Manhattan Office Market

Transcription

1 Manhattan Office Market 3 RD QUARTER 2015 REPORT A NEWS RECAP AND MARKET SNAPSHOT Pictured: 162 Fifth Avenue

2 Looking Ahead City s Commercial Rent Tax: Small Business Exemption Prompts Mixed Response The introduction of a bill in May that would exempt small businesses from the city s controversial commercial rent tax, while requiring more revenue from large businesses has triggered mixed response. The much criticized tax is imposed upon all commercial tenants in Manhattan that pay over $250,000 in rent and are located below 96th Street (excludes non-profits and businesses near the World Trade Center); and while many would like to see the tax levy totally abolished, the new bill would raise the rent threshold to $500,000. The bill proposes that the loss in revenue would be reclaimed by raising the rate of the tax levy for businesses paying over $3 million in annual rent. Some business leaders anticipate that the increased tax burden would further threaten middle-class jobs as companies such as JPMorgan Chase, which is rumored to be nearing a deal across the Hudson River to move 2,150 middle-class jobs to New Jersey, lured in part by big tax incentives. Other alternative suggestions to offset the loss of revenue from the rent tax should it be totally eliminated were to simultaneously undergo a property tax overhaul, increasing the property tax revenue collected from high-income apartment owners which is reportedly rarely more than 1% of the market value of their homes. Mayor de Blasio s mansion tax proposal that was intended to accompany reform of the 421-a Tax Exemption Program fell through the cracks in Albany; and a controversial proposal for a pied-à-terre tax on units worth more than $5 million, that would require approvals by state lawmakers, was recommended late last year by the Fiscal Policy Institute. The current commercial rent tax code results in a double taxation for affected businesses since it applies to all payments tenants make to landlords under the terms of their lease, which in many cases already includes the property taxes incurred by the landlord. As a result, the current tax code creates a double dipping tax levy collecting from both the building owners and the tenants whose lease terms already include a share of the same property tax being paid directly to the city by the landlord. The city expects to collect $770 million in revenue for the 2016 fiscal year, representing close to 1% of the city s entire $78.5 billion budget; and while total elimination of the commercial rent tax would significantly diminish city revenue, it is hoped that the bill will prompt further discussion. P2 P.2

3 In the News New 7-Subway Station Entrance 7-Subway Extension Opens on the Far West Side The city s 469th subway station located at 34th Street and 11th Avenue opened on Sunday, September 13th. The long awaited extension of the 7-subway line which intersects 18 out of the total 22-lines is the first new station to open in 25-years. Ridership was expected to bring over 30,000 to the Hudson Yards neighborhood that is currently in different stages of planning and construction; but has currently only seen the activity of about 7,000 riders per day, a figure that the MTA believes will change as development in the Hudson Yards progresses; and the High Line park entrance at 34th Street which has been temporarily closed reopens. The project which broke ground in 2007 was originally slated for a December 2013 completion. The cost of $2.4 billion which was funded by the city under the Bloomberg administration had escalated from the original $2.1 billion; but the elimination of a proposed intermediate subway station at 10th Avenue and 41st Street kept costs from reaching what would have been a significantly escalated figure of $2.9 million. However, despite completion delays and cost overruns, the opening of the new station received enthusiastic response from many city residents. New 7-Subway Station - Entry Views New 7-Subway Station - Platform Views P3 P.3

4 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 fell to 5.3% (not seasonally adjusted) at the end of August; in comparison to 6.7% at the end of the 2nd quarter. Year-over-year figures resulted in a 25.35% improvement from the 7.3% rate of August Unemployment on the National level fell to 4.9% at the end of August, decreasing 5.45% from the 2nd quarter figure of 5.0%. Year-over-year figures resulted in an 15.52% improvement from the 5.8% rate of August 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 9,600 jobs for the 3 month period between May 2015 and August Year-over-year figures resulted in a 2.6% gain of 91,400 jobs; in comparison to 2.1% and 2.3% year-over-year growth for New York State and the nation respectively. Educational and Health Services continued to lead the way, followed by Leisure & Hospitality. While job numbers continue to rise, the rate of increase was comparatively more moderate than that of the previous year s 3.9%. Weekly Wages Overall weekly wages in New York City averaged $2,847 at the end of the 1st quarter 2015, representing a positive 3.6% improvement year-over-year according the recent report released by the U.S. Department of Labor. The Leisure & Hospitality sector boasted an over 3.1% increase year-over-year at the high, in contrast to the Financial Services sector where wages fell 3.55%. Vacancy for Class A & B office space fell 0.34% over 2nd quarter s 8.01% figure, resulting in an 7.98% vacancy at the end of the 3rd quarter. Downtown accounted for the strongest quarter-over-quarter improvement, shrinking 3.12% resulting in a vacancy of 10.25% the low for Midtown continued a downward trend at a nominal decline of 0.28% resulting in a vacancy of 7.75%. Only Midtown South incurred a reversal as vacancy rose 11.41% to 4.94% quarter-over-quarter in part due to the introduction of the entire 138,000 square feet at 125 West 25th Street, a property that had been taken off the market in 2013 for a full building renovation. Absorption closed the 3rd quarter at positive 109,847 square feet, representing a more moderate improvement over 2nd quarter s sharper climb of positive 1,378,046 square feet. Both Midtown and Downtown s positive absorption of 59,985- and 359,831 square feet respectively was able to offset Midtown South s negative 309,969-square-foot figure. Rental Rates rose more sharply in the 3rd quarter. The overall weighted average asking rent for Class A & B office space of $61.17 per square foot represented a 2.68% increase over the previous quarter, as the rate of increase jumped from the more moderate 042% in the 2nd quarter. Class B weighted average asking rents of $57.94 per square foot accounted for the more significant increase of 5.23%, while Class A asking rents of $62.22 per square foot saw a 2.34% rise representing a rebound of 2nd quarter s moderate reversal of 0.75%. 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 3Q2004 3Q2005 3Q2006 3Q2007 NYC Yr-over-Yr Job Statistics 900, , , , , , , , , , ,500 NYC Unemploy Rate 677, ,500 3Q ,900 3Q ,400 3Q2010 US Unemploy Rate 409,200 3Q2011 Aug 2014 Job#'s 1Q2014 Weekly Wage 425,900 3Q ,500 3Q ,700 3Q2014 $0 Aug 2015 Aug 2015 Job#'s 1Q2015 Weekly Wage $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 Source: NYS Department of Labor and US Department of Labor, Bureau of Labor Statistics Sources: P4 P.4

5 Class A & B Statistics At A Glance 3rd Quarter 2015 Vacancy WTD Average Asking Lease Rent Net Absorption Downtown 5.07% 11.90% Downtown $57.17 $43.98 Downtown Midtown South 2.58% 5.71% Midtown South $71.07 $85.88 Midtown South Midtown 6.29% 8.13% Midtown $54.06 $67.32 Midtown % 5.00% 10.00% 15.00% $0.00 $50.00 $ Class A Class B Thousands (500) Quarter-over-Quarter Vacancy Lease & Sublease Sq. Ftge Net Absorption Net Absorption Class A Class A Class B Lease SF Class AB Sublease SF Class AB 5.83% 8.87% 5.56% 9.02% 5.38% 9.54% 5.47% 9.34% 5.88% 9.47% 3Q14 4Q14 1Q15 2Q15 3Q % 9.00% 6.00% 3.00% 0.00% Thousands 40,000 30,000 20,000 10,000 0 Lease Rent AB Sublease Rent AB $65.00 $60.00 $55.00 $50.00 $45.00 $ Q14 4Q14 1Q15 2Q15 3Q15 3Q14 4Q14 1Q15 2Q15 3Q15 3,579 33,162 3,384 32,734 3,300 33,334 3,201 32,056 2,964 32,182 1, (626) Net Absorption Class B 1,627 (249) 477 (367) 2,000 1,500 1, ,000 Thousands Quarter-over-Quarter Inventory Changes Downtown Midtown South Midtown Removed Added Removed Added Removed Added 3Q2015 2Q2015 1Q2015 4Q2014 3Q2014 3Q2015 2Q2015 1Q2015 4Q2014 3Q2014 3Q2015 2Q2015 1Q2015 4Q2014 3Q2014 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 108,939,457 10,772, ,904 11,162, % 0.36% 10.25% $ ,330 City Hall 14,327, ,344 1, , % 0.01% 5.48% $ ,977 Financial District 41,586,410 3,962, ,434 4,246, % 0.68% 10.21% $ ,760 Insurance District 12,046, ,895 7, , % 0.07% 3.78% $ ,740 TriBeCa 6,522, , , % 0% 2.97% N/A 11,576 World Trade Center 34,457,265 5,385,621 95,565 5,481, % 0.28% 15.91% $ ,797 Midtown South 60,047,539 2,518, ,805 2,966, % 0.75% 4.94% $ ,120 Chelsea 10,555, ,670 17, , % 0.17% 3.33% $ ,850 Flatiron 21,589, , , , % 0.87% 4.32% $ ,546 Gramercy Park 10,212, ,316 26, , % 0.26% 7.82% $ ,815 Greenwich Village 4,353,399 23,396 13,500 36, % 0.31% 0.85% $ ,155 Hudson Square 9,393, , , , % 2.02% 7.59% $ ,689 SoHo 3,942, ,457 15, , % 0.38% 3.38% $ ,097 Midtown 271,313,991 18,890,922 2,125,543 21,016, % 0.78% 7.75% $ ,278 Columbus Circle 31,893,601 1,874, ,819 2,027, % 0.48% 6.36% $ ,509 Grand Central 52,773,745 4,754, ,012 5,140, % 0.73% 9.74% $ ,893 Murray Hill 11,144, ,931 65, , % 0.59% 4.07% $ ,346 Penn Plaza/Garment 46,974,585 3,203, ,675 3,664, % 0.98% 7.80% $ ,843 Plaza District 80,641,592 5,447, ,150 6,048, % 0.75% 7.50% $ ,420 Times Square 44,323,129 3,196, ,999 3,638, % 1.00% 8.21% $ ,659 U.N Plaza 3,562,575 27,188 16,666 43, % 0.47% 1.23% $ ,830 Grand Total 440,300,987 32,182,071 2,964,252 35,146, % 0.67% 7.98% $ ,488 *Buildings 75,000 SF and larger; vacancy and absorption calculations based upon move-in date versus deal signing date P6 P.6

7 Leasing - Small Co-working Space Providers Unable to Make the Cut As the larger providers of co-working space particularly WeWork continue to take over space within the city s buildings, some of the smaller firms have found it difficult to stay afloat. Recent news brought the announcement that Makeshift Society-Brooklyn will be shuttering its outpost in Williamsburg in October despite having moderate success in a short period of time. Planning to vacate the 5,775-square-foot space leased in late 2013 under a 5-year deal in October, a spokesperson for the company commented that their research and guestimated profile of tenant needs fell short of what people wanted doored offices. Makeshift Society has another location in San Francisco, which in contrast to the Brooklyn outpost enjoyed almost immediate success. The news of Makeshift s closure comes about 2 months following the June closing of another co-working facility at 412 Broadway (Downtown) by the New Work City, which was reportedly considered a pioneer in co-working for freelancers and creative employees. In the meantime WeWork continues to expand, recently partnering with developers Boston Properties Inc. and Rudin Management Co. to construct their first ground-up development in Brooklyn. Dubbed Dock 72 at the Brooklyn Navy Yard, the co-working space provider will be anchoring the 675,000-square-foot development in 222,000 square feet. The project that is expected to break ground before the end of the year is projected to have a price tag of $380 million. Asking rents are expected to be at least $60 per square foot for what is anticipated to deliver the highest-end product in the New York tech market. The building will boast 40,000-60,000-square-foot floor plates and 14-foot ceiling heights; and feature amenities such as a health and wellness center, specialty vendors, a massage room, valet bicycle parking, outdoor terraces, a rooftop conference center, and a basketball court that will be open to all Navy Yard workers. Some industry sources that remain optimistic about the future for co-working space providers have characterized the co-working frontrunner WeWork as a mid-market product that offers a broad appeal, further pointing out that there is an enormous amount of opportunity for budget options, premium options and luxury options. Granted the city s high rents are presenting challenges for turning a profit by some newcomers, but others continue to operate in existing smaller spaces despite significant membership growth with efforts for the time being focused on improving operations while keeping a watchful eye on the real estate market and a financially more opportune time to expand. Looking ahead, it has been noted that some co-working space providers have begun exploring possible opportunity in the suburbs and smaller cities surrounding major metropolitan area like New York. P7 P.7

8 Leasing - Law Firms Join the Modernized Office Movement Law firms have become the latest industry to take advantage of modern technology and open floor plans to improve space use efficiency and reduce rent overhead expenses. Some sources anticipate that future space expansion by law firms will only be seen amongst those that have recently acquired other organizations, or by smaller firms on a growth path. Traditionally, square feet per attorney ratios averaged around 1,000 square feet 10-years ago, but that figure has been declining to today s more typical average of square feet a ratio that is expected to continue a further downward trend. The move to economize has prompted some firms to seek buildings that offer wide-open, column-free floor plates that will allow a more efficient and flexible office layout design. In addition, up-to-date technology with improved connectivity has become another highly sought after feature as non-essential office components such as physical libraries and file cabinets are being replaced by digitized archives. The younger, more tech-savvy attorneys that are entering the job market has opened the door to cut-backs in administrative staff, allowing law firms to reposition the freed-up space for additional attorneys, conference rooms, and pantries. Common areas are becoming mixeduse areas that can accommodate both informal meetings or dining space, while also promoting increased collaboration. Private offices are being downsized and in some cases eliminated for associates. Skadden Arps Slate Meagher & Flom LLP / 1 Manhattan West aka 400 West 33rd Street (Penn Plaza/Hudson Yards) The global firm will be reducing its footprint in Manhattan by roughly 300,000 square feet as a result of a relocation deal signed earlier this year for 550,000 square feet. Although design plans for the new office were not released, the move is expected to take place sometime in 2020 upon expiration of their current lease at 4 Times Square. White & Case / 1221 Sixth Avenue (Times Square) The law firm will be reducing its footprint by about 50,000 square feet, having signed a lease for 440,000 square feet last year. The firm intends to redesign the new space to improve efficiency as they prepare to relocate in 2017 from 1155 Sixth Avenue. The new location offered larger floor plates that will facilitate a more flexible and collaborative design. Kirkland & Ellis / Citigroup Center, 601 Lexington Avenue (Plaza) The law firm signed an early extension for its 403,000-square-foot space, opting to retain its existing footprint despite the increase in attorney numbers. Morrison & Foerster / 250 West 55th Street (Columbus Circle) The law firm relocated to the newly constructed tower last year. The 180,000-square-foot office represented a roughly 25% decreased footprint from the 240,000-square-foot space previously occupied at 1290 Sixth Avenue. The new office was designed to include larger conference rooms with smaller common areas; and meeting spaces interspersed throughout the office to promote collaboration. Weil Gotshal & Manges / GM Building, 767 Fifth Avenue (Plaza) The law firm renewed their lease last year, opting to reduce their footprint by about 100,000 square feet. The firm plans to gut-renovate the 388,492-square-foot space, and reconfigure the layout to accommodate more attorneys. Partners offices will reportedly be reduced, with glass walls added to create a more open feel. Paul Hastings / MetLife Building, 200 Park Avenue (Grand Central) The law firm will relocate to a diminished 180,000-square-foot space early next year; downsizing from about 240,000 square feet at East 55th Street. The design of the new space will include work areas for first- and 2nd-year associates that are somewhere between a desk and a cubicle called end zones, something that is currently exclusive to Paul Hastings. The concept will allow for a heightened density of associates within a more efficient and collaborative environment. P8 P.8

9 Leasing Activity Large Vacancy on the Horizon Citadel / 601 Lexington Avenue (Plaza) The hedge fund will be vacating roughly 120,000 square feet, having committed to lease 200,000 square feet as anchor tenant at nearby 425 Park Avenue (Plaza) which is currently under construction and expected to deliver in DKNY / West 40th Street (Penn Plaza/Garment) The fashion brand will be vacating roughly 135,000 square feet in 2016 as a result of a relocation deal recently announced. The company which is undergoing financial setbacks will be downsizing to an 85,000-squarefoot space at 285 Madison Avenue (Grand Central). Associated Press (AP) / 450 West 33rd Street (Penn Plaza) The news agency will be vacating about 291,000 square feet in early The company s current lease at the Brookfield Office Properties tower expires sometime in 2019, but a deal was negotiated that will allow AP to move sooner to a downsized 172,000-square-foot space at 1 Brookfield Place, 200 Liberty Street, which is also owned by Brookfield. Vantone Industrial / One World Trade Center (World Trade Center) The Beijing-based company s China Center that was reportedly the first private-sector tenant to sign a lease at the tower continues to seek a significantly reduced presence of its 2009 commitment for roughly 200,000 square feet spanning floors at the tower. Last May brought news of negotiations to halve their space commitment for the center intended to offer offices, conference and dining space for social, business and cultural leaders from China and the U.S. to gather. More recently, the company has requested a downsize that would limit their presence to single-floor space totaling 31,344 square feet, the vision for the China Center revised due to China s currently faltering economy. The Port Authority of New York & New Jersey (PANYNJ) and the Durst Organization agreed in September to accommodate Vantone s shrunken presence on the 89th floor where at least the company will be paying a higher rent then they would be have paid for the originally leased floors on a lower level. This is the second instance of downsizing by a tenant this year at the tower, advertising firm KiDS Creative reduced their original commitment for 34,775 square feet on the entire 87th floor to a mere 2,400 square foot space. Large Blocks of Space that became Vacant in the 3rd Quarter 1133 Sixth Avenue (Midtown/Times Square) 236,519 square feet spread across entire floors 2-4 and 7-11 plus a portion of the 6th floor which was vacated by the Internal Revenue Service (IRS). The National Basketball Association (NBA) leased 47,234 square feet spread across the entire 5th and a portion of the the 6th floor of the total 285,872 square feet that the government revenue service agency had occupied. 405 Lexington Avenue (Midtown/Grand Central) 145,000 square feet spread across entire floors 7-10 was vacated by law firm Troutman Sanders upon relocation to a downsized 87,126-square-foot office at 875 Third Avenue (Plaza) 161 Sixth Avenue (Midtown South/Hudson Square) 145,910 square feet spanning entire floors 2-3 and 9-11 was reintroduced to the market after undergoing a renovation that included the combining of the tower with adjacent 233 Spring Street wia a shared core which houses new elevators, HVAC, lobby, restrooms and mechanicals. The 2-building portfolio was acquired in 2012 by Steller Management and Imperium Capital. 125 West 25th Street (Midtown South/Chelsea) 138,000 square feet was reintroduced to the market. The space that spreads across the entire 11-story building was taken off the market for renovations following the 2013 foreclosure acquisition by Normandy Real Estate. P9 P.9

10 Leasing Activity (cont d) Notable Move-ins During the 3rd Quarter 1411 Broadway (Midtown/Penn Plaza) 127,451 square feet total. - 25,261 square feet on the 30th floor by Italian sportswear designer Fila USA, having relocated from about 19,343 square feet at 41 Madison Avenue (Flatiron) as a result of the 10-year lease deal announced in February; - 57,280 square feet spread across the entire 2nd floor and a portion of the 3rd floor by clothing manufacturer, merchandiser, and marketer Basic Resources, having relocated from 31 West 34th Street (Penn Plaza) as a result of the sublease deal announced in June; - 45,000 square feet spread across the entire 4th floor by clothing retailer Authentic Brands upon relocating from the Manhattan Mall, West 33rd Street (Penn Plaza) as a result of the sublease deal announced in June. Both sublease move-ins totaling 102,280 square feet was space previously occupied by clothing company Nine West who decided to downsize their footprint at the tower, still retaining roughly 400,000 square feet. Sublease term extends through January 1, Park Avenue (Midtown/Grand Central) 72,750 square feet total. - 48,500 square feet spread across entire floors by law firm Fox Rothschild LLP, having relocated from a smaller office at 100 Park Avenue (Grand Central) as a result of the 15-year lease deal announced in March; - 24,250 square feet on the 10th floor by IT company Hitachi Data Systems upon relocating from 90 Park Avenue (Grand Central) as a result of the 11-year lease deal announced in February. One Worldwide Plaza, 825 Eighth Avenue (Midtown/Times Square) 101,621 square feet total. - 68,432 square feet spread across entire floors by public relations firm Rubenstein Associates as a result of the lease deal announced in April; - 33,189 square feet on the 29th floor by annual award program CLIO Awards in a lease deal that reportedly runs through July 31, Park Avenue South (Midtown South/Flatiron-Gramercy Park) 189,507 square feet spanning entire floors by social web content provider BuzzFeed upon relocating from a 57,691-square-foot subleased space at 200 Fifth Avenue (Flatiron) as a result of the lease deal announced in December. 85 Broad Street (Downtown/FiDi) 234,879 square feet spread across entire floors and by co-working space provider WeWork as a result of the lease deal announced in February. 1 New York Plaza (Downtown/FiDi) 124,605 square feet total. - 68,323 square feet spread across the entire 15th floor by Medicare- and Medicaid-managed plan provider WellCare Health Plans, having relocated from 32,564 square feet at 110 Fifth Avenue (Flatiron) as a result of the lease deal announced last October; - 68,323 square feet spread across the entire 16th floor by financial firm Morgan Stanley Smith Barney as a result of the expansion deal the runs to September P.10

11 Submarket ReCap: Midtown Garment District BID - Fall 2014 Statistics Snapshot Transportation: 16 Subway Lines 55 Bus Routes Regional Transit - Long Island Railroad, Amtrak, PATH, NJ Transit - Metro North Railroad, Grand Central Terminal - Port Authority of NY & NJ Bus Terminal, Midtown Class A and B Vacancy 7.75% Rental Rate $64.34 per sq. ft. Net Absorption 59,985 sq. ft. Demographics: 106,651 Employees 6,840 Companies 7,000 Residents $80,974 Median household income Commercial Real Estate: 2 Million + square feet of retail space spread across 815 locations 35 Million + square feet of office and loft-style space Amenities: 6,334 Hotel keys spread across 28 hotels plus 5 more in different stages of planning and development Sources: P.11

12 Submarket ReCap: Midtown (cont d) Lease Deals to Watch For Boston Consulting Group (BCG) / 10 Hudson Yards aka 501 West 30th Street (Hudson Yards) The Boston, MA-based global consulting firm is reportedly considering a 175,000-square-foot space at the 1.7 million-squarefoot tower that is currently under construction on the Far West Side. BCG is currently headquartered in a roughly 107,000-square-foot office at 430 Park Avenue (Plaza) where they have been a tenant since 2002; and another 50,342 square feet they are reportedly subleasing from Credit Suisse that runs to mid The company will be joining anchor tenant Coach in a 740,000-square-foot condo interest acquired in 2013 as well as SAP America, L Oreal and VaynerMedia. If the deal moves forward the tower will be near full occupancy, paving the way for a potential partial sale that would allow developers Related Companies and Oxford Properties Group to capitalize on the value they created and provide cash to help finance further construction at the multi-building project. Other tenants that are exploring options on the Far West Side including the multi-building complex that is being developed by Related Companies, Oxford Properties Group; as well as Mitsui Fudosan America at 55 Hudson Yards. Discovery Communications The Silver Spring, MD-based global mass media and entertainment company currently occupying over 165,000 square feet as anchor tenant at 850 Third Avenue (Plaza) which was introduced to the market earlier this year by San Francisco, CA-based Shorenstein Properties. 10 Hudson Yards Milbank Tweed Hadley & McCloy LLP - The global law firm is currently headquartered in over 300,000 square feet that runs through 2018 at Lower Manhattan s 28 Liberty Street (formerly 1 Chase Manhattan Plaza), and exploring options that include a possible relocation to 55 Hudson Yards which is currently under construction and expected to deliver in Major League Baseball The baseball organization reportedly has a studio requirement, prompting the consideration of a westerly consolidation into 200,000 square feet at 55 Hudson Yards. MLB is currently headquartered since 1998 at 245 Park Avenue (Grand Central) in over 200,000 square feet. Salesforce / 3 Bryant Park aka 1095 Sixth Avenue (Penn Plaza/Garment) The software and cloud computing company is rumored to be considering to take 200,000 square feet of the 355,924 square feet that insurance company Metlife introduced to the market as a sublease back in June. If the deal moves forward, it would include prominent building signage that would replace the current MetLife sign as the insurance company prepares to relocate to their namesake building at 200 Park Avenue (Grand Central). Salesforce currently has 2-Manhattan locations 74,349 square feet at 685 Third Avenue (Grand Central) leased in 2012 through a 10-year deal; and 30,000 square feet at 1550 Sixth Avenue leased in 2014 through a 5-year deal. Whether or not a consolidation of offices is intended has yet to be verified. The potential deal represents a shift east from earlier reports that the company was exploring sites in the Hudson Yards. P.12

13 Submarket ReCap: Midtown (cont d) Lease Deal Highlights - 3rd Quarter 2015 Citadel / 425 Park Avenue (Plaza) The hedge fund will be leasing 200,000 square feet as an anchor tenant at the 47-story, 670,000-square-foot tower being developed by L&L Holding Co. that broke ground in June. The announcement brings a new record-breaking sum, Citadel reportedly agreeing to pay $300 per square foot for the penthouse space which is about 50% higher than the close to $200 per square foot figure that is expected to be asked at nearby 432 Park Avenue which is also under construction. Initial rumors of a possible deal by the Chicago-IL-based firm were initially reported in June, following a recently signed short-term renewal for the company s 120,000-square-foot office at 601 Lexington Avenue (Plaza). Rents at this level had previously been exclusive to buildings such as 9 West 57th Street, the GM Building at 767 Fifth Avenue, and 667 Madison Avenue. However a growing list of properties are hoping to join the roster including Midtown buildings such as the Time Warner Center at 60 Columbus Circle; Park Avenue Tower at 65 East 55th Street, where ownership is planning to invest over $10 million in renovations to the property s lobby and exterior courtyards to create a more lounge-like, high-end hotel feel; the planned One Vanderbilt at 51 East 42nd Street; as well as 860 Washington Street that is under construction in Midtown South s Chelsea neighborhood. The tower being built on speculation will not only be the first new office construction along famed Park Avenue in over 40-years, but it will also claim the title as the city s first development to receive WELL Building Standard certification. In addition, the building will boast a 2-level lobby with 45-foot ceilings, ventilation that filters 95% of the outside air, floor-to-ceiling windows allowing up to 60% more light than conventional panes, a community space on the 26th floor with distinctive triangle-shaped windows, and a private parking garage with a lounge area for tenants chauffeurs and limousines. A 14,000-square-foot high-end eatery will be an additional amenity to be operated by chef Daniel Humm and restaurateur Will Guidara, known for the Michelin-starred restaurant Eleven Madison at 11 Madison Avenue in the Flatiron. LinkedIn / Empire State Building, 350 Fifth Avenue (Penn Plaza) The social media company is expanding its presence at the iconic tower, signing a lease for about 120,000 square feet spread across the entire 3rd and 26th floors at a reported asking rent in the low to mid-$60s range. Currently occupying 4-entire floors totaling 135,000 square feet plus additional space on other partial floors the recent deal will increase the company s footprint to roughly 280,000 square feet. The large block deal was made possible in part by global fashion/manufacturing firm Li & Fung vacating the 3rd floor space it currently occupied under a sublease that was nearing expiration. J. Walter Thompson / 237 Park Avenue (Grand Central) The marketing and communications firm owned by London-based WPP renewed their lease in June of their 270,000-square-foot office that spreads across entire floors 2-5 and a portion of the 6th floor. The signing will see the firm extend its stay at the tower for another 10-years at an initial base rent of $69 per square-foot for the first 5-years; escalating to $74 per square foot beginning the 6th year. The renewal deal includes an option to return 80,000 square feet to the landlord anytime within the next 2-years; $35 per square foot in tenant improvements, and a rent concession of 5-months. The company has been a tenant in the building since its construction was completed in DKNY / 285 Madison Avenue (Grand Central) The fashion brand will be relocating to an 85,000-square-foot office in 2016 upon expiration of the struggling company s lease at West 40th Street (Penn Plaza/Garment). Details of the deal were not released, but the company will be downsizing from their roughly 135,000-square-foot headquarters. Currently the anchor tenant at the 160,000-square-foot tower on 40th Street, it is not clear if the building s recent change of ownership prompted DKNY s decision to relocate instead of downsizing at the longtime location. National Basketball Association (NBA) / 1133 Sixth Avenue (Times Square) The basketball players union will be relocating to a 47,234-square-foot facility next Spring due to the impending sale of their current location at 310 Lenox Avenue (Harlem). Upon completion of the new facility, the NBA will vacate its current 11,000-square-foot space. Spread across a portion of the 6th floor and the entire 5th floor which boasts up to 24-foot ceilings in parts, the space will include a practice court, locker room, lounge and training facility; and offer player programs and agent seminars. The NBA is reportedly in contract to sell its 25,000-square-foot building to an undisclosed buyer for about $21 million ($840 per square foot), a figure that is nearly 6-times the approximately $3.4 million ($136 per square foot) the NBA paid in Sources: P.13

14 Submarket ReCap: Midtown South Flatiron 23rd Street Partnership BID - Fall 2014 Statistics Transportation: 5 Main thoroughfares - 23rd Street, Broadway, 5th Avenue, 6th Avenue, Park Avenue South 6 Subway lines, 9 bus lines, PATH, 13 CitiBike docking stations Proximity to Penn Station and Grand Central Terminal Demographics: 240,036 Residential population $9 Billion Annual spending $90,246 Median household income 645,600 Daytime workers Midtown South Class A and B Vacancy 4.94% Rental Rate $72.44 per sq. ft. Net Absorption 309,969 sq. ft. Commercial Real Estate: 200+ Commercial office buildings 22.1 Million square feet of rentable building area 550+ Ground floor retail businesses comprised of 28% national tenants and 72% locally-owned independent businesses Amenities: 200 Restaurants, bars, and quick & casual food establishments 36 Fitness boutiques 1,228 Hotel keys recently increased by the May opening of the 273-key New York EDITION hotel at 5 Madison Avenue. Acquired for $165 million, the landmark Clock Tower building underwent extensive renovation. Further hotel expansion is anticipated from yet to be realized projects in different stages of planning and development including an 18-story, 25,000-square-foot project at 17 West 24th Street that is expected to add 18-keys; and a 460-key Virgin-branded hotel at Broadway will be making its New York City debut. The planned 38-story, 400,000-square-foot mixed-use development will also add 80,000 square feet of new retail space. 1Q/2Q 2015 Activity Highlights: Leasing activity by co-working and incubator space providers continued to grow resulting in notable lease signings by The Yard in a 15-year deal for 33,000 square feet at 246 Fifth Avenue; and in early 3Q 2015 British bank Barclays launched Rise New York at the Castro Building, 43 West 23rd Street as an incubator space to pioneer the future of financial technology. P.14

15 Submarket ReCap: Midtown South (cont d) Union Square Partnership Annual Report 2015 Top Industry Sectors by Number of Firms* Sector # of Businesses # of Employees Prof., Scientific & Tech Services 1,514 27,351 Retail 1,393 16,299 Accommodation & Food Services ,144 Information ,250 Union Square Statistic Snapshot: 74,897 Total population $108,021 Median household income 892 Retail, restaurant and services businesses 14.9 Million square feet of office inventory 9,787 Total businesses Real Estate, Rental & Leasing 612 5,351 Healthcare & Social Assistance ,433 Finance & Insurance 310 4,240 *Categories based on NAICS Codes (1/2 mile) Top Office Lease Transactions Company Address Sq. Ftge. Sector Buzzfeed 225 Park Avenue South 194,000 TAMI Gawker Media 114 Fifth Avenue 58,900 TAMI First Look Media 114 Fifth Avenue 58,206 Non-profit Capital One 114 Fifth Avenue 40,000 FIRE AKQA 114 Fifth Avenue 40,000 TAMI Adobe Systems Inc Fifth Avenue 30,644 TAMI Centro Inc. 841 Broadway 26,235 TAMI Peak Performance 90 Fifth Avenue 25,204 Fitness Compass (expansion to 50,000 SF) 90 Fifth Avenue 25,000 FIRE Global Strategy Group 215 Park Avenue South 21,974 PR Hulu 79 Fifth Avenue 20,000 TAMI LippeTaylor 215 Park Avenue South 16,612 PR Capital One Broadway 15,000 FIRE Knewton (expansion to 31,000 SF) Fifth Avenue 14,700 TAMI Chimera Securities 27 Union Square West 11,652 FIRE DropBox 33 West 19th Street 11,000 TAMI The New Republic 1 Union Square West 7,100 Publisher Sources: P.15

16 Submarket ReCap: Midtown South (cont d) New to Market 281 Park Avenue South (Flatiron) RFR Realty intends to market the landmarked 6-story, 40,000-square-foot building towards singletenant users at an asking rent of $125 per square foot for the entire building. Approvals to alter the storefronts and expand retail to the 2nd floor, creating up to approximately 20,000 square feet of possible retail use, were received from the Landmark Preservation Commission in March. In addition, a new lobby entrance will be created on East 22nd Street. The building s interior features vaulted 20-foot ceiling heights, stained-glass detailing, and mullioned arched and gabled windows. The late-19th century building will be delivered white boxed with baseline flooring and temporary lighting by the end of the year. The landlord acquired the building earlier this year for $50 million ($1,250 per square foot) from the Federation of Protestant Welfare Agencies. The non-profit had owned the building for about 51-years, relocating to a 17,786-square-foot office condominium at 40 Broad Street (FiDi) which they acquired for $8.5 million ($478 per square foot) last year. Lease Deal Highlights - 3rd Quarter 2015 One Kings Lane / 315 Hudson Street (Hudson Square) The online home goods retailer signed a 51,576-square-foot relocation deal at a reported asking rent in the mid-$70s. The company will be expanding from roughly 28,139 square feet upon relocation from their current location just a few blocks south at 205 Hudson Street (Hudson Square). FanDuel / 300 Park Avenue South (Flatiron) The fantasy sports platform startup will be relocating to an expanded 41,000-square-foot office spread across entire floors according to the deal announced in September. The building s rooftop will be renovated by the landlord to create a private space for screening films and sporting events. Asking rents at the building reportedly average $80 per square foot. As a result of the deal, FanDuel will be vacating 9,000 square feet at 19 Union Square West. William Morris Endeavor Entertainment / 11 Madison Avenue (Flatiron) The talent agency signed an expansion deal for 33,000 square feet, increasing the company s footprint at the tower to just under 100,000 square feet. The deal was announced just weeks prior to SL Green closing on the acquisition of the over 2.34 million-square-foot tower. Nestlé Skin Health / 430 East 29th Street (Kips Bay) The Nestlé subsidiary leased 30,400 square feet spread across an entire floor at the Alexandria Center for Life s West Tower in a 16-year deal. The new facility is one of 10-global facilities that the company plans to open. IMG Worldwide / 304 Park Avenue South (Flatiron) The sports, media and talent agency will be expanding onto the entire 11th floor at the tower in a 22,500-square-foot expansion deal that will increase the company s footprint to 96,000 square feet. The 2nd expansion in 2-years, asking rent for the new space was reportedly $72 per square foot. Elite Daily / 53 West 23rd Street (Chelsea) The online news platform will be consolidating (2) Manhattan locations upon relocating to their new 22,255-square-foot office spread across the entire 12th floor. The sublease that runs through April 2021 was formerly occupied by Tremor Video who relocated to 1501 Broadway. The 3.5-year old company was acquired by DMG Media in January and will be vacating about 7,000 square feet at 333 Park Avenue South and 42 Green Street as a result of the signing announced in July. Teknion LLC / Sixth Avenue (Chelsea) The designer of high-end workplace products renewed their lease for 21,981 square feet spread across the entire 2nd floor. The 10-year deal was secured at a reported asking rent of $90 per square foot. P.16

17 Submarket ReCap: Downtown Lower Manhattan s East Side Comes into Its Own While Lower Manhattan s West Side has almost monopolized the headlines of late with news of ongoing activity and mega-lease deals, the neighborhood s East Side has remained in the shadows. Revitalization since enduring severe damage as a result of Hurricane Sandy in 2012 has delivered: Downtown Class A and B Vacancy 10.25% Rental Rate $55.08 per sq. ft. Water Esplanade The new city-built walkway beneath the FDR drive transformed the 2-mile stretch between the Battery and Montgomery Street that runs along the East River, into a beautifully designed and landscaped esplanade. Net Absorption 359,831 sq. ft. Pier 15 The once neglected 50,000-square-foot pier that sits off South Street between Fletcher Street and Maiden Lane was transformed by the city into a multi-level public pier offering greenery and beautiful views of the East River. Industry Kitchen The new 5,000-square-foot indoor/outdoor eatery and bar that sits along the East River esplanade at 70 South Street opened this spring. Commercial buildings along Water Street have seen a significant surge in leasing activity since 2012, substantiating the strength of the East Side corridor, which similar to the West Side is attracting a more blended mix of industries. Address Company Sq. Ftge. Industry Year One Seaport Plaza, 199 Water Street Allied World Insurance 143,297 Insurance 2014 Howard Hughes Corporation 36,985 Real Estate 2014 BCG Partners 79,900 Finance 2014 The BCG signing brought the building up to 100% occupancy 55 Water Street Sandbox Studio 67,706 Media 2015 Hugo Boss 68,793 Fashion 2014 NYC Health & Hospitals Corp. 220,000 Health 2013 Liberty Mutual 120,000 Insurance New York Plaza, 1 Water Street OSP Group 157,210 E-commerce 2015 WellCare Health Plans 68,232 Health 2014 Macmillan Science & Education 176,211 Publishing 2014 Revlon 91,194 Beauty 2014 P.17

18 Submarket ReCap: Downtown (cont d) Lower Manhattan s East Side (cont d) Activity on the horizon includes: 55 Water Street - Financial data provider McGraw-Hill Financial Inc. received approvals from its board to relocate from their namesake building at 1221 Sixth Avenue to 55 Water Street, joining the company s Standard & Poor s (S&P) division that is already headquartered at the tower. The shift of about 250 employees from Midtown that began about 1-year ago is expected to be completed by August 1st. At this time it is unclear if new space had been secured or if a consolidation into space currently occupied by S&P is intended. A buy-out of their Midtown lease was negotiated, paying $60 million for the early termination that stretched to 2020, ending their 43-year stay on 6th Avenue at the Rockefeller Group tower Maiden Lane The 2-part condo-hotel project being developed by Fortis Property Group will add a 74-unit, 140,000-square-foot residential building; and a 271-key, 110,000-square-foot hotel to the area. The waterfront project is expected to be completed in Battery Maritime Project The boutique 67-key hotel is currently under construction atop the 1909 landmark structure. The project is being developed by Dermot Company and recently joined London-based Forum Partners. In addition, it will offer a rooftop bar and restaurant by Nammos by the Sea, renowned as one of the most famous beach restaurants in Europe located on the waterfront in Mykonos, Greece. 110 Wall Street The severely hurricane damaged 300,000-square-foot building was totally leased by coworking space provider WeWork who will be fully renovating the building. In addition, a block of small residential units and community facilities will be constructed on the top of the building, utilizing additional air rights previously acquired by landlord Rudin Management Maiden Lane - Rendering 32 Old Slip The 1,132,340-square-foot building was recently acquired by RXR Realty who is planning to revitalize the property and reposition the tower from its current corporate image to a more creative, tech-friendly aesthetic Sources: P.18

19 Submarket ReCap: Downtown (cont d) Lease Deals to Watch For Alexander Wang / 115 Broadway aka 2 Trinity Centre (World Trade Center) The fashion designer is currently in negotiations for about 75,000 square feet. A deal would include the building s penthouse floor which features interior ornamentation, original wood-paneled walls, tall ceilings, and stained glass. If the deal moves forward, it has not been verified if the designer will retain, or relocate from their current 22,632-square-foot office located at Broadway (City Hall) in a lease the expires in Lease Deal Highlights - 3rd Quarter 2015 Moody s / 1 World Trade Center (World Trade Center) The credit rating provider will be expanding its presence in Lower Manhattan, signing a lease for 76,001 square feet spread across the entire 56th and 57th floors at a reported asking rent of $69 per square foot. Currently headquartered next door at 7 World Trade Center in about 680,000 square feet spread across 15-floors, the company was unable to further expand at the tower since it is currently 100% occupied, prompting Moody s to seek alternative locations. Moody s has been headquartered in the neighborhood for over 100-years, having relocated to the World Trade Center from 99 Church Street (City Hall) as a result of a 20-year signing in The expansion deal is significant for One World Trade Center as it marks the first sizable deal for the tower by a financial-services firm; and brings the tower s occupancy to about 66%. KCG Holdings Inc. / NYMEX Building, 1 North End Avenue aka 300 Vesey Street (World Trade Center) The Jersey City, NJ-based brokerage and automated trading firm will be relocating to Manhattan as a result of the announced 169,000-square-foot lease at the NY Mercantile Exchange. The move will result in a downsizing from the company s current 260,000-square-foot office at 545 Washington Boulevard in Jersey City. Details of the 15-year deal were not released, but asking rents at the building are reportedly in the $70s per square foot. Brookfield Office Properties had acquired the 560,000-square-foot building from NYMEX operator CME Group in According to reports at the time of acquisition, the sale/leaseback deal would see the Chicago-based trader remain in 449,000 square feet for 2-years; subsequently downsizing to 220,000 square feet on the building s lower floors for another 13-years. Associated Press (AP) / 1 Brookfield Place, 200 Liberty Street (World Trade Center) The news agency will be heading south as a result of the announced deal for 172,000 square feet. AP is reportedly planning to relocate in early 2017, downsizing from their current 291,000-square-foot office at 450 West 33rd Street which is also owned by Brookfield Property Partners. The decision to relocate from their home of 11-years was in part due to what became an oversized space for the company s current staff size; and the anticipated significant rise in rent in 2019 when their current lease expires, triggered in part by the major remaking of the Hudson Yards area that is currently being transformed from a primarily industrial neighborhood to high-end office and residential space. Sources: P.19

20 Sale Activity India s Interest in New York Real Estate Grows Some sources anticipate that efforts to overcome decades of poverty and economic stagnation in India will result in an increase in Indian capital investment in the New York City over the next 5 to 10-years. While India s fellow BRIC 1 countries Brazil, Russia and China have become significant investors in Manhattan s real estate market, India has remained on the sidelines. To date, commercial investment by India in the city has been minimal despite some notable deals including: Sahara India Pariwar s acquisition of a 75% stake in the Plaza Hotel in 2012 for reportedly $430 million; Thousands Quarter-over-Quarter Sale Statistics Downtown 2,000 1,500 1, TTL Sq. Ftge. WTD Price PSF $750 $600 $450 $300 $150 Dilip Shanghvi, founder of global pharmaceutical company Sun Pharma, reportedly invested $40 million into the planned 128-unit residential condominium project at 125 Greenwich Street (World Trade Center) being co-developed by Michael Shvo and Bizzi & Partners. Traditionally, the country s minority of residents with a net-worth greater than $30 million have only put about 10% of their investments abroad, compared to the 20-40% of most other countries. India s rate of economic growth has in part accounted for the trend, offering numerous domestic investment opportunities with a return on investment rate more attractive than Manhattan s current cap rates. In addition, government restrictions cap investment abroad at $250,000 per year. London which offers a market that is closer in proximity and has a large Indian population, currently serves as India s primary overseas investment market. However London s escalating housing prices have begun to prompt a shifting interest in New York City s real estate market that now appears to offer higher returns on investment than London. It is anticipated that as India begins to cross the city s borders, the firstwave of investors will be residential buyers. Thousands Thousands 0 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 Midtown South 3,500 3,000 2,500 2,000 1,500 1, Midtown 6,000 5,000 4,000 3,000 2,000 1,000 0 TTL Sq. Ftge. WTD Price PSF 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 TTL Sq. Ftge. WTD Price PSF 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 $0 $1,250 $1,000 $750 $500 $250 $0 $1,500 $1,250 $1,000 $750 $500 $250 $0 1 BRIC - In economics, BRIC is a grouping acronym that refers to the countries of Brazil, Russia, India and China, which are all deemed to be at a similar stage of newly advanced economic development Data reflects a sample of sold buildings over 100,000-square-feet P2 P.20

21 Sale Activity (cont d) Middle Eastern Investments Abroad Expected to Rise Low oil prices are prompting Middle Eastern investors to further diversify portfolios, leading to projections of heightened investment on the international property market over the next few years. Industry sources anticipate a year-over-year increase of $1 billion from the $14 billion figure in 2014, with a total of $5 billion already invested abroad during the 1st quarter of 2015 that was evenly split between Europe and the Americas. London and Paris led the way as beneficiaries of the $4.9 billion invested abroad by Qatari investors and funds; and $2.3 billion invested globally by Saudi Arabia, a significant increase from the near-zero figure in New York City fell into the 3rd place slot as a recipient of approximately $1.5 billion in investment funds flowing in from Middle Eastern investors. It is anticipated that efforts to seek safe havens for investments which also offer long-term stable growth potential, will widen abroad investment by the large sovereign funds beyond the gateway markets; however declining oil prices has led to projections of lower spending volume. Typically focused on office buildings and trophy hotels, competition from Chinese investors will likely bring about a shift to further broaden the asset mix. Qatar Joins Growing Roster of U.S. Investors The Doha-based sovereign wealth fund controlled by the Qatar Investment Authority is reportedly planning to invest $35 billion in the U.S. over the next 5-years; and although details of potential investments were not disclosed, the Authority which controls over $250 billion in funds will target various sectors of the U.S. economy. Currently a majority of the fund s investments have been in Europe, but there have been some real estate investments in New York City in recent years including a roughly $45 million acquisition of 4-apartments at Zeckendorf Development s 50 United Nations Plaza by the nation s permanent mission, a $47 million acquisition by Qatar s Prime Minister for a townhouse at 22 East 71st Street. In addition, news of a Qatari buyer considering a $250 million purchase at Vornado Realty Trust s 220 Central Park South tower was released earlier this year that would result in the combining of multiple units into a single residence at the tower that is currently under construction; however current status of the potential deal is not known. Chinese Investment Abroad not Thwarted by China s Economic Downturn The reported devaluation of China s currency, the renminbi, this summer that diminished the buying power by Chinese investors which led to the country s stock market crash in late August has yet to bring any slowdown of investment abroad. While the impact of the China s economic downturn and its effect on New York City s real estate market is currently unclear, buyers from China continue to generate record purchases; wanting to put to work profits generated by other businesses they have. Looming concerns include the potential of the Chinese government tightening restrictions on overseas investment to keep money within the country; and the strengthening of the U.S. dollar making investment more expensive. However for now based upon comparative world standards, New York City still offers attractive return rates and asset that are not overpriced. According to reported statistics compiled by the National Association of Realtors, Chinese investors purchased a higher dollar volume of U.S. property in the 12-months leading up to March 2015 than purchasers from any other foreign country for the first time. China accounted for $28.6 billion in investment which equated to 16% of international transactions in the U.S.; over double the 2nd-largest volume of $11.2 billion invested by Canada. Furthermore, in residential transactions, they also purchased more expensive homes than any other international investor. Canadian Investors Favor New York City Investment by Canadians in New York City has swelled in recent years, surging from the $1.97 billion figure of 2014 to $3.85 billion so far in 2015 according to reported statistics recently released. Canada has accounted for a total of $15.37 billion in investment dollars pouring into the city over the past 10-years spread across 81 properties, close to double that of investors United Arab Emirates whose $8.8 billion figure spread across 15 properties was next in line by dollar volume. Canada s pension funds have accounted for the majority of investments such as the Canada Pension Plan Investment Board and the Ontario Municipal Employees Retirement System; followed by insurers and asset managers. China and Israel rank 3rd and 4th with New York City investments over the past decade totaling $8.1 billion in 30 properties and $5.26 billion in 59 properties respectively. P2 P.21

22 Sale Activity (cont d) Rental Property Investment Sees Uptick Manhattan which has traditionally been a rental town has seen a surge in the number condo properties over recent years. Ballooning land prices have made rental development financially unfeasible, reportedly prompting a growing interest by investors in the acquisition of middle-income rental buildings. As the number of middle-income rentals properties grow more limited in number, the asset s value is driven upwards, offering higher yields on investment than that of the high-end condo or rental market. Blackstone Group in partnership with Fairstead Capital invested $700 million for the purchase of the 25-building residential portfolio from the Caiola family that was announced in July. The portfolio has a combined total of 1,000-units clustered in the Chelsea and Upper East Side neighborhoods. Brookfield Property Partners which owns several commercial properties in the city entered into a new joint venture last October with Urban American Management on a nearly 4,000 apartment acquisition of the former Putnam portfolio in Upper Manhattan and Roosevelt Island for $1.04 billion; resulting in a 93% stake interest now owned by the firm. Office Condominiums Continue to Remain a Niche Market Despite a moderately growing interest by foreign businesses, the development of office condominiums continues to represent a very small percentage of development projects in the pipeline throughout New York City. In June it was reported that the city s current supply of office condo space represents a mere 2% of the total 500 million square feet of office space. The filing of plans by co-developers F&T Group, Rockefeller Group and AECOM Capital to develop 75 commercial condo units at their multi-building mixed-use project known as Flushing Commons in Queens; and the recently received approvals from the New York Attorney General s office to convert the 471,000-square-foot building at 866 United Nations Plaza into office condominiums by Meadow Partners still remain rare news in the city, despite office space ownership being more common in other parts of the world. The roughly 85-tenants in the East Side tower are almost exclusively comprised of foreign governments and non-governmental organizations, including the United Nations itself as well as consulates and missions from countries including Chile, Japan, Finland and Kenya being well-positioned to buy their spaces in the tower. Meadow Partners is betting on many of the existing tenants opting to take advantage of ownership, pointing out that in the case of diplomats who are exempt from New York City real estate taxes typically pay an additional $10 of $15 per square foot on top of their rental rates when leasing the space. P2 P.22

23 Sale Activity (cont d) Bulk Discounts Create Bargains for Residential Condo and Co-op Investors Everyone likes a bargain, something which is becoming more difficult to find in the city s real estate market. However some creative investors have found a new path for finding value-priced properties with the purchase of a block of multiple units within a single building. Although difficult to track; and currently a modest portion of sale activity, the developing trend seems to be gaining interest. Bulk-unit package sales accounted for just 45-units in 2003, with 13-transactions totaling $30.4 million according to a reported analysis of city Department of Finance records. In 2007 bulk-unit acquisitions rose to 805-units spread across 37-deals totaling $236 million in sale revenue, activity diminishing in 2008 and 2009 likely due to the economic downturn brought a significant rebounding of bulk-unit sale activity reaching a total of $338.5 million dollars comprised of 373-units spread across a total of 17-transactions; 2014 bulk-unit sales totaled $277 million spread across 25-transactions for a total of 373-units; 2015 has generated $132 million in bulk-unit sales during the first 7-months of the year, comprised of the purchase of 140-units spread across 15-transactions. Some notable deals include: W Downtown, 8 Albany Street San Francisco, CA-based American Pacific International Capital acquired 32-condo units at the mixed-use tower from the Moinian Group for $27 million which was estimated to represent a 35-40% discount compared with 2-purchases at the property for $1.3- and $1.4 million prior to the bulk sale. Corinthian, 330 West 38th Street aka 345 East 37th Street Gaia Real Estate purchased 144-units at the Spitzer Enterprises building for $147 million in mid While it appears that the company paid a premium on some units with sales preceding the acquisition ranging just under $1-$1.2 million, a roughly 15% discount was gained on others. While the above deals reflect may reflect typical discounts for comparable large packages, sometimes they are as low as 2-3%. On the seller s side, bulk-unit sales bring the economic benefit of significantly reducing transaction costs such as legal and broker fees; and the time it would take to sell-out the units. In addition the discounted price can sometimes be offset by a potential 15-20% tax savings, since sponsors are often able to claim their income from these deals as long term capital gains versus earned income. For buyers, that attraction derives from the strong cash flow generated by renting the units, along with securing a critical mass of properties within a single building that may offer future leverage for negotiating power over future sales and potential conversions there. While a buyer can opt to break up the package and sell the individual units, rents for the bulk-unit packages are typically higher than at comparable rental buildings since finishes and amenities are usually more luxurious and better maintained. Industry sources point out that bulk-sales generally diminish in a strong market where sellers see little reason to discount, especially when they similarly have the option to rent the units in the interim. Also potential competition of unit sales by bulk-buyers has made some sellers leery as they compete for buyers within the same building, which is why bulk-unit packages are almost always the last units available in the project. The larger deals exemplified at both the W Downtown and Corinthian is atypical, with bulk-unit packages more commonly comprised of under 10-units. Another instance that has prompted bulk-unit sales can be seen in the case where a developer has planned a condo-conversion of a rental building that is stalled by a number of tenants that in some cases are rent-regulated and refuse to move out. In this scenario, a developer will often try to sell those units to a relatively small group of buyers that specialize in managing such properties. These bulk packages of rent-regulated units go for about 25-35% of market value, the deep discount due to the units frequently generating negative cash flow according to some real estate sources. While the generating of a profit in this type of acquisition is more challenging, some companies that have developed savvy over the years within this market have succeeded. P2 P.23

24 Sale Activity (cont d) New to Market 787 Seventh Avenue / 1285 Sixth Avenue (Columbus Circle) AXA Financial introduced the 2-building portfolio to the market in August, hoping to fetch $4 billion ($1,170 per square foot) for the pair. The 39-story towers measuring roughly 1.71 million-square-foot each are over 98% occupied. 787 Seventh Avenue is 100% owned by AXA. Recent notable lease deals at the tower include the 120,000-square-foot signing by UBS AG in The property last traded in 2009 for $1.76 million ($1,029 per square foot) Sixth Avenue is 50% owned by AXA, paying $587.5 million in 2012, with JPMorgan Chase reportedly controlling the other half. UBS AG occupies 700,000 square feet as anchor tenant at the building, renewing their lease in 2012 for 5-years. 10 East 34th Street (Midtown East) Longtime owner Brause Realty has introduced the 55,000-square-foot building located just east of 5th Avenue to the market. Current leases for about 61% of existing tenants reportedly expire in early 2016, allowing a buyer to potentially capitalize on rising office rents; or convert the building to residential or hotel space by buying out the remainder of the longer term tenant leases. The roughly 5,550 square feet of retail space has already been vacated by Capital One, who continues to pay rent for the bank s remaining lease term that is set to expire at the end of the year. 125 Broad Street (FiDi) Edison, NJ-based real estate investment trust Mack Cali reportedly plans to sell the 525,000-square-foot office condominium, reportedly intending to shift its investment focus on waterfront office and residential properties and buildings near transit hubs. Spanning floors 2-16 at the 40-story tower, the unit was acquired by the REIT in 2007 for $273 million ($520 per square foot) from SL Green Realty Corp. The sale is part of a number of properties Mack Cali is planning to dispose of for a total divestiture value of approximately $600-$800 million. The Downtown building is the only property owned in Manhattan; and although purchasing at the height of the market, Mack Cali hopes to take advantage of escalating values in the area and fetch in the neighborhood of $300 million over the 2007 figure. 61 Broadway (World Trade Center) RXR Realty has introduced the 780,000-square-foot building to the market, hoping to fetch $450 million ($577 per square foot) for the 33-story tower that is currently about 93% occupied. The sale offering was reportedly prompted by rising office rents in the Lower Manhattan neighborhood that are pushing area asset values higher. RXR had acquired the building in May 2014 for $330 million ($423 per square foot) from Broad Street Development, previously trading for $130 million ($167 per square foot) in P2 P.24

25 Sale Activity (cont d) Sale Deals to Watch For Midtown 111 East 59th Street (Plaza) The partnership of Princeton International Property, Dune Real Estate Partners, and Empire Capital Holdings is reportedly in contract to acquire the 204,545-square-foot building for between $170-$180 million ($831-$880 per square foot) from nonprofit blindness-advocacy organization Lighthouse International in an off-market deal. New ownership plans to convert the building s lower floors into 26,200 square feet of retail, hoping to attract a big-box tenant. Lighthouse had acquired the property in 2011 for an undisclosed price according to city records; and currently occupies the majority of the building which is located along the Bloomingdale s department store corridor. Brill Building, 1619 Broadway (Times Square) Brill Holdings, a partnership of B+B Capital, Israeli firm Fox-Wizel, Conway Capital, and Schottenstein Realty is reportedly in contract to acquire the 175,000-square-foot building for $295 million ($1,686 per square foot) from Allied Partners and Brickman. The 11-story building which boasts an impressive history, having served as home to several legendary songwriters and performers reportedly including Carole Kink, Duke Ellington, Paul Simon, and Dionne Warwick last traded for $185.5 million ($1,060 per square foot) in The sellers had overhauled the 3rd- and 4th floors to accommodate additional retail space; as well as obtaining permissions for future occupants to hang 9-LED signs throughout. The deal was announced just 5-months after the sellers had introduced a 45,000-square-foot retail condo spread across the building s basement, ground, and 2nd-4th floors to the market in March at an asking price of $225 million ($5,000 per square foot). The deal that is expected to closed before the end of the year represents further affirmation of the strength of Manhattan s sale market, the sellers opting to cash in on current high property values rather than seek new tenants for the roughly 70% vacant building. 370 Lexington Avenue (Grand Central) Tokyo-based Unizo, formerly Jowa Holdings, is reportedly in contract to purchase the 261,000-square foot tower for $247 million ($946 per square foot) from the partnership of Sherwood Equities and JPMorgan Chase. The property last traded in August 2008 at the onset of the economic downturn for $155 million ($594 per square foot. The building had been positioned for smaller tenants that typically pay higher rents with shorter lease terms, allowing for more frequent turnover to take advantage of higher rents as the market improved. The purchase made through the company s U.S. subsidiary Unizo Real Estate NY Three, LLC is expected to close in October. News of the imminent deal comes just 2-months after reports of the sale were announced, sources anticipating at the time that the property could fetch a price as high as $300 million ($1,149 per square foot). P2 P.25

26 Sale Activity (cont d) Sale Deals to Watch For (cont d) Midtown South 11-Building Hudson Square Portfolio (Hudson Square) Norway s sovereign wealth fund has reached an agreement in principle 1 with Trinity Real Estate that will make the fund a partner in 11-buildings within Trinity s portfolio if the deal closes. Norway s $830 billion sovereign-wealth fund is reportedly the biggest in the world; and has been expanding in real estate investments. Originally comprised a 4-buildings when introduced to the market as a 99-year ground lease opportunity in March; the offering increased in June to an 11-building, 5 million-square-foot offering of a 49% stake on 75-year leaseholds on the properties. The bidding deadline was August 6th, and in addition to Norges Bank the list of respondent bidders was rumored to include SL Green Realty Corp., and Ivanhoe Cambridge through Callahan Capital; and possibly Brookfield Financial and Vornado Realty Trust. Snapshot of the properties included in the offering Address Size Occupancy Key Office Tenants Retail Tenants 100 Sixth Avenue 381,461 SF 17-Stories 155 Sixth Avenue 225,692 SF 15-Stories 1 Hudson Square (75 Varick Street 10 Hudson Square ( Varick Street) 1.2 MM SF 17-Stories 349,720 SF 12-Stories 200 Hudson Street 386,820 SF 12-Stories 205 Hudson Street 400,996 SF 12-Stories 345 Hudson Street 984,432 SF 17-Stories 350 Hudson Street 335,066 SF 9-Stories 435 Hudson Street 291,064 SF 9-Stories 225 Varick Street 376,749 SF 12-Stories 16 Vestry Street 60,800 SF 7-Stories 98% Sigma Investments 114,815 SF 88% Salesforce 30,960 SF 85% Horizon Media 158,315 SF 94% Kirschenbaum Bond et. al. / 98,000 SF WNYC 99% Havas North America 225,474 SF 99% City University of NY (CUNY) 94,376 SF 99% Viacom 398,314 SF 97% Medidata Solutions 137,535 SF LLC 27,000 SF 85% Workman Publishing 63,000 SF 72% Stella Maris 8,260 SF Elite Gymnastics Mototainment LLC Metro Bicycles SoHo Made Soups Hudson Square Market Arrojo Studio TriBeCa Rooftop Chase Bank / Starbucks Children s Museum of the Arts Hudson Square Pharmacy Dig Inn / Gateway News Gregorys Coffee Hale & Hearty Soups Jacques Torres / Pret a Manger EN Japanese Brasserie Getting Hungry / HSBC New York Sports Club (NYSC) N/A Broadway (Greenwich Village/NoHo) Paramount Group is reportedly in contract to purchase the 75,000-square-foot building through its private equity Fund 7 for $112 million ($1,493 per square foot) from longtime owner F.D.R. Industries. Ownership is currently marketing the 5-story building s retail space at an asking rent of $3 million per year, comprised of 11,250- and 10,000 square feet of respective ground and lower level space. 1 Agreement in Principle is a stepping stone to a contract Source: P2 P.26

27 Sale Activity (cont d) Sale Deals to Watch For (cont d) Downtown 20 Broad Street (FiDi) Metro Loft s founder Nathan Berman is rumored to be acquiring the controlling leasehold for the 542,504-squarefoot building from Vornado Realty Trust, with plans for a residential rental conversion that the REIT was previously considering but now apparently deciding to abandon. Long time tenant New York Stock Exchange (NYSE) will be vacating the building in August 2016, deciding to forfeit their option to extend their sublease of close to 400,000 square feet until The fee-owner Atlanta, GA-based IntercontinentalExchange Group (ICE) acquired the property as part of the acquisition of the NYSE for $8.2 billion in Upon expiration of the leasehold that runs to 2081, ICE will have the option to take back control or cash-in on the land that the exchange has owned since Per previously reports a residential conversion will face some challenges due to the layout of the building s lower floors which are larger than the spaces at the top of the tiered property; and would likely cost in the tens of millions to re-purpose. However another option would be to demolish the existing structure and build a new residential tower in its place. 40 Exchange Place aka William Street (FiDi) The Northwind Group is reportedly in contract to purchase the 237,000-square-foot building for $120 million ($506 per square foot) from Brooklyn-based Weiss Realty. Future plans for the building that reportedly needs updating were not announced, but the building was being marketed as a potential hotel or residential condominium conversion, expecting to fetch in the neighborhood of $140 million ($591 per square foot). The building is currently about 88% leased with numerous small office tenants and 10,000 square feet of retail that will reportedly roll over in the next few years, offering potential future upside in value. Sale activity along William Street has heightened in recent years, particularly amongst buildings within close proximity of the new Fulton Transit Center. 123 William Street The 569,160-square-foot sold for $133 million ($234 per square foot). 100 William Street The 388,419-square-foot building sold for $170 million ($438 per square foot). 156 William Street The 252,000-square-foot building sold for $62 million ($248 per square foot). 110 William Street The 868,000-square-foot building sold for $261.5 million ($301 per square foot) William Street The 142,000-square-foot building sold for $60 million ($423 per square foot). P2 P.27

28 Sale Activity (cont d) Sale Highlights Midtown 575 Lexington Avenue (Plaza) Angelo, Gordon & Co. has acquired the 740,000-square-foot building for $510 million ($689 per square foot) from New Jersey-based Normandy Real Estate Partners. The 35-story tower was introduced to the market earlier this year expecting to fetch over $400 million at the time the sale was reported, representing an over 11% increase of the $360 million ($486 per square foot) paid in Normandy had taken advantage of the market slowdown following the economic downturn, acquiring the building at $40 million below the 2006 purchase price paid by Silverstein Properties and the California State Teachers Retirement System (CalSTRS) at the height of the last property boom West 33rd Street (Penn Plaza) Brookfield Property Partners has acquired the 72,497-square-foot office condominium for $69 million ($952 per square foot) from non-profit Planned Parenthood. The deal comes about 4-months after the sale was announced. The 146,000-square-foot building is the only remaining site that Brookfield does not control within the block of properties where the developer is constructing their multi-building Manhattan West project. An acquisition loan equating to roughly 50% of the price was reportedly secured from Singapore-based United Overseas Bank Limited. The remaining condo interest is owned by Vectra Management Group; and although it was previously reported that negotiations were underway, the status of a sale is unknown at this time. Planned Parenthood will be relocating to a 65,000-square-foot space at 123 William Street (Insurance), deciding to sell their condo interest located at the base of the West 33rd Street building which they acquired in 2012 for roughly $ million ($480 per square foot). 31 Penn Plaza aka 132 West 31st Street (Penn Plaza) The recently launched Vanbarton Group has acquired the operating ground lease for the 444,676-square-foot building for about $265 million ($596 per square foot) from Savanna. The ground lease originated in 1997 according to city records, reportedly runs through 2046; and includes (2) decade-long option periods to buy the ground, with one starting December 31, 2018 for roughly $30 million. The ground lease last traded in 2011 for $130 million ($292 per square foot), Savanna investing an additional $20 million in capital improvements. A potential $293.7 million deal with Westbrook Partners announced in March apparently fell through West 33rd Street (Penn Plaza) The Carlyle Group has acquired the roughly 153,265-square-foot building for $111 million ($724 per square foot) from Manhattan-based Kamber Management Co. The former Bawo & Dotter Building is comprised of about 134,000- and 19,000 square feet of office space and retail space; and sits just south of the Garment district which has seen an uptick in interest from technology and advertising companies due to the continued tight market of nearby Midtown South. 511 Fifth Avenue (Grand Central) A partnership of Wharton Properties Jeff Sutton and Aurora Capital secured a 99-year lease for the 125,622-square-foot office building in a deal valued at $250 million ($1,990 per square foot) from an undisclosed group of family trusts. The 17-story building includes roughly 20,000 square feet of retail space; and currently serves as the New York headquarters for the Israel Discount Bank which has occupied the entire building since the 1960s. The new leaseholders will oversee the building s operations, undertake renovations, and assume the responsibility for leasing East 43rd Street (Grand Central) The recently launched joint venture between Alchemy Properties and ABR Partners called Alchemy-ABR Investment Partners has acquired the ground lease for the 177,000-square-foot building in partnership with Clarion Partners. The $99 million ($559 per square foot) figure is significantly higher than the $61 million paid by Meadow Partners in 2013, who invested an additional $7 million in renovations. Since 2013, Meadow had also vacated the majority of tenants in the building, securing about 20-new leases while raising average asking rents at the building from the low-$30s to over $50 per square foot. Currently about 65% leased, new ownership plans to upgrade the façade and lobby. Ownership of the fee by the estate of Sol Goldman remains unchanged. 135 West 52nd Street (Midtown West) The partnership of MRP Realty and Long Wharf Real Estate Partners purchased the 55,000-squarefoot office condominium from Chetrit Group and Clipper Equity for $36.25 million ($659 per square foot). The 5-story unit spans floors 2-6 and will have an entrance and lobby on the ground level at the base of a 47-story mixed-use redevelopment of a former Flatotel. Office tenants will have access to some additional amenities including a gym and roof deck that will be housed within the 109-unit residential component which will go by the address 133 West 52nd Street. The property was acquired by the co-developers in 2013 for $180 million. P2 P.28

29 Sale Activity (cont d) Sale Highlights (cont d) Midtown (cont d) 215 West 40th Street (Times Square) Heskel Asset Management acquired the roughly 65,000-square-foot building for $52.5 million ($808 per square foot) from co-owners Elyahu Cohen and Ehsan Reyhanian. A $31 million acquisition loan to close the transaction was provided by lender Signature Bank. The 10-year debt was secured at a 3.75% interest rate with a portion of the financing to close out an existing loan with HSBC that had a remaining balance of $14.1 million. The building is currently about 90% leased; and located just off 7th Avenue, a few doors west of the planned $300 million Dream Hotel development at 560 Seventh Avenue. Tower 45, 120 West 45th Street (Times Square) The Manhattan firm Kamber Management has acquired the 443,956-square-foot building just 2 months after SL Green Realty introduced the building to the market. The $365 million ($822 per square foot) sale price is in-line with the over $350 million figure some sources anticipated the 40-story tower would fetch, having recently completed an $8.5 million capital improvements program. A 10-year $150 million acquisition loan was secured from MetLife to close the sale. The debt carries an interest rate of 3.64% according to reports. SL Green had acquired the building for $285 million ($642 per square foot) in 2007 as part of a $4 billion Reckson Associates acquisition. The sale was part of a continued effort by SL Green to raise the necessary equity for the acquisition of 11 Madison Avenue (Flatiron) that closed mid-august. 229 West 43rd Street (Times Square) Atlanta, GA-based Columbia Property Trust acquired the 450,000-square-foot office condominium for $516 million ($1,147 per square foot) from the Blackstone Group, about 2-months after the sale was announced. Blackstone had acquired the condo interest for $160 million ($356 per square foot) in 2011, investing an additional $105 million in renovations; and subsequently bringing occupancy up to 98%. The office condo is expected generate a first-year-in-place net operating income (NOI) of approximately $22.3 million. Recent lease deals such as Yahoo s 176,201-square-foot 10-year deal; Collective Media s 57,929-square-foot 10-year deal; and 10gen s 29,400-square-foot 5-year deal have helped increase occupancy. Columbia intends to fund the acquisition, that closed in August, with a $300 million six-month bridge loan and short-term borrowings under the REIT s $500 million unsecured credit facility. Midtown South 550 Washington Street (Hudson Square) Westbrook Partners now controls the majority stake in the roughly 2.8 million-square-foot St. John s Center, reportedly paying over $200 million to buyout co-investor Fortress Investment Group. The deal values the 4-story, 3-block-long property at about $650 million with Atlas Capital Group retaining its small minority interest in the building. The building boasts in the neighborhood of 280,000 square feet of unused air rights with 800- feet of frontage along the waterfront making it a prime candidate for redevelopment. 550 Washington Street - Conceptual Rendering Redevelopment plans remain a work-in-progress with consideration to either gut-renovate the building or demolish it to make way for new construction. Although located on the periphery of Hudson Square which was rezoned to include residential use, the St. John s site was excluded from the rezoning; and a proposal to include residential use as part of a redevelopment at the site currently zoned for office and hotel use would require city approvals. Last summer, a memorandum of understanding (M.O.U.) had been struck between ownership, the Hudson River Park Trust (HRPT), and The Empire State Development Corporation in an effort to secure additional development rights through a transfer from the park s Pier 40 for over $100 million. The deal which had raised controversy never moved forward, but would have resulted in the partnership moving ahead with a proposal to demolish the existing structure; and over a period of 10 years in phases, build a mixed-use development including several residential buildings and retail shops in its place. State and possible city-led reviews would have been required for such a proposal before any project plans could proceed. In addition, existing leases at the Washington Street site would have required the redevelopment to start at the northern end of the property until tenant leases at the southern end expired. Source: P2 P.29

30 Sale Activity (cont d) Sale Highlights (cont d) Midtown South (cont d) Spring Street (SoHo) Dallas-TX-based Invesco Real Estate, a unit of publicly traded mutual fund firm Invesco has acquired an 80% stake in the 68,000-square foot building that both companies will now run as a joint venture. The deal valued at $277.8 million puts the sale price at $222.2 million ($4,085 per square foot). The 6-story building was introduced to the market by SL Green Realty in December; and is currently home to clothing labels Diesel and Burberry in the roughly 10,495 square feet of retail space. Burberry s lease for its 6,000-square-foot outpost will be expiring next year, and about 11,000 square feet of office space was available at an asking rent around $75 per square foot according to earlier reports. The sale was part of an effort by SL Green to raise the necessary equity for the acquisition of 11 Madison Avenue (Flatiron) that closed mid-august. 260 Eleventh Avenue (Chelsea) Vornado Realty Trust has acquired the 154,433-square-foot building from an undisclosed seller. The $80 million purchase of the Otis Elevator Building was paid in stock units of a newly created operating partnership. The ground will be leased through a 99-year term with annual payments of $3.9 million, plus an option to purchase the fee for $110 million. A 10,000-square-foot parking lot and additional development rights were part of the sale package which the REIT is reportedly planning to utilize for an expansion of the 7-story property, banking on increasing demand for office space in the west side neighborhood that will boast increased accessibility as a result of the September opening of the 7-train extension s new station at 11th Avenue. The building is currently occupied by the City of New York in a lease that runs through Former F.M. Ring Portfolio Buildings Continue to Trade Hands Activity amongst several of the 14-building portfolio properties that Extell acquired in January 2014 brought the recent news of the roughly $267 million sale of 5-buildings located within the Chelsea/Flatiron area to Edison Properties. The Kaufman Organization currently controls the ground lease for all 5-buildings as a result of 99-year deals secured in April 2014 for (4) of the buildings in partnership with Iowa-based Principal Real Estate Investors; and the 5th building at 155 West 23rd Street in partnership with Goldman Sachs that closed in September. The acquisition represented a 1031 exchange for Edison, having closed in May on the $870 million sale of an entire square-block site at West 17th Street aka Tenth Avenue (Chelsea/High Line) to HFZ Capital Group. Address Sq. Ftge. Extell Development Kaufman Organization Edison Properties 45 West 27th Street 66,500 $12,500,000 ($188) $25,050,000 ($377) $43,146,274 ($649) West 24th Street 151,200 $30,000,000 ($198) $60,120,000 ($398) $86,637,784 ($573) 19 West 24th Street 69,000 $12,500,000 ($181) $25,050,000 ($363) $42,004,291 ($609) West 27th Street 55,000 $12,500,000 ($227) $25,050,000 ($455) $38,842,647 ($706) 155 West 23rd Street 72,000 $18,736,000 ($260) $57,313,490 ($796) $57,237,046 ($795) TOTALS: 413,700 $86,236,000 ($208) $192,583,490 ($466) $267,868,042 ($647) 251 Park Avenue South (Flatiron) The Feil Organization closed on the purchase of the 120,000-square-foot building for an undisclosed price in a deal that was anticipated to range $850 to $1,000 per square foot. An acquisition loan in the amount of $70 million was secured from lender M&T Bank. About $45 million of the debt will reportedly replace a $43 million loan provided in 2014 by Deutsche Bank upon Extell Development acquiring the building as part of the 14-building F.M. Ring Portfolio deal; and the balance documented as a 2nd-mortage. To date, 10 of the 14-buildings have traded hands since Extell s January 2015 acquisition leaving: 142 West 24th Street which Extell is reportedly planning to demolish to make way for a possible hotel development; 23 West 24th Street which was ground-leased to real estate investor Oz Levi in a deal reportedly worth $6.1 million; 30 East 23rd Street where a demolition clause was put into effect reportedly forcing the 12-story building s sole tenant speakeasy Milk & Honey to vacate; 17 West 60th Street, the only building outside of Midtown South has seen no recent activity according to sources. P3 P.30

31 Sale Activity (cont d) Sale Highlights (cont d) Downtown 100 Wall Street (FiDi) Cornerstone Real Estate Advisors, the indirect subsidiary of Hartford, CT-based Massachusetts Life Insurance Company has closed on the $275 million ($573 per square foot) acquisition of the 480,000-square-foot tower from real estate investment firm Savanna. The sale reportedly went into contract about 2 months after the property was introduced to the market. According to city records, the building last traded in 2011 for $124.5 million ($259 per square foot). Savanna had invested an additional $26 million in upgrades. This will be the 3rd change in ownership since 2007 when Broadway Partners purchased the building for $134 million ($279 per square foot), subsequently defaulting on the loan resulting in Lehman Brothers taking control of the property. Lehman ultimately sold the building to Savanna whose acquisition included the assumption of a $117 million senior loan and a $7.5 million mezzanine loan. Since 2011, Savanna signed 355,000 square feet in deals, 40,000 square feet of which were recently signed, bringing the building s occupancy up to 97%. Uptown Second Avenue (Upper East Side) Fodera/NewYork, Inc. reportedly acquired the 2-attached, 5-story mixed-used buildings for $22.3 million ($1502 per square foot) from a partnership of developer Robert Skolnick and Ceruzzi Properties. The sale of both 7,425-squarefoot buildings includes a total of 37,500 square feet of development rights; and house 16-gut renovated residential units plus 3,750 square feet of restaurant space currently home to The Writing Room restaurant. Sellers nearly tripled the $8 million figure paid in 2012 for the buildings located at East 88th Street, as property values along the Second Avenue subway line continue to rise in anticipation of the project s first phase nearing completion. 330 West 38th Street aka 345 East 37th Street (Upper East Side) Real estate investor Kevin Chisholm who heads real estate investment firm 60 Guilders is reportedly acquiring the 3-story, 81,000-square-foot office/medical condo unit for between $40-$50 million ($494-$617 per square foot) from ProMed Properties. Located at the base of the 860-unit Corinthian residential tower last, the unit last traded in 2011 for $31 million ($382 per square foot) at which time it was about 80% leased to medical tenants; and has since been further filled. P3 P.31

32 China s Faltering Economy and its Potential Effect on NYC Lending The continued devaluation of China s yuan against the U.S. dollar amidst the volatility of both the Shanghai and Shenzhen stock markets could prompt a change in lending practices by Chinese banks according to reports. It is anticipated by some sources that the Bank of China which has become a significant lender in New York City s real estate industry, may become less willing to work with the lower interest rates that the bank has typically negotiated in the past. As less money becomes available for the kinds of large New York City trophy building investments the Chinese lender has been making over the past several years, in addition to possible interest rate increases, the state-run bank could shift towards more lower-risk deals with more conservative loan-to-value ratios (LTV) 1. In , the Bank of China was involved with $4.73 billion in top loans from prominent New York City buildings, representing a 67% increase over the $2.83 billion in loans for the 2-years prior. If the pace of lending slows, some landlords that previously secured loans from Chinese state-backed institutions may face challenges upon attempting to refinance their loans with Chinese lenders. Although the Bank of China s loans have been unusually large, other sources for capital has broadened due to the strength of the city s commercial real estate market, attracting domestic and other foreign banks as well as non-bank investors such as hedge funds. Notable 2015 loans include: Bank of China 245 Park Avenue - $200 million in debt on top on an existing $800 million loan was secured by Brookfield Property Partners East 44th Street - $251 million loan was secured by BLDG Management from co-lenders the Bank of China and the NYS Housing Finance Agency. 717 Fifth Avenue - $260 million acquisition loan was secured by Anbang Insurance Group East 19th Street / East 20th Street - $280 million senior debt was secured by co-developers the Chetrit Group and Clipper Equity from a group of lenders led by Natixis Real Estate Capital along with Malaysia-based Maybank, Bank of China, Investors Bank and TD Bank Park Avenue A stopgap letter of credit was provided to Continuum Company for the $200 million in tax-exempt municipal bonds administered by the state Housing Finance Agency (HFA). In addition, the Bank of China acquired a long-term leasehold that was valued at roughly $ million for the new tower at 7 Bryant Park aka 1045 Sixth Avenue from co-developers Hines and JPMorgan Chase s asset management arm. Industrial and Commercial Bank of China (ICBC): 100 East 53rd Street - $360 million construction loan secured by the development team of RFR Holding, Vanke Holdings, and China Cinda Asset Management. 1 Loan-to-value: The term is commonly used by banks and building societies to represent the ratio of the first mortgage lien as a percentage of the total appraised value of real property. P3 P.32

33 German Lenders Return to U.S. Real Estate Market Unsettled economics in Europe and the uncertainty of the future of the Eurozone have prompted a shifting trend as German lenders become conservatively active once again in the U.S., their presence significantly decreasing in the years following the 2008 economic downturn with some hit hard by losses. According to reported data compiled by Real Capital Analytics, of the 10 foreign lenders that provided over $1 billion each to the U.S. real estate market, (4) were based in Germany. A total of $15.2 billion in U.S. commercial real estate loans were secured from German lenders last year, with Frankfurt-based Deutsche Bank accounting for $7.5 billion. Others, such as Frankfurt-based Helaba Bank had a year-over-year lending volume increase from $1.3 billion in 2013 to $2.4 billion in 2014; and volume by Allianz Real Estate of America, a subsidiary of Munich-based Allianz Real Estate Holding rose from about $255 million in real estate mortgages to $1.8 billion during the same year-over-year period. However the currently troubled Eurozone situation has diminished the strength of the euro, making it more difficult and expensive for German lenders to enter the U.S. market; also confronting heightened competition, particularly from Asian lenders. A growing number of German banks are doing syndicate deals involving multiple lenders as a way to hedge against competition, while also decreasing risk across the board. It has become strategically important for German lenders to remain in the U.S. according to some sources; further pointing out that the U.S. real estate market offers a safe haven with the desired asset class, along with attractive risk-adjusted returns in conjunction with healthy market transparency and a solid legal environment. P3 P.33

34 2015 CMBS Issuance in NYC Surges A solid rebound of Commercial Mortgage-Backed Securities (CMBS) has neared 2007 levels according to reported data from Trepp, a leading provider of information, analytics and technology to the global CMBS, commercial real estate, and banking industries. New CMBS loans based on New York City properties totaled $11.54 billion in the first-half of 2015, up $47% year-over-year from $7.83 billion mid The mid-2015 figure is reportedly the highest first-half figure since the 2008 economic downturn; and the 2nd-highest since at least The upward trend increases the volume of loans available to real estate investors as a result of increased funds generated from the fees lenders receive for securitization and the selling off the re-packaged bonds upon issuing a mortgage for the property. Factors that have been contributing to CMBS issuance growth are the desire to lock in low rates before the imminent rise in U.S. interest rates that continues to loom; a large number of loans from the boom years maturing; and rising confidence in the real estate market according to some research analysts. A compilation of the top 10 commercial loans in the 12-month period between July 1, 2014 and June 30, 2015 revealed a total of $5.2 billion in CMBS deals spread across 5-deals, in comparison to $4.8 billion for the remaining 5-deals comprised of a mix of balance sheet, syndicated loans, and (1) life insurance company-backed deal according to reported findings from real estate debt-tracking firm CrediFi. Borrower Address Property Amount Lender or Lead Originator Silverstein Properties 3 World Trade Center Office $1.59 billion PANYNJ, New York Liberty Dev. Tishman Speyer Properties 200 Park Avenue Office $1.4 billion Bank of America Hudson s Bay 611 Fifth Avenue Commercial condo $1.25 billion Bank of America Ivanhoé Cambridge Callahan Capital Properties 1095 Sixth Avenue Commercial condo $1.13 billion Deutsche Bank General Growth Properties Jeff Sutton 730 Fifth Avenue Office $1 billion Deutsche Bank Brookfi eld Property Partners 3333 Broadway Multi-family $800 million Fannie Mae RXR Realty 230 Park Avenue Offi ce $785 million American International Group, et al Stahl Organization 277 Park Avenue Commercial condo $750 million Deutsche Bank Tishman Speyer Properties 512 Madison Avenue Offi ce $675 million Bank of America Vornado Realty Trust 2 Penn Plaza Offi ce $575 million HSBC P3 P.34

35 Tel Aviv Stock Exchange (TASE): Debt Issuances Continue to Climb The mutual attraction by both the city s real estate developers and Israeli investors continues to heighten debt activity on the Israeli bond market. The $361 million bond issuance by the Moinian Group that was announced in May reportedly approached $550 million for the debt offering. New York City issuance has typically met with high demand by Israeli investors who favor the city s real estate assets due to its transparency and liquidity in the market. In turn unlike the U.S. markets, TASE allows companies to make debt-based public offerings; but they must become a public company in Israeli to do so. To date, New York-based real estate firms have reportedly been responsible for all debt offering among U.S. real estate firms in Israel. In the U.S., projects are typically structured under an LLC and debt arranged on a project-by-project basis. In contrast TASE offers developers the greater flexibility to secure debt based upon an entire portfolio or a large piece of it, increasing the amount of money that can be raised while simultaneously spreading out the risk. The Israeli bond market also opens opportunity for the issuance of bond offerings on a smaller corporate level that in the U.S. is generally only possible for the huge REITS. While the number of New York developers are increasingly opting to raise debt through TASE, some have chosen not to venture into the Israeli bond market. This decision is in part due to the hurdles that must be cleared to be eligible to sell bonds in Tel Aviv such as the grading of debt by domestic Israeli ratings agencies; hidden costs related to currency translation; and the requirement of becoming a public company in Israel, exposing business activities to a large audience. However despite potential hurdles, the list of real estate developers seeking to raise capital through TASE continues to grow. Further substantiating the growing popularity is the recent news of Wharton Properties expected $500 million debt offering for which a prospectus had been published in May; and reportedly now claims the title as the largest for a U.S. firm, exceeding Moinian Group s recent $361 million ($1.4 billion shekels) bond issuance. However due to poor market conditions; the issuance s complicated structure; and lack-luster demand, Wharton will reportedly attempt to delay the bond issuance several weeks beyond the previously anticipated closure of September 16th. Despite being backed by a 17-property portfolio valued at $1.1 billion, with one asset receiving a high AA rating from Israeli ratings agency S&P Maalot, the issuance attracted nominal interest from Israeli institutions and investors, raising only $100 million according to sources. The bond issuance sought a maximum interest rate of 4.8% over the duration of 5.3 years. Similarly, Flushing-based Marx Development Group s roughly $40 million debt issuance which was backed by a portfolio valued at $514 million fell below expectations, only raising $25 million. Despite raising $24 million from Israeli banks, pension funds, and financial institutions, the offering that was hoping to raise another $16 million through a public tender, fell short, raising only another $1 million due to a relatively low bond rating that failed to attract investor demand. The deal reportedly closed at 8.9%, representing the smallest and most expensive bond issuance made by a U.S. firm to date. Funds raised through the TASE bond market were intended to help fund the developer s planned 399-key Marriott Courtyard Hotel project on the Far West Side at 461 West 34th Street along 10th Avenue, as well as finance future acquisitions. P3 P.35

36 EB-5 Funding Remains Active The U.S. Immigration Fund, a New York regional center that assists in arranging financing through the popular foreign investor program, is currently raising a total of nearly $800 million in mezzanine financing for 4-major New York City projects: $175 Million in debt is being raised for 125 Greenwich Street (World Trade Center). The 128-unit, 77-story condominium project is being co-developed by Michael Shvo and Bizzi & Partners. If the U.S. Immigration Fund succeeds, the majority of the project s financing will be Asian capital which will also include $240 million in equity and debt raised through a successful crowdfund campaign initiated on the Carlton Group s accredited sight. The majority of crowdfunded financing reportedly came from an Asian lender group led by Singapore s United Overseas Bank; and included $40 million from Indian pharmaceutical tycoon Dilip Shanghvi. $175 Million in debt was raised for 111 Murray Street (formerly 101 Murray Street (TriBeCa). The planned 157-unit condominium project is being developed by Fisher Brothers, Witkoff Group, and Howard Lorber. A recent investment of $229 million by Chinese asset manager Taiping Asset Management will raise the total of Asian capital funding for the project to $404 million. $200 Million in debt was successfully raised for the Marriott Edition Hotel, 701 Seventh Avenue (Times Square). The 452-key hotel project is being developed by The Witkoff Group, Winthrop Realty Trust, New Valley LLC, and Maefield Development. $220 Million in debt is being raised for 1 Park Lane at 36 Central Park South (Midtown West). The planned re-development of the former Helmsley Park Lane Hotel into an 88-unit residential condominium is being constructed by a group led by Witkoff Group and Hong Kongbased Jynwel Capital. EB-5 Regional Centers Established by City s Firms Growing The ongoing surge of EB-5 project financing has prompted real estate lending and investment firm Greystone to submit applications to become an EB-5 regional center in New York. The company has established a new division within its operations that will manage the entire EB-5 capital-raising process for real estate developers, including deal structuring, document preparation, marketing, and loan and investor servicing. If approved, Greystone will join Silverstein Properties, Related Companies and the Lightstone Group which have already established regional centers to raise capital for their in-house projects, the designation enabling them to access money through the program directly. P3 P.36

37 EB-5 Funding (cont d) Proposed Legislation Modifying Current EB-5 Program Expected to Confront Opposition Proposed bipartisan legislation recommending modifications to the current EB-5 foreigner investor program that was due to expire at the end of September is anticipated to face some strong opposition. If the bill is adopted, the EB-5 program will continue for another 5-years. While the proposed bill is extremely complicated, a few key modifications have been highlighted. The percentage of indirect jobs being created that can be counted toward the require job creation total will be reduced. A standardized way to track job creation will be created to better enforce that the required creation of 10-permanent jobs is satisfied. Regional Centers will be required to pay the government a $20,000 annual fee in an effort to eliminate regional centers that are not active. Foreign investment in projects located in a target area that has high unemployment - Targeted Employment Area (TEA) will be raised from $500,000 to $800,000 a figure that hasn t increased in 25-years. Foreign investment in projects located outside a TEA will be raised from $800,000 to $1.2 million. The definition of a TEA will be severely restricted. A series of rules are being proposed to better regulate compliance ranging from inspections of regional centers and background checks for investors. If the bill passes as proposed, a developer that has pending applications awaiting approvals from immigration officials for participation in the EB-5 program will be required to ask investors for an additional $300,000-$400,000 to be in compliance with the new rules. It is anticipated that critics of the proposed modification will contest that developers already mid-stream in the lengthy process, which can take up to 14-months, will be unfairly penalized. While pending applicants will have no recourse, knowledgeable sources have recommended that projects currently in initial stages should apply for exemplar status which will give the project grandfathered status, thereby exempting it from some of the new requirements. In addition, projects with the exemplar status would potentially attract more foreign investors over those that were not grandfathered due to the lower amount of required investment. Although the current program was included by lawmakers in federal stopgap legislation that extended it through December 11, developers are likely to hold back until program changes are determined. Since the EB-5 program inception in 1990, it has provided roughly $11 billion in funding and created 73,000 jobs nationwide according to reported statistics from the U.S. Citizenship and Immigration Services, an arm of the Department of Homeland Security. P3 P.37

38 Crowdfunded Development Makes Its Debut AKA United Nations, 234 East 46th Street (Grand Central) The extended-stay condo-hotel that opened on September 10th is the first ever crowdfunded building in New York coming to completion, from A to Z, according to reported comments by the project s developer Prodigy Network. The 95-unit, 20-story property was acquired in partnership with Korman Communities for $68.5 million, of which $10 million was raised via crowdfunded equity that reportedly attracted 116 backers pledging at least $20,000 each. Crowdfund investors, about 90% of which came from outside the U.S., can expect a return on their investment of 19-23% primarily generated from condo unit sales plus some from hotel fees according to Prodigy s further remarks. Senior financing was provided by lender Bank of America, with additional subordinate lending from Emmes & Co. Other planned projects by Prodigy that will resource crowdfund campaigns include: 331 Park Avenue South (Flatiron) Redevelopment of the 49,500-square-foot building purchased for $51 million ($1,136 per square foot) will reposition the 12-story building into 100 residential units and 20,000 square feet of workspace. Up to $20 million is planned to be raised to help finance the estimated $120 million project via a crowdfund campaign. 114 East 25th Street (Flatiron) Redevelopment of the 52,000-square-foot building purchased for $49 million ($942 per square foot) will reposition the 12-story building into 41 residential units and 25,000 square feet of workspace. Up to $25 million is planned to be raised to help finance the estimated $74 million project via a crowdfund campaign. 17 John Street (FiDi) The 15-story rental property was purchased last September for $85.3 million, of which $25 million was raised through a crowdfunded campaign that was reportedly comprised of about 100 investors from 12 states and 10 countries. Prodigy plans to redevelop the property into a 23-story, 191-unit extended stay hotel hybrid. Rebranded as cotel the planned project will be a mix of hotel, co-working space, and networking environment. Senior financing for the acquisition was from lender Deutsche Bank, with additional subordinate lending from pension fund advisory firm Emmes & Co. 84 William Street (FiDi) The $120 million 2013 acquisition and renovation of the extended-stay hotel AKA Wall Street included $31 million in crowdfunded equity. Senior financing of $72.5 million was provided by lender CIBC plus $16.5 million of institutional equity. The hotel is expected to open this year. The emerging investing model was spurred by the 2012 Jumpstart Our Business Startups Act, which eased rules for sales of some investments. Commercial real estate activity is anticipated to more than double to an estimated $2.57 billion this year according to reported statistics released in March by Massolution, a research, advisory and implementation firm that specializes in crowdsourcing solutions for private, public and social enterprises. Sources: P3 P.38

39 Lowline - Rendering Crowdfund Campaign for Proposed Lowline Park Exceeds Goal The transformation of an out-of-use transit infrastructure which lies beneath Delancey Street on the Lower East Side was reportedly proposed by a group of entrepreneurs in 2011 hoping to link the project to the city s anticipated request for proposal (RFP) for the redevelopment of SPURA. At the time, a draft economic-impact summary circulated by the team claimed the new green space would boost land values of SPURA sites; however efforts failed in part due to the city having no authority over the space. The projected cost of the project in 2012 was estimated to range $44-72 million; and a projected operating cost of $2-$4 million and a goal of achieving self-efficiency through revenue generated from events, programmed festivals, performances, public art, and children s programming. Within the first 11-months since the project-backer s Lowline - Rendering initial proposal, the entrepreneurial group was able to raise $150,000 in funding. More recently the group raised close to $224,000 from 2,500 donators, exceeding their goal of raising $200,000 through a Kickstarter campaign; and making it the most funded Public Art project on the creative project crowdfunding platform to date. The Lowline proposal team led by co-founders Dan Barasch, an executive of social innovation network PopTech; and James Ramsey, founder of architecture firm Raad Studio are hoping to turn the 2-acres of tunnels into an underground High Line park that will be administered by a non-profit organization that was created. Originally dubbed Delancey Underground, the space which had served as the Essex Street Trolley Terminal has sat abandoned since Located on land controlled by the state-run Metropolitan Transportation Authority (MTA) which refused to contribute funds towards the project. The MTA stating at the time that they would issue their own RFP upon the completion of the city s Uniform Land Use Procedure (ULURP) process for the SPURA site. The MTA further noted that one requirement of the project would be that it did not impede upon subway operations or vice versa. An economic summary provided by the project-backer s and prepared by an independent consultant reportedly revealed that use of the Clinton Street entrance of the Lowline would not only allow the passage of as many as 20,000 subway riders, but also expand access to the F, M, J, and Z subway lines. Preliminary designs for the proposed green space include the creation of a remote skylight that would transmit sunlight into the space that would sustain foliage, thereby requiring no electricity to light the space during periods of sunlight. According to the project s dedicated website, The Lowline Lab will open in the fall to display cutting-edge solar technology to the general public, serve as a laboratory for lighting and horticultural experiments, and feature multiple cultural and community events. P3 P.39

40 Crowdfunding Predecessors Date Back to 1885 Although the platforms may have been updated and revised in today s world of fast moving technology, the first use of crowdfunding actually dates back about 130 years Crowdfund Campaign Finances First Major U.S. Project The New York World, a newspaper published in New York City from under publisher Joseph Pulitzer reportedly featured an offering in the summer of 1885 seeking donators for a pedestal fund that was to help finance the base of the iconic Statue of Liberty. The campaign ultimately raised $101,091 from roughly 160,000 investors for the base construction which allowed the assemblage of the statue, whose parts had been sitting in a New York Port, to move forward. The concept of crowdfunding over the years began to broaden with the spread of print media and the growth of financial markets in the 19th and early 20th centuries, which allowed crowdfund campaigns to reach beyond an immediate circle of friends Securities Act However, due to a lack of federal securities regulations, abuses began to heighten. Offerings to investors for the purchase of bonds or equity interests came to the market in what was described as a self-regulated market resulted in the investment into companies and stocks that reported good financial standing when it was not the case; or stocks sold by investment banks with assurances that the companies were sound, even though some were bankrupt. In response, Congress passed the Securities Act 1933 requiring almost all securities to be filed by issuers in an attempt to prevent these abuses that reportedly helped fuel the asset bubble that burst in 1929 triggering the Great Depression. Crowdfunding significantly lessened due to the high-cost and time-consuming process of filing with the newly formed Securities and Exchange Commission (SEC); and was further restricted by the newly created ban on the advertising of investment by private companies to the general public. Late 1940s - Syndication Makes its Debut In the late 1940 s a new investment door opened for small time investors called Syndication the breaking up of the large sum required into smaller units. Pioneered by legendary investors Harry Helmsley and Lawrence Wien, it was crowdfunding on its most basic level. The required filing with the SEC meant it only made sense for large projects; and sums raised from each investor were sizable Broadway The entity Motors Building Realty Company offered investors an opportunity to buy a stake in the leasehold of the old GM building in 1958, seeking to raise $5.8 million from a large number of individual investors. Today the building is known as 3 Columbus Circle due to a re-branding in 2010 by current ownership. Empire State Building The $65 million acquisition in 1961 by the partnership of Harry Helmsley and Lawrence Wien was partially funded through the syndicated raising of $33 million from over 3,000 investors, but each share reportedly cost investors $10,000 at the time which equates to about $80,000 today Jumpstart our Business Startups (JOBS) Act As the decades passed crowdfunding advocates lobbied for legislative reform, ultimately culminating with the passage of the JOBS Act which set the stage for the gradual easing of restrictions on crowdfunding Title II of the JOBS Act The newly passed regulation was significant in that reportedly for the first time in 80-years, private startups and small businesses could raise investment funding publicly, and take investment online via equity crowdfunding sites who powered the investment process in a more open and collaborative way. Currently crowdfunding is restricted to accredited investors people with annual individual income of over $200,000; joint income over $300,000; or net wealth over $1 million. The pending Title III of the JOBS Act is meant to open up the market to unaccredited investors, but to date it is unclear when the law will go into effect. P4 P.40

41 Crowdfunding (cont d) Some of today s more prominent crowdfunding platforms include: Company Capital Raised Launched VC Funding Raised Fundrise $60 Million 2010 $41 Million Boasts the title as the first functioning real estate crowdfunding platform in the U.S. Invested just under $30 million in deals including bonds acquired on the secondary market for 3 World Trade Center. Pioneered the practice of pre-funding deals guaranteeing up-front loan payment with its own money prior to initiating crowdfund campaign. Focuses on funding the acquisition and development of urban multifamily and mixed-use properties with sums around $1 million; but currently pursuing larger deals ranging $10.5-$15 million. Institutional investors are among the company s roster in investors. Prodigy Network $106 Million 2012 N/A Crowdfund platform has the distinction of being the developer of all projects they raise cash for; and most of the funds raised is from money abroad. Only raises equity; and finances significantly larger deals than is typical for most platforms. Launched in Miami, FL in 2001 as a new development marketing company; launched U.S. crowdfunding in 2012, prompted by the impending $58 million acquisition of 84 William Street for which the company raised over $40 million through a crowdfund campaign. Currently not seeking institutional investors for its fundraising campaigns. Carlton Accredited Crowdfunding $150 Million 2014 N/A Campaigns are for large transactions; and to date, funds have come from 2 undisclosed wealthy investors that selected the projects online but deals were closed in a more traditional greet-and-meet format. However, the company plans to launch a redesigned crowdfund website geared toward opening the door to smaller investors by decreasing the investment threshold from its current $1 million to $25,000. ifunding $30 Million 2012 $4 Million Currently shifting from the traditional crowdfunding model to a more technology-based conduit between institutions, with some participation from the crowd, versus their previous focus on funding the development and acquisition of both U.S. commercial and residential properties. Now the company simply buys loans from institutional lenders seeking cash, and then passes them on to the crowd and/or other institutional investors Patch of Land $24 Million 2012 $25 million Currently focused on funding small fix-and-flip loans for single-family residential buildings throughout the U.S. that are typically 1-year term and under $400,000; but recently shifting towards seeking institutional backing for larger and more diversified deals. Sharestates $11 Million 2013 N/A Currently focused on funding small fix-and-flip loans that typically average in value of $350,000; but since partnering with Texas-based Ranger Direct Lending Fund which has committed to invest up to $30 million to pre-fund deals, deal volume has significantly increased. Newcomers: Capital Raised Launched VC Funding Raised CityFinders N/A 2015 $1 Million Debut offering was for a $1 million equity share of the Long Island City 467-unit rental development at Northern Boulevard being developed by Simon Baron Development. Focused on larger financing deals that the company is pre-funding with a $40 million credit line that has been provided by high-networth backers. Investment minimum is $5,000 per individual investor. Invest Thor N/A Pending N/A While details of Thor Equities launch were not revealed, the anticipated debut of the real estate firm could significantly impact the crowdfunding market. The company has reportedly acquired $2.8 billion worth of New York properties in 2014, potentially offering crowd investors a considerably larger asset pool than other platforms. Thor would also be the first major real estate firm and developer to launch its own crowdfunding division with the exception of Prodigy Network. It is anticipated that other large real estate firms could follow suit, thereby cutting out the middleman for raising funds by tapping directly into the crowd. Sources: P4 P.41

42 Crowdfunding: In the Event of a Deal Default Most crowdfunded campaigns are for some form of subordinate debt, and like any other real estate investment can potentially go bad whether due to a market downturn or other financial issues the deal sponsor may incur; and how it plays out depends of the particular crowdfunding platform. The crowdfunding platform serves as either: An overseer that just makes the introduction between the investor crowd and the deal sponsor with no future role. In this scenario, unless the sponsor makes an effort to save the deal, the investors will have no recourse other than to incur the investment loss; or as Co-manager of the deal with the sponsor so that they are very much aligned with investors, sometimes requiring an investor to contribute additional capital to create some financial cushion. In an effort to minimize liability, some crowdfunding platforms are building backup arrangements such as the designation of a trustee that would take over if the sponsor fails. Crowdfund Startups Shifting to Institutional Investors to Accelerate Growth Several of the crowdfund platform startups that relied on everyday investors to raise funds for crowdfund campaigns are beginning to shift to institutional investors to propel further growth. Washington, D.C-based Fundrise now sells 50-65% of the debt for larger deals to institutions; and California-based Patch of Land s current $4.5 million campaign will raise funds totally from institutional investors. As competition intensifies with the increasing number of crowdfund startups that has been estimated to be over 100, it becomes paramount to find avenues for more rapid growth in order to attract more sponsors and investors over rival platforms. The reported results of 300 recently surveyed institutional investors revealed that about 85% were attracted to the concept which offers the opportunity to find deals they would otherwise not have access to; and the potential to deliver a greater diversification of assets and offer higher returns. Currently, the nature of crowdfunding impedes rapid growth since the majority of campaigns extend loans to real estate owners and developers. The raising of funds from the crowd of small investors is time consuming; thereby restricting the number of campaigns the platform can take at any given time. The time factor can further inhibit growth, resulting in the potential loss of some of the more lucrative deals when potential borrowers can t afford to wait. The bringing on of institutional investors brings a rapid solution to both problems. Long Island-based Sharestates aggregate deal volume more than doubled upon announcing an agreement struck with the Texas-based Ranger Capital Group who will be investing $30 million through its Ranger Direct Lending Fund. Some platforms are reportedly directing efforts towards partnering with hedge fund, private equity firms, and wealthy individuals. This growing shift may resultant in making them function more like the traditional financial sector they set out to displace, becoming somewhat hypocritical to the originally intended democratization of real estate investment. P4 P.42

43 China Real Estate Developers Consider Crowdfunding China s continued softening of its domestic housing market has prompted (2) of the country s largest real estate developers to form an alliance. It is anticipated to have a significant impact on their international activity, especially global hubs like New York City. Currently Wanda and Vanke have a combined 13 real estate properties outside of China, versus a combined 611 domestic real estate assets. It has been predicted by some that the partnership will continue to work with local partners short-term on international investments as a strategy to increase experience in real estate markets abroad; although it is anticipated development abroad will give rise to challenges of operating on the megaproject scale both companies are accustomed to. Both companies have shifted to an asset-light strategy for domestic investment, but are continuing to invest quite heavily on their own. They intend to seek outside capital for land purchases, deploying REIT-like securitized loans while also looking to get into crowdfunding to diminish the huge sums of capital both companies have had to invest into every project. The recently created partnership will enable both firms to pool capital and spread risk; as well as share investor networks. Dalian Wanda Group reportedly posted 2014 assets at $85.6 billion with a portfolio of over 225 million square feet. The company generated a 2014 profit of $2.1 billion on revenue of $38.8 billion. Year-over-year profits rose 14% from 2013, but sales margins narrowed. The company owns 7 assets abroad, but none in New York to date after a pending 2013 deal to build a luxury condo-hotel development in Manhattan fell through. China Vanke has reported assets totaling $82 billion with a portfolio of 410 million square feet. The publicly traded company posted 2014 revenue of $23.6 billion, but incurred a year-over-year profit loss of 60% in the 1st quarter of 2015 to $105 million. Since 2013, the company has reportedly acquired 6-major properties abroad including New York. Bush Tower, 130 West 42nd Street (Times Square/Garment) - In contract to acquire an undisclosed stake in the 235,000-square-foot for $125 million; 100 East 53rd Street formerly 610 Lexington Avenue (Midtown East/Turtle Bay) Co-developing the 273,598-square-foot residential development having joined developers RFR Realty and Hines in 2014; although details of the transaction were not disclosed. P4 P.43

44 Essex Crossing Project Secures Financing The joint venture made up of L+M Development Partners, BFC Partners, and Taconic Investment Partners, dubbed Delancey Street Associates, secured over $250 million in construction funding for the multi-tower, 1.9 million mixed-use project located within the Seward Park Urban Renewal Area (SPURA). The 9-site project which spans 4-blocks from Ludlow Street to Clinton Street will deliver a total of 1,000 residential units of which 50% will be affordable. The developers were awarded the project by the city in 2013, paying $180 million for the parcels. The project s construction is expected to be completed in 2018 according to previous reports. Wells Fargo provided a $109 million construction loan for work at Site 5/145 Clinton Street s planned 211-unit residential rental development that will include a 50/50 mix of market-rate and affordable units, and 66,000 square feet of retail space. The 3-year debt reportedly covers about 75% of the $142 million project that began construction earlier this year. The full block site is bound by Broome and Grand Streets to the north and south, and Clinton and Suffolk Streets to the east and west. Wells Fargo will also be buying the site s Low-Income Housing Tax Credits for $11.5 million. Planet Fitness will be opening a 22,000-square-foot outpost at the development according to a recently reported deal. Citi provided a $144 million construction loan with $15 million in tax-exempt bonds from the New York City Housing Development Corporation for work at Site 2/80 Essex Street-115 Delancey Street s $264 million project that will house 195 residential rental units. The development will include a 50/50 mix of market-rate and affordable units, and 188,000 square feet of retail space. The new mixed-use tower will reach a linear height of 315 feet and has already begun construction. The entire block site is bound by Delancey and Broome Streets to the north and south, and Norfolk and Essex Streets to the east and west. As with Site 5, Wells Fargo will be buying the site s Low-Income Housing Tax Credits for $13.9 million. Theater chain Regal Entertainment Group will be opening a 14-screen theater in 65,000 square feet at 115 Delancey Street as a result of the 15-year signing announced last year; issuing itself a $6 million loan to build-out the theater space which will sit atop a 30,000-squarefoot ground level space that will be home to the Essex Street Market, reportedly a neighborhood staple that will relocate from 120 Essex Street upon the building s delivery. P4 P.44

45 Essex Crossing Project Clinton Street - Rendering Essex Crossing Project Broome Street - Rendering Essex Crossing Project Delancey Street - Rendering Essex Crossing Project (cont d) Essex Crossing Project - 80 Essex Street / 115 Delancey Street - Rendering The remaining 7-sites had housed several tenement structure which were demolished close to 50-years ago, and remained dormant since: Site 1 / 242 Broome Street bound by Delancey and Broome Streets to the north and south, and Essex and Ludlow Streets Streets to the east and west; Site 3 bound by Delancey and Broome Streets to the north and south, and Suffolk and Norfolk Streets to the east and west; Site 4 bound by Delancey and Broome Streets to the north and south, and Clinton and Suffolk Streets to the east and west; Site 6 / 175 Delancey Street bound by Delancey and Broome Streets to the north and south, and Ridge and Clinton Streets to the east and west. Sites 8 & 10 bound by Stanton and Rivington Street to the north and south, and Norfolk and Essex Streets to the east and west; Site 9 bound by Rivington and Delancey Streets to the north and south, and Norfolk and Essex Streets to the east and west. P4 P.45

46 Lending: Interest Rates to Remain Unchanged The Federal Reserve will leave interest rates unchanged, a decision that was announced mid-september. The decision to hold their benchmark federal funds rate at zero to 0.25% comes amid a continued low inflation rate, uncertain outlook for global growth, and the recent unsettled financial-market. Despite continued improvements to the job market, some policy makers reportedly remain doubtful that the inflation rate will move gradually to the Feds 2% target; having remained well below it for over 3-years. In addition, economists are apprehensive of recent losses in China s equity markets; commenting that it potentially reflects deeper concerns over growth prospects for the world s second-biggest economy. Looking ahead: The recent reprieve by the Federal Reserve may be short lived, as an inevitable interest rate increase draws closer with the economy and employment figures continuing to improve. It is difficult to determine effects on the city s real estate market since the National Council of Real Estate Investment Fiduciaries National Property Index (NCREIF NPI), the benchmark for commercial real estate yields is an imperfect measure of prices; and long-term bond yields, which matter most to real estate, don t always respond in the same way to a rise in shortterm rates according to sources. Response to higher interest rates has drawn mixed response from industry sources. The more optimistic point out that rising interest rates have typically coincided with rising property values spurred by increasing rental income which tends to go hand-in-hand with the economic climate. In contrast others remain uncertain, pointing out that since the real estate market moves in cycles, at what point within the cycle an interest rate increase occurs can result in significantly different outcomes. A rate increase by the Feds before the end of the year would coincide with the 5th year of continuously rising real estate prices which some feel have become inflated for far too long due to ongoing low interest rates; and that a rate hike would hasten a market downturn. In New York, trophy commercial properties values have escalated so rapidly giving rise to a closely aligned speculative investment that has grown more distant from underlying fundamentals for commercial real estate returns initial current yield (or going-in capitalization rates), growth in net operating income, and changes in going-in versus going-out capitalization rates (i.e. pricing improvements). Current Class A office building cap rates in Manhattan reportedly average 4.2%, down 1.1% from the average rate in For investors just seeking a safe haven, today s lower cap rates still remain attractive. Nevertheless, if yields for the much safer 10-year treasury bonds significantly rise above the current 2.08% rate, investment in the city s office inventory which requires additional capital investment every time a lease rolls over, may lose its luster. P4 P.46

47 Lending (cont d) Projects Seeking Lenders 2 World Trade Center (World Trade Center) Silverstein Properties is reportedly in the market for an equity partner or mezzanine investor to help finance the construction of the remaining tower yet to rise at the complex; seeking a roughly $500 million investment towards the estimated $4 billion price tag for the development of the 2.8 million square foot tower. It is anticipated that a pension fund or sovereign wealth fund will be the likely source, with its return reportedly coming in the form of a preferred return or a stake in the tower. If a lease signing moves forward by News Corp. and 21st Century Fox before the end of the year, having signed a non-binding letter of intent (LOI) in June for approximately million on the tower s lower floors, construction would start next year with a targeted 2020 delivery. 400 West 61st Street aka 40 Riverside Boulevard (parcel 1) (Upper West Side) Boston, MAbased GID Development is reportedly negotiating with Wells Fargo and other major lenders for a construction loan totaling at least $1 billion. Funds will go towards the planned 2-building complex on the site within the multi-building Riverside Center project that the company acquired in partnership with Abu Dhabi Investment Authority for $410.8 million in April from Extell Development and the Carlyle Group. Permit applications recently filed reveal 24- and 39-story buildings totaling 858,772 square feet to be comprised of 595 rental and condominium units with an elementary school and 18,467 square feet of retail space. 400 West 61st Street - Rendering Current market performance of high-end apartment projects has resulted in a recovered confidence by lenders, however they remain cautious and efforts to reduce exposure in the event a project falters has led to recent major construction loans more commonly including a component of mezzanine financing. Loans Recently Defaulted Lever House, 390 Park Avenue (Plaza) RFR Realty has defaulted on the $100 million loan that expired in March, triggering a payment of $98 million. Challenges had arisen for the refinancing of the mortgage for the 21-story landmarked tower that the company controls through a ground lease that is expected to more than triple in The 1998 deal entered into with the Korein Family resulted in a 90-year term of ownership for $30 million in exchange for a rent at the time of $6 million per year, investing an additional $30 million in improvements. In 2005, RFR secured a refinance loan in the amount of $110 million originated by lender Credit Suisse First Boston. In December 2014 the loan was sent to special-servicer CWCapital reportedly due to concerns triggered when an existing tenant vacated more than a designated minimum amount of square footage. Based upon the building s reported current lease revenue and operating costs, the $20 million per year ground lease rent that is expected to go into effect beginning 2023 would result in an $11 million yearly loss. About 80% of the building s 270,000 square feet is set to become available in 2020 according to reported details from mortgage-tracking firm Trepp; and while the impending vacancy could create opportunity if lease deals are able to take advantage of rising rents, it also increases risk. It has been estimated that lease deals would have to net rents averaging $140 per square foot to break even on the increased ground lease rent; currently fetching rents in the $170s per square foot for prime floors according to sources. Additional road blocks to RFR s ability to secure new debt is the competition of new buildings in the area including L&L Holding and Tokyu Land Corp s 425 Park Avenue that is expected to deliver in 2018, having already achieved a taking rent of $300 per square foot for its penthouse floor; and Macklowe Properties 71,000-square-foot office component at the 432 Park Avenue residential development that is slated to deliver in 2016 with asking rents ranging $150-$175 per square foot. In addition, banks typically back away from financing ground leases since a foreclosure leaves the bank without an asset to take control of since the leaseholder doesn t technically own the asset. While the building has roughly 250,000 square feet of unused development rights that could fetch about $70 million or more if the proposed Midtown East rezoning is adopted, they are controlled by the Korein family; and as a result their potential sale would not benefit RFR Realty. P4 P.47

48 Reported Loans Secured - 3rd Quarter 2015 Midtown 590 Madison Avenue (Plaza) The State Teachers Retirement System of Ohio (Ohio STRS) has decided to abandon early plans to sell a minority stake in the 1,007,751-square-foot tower, instead securing a mortgage refinancing in the amount of $650 million. The fixed-rate, 10-year debt was provided by Goldman Sachs Mortgage Co. and will early retire by 2-years a previous $350 million mortgage originated in 2007, the pension fund opting to take advantage of current low interest rates. The building owned along with Minskoff Equities was originally developed as IBM s global headquarters back in the 1980 s, the computer company has reduced its footprint over the years but continues to remain the largest tenant at the building which reportedly commands rents in the mid-$100s. Back in March, the Brazil-based banking Safra family was reportedly nearing the finalization of a deal to acquire an undisclosed stake in the tower in response to the offering of up to a 49% stake announced last October Sixth Avenue (Plaza) Connecticut-based Starwood Capital Group secured a $125 million floating-rate loan to refinance the recently opened 229-key 1 Hotel Central Park from Singapore-based United Overseas Bank. The office building that was demolished to make way for the new eco-luxury branded hotel was acquired in 2011 for $72 million. 180 Madison Avenue (Midtown East) Prudential Real Estate Investors has secured a $110 million loan syndicated by JPMorgan Chase and Germany-based Helaba Bank. Funds from the debt will replace a previous loan originated by Wachovia, which is now part of Wells Fargo. The 23-story, 280,696-square-foot building located at the corner of East 34th Street last traded in 2008 for $146.2 million; and is currently nearing completion of a multi-million dollar renovation and repositioning aimed to attract TAMI tenants. 220 Central Park South (Midtown West) Vornado Realty Trust reportedly secured an additional $350 million from the Bank of China for the development of the residential condominium on West 58th Street. The additional debt increases financing provided by the state-owned Chinese commercial bank to a total of $950 million the original $600 million debt had been secured last year. The debt carries an interest rate of 2% over LIBOR with a final maturity of Simultaneously to securing the upsized development loan, the REIT terminated its backup commitment for a $500 million mezzanine loan, paying $15 million fee for the contractual termination. While news of Vornado entering into negotiations with Qatar s sovereign wealth fund were announced last year to line up several millions of dollars to help finance the project, it is not known if discussions are still in play. Commitments totaling $1.1 billion of the $2.84 total sellout have already been secured at the 117-unit development according to news released in May. P4 P.48

49 Lending - Reported Loans Secured (cont d) Midtown (cont d) 111 West 57th Street (Columbus Circle) The partnership of JDS Development and Property Markets Group secured a $725 million construction loan from lenders AIG and ARI, a subsidiary of Apollo Global Management. The senior loan provided by AIG totaled $400 million. The $325 million floating rate mezzanine loan provided by ARI has a 4-year initial term with one 12-month extension option, an appraised loan-to-net sellout of 42%, and has been underwritten to generate an internal rate of return of approximately 16%. ARI reportedly funded $41 million; and another $50 million was acquired by an affiliate fund of Apollo Global Management. The new debt will allow the developers to refinance a $230 million loan previously provided by Annaly Capital. The planned 80-story residential condominium has already begun construction, having received permit approvals in January. It is located along the corridor that has become labeled Billionaire s Row. The slender tower which will incorporate the former Steinway Hall building, West 57th Street is expected to reach a linear height of roughly 1,438-feet with a width of only 60-feet; and house about 60 fullfloor units. Restoration of the landmarked ground floor interior in the former Steinway building that boasts an ornate domed ceiling with marble columns, will upon completion serve as part of the retail space for the new tower. The joint venture paid a total of $217.8 million for the assemblage, purchasing Steinway Hall, West 57th Street for $46.3 million plus an additional $131.5 million for the ground fee and $40 million for the adjacent West 57th Street property; having secured a one-year, interest-only $230 million acquisition loan. The tower s construction is expected to be completed before the end of 2016 and will be using non-union labor. The development is reportedly ranked as the tallest and most complex tower to rise in the city without union labor, potentially setting a precedent for other developers to consider in the future. Manhattan Mall, 100 West 33rd Street (Penn Plaza) Vornado Realty Trust closed on a 5-year, interest only loan totaling $580 million to refinance the over 1.1 million-square-foot mixed-used tower from lender Minneapolis-based U.S Bank, reportedly netting a profit of $242 million. The interest-only loan has a rate of Libor plus 1.65%, and matures July The REIT acquired a 95% stake for $689 million in 2007, having refinanced the building s mortgage on 2-previous occasions in 2012 for $325 million which was due to expired in March 2015, netting Vornado $87 million in the process; and in 2007 for $232 million. The 14-story mixed-use building is comprised of 851,000- and 256,000 square feet of office and retail space respectively. Currently advertising firm FCB anchors the office component in roughly 462,888 square feet, and department store J.C. Penney anchors the retail in about 150,000 square feet Broadway (Penn Plaza) New York REIT (formerly American Realty Capital) has secured $325 million in financing for the 593,532-square foot building from an undisclosed lender. The REIT which was acquired by investment firm Apollo Global Management in August, purchased the property in 2013 for $528.6 million ($891 per square foot) from the Rockpoint Group and Monday Properties. The building is home to Macy s flagship store which spreads across roughly 197,000 square feet through a lease that was extended 11-years in June West 33rd Street (Penn Plaza/Koreatown) The Torkian Group secured a $105 million construction loan from Israeli-based Bank Leumi for the planned development of a 36-story, 165,901-square-foot residential project. The 3-year debt carries a Libor-based floating rate, no pre-payment penalties, and interest-only payments throughout the entire term. The new 198-unit tower will replace a 325-car ICON parking garage that the developer acquired in 2007 for $30 million ($181 per buildable-square-foot). Another $14.85 million was invested for the acquisition of additional development rights $13.2 million from Rick s Cabaret at 50 West 33rd Street; and $1.65 million from above the adjacent storefront, for a total assemblage cost of $44.85 million ($270 per buildable square feet). Excavation for the project is already underway for a potential completion by Plans which were modified in June were originally filed last September. P4 P.49

50 Lending - Reported Loans Secured (cont d) Midtown (cont d) 787 Eleventh Avenue (Clinton/Hell s Kitchen) The partnership of The Georgetown Company and Pershing Square Capital Management, a hedge fund controlled by the Ackman family secured a $180 million bridge loan from lender JPMorgan Asset Management. The debt helped fund the $255.5 million acquisition that closed in early July.of the 8-story, 387,619-square-foot commercial building sold by the Ford Motor Co. Pershing Square which is currently housed in 31,000 square feet at 888 Seventh Avenue plans to occupy a portion of the 11th Avenue building. Details of future plans for the building have yet to be announced by new ownership, having acquired the building about 2-months following the offering announcement. Ford Motor Co. acquired the building in 1997 for $73 million, renovating the building which the automaker used as a service center for Ford and Lincoln brand vehicles. The building s retail space currently houses Jaguar and Land Rover dealerships on month-to-month leases. 416 West 52nd Street aka 411 West 51st Street (Hell s Kitchen/Clinton) Gaia Real Estate secured a $122.8 million acquisition loan from private equity investment firm TPG Real Estate Finance Trust to close on the purchase of the former 6-story, 182,247-square-foot St. Vincent s Midtown Hospital building for reportedly $156.5 million from the Chetrit Group. The 3-year, floating rate loan includes (2) 12-month extension options. New ownership plans to upgrade the building and convert the empty apartments into condos. The Chetrit Group had intended to redevelop the 60,000-square-foot site that can accommodate roughly 218,000 buildable square feet into a residential rental development upon acquiring the property along with adjacent West 52nd Street for $84.73 million in The recession stalled the developer s plans, ultimately deciding to sell the smaller site to the partnership of JVL Property, Okada Acquisitions, and Zion Enterprises for $41.4 million resulting in a 7-story, roughly 60,000-square-foot residential condominium conversion that was completed in Hudson Yards (Hudson Yards) The Related Companies and Oxford Properties Group have secured an $850 million construction loan from London-based hedge fund the Children s Investment Funds. The debt will help finance the construction of the condo portion of the mixed rental/condo development. The 70-story, 960,000-square-foot tower will be the first residential building to rise within the 16-building complex. 15 Hudson Yards - Rendering P5 P.50

51 Lending - Reported Loans Secured (cont d) Midtown South 387 Park Avenue South (Flatiron) TF Cornerstone secured $100 million in permanent financing for the 218,000-square-foot office tower from the AXA Equitable Life Insurance Company, which also provided previous financing for the building. Funds from the 15-year, fixed-rate debt will cover recently completed $20 million in renovations along with future capital expenditures. The building is currently about 80% leased, and notable tenants include Paris-based online advertising firm Criteo and real estate firm Citi Habitats. The building which serves as the developer s headquarters was acquired in 2005 for $68 million ($312 per square foot). 51 Astor Place (Greenwich Village) New York-based Edward J. Minskoff Equities secured a $370 million loan from lenders Bank of America and Barclays. The funds will refinance and pay off the $165 million construction financing by the Bank of America secured in 2011 for the12-story building that delivered in The building s office component is 100% occupied with IBM s Watson Group and St. John s University its largest tenants; and the roughly 23,500 square feet of retail is now 50% occupied as a result of the 11,500-square-foot signing by CVS Pharmacy announced in July. Construction of the 400,000-square-foot building came at a price tag of about $300 million, of which the developer reportedly provided $135 million in equity to help finance West 26th Street (Chelsea) Savanna secured a $115 million construct loan from lender Deutsche Bank. The new debt will be applied to the construction of a 166,525-square-foot mixed-use development that is being built along with the Silvermintz family reportedly through a joint venture. The Avenues: The World School will be housed in 51%, or 85,421 square feet spread across the entire 2nd-5th floors plus portions of the basement and ground levels which has been pre-leased to the international private school system. Upon construction delivery, the 9-story building will house a mix of office, gallery and community facility space. Demolition of the former 2-story art gallery has already been completed and excavation is expected to begin in soon for an expected 2017 completion. Savanna had acquired a stake in the property in 2014 for $24.7 million West 26th Street - Rendering 444 Park Avenue South (NoMad) Moin Development and SBE secured a $109 million loan from lender Fortress Investment Group for the recapitalization and restructuring of the existing mortgage. The development team is nearing the completion of the $150 million renovation of the building which is being converting into an SLS Hotel. The project also included a 6-story vertical expansion of the 14-story office building acquired in 2011 for $45 million. The hotel is slated to open next spring East 19th Street / East 20th Street (Gramercy Park) Co-developers the Chetrit Group and Clipper Equity secured a total of $345.5 million in financing for the multi-building redevelopment of the former Cabrini Medical Center which shuttered in The 3-year, $280 million senior debt that carries (2) one-year extension options was secured from a group of lenders led by Natixis Real Estate Capital along with Malaysia-based Maybank, Bank of China, Investors Bank and TD Bank. The $65.5 million mezzanine debt was provided by Apollo Commercial Real Estate Finance. The 4-tax lot, block-through site located between 2nd- and 3rd Avenues was acquired in 2013 for $152.5 million from S.K.I. Realty, which had paid $83.1 million in 2010 according to city records. Dubbed Gramercy Square, several existing structures will be repurposed for residential use with the addition of a smaller building to be newly constructed. The hospital conversion follows in the footsteps of a similar redevelopment currently under construction by Rudin Management of the former St. Vincent s Hospital located nearby that has been dubbed Greenwich Lane East 19th Street will have 140-units spread across 16-stories with significant exterior changes that will replace the current small windows and overbearing façade with large glass panes; 228 East 20th Street / 227 East 19th Street will have 54-units each; 224 East 20th Street the newly constructed building will have 8-full floor apartments. 152 Elizabeth Street (NoLita) Manhattan-based Sumaida + Khurana secured a $40 million construction loan from Deutsche Bank for the planned 7-story, 27,090-square-foot residential condominium development. Located on the southeast corner of Kenmare Street, the existing 4-story garage was acquired for $21 million ($775 per buildable-square-foot) last year East 19th Street - Rendering 152 Elizabeth Street - Rendering P5 P.51

52 Lending - Reported Loans Secured (cont d) Downtown Broadway Atrium, 45 Broadway (World Trade Center) Cammeby s International secured a 12-year, $95 million loan from lender Cornerstone Real Estate Advisers. The refinance deal was reportedly at a 3.78% fixed interest rate with 6-years of interest-only payments followed by a 30-year amortization schedule. Funds from the new debt will replace a $72.4 million loan securitized by JPMorgan Chase. The building is nearly 100% leased, larger tenants include law firms Cozen O Connor and Winget, Spadafora & Schwartzberg; and information technology provider MTM Technologies. The 394,792-square-foot building was acquired by Cammeby s in 2000 for $60 million ($152 per square foot); and is currently commanding asking rents in the range of $40-$50 per square foot according to sources Vestry Street aka West Street (TriBeCa) Related Companies secured a total of $200 million in loans from the Bank of America to help fund the construction of a planned 13-story, 154,019-square-foot residential condominium development. Although details of the transaction were not released, the debt was divided into 2-separate loans valued at $161 million and $39 million. The 47-unit project that spans 6-tax lots will run the entire block facing West Street between Vestry and Desbrosses Streets; and is reportedly being constructed along with Ponte Equities. Uptown West 77th Street (Upper West Side) The Naftali Group secured a $104 million construction loan from German-based lender Deutsche Bank in August. Details of the financing deal for the planned 18-story, 79,899-square-foot development were not disclosed. The 25-unit project that will include a 1,624-square-foot ground-level commercial component replaces a 5-story garage which the developer acquired in November for $63 million ($788 per buildable-square-foot) from the partnership of David Berley of Walter & Samuels and garage investor Arnold Penner West 77th Street - Rendering P5 P.52

53 Notable Transactions Lease Address Submarket District Sq. Ftge Tenant 200 Liberty Street Brookfield Place Downtown World Trade Center 172,000 Associated Press (AP) (relocation/downsizing) 1 North End Avenue Downtown World Trade Center 169,000 KCG Holdings (relocation) 1 World Trade Center Downtown World Trade Center 76,001 Moody s (expansion of space at 7 WTC) 55 Water Street Downtown FiDi 67,706 Sandbox Studio (relocation) 350 Fifth Avenue Midtown Penn Plaza 120,000 LinkedIn (expansion) 7 Times Square Midtown Times Square 101,958 White & Williams 888 Seventh Avenue Midtown Columbus Circle 100,000 Texas Pacific Group (TPG) (renewal/expansion) 285 Madison Avenue Midtown Grand Central 85,000 DKNY (relocation/downsizing) 601 Lexington Avenue Midtown Plaza 60,000 Blackstone Group (expansion) 315 Hudon Street Midtown South Hudson Square 51,576 One Kings Lane (relocation) Sale Address Submarket District Sq. Ftge Sold Price Purchaser 100 Wall Street Downtown FiDi 480,000 $270,000,000 Cornerstone Real Estate Adv. 575 Lexington Avenue Midtown Plaza 740,000 $510,000,000 Angelo Gordon & Co 120 West 45th Street Midtown Times Square 443,956 $365,000,000 Undisclosed 31 Penn Plaza Midtown Penn Plaza 426,889 $264,700,000 Vanbarton Group (leasehold) East 43rd Street Midtown Grand Central 177,000 $99,000,000 Alchemy-ABS Investment Partners Clarion Partners (ground lease) 511 Fifth Avenue Midtown Grand Central 125,632 $250,000,000 Aurora Capital Jeff Sutton (leasehold) 11 Madison Avenue Midtown South Flatiron 2,348,115 $2,585,000,000 SL Green Realty 5-Building Portfolio Midtown South Chelsea 413,700 $267,868,042 Edison Properties 260 Eleventh Avenue Midtown South Chelsea 154,433 $80,000,000 Vornado Realty Trust Greene Street Midtown South SoHo 145,044 $231,163,875 SL Green Realty (est. price) The Manhattan Office Market Report is produced quarterly by: Jamie Mason Director of Marketing & Research ABS Partners Real Estate, LLC P5 P.53

54 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