Southern California Office Real Estate Blog

BUY WATERGATE – A INFAMOUS NIXON-ERA COMMERCIAL LANDMARK

BUY WATERGATE – A INFAMOUS NIXON-ERA COMMERCIAL LANDMARK

By Jodi Summers

Politicos will be intrigued to learn that the Watergate complex in Washington, D.C. is for sale.  To rattle your memory, the Watergate is famous for its role in the downfall of former president Richard Nixon, leading to his resignation.

Being offered is a 10-acre, mixed-use development is comprised of three luxury residential towers, two class-A office buildings, a 200-room hotel and a parking garage. The assets have been tentatively valued at north of $100 million.

What you get is 2600 Virginia Ave. - a 198,538-square-foot office building; 2500 Virginia Ave. - a 66,034-square-foot retail venue; and a 314-space underground parking facility.

The complex has an occupancy rate that averages in the low 90s, with the office occupied at around 96%. Office tenants include the Saudi Arabian Cultural Mission, Saul Ewing, the Washington Opera and PNC Bank. The US Postal Service, CVS Pharmacy and Safeway supermarket are among the retail tenants.

The property’s financing is assumable. With a term that ends October 2015, it has an initial blended rate of 5.43%.

The Watergate scandals were a series of American political scandals during the presidency of Richard Nixon that resulted in the indictment of several of Nixon’s closest advisors, and ultimately his resignation on August 9, 1974. The scandals began with the arrest of five men for breaking and entering into the Democratic National Committee headquarters at the Watergate Office complex in Washington, D.C. on June 17, 1972. The scandal has been immortalized with the trend of adding ‘gate’ to the phrases associated with scandals.

Info courtesy of:

http://www.globest.com/news/1366_1366/washington/177425-1.html

http://en.wikipedia.org/wiki/Watergate_scandal

http://ilikedginger.net/gtisongs/boyfriends/elvis_presley_and_richard_nixon.jpg

http://www.memphisflyer.com/binary/dd83/RichardNixonFarewell.jpg

ECONOMIC STIMULUS FOR SMALL BUSINESS

ECONOMIC STIMULUS FOR SMALL BUSINESS

by Jodi Summers

Everyone is bitching about how the Economic Stimulus Bill does nothing to benefit small businesses. Okay, so maybe it isn’t everything the Republicans had hoped for, but as BusinessWeek.com astutely points out, President Obama’s bill contains several tax provisions designed to assist small businesses struggling through a tough economic times.

Net operating loss carryback. If your business operated in the red in 2008, but paid taxes on profits in the past five years, you can apply last year’s loss to prior-year taxes—and possibly get a refund on taxes you’ve paid in the past. It’s a bit like reassessing your property value.

Deduct and depreciate equipment. Companies that bought new equipment in 2008 can treat it as an operating expense and immediately deduct the whole amount up to $250,000, a $117,000 increase over its previously scheduled limit.

Shorter holding period for S-Corps. “This shortens the period that S-corp assets can be sold without paying taxes on built-in gains,” explains BusinessWeek.com. “A built-in gain is the difference between the fair market value of the assets and their tax basis at the time the company put an S-corp in place. The impact of this is that many business owners will be able to retire earlier without facing two layers of taxation.”

http://www.realtor.org/RMODaily.nsf/pages/News2009022401?OpenDocument

http://highbridnation.com/wordpress/wp-content/uploads/2008/05/stimulus.jpg

http://rlv.zcache.com/economic_stimulus_package_t_shirt-p235378275582632747s564_400.jpg

http://images.thestreet.com/tsc/rss/images/itunes_small-business_300×300.jpg

THE NY TIMES LEVERAGES ITS OFFICE BUILDING

THE NY TIMES LEVERAGES ITS OFFICE BUILDING

by Jodi Summers

Business is changing as we know it –music, banking, media, retail, automotive – it’s all evolving…and different companies are evolving to meet the challenges.

Not willing to give up on the newspaper industry, the New York Times Co. has sold its portion of its headquarters building at 620 Eighth Ave. to investment firm W.P. Carey & Co. and two affiliates in a $225-million sale-leaseback. The Times Co. has stated it will use proceeds from the sale to pay down debt.

“This Times Building transaction really should be viewed as a corporate finance deal that’s a way for the Times to borrow significant amounts of money against the value of their real estate,” observed Craig Evans, a senior vice managing director with brokerage Colliers ABR.

Los Angeles based W. P. Carey specializes in corporate financing, not real estate. W.P. Carey and two of its publicly-held, non-traded REIT affiliates, CPA:16–Global and CPA:17–Global, bought the 21 floors, totaling 750,000 square feet, which the Times Co. uses as headquarters space. The transaction does not include the six floors at 620 Eighth which the Times Co. leases to other tenants.

The company spent more than $600 million on its building, on Eighth Avenue in Midtown Manhattan, which was completed in 2007. The Times Company owns 58 percent, and its development partner, the Forest City Ratner Companies, owns the rest.

Both companies characterized the agreement more as a loan secured by the building, than a real estate transaction.

“W. P. Carey was able to clearly understand our company, our facility and our objectives,” said Janet L. Robinson, the president and chief executive of the Times Company, in a statement.

Details reveal that the sale-leaseback agreement with W. P. Carey & Company, could last as long as 15 years, but the Times Company has the option of buying the building back after 10 years for $250 million. It is expected that this option will be exercised.

It was reported that W.P. Carey was drawn to the deal because of “the opportunity to secure a very attractive current return, while limiting our downside risk because of the very good price per square foot.”

There has been buzz about this transaction in the Big Apple since the end of 2008, when it was revealed the Times Company had more than $1 billion in debt. It still faces a principal payment on long-term borrowing of $49.5 million due in November, and a payment of $250 million due in March 2010.

GlobeSt. Reported that in addition to the NY Times’ maturing debt, its credit rating had been reduced to junk status, increasing its potential borrowing costs.

W.P. Carey “is getting a great deal” in the building, according to Victor Calanog, Reis’s research director.

Reis research firm projects rents in Manhattan will start growing by 3 to 4 percent annually starting in 2014. That’s the bright spot. Currently, it projects that rents will fall 11.3 percent this year and 5.2 percent next year, with declines slightly steeper in the Midtown West submarket. Rents will then begin growing tepidly in 2012 and 2013. Those projections are based on a lack of new supply.

Manhattan has led the nation’s office markets in past upswings. For example, at mid-year 2007, shortly before the credit markets started falling apart, Manhattan’s overall office vacancy rate had dropped to 5.3 percent, lowest in the nation, while average asking rents rose 36 percent from the year before to $59.17/sf.

http://www.nytimes.com/2009/03/10/business/media/10paper.html?_r=1

http://www.globest.com/news/1362_1362/newyork/177327-1.html

http://www.loopnet.com/xnet/mainsite/news/news.aspx?DocID=6755&sourcecode=1lntd009

http://byfiles.storage.live.com/y1pBgEx1qEZ0E5wwsBWLlMC7jOCArmtti2zGadk6gHY6E3jOmlSgdbe9CHkDlnA_K9HNbYj7aY_JFQ

OFFICE REAL ESTATE UPDATE

OFFICE REAL ESTATE UPDATE

By Jodi Summers

In case you were looking for an official statement, the National Association of Realtors® has determined that the commercial real estate market will be slow this year.

The most recent Commercial Leading Indicators Report confirms that losses in the job market continue to reduce demand for office space, thus eroding office building lease rates and sale prices. Vacancy rates are projected to increase to 16.7% in the 3Q of 2009 from 13.4% in the 3Q of 2008.

“We’ve been trying for more than a year to get our 2^nd floor rented,” shared a building owner on Motor Ave. “Everyone wants concessions and modifications; it’s to the point that the offers we do get are not very tempting.”

Annual rent in the office sector is expected to decline 4.2% this year following a 0.4% dip in 2008. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is seen as a negative 77.4 million square feet in 2009.

 “The credit crunch has especially hammered down some components of NAR’s commercial leading indicator,” Lawrence Yun, NAR chief economist, noted. “A lack of commercial credit is a serious threat to the overall economy. The Federal Reserve needs to use the Term Asset-Backed Securities Loan Facility (TALF) to provide liquidity and support for commercial mortgage-backed securities.”

NAR has concluded that commercial real estate activity, as measured by net absorption and the completion of new commercial buildings, is likely to weaken further over the next six to nine months.

This lackluster attitude is confirmed by the Society of Industrial and Office Realtors®. In its SIOR Commercial Real Estate Index, which surveyed 644 local market experts, confirmed an anticipated lower level of business activity in upcoming quarters. Ninety% of respondents indicate leasing activity in their market is down, and vacancy rates are generally higher.

The SIOR index has declined for eight consecutive quarters and is 58.5%age points below the 100 point criteria that represents a balanced marketplace.

“The stimulus package is designed to create jobs, and that would eventually lead to an upturn in the commercial market,” Realtors® Commercial Alliance Committee chair Robert Toothaker observed. “However, we need to quickly restore liquidity to commercial real estate lending so transactions can move forward and debt on existing properties can be rolled over.”

Get all the dirt @

http://www.realtor.org/press_room/news_releases/2009/02/commercial_re_activity_to_continue_decline

NATIONAL DO NOT CALL LIST CELL PHONE REMINDER

NATIONAL DO NOT CALL LIST CELL PHONE REMINDER

Shortly, all cell phone numbers are being released to telemarketing companies and you will start to receive sale calls.

…. YOU WILL BE CHARGED FOR THESE CALLSTo prevent this, call the following number from your cell phone:

888-382-1222.
It is the National DO NOT CALL list. It will only take a minute of your time. It blocks your number for five (5) years. You must call from the cell phone number you want to have blocked. You cannot call from a different phone number.

REAL ESTATE DEVELOPERS IMPACTED BY BERNIE MADOFF’S “PONZI SCHEME”

REAL ESTATE DEVELOPERS IMPACTED BY BERNIE MADOFF’S “PONZI SCHEME”

By Jodi Summers

Several major East Coast Real Estate Developers have been named as victims in  Bernard Madoff’s complex  Ponzi scheme, which is rumored to have stripped investors of  $50 billion in assets.

According to GlobeSt.com this list includes:

·         Larry Silverstein, the World Trade Center developer;

·         The Wilpons and Rechlers families;

·         Brokers at Newmark Knight Frank and CB Richard Ellis–including Stephen Siegel, chairman of worldwide operations there,

·         New Jersey developer Fred Daibes is rumored to have lost a significant amount of money;

·         Mort Zuckerman, the chief executive of Boston Properties;

·         Fred Wilpon, who owns the Mets and is head of Sterling Equities;  

·         Steven Simkin, a partner at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison and chairman of the firm’s real estate department;

·         A number of limited real estate partnerships in DC are also among the supposed victims.

·         Other recognizable names on the list include John Malkovich, Sandy Koufax and Tim Teufel, - if  these are the actor and baseball players, respectively, is unconfirmed, as  is   Larry King, the talk-show host, Frank Lautenberg, the Democratic senator from New Jersey, and Mark Green, a former public advocate of New York City.

Madoff was known to have focused on the rich and famous, sometimes requesting as much as  a $20 million minimum.

A large number of the developers who invested with Madoff are reported to have pledged securities held by him for development projects. It has yet to be determined whether the actions of one person, will again impact bank lending criteria.

The complete client list of Madoff has been provided by the Wall Street Journal:

http://online.wsj.com/public/resources/documents/madoffclientlist020409.pdf

Info courtesy of:

http://www.globest.com/news/1341_1341/newyork/176748-1.html

https://ecf.nyeb.uscourts.gov/

http://designdepartment.wordpress.com/2006/09/07/

http://marketplace.publicradio.org/display/web/2006/10/27/down_in_debt/

http://www.observer.com/term/25509

http://gothamist.com/2007/09/07/revised_vision.php

http://blog.lib.umn.edu/mcgin017/blog/fall_2008/honors_intro_to_philosophy_fall_08/