Sunday Summary: Newmark's Got Talent
A very important name in New York real estate is Paul Massey. Massey and his old partner Robert Knakal, who now runs the private capital group at JLL, founded Massey Knakal in the 1980s. The firm established a legendary territory system of investment sales throughout New York, and was eventually sold to Cushman & Wakefield for many, many millions of dollars on New Yearâs Eve 2014. After that, Massey mounted a serious (if ultimately unsuccessful) campaign for mayor of New York, and in 2018 founded yet another investment sales and capital advisory firm called B6 Real Estate Advisors. So, we have to ask: What in the heck is going on at B6? In the last few weeks there has been an [alarming exodus of talent]( from the 5-year-old firm. Adrian Mercado, the COO since its founding, left abruptly (Mercado didnât say where heâs going). Brian Whelan and Mitchel Flaherty have jumped ship for [Ripco Real Estate](. Alix Curtin departed for [Ariel Property Advisors](. [IPRG]( hired B6 brokers Jared Friedman and Robert Rappa. Thomas Donovan left for [Meridian Capital Group](. Finally, [according to The Real Deal](, DJ Johnston, who joined B6 as a partner in 2018, as well as Corey Rosenthal and Brock Emmetsberger, are all headed to Matthews Real Estate Investment Services. âThere is no way we are closing,â Massey assured Commercial Observer when we asked about the departures. âWeâre open for business focusing on moving ahead.â Be that as it may, insiders told CO they donât see B6 surviving, with one saying âthe writing is on the wallâ and another saying âthere will be one broker remaining next week.â Thatâs a story CRE professionals would be wise to keep an eye on. Letâs talk about politics Thatâs right, the thing your mother warned you not to discuss at the dinner table â along with religion. Good thing youâre not at the dinner table. (And, if you are, please meet us in the other room.) There was a swirl of political bombshells that went off last week. Some of which had nothing to do with real estate â like the [impeachment hearings]( of President Biden that began in the House Oversight Committee. Some of which will certainly have [a peripheral effect]( on real estate â such as the likely shutdown of the U.S. government, which will probably have taken effect by the time you read this. But there was one very big political/real estate crossover when New York State Supreme Court Judge [Arthur Engoron ruled]( that the [Trump Organization]( had committed fraud by inflating the value of former President Donald Trumpâs properties by as much as $2.2 billion. The properties in question include some of Trumpâs most high-profile ones, like 40 Wall Street, which has been struggling with tenant retention and plummeting rents since 2020. With the ruling, the properties will be put in the hands of a receiver who will be charged with liquidating them. However, this is almost certainly not the end of the matter. âIn the history of New York, thereâs never been a more likely chance that a party was going to appeal a decision,â Paul Golden, a partner at Coffey Modica, told CO. âI believe you can call this a historical decision, and the appeal is likely to be historical as well. Thereâs no other choice â unless they want to settle, which seems unlikely.â Moreover, there are sticky what-happens-next questions with a liquidation and sale. âIf you cancel the LLC of a property â letâs say 40 Wall Street or Trump Plaza â you then make the property unsellable, and if you canât sell the property, then youâre violating the U.S. Constitution and the Fifth Amendment,â said attorney Adam Leitman Bailey. âIt just doesnât provide a remedy that can work under New York law. So whatâs going to have to happen is the judge is going to have to reform this order, or, more likely, the defendants should apply for a stay and appeal a decision.â Also at the national level, the Federal Trade Commission dropped a major antitrust lawsuit on Amazon. Itâs unclear how much the suit â and other problems besetting the e-commerce colossus â [will actually affect Amazonâs bottom line](. Stay tuned. National political debates and considerations are beginning to make their appearance on a state level, too â with real estate implications. Last spring, Republican presidential hopeful Ron DeSantis [signed a Florida bill]( into law that prohibits people and companies from Iran, North Korea, Syria, Russia, Venezuela and Cuba from purchasing property within 10 miles of a military installation or critical infrastructure â and companies or people from China may not purchase any property in the state at all. âIâm proud to sign this legislation to stop the purchase of our farmland and land near our military bases and critical infrastructure by Chinese agents,â DeSantis said when he signed the bill. âWe are following through on our commitment to crack down on Communist China.â But the law, which recalls the now-unconstitutional Alien Land Laws of a century ago, is being challenged by the American Civil Liberties Union on behalf of a political asylum seeker who fled China and a real estate agency that primarily represents Chinese clients. âThere is an argument that the law went too far, and is already creating adverse effects that are discriminating against Chinese Americans, or even Asian Americans,â Joe Hernandez, a real estate lawyer and partner at Bilzin Sumberg, told CO. Thatâs another case weâll be keeping an eye on as it unfolds. But amid the sturm und drang in Washington, Florida and New York there was [one piece of legislation]( that CRE pros no doubt were happy to learn was wending its way through Congress. HR 5580, a bipartisan (such a thing still exists?) bill that makes it easier to defer tax payments on properties with loan modifications or workouts, was introduced on Sept. 19 and is being boosted by Real Estate Roundtable head honcho Jeffrey DeBoer. âFrom the tax law to banking regulation, housing policy and other areas, public policy has always encouraged the restructuring of unsustainable loans to help businesses turn around and help taxpayers get back on their feet,â DeBoer said. He added: âDebt workouts between lenders and borrowers are a critical part of the solution. Workouts can ensure that these properties continue supporting jobs and economic activity.â Letâs talk about housing instead OK, you can go back to the dining table. Multifamily was the topic for the day at [COâs Multifamily Forum]( on Sept. 21 in Midtown Manhattan. And the optimism was generally there â if a little more circumspect than in years past. âWeâre moving ahead with buying a portfolio in Florida, but weâre being cautious,â said David Hochfelder, the chief investment officer at Naftali Group. âThereâs more price discovery in multifamily. Itâs just much better relative value to finance something at 65 percent LTV [loan to value ratio on a mortgage] â which, on the equity side with todayâs financing and equity costs, I donât think those deals underwrite that way.â âThere are not many people who feel comfortable breaking into the market right now,â said Cushman & Wakefieldâs Lauren Kaufman when the subject turned to Gotham. âI think anything thatâs subject to rent regulation here in New York is considered distressed.â Regardless of the problems of financing housing, demand is still there. And demand doesnât seem to be easing, given how many [barriers there are to development]( in a lot of markets. And the money is there for the right kind of housing project in the heart of an underserved city â like the[$56 million Mosaic Investment Partners secured]( to build student housing near the University of Southern California campus. And Standard Communities is laying down $106.4 million for [six Section 8 properties]( in Los Angeles from Goldrich Kest. Just donât expect those big kinds of sales with office. Actually⦠Letâs take that back. There was a massive office-related (and Related office) piece of news last week when word came down that Wells Fargo is in talks with Related Companies and Oxford Property Group to [purchase the old Neiman Marcus flagship]( at Hudson Yards for a whopping $550 million. The buyer plans to convert the abandoned department store into office space. And, after many years of anxious waiting and wrangling, we were treated this week to the sweet new opening of [Brooklynâs Domino Sugar Refinery](, which has been remade as offices. (And they have aggressive asking rents from the high $70s to the high $90s per square foot. Brooklyn, youâre beautiful.) One of the big office questions, however, is going to be what the federal government decides to do with its office footprint. (Ha ha â weâre going back to politics!) More than half of all federal leases (4,108 out of 7,685) are set to expire in the next five years. Thatâs 83 million square feet of space! Robin Carnahan, head of the General Services Administration, did not exactly assure us that the appetite for space would remain constant. âAs we think about rightsizing and optimizing the federal portfolio, we need to think about our leased buildings as well as which buildings we keep in our federal inventory that are owned buildings and which ones we dispose of,â [Carnahan told CO](. âAll of this is really driven by our agency partners and customers and what their needs are. And, itâs no secret, everybodyâs sort of rethinking what the basic needs are.â Words of congratulations â and sorrow We learned last week that John Kessler, the chief operating officer at Mitsui Fudosan America, will be [stepping into the role of CEO]( after John Westerfield announced his retirement. Kessler came to Mitsui from Empire State Realty Trust in April and before that he served stints at Fortress Investment Group and Morgan Stanley Real Estate. We also learned the sad news that Wayne Ratkovich, the developer behind the Ratkovich Company, which owned such L.A. landmarks as the Oviatt Building, the Pellissier Building, and The Alhambra, [died at age 82](. Sunday reading Well, you could do some Sunday perusing through the photos from [COâs Power Gala](, to which some of the biggest boldface names in real estate showed up to meet, greet, toast and possibly do business with their fellow honorees. (Is that chef Daniel Boulud in one of the photos? Uh, yeah, it is.) And rather than have a Sunday read, we invite you to enjoy a Sunday listen. Power honoree, developer and all-around real estate powerhouse [MaryAnne Gilmartin dropped in for COâs Back Story podcast]( to talk about MAG Partners, how much of a pain in the neck it is to borrow money now, the Barclays Center and more. See you next week! [View in Browser]( | [Advertise]( | [Forward to a Friend](
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This newsletter was published 10/01/2023