shareholder of Vantone Industrial Co., Ltd. China Center obtained vigorous support from TEDA Investment Holding Co., Ltd., as well as the Tianjing municipal government. Key components of the China Center will include an Executive Business Club, conference center, and first-class office space.

Port Authority Chairman Anthony R. Coscia said, "Signing up the China Center on competitive terms and in a struggling economy is a firm stamp of approval for the World Trade Center site as a world-class business destination. We look forward to building on today’s success and securing other quality tenants for One World Trade Center from around the globe."

For more news and information, visit Blumberg Capital Partners.

Commercial Property Loan Crisis

The delinquency rate on about $700 billion in securitized loans backed by office buildings, hotels, stores and other investment property has more than doubled since September to 1.8% this month, according to data provided to The Wall Street Journal by Deutsche Bank AG. Increased loan delinquencies threatening to cause tens of billions of dollars in losses to banks, 47 of which have failed nationally since 2007. Foresight Analytics has estimated that the banking sector could suffer as much as $250 billion in commercial real-estate losses in the current crisis, and predicts that 700 banks could fail under CRE exposure.

At the end of 2008, more than 2,900 banks had more than 300% of their risk-based capital in CRE loans. "In perfect hindsight, we would have done less commercial real-estate lending," said Larry B. Faigin, president and CEO of First Bank of Beverly Hills. The Calabasas-based bank's oustanding commercial property debt was fourteen times the bank's total risk-based capital at the end of last year, with delinquencies reaching 12.9%.

For more news and information, visit Blumberg Capital Partners.

Interstate Realty Sells NJ Office Building

R.N. Foster Associates, LLC. has purched an office building at 20 Bushes Lane in Elmwood Park, NJ from Interstate Realty for an undisclosed price, according to a crefeed.com report. NAI James E. Hanson represented the buyer in the transaction while SBWE represented the seller.

The building is a 16,000 square foot free-standing single story building that includes 30-plus parking spaces, 2 loading docks and 18' clear high ceilings. 20 Bushes has never had any vacancy and a pending relocation by the current tenant had the building being positioned to be placed on the market in the near future. "R.N. Fosters Associated is in the midst of planning a full interior renovation that will include new offices and mechanicals. Occupancy is slated for sometime middle- to-late summer," said Greg Reid of NAI Hanson.

For more news and information, visit Blumberg Capital Partners.

Report Predicts Office Rents Will Remain Flat in 2009

Conley Associates, a commercial real estate brokerage in Albany, New York, has released a market report suggesting that Class A office space can expect rents to mostly remain flat this year, according to a Business Review article. The report, drawing on results from surveys of New York's Capital District landlords and commercial brokers, indicates that most base rent trends for Class A buildings will vary from flat to increasing, and predicts that this will lead to an increased interest in Class B office space.

The predictions are attributed two factors: Existing tenants are getting short-term extensions on their leases rather than incurring the cost of relocation, and there has been relatively little construction of new office space. "It's the uncertainty that's causing companies to delay any significant decisions," adds Tracy Metzger, owner of TL Metzger Associates in Albany, told timesunion.com. "Moving is a significant decision, and you need to know what size you're going to be."

For more news and information, visit Blumberg Capital Partners.

CMBS Loan Delinquencies Show Increased Retail Hit

Fitch Ratings said its commercial mortgage-backed securities loan delinquencies index rose to 1.28% last month from 1.15% in January, driven by declining retail performance for the sixth time in the last seven months. The rate of increase is consistent with Fitch's expectations that loan defaults will increase to at least 3% by the end of the year. In February, 46 retail loans totaling $277 million became newly delinquent, according to a GlobeSt.com article.

"As retail landlords struggle with increasing vacancies at existing center, they must cope with new market realities including a deceleration in new store openings, an overhang of new supply and continued downward pressure on rents demanded by those tenants still in operation," says Susan Merrick, Fitch managing director and head of its US CMBS group. Fitch said that it expects many vacant big-box spaces will remain empty "for the foreseeable future" and that in the near to medium term, retail will be a growing proportion of defaults.

For more news and information, visit Blumberg Capital Partners.

Capmark Originates Two $64M Loans Through Freddie Mac

Capmark Finance Inc. has originated a total of approximately $63.9 million in permanent debt through its Freddie Mac program for two properties in Philadelphia and Pembroke Pines, Florida. Acting on behalf of BR Penn Realty Owner L.P., Capmark secured $33 million for the refinancing of the 265-unit apartment community at 640 N. Broad St. in Philadelphia, Pennsylvania; Capmark also orchestrated a $30.9 million Freddie Mac loan for Pembroke Cove South L.L.C. for the purchase of the Pembroke Cove apartment community in Pembroke Pines, Florida, according to a Commercial Property News article.

Situated on 23.370 acres, Pembroke Cove is a 320-unit garden-style apartment property located at 13401 NW 5th St. in Pembroke Pines. The 361,124-square-foot Class-A property was built in 1997. The property features attached garages with direct access in each unit. The property is 92 percent occupied. 640 N. Broad Street is a 64,340-square-foot multifamily property containing 265 dwelling units. The property was originally constructed in 1913 and used as an industrial manufacturing facility before being converted to its current use in 2006 – two years after it was purchased by BR Penn Realty Owner. The property, operating at 94 percent occupancy, contains highly-desirable residential apartment units and features a variety of both in-unit and complex amenities.

For more news and information, visit Blumberg Capital Partners.

AIG To Sell NYC Headquarters

AIG is reportedly putting its 66-story Art Deco headquarters in New York up for sale, according to a Commercial Property News article. AIG has owned the building since the 1970s, and is one of the more famous structures in New York City. Completed in 1932, 70 Pine St. is the fifth tallest building in New York and 39th in the world. Company spokesman Mark Herr said AIG "is evaluating the potential sale of its headquarters building at 70 Pine Street and the 72 Wall Street building."

"I dare not even venture a guess on a price because this is exactly the type of asset lenders are avoiding like the plague right now," said Dan Fasulo, managing director at research firm Real Capital Analytics Inc. One of the prospective buyers is the union that represents doormen and porters and office and apartment buildings, sources told the New York Post. "Institutional investors say they would pay only around $50 million and others would be hard-pressed to pay $100 million," one investment adviser said.

For more news and information, visit Blumberg Capital Partners.

Larrabee Complex in Maine Transfers Hands

The Larrabee Complex in Westbrook, Maine, a 101,250 square foot multi-tenant retail and office complex, was sold by Miele Properties, LLC to WE 100 Larrabee Road LLC, according to a crefeed.com report. Miele was represented by Craig Young, CCIM and CBRE partner, while WE 100, an affiliate of Winstanley Enterprises LLC, was represented by Gregory Boulos of CBRE | The Boulos Company.

The single-story complex, located at 100 Main Street, counts Advance Auto Parts, Sherwin Williams, NAMCO, Spa Tech, Northeast Paging, Rent-A-Center and Big Wings among its current tenants. A sale price for the property was not disclosed.

For more news and information, visit Blumberg Capital Partners.