Manhattan Office Market

Transcription

1 Manhattan Office Market 1 ST QUARTER 2015 REPORT A NEWS RECAP AND MARKET SNAPSHOT Pictured: 380 Second Avenue

2 Looking Ahead Potential Garment District Rezoning Brings Mixed Response The city s Garment District could see a new wave of changes as the City Planning Commission (CPC) considers possible zoning changes that would result in the easing or removal of restrictions on landlords so as to allow renting their buildings entirely to office tenants while remaining a strictly commercial area. Critics of a reform to the current zoning regulations have claimed that although U.S. manufacturing doesn t solely depend on the city s Garment Center, the initial prototypes and high-end manufacturing is based in New York and still considered the backbone of the industry. Other opponents further predict that the current trend toward made in the U.S.A. after the factory fires in Bangladesh will prompt the return of production. In contrast, supporters of the proposal predict it will increase property values that have already been on the uptick in the now 24/7 neighborhood that has recently enjoyed a growing diversity and resurgence in popularity. The district which runs from 35th to 42nd Street between 5th and 9th Avenues has reportedly added 30 new hotels over the last 10-years with 10 more in the immediate pipeline. The neighborhood s central location between major transportation hubs Penn Station, Port Authority Bus Terminal and Grand Central Terminal opens the door to employees residing in Westchester, Long Island, or New Jersey. Early 1930s The Garment District boasted the largest concentration of clothing manufacturers in the world. After World War II some facilities began to locate out of state, with many eventually migrating overseas. By 1950, the fashion industry represented 13.5% of the city s employment which diminished to just over 1% in The city enacted a special zoning regulation that obligated landlords to reserve half of their property space for manufacturing purposes, but it was unable to thwart the growing shift of manufacturing to overseas Garment District employment in the fashion industry fell 44% in comparison to non-fashion employment s 82% growth. While the re-evaluation of the Garment District s zoning awaits review by the City Planning Commission, some landlords have moved ahead with building upgrades and renovations, further accelerating revitalization. The Empire State Realty Trust (ESRT) led the way, 1333 Broadway undergoing renovations in 2013 with other landlords following: 1407 Broadway The Lightstone Group has spent over $15 million on improvements, and expects to invest an additional $15 million on new storefronts, lobby renovations, and other upgrades; also considering a rooftop conversion to offer a restaurant and bar Broadway San Francisco, CA-based Swig Co. is redoing the public plaza at the site as well as upgrading the lobby entry storefronts. 132 West 36th Street The Kaufman Organization decided to reinvest in the building, abandoning the company s previous consideration of selling the property. P2 P.2

3 Market Snapshot: Class A & B New York City s Unemployment According to the New York State Department of Labor s figures, the city s unemployment rate rose to 7.2% (not seasonally adjusted) at the end of February; in comparison to 6.2% at the end of the 4th quarter. Year-over-year figures resulted in a 15.29% improvement from the 8.5% rate of February Unemployment on the National level rose to 5.7% at the end of February, increasing 9.62% from the 4th quarter figure of 5.2%. Year-over-year figures resulted in an 18.57% improvement from the 7.0% rate of February Q 2015 Vacancy Rental Rate Net Absorption Total Class A Class B Employment activity in New York City s private sector resulted in the loss of 51,800 jobs in the 3 month period between November 2014 and February 2015, yet year-over-year figures continued to show a 2.9% gain of 102,500 jobs; in comparison to 2.0% and 2.8% year-over-year growth for New York State and the nation respectively. Educational and Health Services led the way in private sector job gains, followed by Professional & Business Services. The Information sector rebound during the quarter resulting in a 1.74% year-over-year job gain at the end of February. 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% Feb 04 Feb 05 NYC Unemploy Rate Feb 09 Feb 08 Feb 07 Feb 06 US Unemploy Rate Feb 13 Feb 12 Feb 11 Feb 10 Feb 14 Feb 15 Weekly Wages Overall weekly wages in New York City averaged $1,733 at the end of the 3rd quarter 2014, representing a positive 4.0% improvement year-over-year according the recent report released by the U.S. Department of Labor. The Financial sector boasted the sharpest rise of positive 5.09% year-over-year, in contrast to the Information sector that saw a more moderate increase of 1.72%. Vacancy for Class A & B office space rose 1.56% over 4th quarter s 8.25% figure, resulting in an 8.38% vacancy at the end of the 1st quarter. Midtown South accounted for the strongest quarter-over-quarter improvement and a drop in vacancy of 7.85%, while Midtown vacancy held steady at 7.90%. In contrast, Downtown vacancy rose 7.94% quarter-over-quarter despite continued robust activity, with close to 1 million square feet being introduced to the market at Fosun International s 28 Liberty Street due to JPMorgan Chase vacating the former 1 Chase Manhattan Plaza. NYC Yr-over-Yr Job Statistics 1,000, , , , , , , , , , , , , ,000 Feb 2014 Job#'s 3Q2013 Weekly Wage 442, , , ,800 Feb 2015 Job#'s 3Q2014 Weekly Wage 183, ,800 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 Source: NYS Department of Labor and US Department of Labor, Bureau of Labor Statistics $500 $0 Absorption closed the 1st quarter at negative 567,501 square feet, representing a reversal over 4th quarter s positive 639,339 square feet. Both Midtown and Midtown South absorption remained positive, in contrast to Downtown s significant reversal and negative absorption. Rental Rates rose moderately in the 1st quarter. The overall weighted average asking rent for Class A & B office space of $59.30 per square foot represented a 0.97% increase over the previous quarter; as compared to 4th quarter s steeper quarter-over-quarter rise of 4%. Class B asking rents accounted for the more significant increase of 3.03%, while Class A asking rents saw only a negligable 0.23% increase. Sources: P3 P.3

4 Market Snapshot (cont d) Office of the NYC Comptroller: NYC Quarterly Economic Update 4Q14 The report released in February revealed several positive indicators affirming an outlook of ongoing improvement of the city s economy. Despite some setbacks during the 4th quarter, the overall results for 2014 maintained an improving trend with the city growing at a faster rate that the nation. Real Gross City Product (GCP) Grew at an estimated annual rate of 2.8%. Despite the slowdown from the 4.2% rate in the 3rd quarter, the overall 3.1% rate for the year was comparatively better than the national Real Gross Domestic Product (GDP) rate of 2.4%; of which the city accounted for over 4% of the nation s total economic output in Venture Capital Investment (VC) Totaled $1.2 billion during the 4th quarter, remaining unchanged year-over-year. The overall $5 billion in VC investment spread across 478 deals during 2014 represented a 56.25% surge above the year-over-year total of $3.2 billion and 469 deals, despite a 29.4% decline from the quarter-over-quarter figure of $1.7 billion. NYC Personal Income Tax Revenues Rose 10.8% year-over-year to an estimated over $2.3 billion, the highest figure for a 4th quarter since Strengthening U.S. Dollar and Tourism a Bad Mix Tourism, which has been a significant driver in helping New York City weather the recession, may begin to see a slowdown as the strength of the U.S. dollar improves. Escalating costs of being a tourist in the city an industry that has reportedly grown to $60 billion, may prompt travelers to seek bargains in other countries as currencies weaken in 9 of the city s 10 largest tourist markets. The Intercontinental Exchange dollar index which tracks the currency s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona rose to 11% since July 2014, its highest level reportedly since Tourism volume which has climbed to about 55 million annually over the past decade triggering a sharp rise in jobs. Tourism-related employment surged 22%, equating to 3-times the city s overall job increase. A study done by the New York Fed in 1995 of the city s exposure to currency fluctuations found that a 6.7% appreciation of visitors currencies would lead to a 1% rise in hotel occupancy rates. Conversely it can then be hypothetically assumed that a 1% depreciation in the city s tourism would translate to a $600 million economic loss, or the equivalent of the annual wage elimination of about 14,000 average leisure and hospitality workers based upon the $60 billion figure the industry currently generates. Sources: P4 P.4

5 Class A & B Statistics At A Glance 1st Quarter 2015 Vacancy WTD Average Asking Lease Rent Net Absorption Downtown 5.41% 13.55% Downtown $56.49 $40.28 Downtown Midtown South 3.52% 5.29% Midtown South $65.08 $90.01 Midtown South Midtown 5.91% 8.42% Midtown $53.60 $65.20 Midtown % 5.00% 10.00% 15.00% $0.00 $50.00 $ Class A Class B Thousands (1,000) (500) Quarter-over-Quarter Vacancy Lease & Sublease Sq. Ftge Net Absorption 6.35% 9.89% 6.31% 10.04% Net Absorption Class A Net Absorption Class B Class A Class B Lease SF Class AB Sublease SF Class AB 5.58% 9.55% 5.67% 9.33% 6.07% 9.46% 1Q14 2Q14 3Q14 4Q14 1Q % 9.00% 6.00% 3.00% 0.00% Thousands 40,000 30,000 20,000 10,000 0 Lease Rent AB Sublease Rent AB 1,500 $65.00 $60.00 $55.00 $50.00 $45.00 $ Q14 2Q14 3Q14 4Q14 1Q15 1Q14 2Q14 3Q14 4Q14 1Q15 3,938 35,271 3,682 33,423 3,762 35,039 3,487 32,979 3,410 33, (30) (51) 459 1, (676) 1, ,000 Thousands Quarter-over-Quarter Inventory Changes Downtown Midtown South Midtown Removed Added Removed Added Removed Added 1Q2015 4Q2014 3Q2014 2Q2014 1Q2014 1Q2015 4Q2014 3Q2014 2Q2014 1Q2014 1Q2015 4Q2014 3Q2014 2Q2014 1Q2014 Thousands Thousands Thousands *Buildings 75,000 SF and larger; vacancy and absorption calculations based upon move-in date versus deal signing date P5 P.5

6 Submarket Statistics Overview: Class A & B Office Manhattan Inventory Vacant Sq. Ftge. Vacancy Rate WTD Avg Rent PSF Submarkets Districts Total RBA* Direct Sq. Ftge. Sublet Sq. Ftge. Total Sq. Ftge. Direct Vacancy Sublet Vacancy Overall Vacancy Direct Asking Net Absorption Year-to-Date Sq. Ftge Downtown 110,462,756 11,999, ,599 12,692, % 0.63% 11.49% $ ,075 City Hall 14,746, , , % 0.00% 5.64% $ Financial District 41,846,828 4,829, ,709 5,152, % 0.77% 12.31% $ ,142,548 Insurance District 12,046, ,142 18, , % 0.15% 4.44% $ ,017 TriBeCa 6,647, , , , % 1.81% 4.84% $ ,721 World Trade Center 35,176,146 5,620, ,210 5,852, % 0.66% 16.64% $ ,978 Midtown South 60,314,221 2,752, ,435 2,927, % 0.29% 4.85% $ ,271 Chelsea 10,417, ,026 20, , % 0.19% 1.28% $ ,013 Flatiron 21,919,319 1,183, ,012 1,309, % 0.57% 5.97% $ ,345 Gramercy Park 10,288, ,579 18, , % 0.18% 8.97% $ ,098 Greenwich Village 4,353, , , % 0.00% 3.98% $ ,665 Hudson Square 9,393, ,899 5, , % 0.06% 3.31% $ SoHo 3,942,692 73,595 5,237 78, % 0.13% 2.00% $ ,528 Midtown 271,129,387 18,871,113 2,542,121 21,413, % 0.94% 7.90% $ ,303 Columbus Circle 32,157,669 1,261, ,054 1,586, % 1.01% 4.93% $ ,117 Grand Central 52,853,745 4,771, ,197 5,216, % 0.84% 9.87% $ ,800 Murray Hill 11,144, ,450 99, , % 0.89% 5.34% $ ,141 Penn Plaza/Garment 46,500,913 2,784, ,032 3,275, % 1.06% 7.04% $ ,125 Plaza District 80,641,592 6,094, ,246 6,852, % 0.94% 8.50% $ ,066 Times Square 44,268,129 3,449, ,905 3,872, % 0.96% 8.75% $ ,259 U.N Plaza 3,562,575 13, , % 0.00% 0.39% $ ,693 Grand Total 441,906,728 33,623,337 3,410,155 37,033, % 0.77% 8.38% $ ,501 *Buildings 75,000 SF and larger; vacancy and absorption calculations based upon move-in date versus deal signing date P6 P.6

7 Leasing - Large Banks are Back in the Game Stability is returning to the banking industry after years of weathering the aftermath of the financial crisis. Adjusting to the new regulatory requirements banks are finding alternative ways to remain profitable. A further sign of the industry s brightening outlook was the announcement late last year of Canadian financial firm Toronto-Dominion Bank s (TD Bank) commitment to lease approximately 200,000 square feet as anchor tenant at One Vanderbilt, Madison Avenue (Grand Central) upon its expected 2020 delivery. Continuing to shrink their footprint and consolidate employees, some large banks are reportedly beginning to explore options in an effort to update outdated spaces as lease expirations loom on the not too far off horizon. The process of relocation by a large investment bank can take several years, having to determine needs of individual units and commuting patterns of its employees. While a decision to remain in place and retrofit existing space is typically more expensive than relocating, the debt incurred can be spread out over a longer term of years. JPMorgan Chase recently decided to remain at 270 Park Avenue and 383 Madison Avenue, leasing 123,000 square feet at 5 Manhattan West, 450 West 33rd Street (Penn Plaza) for some of its technology staff. While some relocation deals give rise to potential big block absorption, moves may only be a parallel shift of space and what lately has been characterized as the office space shuffle; having little effect on office space vacancy as a result one man s gain is another man s loss. Deutsche Bank AG The Frankfurt, Germany-based bank is in the market for roughly 1 million square feet, considering whether to relocate, downsize, or renew their current lease that runs until 2022 at 60 Wall Street (FiDi) where they occupy the entire over 1.6 millionsquare-foot building. Offices at the tower would require extensive remodeling, Deutsche establishing its headquarter there since acquiring the building in 2001, ultimately selling it to the Paramount Group in 2007 as a sale/leaseback deal for $1.18 billion that would see the bank remain as a tenant for another 15 years. HSBC Holdings PLC The London, England-based bank issued a request for proposal (RFP) for 500, ,000 square feet as they consider their future needs. In addition to about 312,000 square feet of multiple offices spread across 4 other Manhattan locations, HSBC s current headquarters of over 300,000 square feet is located at 452 Fifth Avenue (Penn Plaza) in a lease that expires Wells Fargo The San Francisco, CA-based lender is in the market for 200, ,000 square feet to house some of its top investment bankers, reportedly weighing its options at 3 of its New York locations in the Plaza district Seagram Building, 375 Park Avenue as well as 2 smaller locations at 540 Madison Avenue and 640 Fifth Avenue. Currently headquartered in close to 300,000 square feet at the Socony- Mobil Building, 150 East 42nd Street (Grand Central) where the bank is expected to remain. BNP Paribas SA The Paris, France-based bank has been located at the Equitable Building, 787 Seventh Avenue since about 1986 when the building opened. BNP s current lease that will be expiring early in the next decade and a request for proposal (RFP) was issued last year as the bank considers its options. Sources: P7 P.7

8 Competition in the Co-Work Space Market Heats Up The ongoing popularity of short-term, shared space has flooded the market with co-working companies. As competition intensifies for market share some co-working space providers focus on their marketing efforts to help differentiate themselves and standout amongst the growing numbers, exemplified by: In Good Company which offers shared workspaces exclusively to women; Writers Room leases workspace exclusively to writers; Edison Offices only offers executive suites and private offices; Makeshift Society offers shared workspace in a common space geared toward freelancers; Emerge212 is a subsidiary of SL Green Realty Corp. that was initiated in 1999 offering fully furnished, boutique shared offices amongst the (3) SL Green-owned locations. AlleyNYC recently added a 2nd Manhattan location, becoming the first new tenant to sign at West 24th Street since Kaufman Organization secured the 99-year leasehold for the former F.M. Ring building. The company hosts events to establish a following, offering rates that reportedly range form $25 per day for desk to $2,200 per month for personal office space. PivotDesk launched in 2012 has added a unique twist by establishing relationships with building tenants that have more space than they need, and connecting them with potential short-term subtenants. The company currently has locations across 45 states with New York City reportedly accounting for 60% of the company s national revenue. Host companies create an online profile of the space, company industry, and office environment complete with photos to facilitate workers locating a match for their needs. Rents for the space that are typically around $550 per person per month are determined at the discretion of the host company, and are secured by a 30-day license. PivotDesk generates revenue by charging a monthly 10% license fee for which the company helps close the deal and handles the responsibility of rent collections. Due to a growing interest by brokers, PivotDesk launched Cultivate, a company referral platform for brokers working with prospective tenants seeking short-term space; enabling brokers to maintain and cultivate relationships with start-ups until they are ready to commit to a real lease. WeWork which has been hailed as one of the fastest growing co-working space providers typically takes a discounted lease on a floor or more in a building and then demises the space into smaller parcels, charging monthly memberships to start-ups and small companies that reportedly range $425-$750 per month pending use levels that range from whatever desk is free at the time or for a private office. Taking the company s already successful office model further, WeWork is considering combining it with the company s WeLive concept of shared, affordable housing that is being pursued in Crystal City near Washington, D.C. The recent announcement of a planned addition of small apartments and community facilities on the top of Rudin Management s 110 Wall Street is intended to help reduce the growing challenges of TAMI industry recruits that are unable secure affordable housing in the city. While co-working space has primarily attracted start-ups, established companies have discovered the advantages of more readily available short-term space with reports of Google s interest to rent space at one of SL Green s Emerge212 facilities for temporary training events. However, some industry sources predict that the market is nearing saturation; and as startups mature and graduate into traditional office leases, co-working companies may begin to see a lessening in shared space demand. With this in mind, a rising concern amongst some landlords of the future usability of co-working designed layouts that have a significant amount of compartmentalized offices and the potential significant expense to demise the space for a typical office tenant. P8 P.8

9 Leasing - Concerns of a Market Glut Loom Findings of a recently reported market study projects an estimated total of 9.5 million square feet of top-priced, brand new office space that will need to be absorbed between now and 2018, raising the concern of a potential office space glut. The new space some of which is already hit the market comes at a time when large users, particularly amongst the financial sector, are downsizing and reducing the overall square footage per employee. Whether or not the leasing market is strong enough to absorb it and avoid a spike in vacancy has met with mixed opinions from some industry sources. While it has been noted that the 9.5 million square feet is a small fraction of the city s reported total of 450 million square feet of inventory, the question warrants serious consideration and a predicted need to absorb about 1.5 million to 2 million square feet per year. The projected figure omits space that has already secured deals or full commitment such as law firm Skadden Arps Slate Meagher & Flom s letter of intent at 1 Manhattan West; the Bank of China s agreement to purchase the leasehold for 7 Bryant Park and a possible occupancy of 200,000 square feet at the tower upon its delivery this year; and on the horizon, TD Bank s commitment to anchor One Vanderbilt, Madison Avenue in a lease for 200,000 square feet upon planned delivery in pending final approvals of the project. 2 Million Square Feet has already come online at One World Trade Center and 4 World Trade Center 7.5 Million Square Feet of anticipated new inventory comprised of several projects in different stages of construction and permit approvals include: 3 World Trade Center - 2 million square feet 1 Manhattan West million square feet 55 Hudson Yards million square feet 10 Hudson Yards - 250,000 square feet Plus the redevelopment by L&L Holdings of: 390 Madison Avenue, formerly 380 Madison Avenue 845,000 square feet 425 Park Avenue 650,000 square feet It is anticipated that new space which is LEED-certified and offers column-free floors with state-of-the-art features will present challenges for the older Midtown stock. Although being marketed at higher price levels, the new construction may still lure big users away from the Midtown area, despite landlord s efforts to invest in upgrades to elevate the competitive capabilities of older properties. It has been further noted that the thrust of leasing activity Downtown has for the first time shown signs of a shifting away from Midtown as the center commercial core, yet is has been recognized that while Midtown s profile could be shifting towards a predominantly back-office district, global companies will continue to establish locations on 5th- and Park Avenues. 390 Madison Avenue - Rendering 425 Park Avenue - Rendering Sources: P9 P.9

10 The Office Market s Highest Valued Deals Some of Manhattan landlords will reportedly get a piece of the estimated $7.6 billion in rent income as a result of the 10 most valuable office deals signed last year based upon values 1 reportedly provided by an online real estate and analytics platform. Large deals by a creditworthy tenant are attractive to landlords because they can drive leasing in surrounding buildings, but more importantly the rental stream generated by them raises the property s value which in turn increases the landlord s borrowing power or helps facilitate a sale. Yet in a market that is dynamic, the downside is that both the landlord and tenant are locked into a rent rate for years; and pending which way the real estate market turns during the life of the lease, the risk of carrying a lease at below-market rents or paying rent at above market rates can potentially be incurred by both landlord and tenant respectively. The top deals also further demonstrates the financial sectors continued receding footprint, with only 2 deals amongst the roster from financial firms; opening the door to a more diversified tenant roster in some buildings previously dominated by financial tenants. Credit Suisse s renewal at 11 Madison Avenue reduced the global financial firm s footprint by about 800, ,000 square feet, enabling both electronics firm Sony and online review site Yelp to establish new headquarters at the Flatiron tower. Tenant Address Sq. Ftge. Base Rent Term Lease Type Value Industry Credit Suisse 11 Madison Avenue 1.1 Mil $70s 20 yrs Renewal $1.7 Bil Finance Kirkland & Ellis 601 Lexington Avenue 403,000 High $90s 20 yrs Renewal $872 Mil Law Mt. Sinai Health Sys East 42nd Street 448,819 High $40s 33 yrs New $860 Mil Healthcare White & Case 1221 Sixth Avenue 440,218 High $80s 21 yrs Relocation $840 Mil Law Weil, Gotshal & Manges 767 Fifth Avenue GM Building 390,000 Mid $110s 15 yrs Renewal $671 Mil Law Neuberger Berman 1290 Sixth Avenue 354,891 Mid $70s 22 yrs Relocation $610 Mil Finance Sony 11 Madison Avenue 547,996 Mid $70s 16 yrs Relocation $599 Mil Electronics Amazon 7 West 34th Street 456,000 $ yrs New $540 Mil E-commerce Time Inc. Hudson s Bay 225 Liberty Street Brookfield Place 225 Liberty/250 Vesey Streets Brookfield Place 669,832 Low $50s 18 yrs Relocation $506 Mil Publishing 398,712 High $50s 18 yrs Relocation Consolidation $449 Mil Retail Trade 1 Values were determined by adding up all of the rent payments and then subtracting free rent and tenant improvements (TI) paid by the landlord. 2 Mt. Sinai purchased space as leasehold condo to save taxes paying $110.6 million, consolidated offices as a result of merger with Continuum Health Partners P.10

11 Leasing Activity Big Block Tenants in the Market News Corp. / 21st Century Fox Rumors have resurfaced of the separate media companies controlled by Rupert Murdoch exploring options for a new Manhattan headquarters that would likely result in an expansion of the currently combined 1.2 million square feet they have under several different leases at and 1211 Sixth Avenue (Times Square) that are due to expire in Recent news announced that both media companies have been in discussions for the last few months with the Port Authority of NY & NJ (PANYNJ) and Silverstein Properties, considering a joint headquarters in 2 World Trade Center. The 88-story, 3.1 million-square-foot tower has remained in planning stages, lacking a required anchor tenant to break ground on the project. If a deal moves forward, the companies could become co-developers; and the tower s current design would require substantial revisions in order to accommodate the media companies request to house television studios at the base of the tower. Both companies are still considering other options, reportedly viewing Related Companies Hudson Yards complex earlier this year, but ultimately decided to pass on the opportunity. In the meantime, ongoing discussions could result in both companies remaining at their current locations. Twitter The social media company is rumored to be considering an additional expansion, simultaneously to preparing for their move into the 140,000 square feet at W 17th Street (Chelsea) leased early last year. Although currently unconfirmed, the company may be on the prowl for an additional 60,000 square feet. Fried Frank Harris Shriver & Jacobson The law firm is rumored to be considering a relocation from their long time 390,710-square-foot headquarters at 1 New York Plaza (FiDi) to the Manhattan West mixed-use complex on the Far West Side that is currently being developed. An early termination of Fried Frank s lease renewed in 2005 may be facilitated due to both properties under the same ownership of Brookfield Office Properties. Currently seeking commitments for the multi-building project, Brookfield may favor a buyout of the FiDi lease that extends through 2015, acknowledging that current high-levels of leasing activity in Lower Manhattan are making it easier to fill vacant space for those properties. Nike The athletic footwear company is reportedly seeking about 100,000 square feet to relocate from their current 90,000-square-foot office at Google s 111 Eighth Avenue building. The current lease that is due to expire this year reportedly includes a renewal option that could extend term through Since acquiring the building in 2011, Google has offered buyouts for early lease terminations of many of the property s tenants in order to free up space for its growing number of employees, but several including Nike refused. Lease Deals To Watch For Google / Pier 57 Superpier (Chelsea) The Mountain View, CA-based technology company is reportedly in preliminary discussions to lease a portion of the former Marine and Aviation building that has been rebranded as Superpier. The planned redevelopment project of co-developers Youngwoo & Associates and RXR Realty is located across the street from the former Nabisco factory at 85 Tenth Avenue. Google signed a lease in November for 180,000 square feet which is expected to double in size upon the federal government vacating their space this year. Department of City Planning (DCP) / 120 Broadway (FiDi) The city agency is reportedly considering a consolidation of approximately 300 employees from 2-Lower Manhattan offices into a 120,000-square-foot space on floors at the tower known as the Equitable Building, pending approvals of an application filed on behalf of the agency by the Department of Citywide Administrative Services. Currently headquartered in the entire 99,000-square-foot city-owned building at 22 Reade Street (City Hall), a move has been prompted by ongoing maintenance issues due to the building s state of disrepair. In addition, the lease would allow the DCP to consolidate under one roof its off-site transportation division currently housed at 2 Lafayette Street (City Hall). P.11

12 Leasing Activity (cont d) Large Vacancy on the Horizon New York Stock Exchange (NYSE) / 20 Broad Street (FiDi) Atlanta, GA-based IntercontinentalExchange Group (ICE), parent company of the NYSE will not be renewing the lease at the longtime location of the exchange. The decision comes in an effort to cut costs since the company s $8.2 billion acquisition of NYSE Euronext in While NYSE will retain its entire space at nearby 11 Wall Street where their stock trading floors have operated for reportedly over 221-years, NYSE Euronext s presence in the financial district will be significantly diminished by close to 400,000 square feet when the current lease at the Broad Street location expires in August 2016; reportedly despite having the option to extend the term of sublease until The entire 542,504-square-foot building is being marketed for lease, seeking large users of 100,000 square feet or greater. The property that is expected to undergo renovations, the building currently under a Vornado Realty Trust-controlled leasehold through 2081 from fee-owner NYSE. Move-out by the NYSE opens the door to ICE further cashing-in on the land that the exchange has owned since 1928, and the opportunity to either sell the land to Vornado or another investor. Large Blocks of Space that became Vacant in the 1st Quarter 28 Liberty Street (Downtown/FiDi) 984,116 square feet as a result of JPMorgan Chase shifting about 2,000 employees to buildings the financial giant owns in Brooklyn s MetroTech Center; having sold the building to Fosun International in Madison Avenue (Midtown/Plaza) 112,489 square feet was reintroduced to the market following a $60 million building upgrade by the Kaufman Organization Broadway (Midtown/Penn Plaza) 183,065 square feet of sublease space spread across entire floors 2, 4-5, due in part to a downsizing by The Jones Group, Inc. which owns several fashion brands including Jones New York, Nine West, and Stuart Weitzman Sixth Avenue (Midtown/Times Square) 117,112 square feet of sublease space spread across entire floors due in part to the downsizing of law firm King & Spalding, LLP; and the relocation of law firm Zuckerman & Spaeder to 399 Park Avenue Notable Move-ins MediaMath / 4 World Trade Center (Downtown/World Trade Center) 106,000 square feet on entire floors The software company will be expanding from approximately 23,000 square feet at 1440 Broadway. As part of the signing, MediaMath was awarded incentives totaling $5.8 million through the federally funded Job Creating and Retention Program offered jointly by Empire State Development and Economic Development Corporation for the anticipated addition of 1,000 new jobs. The asking rent was reportedly in the mid-$70s per square foot. Mount Sinai Medical Center / 150 East 42nd Street (Midtown/Grand Central) 448,419 square feet. The leasehold for the condo unit was purchased, allowing the healthcare provider the merged with Continuum Health Partners to consolidate offices and operations. MUFG Union Bank, N.A. / 1221 Sixth Avenue (Midtown/Times Square) 109,700 square feet spread across 3-lower floors. The subsidiary of Mitsubishi UFJ Financial Group will be consolidating several offices including 1251 Sixth Avenue and 1633 Broadway Sixth Avenue (Midtown/Times Square) Avison Young 40,240 square feet in a sublease from publisher Condé Nast that expires in 2020, relocating from 623 Fifth Avenue. Redeemer Presbyterian Church 40,240 square feet in a sublease from publisher Condé Nast that expires in Barnes & Noble 40,240 square feet in a sublease that expires 2021 P.12

13 Submarket ReCap: Midtown Times Square s Overcrowding Raises Concerns Times Square is notably the city s most successful tourist destination, aglow with glitter and bright lights from its array of digital billboards and lineup of Broadway theatres, that according to the Times Square Alliance experienced one of its highest grosses to date during the last week of December. However, some landlords and office tenants are reportedly concerned about its future outlook and dissatisfied with overcrowding according to a survey conducted by the BID in May. Even theater owners are worried about the decline of New Yorker attendance when looking ahead and predicting an eventual leveling out or even reversal of the current tourism boom, despite recent record sales. Midtown Class A and B Vacancy 7.90% Rental Rate $63.21 per sq. ft. Net Absorption 117,303 sq. ft. Due to the growing popularity of the neighborhood that is roughly bound by 40th- and 53rd Streets to the north and south between 6th- and 8th Avenues, crowds lured to the area s booming retail corridor have become so thick that sidewalk navigation by local office workers has become a challenge making a 30-minute lunch almost impossible. Some area buildings have alleviated the lunchtime dilemma by offering on-site cafeterias and gyms for employees as exemplified by 1540 Broadway at West 45th Street. The true test of the district s desirability by office users will be the pace of leasing activity to fill the large block of space at 4 Times Square that anchor tenant Condé Nast has begun to vacate as the company begins to shift its employees to their new headquarters at One World Trade Center; and the potential relocation of law firm Skadden Arps Slate Meagher & Flom having signed a letter of intent (LOI) to relocate to the planned 1 Manhattan West, 401 Ninth Avenue development. The collaborative efforts of city officials and the state in the 1990s brought new development and increased tenancies, transforming Times Square and the area once known as the red light district. Today, the neighborhood is facing a new set of problems due to its current popularity overcrowding and a swell of costumed characters and vendors. Pedestrian traffic has surged to a reported 480,000 per day compared to the 350,000 per day figure of 2009 in part due to the addition of a series of public plazas that closed down Broadway between 42nd and 47th Streets, doubling pedestrian space. Retail leasing and hotel occupancy have benefited from the ongoing heightened activity, but office leasing rents reportedly continue to remain below 2007 levels while retail rents have quadrupled since Although some of the large firms that settled in the neighborhood during the 1990 resurgence have left, such as multi-media company Bertelsmann and now publisher Condé Nast, Times Square has been able to lure large firms including Microsoft and Yahoo. Sources: P.13

14 Submarket ReCap: Midtown (cont d) Lease Deal Highlights - 1st Quarter 2015 Franklin Templeton & Fiduciary Trust International / 280 Park Avenue (Plaza) The financial services companies will be making what appears to be a parallel relocation as a result of a lease for 126,000 square feet announced in January. The deal will allow Franklin Templeton and its subsidiary to consolidate offices onto a single floor for each company versus being spread across multiple floors within their current offices at 600 Fifth Avenue (Plaza). The headquarter move is expected to take place in 2016 to the SL Green and Vornado Realty Trust property that just underwent a $150 million capital improvement program. Asking rents were not disclosed, but reportedly ranged $95-$130 per square foot last October. CohnReznick / 1301 Sixth Avenue (Plaza) The accounting firm signed a relocation deal in early January for 125,000 square feet at a reported asking rent of $68 per square foot that will see the firm relocate from its current offices at 1212 Sixth Avenue (Plaza) in The building continues to struggle to fill the large vacancy totaling about 470,000 square feet left by the now defunct law firm Dewey & LaBoeuf one-year ago. Bloomberg LP / 919 Third Avenue (Plaza) The prominent financial reporting and media firm leased 150,000 square feet at the building. The new space is located near the company s main headquarters at Bloomberg Tower, 731 Lexington Avenue, having signed a 5-year renewal last year for an 188,608-square-foot space there. In addition, an expansion deal at 120 Park Avenue in 2013 resulted in the company s increased footprint of 68,000 square feet at the Grand Central neighborhood tower in addition to the 482,399 square feet leased in PJT Partners / 280 Park Avenue (Plaza) The investment firm will be significantly increasing their Manhattan footprint as a result of a 100,000-square-foot relocation deal that will see the company relocate from a reportedly 13,000-square-foot office at 40 West 57th Street (Plaza). Details of the lease were not released, but asking rents range $100-$150 per square foot according to sources. Kirkland & Ellis / Citigroup Center, 601 Lexington Avenue (Plaza) The law firm signed an early renewal of its 403,000-square-foot office, extending the lease that was currently set to expire in 2019, by 20-years to run through The company had explored a possible relocation, deciding that an early extension at their existing outpost was most economical option, protecting the company from a further market rise. As part of the deal, the company was able to relocate to higher floors within the building, trading the currently occupied floors for the upper level 45, 46 and 51 floors. Asking rents at the building reportedly range in the high-$60 s-$150 per square foot. P.14

15 Submarket ReCap: Midtown (cont d) MetLife / MetLife Building, 200 Park Avenue (Grand Central) The insurance company will consolidate multiple locations in the city, returning to its namesake home as a result of a 12-year, approximately 430,000-square-foot lease announced in mid-march. The relocation of the company s operations and 1,700 employees will begin in December 2016 and proceed in phases that are expected to be completed by the first half of 2017; vacating both 1095 Sixth Avenue (Penn Plaza-Garment) and 277 Park Avenue (Plaza) as a result. The newly expanded footprint is reportedly the largest block of space at the tower that MetLife has had since acquiring the building back in Currently about 450 employees of the insurance giant are housed in roughly 110,000 square feet; and now MetLife plans to take advantage of the expanded space to create a state-of-the-art environment that will allow for greater collaboration among employees. The deal was reportedly made possible by an agreed upon give-back of 335,000 square feet by existing tenant Barclays PLC who has been looking to downsize. Decisions to consolidate were in part due to simple economics. Rents at the MetLife Building are currently less expensive than at 1095 Sixth Avenue where MetLife has about 350,000 square feet, the majority of which is on the upper floors that are currently commanding asking rents exceeding $80 per square foot according to sources. It was previously reported that MetLife was in discussions with Canadian-based firm Cambridge and Chicago, IL-based Callahan Capital Partners, ownership of the tower also known as 3 Bryant Park, to release them from their existing lease; freeing up the space to re-rent at the higher, current market price. In the event that MetLife subleases the space, due to the escalated rents, the space could be offered to a subtenant at an attractive rate while potentially still netting a profit. The core of MetLife s New York City employees were located at 1 Madison Avenue (Flatiron) since 1958, ultimately relocating to 293,018 square feet at Queens Plaza North in Long Island City in 2002 in a long-term lease with current escalated rent in the $30s per square foot. In 2008, MetLife vacated the Queens Plaza space upon relocation to 1095 Sixth Avenue, subleasing the entire 293,018 square feet to other companies. Fortress Investment Group / 1345 Sixth Avenue (Columbus Circle) The finance firm is expanding its presence at the tower by 44,000 square feet as a result of a recent renewal/expansion deal announced in early February. The signing will increase their total footprint to 200,000 square feet and extend the company s presence at the building another 15 years beyond the current lease expiration at the end of Publicis / 1675 Broadway (Columbus Circle) The global advertising agency signed a renewal/expansion deal that will increase the company s footprint at the tower to 580,000 square feet. Currently housing multiple divisions in 480,000 square feet spread across floors 2-16 and 24-30, the recent expansion of 100,000 square feet will allow the company to consolidate offices of its Publicis Worldwide North America division that will be relocating from 950 Sixth Avenue (Penn Paza) by the end of this year or early The renewal now extends Publicis presence at the building through 2013, where average per square foot asking rents are reportedly in the $70s. WeWork / 1460 Broadway (Penn Plaza/Times Square) The co-working office space provider signed a lease for 180,000 square feet Just about 1 month following the large deal at Downtown s 85 Broad Street. The 19-year lease that reportedly executed on March 31st coincided with the existing tenant law firm Skadden Arps vacating the space used for the company s back-office services. The building owned by the partnership of Himmel + Meringoff and San Francisco, CA-based The Swig Co. recently underwent $25 million in modernization upgrades. HNTB / 350 Fifth Avenue (Penn Plaza) The architecture and engineering services firm signed a 10-year, 5-month lease for 78,000 square feet spread across floors at the Empire State Building. The deal with an asking price in the $60s, will allow the company to consolidate several suites when they relocate from 5 Penn Plaza at the end of the year. Interpublic Group of Companies (IPG) / 5 Manhattan West, 450 West 33rd Street (Penn Plaza) The advertising services company signed a 15-year renewal/expansion deal at the Brookfield Office Property s tower that is undergoing a major renovation as part of the company s Manhattan West project. The 278,037-square-foot lease included an expansion of 52,350 square feet at a reported asking rent of $70 per square foot, of which IPG s subsidiary R/GA will be taking 173,000 square feet this summer as a result of a relocation deal announced last August. Markit / 5 Manhattan West, 450 West 33rd Street (Penn Plaza) The London-based global financial data provider will be consolidating 2 existing Manhattan locations as a result of the 140,000-square-foot lease for the entire 5th floor announced in March. The deal will see the firm increase its footprint upon anticipated relocation from roughly 47,000 square feet at 101 Park Avenue (Grand Central); and 32,000 square feet at the New York Times Building, 620 Eighth Avenue (Times Square). Source: P.15

16 Submarket ReCap: Midtown South Escalated Rents Threaten Long-time Tenants Previously protected by long-term leases, the pool of older tenants in Midtown South are now faced with significantly escalated rent prices as they face impending expirations, continuing to deepen the changing personality of neighborhoods in the submarket. News of several long-time established restaurants that have already been affected by rent spikes has previously made headlines, as international retail chains, banks, pharmacies and other higher revenue businesses fill storefronts. The closure of popular restaurant Pastis exemplified the growing trend, shuttering its doors last February at 9-19 Ninth Avenue, a property located in the Meat Packing Midtown South Vacancy Rental Rate Net Absorption Class A and B 4.85% $70.36 per sq. ft. 249,271 sq. ft. district that is currently undergoing an expansion to make way for national tenant Restoration Hardware. The impact of rising rents has also spread into the office sector and some tenants amongst the ranks of yesteryear are being prompted to consider a move for perhaps the first time in several years. December brought news of The Nation, the magazine publisher with a history that spans close to 150 years to be considering a possible relocation. The company s 16,000-square-foot office spreads across the 8th floor at 33 Irving Place (Gramercy Park) that borders popular Flatiron district in Midtown South, where they have been a tenant since The lease that expires in 2016 is anticipated to demand an asking rent of $62 per square foot which is reportedly about double The Nation s current rent figure, prompting the company to explore options. Until recently 51 Astor Place, the new Class A state-of-the-art tower in Greenwich Village was the bellwether for commanding asking rents in the $80 per square foot range within the predominantly Class B submarket. However, the Ashkenazy tower will not be alone for long; and the redevelopment of 430 West 15th Street (Chelsea), a 99,558-square-foot garage may soon be sitting by it side. The earlier potential hotel redevelopment by leaseholders Atlas Capital Group and Rockpoint Group has shifted to an office conversion that is expected to command asking rents of $80-$100 per square foot. In addition, 675 Sixth Avenue, a 1900s building that underwent renovations in 2013 introduced space on the 3rd- and 4th floors in December at an asking rent of $85 per square foot. P.16

17 Submarket ReCap: Midtown South (cont d) Lease Deal Highlights - 1st Quarter 2015 WebMD / 395 Hudson Street (Hudson Square) The online health information and news provider will be vacating its approximately 100,000-square-foot office at Google s 111 Eighth Avenue a bit sooner than the company s November 2015 lease expiration. As a result of a buyout deal made with Google for an undisclosed sum, WebMD signed a sublease for 147,670 square feet and will relocated to the Hudson Square building. WebMD will be subletting the space that spans the entire 3rd- and 4th floors from test-prep company Kaplan who will be downsizing to a 7-year, 80,000-square-foot sublease from sublandlord Condé Nast at 750 Third Avenue (Grand Central). To secure the deal, Kaplan reportedly provided the often-used concession of upfront cash to help WebMD pay for its state-of-the-art buildout. The tenant improvement (TI) monies will ultimately be recouped over the term of the sublease since WebMD will be paying a rent above the per square foot figure in the $50s that Kaplan was originally seeking. The signing includes an extension option of at least 5-years directly with the building s landlord New York District Carpenters, on top of the remaining 9-year sublease term. Facebook / 770 Broadway (Greenwich Village) The social media company expanded 79,998 square feet onto the entire 15th floor at the tower, reportedly increasing their total footprint to roughly 200,000 square feet since first establishing a presence at the building in The base rent of $105 per square foot for the expansion deal further exemplifies the ongoing escalation of rents in the popular submarket, the company having paid in the low-$70s per square foot rent for space on the 7th- and 8th floors less than 2 years ago. Estée Lauder / West 23rd Street (Flatiron) The cosmetic company will be expanding their presence at the tower as a result of a 100,000-square-foot deal announced in mid-february, increasing their total footprint to 166,000 square feet spread across the 3rd- and 6th-9th floors. Details for the deal were not disclosed, but asking rents reportedly range $69-$75 per square foot. P.17

18 Submarket ReCap: Downtown Downtown s Comeback - 20 Years in the Making The revitalization of Lower Manhattan, one of the city s oldest neighborhoods, brings a story that is as exhilarating as the energy that fills the neighborhood today. The resiliency of Lower Manhattan has allowed it to emerge as one of the hottest neighborhoods in the city today, despite major setbacks that included the September 11, 2001 attacks; significant damage incurred in the aftermath of Hurricane Sandy; and the decentralization of the financial services industry which at one time served as the economic hub of Lower Manhattan. The Downtown Alliance s Lower Manhattan Real Estate Year in Review report released in February offers findings that deliver a positive forecast of continued growth in Downtown Class A and B Vacancy 11.49% Rental Rate $53.89 per sq. ft. Net Absorption -934,075 sq. ft. Revitalization since 1995 has resulted in a total of 15.8 million square feet of office space being repositioned into residential or hotel use; improvements to numerous streetscapes with an increase in open space; and nearly 40 acres of new parkland has been created. Now 20-years later, the Downtown neighborhood boasts: Residential Population has more than tripled in growth since 1995 to the current total of roughly 60,000 residents; Business Diversity has been growing as a major influx in large companies from a mix of industries continue to migrate to the area; Wall Street which once only served as a place where you made a living has now evolved into a live/work neighborhood that claims 41% of employed residents now living in the area as well. Tourism is booming, and the 12.4 million people that visited the district in 2014 continues to prompt a spike in hotel development that resulted in a 20% year-over-year increase in hotel room inventory. By the end of 2015 Lower Manhattan will have added 25 new hotels since Retail Activity has risen significantly, delivering the opening of 76 new stores and restaurants in 2014 as retail leasing continues to fill the over 2 million square feet of new or repositioned retail space that will open or be in development by the end of Accessibility has become increasingly essential over the last 10-years as the number of professionals living within a 30-minute commute to Lower Manhattan continues to rise, reaching 557,000 in The opening of the Fulton Transit Center that will ultimately connect 10 of Lower Manhattan s 12 subway lines and the NJ Transit Path Train has significantly improved Lower Manhattan s accessibility. In addition, the area offers 30 bus routes, 2 PATH routes, 6 ferry terminals, 7 Downtown Connection buses, and 25 Citi-bike docking stations. Private Sector Employment currently totals 318,000, representing a 12% improvement from the 2009 post-recession low; and due to increased leasing activity, is predicted to continue to grow with heightened diversification as significant shifts in business industries continue in 2015 and beyond. Value continues to lure tenants to Lower Manhattan with overall office space asking rents continuing to remain about 15% and 10% below that of Midtown and Midtown South respectively, despite an ongoing upward trend. P.18

19 Submarket ReCap: Downtown (cont d) Office leasing activity 2014 recap of the top 20 deals: The World Trade Center and Brookfield Place accounted for the largest deals during the year for a total of million square feet in deals. One World Trade Center 237,000 square feet leased amongst 10 tenants 4 World Trade Center 149,000 square feet leased amongst 3 tenants Brookfield Place over 1.9 million square feet Tenant Name Location Sq. Ftge. Leased Lease Type Quarter Signed Sector Time Inc. / 225 Liberty Street 669,832 / Relocation Q2 / TAMI - Media Hudson s Bay Co. / 225 Liberty & 250 Vesey Streets 398,712 / Relocation Q3 / Retail Trade Bank of New York Mellon / 225 Liberty Street 346,607 / Move within LoMa Q2 / FIRE - Finance MacMillan Science & Education / 1 New York Plaza 176,121 / Relocation Q3 /TAMI - Publishing Teach for Amerca / 25 Broadway 172,774 / Relocation Q1 / Non-profit Amerigroup Corporation / 14 Wall Street 165,029 / Renewal Q1 / FIRE - Insurance OSP Group / 1 New York Plaza 157,210 / Relocation Q4 / Retail Trade Allied World Insurance Company / 199 Water Street 142,000 / Renewal* Q1 / FIRE - Insurance Jane Street Capital, LLC / 250 Vesey Street 114,000 / Move within LoMa* Q3 / FIRE - Finance NYC Dept. of Investigation / 80 Maiden Lane 111,012 / Renewal* Q2 / Government MediaMath / 4 World Trade Center 106,000 / Relocation Q3 / TAMI - Technology City of New York / 80 Maiden Lane 94,896 / Renewal Q1 / Professional Srvcs Revlon / 1 New York Plaza 90,194 / Relocation Q1 / Retail Trade High 5 Games / One World Trade Center 87,663 / Relocation Q4 / TAMI - Technology Union of Orthodox Jewish Congregations of America / 11 Broadway 75,120 / Renewal* Q2 / Non-profit Hugo Boss / 55 Water Street 73,690 / Relocation Q4 / Retail Trade BCG Brokers / 199 Water Street 71,990 / Renewal Q3 / FIRE - Finance NYC Office of Labor Relations / 40 Rector Street 69,033 / Renewal Q2 / Government Trinity Wall Street / 120 Broadway 68,350 / Move within LoMa Q1 / Non-profit WellCare Health Plans / 1 New York Plaza 68,325 / Relocation Q4 / FIRE - Insurance *Expansion Lease Deal Highlights - 1st Quarter 2015 WeWork / 85 Broad Street (FiDi) The co-working office space provider expanded again, adding 240,000 square feet to the company s continually expanding footprint in the city. The deal that was announced late February will absorb a large block of the longtime vacant space left by Goldman Sachs upon relocating to 200 West Street in Founded in 2010, the company now boasts 14 Manhattan locations plus its first Harlem outpost at 5 West 125th Street which is currently under construction; and 1 location in Brooklyn at 81 Prospect Street in DUMBO, with a 2nd upcoming location at 242 Bedford Avenue, Williamsburg upon new construction delivery. OSP Group / 1 New York Plaza (FiDi) The online apparel retailer signed a 15-year lease for 157,210 square feet that will spread across the entire 13th- and 14th floors at the tower at a starting rent just shy of $42 per square foot. The deal will enable the company to consolidate 2 Midtown locations including 463 Seventh Avenue (Penn Plaza), investing $20 million as a result. As part of the signing, OSP was awarded a $1.8 million grant from New York State s Empire State Development & New York City s Economic Development Corporation in exchange for the creation of 150 new jobs. Sources: P.19

20 Sale Activity Sale Deals to Watch For RXR Realty 6-Building Portfolio Stake Blackstone Group LP, through its core-plus real estate fund, is reportedly in contract to acquire a roughly 50% stake in the office properties that RXR Realty has been acquiring since the Uniondale, Long Island-based company s 2009 debut into the Manhattan market. RXR s purchases predominantly represented deals at sharp discounts for properties where prices were significantly lower than pre-recession values, ultimately improving cash flows for future re-sale to investors seeking steady and less-risky returns. As a result, Blackstone will benefit from the future potential to increase its company s cash flow with the addition of the portfolio that is currently about 90% leased with some tenants paying below-market rents. The sale reportedly values the 5.3 million square feet of commercial space at a combined total of $4 billion; and proceeds from the sale will return almost all of the investors equity, generating an annual return of 25% on their money. While the deal further substantiates the city s real estate market recovery, some analysts comment that price gains may have peaked due to current prices reaching the point where property is now fairly valued. Additionally, a leveling off of price gains could shift to losses if there is not sufficient inflation to push tenant rents higher and offset the eminent rise in interest rates. Included amongst the 6-buildings within the stake offering are: Thousands Quarter-over-Quarter Sale Statistics Thousands Downtown 2,700 1, Q2014 2Q2014 3Q2014 4Q2014 1Q2015 Midtown South 1, TTL Sq. Ftge. WTD Price PSF TTL Sq. Ftge. WTD Price PSF $750 $600 $450 $300 $150 $0 $1,250 $1,000 $750 $500 $250 Starrett-Lehigh Building, 601 West 26th Street (Chelsea) Purchased in 2011 for $920 million; 0 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 $0 340 Madison Avenue (Grand Central) Purchased a 49% interest in the office component for $ million in cash in 2010 plus the replacement of unassumable financing with a new $310 million mortgage that valued the deal at a total of $547 million; Midtown 6,000 TTL Sq. Ftge. WTD Price PSF $1, Sixth Avenue (Flatiron) Acquired an approximately 55% interest in the building for $ million in 2011, exercising an option to acquire the remaining 45% for $225 million in 2012 for a total acquisition price of $ million; 1330 Sixth Avenue (Plaza) Acquired the building for $400 million in Thousands 5,000 4,000 3,000 2,000 1, Q2014 2Q2014 3Q2014 4Q2014 1Q2015 $1,000 $750 $500 $250 Data reflects a sample of sold buildings over 100,000-square-feet P2 P.20

21 Sale Activity (cont d) Sale Deals to Watch For (cont d) Midtown 717 Fifth Avenue / Office Condo (Plaza) Almost immediately on the heels of the acquisition of the famed Waldorf Astoria Hotel, the announcement in mid-february brought news of a another trophy acquisition by the Beijing-based Anbang Insurance Group and a shift to office investment. The insurer is reportedly purchasing the approximately 350,000-square-foot office component of the tower from the Blackstone Group for an undisclosed price. Further details of Blackstone s future intensions for the roughly 110,000-square-foot retail space are not yet known, but it is situated along 5th Avenue s priciest retail corridor that boasts an average asking rent of $3,420 per square foot according to the Real Estate Board of New York s (REBNY) Fall 2014 Retail report. News of the office condo sale was originally reported in October 2013 at an asking price in the neighborhood of $370 million ($1,057 per square foot); further noting that Wharton Properties has a right of first offer. As a result, the sale price is required to be at least 95% of Wharton s offer or Blackstone must offer it again to Wharton Properties at the reduced price. The partnership of Wharton Properties Jeff Sutton and SL Green (minority interest) own the 103,962-square-foot retail units at the base. Major retail tenants include fashion designers Dolce & Gabbana, having signed a 15-year lease in 2011; and Armani which signed a 15-year lease in What singles out the building is that property taxes for the owners is based upon the percentage of space they own, rather than the more typical value of the space in this case, the retail space earns significantly more than the office space; but only pays 25% of the taxes a disproportion that is predicted by industry experts to grow as the current retail rents are reportedly below market rates for the area. Baccarat Hotel, 20 West 53rd Street The Sunshine Insurance Group, a Chinese insurer founded in 2005 has reportedly agreed to purchase the high-end hotel for over $230 million ($2.02 million per key). The 114-key hotel being developed by Starwood Hotels & Resorts Worldwide and Tribeca Associates is expected to open in March. The deal further exemplifies heightened foreign investment by Chinese insurers, taking advantage of loosened restrictions and expected to become a more significant player in U.S. investment. The sale follows Beijing-based Anbang Insurance Group s agreement to purchase the Waldorf Astoria, 301 Park Avenue for roughly $1.95 billion ($1.4 million per key) in November. 590 Madison Avenue (Plaza) The Safra family, a Brazil-based banking family is reportedly near finalizing a deal to acquire an undisclosed minority stake percentage in the 1,007,651-square-foot tower owned by pension fund The State Teachers Retirement System of Ohio (Ohio STRS) and Minskoff Equities. If the deal closes for the offering of as much as a 49% stake that was announced in October, it could value the tower at over $1.5 billion according to sources. Earlier reports predicted that a 49% interest acquisition of the 1980 s building originally developed as IBM s headquarters could fetch in the neighborhood of $735 million ($1,489 per square foot). The building is currently about 86% leased, but the retail space that is currently occupied by watch-retailer Tourneau and auction house Bonhams at below-market rents offers a potential upside down the road. Other New York City investment by the Safra Family in recent years included a 254,000-square-foot condo purchase at 660 Madison Avenue and a minority stake in the GM Building at 767 Fifth Avenue. 230 Park Avenue (Grand Central) RXR Realty is reportedly nearing a purchase of the tower that the partnership of Monday Properties, Invesco, and South Korea s National Pension Service had introduced to the market last year. Originally considering an offering price of $1.5 billion for the million-square-foot tower, it was later lowered to $1.4 billion ($1,158 per square foot). Ownership recently completed a major renovation of the former Helmsley Building, earning the status as the first pre-war building to receive LEED-Gold certification from the U.S. Green Buildings Council. The building that had a value of $635 per square foot back in 2011 when last traded, is expected to fetch about $800 per square foot ($1.1 billion). The building is currently about 93% occupied; and has 70,000 square feet of retail space at its base which reportedly offers expansion potential. Sources: P2 P.21

22 Sale Activity (cont d) Sale Deals to Watch For (cont d) Midtown (cont d) 11 Times Square (Times Square) Norges Bank Investment Management, a division of the central bank of Norway is reportedly in contract to acquire a 40-49% stake in the tower for an undisclosed price from SJP Properties, a fund managed by Prudential Real Estate Investors that began marketing a 49% stake offering in November. The over 1.1 million-square-foot LEED Gold-rated tower built in 2010 is reportedly the newest office tower in the neighborhood, but has been slow to lease according to sources. However, an uptick in activity last year secured a lease of 230,000 square feet with technology firm Microsoft, helping to bring the tower to about 85% occupancy Broadway (Penn Plaza-Garment) Shorenstein Realty Services is reportedly in contract to purchase the ground lease of the 1.1millionsquare-foot tower for $330 million ($300 per square foot). Rents of an undisclosed amount are currently being paid to fee owner Solil Management by Abraham Kamber & Co. which currently controls the master lease; and the Lightstone Group which controls the operating sublease, having acquired it for $122 million in October The building that spans and entire block between West 38th- and 39th Streets is currently about 96% leased and includes 33,000 square feet of retail space. Downtown 123 William Street (Insurance) Real estate investment trust American Realty Capital is reportedly close to acquiring the 569,160-squarefoot building for $253 million ($445 per square foot) from East End Capital and GreenOak Real Estate; paying almost double the $133 million ($234 per square foot) the joint venture had paid in The REIT made a $25.3 million non-refundable deposit to secure the deal. Sale Highlights Midtown Waldorf Astoria, 301 Park Avenue (Plaza) Beijing-based Anbang Insurance Group Co. Ltd. closed in mid-february on the $1.95 billion acquisition of the luxury hotel according to the press release on McLean, VA-based Hilton Worldwide Holding s website. Anbang plans to initiate a major renovation of the historic property in addition to repositioning the upper floors that currently operate as The Waldorf Towers into luxury condominiums a 181-room boutique hotel with some rentable one- and two-bedroom residences spread across the building s top floors includes a dedicated entrance on East 50th Street, its own fitness center and elevators. Closure of the sale that will see Hilton continuing to operate the hotel under a 100-year management agreement, incurred delays after the deal was announced back in October due to a possible investigation by the Committee on Foreign Investment (CFIUS). Proceeds from the sale will allow Hilton to add 5 landmark properties to its owned portfolio via an expected 1031-exchange. 757 Third Avenue (Plaza) Toronto, Canada-based Bentall Kennedy is acquiring the 510,000-square-foot property for $360 million ($706 per square foot) from RFR Realty. The building last traded for $103 million ($202 per square foot) in Renovations totaling $20 million were completed last year; and the building is currently about 98% leased, in part due to a 130,357 relocation deal signed by tax consultant firm Grant Thornton early last year. 100 East 53rd Street formerly 610 Lexington Avenue (Midtown East/Turtle Bay) Chinese bank China Cinda acquired a majority 65.1% stake in the 61-story, roughly 273, ,000 square-foot tower that is currently under construction or $140.5 million ($719-$791 per square foot), joining developers Hines and RFR Realty. China Vanke, a publicly traded developer in China had joined the development team as a new partner early last year, although details of the transaction were not disclosed Broadway / 31 Penn Plaza (Penn Plaza) Westbrook Partners acquired a 96% stake in the 2 properties that have been valued at a total of $650 million for an undisclosed price from Savanna Broadway approximately 464,951 square feet, the building was purchased by Savanna for $135 million in 2010; is currently valued at roughly $356.2 million ($290 per square foot); and about 90% leased. 31 Penn Plaza approximately 444,676 square feet, the leasehold interest was acquired by Savanna for $130 million ($292 per square foot) in 2011; is currently valued at roughly $293.7 million; and about 97% leased. P2 P.22

23 Sale Activity (cont d) Sale Highlights (cont d) Midtown (cont d) 1865 Broadway (Columbus Circle) Real estate investment trust AvalonBay Communities, Inc. has acquired the 156,000-square-foot property for $300 million ($1,923 per square foot) from non-profit American Bible Society; and plans to demolish the existing structure to make way for a residential development. Marketing of the property began last March, reportedly attracting the interest of about 150 investors resulting in a total of 25 bids. American Bible has owned the building since 1966, paying $5.5 million ($35 per square foot), and will be consolidating staff from the city and Valley Forge, PA into a new 10,000-square-foot office in Philadelphia, PA. 321 West 44th Street (Clinton-Hell s Kitchen) Japanese investment firm Jowa Holdings has acquired the 227,949-square-foot building for $165 million ($724 per square foot) from East End Capital, paying nearly 75% above the $95.5 million ($419 per square foot) figure that was paid in East End Capital will retain a small stake in the 10-story property that underwent renovations in 2013, successfully bringing the occupancy up to 98% with a rise in average rents reportedly from the low-$30s to over $50 per square foot. The sale marks the 3rd reported acquisition by Jowa Holdings and a further sign of a rising trend of Japanese investment in the city, having purchased 440 Ninth Avenue (Penn Plaza) in 2013 for $211.5 million ($530 per square foot); and more recently the 2-building portfolio of West 25th Street / 40 West 25th Street. Midtown South West 25th Street / 40 West 25th Street (NoMad) Tokyo, Japan-based Jowa acquired the 2-building portfolio totaling 208,384 square feet for $210 million ($1,008 per square foot) from the partnership of DivcoWest and Brickman Real Estate in January, at a price that was almost double the combined $111 million ($533 per square foot) paid just 2-years ago having paid $55.4 million for West 25th Street; and $55.6 million for 40 West 25th Street according to city records. The 12-story properties are located at the north end of Madison Square Park in a neighborhood that has been undergoing a revitalization as several high-end residential towers begin to fill the area West 24th Street (Flatiron-Chelsea) Brooklyn-based MJ Orbach Associates has acquired the 11-story, 115,000-square-foot building for $92.5 million ($804 per square foot) from the Kaufman Organization, fetching close to double the $55.5 million figure paid in December A $2.5 million capital improvement program that the building underwent following the 2012 purchase reportedly accounted for the significant value increase, and a rise in rents from the $30 per square foot range to close to $65 per square foot in some cases with a current occupancy of about 96%. Kaufman began marketing the building last September at an asking price in the neighborhood of $95 million ($826 per square foot). A 5-year, $52.5 million loan was reportedly secured by MJ Orbach at an interest rate of 3.75% from lender Signature Bank to complete the transaction that closed on February 23rd. 34 West 17th Street (Chelsea) The Lower East Side-based development firm Atkins & Breskin acquired the 10-story, 25,000-square-foot building for $20 million ($800 per square foot) in a deal that marks the latest of sales amongst the former 14-building F.M. Ring Portfolio by Extell Development. The building that is currently vacant was introduced to the market back in June and will be repositioned into fullfloor residential condominiums. As part of the portfolio purchase early last year, Extell had paid $19.5 million ($780 per square foot) for the property that has no additional air rights. 837 Washington Street (Chelsea-MePa) TIAA-CREF acquired the 6-story, 63,131-square-foot office and retail building that was completed this year for roughly $ million ($3,010 per square foot) from co-owners Taconic Investment Partners and Thor Equities, the latter having purchased a 75% stake in 2011 for $55 million. The deal comes just 2 months after ownership began marketing the property to a select group of investors. Located in the heart of the Meatpacking district near the new Whitney Museum, Google s 111 Eighth Avenue, and Apple s 401 West 14th Street store, the building is totally occupied by South Korean technology company Samsung Electronics N.A. in a 10-year deal with two 5-year renewal options with 15-months notice and annual rent escalations. 331 Park Avenue South (Flatiron) MetroLoft has purchased the 44,900-square-foot building for $39.5 million ($880 per square foot) from Extell Development. The deal marks the 2nd acquisition by the company of a property amongst the 14-building former F.M. Ring Portfolio, having purchased 114 East 25th Street in December for $36.5 million ($702 per square foot). Extell had paid $34 million ($757 per square foot) last year for the building that lends itself to floor-through apartments, prompting some sources to anticipate that it will likely be repositioned into a residential condominium. Sources: P2 P.23

24 Sale Activity (cont d) New to the Market 850 Third Avenue (Plaza) San Francisco, CA-based Shorenstein Properties has introduced the over 600,000-square-foot building to the market through its $2.1 billion real estate fund Fund Nine, which at the time of purchase in 2008 was valued at over $300 million as part of a $930 million 2-property portfolio acquisition. Media firm Discovery Communications is the largest tenant in the building, currently occupying over 165,000 square feet. A $170 million refinance loan was secured in August from MetLife. 575 Lexington Avenue (Plaza) Normandy Real Estate Partners introduced the 35-story, 740,000-square-foot building to the market mid-february, sources expecting a sale to fetch over $400 million ($541 per square foot), representing an over 11% increase above the $360 million ($486 per square foot) that was paid in Normandy had taken advantage of the market slowdown following the economic downturn, acquiring the building at $40 million below the 2006 purchase by Silverstein Properties and the California State Teachers Retirement System (CalSTRS) at the height of the last property boom. 142 West 36th Street / 234 West 39th Street (Garment) Co-owners Herald Square Properties and the Davis Cos. have introduced the 2-property portfolio totaling just under 210,000 square feet to the market at an asking price of $125 million ($595 per square foot). The sellers are hoping that investors will be attracted to the properties which are located just north of Penn Station due to the increase in leasing activity as tenants are priced out of Midtown South, and some shifting their search further north. Lease expirations of about 75% of the total space is reportedly due expire in 5-years, allowing the new owner to capitalize on the uptick in rents the neighborhood is currently seeing. The sale also includes 30,000 square feet of unused development rights at the 91,466-square foot building on West 39th Street that offer future potential expansion. P2 P.24

25 Sale Activity (cont d) New to the Market (cont d) 4-Building Hudson Square Portfolio (Hudson Square) Trinity Real Estate will be ground leasing the 4-properties that sources predict could fetch $1.25 billion or more as rents in the area continue to rise. The proposal deadline was mid-march for the portfolio that is about 98% leased includes One Hudson Square, 75 Varick Street, a 1,173,231-square foot building; 200 Hudson Street, a 383,841-square-foot building; 205 Hudson Street, a 401,083-square-foot building; and Vestry Street, a 60,257-square-foot building. One Hudson Square 200 Hudson Street 205 Hudson Street Vestry Street 200 Lafayette Street (SoHo) General Growth Properties is offering the fully leased, 85,000-square-foot office component for sale that some sources predict will fetch in the neighborhood of $120 million ($1,412 per square foot). General Growth reportedly plans at this time to retain the 30,782-square-foot retail component that spans the entire lower level, ground and 2nd floor of the building; and is currently in late-stage negotiations with San Diego, CA-based luxury home décor chain Pirch (formerly Fixtures Living) to lease the entire space. The building was acquired in October 2013 for $ million ($1,229 per square foot) from the partnership of Kushner Cos. and CIM Group who had paid $50 million ($413 per square foot) about 18 months earlier, investing an additional $20-$30 million in renovations that resulted in a 15-year lease plus (3) 5-year options for the entire building by JCPenney 6-months later. A subsequent downsizing by the department store chain brought yogurt-maker Chobani to the building, absorbing the entire 33,560 square feet vacated by JCPenney in a 10-year deal announced in February. 250 Lafayette Street aka 89 Crosby Street (SoHo) T.F. Chen Cultural Center introduced the 6-story, 16,766-square-foot mixed-used building to the market in February at a reported asking price of $40 million ($2,386 per square foot). The existing structure that the nonprofit has owned for 20 years is a mix of office, retail and residential. Recent sale activity in the area brought news of a $25 million ($1,359 per square foot) acquisition of another 6-story, 18,400-square-foot mixed-use building by GreenOak Real Estate in January. 100 Wall Street (FiDi) Real estate investment firm Savanna has introduced the 480,000-square-foot tower to the market that sources predict will fetch in the neighborhood of $250 million ($521 per square foot). Savanna had acquired the property through a foreclosure auction from Lehman Brothers Holdings in 2011, assuming the $ million senior loan and a $7.5 million mezzanine debt; followed by an additional $24.7 million investment for renovations at the building that is now currently about 94% leased. P2 P.25

26 EB-5 Foreign Investor Program: September 2015 Renewal Looms The Federal government s EB-5 foreign investor program has become a widely used finance arm for many of the city s developers, offering nearly interest-only non-recourse 1 funds. As the impending September 2015 renewal looms, some sources comment that developers may need to look elsewhere for lower-cost financing as doubt has risen as to whether or not Congress will reauthorize another 3-year term for the 10th time since the program s inception in Anticipated political obstacles loom due to the shift of a more Republican-controlled Congress that has reportedly been less supportive of the program in the past. As the program comes up for review, some of the language and guidelines are anticipated to be tweaked, such as: A possible decrease in the number of visas to be approved that currently stands at 10,000 each year; A reconsideration of the annual limit parameters to investment volume; A re-evaluation of the 50% reduction of the threshold investment for projects within the Targeted Employment Areas (TEA) 2, requiring only a $500,000 investment that as a result has generally accounted for the only projects getting funding. The arising issue which then leads to the question as to whether or not to federalize the process of certifying an area as a TEA that is currently controlled by states. The number of developers utilizing the program continues to grow. It was recently announced that Victor Homes is pitching preliminary renderings of the planned 51-story, 250,065-square-foot condominium tower at 281 Fifth Avenue (NoMad) to foreign investors through the federal EB-5 foreign investor program. The acquisition from the partnership of Kushner Real Estate and Ironstate Development Company mid-2014 for $99 million included the existing 3-story site of a former deli in addition to a package of development and air rights previously amassed by the sellers. Lender Options Continue to Grow However, simultaneously to concerns rising about the future of the EB-5 foreign investment program, the lending market place is adding a number of new players. The growing roster of new entrants are offering creative borrowing structures and aggressive pricing as New York City s attraction by investors continues an upward trend due to current low interest rates and the city s strong real estate market according to some sources. While traditional lenders have become more conservative for some of the riskier projects during the current construction boom, an increase in lending capital is coming from several sources. Private equity funds, debt funds, and other non-traditional lenders including insurance companies, sovereign wealth funds, and pension funds, which need to generate yields in order to meet their own fiscal obligations, are becoming key players as they redirect capital away from low yielding U.S. Treasury bonds, money market funds, and the stock market which is at an all-time high. As the strength of the real estate market holds steady, it has become an essential component of a well-diversified portfolio. 390 Madison Avenue - Rendering 1 Non-recourse loan is a secured loan that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender can seize the collateral, but the lender s recovery is limited to the collateral. 2 Targeted Employment Area is an area which, at the time of investment, is in a rural area or an area with an unemployment rate at least 150 percent of the average national unemployment rate. Sources: P2 P.26

27 Lender Options (cont d) Crowdfunding the online platform has been increasing in popularity, now reportedly boasting about 50 companies throughout the U.S. since the JOBS Act of 2012 eased federal restrictions on fundraising for small companies. In addition to the many start-ups in recent years, larger more established firms are joining in. It has been estimated that amongst the roster of publicly cited real estate projects, the crowdfund platform has raised over $135 million nationally of which the city accounted for about 50%. In addition to small investors, the platform is seeing an increase of institutional participants that are taking advantage of the convenience of the online technology allowing them to select specific assets while simultaneously offering a partner base for the city s developers. Having made significant growth strides, crowdfunding s future growth could be hindered by a market downturn or changes in regulatory guidelines which are currently being reviewed. Regulators could raise the dollar value threshold required to become an accredited investor from the current $1 million minimum to $5 million, which would significantly diminish the pool of investors. Carlton Group The global firm which specializes in equity and debt placement launched its own accredited equity crowdfunding program in mid-2014; and has successfully generated some large transactions including a $240 million crowdfund campaign for 125 Greenwich Street which is being redeveloped into a residential condominium by co-developers Michael Shvo and Bizzi & Partners. Fundrise The Washington, D.C-based crowdfund platform launched in 2010 that boasts itself as the pioneer to taking commercial real estate investment public via the online platform, recently initiated a campaign offering investors an opportunity to buy into a $2 million share of the $1.6 billion in tax-free bonds issued to finance the further construction of 3 World Trade Center. CityFunders A new platform being launched that has secured a $40 million credit-line, allowing campaign capital to be arranged prior to the crowdfunding s completion. Bridge Loan Boom Lenders of these typically shorter-term loans have met with increased demand due to rising property values in the city resulting in buyers escalated need for short-term financing as they race to acquire assets, recognizing that the process to secure a bridge loan moves along much faster than that of a conventional loan. This trend has been further heightened by the strong sale market and the flipping of properties to turn a quick profit grows in popularity. In addition developers have turned to bridge loans to finance the growing rise of property repositioning in neighborhoods that have begun to revitalize in recent years. The rising demand for short-term capital has reportedly led to a growing roster of bridge-lending newcomers including Trevian Capital, a Manhattan-based firm launched in 2013; Thorofare, a Los Angeles-based firm that launched a $400 million bridge-loan fund last September; and Cantor Fitzgerald which began raising equity for a new bridge-loan fund in the neighborhood of $400 million. Commercial Mortgage-Backed Securities (CMBS) Sharply rebounding in recent years, 2014 resulted in a total of $13.3 billion CMBS loans, rising from the $1.1 billion in 2010 after the market came to a halt in The CMBS rebound was in part due to economic and real estate market improvements prompting insurance companies and commercial banks to ease lending standards. At its peak in 2007, $230 billion in CMBS were issued, of which the majority were 10-year balloon loans that will be maturing in 2017, creating a true test for the strength of the capital markets as property owners begin to seek refinancing. Sovereign Wealth Funds The state-owned investment funds are reportedly making a renewed resurgence into the city s real estate market in their quest for higher yields resulting in attracting some investments at very high figures, exemplified by: Abu Dhabi Investment Authority that totals $773 billion in assets, partnered with Related Companies and the Government of Singapore in the $1.3 billion acquisition of 10 Columbus Circle last year. Norway Government Pension Fund - Global that totals $884 billion, made its investment debut in the U.S in 2013 and plans to increase its real estate portfolio to about $11 billion with investment reportedly focused in New York, Boston and Washington, D.C. In 2014, the sovereign wealth fund paid $1.5 billion for a 45% stake in 601 Lexington Avenue. P2 P.27

28 Lender Options (cont d) Foreign Investment Statistics compiled for 2014 reportedly boasted a total of $9.8 billion in foreign investment in the city s real estate market amongst the 6 largest foreign investors with Canada leading the way. Foreign investment is poised to grow in part due to eased government regulations in some countries; U.S. prices per square foot are relatively lower compared to Tokyo, London and Moscow; and U.S. financing rates currently remain attractive. Seeking more control of their investments, there has been an increase in direct investment in New York projects, rather than investing in private equity funds. Canada - $3.4 billion; China - $3.35 billion Singapore - $1.6 billion Norway - $1.1 billion; Qatar - $0.77 billion Japan - $0.68 billion Investment activity from China has been robust in recent years as real estate investment in Asia grows increasingly unattractive. A more significant rise of dollars flowing into the U.S. from Chinese investors has been due to a combination of factors including the rapid appreciation of their currency Yuan, the slowing Chinese economy, high property prices and complicated ownership rules in China. More significantly, looser restrictions that went into effect in 2012 streamlining approval procedures for all outbound investment cut wait time for approvals in some cases from 6-months to 1-month. Chinese private equity is predicted to also start finding its way into the U.S., previously prohibited by Chinese regulations from investing abroad. Insurance companies, which reportedly grew 13% between 2008 and 2013, have money to invest and are already making their debut in the U.S. with investments abroad projected to increase to reportedly around $205 billion in 2018; and long-term investment strategies will give them a competitive edge against competitors in New York. Heightened involvement in New York City has led to a growing number of offices being established in the city: Xin Development Group International Inc. established an office at 150 East 52nd Street in State Administration of Foreign Exchange (SAFE) which manages China s currency reserves opened a 2nd office in the city on 5th Avenue in 2013 to facilitate diversification of U.S. investments. China Investment Corp., a $600 billion sovereign wealth fund is rumored to be relocating its current North American headquarters from Toronto, Canada to New York. On the lending side, Chinese banks are becoming a growing player as a financing source for U.S. real estate, exemplified by the Bank of China which has become an active lender in recent years. It has also been reported that the Chinese-American East West Bank which has $28.7 billion in assets under management issues $8.6 billion in U.S. commercial real estate loans, up 20% from 2013, equating to about 10-12% of the bank s business. Sources: P2 P.28

29 Lending - Tel Aviv Stock Exchange Growing U.S. Player A growing number of development projects in the city are being financed in part by funds raised through the Tel Aviv Stock Exchange (TASE). Amongst the growing list that includes Extell Development and Brookland Capital, the Lightstone Group successfully raised $120 million as a result of the sale of the unsecured corporate bonds on the Israeli bond market, after considering the offering that was originally announced last summer. The company plans to use the proceeds to fund future growth with several development projects in the pipeline. Cheaper borrowing costs and investor demand have reportedly created a surge in activity that totaled $14.6 billion in company bond sales through November 20, 2014, representing a 67% spike in volume over the same period in More recently it was announced that Related Companies and GFI Capital Resources Group are the latest U.S. firms to tap into the Israeli bond market to raise capital, respectively issuing draft prospectuses in February in an effort to raise an estimated aggregate sum of $200 million on the TASE roughly $113 million and $100 million respectively. In addition, developer JDS Development Group is preparing a prospectus to raise about $40-$55 million. Other developers tapping into TASE include: Moinian Group was considering a $500 million bond issue according to a press release in October; Extell Development reportedly raised about 945 million shekels, equating to about $271 million at the time of the June announcement; Brookland Capital raised about 120 million shekels, equating to about $34.5 million at the time of the June announcement P2 P.29

30 Lending Reported Loans Secured 1st Quarter 2015 Metlife Building, 200 Park Avenue (Grand Central) Tishman Speyer secured a $1.4 billion refinance loan from lenders Bank of America and Wells Fargo & Co, valuing the over 3 million-square-foot tower at reportedly close to $3 billion. Details of the loan were not disclosed, but the funds are expected to pay down a mortgage secured upon the company s $1.72 billion acquisition of the building from MetLife in Both banks plan to slice the 10-year debt into bonds and sell them to investors and 545 Fifth Avenue (Grand Central) The Moinian Group secured a $310 million CMBS loan to refinance the adjacent buildings from lender Morgan Stanley. The 10-year deal is at a fixed interest rate below 4%; and replaces a previous 2006 debt from lender Column Financial. The properties recently underwent renovations boasting 2014 year-end signings by the National Basketball Association (NBA) for 23,957 square feet as its flagship location; and global conference-planning firm IQPC s renewal and expansion deal for 28,340 square feet. 685 Third Avenue (Grand Central) The joint venture TIAA-CREF and Australia s sovereign wealth fund Australian Government Future Fund secured a $190 million loan at a loan-to-value (LTV) ratio of 54% from MetLife. Funds from the 5-year debt will go towards additional upgrades to the building, have completed a capital improvement plan last year. The 559,755-square-foot building last traded for $190 million ($339 per square foot) upon purchasing from pharmaceutical firm Pfizer in 2010, with a subsequent 49.9% stake sold to the Australian fund for just over $100 million ($358 per square foot) in Fifth Avenue (Times Square) An affiliate of the Riese Organization secured a $30 million loan from lender Oritani Bank at an interest rate below 4% according to sources. The 5-year debt the comes with a 5-year extension option and a 30-year amortization schedule will replace an existing New York Community Bank loan and provide additional funding for the property. The 13,580-square-foot building owned by the Riese Organization currently houses their executive offices with sports apparel retailer Oakley on the ground, 2nd, and lower levels due to a 10-year lease for the 6,800 square feet signed in and 12 East 33rd Street (Murray Hill) Dalan Management secured a 4-year, $25 million mortgage from lender Bank of the Ozarks at an interest rate of 375 over LIBOR with a floor of 4% according to sources. The $36 million ($612 per square foot) acquisition of the two 12-story, 29,400-square-foot buildings from Adee Associates was part of a 1031 exchange after selling (3) Washington Heights buildings last November for $16 million. While no immediate repositioning plans were announced, the 2-building portfolio offers the future potential of a residential or hotel conversion; and includes a total of 4,000 square feet of retail space that is currently occupied by a nail salon and dry cleaner. P3 P.30

31 Lending (cont d) Loans Secured (cont d) West 18th Street / 500 West 19th Street aka 131 Tenth Avenue (Chelsea-High Line) The Related Companies secured a $125 million loan for the acquisition of the 2-adjacent parcels purchased for $205 million in December an estimated $ per square foot for the development assemblage. Situated near the Chelsea Piers and adjacent to the elevated High Line Park, the sites are comprised of an existing 46,000-square-foot low-rise garage building on 18th Street; and a parking lot that spans the full block between West 18th and 19th Streets along 10th Avenue. Last May it was reported that Related intended to construct a residential tower 250 feet in linear height which would require the purchase of air rights to develop taller than the 125-foot height cap for the High Line district, however development plans have yet to be reconfirmed. 428 Broadway (SoHo) The Chetrit Group refinanced the 57,000-square-foot building known as the Suspenders Building in January, securing a $70.5 million mortgage from Connecticut-based lender Jeffries LoanCore. Funds reportedly appear to replace a $57.9 million loan from PB Capital issued in 2012 that was backed by 5 of Chetrit-owned properties, and transferred to Union Bank in 2013 upon the sale of PB s commercial real estate unit. 99 Wall Street (FiDi) The Claremont Group secured a $52.4 million floating-rate loan from lender Cornerstone Real Estate Advisers in September for the conversion of the 25-story, 91,357-square-foot office building into a high-end residential condominium. A termination clause in the existing tenants leases was exercised by Claremont to make way for redevelopment. 140 West Street (World Trade Center) The partnership of Magnum Real Estate and CIM Group secured a 3-year, $390 million loan from lenders New York-based istar Financial and Stamford, CT-based H/2 Capital. Funds from the LIBOR-based loan will be applied towards the repositioning of the top 21-floors of the Verizon Building into 166 luxury residential condominium units. Recently re-branding the project as 100 Barclay, the block of approximately 713,562 square feet was purchased from Verizon in 2013 for $274 million ($384 per square foot); more recently acquiring the 40,000-square-foot retail component for about $40 million ($1,000 per square foot) in November and 44 West 66th Street (Upper West Side) Extell Development secured an 18-month, $96 million loan that includes a 6-month extension option from lender Natixis Real Estate. The funds will be applied towards closing out a previous financing for the acquisition of 44 West 66th Street, which Extell purchased from religious group Congregation Habonim for $45 million; and West 66th Street spread across 2 tax lots which were purchased by New York-based Megalith Capital Management for $85 million last March. The properties are to be combined into a single development assemblage through a joint venture of Extell and Megalith. Project plans have yet to be announced for the 3-parcel property that can accommodate a total of 149,880 buildable square feet 75,000 square feet at 44 West 66th Street; and 74,880 square feet at West 66th Street Third Avenue aka East 62nd Street (Upper East Side) White Plains, NY-based Acadia secured a 6-year, $42 million floating-rate mortgage from German bank Helaba for the acquisition of the retail, office, and garage condominium situated at the base of the residential condominium The Wellington. The purchase reportedly through the company s Strategic Opportunity Fund IV platform totaled $ million for the 3 condominium units; and although the total square-footage was not announced, the sale closed January 28th per city records, paying $ million for the 2-level retail condo; $14 million for the 2nd floor office space; and $22 million for the underground garage. Additional funds from the debt will be used to reposition the space. 75 Maiden Lane (FiDi) A.M. Property Holdings Corp. secured a $46.5 million refinance loan at an interest rate in the mid-3% range from lender New York Community Bank. The 7-year debt refinancing the 12-story, 172,040-square-foot building included a 5-year extension. Funds will replace a $31 million commercial mortgage-backed security (CMBS) due to expire in 2016 provided by Column Financial in Financing Being Sought West 17th Street aka Tenth Avenue (Chelsea-High Line) HFZ Capital Group is reportedly in talks with SL Green Realty Corp. and JPMorgan Chase to secure a mortgage that sources estimate could be about $500 million for the $870 million ($1,088 per buildable-square-foot) acquisition of the entire square-block site. Currently an operating parking lot, HFZ is reportedly planning an approximately 800,000-square-foot mixed-use project that will include a hotel, residential condominiums, and ground level retail. In January, it was announced that the developer was in contract to purchase the site that is bound by West 17th- and West 18th Streets to the north and south, and 10th Avenue and the West Side Highway to the east and west from New Jersey-based Edison Properties. P3 P.31

32 Notable Transactions Lease Address Submarket District Sq. Ftge Tenant 85 Broad Street Downtown FiDi 240,000 WeWork 1 New York Plaza Downtown FiDi 157,210 OSP Group (relocation) 395 Hudson Street Midtown South Hudson Square 147,670 WebMD (sublease/relocation) West 23rd Street Midtown South Flatiron 100,000 Estée Lauder (expansion) 770 Broadway Midtown South Greenwich Village 79,998 Facebook (expansion) 1675 Broadway Midtown Columbus Circle 580,000 Publicis Groupe (renewal/expansion) 601 Lexington Avenue Midtown Plaza 403,000 Kirkland & Ellis (extension) 450 West 33rd Street Midtown Penn Plaza 278,037 Interpublic Group of Cos. (renewal/expansion) 1345 Sixth Avenue Midtown Columbus Circle 200,000 Fortress Investment Group (renewal/expansion) 919 Third Avenue Midtown Plaza 150,000 Bloomberg LP (expansion) Sale Address Submarket District Sq. Ftge Sold Price Purchaser 180 Maiden Lane Downtown FiDi 1,090,000 $470,000,000 Murray Hill Properties & partner 315 Park Avenue South Midtown South Flatiron 320,000 $353,841,114 Columbia REIT (315 Park Ave So LLC) 386 Park Avenue South Midtown South Flatiron 260,000 $201,500,000 Heng Sang Realty (Hong Kong) 24-30, 40 West 25th Street Midtown South Chelsea 208,384 $210,000,000 Jowa Holdings (Japan) West 24th Street Midtown South Chelsea 115,000 $92,500,000 MJ Orbach Associates 1095 Sixth Avenue Midtown Times Square 1,200,000 $2,250,000,000 Ivanhoe Cambridge Callahan Capital Partners 757 Third Avenue Midtown Plaza 510,000 $360,000,000 Bental Kennedy (Canada) 24 West 40th Street 45- and 145 West 45th Sts. Midtown Penn Plaza Times Square 280,611 $218,000,000 Thor Equities 321 West 44th Street Midtown Clinton/Hell s Kitchen 227,949 $165,000,000 Jowa Holdings (Japan) 1865 Broadway Midtown Columbus Circle 156,000 $300,000,000 AvalonBay The Manhattan Office Market Report is produced quarterly by: Jamie Mason Director of Marketing & Research ABS Partners Real Estate, LLC P3 P.32

33 For More Information Please Contact: Park Avenue South, 10th Floor, New York, NY We Build Partnerships That Last Although the information furnished is from sources deemed reliable such information has not been verifi ed and no express representation is made nor is any implied as to the accuracy thereof. Sources: CoStar Group, The Real Deal, Crain s New York Business, The New York Times, New York Post, New York Yimby, and Commercial Observer