4 q13 ngkf_capital_markets_report

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4 q13 ngkf_capital_markets_report

  1. 1. 4Q13 CAPITAL MARKETS REPORT FOR THE INTELLIGENT INVESTOR
  2. 2. Capital Markets Report Table of Contents 3 Market Summary 4 5 6 7 8 9 10 11 12 Economic Indicators 13 14 15 16 17 18 19 Overview Cap Rates by Property Type: Manhattan Significant Recently Completed Office Sales Significant Pending Office Sales Venture Capital Funding: United States Metro Areas Venture Capital Funding: San Fran-New York Transactions: New York Yesterday and Tomorrow: 2013 vs. 2014 Lending vs. Equity Corporate Production Unemployment Rates: International Unemployment Rates: Domestic Payroll Employment Office-Using Employment 27 Capital Markets Intelligence 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 CMBS Issuance Capital Distribution Buyer Distribution Sales Volume: Major Metropolitan Cities Sales Volume: Manhattan Half Billion Dollar Transactions Historical Top-Tier Transactions: Price Historical Top-Tier Transactions: Price / SF Recession Flippers Office Building Sales (P/PSF): United States Historical Office Building Sales (P/PSF): Manhattan Office Building Sales (Cap Rates): United States Historical Office Building Sales (Cap Rates): Manhattan Development Site Volume: Manhattan Development Site Pricing: Manhattan Residential Cap Rates: Manhattan Residential Condominium Pricing: Manhattan Luxury Condominium Pricing: Manhattan Leasing Analysis 20 21 22 23 24 25 26 Availability & Rent: Manhattan Availability & Rent: MT / MTS / DT Historical Asking Rents Top-Tier Taking Rents Rental Rates: Net Effective vs. Base Taking Rental Rates: Net Effective Commercial Development Pipeline 4Q13 CAPITAL MARKETS REPORT 2
  3. 3. 4Q13 MARKET SUMMARY
  4. 4. 4Q13 Market Summary Overview Domestic and international capital has generally flocked to primary markets, gateway cities and supply constrained environments. However, demand from investors has saturated the prime markets and smart money is now looking at the ICE markets (intellectual capital and energy) in the search for higher yields  While absorption totals have been healthy, the momentum in investment sales has outpaced rent growth  Interest rates remain low yet somewhat volatile, but are expected to rise within the next couple of years and put pressure on highly leveraged investors who are financed with floating rate debt  With limited quality product on the market, land and lot sales have spiked as developers are competing to build new properties in supply constrained markets such as New York, San Francisco, Boston, Washington, D.C. and Seattle  While San Francisco and New York remain national technology hubs, several large office transactions (Twitter, Facebook, IBM Watson, Google and Spotify expansions) were completed that solidified Midtown South as the center of New York’s technology universe  The New York investment sales market has matched pre-recession levels in four property types: residential, office, retail and development sites 4Q13 CAPITAL MARKETS REPORT 4
  5. 5. 4Q13 Capital Markets Intelligence Cap Rates by Property Type Manhattan  Despite declining yields, 8.0% substantial worldwide demand for prime Manhattan 6.0% 6.0% opportunities remains  At 4.2%, average cap rates for 5.0% residential and office property 4.2% 4.2% are among the lowest in the country along with Downtown 4.0% San Francisco  Strength continues to exist in all property types with hotel 2.0% cap rates lagging slightly due to increased supply 0.0% Residential Source: Newmark Grubb Knight Frank; Real Capital Analytics Office Retail Hotel 4Q13 CAPITAL MARKETS REPORT 5
  6. 6. 4Q13 Market Summary Significant Investment Sales Transactions Recently Completed N/A $330 P/PSF $364 P/PSF $475 P/PSF $513 P/PSF $712 P/PSF $750 P/PSF $1,166 P/PSF $1,181 P/PSF 1345 Sixth / 605 Third One Chase Manhattan Plaza One North End Avenue 195 Broadway 440 Ninth Avenue 1440 Broadway 122-130 East 23rd Street 200 Lafayette Street 60 Columbus Circle  Built in 1969 (1345  Built in 1963 Sixth; 1963 (605 Third)  1345 renovated in 1988  1,900,000 SF (1345); 1,100,000 SF (605)  50 floors (1345); 43 floors (605)  Rockpoint Group jv Fisher Brothers purchased  National Bulk Carriers sold  Fisher Brothers  Built in 1997  2,200,000 SF  550,000 SF  60 floors  16 floors  Fosun Group  Brookfield Office purchased  JPMorgan Chase sold Properties purchased  CME Group sold  $725,000,000  $200,000,000  Marketed as  NYMEX will lease potential residential conversion, will likely remain an office building 449,000 SF for 24 months before they consolidate into 222,000 SF, 2nd - 8th floors  Built in 1913 (renovated in 1986)  Built in 1927 (renovated in 1999)  1,100,000 SF  412,000 SF  29 floors  18 floors  J.P. Morgan Asset  Jowa Holdings Management purchased  Beacon Capital & L&L Holding sold purchased jv Paramount Group sold  $211,500,000  Recapitalization  B&H occupies retained minority interest (5%)  Built in 1952  740,000 SF  75,000 SF  25 floors  4 floors  American Realty  Toll Brothers Capital NY Recovery Reit purchased purchased  Sherwood Equities  Rockpoint Group &  $498,450,000  L&L Holding  Built in 1925 150,000 SF on long-term lease  United Cerebral Palsy of New York sold  Built in 1914 (renovated in 2012)  130,000 SF  7 floors  General Growth purchased  Kushner Monday Properties  $150,000,000 Companies sold sold  $274,000,000  Can develop  $528,000,000 200,000 SF  JCPenny signed a  95% leased at residential building NNN lease with time of sale on existing site options through 2029  200,000 SF leased  Built in 2003  1,100,000 SF  80 floors  Related Companies with GIC and Abu Dhabi purchased  Time Warner sold  $1,300,000,000 (approximate)  Time Warner will relocate its headquarters to Hudson Yards to Macy’s retains majority interest 4Q13 CAPITAL MARKETS REPORT 6
  7. 7. 4Q13 Market Summary Significant Investment Sales Transactions Pending & Available $321 P/PSF $850 P/PSF $1,200 P/PSF TBD TBD TBD TBD TBD TBD 90 Broad Street 1350 Avenue of the Americas 1334 York Avenue 560 Seventh Avenue 347 Madison Avenue One Park Avenue 65 East 55th Street 717 Fifth Avenue 450 Park Avenue  Built in 1930 (renovated in 2000)  393,000 SF  25 floors  On the market for sale from Swig Equities  Princeton  Built in 1966  600,000 SF  35 floors  On the market for  Built in 1921 (renovated in 1999)  500,000 SF  10 floors sale from SL Green Realty Corp.  On the market for sale from  Looking for an Sotheby’s equity partner, not an outright sale of  Looking for International the building approximately Properties Corp. to  Major tenant, $600,000,000 purchase Amazon (100,000  100% owned and  Looking for sf), is currently in occupied by approximately the market for Sotheby’s $125,000,000 possible relocation, but may renew and  Lower level expand renovations planned for Superstorm Sandy damage  Built in 1963  Built in 1917  50,000 SF  200,000 SF  6 floors  20 floors  On the market for  On the market for sale from Parson New School for Design  Soho Properties & Murray Hill Properties to purchase  Looking for approximately $60,000,000  Plans to demolish and build a hotel sale from Metropolitan Transit Authority  Close proximity to Grand Central Terminal  Likely teardown  Built in 1926 (renovated in 2000)  1,000,000 SF  20 floors  On the market for sale from Vornado Realty Trust  Purchased 3 years ago to avoid default and redevelopment  Murray Hill Properties owns 5% minority interest  Built in 1986  Built in 1958  615,000 SF  475,000 SF  36 floors  26 floors  On the market for  On the market for sale from Shorenstein Properties  Looking for approximately $775,000,000  Known as Park Avenue Tower  255,000 SF lease sale from Blackstone  Looking for approximately $375,000,000  Wharton Property Advisors owns the 80,000 sf retail condo in the base  Built in 1972 (renovated in 2003)  320,000 SF  33 floors  Somerset Partners & Michael Tabor selling  Looking for approximately $600,000,000  Previously sold in 2007 for $1,585/psf with Paul Hastings  Merrill Lynch is expires in 2016 major tenant with over 100,000 SF  George Klein owns 5% minority interest 4Q13 CAPITAL MARKETS REPORT 7
  8. 8. 4Q13 Leasing Analysis 2013 Venture Capital Funding United States Metro Areas 2013 Top Technology Transactions – San Francisco / Silicon Valley Tenant Google 100-222 Mayfield Avenue 527,679 Microsoft 1065 La Avenida Street 515,700 Intuit/Demand Force 22 4th Street 202,355 Nvidia 2880 Scott Boulevard 200,000 eBay 2515-2535 N1st Street 187,282 Samsung 601 McCarthy Boulevard 187,134 Western Digital 1710 Automation Parkway 183,303 Washington, D.C. Twitter 1355 Market Street 155,180 $1.5 B StubHub 199 Fremont Street 140,378 171 deals Neustar 505 Howard Street 138,574 Illumina, Inc. San Francisco/Silicon Valley Address 499 Illinois Street 97,700 Eventbrite 155 5th Street 97,624 Uber Technologies 1455 Market Street 88,000 Square, Inc. 1455 Market Street 85,111 Zendesk 1019 Market Street 72,933 $12.1 Billion Boston (New England) 1,247 deals $3.3 Billion Square Feet 412 deals Los Angeles $1.7 B New York 248 deals $3.2 Billion 441 deals Chicago Philadelphia $1.0 B 165 deals $1.0 B 80 deals San Diego $757 M 97 deals DallasFt. Worth $693 M 40 deals Austin $406 M 79 deals Source: Newmark Grubb Knight Frank, PricewaterhouseCoopers /National Venture Capital Association MoneyTree Report 4Q13 CAPITAL MARKETS REPORT 8
  9. 9. 4Q13 Leasing Analysis 2013 Venture Capital Funding San Francisco and New York – National Technology Anchors $12.5 $11.8 $11.4 $11.2 $12.1 $3.8 $9.3 $10.0 $3.2 $2.9 $3.0 $8.2 $7.5 $2.3 $5.0 $1.5 $2.5 $0.8 $0.0 2008 2009 2010 2011 2012 $0.0 2013 Venture capital funding in San Francisco topped $12 billion in 2013 with 58% 2008 Strong demand for highly-skilled labor in technology is drawing workers to the city, driving new housing development and investment in key San Francisco 2009 2010 2011 2012 2013 New York Venture Capital Funding  dedicated to software, 8% to media/entertainment and 6% to IT services.  $1.9 $1.7 San Francisco Venture Capital Funding  $2.3 $2.1 Venture capital funding in the New York area has risen 88% since the down year of 2009, compared with a 48% gain for Silicon Valley.  In 2013, there were 441 VC deals for New York while New England had 412; Silicon Valley led the nation with 1,247. neighborhoods such as Hayes Valley, Mission Bay, and Dogpatch. Source: Newmark Grubb Knight Frank, PricewaterhouseCoopers /National Venture Capital Association MoneyTree Report 4Q13 CAPITAL MARKETS REPORT 9
  10. 10. 4Q13 Leasing Analysis San Francisco and New York – National Technology Anchors What began on the West Coast has ventured to Manhattan 2013 Top Technology Transactions - New York Tenant AppNexus 28-40 West 23rd Street 219,105 Twitter 245-249 West 17th Street 140,000 WeWork 222 Broadway 120,537 SAP Hudson Yards - South Tower 115,000 Facebook 770 Broadway 98,570 Mediaocean 620 Avenue of the Americas 88,387 Shutterstock 350 Fifth Avenue 80,062 Droga5 120 Wall Street 75,144 BuzzFeed 200 Fifth Avenue 68,791 High 5 Games 770 Broadway 58,378 eMarketer 11 Times Square 53,573 Indeed.com 125 West 55th Street 49,536 Infor 641 Avenue of the Americas 49,246 LinkedIn Corporation 350 Fifth Avenue 40,781 Rocket Fuel Source: Newmark Grubb Knight Frank Address Square Feet 100 West 33rd Street 40,503 4Q13 CAPITAL MARKETS REPORT 10
  11. 11. 4Q13 Market Summary Yesterday and Tomorrow 2013 2014 BUILDING CONVERSIONS/RENOVATIONS 550 Madison Avenue 10 East 53rd Street 140 West Street 101 Murray Street Brookfield Place 280 Park Avenue St. John’s Center 180 Maiden Lane One Soho Square CONSTRUCTION DELIVERIES 4 WTC 250 West 55th Street 51 Astor Place 1 WTC 837 Washington Street 432 Park Avenue (formally The Drake Hotel) Recession Flippers Foreign Investments American Realty Capital Properties Thor Equities J.P. Morgan RXR Realty Blackstone Equity Residential International investors: China Canada Australia Middle East Core Funds Coach L’Oreal Time Warner GroupM Jones Day AppNexus Sony Amazon.com Sotheby’s Reed Smith Al Jazeera Media/Technology Media/Technology Plaza District World Trade Center Brookfield Place Facebook to 770 Broadway IBM Watson to 51 Astor WeWork Soho Cornell Tech (Roosevelt Island groundbreaking ) Twitter to West 17th Street WeWork Wall Street Williamsburg, Downtown Brooklyn Bushwick, Long Island City INVESTMENT SALES ACTIVE INVESTORS LEASING DOMINANT LEASING INDUSTRY SECTOR RETAIL TECHNOLOGY HOT BOROUGH MARKET 4Q13 CAPITAL MARKETS REPORT 11
  12. 12. 4Q13 ECONOMIC INDICATORS
  13. 13. 4Q13 Economic Indicators Lending vs. Equity Dow Jones Industrial Average vs. 30-Year Fixed Mortgage Rate 8.0% 18,000  Following a mid-year run on 30- year fixed mortgages, rates pulled back at the beginning of the fourth 7.0% quarter before increasing in 15,000 December to match late-summer 6.0% averages.  5.0% 12,000 The 30-year rate is more than a full percentage point higher since hitting a low of 3.4% at the end of 2012, when rates were at the 4.0% lowest point on record dating back 9,000 to the 1970’s. 3.0%  The Dow Jones Industrial Average has historically been a leading 2.0% 6,000 2005 2006 2007 2008 Dow Jones Industrial Average Source: Newmark Grubb Knight Frank 2009 2010 2011 2012 2013 indicator and jumped 24% in 2013. 30-Year Fixed Mortgage Rate 4Q13 CAPITAL MARKETS REPORT 13
  14. 14. 4Q13 Economic Indicators Corporate Profits United States $2,250.0  Corporate profits are at an all-time high with over $2 billion registered in each of the last five quarters. $2,000.0  Profits have risen over 100% since hitting a bottom in 2008 and are up $1,750.0 Billions 25% over the previous peak established in late 2006. $1,500.0  Despite tax increases and government spending cuts that $1,250.0 have affected the economy, continued improvement in 2014 is $1,000.0 forecasted. $750.0 $500.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Corporate Profits Source: U.S. Department of Commerce: Bureau of Economic Analysis 4Q13 CAPITAL MARKETS REPORT 14
  15. 15. 4Q13 Economic Indicators Unemployment Rate International 30.0% At 6.7%, the United States unemployment rate is significantly lower than in early 2013, down 25.9% 27.8% 25.0%  from 7.8% one year ago.  20.0% Uneven job recovery in the U.S. continued in December with only 74,000 new jobs, despite averaging 15.6% 15.0%  10.9% Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics Switzerland Japan Germany Australia United States United Kingdom Canada Sweden France Ireland Italy Portugal Spain Greece 0.0% Hong Kong 3.2% continue is not prevalent. Gains in 3.5% 4.0% 5.2% anticipation for this trend to 5.8% 6.7% 7.1% 7.2% 5.0% While Japan kept unemployment rates low during the recovery, 7.5% 10.0% 12.4% 12.7% 182,000 new jobs a month in 2013. gross domestic product during 2014 will be hard pressed as new tax laws beginning in April may have an adverse effect on the short-term growth of the economy. 4Q13 CAPITAL MARKETS REPORT 15
  16. 16. 4Q13 Economic Indicators Unemployment Rate Domestic 9.0%  Manhattan’s unemployment rate, 6.3% 6.3% 6.3% 6.0% 5.6% Baltimore Miami Boston San Francisco Dallas 6.6% 6.7% 7.0% 7.0% just below the national average, 7.3% 6.0% 8.1% 8.5% Primary Markets remains high as the financial service sector has not begun to Manhattan United States Philadelphia Atlanta Washington D.C. Chicago Los Angeles 3.0% hire at a pre-recession pace. Despite solid job growth, the city is looking to supplement strong gains in professional services, healthcare and hospitality. 9.0%  Oklahoma City 4.7% Houston Seattle Denver Raleigh/Durham Pittsburgh Austin 4.7% 5.6% 5.7% 5.8% 6.1% 6.2% 6.2% Portland San Jose United States San Diego 3.0% Primary Markets Many of the cities near or below the national average unemployment 6.3% 6.7% 6.8% 6.0% ICE Markets (Intellectual Capital & Energy) rate have economies that produce significant revenue from intellectual capital (technology) and energy industries. ICE Markets Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics 4Q13 CAPITAL MARKETS REPORT 16
  17. 17. 4Q13 Economic Indicators Payroll Employment United States vs. New York City 4.0  140 Despite employment growth in several key sectors such as 135 professional/business services, leisure/hospitality and education/ 3.8 130 health services, New York City 125 3.6 120 3.4 115 just 3.4% in 2013 as employment in Thousands Thousands remains below expectations adding financial services continues to lag.  The pace of New York’s employment growth will be 110 somewhat restricted until financial service jobs are added to 3.2 105 supplement the growing number of technology positions in the 3.0 1989 100 1991 1993 1995 1997 1999 United States Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics 2001 2003 2005 2007 2009 2011 workforce. 2013 New York 4Q13 CAPITAL MARKETS REPORT 17
  18. 18. 4Q13 Economic Indicators Office-Using Employment New York City  1,350 Office employment (professional and business services, financial 1298.4 1,300 services, real estate and Thousands 1,250 information) is up 9,100 jobs over 1251.7 1244.4 the past year.  1,200 Since the recession officially ended four years ago (June 2009), office jobs have increased by 89,800 1,150 positions, or 7.7%. 1,100 1,050 1,000 950 900 1991 1993 1995 1997 1999 2001 2003 2005 Source: NYC Office of Management and Budget/NYC Office of the Comptroller; Seasonally Adjusted 2007 2009 2011 2013 4Q13 CAPITAL MARKETS REPORT 18
  19. 19. 4Q13 LEASING ANALYSIS
  20. 20. 4Q13 Leasing Analysis Overall Asking Rent and Availability Rate Manhattan $65.00 15.0%  Positive absorption via strong leasing in technology, on the west $60.00 side of Lower Manhattan and along the Sixth Avenue corridor over the $55.00 13.0% final two quarters of 2013 pushed the overall availability rate to its $50.00 lowest point in five years. $45.00 11.0%  At $55.47/PSF, average asking rents have risen 4.8% since the $40.00 first quarter and closed at the $35.00 9.0% highest quarterly figure since third quarter 2008. $30.00 Rent (Price/SF) Source: Newmark Grubb Knight Frank 4Q13 3Q13 2Q13 1Q13 4Q12 3Q12 2Q12 1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09 4Q08 3Q08 2Q08 7.0% 1Q08 $25.00 Availability (%) 4Q13 CAPITAL MARKETS REPORT 20
  21. 21. 4Q13 Leasing Analysis Availability Rate and Average Asking Rent MIDTOWN 12.2% $63.61 9.0% $60.38 Grand Central 14.5% $58.12 Park Avenue 11.6% $69.91 Sixth Avenue / Rock Center 12.6% $81.77 Upper Fifth / Plaza 16.2% $63.63 8.1% $64.74 MIDTOWN SOUTH 10.3% $50.28 Times Square South 8.6% $43.05 Penn Station 12.5% $47.14 Park Avenue South 10.5% $49.08 Chelsea 6.5% $48.00 Lower Sixth Avenue 4.5% $55.72 Flatiron / Union Square 13.6% $61.85 Hudson Square 10.0% $56.09 6.9% $54.00 Village 14.0% $85.87 DOWNTOWN 14.7% $45.80 8.0% $37.23 WTC 25.9% $64.62 Financial 14.6% $39.63 Eastside Westside SoHo / NoHo City Hall / Insurance 4Q13 CAPITAL MARKETS REPORT 21
  22. 22. 4Q13 Leasing Analysis Overall Asking Rents by Market Manhattan  $85.00 While average rental rates in $80.45 Manhattan are considerably higher than the trough in 2010, Midtown $75.00 rents have been relatively flat for the past eighteen months. $65.00  $63.61 Midtown South asking rents have increased at a faster pace than Midtown and Downtown, up 48% $55.00 $50.28 $46.44 $45.00 since the 2010 bottom and up 12% $45.80 $49.66 in the past year. $35.00 $25.00 1998 1999 2000 2001 2002 Midtown Source: Newmark Grubb Knight Frank 2003 2004 2005 2006 2007 Midtown South 2008 2009 2010 2011 2012 2013 Downtown 4Q13 CAPITAL MARKETS REPORT 22
  23. 23. 4Q13 Leasing Analysis Top-Tier Transactions – Taking Rents Manhattan 200  There were nearly twice as many deals completed with $100/PSF 175 base taking rents in 2013 42 47 than 2012. 21 150  125 100 16 The average base taking rent for deals at or above $100/PSF in 51 12 42 48 2013 is $123.39/PSF compared 17 24 26 with $118.86/PSF in 2012. 30  75 25 buildings have completed deals with base taking rents at or above 2 18 50 99 1 16 $100/PSF. 97 92 86 98 76 25 47 49 2009 2010 0 2006 2007 2008 $75.00 - $99.99 Source: Newmark Grubb Knight Frank $100.00 - $124.99 2011 2012 2013 + $125 4Q13 CAPITAL MARKETS REPORT 23
  24. 24. 4Q13 Leasing Analysis Rental Rates: Net Effective vs. Base Taking Direct Deals, 5 Years (+)  28% higher than Midtown South and $67.03 Plaza District Class A nearly 60% more than Downtown. $79.66  $59.64 Midtown Average Midtown taking rents are The Plaza District has the highest concentration of trophy assets and $71.13 command the highest taking and net effective rents in Manhattan. $47.19 Midtown South  $56.06 Downtown has the largest net effective to base taking rent spread of the three major markets as Lower $34.27 Downtown Manhattan landlords have been $45.10 giving significant concession packages on new lease transactions. $50.39 Manhattan $61.25 $0.00 $10.00 $20.00 $30.00 2013 Net Effective Rent Source: Newmark Grubb Knight Frank $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 2013 Base Taking Rent 4Q13 CAPITAL MARKETS REPORT 24
  25. 25. 4Q13 Leasing Analysis Rental Rates: Net Effective Direct Deals, 5 Years (+)  $68.40 Plaza District Class A At $59.64/PSF, Midtown net effective rents rose 4.6% in the $67.03 past 12 months as Sixth Avenue closed the year strongly, $57.00 Midtown absorbing a good amount of the $59.64 existing vacancy.  Average Midtown South net $45.99 Midtown South effective rents have increased $47.19 three consecutive years and are now 30% higher than $33.99 Downtown Downtown rents. $34.27  Lower Manhattan, the value play, $50.05 $0.00 $10.00 $20.00 $30.00 2012 Net Effective Rent Source: Newmark Grubb Knight Frank $40.00 remains the least expensive of the $50.39 Manhattan three major New York markets. $50.00 $60.00 $70.00 $80.00 2013 Net Effective Rent 4Q13 CAPITAL MARKETS REPORT 25
  26. 26. 4Q13 Leasing Analysis Commercial Development Pipeline Manhattan 18  New Construction (1980-2013): 81.3 MSF  Expected Delivery (2014-2017): 9.9 MSF 14  2014: 1 WTC  Potential (2018-2023): 16.3 MSF 16  2013: 4 WTC, 250 W. 55th Street, 51 Astor Place  2015: Hudson Yards South, Seven Bryant Park  2016+: 3 WTC, Hudson Yards North, 425 Park Avenue, 380 12 MSF Madison Avenue, One Vanderbilt Avenue, Manhattan West 10 8 6 4 2 Source: Newmark Grubb Knight Frank 4Q13 CAPITAL MARKETS REPORT 2018+ 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 0 26
  27. 27. 4Q13 CAPITAL MARKETS INTELLIGENCE
  28. 28. 4Q13 Capital Markets Intelligence CMBS Issuance United States  $250 $228.6 While the volume of CMBS issuances in 2013 eclipsed the total of the two previous years $198.4 $200 combined, 2014 is expected to be equally as active. $166.5  $150 The dramatic rise in issuances during 2013 coincided with low interest rate levels as well as more liquidity and availability of capital in $92.6 $100 $86.1 the market. $77.8 $48.4 $50 $32.7 $12.1 $11.6 $2.7 $0 2003 2004 2005 2006 Source: Newmark Grubb Knight Frank, Commercial Mortgage Alert 2007 2008 2009 2010 2011 2012 2013 4Q13 CAPITAL MARKETS REPORT 28
  29. 29. 4Q13 Capital Markets Intelligence Capital Distribution – All Property Types Origin of Capital Total Properties Total Volume Canada Germany 796 $20,428.0 97 $4,966.7 Singapore 19 $4,466.6 Australia 41 $3,717.5 Israel 91 $3,540.4 Norway 75 $3,464.4 China 48 $3,444.3 Switzerland UK 48 $3,379.6 75 $2,614.0 Other 586 $17,583.7 Total United States 1,876 $67,605.3 Country Top Markets For Investment Total Properties Total Volume 107 $17,256.2 Los Angeles 81 $6,677.3 San Francisco 47 $3,390.6 Chicago 72 $3,295.8 Houston 93 $3,139.5 Washington, D.C. 24 $2,344.8 Seattle 58 $2,006.1 Dallas 97 $2,049.6 Market Manhattan Boston $1,643.6 1,266 $25,747.0 Total Source: Newmark Grubb Knight Frank; Real Capital Analytics 31 Other 1,876 $67,605.3 4Q13 CAPITAL MARKETS REPORT 29
  30. 30. 4Q13 Capital Markets Intelligence Buyer Distribution – All Property Types United States  100.0% 6.5% 9.3% 10.1% Private buyers have been the most 5.3% 8.6% 6.0% active type of purchasers in 9.9% 8.2% Manhattan for the past several years and account for more than 80.0% 26.9% 28.5% 31.8% 40% of the market. 24.2%  60.0% Publically listed REIT’s continue to be heavily invested in the United States and have purchased at a fairly consistent yearly rate. 40.0% 41.5% 37.8% 41.4% 34.1%  While cross-border transactions in the United States account for 10% of all activity, foreign investments in 20.0% Manhattan represent 24% of year- 18.2% 17.9% 15.0% 18.9% to-date deals, led by China, Canada, Israel and Australia. 0.0% 2010 Public 2011 Private Source: Newmark Grubb Knight Frank; Real Capital Analytics 2012 Institutional Cross-Border 2013 User/Other 4Q13 CAPITAL MARKETS REPORT 30
  31. 31. 4Q13 Capital Markets Intelligence 2013 Total Sales Volume – All Property Types Major Metropolitan Cities  $40.0 19 cities in the United States totaled more than $5 billion in sales during $35.0 2013 with volume jumping nearly 40% in Dallas, Houston, Atlanta and $30.0 Inland Empire. $25.0 Billions  $20.0 Activity in only 4 of the 19 cities represented a decline from 2012 to 2013: San Francisco (-19%), $15.0 Seattle (-15%), San Jose (-6%), and Phoenix (-1%). $10.0  $5.0 The majority of sales in Manhattan (77%) are derived from office and Austin Inland Empire San Diego Northern NJ Washington, D.C. Phoenix Denver * NYC Boroughs San Jose San Francisco D.C.-VA burbs Seattle Boston Atlanta Houston Dallas Chicago Los Angeles Manhattan $0.0 residential building transactions. * Includes Brooklyn, Queens, Bronx, Staten Island and Long Island Primary Markets ICE Markets Source: Newmark Grubb Knight Frank; Real Capital Analytics 4Q13 CAPITAL MARKETS REPORT 31
  32. 32. 4Q13 Capital Markets Intelligence 2013 Sales Volume by Property Type Manhattan Hotel, 5.7% Property Type Volum e ($ m illion) # of Properties Office $20,941 $9,411 459 Retail $3,452 229 Development Sites $2,669 60 Hotel $2,235 17 Industrial $346 21 Totals $39,056 Development Sites, 6.8% 171 Apartment Industrial, 1.0% 957 Retail, 8.8% Apartment, 24.1% Source: Newmark Grubb Knight Frank; Real Capital Analytics Office, 53.6% 4Q13 CAPITAL MARKETS REPORT 32
  33. 33. 4Q13 Capital Markets Intelligence Office Building Sales Manhattan Half Billion Dollar Transactions  20 Class A, trophy office building sales 20 have returned to the New York market in large quantity with 14 16 completed transactions in excess of $500 million during 2013 as well 14 as five more pending deals that are 12 expected to close in 2014. 11 11 8 7 5 4 3 3 2 2 1 0 2003 2004 1 2005 2006 2007 Completed Source: Newmark Grubb Knight Frank 2008 2009 2010 2011 2012 2013 2014 Pending 4Q13 CAPITAL MARKETS REPORT 33
  34. 34. 4Q13 Capital Markets Intelligence Office Building Sales – Price Select Top-Tier Historical Manhattan Transactions $3.0 $2.8 $2.5 $2.0 Billions $1.8 $1.7 $1.8 $1.7 $1.5 $1.5 $1.5 $1.3 $1.3 $1.3 $1.2 $1.1 $1.0 $1.0 $1.0 $1.0 $0.8 $0.8 $0.7 $0.5 $0.0 399 Park (3Q02) 111 Eighth (1Q04) 200 Park (2Q05) Source: Newmark Grubb Knight Frank 1290 AoA (2Q06) 1211 AoA 5 Times Sq. 666 Fifth (3Q06) (4Q06) (1Q07) 825 Eighth (1Q07) 767 Fifth (2Q08) 1301 AoA 111 Eighth 1633 (3Q08) (4Q10) Broadway (2Q11) 601 West 26th (3Q11) 550 Madison (1Q13) 650 Madison (3Q13) One CMP (4Q13) 60 Columbus (1Q14) 65 East 55th (Pending) 4Q13 CAPITAL MARKETS REPORT 34
  35. 35. 4Q13 Capital Markets Intelligence Office Building Sales – Price Per SF Select Top-Tier Historical Manhattan Transactions $2,500 $2,175 $2,000 $1,525 $1,507 $1,500 $1,373 $1,285 $1,258 $1,205 $1,166 $1,181 $1,010 $1,000 $1,000 $790 $753 $631 $685 $679 $610 $500 $0 745 Seventh (4Q01) 399 Park (3Q02) 767 Fifth (3Q03) Source: Newmark Grubb Knight Frank 111 Eighth (1Q04) 666 Fifth (1Q07) 450 Park (3Q07) 280 Park (4Q07) 767 Fifth (2Q08) 111 Eighth (4Q10) 450 Lexington (3Q12) 450 West 15th (1Q13) 140 West (3Q13) 499 Park (3Q13) 550 Madison 650 Madison 200 60 Columbus (1Q13) (3Q13) Lafayette (1Q14) (4Q13) 4Q13 CAPITAL MARKETS REPORT 35
  36. 36. 4Q13 Capital Markets Intelligence Office Building Sales – Recession Flippers: Manhattan 197.0% 200%  Landlords who purchased buildings between 2008–2010 when the economy and real estate market was depressed have seen values 145.0% 150% 130.0% in their properties rise significantly.  Savvy landlords such as Savanna and Kushner have purchased 100% 91.8% 84.2% buildings, renovated, leased-up and flipped for a substantial profit in less than two years. 48.4% 50% 51.2% 55.0% 40.0% 30.4% 5.9% 8.1% 125 West 55th 1330 AoA 12.5% 0% 7 West 51st 86 Trinity 509 Fifth 430 West 434 Bway 104 West 14th 40th 15 East 26th 256 Fifth 158 West 100 Fifth 200 27th Lafayette * All calculations are of sale price and does not take into account pre-existing mortgages or liens. Source: Newmark Grubb Knight Frank 4Q13 CAPITAL MARKETS REPORT 36
  37. 37. 4Q13 Capital Markets Intelligence United States Office Building Sales Price Per SF  $900 Average office building prices on a per-square-foot basis in Manhattan $800 $778 are 34% higher than this time last year. $700  $600 $535 the past year in some major $480 $500 While prices have been flat over $454 markets such as Washington, D.C. and Chicago, averages are up in $400 $321 $300 $296 secondary markets like Seattle $286 $248 $232 and Denver. $212 $200 $150 $147 $105 $100 Primary Markets Dallas Pittsburgh Atlanta Houston Chicago Denver Los Angeles San Diego Seattle Boston San Francisco Washington, D.C. Manhattan $0 ICE Markets Source: Newmark Grubb Knight Frank; Real Capital Analytics 4Q13 CAPITAL MARKETS REPORT 37
  38. 38. 4Q13 Capital Markets Intelligence Historical Office Building Sales Manhattan Price Per SF $1,000 $900 $849 $778 $800 $700 $600 $500 $400 $300 $245 $200 $100 $0 2006 2007 2008 Source: Newmark Grubb Knight Frank; Real Capital Analytics 2009 2010 2011 2012 2013 4Q13 CAPITAL MARKETS REPORT 38
  39. 39. 4Q13 Capital Markets Intelligence United States Office Building Sales Cap Rates 8.0% 7.4% 7.6% 7.6%  Manhattan and San Francisco 6.9% 6.5% 6.0% 6.0% 5.4% 6.5% 6.5% have moved lower in the past 6.0% year as strong demand in those 5.5% cities continue.  4.2% Cap rates on office buildings in Liquidity and projected rent 4.2% growth have pushed some 4.0% notable sales in the New York and San Francisco markets towards cap rates in the 3-4% range. 2.0% Primary Markets Pittsburgh Atlanta Dallas Chicago San Diego Denver Houston Seattle Los Angeles Washington, D.C. Boston San Francisco Manhattan 0.0% ICE Markets Source: Newmark Grubb Knight Frank; Real Capital Analytics 4Q13 CAPITAL MARKETS REPORT 39
  40. 40. 4Q13 Capital Markets Intelligence Historical Office Building Sales Manhattan Cap Rates 8.0% 6.9% 7.0% 6.0% 5.0% 4.0% 4.2% 4.2% 3.0% 2006 2007 2008 Source: Newmark Grubb Knight Frank; Real Capital Analytics 2009 2010 2011 2012 2013 4Q13 CAPITAL MARKETS REPORT 40
  41. 41. 4Q13 Capital Markets Intelligence Development Site Volume Manhattan  After very little activity during the recession and early recovery, $4,000,000,000 volume of development site sales have increased 67% in the $3,500,000,000 past year and approached 20062007 levels. $3,000,000,000  $2,500,000,000 As activity has trended higher, pricing has significantly improved and intensified competition $2,000,000,000 among local and foreign developers with the intent to $1,500,000,000 develop high-end retail, residential and hotel properties. $1,000,000,000  Toll Brothers, Extell Development, Related Companies and McSam $500,000,000 Hotel Group were all active buyers of development sites in 2013. $0 2005 2006 2007 Source: Newmark Grubb Knight Frank; Real Capital Analytics 2008 2009 2010 2011 2012 2013 4Q13 CAPITAL MARKETS REPORT 41
  42. 42. 4Q13 Capital Markets Intelligence Development Site Pricing (Price Per Buildable SF) Manhattan $1,200 $1,034 $1,000 $905 $853 $800 $722 $747 $635 $600 $555 $565 $575 356 Tenth Avenue 101 Murray Street $586 $460 $400 $321 $329 517 W. 35th (Pending) 616 First Avenue $330 $200 $0 234 E. 23rd * 41 E. 22nd * 180 E. 88th Street Street Street 225 W. 57th 560 Seventh 118 E. 59th Street Avenue Street 122 E. 23rd Street 239 Tenth Avenue 19 E. Houston Street 17 E. 12th Street * Prices reflects a blended rate with air rights Source: Newmark Grubb Knight Frank 4Q13 CAPITAL MARKETS REPORT 42
  43. 43. 4Q13 Capital Markets Intelligence Residential Cap Rates Manhattan  7.0% Averaging 4.2% as of the fourth quarter 2013, cap rates on residential buildings in Manhattan 6.5% declined dramatically in the past three years. 6.0%  5.5% Cap rates have matched second quarter 2008 averages, which was the lowest point recorded over the 5.0% past 10 years and are well below the 6.8% average that was 4.5% registered in second quarter 2010. 4.0% 3.5% 3.0% 2004 2005 2006 2007 Source: Newmark Grubb Knight Frank; Real Capital Analytics 2008 2009 2010 2011 2012 2013 4Q13 CAPITAL MARKETS REPORT 43
  44. 44. 4Q13 Capital Markets Intelligence Residential Condominium Pricing Manhattan  $1,500 $1,412 Prices of residential condominium sales in Manhattan are up $1,374 considerably since hitting a post$1,275 $1,225 $1,250 recession low in 2010 and have $1,229 $1,210 increased 11% in the past year. $1,167 $1,142  While the $1,412 per-square-foot $1,086 average achieved in the fourth quarter eclipsed 2008 peak pricing $1,000 levels, demand is expected to drive $873 prices even higher in 2014. $765 $750 $500 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Average Price/PSF Source: Newmark Grubb Knight Frank; Miller Samuels 4Q13 CAPITAL MARKETS REPORT 44
  45. 45. 4Q13 Capital Markets Intelligence Luxury Condominium Pricing Manhattan  Sales in twenty-two residential condominium buildings in New $5,505 $5,500 York have averaged at least $3,000 per square foot over the past two years. $4,642 $4,500  $3,960 $3,565 $3,574 $4,043 $3,671 future high-end projects such as One West 57th Street, 432 Park Avenue (Drake Hotel site) or $3,500 $2,915 $2,957 $2,968 Not included in the sample are 1107 Broadway. $3,128 $3,046 $3,064 $2,716 $2,738 $2,500 $1,500 The Park Imperial One Central Park West (Trump) 165 Charles Street 521 Park 173 Perry Avenue Street Source: Newmark Grubb Knight Frank; CityRealty 279 40 Bond The Plaza 200 Central Street Eleventh Park West Avenue One Beacon Court Millenium 515 Park 80 One 15 Central Tower Avenue Columbus Madison Park West Circle Park 4Q13 CAPITAL MARKETS REPORT 45
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