Philip Blumberg Blog

Largest Manhattan Office Deal for 2009

Paul, Weiss, Rifkind, Wharton & Garrison LLP closed on a deal this past week to renew and expand its current lease at 1285 Avenue of the Americas, also known as the PaineWebber Building, keeping the international law firm in a 15-year lease for roughly 585,000 feet of space in the tower. Paul Weiss will be taking over 18 floors in the building along with portions of the concourse and second floor levels according to a CoStar article, making it Manhattan's largest office transaction this year.

"Our decision to extend our lease at 1285 is a testimony to the quality environment this preeminent Midtown building has provided and the outstanding relationship we have enjoyed with ownership and building management over the years," said Steve Simkin, chair of Paul Weiss' real estate department. Newmark Knight Frank represented Paul Weiss with Jones Lang LaSalle's New York office represented ownership in the transaction. A joint venture of AXA Equitable Life Insurance Co. and institutional investors advised by J.P. Morgan Asset Management owns the office tower.

For more news and information visit Blumberg Capital Partners.

AFI USA Completes $267M Refinancing of Times Square Building

Africa Israel USA (AFI USA) has come to a settlement with its lenders and completed the recapitalization and restructuring of the debt on the Times Square Building according to a CoStar report. The refinancing allows AFI USA to move forward with plans for redevelopment of the property with this new five-year refinancing with a revolving line of credit from Banco Inbursa SA. The 16-story, 750,000-square-foot office building at 229 W. 43 St., formerly the home of the New York Times, will see floors five through 11 leased or sold to a major hotel operator and the four top floors turned into luxury condominiums.

"We believe in this project and are confident that the new leadership of AFI USA will bring the project to a successful completion," said James Glasgow, a Partner of Five Mile Capital Partners, which will convert its existing debt to equity to become a 50% equity partner in the property. "We are glad to be a partner in a redevelopment that offers so much unique value, even in a challenging real estate market."

For more news and information visit Blumberg Capital Partners.

UBS on the Hunt for New York Space

Bloomberg is reporting that UBS AG is looking to secure as much as 800,000 square feet of NYC-area office space, a timely move as rental rates for Class A offices in Midtown fell 25 percent from November 2008 to November 2009 according to Colliers ABR Inc. Kris Kagel, a New York-based spokesman for UBS, noted in an email correspondence that the company is considering offices in either Manhattan or outlying areas as its current leases expire. UBS currenly occupies roughly 5 million square feet in New York City, suburban New Jersey and Connecticut.

"We have a number of leases that come up in 2013, so we have started to look at various options including new buildings, existing building, etc.," Kagel said. "A decision probably won't be reached for several months."

"It would definitely be a boon to the landlord that lands them," said Robert Sammons, research director at Colliers. "Manhattan rents are at or near their low point. It remains an ideal market for the tenant."

For more news and information, visit Blumberg Capital Partners.

Failed Bank Loans Pique Bid Interest

According to a Wall Street Journal article more than a dozen investors have submitted bids to the FDIC to buy a $1.1 billion package of CRE loans extended by failed banks, including loans held by Franklin Bank, IndyMac Bank and other failed lenders. The FDIC is expected to announce the winning bidder in the next few weeks marking its second largest bulk sale of commercial assets since the downturn (the largest to date was the October transaction of loans made by the Corus Bank).

An excerpt from the article:

Under the options being considered for the $1.1 billion package, the FDIC would likely hold a 60% stake and provide financing. Deutsche Bank AG is advising the FDIC on the auction. The portfolio consists of mostly nonperforming commercial property loans. Both Franklin, led by mortgage-bond pioneer Lewis Ranieri, and IndyMac were best known as home-mortgage lenders. But they also lent heavily to home builders and other property developers during the boom times, in states from California to Texas.

For more news and information visit Blumberg Capital Partners.

Bay Area Office Vacancy at 5 Year High

According to NAI BT Commercial the San Francisco commercial vacancy rate is at 15.3%, up from 10.2% in 2007. Though this doesn't match the 20% vacancy rate seen in 2002 after the dot-com bubble burst, industry experts in a Wall Street Journal article say they expect the rate to continue climbing in the next quarter with continued high unemployment numbers.

Tom Christian, a managing partner at NAI BT, said the office market can't begin turning around until more jobs are created to help fill the empty space. "You won't see a new building built for a long time, until rents go up to justify new construction," he said. "The fundamentals are different this time around," said Michael Smith, senior managing director for the Bay Area office of CB Richard Ellis.

For more news and information visit Blumberg Capital Partners.

Intuit to Sell Intuit Real Estate Solutions

Intuit Inc. has signed an agreement to sell Intuit Real Estate Solutions (IRES) to Vista Equity Partners for approximately $128 million in cash. IRES, formerly known as Management Reports, Inc., is part of Intuit’s global business division and is a leading provider of software and services to companies in the real estate management and investment industry. Based in Highland Hills, Ohio, it has approximately 340 employees in its worldwide offices, serving more than 1,700 customers. The transaction, subject to regulatory review and customary closing conditions, is expected to close by January 31.

"Intuit Real Estate Solutions is a great business with a bright future," said Brad Smith, Intuit’s president and chief executive officer. "As we’ve focused our strategy on providing connected services that help consumers and small businesses, the Intuit Real Estate Solutions business model and the enterprise customers it serves are no longer a strategic, long-term fit for Intuit."

"We are long-term investors in enterprise application software businesses that are committed to being leaders in their markets," said Robert F. Smith, managing principal of Vista Equity Partners. "We are impressed by Intuit Real Estate Solutions’ suite of products, its track record of customer service and its global customer base. We look forward to working with them to help them reach their full potential."

For more news and information visit Blumberg Capital Partners.

Moodys/CPPI Numbers Down

The Moody’s/REAL Commercial Property Price Indices fell 1.5% in October from September, according to data compiled by Bloomberg. This is the lowest seen since since August 2002 with prices down 36% from the same time last year. The November 25 report showed a return of negative 3.9% in September for the all properties national index.

Matthew Anderson, partner at Foresight Analytics, told Bloomberg "This is the worst that we've seen since World War II." He went on to suggest that property values in the commercial sector may decline by up to 50% from top to bottom.

"The pace of declines has tapered off since the large drops measured in April and May," says Moody's Managing Director Nick Levidy. "However, further declines are anticipated."

For more news and information visit Blumberg Capital Partners.

Lantana Entertainment Media Campus Sold to Lionstone

The Lionstone Group, a Houston-based private real estate investment firm, has purchased the Lantana Entertainment Media Campus in Santa Monica from Maguire Properties according to a CoStar article. Lionstone purchased the campus as part of its urban investments fund; the terms of the deal were not disclosed. The 463,000-square foot studio production and creative office property is made up of four buildings on a 12-acre site in Los Angeles' Westside, and is currently used by entertainment companies including IMAX Corporation, NBC Universal Television, Dick Clark Productions and Revolution Studios.

Lee & Associates, which assisted in the transaction, is Lionstone's West Los Angeles consultant and will assume brokerage responsibilities for the property. Jim Jacobsen, Lee co-president and long-time Lionstone strategic partner, will oversee management of the Lantana campus, including brokerage, renovations and completion of LEED ® Certification efforts. Carl Muhlstein and Andrew McDonald of Cushman & Wakefield represented Maguire Properties in the disposition of the asset.

For more news and information visit Blumberg Capital Partners.

Northern California's Moffett Towers Lands First Tenant

Sunnyvale's long-vacant office complex, Moffett Towers, has finally signed its first occupant. According to the Silicon Valley Business Journal, chip maker Rambus will move 300 employees into 130,000 sq ft across several floors in one of the seven eight-story buildings that make up the complex. According to Square Feet Commercial Real Estate Blog, the terms of the lease are: 

- 10-Years
- $2.45 NNN start rate with 3% annual increases
- 6-Months Free Rent
- Right to cancel after 7 years

Rambus will occupy the first, 6th, 7th, and 8th floors of 1040 Enterprise. Cornish & Carey brokered the deal for both Rambus and landlord Jay Paul. Construction on Moffett Towers, which encompasses 1.7 million square feet, started in 2006 and was completed in 2008.

For more news and information visit Blumberg Capital Partners.

Facebook Leases More Office Space in Palo Alto

As social-networking giant Facebook continues to expand its reach across the globe, they are filling up Palo Alto office buildings nearly as quickly. Earlier this year, Facebook moved its nearly 900 employees to a 150,000 sq ft building  located at 1601 South California Drive in the Stanford Research Park. According to the Silicon Valley Business Journal, Facebook will double that space when they sign a lease for 265,000 sq ft space at 1050 Page Mill Rd. Square Feet, a commercial real estate blog, reported the latest sublease, from Beckman Coulter, consists of 135,000 square feet of space in a 2-story R&D building, 43,000 square feet in a two-story building behind it, and about 86,000 square feet of single-story warehouse and industrial space. 

Facebook has seen huge growth over the last few years and reportedly has over 100 million users in America alone. In August, Facebook CEO foresaw even more growth for the website and aims to enroll over a billion users in the future. Zuckerberg said at the time that he company was looking to grow its 1,000-employee work force by as much as 50 percent. According to the Business Journal, he told Bloomberg that Palo Alto has been a great location for the company to grow. "No one else has been hiring. It’s been a great environment for us because the economy has helped out."

For more news and information visit Blumberg Capital Partners.