CPN - March 2009 - (Page 6) BUZZWORTHY NEWS TREND High Profile NYC Deals, Developments Unravel The size and diverdelayed its acquisition sity of the New York of the development City commercial proprights to the 26-acre erty market all but complex. Noting the assure that the current ailing economy and a economic turmoil will tight financing market, not bring the market to Related reached an a complete standstill, a agreement with the very real possibility for state of New York’s many other cities. But Metropolitan TransNew York has by no portation Authority, the means escaped the site’s owner, to delay malaise. In fact, several by one year the Jan. 31, of the city’s highest2009, deadline for closprofile projects and ing the deal. deals have run aground And just days after lately, and that could that announcement, be a harbinger of Boston Properties Inc. even more problems also cited the roiled Boston Properties Inc. to come. market when suspendhas suspended construcIn early February, ing construction on its tion on its $980 million the $1 billion Hudson office tower at 250 W. $980 million office Yards redevelopment 55th St. after losing a project at 250 W. 55th on Manhattan’s Far prospective major tenant. St. after a major tenant, West Side, one of the reportedly law firm city’s largest and most visible proj- Proskauer Rose L.L.P backed out of ., ects, hit a snag when Related Cos. a tentative deal to lease almost half of the 1 million-square-foot property. Major investment deals have also fallen through, most notably the prospective sale of Brooklyn’s massive Starrett City multi-family complex.The owners, Starrett City Associates, took it off the market in midFebruary when bids came in $500 million lower than the $1.2 billion price that the firm expected when it put the complex on the block back in 2006. But despite those faltering deals, high-profile transactions have not disappeared altogether. Brooklyn’s $4 billion Atlantic Yards development just received a key $162 million in loan refinancing.And auction house Sotheby’s shelled out $370 million to buy its Manhattan headquarters back from an affiliate of RFR Holding Corp., which acquired the property from Sotheby’s six years ago. —Reach news writer & economic editor Adam Perrotta at adam.perrotta@nielsen.com. might lead to a surge in longterm interest rates. This is the best-case scenario. The global downward spiral could also continue and the economy could stagnate in a prolonged Japanese-style recession. It is true that the near-term outlook for the housing and mortgage markets is extremely weak. The delinquency and foreclosure rates for subprime, option adjustable-rate and alt-A mortgages continue to accelerate. Even jumbo mortgages are showing a surge in problem loans. The problem in 2007 and the first half of 2008 owed to the poorly structured mortgages made to risky borrowers. Now the problem is that massive job losses are further eroding households’ ability to make their mortgage payments. As the housing bubble continues to unwind in 2009, expect another 6.9 percent drop in prices, bringing the cumulative decline to more than 24 percent. And single-family Continued on page 26 ® Deal Trends Despite a grim economy and internal financial challenges, ProLogis remains active in international leasing. Reynosa, Mexico—In early February, the firm leased 178,000 square feet of recently developed industrial space: 94,500 square feet in ProLogis Park Pharr Bridge’s Building 11 and 83,400 square feet in El Puente Industrial Center’s Building 3. Dusseldorf, Germany—In January, the company leased 430,566 square feet in the recently completed ProLogis Park Hunxe to Logistics Group International GmbH. Bratislava, Slovakia—ProLogis signed Tesco International Clothing Brand to more than 140,000 square feet at ProLogis Park Galanta-Gan in the same month. United Kingdom—Also in January, the landlord leased 188,000 square feet to Samson Holding Ltd. in Peterborough’s ProLogis Kingston Park and more than 116,000 square feet to Culina Logistics Ltd. in ProLogis Cabot Park, near Bristol. —Reach staff writer Elena Gontar at elena.gontar@nielsen.com. ON THE RADAR ECONOMIST’S VIEW Positive Signs The American economy has been in a recession since December 2007, and it deepened dramatically in the fourth quarter of 2008. During the past five months, the United States has lost almost 2 million jobs—nearly 600,000 in January alone—creating an economic downward spiral. Deteriorating job and financial market conditions have hit consumer confidence especially hard. At the consumer, corporate and real estate levels, the credit crunch continues to be severe. However, some signs indicate that the substantial injection of money by the Federal Reserve Board and the Treasury are having some impact. The sharp decline in the spread between LIBOR and the federal funds rate, as well as the issuance of a large volume of corporate bonds, for instance, indicate a possible thawing in credit markets. 6 Further good news stems from the fact that policy responses to the deep recession will be in place by spring. Congress has authorized the $350 billion second phase of the TARP plan, and use of this capital to By Kenneth Rosen buy problem assets and to mitigate the foreclosure crisis is expected to be announced in the next several weeks. Congress has also passed the massive $800 billion fiscal stimulus plan. Many countries are instituting similar packages. This attempt to reinflate the world economy with easy money and massive fiscal stimulus has a good chance of being successful. If so, stock, bond and real estate markets will respond, and we would also expect Treasury rates to rise, as the flight to safety should reverse and inflationary expectations Lenders Eye Green Projects Some lenders are turning to sustainable projects as safe havens for their capital. Washington state-based ShoreBank Pacific has established a new loan program that targets ecofriendly development. Projects funded under the program must either meet the bank’s sustainability standards or obtain LEED, Energy Star or the Northwest region’s Earth Advantage certification. Other financiers jumping on the green bandwagon include Houston-based GreenBank and San Francisco’s New Resource Bank. An Austin-based consortium of bankers and environmental experts plans to establish One Earth Bank this spring. And should more traditional property sectors continue to falter, the number of firms considering projects that embrace long-term sustainability, both environmentally and financially, is only expected to grow. —Adam Perrotta Visit www.cpnoline.com for more news and trends. COMMERCIAL PROPERTY NEWS • March 2009 • www.cpnonline.com http://www.cpnoline.com http://www.cpnonline.com
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.