By Keiko Morris
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 18, 2018).
Sales of the city's office towers, apartment buildings,
development sites and other properties rose to $12.42 billion in
the first quarter, a 70% increase from the same period last year,
according to real-estate services firm Cushman & Wakefield.
Manhattan transactions more than doubled to $8.9 billion.
Google's $2.4 billion purchase of the Chelsea Market building,
one of the highest-priced office sales in the city's history,
helped those numbers. But other large deals also closed, such as
the $700 million acquisition of the 3.25-acre St. John's Terminal
site by Oxford Properties Group and Canada Pension Plan Investment
Board.
And there are a number of deals on the horizon, including Pfizer
Inc.'s agreement to sell its headquarters at 219 E. 42nd St. and
235 E. 42nd St. to investor David Werner for about $360 million,
according to a person familiar with the deal.
"2018's first-quarter activity has showcased a well-balanced
offense with several individual transactions contributing to the
overall return of confidence and healthy transaction levels," said
Douglas Harmon, chairman of Cushman's capital markets group and
part of the team representing the sellers in the Chelsea Market and
St. John's Terminal deals. "This should portend well for the rest
of the year."
Sales began rising steadily in 2010 and shot up in 2014 and
2015, the most recent peak, when deals reached $80.4 billion,
according to Cushman. By the end of 2017, the dollar amount of
transactions had dropped by 55%.
Real-estate brokers and executives have cited a number of
reasons for the nosedive after 2015, including the uncertainty of
the presidential election, wariness of being in the late stages of
a long economic expansion and a pricing gap between sellers and
bidders. Inexpensive and abundant financing also made it possible
for owners to continue holding their properties.
"I think a lot of people went to the sidelines last year saying,
'I spent a lot of money in 2014, 2015 and 2016,'" said Darcy
Stacom, chairman of the New York City capital markets group for
CBRE Group Inc.
The absence of megadeals drove much of the sales slowdown in
2017, Mr. Harmon said. The first quarter of 2018 demonstrated the
return of the larger deals, even setting aside the Chelsea Market
sale. A preliminary tally from Real Capital Analytics showed about
12 deals of $250 million or more in Manhattan for the first quarter
of 2018, compared with four such deals in the same period of
2017.
Sales of multifamily apartment buildings also increased in the
first quarter, more than doubling to $2.9 billion throughout the
city, according to a preliminary analysis by Ariel Property
Advisors. Expectations of buyers and sellers have adjusted,
depending on the property, Shimon Shkury, Ariel's president,
said.
"Properties that are in prime locations or have a clear
value-add proposition are trading with no discount, at pricing they
used to trade before 2017," said Mr. Shkury. Meanwhile, more
"vanilla" apartment buildings likely will sell for 5% less than
2016 prices, he said.
Office properties played a significant part in Manhattan's sales
increase in the first quarter and have accounted for more than half
of the investment activity since 2016, according to a report from
real-estate services firm JLL. The city's continued addition of
jobs and low unemployment rates have made the office sector
attractive to investors, and Google's recent acquisition plays into
that premise, said Craig Leibowitz, director of JLL's New York
research.
Ruben Cos. sold its office tower at 1700 Broadway to the
Rockpoint Group for about $465 million, according to people
familiar with the deal. The company had developed the building in
the 1960s and purchased the land beneath the tower a few years ago,
said Richard Ruben, chief executive of Ruben Cos.
"I would say there is a huge abundance of capital chasing these
products, especially on the debt side, and not a whole lot of
product on the market," Mr. Ruben said. "So whenever something
comes to market it is strongly bid."
Manhattan isn't the only focus for investors. Jamestown, the
firm that sold the Chelsea Market building to Google, is bullish on
places like the Bronx as well as Sunset Park, Brooklyn, where the
firm and its partners have redeveloped an industrial complex into a
business hub.
"We've focused on aspirational and inclusive places," said
Michael Phillips, Jamestown president. "Places like the Bronx,
Sunset Park and Long Island City all kind of meet that
description."
While most brokers anticipate sales will increase from 2017
levels, some say it is unclear how robust that will be. Rising
interest rates could pose a headwind, some brokers said.
Pricing also might not be high enough to pull some sellers off
the sidelines, Ms. Stacom said.
"I think we still have reluctant sellers who love owning New
York real estate, who can finance it pretty inexpensively," Ms.
Stacom said.
Write to Keiko Morris at Keiko.Morris@wsj.com
(END) Dow Jones Newswires
April 18, 2018 02:47 ET (06:47 GMT)
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