Crickets: City sees zero mid-market investment deals

David Goldsmith

All Powerful Moderator
Staff member

Brokers split on whether flat-lining is the new normal

For the first time in at least months and possibly years, a week passed with no mid-market investment deals in New York City.

There was little doubt about why: Brokers unanimously blamed the coronavirus pandemic for the absence of buying and selling. And while some said they expected to see at least a few mid-market deals in the weeks ahead, others warned that zero could be the new normal for the time being.

“I don’t think anybody is looking to acquire any real estate until the world opens up again a little bit,” said Walker & Dunlop’s Aaron Appel. “This is a tremendously distressed situation.”

Stephen Preuss of Cushman & Wakefield echoed that, saying he expected zero deals per week to be more of a trend moving forward. Although he has not seen that many people drop out of deals completely, he has seen virtually all of them slow down as buyers and sellers look to get a better handle on the pandemic.

“No matter who it is on the transaction, everyone is pushing for a little bit more time,” Preuss said.

Mid-market investment sales in New York were not exactly on fire prior to last week. Since the beginning of 2020, the $10 million to $30 million segment of the market never saw more than five deals in one week —a peak reached once in mid-February and once in mid-March — and in some weeks only one deal happened.

Paul Massey of B6 Real Estate Advisors attributed the pre-pandemic slowdown largely to the strict rent law New York passed in June. He said the city was on track for only about 1,900 deals in 2020 as opposed to the roughly 2,700 it sees in a normal year.

He expected to see deal volume tick up at least slightly but said buyers and sellers still need more time to get acclimated to the dramatically new environment.

“I think we’re still dealing with system shock,” Massey said. “People need to get over the system shock before they start really transacting.”

David Schechtman of Meridian Capital said the fates of his deals during the pandemic have run the gamut: some are in hard contract and still expected to close, while others have fallen apart. He still expects to see transactions more frequently as pent-up demand is released.

“I think you’re going to continue to see deals close right through this, and volume is going to pick up tremendously deep into the summer,” he said. “You’re going to see an August that feels a hell of a lot more like March or April.”

Uncertainty has emerged as one of the key aspects of the pandemic, as the real estate community is grappling with an unprecedented situation. Eric Anton of Marcus & Millichap said he is advising all of his clients to move forward at a slow and steady pace given how much about the pandemic they still don’t know.

“It shocks me a little bit — but not too much — that everything shut down,” Anton said, “because, look, we’ve never had this before.”
 

David Goldsmith

All Powerful Moderator
Staff member

And then there was one (mid-market i-sale)
Investment sales have dwindled, but Tribeca office building did trade hands last week

There was just one mid-market investment sale in New York City last week — a slow period to be sure, but, technically speaking, infinitely busier than the week before.

April opened with no deals, the market’s first bankrupt week in months if not years.

The sole deal between $10 million and $30 million last week was for a six-story office building at 177 Franklin Street in Tribeca, which an LLC linked to Rosemont Solebury Capital purchased for $18 million from The Bedrock Building/New York City, a limited partnership based in Texas.

The property spans 12,100 square feet and contains seven units, according to city records. Shinola, a company that sells luxury goods including watches and jewelry, is a tenant in the building.

New York’s mid-market investment sales have, like everything else in real estate, been hurt by the coronavirus pandemic. However, the market had been somewhat slow even before the pandemic. Just one deal happened in late February
 

David Goldsmith

All Powerful Moderator
Staff member

One more time: A single mid-market i-sale this week
Jeffrey Lam bought a Chinatown building out of bankruptcy for about $29M

New York City saw one mid-market investment sale for the second straight week, yet another sign of how the coronavirus has been slowing down activity.

The lone deal between $10 million and $30 million was for a mixed-use building at 55-59 Chrystie Street in Chinatown that went through a bankruptcy auction earlier last year.

Jeffrey Lam of Lam Generation bought the six-story property for $28.6 million via the auction, which was organized by Rosewood Realty’s Greg Corbin and his team.

CTW Realty had owned the roughly 46,000-square-foot building since 1982 and had several legacy tenants in the property. CTW Realty’s Gary Tse had planned to clear out the tenants and recruit new ones from industries like media and tech, but he was unable to replace several longtime renters and defaulted last year on a $25.1 million loan.

This week was not the slowest the market has seen this year. Two weeks earlier there were none.
 

David Goldsmith

All Powerful Moderator
Staff member
NYC sees second week with no mid-market deals since onset of pandemic
It's the second week this year that saw zero commercial sales between $10M and $30M

The weather’s heating up, but for mid-market investment sales, it was another week of absolute zero.
The last week of May marked the second time since the onset of the pandemic that commercial sales between $10 million and $30 million ground to a complete halt. After the first time it happened, during the week of April 6, brokers unanimously blamed the coronavirus pandemic for the absence of buying and selling. And while some said they expected to see at least a few mid-market deals in the weeks ahead, others warned that zero could be the new normal for the time being.

“I don’t think anybody is looking to acquire any real estate until the world opens up again a little bit,” Walker & Dunlop’s Aaron Appel said in April. “This is a tremendously distressed situation.”
Stephen Preuss of Cushman & Wakefield echoed that sentiment at the time, saying he expected zero deals per week to be more of a trend moving forward. Although he has not seen that many people drop out of deals completely, he has seen virtually all of them slow down as buyers and sellers look to get a better handle on the pandemic.

“No matter who it is on the transaction, everyone is pushing for a little bit more time,” Preuss said.
Since the initial low in April, the mid-market sector has seen one to four deals per week.
David Schechtman of Meridian Capital previously told TRD that the fates of his deals during the pandemic have run the gamut: some are in hard contract and still expected to close, while others have fallen apart. He still expects to see transactions more frequently as pent-up demand is released.

“I think you’re going to continue to see deals close right through this, and volume is going to pick up tremendously deep into the summer,” he said. “You’re going to see an August that feels a hell of a lot more like March or April.”
 

David Goldsmith

All Powerful Moderator
Staff member
TRD Insights: NY investment sales hit the skids in April and May
CRE market was more notable for scrapped deals than closed ones during those months

March, what now seems like a lifetime ago, was a banner month for investment sales in New York City. That’s when two $900 million-plus office building sales helped propel total deal volume to over $4 billion, the third-highest sum in the past 12 months.
But that data still largely reflected a pre-Covid world, because of the lag between closings and property record filings, as well as the pipeline of deals that were already in the works.
In April, commercial real estate deals fell to $708 million in deals recorded, down 75 percent from the 12-month rolling average, according to an analysis of property records by The Real Deal. The market continued to slow into May, as deal volume plummeted to $551 million.
Investment-Sales-Dollar-Volume-by-month.png

Investment Sales Dollar Volume by Borough, Past 12 Months
Search:
MonthManhattanBrooklynQueensBronxTotal
Jun '19$3,488,826,980$491,583,486$404,936,585$228,998,365$4,614,345,416
Jul '19$2,055,831,903$635,526,295$225,712,596$231,303,826$3,148,374,620
Aug '19$994,568,763$549,667,829$163,006,097$248,431,610$1,955,674,299
Sep '19$2,467,687,345$778,870,723$362,069,402$109,441,020$3,718,068,490
Oct '19$2,830,091,040$567,269,046$472,470,411$121,591,497$3,991,421,994
Nov '19$1,542,481,247$502,925,947$643,464,996$99,568,914$2,788,441,104
Dec '19$2,944,526,061$793,378,103$479,708,549$123,976,948$4,341,589,661
Jan '20$1,192,344,089$946,933,659$287,534,737$258,234,091$2,685,046,576
Feb '20$941,738,457$616,060,878$278,359,927$159,804,440$1,995,963,702
Mar '20$3,354,998,451$357,237,114$286,574,234$189,028,549$4,187,838,348
Apr '20$363,761,356$200,824,488$79,913,561$63,843,667$708,343,072
May '20$194,605,422$245,431,527$60,863,297$49,603,595$550,503,841
Showing 1 to 12 of 12 entries
SOURCE: The Real Deal analysis of NYC property records (ACRIS)

In March, the deals were enormous. The biggest were Amazon’s $1.1 billion purchase of WeWork’s Lord and Taylor building, and Munich RE’s approximately $900 million acquisition of Abu Dhabi Investment Authority’s 330 Madison.
But April and May saw just one deal larger than $100 million recorded. That was Trinity Place Holdings’ sale of a commercial condominium unit at 77 Greenwich Street. The buyer was the New York City School Construction Authority, which paid $104 million for the property.
Only three other deals surpassed $50 million in April and May, all in Brooklyn: Rockrose Development’s $81 million all-cash acquisition of a development site on the border of Fort Greene and DoBro, Camber Property Group’s $82 million buy of an eight-building Flatbush portfolio, and Fortis Property Group’s acquisition of a Bushwick nursing home for $58.8 million.
Mid-market dealmaking also slowed to a crawl, with several weeks of either just one deal or even zero deals in the $10 million to $30 million range.
The months since the pandemic hit New York have been more notable for the deals that fell through than for the ones that closed.
These include SL Green’s scrapped sale of the Daily News Building to Jacob Chetrit for $815 million, All Year Management’s abandoned sale of a 73-building multifamily portfolio to David Werner for $346 million, and Thor Equities’ $24 million sale of a Flatiron District retail building to Mactaggart Family & Partners. The total value of these abandoned deals is nearly on par with the total volume of recorded deals in the past two months.
See the table below for more details on the largest deals that were recorded from March through May:
Top Four Commercial Real Estate Sales by Borough & Month, Mar-May 2020
Show 102550100 entries
Search:
BoroughMonthPropertySales PriceBuyer/SellerListing Brokerage
ManhattanMarch 2020424 Fifth Avenue (Lord & Taylor building)$978 millionAmazon / WeWork
ManhattanMarch 2020330 Madison Avenue (office building)$900 millionMunich RE / Abu Dhabi Investment AuthorityCBRE
ManhattanMarch 2020530 Broadway (office building)$382 millionMichael Shvo, Deutsche Finance, BVK & Bilgili Holding / Wharton Properties & Thor Equities
ManhattanMarch 202044 Wall Street (office building)$200 millionGaedeke Group / BlackstoneEastdil Secured & Hodges Ward Elliott
BrooklynMarch 2020123 Hope Street (mixed-use multifamily building)$84 millionHUBBNYC / Adam AmericaPrince Realty Advisors
BrooklynMarch 202035 Jay Street (development site)$62 millionEdward J. Minskoff Equities / Forman Group of CompaniesJLL
BrooklynMarch 2020167-171 North First Street (warehouse)$18 millionNew Mexico-based LLC / Kevsta Inc.
BrooklynMarch 202039 (a.k.a. 45) Ainslie Street (mixed-use multifamily)$11 millionYosef Rabinowitz / Brooklyn Standard Properties
QueensMarch 2020133-25 37th Avenue (development site)$59 millionGary Tsan / Yihai PropertyCushman & Wakefield
QueensMarch 202038-18 Union Street (retail condominium)$42 millionThor Equities & United American Land / F&T Group, AECOM Capital & Rockefeller Group
Showing 1 to 10 of 48 entries
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David Goldsmith

All Powerful Moderator
Staff member
NYC i-sales slashed in half by coronavirus
New report shows dollar volume fell to $9.6B in first half of 2020; Manhattan saw 40% drop

New York’s first-half investment sales numbers are in and they’re not pretty.
Sales volume from January through June totaled $9.65 billion — a decline of 45 percent compared to the second half of 2019, according to a new report by Ariel Property Advisors. Manhattan suffered the biggest dollar dip. It saw $5.6 billion in transactions in the first half of 2020, a 41 percent drop from the previous six months.

The number of transactions across the city fell by 35 percent over the same period, to 653 deals.
Uncertainty surrounding the pandemic “led to a sharp reduction in investment property transactions across most asset classes,” according to the report.

By percentage, Northern Manhattan led decliners. Dollar volume there tanked 77 percent, to $386 million. Queens dropped 63 percent to $744 million.The Bronx also suffered a 44 percent dip, to $436 million.
Brooklyn proved to be the most resilient borough with a sales total of $2.45 billion, a relatively small drop-off at 30 percent when compared to the other boroughs.

The report noted that the biggest deals to close during the first half — including Amazon’s $1 billion purchase of the former Lord & Taylor building and Munich RE’s $900 million buy of 330 Madison Avenue — went into contract before the pandemic hit.

That means the true impact of the Covid-induced economic shutdown on the sales market is likely even more severe than the numbers show.
“Since sales volume is light and since the vast majority of transactions covered in this report were put in contract pre-Covid-19, the length and depth of this downturn is unclear at this time,” the report read.

Before the virus hit, New York City’s investment sales market had already been experiencing several years of decline, after peaking in 2015. Changes to the state’s rent stabilization laws enacted in the middle of last year dealt the market another blow as activity in the multifamily market took a sharp decline.
 

David Goldsmith

All Powerful Moderator
Staff member
2 weeks ago this deal was $1.25 billion; now it's$860 million?
KKR teams up with Dalan on big Brooklyn multifamily buy
Contract price for 14-building portfolio is $860M

Private equity giant KKR is teaming up with Dalan Management to buy the big Bruman Realty multifamily portfolio in Brooklyn.
The alternative asset manager is providing the bulk of the equity for the deal, Bloomberg reported. The contract price is $860 million, according to the outlet.

The Real Deal first reported two weeks ago that Dalan was in contract to buy the 14-building portfolio from Joseph Brunner and Abe Mandel’s firm. But sources at the time said the price was significantly higher, around $1.25 billion.

Brunner and Mandel are among the biggest landlords in Brooklyn, while family-run Dalan owns about 1,500 apartments throughout the city.
The portfolio consists of buildings constructed in recent years under the city’s 421a tax abatement program. It spans 1.5 million square feet and includes roughly 1,275 residential rental units. The largest property in the portfolio is 260 Gold Street, a 286-unit rental tower in Downtown Brooklyn.

Sources familiar with the deal previously told TRD that Bruman put the portfolio on the market late last year. It’s one of the biggest multifamily trades in the borough to date.
 

David Goldsmith

All Powerful Moderator
Staff member
David Werner misses deposit deadline on $300M deal with All Year
Israeli bonds on Yoel Goldman’s firm tumble following second hiccup with sale

All Year Management’s months-long effort to sell a $300 million Brooklyn multifamily portfolio has hit another snag — and bondholders in Israel are spooked.
Yoel Goldman’s firm disclosed Sunday on the Tel Aviv Stock Exchange the buyer of the portfolio, had yet to pay the remainder of the deposit for both stages of the deal. That $6.5 million sum was due on Aug. 27.
The buyer — undisclosed in Tel Aviv Stock Exchange filings — is identified in property records as an affiliate of prolific but low-profile real estate investor David Werner. Emerald Equity’s Isaac Kassirer has also been involved in the negotiations, according to two sources. Werner and Kassirer could not immediately be reached for comment.

“The company is continuing to work with the buyer to advance the completion of the deal as soon as possible, including the assignment of debt on the sold properties,” All Year’s disclosure says. A representative for the company declined to comment to The Real Deal.

All Year’s bond prices responded negatively to the news, with the developer’s Series B bonds falling below 70 cents on the dollar, down 13 percent from a high of 79.5 cents on the dollar earlier in August.
All Year’s Series B bond price has tumbled in recent days (Source: TASE)

All Year’s Series B bond price has tumbled in recent days (Source: TASE)

Goldman’s firm first announced plans to sell the portfolio in March, shortly before the coronavirus pandemic hit New York City. By May, amid financing delays and other disagreements, the buyer called off the deal — but returned to the negotiating table soon after.

The parties put together a new deal in July, reducing the number of properties to 68 from 74, and dividing the transaction into two stages. While the first stage was originally set to close in late July, the deadline for payment of deposits was later pushed to Aug. 27, and the closing date for stage one to Sept. 2 — to allow for the “completion of legal conditions and the assignment of debt,” according to a disclosure.

It is unclear if All Year and Werner will be able close the deal as planned tomorrow, Sept. 2. A source close to the deal emphasized that the deal remains “alive.”
Soon after All Year disclosed its modification to the original portfolio deal, rating agency Midroog put the developer’s bonds on credit watch. The reasons for the credit watch included the delay of the portfolio sale, as well as delays in a previously announced $675 million refinancing of the Denizen Bushwick mixed-use development. Midroog has not yet made any changes to All Year’s bond ratings related to the latest update in the Brooklyn deal.
 

David Goldsmith

All Powerful Moderator
Staff member
Cindat looks to sell stake in Manhattan hotel portfolio at discount
Chinese private equity firm paid $571M for stake in 7 hotels in 2016

A Chinese private equity firm is looking to sell a stake in its large Manhattan hospitality portfolio at a discount, in one of the largest hotel offerings to hit the market since the start of the pandemic.
Cindat USA is looking to sell a preferred equity stake in a portfolio of seven select-service Manhattan hotels it bought in 2016 as part of a joint-venture with Hersha Hospitality Trust. The company, which is backed by China’s Cinda Asset Management and Taikang Life Insurance, is eyeing pricing that would value that 1,087-room portfolio in the low-$400 million range, according to the brokers handling the listing.

That’s a significant discount to the $571 million the partners paid for the portfolio four years ago, reflecting the dramatic shift the market’s taken during that time.

“Now is a time to invest in New York at a historically attractive long-term basis,” said JLL’s Kevin Davis, who is leading the team marketing the portfolio. “We are in the market with a number of transactions in New York City right now and are seeing tremendous interest from both domestic and foreign investors.”

It’s been a tough market for investment sales, and particularly tough for hotels.
Just six hotel deals closed in the first half of the year, according to a recent report from the Real Estate Board of New York. That was down 70 percent from the same time last year, with pricing falling 37 percent.
That was a slower pace of sales than the investment market overall, which saw transaction volume fall 32 percent.
The pandemic brought the city’s tourism industry to a near halt earlier this year, but in recent weeks hotel occupancy rates have climbed back up — though they remain far below where they were at a year ago. Even before the pandemic, though, hotel values had been hurt by an influx of new supply and increasing costs, particularly for properties represented by the city’s hotel union.

Cindat and Hersha’s portfolio is non-union. And the partners own the properties outright without ground leases — traits that Davis said should help drum up demand from potential investors.
Cindat bought a 70 percent stake in the portfolio in 2016 from Hersha, which retained its 30 percent. The company is looking to sell a piece of its stake and will stay in the deal. The properties are the Holiday Inn Express, Candlewood Suites and Hampton Inn in Times Square; a pair of Hampton Inn hotels in Chelsea and Herald Square; a Holiday Inn on Wall Street and a Holiday Inn Express on Water Street.
Cindat’s parent company, Cinda, has partnered with Aby Rosen’s RFR Realty, along with Hines and China Vanke, on a condo project at 100 East 53rd Street.
 

Noah Rosenblatt

Talking Manhattan on UrbanDigs.com
Staff member
hmm so thats like 25%? Man, this city is on sale right now. What do you make of recent CDC guidelines regarding evictions until end of year?
 

David Goldsmith

All Powerful Moderator
Staff member
Kicking the can down the road: what happens then? And I think in the end could make the problem worse if people feel they can spend what money they have on other things since they can't be evicted anyway.

But as I've said before when Cuomo first announced the NY moratorium, I half suspect there is a manufacturing of a crisis so that legislators can get to "we have no choice but to....." and either cancel rent, provide vouchers, or some other actual solution because we already have borderline insurrection and if 10 million people are going to get thrown out of their homes I can only imagine what types of violence could result.
 
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