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CHASE COMMERCIAL MORTGAGE LENDING Retail | Mixed Use | Office | Industrial

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Credit is subject to approval. Rates and programs are subject to change; certain restrictions apply. Terms and conditions subject to commitment letter. Products and services provided by JPMorgan Chase Bank, N.A. © 2017 JPMorgan Chase & Co. All rights reserved. Chase is a marketing name for certain businesses of JPMorgan Chase & Co. and JPMorgan Chase Bank, N.A., Member FDIC.

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3/24/17 4:10 PM 3/27/17 1:33 PM

INSIGHTS AND EXPERTISE TO HELP YOU SUCCEED IN TODAY’S MORE DYNAMIC MARKETPLACE. From a new administration to emerging trends impacting each of New York City’s boroughs, there was a lot of ambiguity about the state of the commercial property market as we moved into 2017. We recently hosted a panel discussion—

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moderated by Michael Stoler, Host of The Stoler Report and Managing Director of Madison Realty Capital—to dive into the factors affecting the New York City market.

Left to right: Judy Guarino, Chase; Michael Stoler, Madison Realty Capital; Joseph Harbert, Colliers International; Lester Petracca, Triangle Equities; Michael Maturo, RXR Realty LLC; Joanne Potell, Cushman & Wakefield; Eric Gural, Newmark Holdings.

Visit chase.com/CML-NYCMarket for insights from the event, including the panelists’ views on co-working and hoteling, tenant incentives, the impact of tourism and more.

CHASE COMMERCIAL MORTGAGE LENDING Retail | Mixed Use | Office | Industrial

For more commercial real estate insights, visit: chase.com/CRE-insights

Credit is subject to approval. Rates and programs are subject to change; certain restrictions apply. Terms and conditions subject to commitment letter. Products and services provided by JPMorgan Chase Bank, N.A. © 2017 JPMorgan Chase & Co. All rights reserved. Chase is a marketing name for certain businesses of JPMorgan Chase & Co. and JPMorgan Chase Bank, N.A., Member FDIC.

17CCB004 MFL Commercial Observer APRIL Cover_032417.indd 2 ChaseWrap.indd 2

Call today to get started.

(888) 808-3792 chase.com/CML-newyork

CHASE COMMERCIAL MORTGAGE LENDING Retail | Mixed Use | Office | Industrial

Credit is subject to approval. Rates and programs are subject to change; certain restrictions apply. Terms and conditions subject to commitment letter. Products and services provided by JPMorgan Chase Bank, N.A. © 2017 JPMorgan Chase & Co. All rights reserved. Chase is a marketing name for certain businesses of JPMorgan Chase & Co. and JPMorgan Chase Bank, N.A., Member FDIC.

3/24/17 4:11 PM 3/27/17 1:34 PM

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APRIL 5, 2017

Israeli investors to NYC: No thanks!

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Ken Kurson Editorial Director

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Dan E. Gorczycki and Joshua Stein

The real estate industry’s propensity

WRITERS Rebecca Baird-Remba, Reporter Liam La Guerre, Reporter Rey Mashayekhi, Reporter — Robyn Reiss Executive Director — SALES Barbara Shapiro, Associate Publisher Brigitte Baron, Sales Director Shannon Rooney, Account Executive — MARKETING & EVENTS Lauren Russell, Marketing Director Ashley Roseman, Marketing & Events Manager — DESIGN, PHOTO & PRODUCTION Jeffrey Cuyubamba, Art Director Emily Assiran, Photo Director Kaitlyn Flannagan, Photo Editor — OBSERVER MEDIA Joseph Meyer Publisher, Chairman and CEO

92 Party Circuit 94 The Plan 93 ChartLease / Sale FROM TOP: MICHAEL NAGLE/FOR COMMERCIAL OBSERVER; GONZA RODRIGUEZ; COURTESY MARCIA DIAZ COVER ILLUSTRATION BY FRED HARPER

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Krystyn Gatto, Leasing Associate 212-356-4106 | krystyn.gatto@slgreen.com Jeremy Bier, Vice President 212-216-1722 | jeremy.bier@slgreen.com Larry Swiger, Senior Vice President 212-216-1628 | larry.swiger@slgreen.com slgreen.com

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News BYE BYE, BEBE

Bebe, a 1990s favorite for women’s fast fashion, is shuttering its ground-floor store at 1 West 34th Street between Fifth Avenue and Avenue of the Americas, according to a notice the company filed with the New York State Department of Labor. The closing, slated for May 27, will impact 16 employees.

The news comes as the 40-year-old fashion chain—which lost about $200 million over the past four years—prepares to close all of its 170 stores nationwide, as Bloomberg recently reported, and avoids filing for Chapter 11 bankruptcy.

Instead Bebe will focus on its online business.

Kate Newlin of Newlin Consulting, a brand consultant for retailers and manufacturers, emailed about the company’s fate: “Junky merchandising. Junky clothes.

Looks cheap. Hard to tell a teen/millennial aspirational story. No narrative. Compare to an Urban Outfitters vibe. And geez Louise.

Who shops 34th Street? Not a workable business model. Survival may go to the fittest retailers, but not these guys.”

Bebe announced on March 22 that “its board of directors is exploring strategic alternatives for the company…[and has] engaged a real estate adviser to assist with options related to its lease holdings.”

Bebe is just the latest large retailer to face country-wide closures. Others making a similar move include Macy’s, Kenneth Cole, J.C. Penney, Sears and Kmart.

“This is another example of how e-commerce has affected retail brick-and-mortar stores throughout the U.S.,” said retail broker James Famularo of Eastern Consolidated.

Meanwhile, Commercial Obser ver reported recently that property owners BLDG Management and Crown Acquisitions landed a $150 million financing from Wells Fargo and Goldman Sachs for 1 West 34th Street.

BLDG acquired the property between Fifth Avenue and Avenue of the Americas 6 | APRIL 5, 2017 | COMMERCIAL OBSERVER

for $51.5 million in March 2002, according to CoStar Group. It was not immediately clear when Crown bought into the property. It is comprised of three contiguous buildings totaling 212,000 square feet.

Ground-floor tenants also include Duane Reade and Bank of America.

Bebe Stores, BLDG and Crown representatives didn’t immediately respond to requests for comment.—Lauren Elkies Schram

COURTESY COSTAR GROUP

Bebe Closing W. 34th St. Store as Brick-and-Mortar Biz Dies

ROCKABYE BEBE: Bebe is closing its store at 1 West 34th Street.

STAT OF THE WEEK

Midtown Madness Part II: 6.3 percent

BY RICHARD PERSICHETTI Last week during part one of the Midtown Madness Tournament, the Park Avenue submarket got knocked out and failed at its bid of a repeat champion. Meanwhile, the East Side/U.N. played its way into the brackets and recorded the only upset of the first round. Let’s see which of these final four submarkets can be crowned as the 2017 Midtown Madness Champion.

The second round will be decided by the largest year-over-year increase in average Class A direct asking rents. In the East region, East Side/U.N. had a minimal change in asking rents, up only 0.6 percent to $75.64 per square foot and could be facing elimination after its Cinderella run. Madison/Fifth came out draining buckets, as asking rents jumped 5.7 percent to $111.36 per square foot. In the West region, Sixth Avenue/Rock Center asking rents were up slightly, with a 0.1 percent increase to $92.41 per square foot. The West Side submarket came out with a full court press and scored the upset with a 5.7 percent increase in asking rents to $82.73 per square foot.

With the two No. 2-seeded submarkets advancing to the finals, it’s time for the champion to be decided by new leasing activity over the last 12 months as a percentage of the total submarket size. The Madison/Fifth submarket had over 1.5 million square feet of new

leases signed, equal to 6.3 percent of its total inventory, as six leases above 25,000 square feet accounted for nearly one-quarter of the submarket’s total leases. The West Side had over 1.7 million square feet of new leases completed, a number fueled by nine leases greater than 50,000 square feet completed. However, this only equals 5.6 percent of the West Side total inventory, which makes Madison/Fifth the 2017 Midtown Madness Champion!

Richard Persichetti is the vice president of research and marketing at Cushman & Wakefield.

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COURTESY COSTAR GROUP

Office Provider Knotel Grows With New Manhattan Locations

KNO MORE: Startup Knotel has taken space at 1 State Street.

Knotel, a workspace startup, is continuing to expand operations, having opened new locations in the Financial District and NoMad while also growing its footprint near Union Square—for a total expansion of 50,000 square feet.

Knotel, which provides office space to small to midsized businesses via short-term or rolling lease agreements, has taken 27,000 square feet at the Wolfson Group’s 1 State Street and 10,000 square feet at Acuity Capital Partners’ 25 West 26th Street. The company has also expanded its presence at Argo Real Estate’s 50 West 17th Street by 13,000 square feet, taking its total space at the property to 20,000 square feet.

Knotel has 15 locations spread out across Manhattan and Brooklyn, said Amol Sarva, its co-founder and chief executive officer. The firm recently completed a $25 million Series A funding round via investors including Bloomberg Beta and Invest AG. (Disclosure: Observer Capital, led by Observer Media Publisher, Chairman and CEO Joseph Meyer, is also among Knotel’s investors.) Sarva said Knotel has plans to expand by another 750,000 square feet by the end of the year, including in markets outside of New York.

Sarva said the company is different from most coworking providers in that it caters to larger firms than the likes of WeWork and Bond Collective and said Knotel’s business is based around the idea that the traditional office leasing model is economically inefficient and restrictive—as it ties tenants

to long-term contracts that often leave them with more or less space than they need. “The lease is the enemy,” Sarva said.

“No one has ever asked us for the natural [long-term] lease lengths that dominate the New York market. There’s a reason for that: Leases tie people into buying too much space for too long. We have some folks on two-year deals, and even them, after three months, they’re making changes.”

Knotel has already signed several tenants to its new spaces, including financial news media firm Cheddar at 1 State Street, small business insurer CoverWallet at 25 West 26th Street and both digital market intelligence firm SimilarWeb and online education platform Teachable at 50 West 17th Street.

Cheddar CEO Jon Steinberg told CO that the company chose the space at 1 State Street due to its proximity to the New York Stock Exchange, where it broadcasts from the trading floor. “The New York Stock Exchange is our primary broadcast facility, so we wanted to be close,” Steinberg said.

The majority of Knotel tenants, Sarva said, are 20-plus-person firms that occupy large portions of the floors in question.

“This is our struggle; when we meet with [landlords] who haven’t heard of us yet, they think ‘coworking,’ ” he said. “The overall sentiment is that [coworking] is annoying—it causes problems and tons of load [on buildings]. And the reason is because there are 100 CEOs crawling around, talking on their phones. We put one company on each floor.”—Rey Mashayekhi

Sam Chang Closes on $42.4M Buy of 292 Fifth Avenue

The owner of a Gramercy Park-area office building at 67 Irving Place has filed for Chapter 11 bankruptcy protection, at the same time an affiliated company filed for Chapter 11 on a Washington, D.C., site, bankruptcy documents indicate. The former, which is between East 18th and East 19th Streets, is valued at $40 million, and the latter at $8 million, the records show.

Puble N.V., whose president is Charis C. Lapas, filed for Chapter 11 in United States Bankruptcy Court in the Southern District of New York for 67 Irving Place. And an affiliate company, Scotia Valley N.V., filed for bankruptcy protection on 1737 H Street N.W., an office building in Washington, D.C. Lapas wasn’t reachable and his attorney in both bankruptcies, Frank A. Oswald, didn’t respond to requests for comment.

Mortgage lender Daniel Wrublin of Dalan Management is owed $13.3 million at the properties, documents show.

The 12-story, 44,160-square-foot office building on Irving Place was erected in 1909, and Puble N.V. has owned it since 1986. It is home to Drake Design Associates and Bedford Cheese Shop.

Heritage Realty Services, the operator of 67 Irving Place, is also a tenant in the building and is cited in both cases as a creditor with an unsecured claim for $22,295.97 in brokerage commission.

George Constantin, the president and chief executive officer at Heritage Realty Services, 8 | APRIL 5, 2017 | COMMERCIAL OBSERVER

COURTESY COSTAR GROUP

Owner of $40M Irving Place Office Building Files for Chapter 11

NO PLACE: Puble N.V. filed for Chapter 11 bankruptcy protection for 67 Irving Place. previously told Commercial Observer that the landlord is a high net-worth European family, which owns the building through a corporation in the Netherlands. Alexander L. Constantin, a Heritage Realty Services analyst, didn’t respond to requests for comment.

“There appears to be plenty of equity value between these two properties, as the total asset value is $48 million against only $13 million of debt,” commented Adam D.

Stein-Sapir, a portfolio manager at Pioneer Funding Group, which specializes in analyzing and investing in bankruptcy cases, and who is not involved in the case. “If I had to speculate as to why these properties filed for bankruptcy, I would say that they are asset rich but cash poor, lacking liquidity to pay the mortgage and other expenses.

We’ll know more as the case develops.”

—Lauren Elkies Schram

Last week, hotel developer Sam Chang of McSam Hotel Group sealed a $42.4 million deal for a development site in Koreatown, Commercial Observer has learned.

Chang bought the 5,769-square-foot lot at 292 Fifth Avenue between West 30th and West 31st Streets and is expected to erect a hotel at the site, according to Robert Knakal of Cushman & Wakefield. The prolific hotelier can build a structure as big as 57,690 square feet and even 69,223 square feet with inclusionary housing.

Knakal a long w it h John Ciraulo and Jonathan Hageman of C&W represented Chang and the seller, a partnership controlled by hotelier Richard Born of BD Hotels. Chang, the king of the New York City budget hotel sector, didn’t respond to requests for comment, and nor did Born.

Born and company bought the building in October 2013 for $10.4 million, property records show. As Crain’s New York Business reported last December, Born picked up the adjacent buildings—294 Fifth Avenue and 296 Fifth Avenue—also in 2013, and had planned for a 20-story building including a 57,000-square-foot hotel and 12,000 square feet for residences.

Knakal said of Born selling the site, “He just wanted to sell it.”—L.E.S.

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DAVID SILVERMAN/GETTY IMAGES

NEWS

Israeli Investors to NYC: Thanks but No Thanks New report shows Israeli investment in the Big Apple is dropping

BY REY MASHAYEKHI

A

fter years of increasing investment activity, Israeli investors took a step back from New York City property markets in 2016, according to a new report by Ariel Property Advisors provided to Commercial Observer.

Total Israeli investment in New York City real estate exceeded $130.5 million last year—down significantly from nearly $2.07 billion in 2015, per the report. While overall investment activity across the city also fell substantially year-on-year, to nearly $48 billion in 2016 from almost $67 billion the year prior, the flow of capital from Israel into the city’s property markets hit its lowest level since 2009, during the height of the global financial crisis.

The downward trend was reflected in the number of transactions involving Israeli investors last year, which dropped to 18 deals, the lowest figure since 2011, from 39 transactions in 2015.

Shimon Shkury, the president and founder of Ariel, told CO that the decline in Israeli investment activity was driven by concerns about “a market that was

10 | APRIL 5, 2017 | COMMERCIAL OBSERVER

overheated in 2015,” pullback in the new development market and election year uncertainty.

“What we saw in 2016 was that there weren’t many major trades in the development market,” Shkury said. “Israeli investors, as well as developers here, really took a step back. When it comes to the multifamily investment class, we saw a drop in volume there as well but not as substantial.”

Israeli investment in new development projects, in particular, fell to 11 deals comprising $112.5 million last year from 24 transactions constituting $1.31 billion in 2015. The drop in multifamily transactions was not so steep (seven deals in 2016 compared with 10 transactions the previous year), though dollar volume in the asset class did fall sizably (to $18 million last year from $353.7 million in 2015).

In total, Israeli investors—including major financial institutions, funds and individuals—have poured money into 225 New York City commercial property transactions representing $5.74 billion since 2007, according to Ariel.

Shkury said that while Israeli investment activity may continue to lag over the immediate to near term compared to the heights hit recently, Ariel is already seeing “a lot more

requests” this year from Israeli investors eyeing opportunities in New York real estate.

“Israeli investors are careful and look for certainty, but they’re also opportunistic,” he said. “I think 2017 will remain a slower year from an Israeli investment perspective, [but] either next year or the year after, you’ll see again a flurry of activity. [In 2016] they stopped and took a pause, and that’s completely natural.”

David Schechtman, the senior executive managing director at Meridian Investment Sales, told CO that while there may be “fewer individual Israeli investors today than there were 12 months ago” looking to partake in the city’s property markets, he has seen continued interest among “entrenched family and institutional investors.”

“I don’t think there’s a lack of interest or investment, I just think the market has changed,” Schechtman said, noting investor wariness about “overpriced” deals and the expectation that Israeli capital will return to New York real estate as property values correct. “I think Israeli investors are very pensive and cerebral; when they see a market shift, they’re trying to figure out how to be ahead of it. There were [properties] that were overpriced in 2015 and 2016 that are

now returning to the market with slightly adjusted pricing.”

While Israeli investors have been increasingly reluctant to invest in New York City real estate as of late, American real estate companies have continued to go to Israel to raise debt to finance their operations here.

U.S. real estate firms issued $878.5 million in debt in Israel in 2016, according to Ariel— much of it through bond issuances on the Tel Aviv Stock Exchange.

Though that number was down from the $1.07 billion in debt issued in Israel by U.S. companies in 2015—including deals by major New York developers like Extell Development Company and Related Companies—Shkury said the Israeli bond market continues to grow in profile among American developers and that he anticipates “new, quality issuers coming to the market” in the coming years.

“We’ve started to hear conversations and questions from people about this specific kind of [Israeli bond] structure,” he said. “People who weren’t interested before now are. It’s a two-way street—the Israeli market is getting more comfortable [with U.S. issuers], and American companies are more interested [in the Israeli bond market].”

ON MAD. SQ. PARK VIEWS FROM EVERY FLOOR 9,000 SF F LO O R P L AT E S F U L L P R E B U I LT FLOORS AVAILABLE 18,000 SF CONTIGUOUS Brent M. Ozarowski Executive Managing Director 212-372-2246 bozarowski@ngkf.com

Andrew M. Peretz Executive Managing Director 212-233-8164 aperetz@ngkf.com

Brian S. Waterman Vice Chairman 212-372-2299 bwaterman@ngkf.com

LEASES

PHOTOGRAPHS COURTESY COSTAR GROUP

Lease Deals of the Week WeWork 94,740 New

WeWork is continuing its expansion throughout the Big Apple.

The coworking giant has taken a 94,740-square-foot lease at 205 Hudson Street, Commercial Observer has learned.

WeWork will occupy the entire fifth, sixth and seventh floors of the building between Watts and Debrosses Streets. The property is part of the 5-million-squarefoot Hudson Square portfolio owned by Trinity Church Wall Street, Norges Bank Real Estate Management and Hines. The terms of the deal was not immediately clear.

Newmark Grubb Knight Frank’s David Falk, Peter Shimkin, Kyle Ciminelli, Ben Shapiro, Jonathan Franzel and Brittany Silver represented the landlords in the deal. A spokesman for NGKF did not return a request for comment.

Michael Schoen of Savitt Partners represented WeWork at the 12-story, 401,000-square-foot building. A spokesman for Hines declined to comment on the deal, as did a spokeswoman for WeWork.

The Hudson Square portfolio includes 1 and 10 Hudson Square, 100 and 155 Avenue of the Americas, 225 Varick Street, as well as 345, 350 and 435 Hudson Street. Last October, the landlord selected NGKF and CBRE teams to lease office and retail spaces at the portfolio, as CO reported at the time.—Liam La Guerre

ABC Carpet & Home 78,000 Relocation High-end home goods store ABC Carpet & Home is relocating two shuttered warehouse outlets—one from the Bronx and one from New Jersey—to 78,000 square feet in Industry City, Commercial Observer can first report.

The new space will “really be their distribution center, warehouse and outlet,” a source said.

The company has signed a lease on the first and fifth floors in Building 19 at 168 39th Street, according to a spokeswoman for Jamestown. Brooklyn Nets’ playing facility is on the eighth floor and the rooftop of the Sunset Park building.

“ABC joins a critical mass of home furnishings and design businesses currently in Industry City,” Jamestown Principal and President Michael Phillips told CO. Building 19 is part of the 6-million-square-foot group of warehouse structures on the waterfront owned by a group led by Jamestown and Belvedere Capital.

Last year, after 30 years, ABC Carpet & Home shuttered its 250,000-square-foot Bronx warehouse outlet at 1055 Bronx River Avenue because the company said it was no longer “strategically viable.” The outlet at 400 Huyler Street in South Hackensack, N.J., has shuttered as well.

A spokesman for ABC Carpet & Home would only confirm the company signed a lease for “warehouse space in Industry City” and acknowledged the closing of “our Bronx and New Jersey warehouses and outlets.”—Lauren Elkies Schram

12 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Callen-Lorde

S’well Bottle

America Press

25,000 New

25,000 New

14,802 Relocation

Callen-Lorde Community Health Center has signed a 25,000-square-foot lease at 40 Flatbush Avenue Extension in Downtown Brooklyn, Commercial Observer has learned.

The nonprofit, which provides health care needs to the lesbian, gay, bisexual, transgender and queer (or LGBTQ) community and those with HIV and AIDS, will take the entire third floor of the property between Chapel and Concord Streets. The asking rent in the 20-year deal was in $40s per square foot, according to the tenant’s broker, Cushman & Wakefield.

Callen-Lorde’s Brooklyn location, which will house a health care facility and offices, is opening in 2019.

“We were able to identify a location that will allow Callen-Lorde to make its presence felt in Brooklyn and serve a community in need of its services,” C&W’s Carri Lyon, who represented the tenant with colleague Mitzi Flexer, said in prepared remarks.

Joseph Jem a l of ISJ Management represented the landlord, 40 Flatbush Realty Associates, in-house. Jemal did not return a request for comment.

Callen-Lorde already has one location each in Manhattan and the Bronx. Its headquarters is at 356 West 18th Street between Ninth and Eighth Avenues in Chelsea.—L.L.G.

After more than doubling its staff in the last year, the trendy beverage-bottle maker S’well Bottle has subleased a 25,000-square-foot, fifth-floor office at 28-40 West 23rd Street between Fifth Avenue and Avenue of the Americas.

Colliers International’s Andy Roos and Michael Cohen own the 12-story, 561,000-square-foot building, which houses Home Depot at the base, and S’well took over part of AppNexus’ 220,000 square feet in the building.

S’well, known for its distinct stainless steel bottles, moved out of its old 5,000-square-foot home at 50 West 17th Street last month and into the new digs. The company had a five-year lease in the West 17th Street building, but eventually ran out of space, Sarah Kauss, the chief executive officer of S’well, told The Wall Street Journal.

A representative for S’well told Commercial Observer that the company wanted to stay in the Midtown South or Union Square area to ensure easy access to the office for its employees who commute from outside the city.

Though the asking rent in twoyear deal was not immediately clear, asking rents ranged from $69 to $75 per square foot in December 2014, when Estée Lauder consolidated its digital and fragrance teams at the building.

CBRE’s Ben Fastenberg represented S’well, and it wasn’t clear who represented the landlords.

Representatives for CBRE and Colliers did not respond to requests for comment.—Danielle Balbi

While many media companies like The Associated Press, Condé Nast and Time Inc. have moved from Midtown to Downtown in the past few years, at least one is bucking that trend.

Publisher America Press has signed a 14,802-square-foot deal to relocate its offices to 1212 Avenue of the Americas, Commercial Observer has learned.

The company, which is known for its Catholic-focused magazine America, will take the entire 11th floor of the 23-story, 251,000-square-foot building between West 47th and West 48th Streets. The asking rent in the 15-year transaction was in the high $60s per square foot, according to a source with knowledge of the transaction.

America Press is moving from 33 West 60th Street between Broadway and Columbus Avenue.

The West 60th Street office is just a temporary space, as the company sold its headquarters at 106 West 56th Street in February 2016 to developer and investor Savanna for $48.7 million, according to public records.

A CBRE team of Edward Goldman, Sam Seiler and Derrick Ades represented landlord Stawski Partners. Stuart Eisenkraft, also of CBRE, handled the transaction for the tenant. A spokeswoman for CBRE declined to comment on the transaction on behalf of the brokers on both sides of the deal.

Landlord Stawski Partners did not return a request for comment.—L.L.G.

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Lease Deals of the Week T. Rowe Price

MySpace NYC

Modern Post

Sweetgreen

Roche Bobois

13,450 New

7,500 New

7,230 Relocation

3,930 New

3,525 Expansion

Global investment manager T. Rowe Price has signed a 13,450-square-foot lease at 233 Park Avenue South for its first New York City office, Commercial Observer has learned.

The Baltimore-based company will occupy the entire second floor of the building between East 18th and East 19th Streets. The asking rent in the 10-year deal was $85 per square foot, according to landlord Orda Management’s broker, Newmark Grubb Knight Frank.

NGKF’s Brian Waterman, Andrew Peretz and Brent Ozarowski represented Orda Management in the transaction.

Waterman confirmed the deal but declined to comment about the transaction.

T. Rowe Price is expected to begin occupying the new digs by the fall. It chose 233 Park Avenue South because of the neighborhood and recent upgrades to the building.

The tenant selected 233 PAS because of its “hands-on ownership, recent modern building renovations, excellent transportation [and] building access and a trendy neighborhood that will be critical in retaining talent,” JLL’s Kirill Azovtsev, who represented T. Rowe Price with colleague Lisa Kiell, said via a spokesman.

The building at 233 Park Avenue South is combined with the structure next door, 225 Park Avenue South, where BuzzFeed and Facebook are tenants.—L.L.G.

Brooklyn residential brokerage MySpace NYC will open a new Bushwick office after agreeing to a 7,500-square-foot lease for a ground-floor retail space at 96 Bogart Street.

Asking rent for the location at the corner of Boerum Street was $55 per square foot, according to a press release from M Properties Group, which represented landlord David Moore in the transaction.

The length of the lease was not disclosed, with M Properties describing it as “long-term.”

MySpace NYC is planning to house its offices and a showroom in the space. The brokerage expects to consolidate its existing north Brooklyn locations— in Williamsburg, Greenpoint and Bushwick—into the new space at 96 Bogart Street. It also has offices in Crown Heights and Prospect Lefferts Gardens that will remain open.

Lane Sanders and Max Lu of M Properties Group, who worked as the landlord’s representatives on the deal, could not be reached for additional comment.

MySpace NYC was represented in-house by Shawn Mullahy, who confirmed the transaction.

“96 Bogart’s proximity to the vibrant office and entertainment district off the Morgan L [stop] allows our employees, agents, clients and customers to enjoy everything that makes Bushwick such a unique neighborhood while providing easy access to the entire north Brooklyn and Ridgewood, Queens market,” Mullahy said in a statement.—Rey Mashayekhi

Modern Post, a full-service post-production company, is departing its Garment Center digs for Soho, Commercial Observer can report.

The company has taken 7,230 square feet on the entire fourth floor at Savanna’s nine-story office building at 434 Broadway between Grand and Howard Streets, a source with knowledge of the deal said.

The transaction is for 10 years and had an asking rent of $80 per square foot.

Benjamin Bass and Kip Orban, both of JLL, represented the landlord in the deal. Daniel Lolai of LSL Advisors worked on behalf of Modern Post. Lolai didn’t respond to a request for comment and nor did a spokesman for JLL. The tenant will be relocating from 260 West 39th Street between Seventh and Eighth Avenues on May 12, according to a source and CoStar Group.

Atlas Capital Group picked up the property in November 2013 for $62 million, property records indicate. And then Atlas “sold his contract to Savanna for a higher price,” JLL’s Yoron Cohen, who handled the sale, previously told The Real Deal.

The building is 63,600 square feet, including 58,000 square feet of office space and 4,800 square feet of ground-floor retail. Tenants include media tech company Technicolor, which in July 2014 signed a deal to expand its space in the building by 7,230 square feet, as CO reported at the time. —L.E.S.

Following the thumbs-up from the co-op board, Sweetgreen has sealed a deal for a new location on the Upper West Side, Commercial Observer has learned. This marks the eatery’s 19th locaitno in New York City.

The fast-casual salad and grain bowl chain has taken 3,930 square feet at 2460 Broadway, the co-op building between West 91st and West 92nd Streets, 2,430 square feet of it on the ground floor, and 1,500 of it below grade for backof-house functions, sources said.

The deal is for 10 years, and the ground-floor asking rent was $250 per square foot.

This Sweetgreen should open in late summer. The closest open ones are at 311 Amsterdam Avenue at West 75th Street and 2937 Broadway between West 114th and West 115th Streets.

Slated to open in May are locations at 101 University Place at the corner of East 12th Street and 50 Washington Street in Dumbo, Brooklyn. Come fall, Sweetgreen will bow at the Grace Building at 1114 Avenue of the Americas between West 42nd and West 43rd Streets.

David Abrams and Brandon Eisenman from RKF represented the retail co-op owner and SCG Retail’s Jacqueline Klinger and Taryn Brandes represented Sweetgreen. None of the brokers responded to a request for comment.—L.E.S.

High-end French furniture store Roche Bobois has inked a deal for its third Manhattan location on the ground floor of the Coronado, a 22-story condominium building at 2040 Broadway on the Upper West Side.

The Paris-based company signed a 10-year lease for 3,525 square feet at the 28-year-old development, which sits at the corner of West 70th Street, as The Wall Street Journal first reported. Roche Bobois opened a flagship New York City showroom at 200 Madison Avenue at East 35th Street 40 years ago, and the furniture designer opened a second showroom at 207 East 57th Street between Second and Third Avenues in 2013, The New York Times reported at the time.

“It’s a great home for Roche Bobois, and we think they’re going to be there for years and years to come,” said Greenberg Group’s Zack Gross, who represented Roche Bobois in the deal.

The landlord, Sherwood Equities, asked $275 a square foot for the space, according to Gross.

RKF’s Ariel Schuster and Andrew Connolly represented Sherwood Equities in the deal.

“When you bring in a luxury home furnishing tenant in an area that has the densest residential in Manhattan, all three parties win,” said Connolly. “Jeff Katz [chief executive officer of Sherwood Equities] is a long term owner of the asset and cares very much about the building.

—Rebecca Baird-Remba

14 | APRIL 5, 2017 | COMMERCIAL OBSERVER

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The Power 50 THE MOST IMPORTANT FIGURES OF COMMERCIAL REAL ESTATE FINANCE

By Danielle Balbi • Cathy Cunningham • Larry Getlen • Max Gross • Liam La Guerre • Rey Mashayekhi • Lauren Elkies Schram Illustration by Gonza Rodriguez

W

as it a sweet ‘16? Only for some of the industry’s powerhouses.

Most banks saw a decrease in lending activity last year, as did some of the larger institutional private funds. It was, undoubtedly, the year of the alternative lenders, who filled the construction and transitional debt void nicely, upping their originations significantly on the way. Life companies didn’t fall far behind and, in several cases, outperformed their 2015 figures.

That said, we added a few private lenders to our rankings, like Mesa West Capital at No. 40 and Mack Credit Real Estate

Strategies at No. 49. A bigtime U.K. hedge fund even earned an honorable mention. ACORE Capital, which was founded in May 2015, jumped up to the No. 10 spot from No. 39 last year, very much due to its tremendous growth in the bridge-lending space.

And one notable addition was Bank of the Ozarks. The Little Rock bank that could was exceptionally active on the construction lending front and scored the No. 31 spot.

Janet Yellen—who had landed the No. 20 spot on our list last year as the fate of interest rates were uncertain—still yields a

huge amount power over the financial markets, but almost all of the lenders Commercial Observer spoke with now expect a couple of more quarter-point rate hikes and have baked those changes into their underwriting. If anything, industry experts see interest rate increases as an indication of economic growth (and for some, a way to increase pricing).

Now, under the Trump administration, there are new faces (one who also happens to have produced a number of Hollywood films) who stand a greater chance at dictating what happens in the financial markets. — D.B. and C.C. COMMERCIALOBSERVER.COM | APRIL 5, 2017 | 17

TOP 50

Chief Lending Officer at Bank of China Last Year’s Rank: 3

Bank of China was more selective and opted to back developments in dense in-fill locations.

In fact, Bank of China was one of five lenders to take down the whopping $1.5 billion construction loan for SL Green Realty Corp.’s One Vanderbilt.

The bank also provided a number of refinancings for its clients, including a $314 million loan to Jamestown, George Comfort & Sons and Loeb Partners on a 15-story office building at 63 Madison Avenue in NoMad and a $60 million mortgage for Jeff Sutton’s single-tenanted retail property at 661 Eighth Avenue in Times Square. On the West Coast, Bank of China provided a $390 million construction-take-out loan for Crescent Height’s Ten Thousand, a 40-story, luxury rental building in Los Angeles.

Looking forward, Qiao said that while the new administration’s tone is pro-commerce, it’s too early to tell if commercial real estate will benefit. But in regards to rising interest rates, he said, “expensive money will reduce transaction volume across the board, especially for those buyers dependent on a lower cost of funding.”—D.B.

y T p S r

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o $ P

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Raymond Qiao.

2

Alan Wiener.

18 | APRIL 5, 2017 | COMMERCIAL OBSERVER

w $

Alan Wiener Group Head of Wells Fargo Multifamily Capital Last Year’s Rank: 1

When Alan Wiener talked about Wells Fargo’s activity in 2015 for the Top 50 list last year, he said it would be a difficult 12 months to duplicate. Yet, in 2016 his team originated roughly the same amount of debt, finishing off the year with $15 billion in loans provided across the country.

The San Francisco-based lending giant started the year off strong, closing on a $2.6 billion loan for Starwood Capital Group’s purchase of a national multifamily portfolio from Equity Residential. Wiener’s team also worked on the origination of a $500 million credit facility to national manufactured housing owner YES! Communities. The Denver-based owner-operator used the proceeds to consolidate its portfolio last August.

Outside of those two major deals, much of Wells Fargo’s 2016 was characterized by flow business, or refinancings, of conventional, affordable and senior housing across the United States. “People wanted to lock in low interest rates,” Wiener said. “That’s happening this year as well.”

As far as where interest rates will go in 2017, Wiener said there is no real way of knowing.

“If I knew that, I could just stop working and

invest in futures,” he joked. “I think interest rates will go up incrementally but not a lot.”

One of the real issues that could affect not only the business Wiener oversees at Wells Fargo but also affordable housing across the nation is potential tax reform. He explained that if tax credits become less attractive to investors, more subsidies from city and state municipalities will be needed, and that combination would likely result in the creation and preservation of less housing.

That said, Wiener’s group remains fully committed to financing all types of housing. Last year in New York City, the bank lent on Related Group’s 400-unit, fully affordable Marine Terrace apartment complex in Astoria, Queens. The loan refinanced old debt on the property and funded the creation of 23 more units on the site to provide supportive housing for veterans. In November, Wells Fargo originated an $80.4 million construction loan and invested $67 million in low-income housing tax credits for the development of St. Barnabas Hospital in the Bronx. On completion, the property will house 314 affordable units, a medical care facility, a retail space and a day care center.—D.B.

CLOCKWISE FROM TOP: COURTESY MATT BORSTEIN; CLINT SPAULDING/ PATRICKMCMULLAN; COURTESY STEPHEN PLAVIN; COURTESY TIM JOHNSON; COURTESY JONATHAN POLLACK; MICHAEL NAGLE/FOR COMMERCIAL OBSERVER

On the campaign trail, now-President Donald Trump rattled against long-standing trade policies with China. At one point he suggested placing a 45 percent tariff on the country. He even labeled China as a currency manipulator.

But the commander in chief can’t scare Chinese money away from U.S. real estate lending. In fact, Chinese money played a huge role last year—not only in real estate investments in the U.S. but also on lending within America’s own borders.

The big fish in Chinese lending in America is the Bank of China and its numbers do not disappoint. Not only did the giant originate $4.5 billion in commercial real estate loans; it became a landlord when its brand new U.S. headquarters building, 7 Bryant Park, opened its doors to tenants.

As far as lending goes, the bank kept its geographic focus on gateway markets like New York, San Francisco, Los Angeles, Chicago, Washington, D.C., and Miami, and 70 percent of its transactions in 2016 were backed by income-producing properties, Raymond Qiao said. When it came to construction deals,

FROM TOP: YVONNE ALBINOWSKI/FOR COMMERCIAL OBSERVER; WILL O’HARE/FOR COMMERCIAL OBSERVER

1

Raymond Qiao

TOP 50

3

Matt Borstein and Ed Adler Head of Global Commercial Real Estate; Head of U.S. Origination at Deutsche Bank Last Year’s Rank: 9

Deutsche Bank started off with a bang last year with a $780 million financing in February.

The bank provided CalPERS, the California pension fund, with a first mortgage for 787 Seventh Avenue, as Commercial Observer reported at the time.

“That got us running really well,” Matt Borstein said.

Also in the first quarter, Deutsche was part of a consortium of banks that provided about $1.2 billion in refinancings to Brookfield Property Partners for 225 Liberty Street.

After this, Borstein said executives spent a considerable amount of time reassessing market conditions knowing that risk retention was coming up and large trades needed to be completed.

“We had to address how to deal with risk retention in the market,” Borstein said.

“Deutsche in particular started that process a little ahead of everyone else.”

One of the bank’s successes Borstein touted was 10 Hudson Yards. Deutsche securitized the $1.2 billion mortgage on the site. He called this

4

“the highlight of the year” and a “landmark transaction for us and the city.”

The German bank was the first to have both the L-shaped and horizontal risk retention compliant structures under its belt, as well as the first to take down a single-asset, single-borrower deal for 667 Madison Avenue under the new regulation.

In total, Deutsche acted as bookrunner on 25 CMBS deals totalling $9.7 billion in 2016.

It contributed $7.9 billion to CMBS last year, or 11.9 percent of market share, according to Commercial Mortgage Alert, down from roughly 18 percent in 2015.

“I think [667 Madison] got the ball rolling for us and the rest of the market to see how these deals could be done going forward,” Borstein said. “I think that was an important deal for us and the market in general.”

After 18 months of shying away from construction lending, Deutsche jumped back into that side of the market. That included a $650 million deal for Gary Barnett’s Extell Development at 251 South Street.

CLOCKWISE FROM TOP: COURTESY MATT BORSTEIN; CLINT SPAULDING/ PATRICKMCMULLAN; COURTESY STEPHEN PLAVIN; COURTESY TIM JOHNSON; COURTESY JONATHAN POLLACK; MICHAEL NAGLE/FOR COMMERCIAL OBSERVER

“He had an important need on an important asset,” Borstein said. “We stepped up for him.”

The company is active in the bridge loan space, especially in New York City. That included 441 Ninth Avenue on the Far West Side and the Doubletree by Hilton hotel at 346350 West 40th Street, which each exceeded $200 million.

All this came amid a company restructuring and an investigation into allegations that the bank misled investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities between 2006 and 2007. This January, Deutsche agreed to a $1.7 billion settlement. And the bank is

Ed Adler. sorting out how to deal with its relationship with President Donald Trump, to whom the bank lent roughly $300 million before inauguration. Bloomberg Politics noted, “What makes matters more complicated is that the U.S. government has been investigating Deutsche Bank’s failure to flag trades by wealthy Russians who spirited $10 billion out of Russia.” A bank spokesman declined to comment on the situation.

Borstein assured that the commercial real estate group has remained unscathed.

He noted, “We did not see a single lost piece of business due to complications at Deutsche Bank.”—L.E.S.

Michael Nash, Stephen Plavin, Jonathan Pollack and Tim Johnson Co-Founder and Chairman of Blackstone Real Estate Debt Strategies; CEO of Blackstone Mortgage Trust; Global Head of Blackstone Real Estate Debt Strategies; Senior Managing Director at Blackstone Real Estate Debt Strategies Last Year’s Rank: 2

FROM TOP: YVONNE ALBINOWSKI/FOR COMMERCIAL OBSERVER; WILL O’HARE/FOR COMMERCIAL OBSERVER

Matt Borstein.

Blackstone Group spreads its financing across three businesses: its origination platform Blackstone Real Estate Debt Strategies (BREDS), its real estate investment trust Blackstone Mortgage Trust (BXMT) and its hedge fund management platform that trades commercial mortgage-backed securities. Across BREDS and BXMT, the private equity giant lent a total of $6.7 billion in 2016, down from $14 billion in 2015 (when it purchased the $14 billion GE Capital Real Estate portfolio).

Despite the decrease, nearly $7 billion in debt deals is still quite a bit of action, and it places Blackstone ahead of many of its competitors. Last year, BREDS’ business was primarily driven by its institutional clients in major core markets like San Francisco, Los Angeles and Seattle, and according to

a spokeswoman, “the opportunities were made possible by our ability to act fast, bring certainty to a transaction and serve as a ‘onestop’ solution for our borrowers.”

That said, Blackstone was very active in New York City and, in November 2016, provided a $349.5 million construction loan to The Georgetown Company and Pershing Square Capital Management for the repositioning of 787 11th Avenue, a former Ford dealership.

The following month, Blackstone provided two hefty acquisition loans, including a $200 million financing for Savanna’s purchase of The Falchi Building in Long Island City, and a $158.8 million mortgage for Patriarch Equities, Sionio Group and Highgate’s buy of the Stewart Hotel at 371 Seventh Avenue in Midtown.—D.B.

Michael Nash.

Stephen Plavin.

Jonathan Pollack.

Tim Johnson.

COMMERCIALOBSERVER.COM | APRIL 5, 2017 | 19

TOP 50

Steven Mnuchin.

U.S. Secretary of the Treasury New

Goldman Sachs veteran Steven Mnuchin had a relatively easy confirmation process compared to some of President Donald Trump’s cabinet nominees. Now, as head of the Treasury Department, he is (along with the chair of the Federal Reserve) the most influential economic policymaker in the United States—and it is safe to assume that many of those policies could have considerable impact on the commercial real estate finance market.

Mnuchin followed in his father’s footsteps and started at Goldman soon after graduating from Yale University in 1985. He quickly climbed the ranks at the investment banking giant and held significant sway over Goldman’s mortgage operations, serving as head of the mortgage securities department in the 1990s.

After leaving the firm in 2002, Mnuchin dabbled in the private equity sector and, in 2004, made his mark as a Hollywood film producer when he co-founded film production company RatPac-Dune Entertainment with Brett Ratner and James Packer. He later served as an executive producer on blockbusters like American Sniper in 2014 and Mad Max: Fury Road in 2015. (In late March, Senate Democrat Ron Wyden called for an ethics violation investigation into Mnuchin regarding comments he made in an interview apparently promoting The Lego 20 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Batman Movie, which was financed in part by RatPac-Dune.)

He also got back in the residential mortgage game for a while, leading an investment group that acquired, in 2009, the failed California-based residential mortgage lender IndyMac, in the wake of the subprime mortgage crisis. Mnuchin helped nurse the company back to health, renaming it OneWest Bank and selling it to CIT Group for $3.4 billion in 2015.

While he’s no stranger to the real estate financing market, the real question is how Mnuchin’s policies as secretary of the Treasury will impact the market moving forward.

Already, he’s called for Congress to pass “comprehensive” tax reform with the goal of stimulating the economy. That could lead to more investor confidence in the commercial real estate sector and, hence, to more borrowing and further growth. Mnuchin is reportedly central in the Trump administration’s drafting of its tax reform proposal and has said he hopes to pass legislation by the August congressional recess.

Then there’s the question of Trump’s promised investment in infrastructure spending— the sort of stimulus that could lead to higher long-term interest rates and inflation—and a possible rollback of Dodd-Frank regulations viewed as burdensome on the financial services sector.

Whatever the next four years bring, Mnuchin will play a significant role in dictating U.S. economic policy, and that will almost certainly affect the state of commercial real estate financing in the foreseeable future.—R.M.

Ralph Herzka.

6

Aaron Birnbaum.

Ralph Herzka and Aaron Birnbaum Chairman and CEO; Executive Vice President at Meridian Capital Group Last Year’s Rank: 4

In the spring of 2016, RXR Realty and real estate investor David Werner made a bold purchase: the 42-story 1285 Avenue of the Americas for a whopping $1.65 billion.

It’s no real surprise that, when RXR began shopping around for a loan, it turned to Meridian.

The $1.2 billion deal that Meridian’s Rael Gervis and Drew Anderman brokered for RXR (along with Adam Spies and Douglas Harmon, who were at Eastdil Secured at the time) from AIG and Morgan Stanley would stand out as a distinct moment of glory in a pretty lucrative year.

“It was a frenetic year of fast-paced finance,” Ralph Herzka told Commercial Observer.

According to Herzka, the firm did about

$35 billion in finance deals in 2016—which was equal with what it did in 2015. However, last year Meridian also managed to generate another $2 billion in deals through its investment sales arm, which launched in 2015. (No, it’s not the financing part of the operation, perhaps, but $2 billion in business is hardly chump change.)

Of course, 1285 Avenue of the Americas was just one (extremely impressive) deal; Meridian also arranged a $330 million construction loan for Spitzer Enterprise’s massive, 856-unit Williamsburg project at 416-420 Kent Avenue, from Starwood Capital Group.

Meridian has had its hand in Florida and the Northeast but has also extended its reach out west to California.—M.G.

FROM LEFT: THOMAS NIEDERMUELLER/GETTY IMAGES; COURTESY MERIDIAN CAPITAL GROUP

5

Steven Mnuchin

Wells Fargo congratulates our winners

Doug Mazer

Kara McShane

Alan Wiener

Head of Real Estate Capital Markets 15 years with Wells Fargo

Head of Commercial Real Estate Capital Markets & Finance 7 years with Wells Fargo

Head of Multifamily Capital 11 years with Wells Fargo

Congratulations for being named to Commercial Observer’s “Top 50 Most Important People in Commercial Real Estate Finance.”

wellsfargo.com/realestate

© 2017 Wells Fargo Bank, N.A. All rights reserved. IHA-4079701

TOP 50

7

George Klett Chairman of the Commercial Real Estate Committee at Signature Bank Last Year’s Rank: 8

Start spreadin’ the news...Signature’s originations hit the $6 billion mark last year, mirroring 2015’s number. “We’re one of the most active lenders in New York City, and I think Signature’s reputation is that we understand the market and we can deliver,” George Klett said.

And deliver, it does. In 2016, the bank was busy lending on numerous Big Apple deals, including a $100 million acquisition loan for Dennis Wong’s 23-story apartment building buy at 377 East 33rd Street in Kips Bay and a $104 million loan for Bonjour Capital’s purchase of the 38-story Hamilton at 1735 York Avenue on the Upper East Side.

“What we focus on is multitenanted, income-producing properties in the New York City area,” Klett said. “We like multifamily, neighborhood retail properties, office buildings—but not Class A—some industrial and manufacturing buildings, all within 45 miles of New York City.

We know the market very well, and we know all the players. We keep it close to home.”

When it comes to financial regulation, Klett is hoping the president follows through on his intentions. “The regulators are putting a tremendous amount of pressure on banks and forcing us to pull back a bit, which is presenting some difficulties,” he said. “[President Donald] Trump has said he is going to roll back regulation, but it takes a while. I’m hoping it happens, and the sooner the better, but to be realistic about it I think it’s going to take some time.”

8

George Klett.

In the meantime, it’s safe to say that Signature Bank is doing just fine. “We have a $22 billion portfolio with no losses and no problem loans.

I’ve been [at the bank] for nine-anda-half years, and during that time, we haven’t lost one dollar in real estate,”

Klett said.

Doesn’t get much better than that.—C.C.

James Carpenter and John Adams Senior Executive Vice President and Chief Lending Officer; First Senior Vice President, Chief Administrative and Senior Lending Officer at New York Community Bank

When it comes to the bread-and-butter loans that keep New York’s multifamily and commercial real estate industry going, few names are more important than New York Community Bank.

But from its perch as the city’s most active lender in 2015, NYCB saw its loan origination shrink considerably in 2016.

According to figures from Actovia, NYCB executed 1,161 total deals in 2015, compared with 610 in 2016, a drop of about 47 percent.

Moreover, the aggregated dollar amount of deals dropped to $3.72 billion from $6.48 billion, a decrease of more than 42 percent. (NYCB could not confirm these figures by press time.)

In December, regulators nixed NYCB’s potential merger with Astoria Financial

22

| APRIL 5, 2017 | COMMERCIAL OBSERVER

because the combined institution would have more than $50 billion in assets, making it a “systemically important financial institution,” as has been widely reported.

Still, 2016 wasn’t too shabby a year by any means, and the bank was busy doing deals. Late last year, NYCB provided David Bistricer’s Clipper Equity with a $104 million loan to purchase The Brewster at 21 West 86th Street; the bank lent $148.6 million through 19 loans for a 21-property multifamily portfolio in the Bronx for The Morgan Group; and Banbridge Companies and China Orient Asset Management turned to NYCB for a $128 million mortgage to purchase the 656-unit Devonshire Hills complex in Suffolk County.—M.G.

James Carpenter.

John Adams.

CLOCKWISE FROM TOP LEFT: COURTESY NYCB

Last Year’s Rank: 7

Blackstone Real Estate congratulates this year’s Power 50.

New York | London | Hong Kong | Beijing | Dubai | Dublin Düsseldorf | Houston | Los Angeles | Madrid | Mexico City | Mumbai Paris | São Paulo | Seoul | Shanghai | Singapore | Sydney | Tokyo | Toronto www.blackstone.com

TOP 50

9

Brian Baker Global Head of Commercial Mortgages at J.P. Morgan Securities Last Year’s Rank: 10

“We’re a unique business in that we are global,” said Brian Baker, whose team originated $16 billion in loans in 2016, up $2 billion from the year prior. “We’re basically in the business of either lending to banking clients or trading with investor clients. This is what keeps me interested in doing what I’m doing. We have clients on both sides of our business.”

One of Baker’s more exciting projects last year was providing a $765.5 million loan to the Witkoff Group for the Marriott Edition Hotel at 20 Times Square.

“We’re very excited to be involved with that,” Baker said. “The transition of Times Square has been happening for many years now, and [this project] takes

it to the next phase.”

Baker and his team also lent $446.4 million to Michael Rosenfeld’s Woodridge Capital for the renovation of the Century Plaza Hotel in Los Angeles and $320 million to Related Group and Oxford Properties Group for 50 Hudson Yards.

These major deals were just the tip of the iceberg for Baker and his team’s productive year.

“We were also involved in some very large financing for Hilton Hotels & Resorts for some of their Hawaiian and San Francisco hotels,” he said. “We put them into a number of securitized transactions over the last few months.”

Baker emphasized that the variety of clients they service is a marked advantage for the firm—and one that hopes to make 2017 as strong as its predecessor.

“We are pretty broad in terms of our product offerings,” Baker said. “The power of the franchise is the ability to leverage the scale of J.P. Morgan and the client franchise. We will do smaller loans all the way up to billion-dollar loans.

While we’re institutional in nature, there are plenty of good clients that need $5 million, $10 million, $15 million and $20 million loans as well. We try our best to balance those needs against the resources we have available.”—L.G.

Brian Baker.

10

Warren de Haan, Boyd Fellows, Chris Tokarski and Stew Ward

Warren de Haan.

Boyd Fellows.

24

| APRIL 5, 2017 | COMMERCIAL OBSERVER

Chris Tokarski.

Last Year’s Rank: 39

Stew Ward.

The name may still be new, but the team is not.

In 2016—its first full year of business—ACORE was the second largest lender of transitional debt in the country, Boyd Fellows said.

And the numbers certainly add up. The private lender, which was launched

by Warren de Haan, Fellows, Chris Tokarski and Stew Ward, provided $5 billion in commercial real estate debt loans across the United States, putting it second to Blackstone Group when it came to bridge lending.

Despite the volume, ACORE was extremely selective, and for every 20 deals that come across its desks, the firm may only lend on one. The company completed 70 transactions last year, making its average deal size just in excess of $70 million.

In September 2016, ACORE teamed up with Vanbarton Group and provided a $105 million debt package for Shorewood Real Estate Group’s mixed-use development at 17 John Street in the Financial District. In March of last year, the company made a $105 million construction loan against AECOM Capital and Ensemble Real Estate Investment’s 11-story hotel at 100 Independence Drive in Silicon Valley.

“In 2015 we were introducing ourselves to the market and getting our brand established,” Fellows said. “By the time 2016 began, our brand had become very widely known in the real estate community, so we executed on [deals] like we always do.”

If 2016 was only the start for ACORE, 2017 may have even more in store.—D.B.

FROM TOP: COURTESY BRIAN BAKER; ERIC KAYNE/ FOR COMMERCIAL OBSERVER

Managing Partners at ACORE Capital

1180 Peachtree $195MM First Mortgage & Mezzanine Loan Office Midtown Atlanta, GA

It Pays To Partner With The Biggest, Best And Brightest.

At Starwood Property Trust and Starwood Mortgage Capital, our goal is to help you succeed beyond expectations. How? By being more than a lender— by being your partner.

At Starwood Property Trust and Starwood Mortgage Capital, we understand that commercial real estate is complex, requiring keen oversight and coordination of many elements. The cornerstone to success is having the right partner at your side.

By partnering with us, you’re choosing a team with the most respected name in commercial real estate finance. We are industry pioneers with a global portfolio of successful projects exceeding that of our competition.

We draw upon this vast experience to apply best practices to every partnership, and then completely customize to surpass your expectations.

With Starwood Property Trust and Starwood Mortgage Capital, our entire team of nearly 500 professionals is dedicated to making your project—and our relationship—a lasting success.

Starwood Property Trust Dennis Schuh Chief Originations Officer 203.485.5108 dschuh@starwood.com starwoodpropertytrust.com

Starwood Mortgage Capital Larry Brown President 704.362.1979 lbrown@starwood.com starwoodmortgagecapital.com

Brilliant Solutions Since 2009

TOP 50

11

Doug Mazer.

Last Year’s Rank: 13

While many commercial mortgage-backed securities shops were dreading the implementation of risk retention, Wells Fargo got ahead of the curve, with Doug Mazer and Kara McShane at the forefront.

The San Francisco-banking giant, along with Bank of America Merrill Lynch and Morgan Stanley, actually led the first risk-retention structured deal, WFCM 2016BNK1, in August 2016, well in advance of the rule’s Dec. 24, 2016, compliance date.

Given the reception of the deal in the market, Wells Fargo issued a second BNK deal in 2016 and has issued two more, BNK3 and BNK4, so far this year.

Beyond structuring the first CMBS regulatory-compliant deal, McShane’s teams outdid themselves in terms of revenue growth.

The commercial mortgage loan finance business experienced 22 percent year-over-year growth, and the CMBS team closed 80 securitizations totaling $57.3 billion. Of those 80,

Wells Fargo led or co-led 45, totaling $30.9 billion, making the bank the No. 2 U.S. and global CMBS bookrunner. McShane’s team was also the top Freddie Mac CMBS bookrunner for the third year in a row, the top CRE CLO bookrunner (a title it has held since 2013), and the No. 2 global real estate bonds bookrunner and multifamily single-family rental bookrunner.

Mazer’s team was not short of accolades either. His real estate capital markets team was the top CMBS lender by loan count for the fifth year in a row and lent $10 billion in nonrecourse loans, of which $4 billion were securitized and $6 billion were held on Wells Fargo’s balance sheet. Some of his team’s most notable deals included a $900 million loan on Brookfield Property Partners’ 225 Liberty Street, a $625 million loan on Related Companies and Vornado Realty Trust’s 85 10th Avenue and a $550 million loan for the Shops at Crystals in Las Vegas.—D.B.

Paul Vanderslice, Joseph Dyckman and David Bouton Co-Heads of U.S. CMBS at Citigroup Last Year’s Rank: 19

Citigroup completed 28 CMBS deals in 2016 comprising a whopping $11 billion in overall volume—a $2 billion increase from its 2015 total. The group purposely targeted all four aspects of the market (conduit, single-asset/single-borrower, agency and collateralized loan obligations) and increased its volume in each bucket.

“We did two to three deals per month, one right after the other, and in some cases we had overlapping deals in the market.

It was a planned, well-executed strategy from the beginning of the year. We targeted all four areas and just delivered on it,” Paul Vanderslice said.

Not only was Citi’s overall volume up 15 percent (in a market that was down 25 percent); its market share increased from 8 percent to 12 percent, and the bank ranked No. 4 in overall loan contributions to CMBS. As if that wasn’t impressive enough, Citi boldly went where no man or woman has gone before and rolled out the first

26

Head of Real Estate Capital Markets; Head of Commercial Real Estate Capital Markets and Finance at Wells Fargo

| APRIL 5, 2017 | COMMERCIAL OBSERVER

L-shaped risk retention-compliant deal— the $1.3 billion CD 2017-CD3 transaction— in January of this year. “When everyone was doing the practice deals back in December 2016, everyone was thinking ‘vertical, vertical, vertical,’ and we didn’t buy it,” Vanderslice said. “So we did the first L deal, which is far more complicated.”

As for the lure of the “L”? “It made the B-piece, which KKR bought in that deal, non-free to trade,” Vanderslice said. “A vertical deal locks the lenders in for 5 percent all the way down, but the B piece is free to trade, so they can buy it on Monday and sell it on Tuesday. With the L shape, all the relevant parties to the deal are locked in, and I think the L is a superior structure to the vertical structure for that reason.”

Looking ahead to the remainder of this year, “I think the market will be flat to up 15 percent. We want to continue to be more active in 2017 than we were in 2016,” Vanderslice said.—C.C.

David Bouton.

Paul Vanderslice.

Joseph Dyckman.

CLOCKWISE FROM TOP LEFT: ARNOLD ADLER; CHRIS SORENSEN/FOR COMMERCIAL OBSERVER; COURTESY DAVID BOUTON; J GRASSI/PATRICKMCMULLAN; DANIELLE BALBI/COMMERCIAL OBSERVER

12

Kara McShane.

Doug Mazer and Kara McShane

Certainty in Lending on Large Complex Transactions New York

130 West 42nd St 212.235.1280

Los Angeles

11601 Wilshire Blvd 424.346.6102

San Francisco

80 E Sir Francis Drake Blvd 415.917.4402

Š2017 ACORE Capital. Registered trade/service marks are the property of ACORE Capital. All rights reserved.

Dallas

5949 Sherry Lane 214.945.1414

TOP 50

Jeff DiModica.

James Flaum.

13

James Flaum Global Head of Commercial Real Estate Lending at Morgan Stanley Last Year’s Rank: 18

For James Flaum’s team at Morgan Stanley, 2016 was characterized by some very large deals for its institutional client base.

Morgan Stanley paired up with AIG in May to provide $1.2 billion for RXR Realty and real estate investor David Werner’s purchase of 1285 Avenue of the Americas, which was one of the largest deals of the year. (And just last month, Flaum’s team topped that by putting together a $1.4 billion financing package to refinance 5 Times Square for the same borrowers.)

The mega-lender also provided two large refinancings for Vornado Realty

28

| APRIL 5, 2017 | COMMERCIAL OBSERVER

Trust, including a $700 million loan on 770 Broadway in Manhattan and a $675 mortgage against Merchandise Mart in Chicago.

Jeff Sutton’s Wharton Properties also scored two refis from Morgan Stanley: a $272 million debt package for 529 Broadway in Soho and more recently a $125 million mortgage for the Whole Foods site at 100 West 125th Street in Harlem.

In total, Morgan Stanley’s real estate team completed roughly $14 billion in loans last year, roughly 40 percent of which was securitized, down from $16 billion in 2015.—D.B.

Jeff DiModica and Dennis Schuh President; Chief Originations Officer at Starwood Property Trust Last Year’s Rank: 17

While Dennis Schuh is new to Starwood Propert Trust, he’s no first -timer when it comes to the business.

In May 2016, he left his longtime post at J.P. Morgan Chase to oversee Starwood’s large loan lending business.

Jeff DiModica said that the company has seen a tremendous spike in deals, in part due to Schuh’s presence on the team.

“Having Dennis has been transformational,” he said. “There is not a better liked person that I’ve ever worked with, both internally and externally. After 19 years [at J.P. Morgan Chase], his Rolodex is a phonebook.”

In 2016, Starwood completed $6.4 billion in commercial real estate debt deals, up from $5.8 billion in 2015. One of its largest was a $330 million loan for the development of Eliot Spitzer’s residential building at 416-420 Kent Avenue in Williamsburg, and a $195 million financing across a first mortgage and mezzanine loan to refinance an office tower at 1180 Peachtree in Atlanta.

Of Starwood’s total CRE volume, more than half was on its balance-sheet lending book, while the remainder was split between the conduit business, commercial mortgage-backed securities and property investment.

“We are the most diversified of our peers,” DiModica said. “Most people have one cylinder of investment, while we have a multicylinder investment approach. I think the bond market was very happy to have an opportunity to put money in a company that wasn’t subject to any one sector.”

In addition to getting deals done and raising a significant amount of equity, Starwood ended the year with “more than $1.5 billion in liquidity,” which will give the company a “tremendous amount of gunpowder to look at a wider spectrum of deals,” DiModica said. Now, Starwood is deciding where to put that capital, and DiModica anticipates that “2017 will be the biggest production year by far.”—D.B.

FROM LEFT: GEOFFREY HAUSCHILD; RICHARD FREEDA; SASHA MASLOV/FOR COMMERCIAL OBSERVER

14

Dennis Schuh.

congratulates our very own

Anthony Orso & Michael Lehrman on their continued success & top ranking among the Mortgage Observer Most Important People in Real Estate Finance for the fifth consecutive year

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TOP 50

Gary Otten.

15 Roy March.

Roy March CEO at Eastdil Secured Last Year’s Rank: 5

Early in the year, Eastdil Secured’s investment sales brokers negotiated one of the biggest acquisitions of 2016—CalPERS and CommonWealth’s $1.9 billion purchase of 787 Seventh Avenue from AXA Financial—and the finance team brokered the respective $1 billion acquisition financing.

Then, Eastdil suffered a big blow last October when top investment sales deal makers Douglas Harmon and Adam Spies left the company for Cushman & Wakefield.

Following the departure of Harmon and Spies, Roy March became a more frequent presence in the New York City office, as Commercial Observer reported in late December.

“He has been in New York every single week since these guys left,” David Lazarus, a senior managing director in New York, told CO at the time. “Given what happened he’s been much more focused on New York.”

30

| APRIL 5, 2017 | COMMERCIAL OBSERVER

Perhaps that focus paid off.

Toward the end of the year, Related Companies and Vornado Realty Trust secured $625 million to refinance 85 10th Avenue, according to Grant Frankel, a managing director at Eastdil, the exclusive adviser in the deal.

Eastdil—a wholly owned subsidiary of Wells Fargo—also brokered Savanna’s $257.5 million purchase of The Falchi Building in Long Island City, Queens, from Jamestown.

And, the finance arm arranged Savanna’s $200 million acquisition loan for the property, which has an address of 31-00 47th Avenue, from Blackstone Group, Savanna announced on Dec. 22, 2016.

But still, the company’s originations decreased in the U.S. last year to $41.1 billion, with deals averaging $207 million, from $52.4 billion in 2015, when deals averaged $236 million, Frankel said.—L.E.S.

Head of Real Estate and Agricultural Finance; Head of Real Estate Debt Strategies at MetLife Last Year’s Rank: 11

Talk to a lot of the firms on this list about how they did last year, and almost everyone gives you the qualified answer, “Not as good as 2015, but nobody did as well as 2015.”

MetLife is one of the debt originators that doesn’t have to make excuses: It had an unambiguously better year in 2016 than it did in 2015.

The commercial real estate wing of the insurance industry titan originated a record $15 billion in loans, up roughly 5 percent from its previous record in 2015 of $14.3 billion.

Granted, it was not as dramatic a jump as the company made from 2014, where origination increased 18 percent, but it’s hard to keep breaking records. “[Last year] represented the fourth consecutive year of record commercial mortgage loan production for MetLife’s platform,” Gary Otten said. “I am hopeful that 2017 will continue our team’s trend of high-quality commercial mortgage originations, consistent with prior-year results.”

Among the highlights of 2016, MetLife threw $275 million at the Cherry Creek Shopping Center, a megamall in Denver, Colo., as the lead lender in the $550 million mortgage financing with PGIM Real Estate Finance, according to Commercial Real Estate Direct; it provided a $415 million floating-rate warehouse facility secured by a portfolio of 12 commercial mortgages

Robert Merck. nationwide, and finally, its big kahuna of 2016 was a $563 million first mortgage on a portfolio of Class A industrial properties in California, according to a release from MetLife.

But, of course, those were the biggies.

MetLife continued expanding globally, inking deals worldwide, including $533 million in loans in Australia, more than $289 million in Japan and other deals in the U.K., Chile, Mexico and South Korea.

—M.G. and D.B.

FROM LEFT: ADRIEL REBOH/PATRIC MCMULLAN; COURTESY METLIFE

16

Robert Merck and Gary Otten

Challenge [chal-inj] To us, this means always looking for the right solution for our clients.

At UBS, we have built our business around you, our clients.

We want to help you achieve your ďŹ nancial goals and deliver results beyond your expectations. And that means always striving to provide the advice, ideas and excellent execution you need to succeed.

So we're delighted to congratulate our very own Christopher LaBianca, as an honoree on Commercial Observer's 2017 Power 50 list of the Most Important People in Commercial Real Estate Finance.

Š UBS 2017. All rights reserved.

TOP 50

17

David Durning and Marcia Diaz President and CEO; Global Head of Originations at PGIM Real Estate Finance Last Year’s Rank: 26

Last year was a busy one for life companies and PGIM was no exception. The company provided more than $13.9 billion in financing nationwide, $13.2 billion of which was driven by multifamily, industrial and office property transactions.

“I think that 2015 and 2016 were fairly similar,” Marcia Diaz said (see Q&A on page 76).

“Both were very strong years and very close in originations. In terms of real estate fundamentals and activity they were also similar— we felt like everything was humming. So far, if we annualize our production, we are on track for a similar production year in 2017.”

PGIM has a variety of loan offerings—from mezzanine and preferred equity to agency products from Fannie Mae and Freddie

18

Mac—and began offering financing on “coreplus” assets, or more transitional commercial real estate transactions with a value-add component this year. “Core-plus is a natural extension of our core lending strategy,” Diaz said. “We see demand for this debt product and wanted to be able to provide an option for our borrower clients.”

Standout transactions from 2016 include a $271 million, 10-year fixed-rate portfolio loan for 32 well-leased industrial properties in Mexico (Guadalajara, Monterrey, Mexico City and Tijuana), totaling 7.5 million square feet. “We have invested in Mexico before, but this was a new borrower for us, and we were very excited to do that deal,” Diaz said.—C.C.

Marcia Diaz.

David Durning.

Chad Tredway and Greg Reimers Head of Commercial Term Lending East; Real Estate Banking Northeast Market Manager at J.P. Morgan Chase

Being a New York-based bank, J.P. Morgan Chase had yet another big year of lending in the Big Apple. The bank lent just over $6 billion in debt across the five boroughs last year, according to data from Actovia, up from $4.2 billion from the year prior.

Chad Tredway attributes J.P. Morgan’s success to its “client obsession” and “certainty of execution.”

“We remained consistent in our ability to lend to clients when regulatory headwinds hit almost all of our competitors,” he said.

His team focused on providing debt on housing across the city, and some of their deals included a $70 million loan on seven Manhattan apartment buildings, a $55.8 million financing for six multifamily properties across Queens and Brooklyn and a $24.5 million mortgage for 445 East 77th Street on the Upper East Side, city records indicate.

“Since 2013 we have been working to be a stable source of capital because we want people to live in New York City and because the supply and demand characteristics are in our favor,” Tredway said. “We focus on rent-regulated housing for two reasons: No. 1, we believe it’s great for the community. We’re a New York-based bank, and therefore we believe it’s our responsibility to lend on housing that’s affordable in New York City. No. 2, we believe that rent-regulated housing provides a very safe place to lend. The cash flow and volatility on it is lower than free-market assets.”

Greg Reimers’ team was also active and participated in some of the city’s most iconic deals of the year. The bank provided part of the $1.5 billion construction loan for SL Green Realty Corp.’s One Vanderbilt, and it also teamed up with M&T Bank and U.S. Bank on the $250 million loan for the development of Rudin Management and Boston Properties’ Dock 72 in the Brooklyn Navy Yard.

32

| APRIL 5, 2017 | COMMERCIAL OBSERVER

Chad Tredway.

Looking forward, rising interest rates could be a game-changer for borrowers, especially depending on how far and how fast they rise, Reimers said.

“Any responsible real estate investor who is looking at a new loan or new acquisition has to look at

Greg Reimers. how much that investment is going to perform in a higher interest-rate environment,” he said. “It affects how much a buyer can pay, and it impacts a lender’s coverage on a loan and their ability to get repaid at maturity.”—D.B.

FROM TOP: COURTESY PGIM REAL ESTATE FINANCE; COURTESY J.P. MORGAN CHASE

Last Year’s Rank: 23

C O N G R ATU L ATI O N S TO

David Schonbraun Co-Chief Investment Officer

on being recognized among the 50 Most Important People in Commercial Real Estate Finance.

We salute all the honorees.

TOP 50

19

Gino Martocci and Peter D’Arcy

Co-Head of Commercial Banking; President of New York City and Long Island and Head of Commercial Real Estate Segment at M&T Bank

“We pride ourselves on being the bank we’d want if we were one of the successful entrepreneurs we’re dealing with,” Peter D’Arcy said.

Given last year’s success, it’s easy to see why.

Gino Martocci runs the company’s commercial banking activities (including the off balance sheet subsidiary M&T Realty Capital Corporation, which did $3.6 billion worth of business in 2016), while D’Arcy leads M&T’s commercial real estate business. In total, M&T financed over $13 billion worth of business in 2016, up from $10 billion the year prior.

Last year, M&T funded two sizable deals on behalf of the Durst Organization: a $92 million loan for the real estate owner’s purchase of 1800 Park Avenue and a $167 million mortgage for a development site at 29-37 41st

Avenue in Long Island City, Queens. M&T also originated a $135 million mortgage for Two Trees Management’s 20 Jay Street and $62 million for a purchase in Newport, N.J., by the LeFrak family.

Despite the size of the deals, Martocci views M&T on more intimate terms.

“We talk about ourselves as a community bank,” he said. “Our mission is to serve the communities we’re in and the clients we carefully select to do business with through cycles. We’re not in it when things are good and out when things are bad.”

D’Arcy added, “We try to pick the best people and be really good banking partners for them. That’s what gets me personally excited about doing what we do.”—L.G.

Gino Martocci.

Pursue your bold vision with focused commercial real estate solutions. bofaml.com/commercialre

General disclaimer for Bank of America Merrill Lynch, visit bofaml.com/en-us/content/creb-disclaimer.html. ©2017 Bank of America Corporation. CREB-122-AD ARLXJKP8

34 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Peter D’Arcy.

COURTESY M&T BANK

Last Year’s Rank: 12

Connecting capital and ideas to build the future Every commercial real estate initiative is unique. It takes deep experience and understanding of the industry to develop the right financial solutions that will support your real estate needs.

At Barclays, our team of leading experts is ready to develop an approach that will help take your business forward.

Contact Barclays today: Larry Kravetz Head of CMBS Finance +1 212 526 5838 larry.kravetz@barclays.com

Eric Wu Head of Originations +1 212 526 4890 eric.wu@barclays.com

Barclays undertakes its US securities and investment banking business in the name of its wholly-owned subsidiary Barclays Capital Inc., an SIPC and FINRA member. Š2017 Barclays Bank PLC. All rights reserved. Barclays is a trademark of Barclays Bank PLC.

TOP 50

20

Steve Kenny and Brad Dubeck

East Region Real Estate Executive; Commercial Real Estate Banking Executive for New York and New Jersey at Bank of America Merrill Lynch Last Year’s Rank: 6

In 2016, Bank of America continued to grow its business overall, but its New York and New Jersey team saw a dip in originations—to roughly $2 billion from $4.3 billion the year prior.

“There were fewer large-scale construction loans last year, and there was less deal flow in 2016 than 2015 in terms of our clients,” Brad Dubeck said. “We have a very selective client base, and last year a lot of them considered themselves sellers.”

“As a business, we focused on serving our investors on quality real estate projects through the country,” Steve Kenny said, noting that Bank of America’s lending activity was diversified in 2016 with roughly 50 percent of activity in the term loan space, 25 percent in construction and the remaining

25 percent consisting of corporate lines and other types of credit facilities.

One of Bank of America’s largest deals was a $1 billion portfolio loan backed by more than 80 retail properties, Kenny said, declining to provide further details.

Steve Kenny.

While potential changes to the financial markets’ regulatory framework are the topic du jour, Dubeck said deregulation would likely not have much of an impact on the banking system. “[Banks] have spent so much time

adopting new processes and regulations— many of which, I think, are frankly good for operating the business—that I don’t think there would be much change in how banks operate even if deregulation does happen,” he said.—D.B.

David Schonbraun Co-Chief Investment Officer at SL Green Realty Corp.

Last Year’s Rank: 15

New York City’s largest office landlord had an active 2016 on the commercial real estate finance front, having received a $1.5 billion all-bank construction loan to finance the development of its One Vanderbilt office tower in Midtown. That said, SL Green continued to be a major lending player as well with its focus on subordinate and transitional debt.

David Schonbraun, who leads the real estate investment trust’s structured finance operations, pegged the firm’s originations at close to $2.2 billion in commercial debt in 2016—up from $1.8 billion in 2015.

He described SL Green as “the leader in New York”—the only market in which it is active as a lender—on bridge and mezzanine financing. “I think we provide more of this product 36 | APRIL 5, 2017 | COMMERCIAL OBSERVER

in New York than anyone,” he said.

Notable deals included teaming up with Apollo Global Management to provide a $160 million mezzanine loan to JDS Development Group and Largo Investments for their American Copper Buildings rental towers at 626 First Avenue and a $200 million junior mezzanine loan to RXR Realty and David Werner to refinance their 5 Times Square office building.

“In this market, we’re trying to [look for] very good sponsors with very good product,” Schonbraun said, noting that SL Green’s lending operations have focused on the multifamily, office and retail sectors while mostly staying away from hotels and for-sale condominiums.—R.M.

David Schonbraun.

CLOCKWISE FROM TOP LEFT: SASHA MASLOV/FOR COMMERCIAL OBSERVER; BEOWULF SHEEHAN; ILIR BAJRAKTARI/PATRICKMCMULLAN

21

Brad Dubeck.

Signature Bank congratulates

George Klett on being named one of

Commercial Observer’s

POWER 50

for 2017

All of us at Signature Bank are honored by George Klett’s naming once again to the Power 50 list by Commercial Observer, and being recognized as one of commercial real estate’s top finance executives.

George has successfully financed thousands of commercial real estate transactions, helping Signature Bank secure a leadership position in commercial real estate finance, since his joining in 2007.

We congratulate George on this prestigious honor and wish him continued success.

George Klett Executive Vice President, Commercial Real Estate Banking

From all of your colleagues at

www.signatureny.com

Member FDIC

TOP 50

Global Head of Real Estate Finance at Goldman Sachs Last Year’s Rank: 16

David Lehman continues to pull the strings when it comes to the investment banking giant’s real estate finance operations, of which he assumed control in 2014.

Goldman Sachs remains a major player in both commercial property financing and commercial mortgage-backed securities, backing deals globally while also retaining a high profile in New York.

Goldman acted as bookrunner on 21 CMBS deals totaling $7.79 billion—10.3 percent of the total market share—in 2016, according to Commercial Mortgage Alert. That dollar volume was down 6.4 percent from 2015, when it did 17 deals totaling $8.32 billion, albeit having a lower market share of 8.2 percent.

The bank’s contribution to CMBS deals, however, grew in 2016 to $6.79 billion from

$6.26 billion the previous year—an 8.5 percent increase.

Notable recent deals include a $400 million refinancing of Vornado Realty Trust’s 350 Park Avenue office tower and a $450 million CMBS loan for SL Green Realty Corp.’s 485 Lexington Avenue office building. Goldman also teamed up with Wells Fargo to provide a $150 million securitized mortgage for BLDG Management and Crown Acquisitions’ 1 West 34th Street.

Goldman Sachs also underwrote $1.06 billion in bonds issued by the Metropolitan Transportation Authority and backed by the Hudson Yards mega-development on Manhattan’s Far West Side—the first time the MTA issued real estate-backed bonds in its history.—R.M.

David Lehman.

23

Jeff Fastov.

38 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Jeff Fastov Senior Managing Director at Square Mile Capital Management Last Year’s Rank: 30

It’s hip to be Square when your origination volume doubles for the second year in a row.

In 2016, Square Mile Capital Management originated a cool $3.3 billion across its three lending strategies—leaving its $1.6 billion 2015 total in the dust.

In what was undoubtedly the year of the nonbank lender, Square Mile had an especially active 2016. “Because we do senior, mezzanine and common equity, we literally invest up and down the capital stack,” said Jeff Fastov, who heads up Square Mile’s commercial real estate lending business. “We’re starting to see a lot more repeat business and feeling the real benefit of being able to offer so many different capital solutions.”

Notable transactions include a $40 million mezzanine loan for the refinancing of the

Hyatt Regency in New Orleans, a $45 million mezzanine loan for Minskoff Equities’ 1166 Avenue of the Americas and, most recently, a $145 million construction loan for The Bohannon Companies’ Class A office building in Menlo Park, Calif.

“The banks became even more conservative on development lending [last year],” Fastov said. “The Menlo Park deal is an example of what we hope to do more of. There was a pretty fundamental and pronounced change in the market for construction lending, and that created a big opportunity for us.”

Borrowers that work with Square Mile know that the team will go all out to provide the perfect deal, Fastov said. “We don’t leave the room until we find [a solution for our client].”—C.C.

FROM TOP: MARK MCQUEEN; COURTESY JEFF FASTOV

22

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TOP 50

David Brickman.

Head of Multifamily Business; Senior Vice President of Multifamily Production and Sales at Freddie Mac

Michele Evans.

Last Year’s Rank: 22

Freddie Mac is the top dog when it comes to multifamily lending in the United States.

The government-sponsored entity reported $56.8 billion in loan purchasing volume in 2016, up from $47.3 billion a year prior. But that’s not all: The agency issued a record-high $51 billion in securities last year, making it the largest issuer of structured securities in the commercial mortgage-backed securities market.

And Freddie Mac did all of this without a sizable (a.k.a. over $1 billion) transaction last year. If the lender could categorize 2016, it would call it a year of success in “terms of social impact.”

While the largest deal the lender completed in 2016 was a $238 million financing for Fairstead Capital’s $315 million acquisition of the 1,790-unit Savoy Apartments in Harlem in July, it was primarily smaller transactions that drove business.

“We love going after the large deals in Manhattan as well, but we were able to put up the numbers that we put up while not having any mega-deals,” David Brickman said.

Freddie Mac provided about $4.5 billion in loans across the United States through its small balance loan program, which offers loans between $1 million and $6 million to smaller projects. In just the five boroughs alone, it issued 200 such loans for $500 million in debt.

40 | APRIL 5, 2017 | COMMERCIAL OBSERVER

25 John Cannon.

Freddie Mac also financed more than $6.3 billion for the construction or redevelopment of rent-restricted housing for low- and moderate-income families, and it issued $5.2 billion in loans on rental housing where landlords made “green” upgrades. In addition, Freddie Mac financed more than $1 billion through its moderate rehabilitation program, which allowed the renovation of about 50 moderate-income communities across the country, and it provided $3.2 billion in its senior housing business.

“To get to $57 billion last year without a mega-deal was a statement—it was a lot of singles, doubles and triples,” John Cannon said.—L.L.G.

Jeffery Hayward.

Michele Evans and Jeffery Hayward Senior Vice President and COO of Multifamily; Executive Vice President of Multifamily at Fannie Mae Last Year’s Rank: 21

Fannie Mae Multifamily, which relies on its roughly 30-year-old Delegated Underwriting and Servicing program to finance rental housing, had its busiest year in 2016. Last year, the arm provided financing for $55.3 billion worth of multifamily loans, according to Jeffery Hayward.

“The number has continuously gone up probably since conservatorship,” Michele Evans noted, referring to September 2008, when the Federal Housing Finance Agency gained broad authority over Fannie Mae and Freddie Mac. Fannie’s biggest deal last year was the closing of a $2.7 billion mortgage to fund Blackstone Group and Ivanhoe Cambridge’s purchase of Stuyvesant Town-Peter Cooper Village on the East Side of Manhattan. (While the sale closed in December 2015, Fannie Mae purchased the debt from Wells Fargo in January 2016.)

Evans and Jeffery Hayward both highlighted the company’s green initiatives, through which Fannie incentivizes borrowers making environmentally friendly improvements by offering lower pricing.

Of its 2016 deals, $3.6 billion were green loans, a number that has increased each year since Fannie introduced green lending products three years ago, Evans said. A lot of that, the pair said, came as a result of the company’s efforts to educate buyers about green financing.

“The big jump was really a function of the programs that we established but also the attractive financing and the attractive pricing,” Evans said. “I also think it had a lot to do with buyers learning about the nuances with [going green].”

When it came to manufactured housing community transactions, Fannie came out ahead last year, with $3 billion worth of business, versus the typical $1 billion a year, Evans noted. The spike was in large part due to a $1 billion financing to YES! Communities last August, which was backed by 120 communities that will provide workforce housing for more than 29,000 families in 13 states. That was the biggest MHC deal Fannie has ever done, Hayward noted.—L.E.S.

CLOCKWISE FROM TOP LEFT: COURTESY DAVID BRICKMAN; CADED MARTIN; COURTESY JEFFREY HAYWARD; COURTESY JOHN CANNON

24

David Brickman and John Cannon

TOP 50

27 Jonathan Schwartz.

Aaron Appel.

Keith Kurland.

Dustin Stolly.

26

Jerome Sanzo Head of Real Estate Finance at Industrial and Commercial Bank of China (ICBC) Last Year’s Rank: 28

When Commercial Observer sat down with Jerome Sanzo last summer, he had just learned how to say, “xin qing hao,” which means “the mood is very good.” That sentiment carried on throughout the year, as ICBC originated another $2.5 billion in 2016, roughly the same as the year prior.

The Chinese bank focused its energies on gateway markets, like New York City and Los Angeles. In January 2016, ICBC provided a $211.6 million loan to Kuafu Properties and Shanghai Construction Group for the acquisition of the top 13 floors of 1 MiMa Tower. In September, it teamed up with Deutsche Bank

and Natixis Real Estate Capital on a $500 million senior loan for Extell Development Company’s One Manhattan Square. The following month, ICBC led a $115 million mortgage for Brookfield Property Partners’ Silver Spring Metro Plaza office complex in Silver Spring, Md. Looking forward, Sanzo thinks the “story this year will be how much foreign investment in U.S. real estate will continue, grow and taper,” he said. “It’s no surprise and no secret that the Chinese government is trying to curtail some [of the outbound investment].

It’s more difficult to move money out.”—D.B.

Aaron Appel, Keith Kurland, Jonathan Schwartz and Dustin Stolly Co-Head; Executive Vice President; Vice President; Managing Director at JLL’s Real Estate Investment Banking Team

Between Aaron Appel, Keith Kurland, Jonathan Schwartz and Dustin Stolly, JLL’s real estate investment banking team negotiated $12.6 billion in debt deals last year, up from $9.4 billion the year prior—numbers that stand out in a year where many lenders experienced less deal flow volume.

Kurland secured a $370 million financing from Deutsche Bank and SL Green Realty Corp. on behalf of Kushner Companies, for the old New York Times Building at 229 West 43rd Street. Appel and Schwartz negotiated a $102 million Mesa West loan for Taconic Investment Partners, TH Real Estate and Squire Investments’ 817 Broadway. And despite being based in New York City, the broker 42 | APRIL 5, 2017 | COMMERCIAL OBSERVER

powerhouse was active across the country.

Stolly arranged a $300 million construction loan from Cornerstone Real Estate Advisers for Steve Witkoff’s Edition-branded hotel in West Hollywood, Calif.

When it comes to 2017, Stolly said there are positive signs in both the long-term fixedrate and transitional debt markets. “[They’re stronger and more competitive than I’ve seen in several years,” he said. “There’s significant stability, which is a good sign, particularly in the CMBS market—and there’s a ton of competition. If you’re a borrower, you’re going to have tremendous opportunity to take advantage of that. There’s an abundance of capital for all asset classes and all types.”—D.B.

Jerome Sanzo.

FROM LEFT: COURTESY JLL; KAITLYN FLANNAGAN COMMERCIAL OBSERVER

Last Year’s Rank: 25

Cushman & Wakefield Congratulates

Steven A. Kohn

Dave Karson

Gideon Gil

Alex Hernandez

on being selected for the Commercial Observer’s list of The 50 Most Important People in Commercial Real Estate Finance in 2016 additional team members include: John Alascio, Mark Ehlinger and Christopher Moyer

cushmanwakefield.com

TOP 50

Robert Verrone.

Principal; Managing Director at Iron Hound Management Company Last Year’s Rank: 29

Wachovia alumni Robert Verrone and Christopher Herron continued to move and shake on multiple fronts through their restructuring advisory platform and debt and equity business.

In total, Iron Hound was involved in roughly $3.8 billion in debt transactions in 2016, Herron said—up from roughly $3 billion in 2015. He attributed the increase to “an overall ramping up of our platform,” with the firm continuing to tap into relationships with existing clients and making inroads with new ones.

Notable deals included advising on the $272 million refinancing of retail magnate Jeff Sutton’s new development at 529 Broadway in

29

Soho, a $217 million workout of Chetrit Group, Edward J. Minskoff Equities and the Moinian Group’s 500-512 Seventh Avenue office building in Midtown and a $194 million financing package for Chetrit’s condominium conversion of 49 Chambers Street in the Financial District.

But Iron Hound still maintains a national presence: Herron noted the firm remains “bullish on the major markets in gateway cities, across all asset classes.” He said he expects the firm’s restructuring advisory business to “stay very busy” in the face of upcoming maturations involving legacy commercial mortgage-backed securities originations from 2006 to 2008 “still left to come on the table.”—R.M.

Rick Lyon and Benjamin Stacks Executive Vice President and Head of Commercial Real Estate; Northeast Market Manager at Capital One Last Year’s Rank: 36

Rick Lyon.

Benjamin Stacks.

Greg Murphy.

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Christopher Herron.

| APRIL 5, 2017 | COMMERCIAL OBSERVER

Capital One’s portfolio of loans grew to $26.5 billion in 2016, up by nearly $1 billion the year prior.

Similar to growing its book, the bank’s current strategy revolves around growing its presence, Benjamin Stacks said. In addition to its operations in New York, New Jersey, Pennsylvania, Louisiana and Texas, Capital One opened offices in Boston and San Francisco recently—and Los Angeles is next on the list.

While Capital One’s focus on growth was national, it was an active lender in the outer boroughs last year with signature deals in Brooklyn, Queens and the Bronx.

In April 2016, Capital One provided a $110 million floating-rate, interest-only

loan to Taconic Investment Partners and Clarion Partners to refinance their 1,416unit, 118-building Eastchester Heights Apartments in the Bronx.

Then in December, Capital One issued an $80 million construction loan to Starwood Capital Group and Toll Brothers for the 194-key 1 Hotel Brooklyn Bridge in Dumbo. The project, which opened this February, includes 20,000 square feet of meeting space, a 24-hour-fitness center, a spa, and a rooftop bar and a pool.

“We are cautiously optimistic about current market conditions and remain committed to providing our customers with access to capital, excellent service and competitive rates,” Stacks said.—L.L.G.

CLOCKWISE FROM TOP LEFT:COURTESY IRON HOUND MANAGEMENT COMPANY; COURTESY CAPITAL ONE

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Robert Verrone and Christopher Herron

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TOP 50

31

Dan Thomas and Richard Smith Vice Chairman and Chief Lending Officer and President of Real Estate Specialties Group; Executive Vice President and Northeast Manager of Real Estate Specialties Group at Bank of the Ozarks New

The Little Rock, Ark.-based bank has made huge strides in recent years, transforming itself from a regional player into one of the more active lenders in the New York City commercial real estate market.

Bank of the Ozarks’ real estate specialties group, led by Dan Thomas, originated $8.24 billion in debt in 2016—up considerably from $5.63 billion the previous year. Thomas said the increase was due to “both a larger number of loans and a larger average loan size.”

While an increasing number of lenders have deemed the residential condominium sector too risky to engage with, Bank of the Ozarks has stepped in to fill the void. Some of the bank’s most notable deals include a $108 million loan for XIN Development’s new 72-unit condo building at 615 10th Avenue in Hell’s Kitchen; a reported $135 million in

financing for JDS Development Group and the Chetrit Group’s supertall residential development at 9 DeKalb Avenue in Downtown Brooklyn; and a reported $187 million loan for Nathan Berman’s latest office-to-residential conversion at 20 Broad Street.

While Thomas acknowledged that the bank has been active in financing condo projects, he noted that Bank of the Ozarks has “primarily focused on the moderately priced segment of the market” while only lending to “a limited number of ‘luxury’ condo developments.”

“We have been very selective with respect to the location, strength and experience of sponsorship, current and anticipated future supply in the submarket and presales contracts,” Thomas said. “In all cases, we have kept our leverage ratio low.”—R.M.

Andrew Farkas.

Founder, Managing Member, Chairman and CEO of Island Capital Group

The king of a veritable real estate empire wasn’t on the Power 50 list last year? What the Farkas! Andrew Farkas, that is. After switching him over to the Power 100 last year, we thought it’d make more sense for the founder and chief executive officer of Island Capital Group (and its subsidiaries C-III Capital Partners, NAI Global and EVO) to have a spot on this list.

C-III Capital Partners is one of the largest CMBS investors and special servicers in the U.S. Its special servicing arm oversees $60 billion in commercial loans—likely boosted last year by the wave of CMBS maturity defaults and loan modification requests, and its primary servicer handles a further $4 billion. C-III and its subsidiaries manage more than $12.3 billion in assets.

In 2016, C-III also acquired Resource America, an asset management company specializing in real estate and credit investments.

Resource America manages a publicly traded 46 | APRIL 5, 2017 | COMMERCIAL OBSERVER

commercial mortgage real estate investment trust, Resource Capital Corp., as well as four nontraded public REITs and two other investment companies.

“This is a transformative acquisition for C-III,” Farkas said in a September 2016 press release. “With our expanded platform, we are now able to provide commercial real estate debt and equity solutions to both institutions and retail investors. Today, we are well positioned for further growth and to better serve the needs of our clients as well as those of the evolving commercial real estate industry.”

Lastly, the C-III platform is now one of the top 30 multifamily property managers in the nation, with over 43,000 units owned or managed. Within New York City alone, C-III invests in a portfolio of more than 2,000 multifamily units in 15 buildings.—C.C.

Dan Thomas.

Richard Smith.

FROM LEFT: COURTESY MARK TALGO; FRANCESCO SAPIENZA/FOR COMMERCIAL OBSERVER; SASHA MASLOV/FOR COMMERCIAL OBSERVER

New

FROM LEFT: COURTESY STEVE FRIEDMAN; COURTESY BANK OF THE OZARKS

FROM LEFT: CELESTE SLOMAN/FOR COMMERCIAL OBSERVER; HANNAH MATTIX/FOR COMMERCIAL OBSERVER

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Andrew Farkas

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TOP 50

33

Stephen Rosenberg and Richard Bassuk Founder and CEO of Greystone; Co-Chairman and CEO of The Greystone Bassuk Group New

Stephen Rosenberg’s Greystone racked up $7.1 billion in agency, commercial mortgage-backed securities, bridge and proprietary loan originations in 2016, a 34 percent increase over its $5.3 billion 2015 number. A top Fannie Mae and Freddie Mac lender, the company was the most active Fannie Mae small loan originator in 2016 and the No. 2 Freddie Mac lender for small balance loans.

As if that wasn’t impressive enough, the firm also grew its loan servicing portfolio to a whopping $21 billion.

With a national reach, some of the notable deals keeping Rosenberg’s team busy included a $106 million Fannie Mae financing for the acquisition of a six-property portfolio in Texas, a $103 million affordable housing preservation recapitalization in Florida and a $221 million Freddie Mac credit facility for an 1,800-unit affordable housing property in California.

Greystone’s advisory business, The Greystone Bassuk Group, has been busy too.

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Last February it completed the $586 million refinancing of a portfolio of 34 multifamily properties located in New York, Florida, Nebraska, Nevada, Arizona and Colorado on behalf of Maxx Properties.

The firm has also been busy building out its EB-5 practice. “It was something that took patience,” Richard Bassuk said. “As we were doing it, we thought, ‘It’s going slowly,’ but then it started accelerating. At the end of the day when we look back, it will be something that sits well with our overall corporate strategy, and I feel very proud of it.”

As with anything else, “Nothing worth doing is ever easy, and that’s what my wife always tells me,” Bassuk said. “Greystone has had the success it has had by being very careful and by being very client-centric. It’s another form of consumerism, and if you don’t do a good job, you’re going to have that hit you over the back of the head.”—C.C.

Mark Talgo.

FROM LEFT: COURTESY MARK TALGO; FRANCESCO SAPIENZA/FOR COMMERCIAL OBSERVER; SASHA MASLOV/FOR COMMERCIAL OBSERVER

FROM LEFT: COURTESY STEVE FRIEDMAN; COURTESY BANK OF THE OZARKS

32

Mark Talgo Senior Managing Director and Head of New York Life Real Estate Investors Last Year’s Rank: 35

In 2015, New York Life Real Estate Investors had a record year with $10 billion in new deals across its lending, equity and real estate securities businesses. And in 2016, the life company fell just shy of that number with $9 billion in its three divisions. But Mark Talgo touted that the company grew to $50 billion in total assets under management, up from more than $46 billion in 2015.

One of the lending platform’s major highlights from last year came in June, when it provided $228.1 million in financing to ECI Group for a 10-property multifamily portfolio across Georgia and Florida.

Later in 2016, New York Life Real Estate Investors originated $225 million in debt on

behalf of Macerich and Institutional Mall Investors for The Village at Corte Madera, a 460,000-square-foot regional mall in Corte Madera, Calif. And in November, it issued a $90 million, 15-year loan to TF Cornerstone for two Washington, D.C., office buildings at 1156 15th Street NW and 1620 Eye Street NW. Talgo is projecting New York Life’s business will remain consistent in 2017. “We expect to [invest] $9 billion and maybe closer to $10 billion,” he said. “It’s still competitive out there. There is no other way to look at it.

Even though there are some areas that look stressed, [real estate] fundamentals are in still good shape.”—L.L.G.

Stephen Rosenberg.

Richard Bassuk.

COMMERCIALOBSERVER.COM | APRIL 5, 2017 | 47

TOP 50

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Spreading the Wealth

N

ew York City is one of the priciest real estate markets—not just in the United States but in the world. And while there are many lenders out there willing to shell out the big bucks to fund the purchase or development of a property in the city, it isn’t always easy to do those larger deals alone.

That is particularly true when it comes to construction lending, with Basel III’s High Volatility Commercial Real Estate rule throwing a spanner in the works and limiting banks’ abilities to provide development financing—something that many of the Finance 50s spoke about (at least we’re all in it together, right?). That wasn’t the case for nonbank lenders, however.

We decided to examine some of 2016’s biggest deals—the

ones that are changing the landscape of the city—and from what we can see, the structuring of these transactions are a testament to the regulatory environment and lending climate.

For instance, it took the wherewithal of five major banks to originate the $1.5 billion construction loan on SL Green Realty Corp’s One Vanderbilt. Meanwhile, hedge fund Children’s Investment Fund didn’t need to take on any partners when it provided a whopping $1.2 billion loan to Related Companies and Oxford Properties Group for 35 Hudson Yards.

Take a look at our deal web, and you’ll see who has the deepest pockets, and who linked up with whom to fund the biggest transactions of 2016.—D.B. and C.C.

KAITLYN FLANNAGAN/COMMERCIAL OBSERVER

There are a lot of large mortgages out there, and not all lenders can take them down alone

COMMERCIALOBSERVER.COM | APRIL 5, 2017 | 49

TOP 50

35

Michael Lehrman and Anthony Orso Co-CEOs and Co-Founders of CCRE Last Year’s Rank: 14

CCRE saw a down year on the CMBS side, according to figures from the Commercial Mortgage Alert, which reported that after contributing $4.1 billion to CMBS deals in 2015, that figure dropped 23 percent for the firm in 2016 to $3.15 billion, or 4.7 percent of the market share. From that figure, $96 million was in single-asset, single-borrower deals.

One 2016 deal for the company, according to Commercial Property Executive, was the sale of a $112 million fully performing, adjustable-rate loan portfolio of commercial and multifamily assets in four states, to “a mix of private equity groups and regional banks.”

The company did not respond to requests for an interview for this piece.—L.G.

Michael Lehrman.

Christopher LaBianca.

Head of Originations at UBS Last Year’s Rank: 41

UBS’ lending business remained steady year-over-year, holding to $3 billion in volume in 2016. Of that, roughly $2.5 billion was securitized in the commercial mortgage-backed securities market.

Christopher LaBianca said he expects volume to increase in 2017, as the firm rolls out new balance-sheet lending programs.

“Last year was interesting for us because, especially on the CMBS side, the first quarter was so brutal,” he said. “Two-thirds of the entire production for the year got done in the second half.”

And indeed, some of UBS’ most iconic deals closed in the latter half of 2016. In August, the firm co-originated a $272 million debt package with Morgan Stanley for Jeff Sutton’s 529 Broadway Nike store in Soho, and in November, UBS teamed up with Citibank on a $215 million refinancing

50 | APRIL 5, 2017 | COMMERCIAL OBSERVER

of Metropole Realty Advisors’ 681 Fifth Avenue.

As for 2017, LaBianca said the market should be busy for the first two quarters, as loans from 2007 are coming due. “It’ll be interesting to see what the second half of the year looks like because we expect less rollovers and expect interest rates to start moving up,” he noted.

Interest rates aren’t the only relevant factor for UBS’ business, though. The firm is watching spreads, which have been at “extremely tight levels” throughout the capital stack, LaBianca explained. “It’s hard to believe that they could stay there for the entire year,” he said. “You would expect that they probably start to widen out as product becomes a little more scarce as there is less opportunity for refinancings [in the latter half of 2017].”—D.B.

Anthony Orso.

CLOCKWISE FROM LEFT: COURTESY CHRISTOPHER LABIANCA; CHRIS SORENSEN/FOR COMMERCIAL OBSERVER; A.E. FLETCHER

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TOP 50

36

Gregg Gerken and Roy Chin Head of U.S. Commercial Real Estate Lending; New York Metro Area Regional Director for Commercial Real Estate at TD Bank Last Year’s Rank: 33

TD Bank slightly increased its loan production volume in 2016 to $5.8 billion from $5.3 billion in 2015, and similar to the previous years, its deal flow was driven by its institutional clients doing big deals across New York City.

Perhaps the most notable deal TD was involved in was the $1.5 billion financing of SL Green Realty Corp.’s One Vanderbilt across from Grand Central Terminal. The Torontobased lender was one of five banks involved in the mega-construction loan and held a $170 million piece of the deal on its books. Additionally, TD preleased 200,000 square feet in the 58-story tower.

TD also provided the Related Companies with $116 million in debt, $58 million of which was used for the development of a 160-unit, mixed-income apartment building in the Hudson Square neighborhood of Manhattan.

As far as 2017 goes, Gregg Gerken predicts that lending activity could cool down.

“As the economy continues to improve, future [interest rate increases] have become more likely,” he said, and “one would expect potential rent inflation and an increase in cap rates.”—D.B. Gregg Gerken and Roy Chin.

Gary Magnuson.

52 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Patrick Burns.

Head of Commercial Real Estate Finance; Managing Director of Institutional Real Estate at Citizens Bank Last Year’s Rank: 45

Citizens Bank saw its portfolio grow by 15 percent last year with its outstanding real estate debt reaching $9.8 billion at the end of 2016, compared with $8.5 billion at the end of 2015. “We were able to grow our business in many different ways,” Gary Magnuson said.

“We were able to syndicate more deals and lead more deals.”

The bank enacted a strategy a few years ago that focused on proving its capabilities to better sponsors in better markets. “I think we’ve done that,” he said. “The thing that our clients want is certainty of execution, and we’ve been able to provide them with that. As a result we’ve done a fair amount of repeat business with some of the biggest and best real estate sponsors in the country.”

While Citizens’ primary markets are Boston, New York City, Washington, D.C. and Chicago, the Rhode Island-based bank has also been busy providing construction loans in gateway

cities across the country. It provided a $107.3 million construction loan to developer Questar Properties for 414 Light Street in Baltimore—a 44-story, 394-unit luxury apartment tower— and a $87.4 million construction loan to Mill Creek Residential for the construction of a 21-story residential tower in Atlanta. Other notable transactions included a $117.3 million loan to a joint venture between DivcoWest and the Rockpoint Group for the acquisition of a 17-story office tower in the heart of downtown San Jose, Calif.

“Last year was a little diverse,” Patrick Burns said. “We were busy with multifamily construction lending in the first half of the year, but as we got into the second half of the year, we saw more opportunities on the office side and in repositioning of properties that institutional buyers were looking to add value to. We also saw a ramp up in the life science space—it’s been a great segment for us.”—C.C.

FROM TOP: CELESTE SLOMAN/FOR COMMERCIAL OBSERVER; COURTESY CITIZENS BANK

37

Gary Magnuson and Patrick Burns

TOP 50

President; Principal; Principal of Ackman-Ziff Last Year’s Rank: 37

Ackman-Ziff held steady in 2016, matching its $5 billion in transactions from the year before. While deal volume remained flat, the firm’s revenue has significantly increased due to investment sales and equity activity, Simon Ziff said.

“We think we’re unique in that we are entrepreneurial and aggressive like some of the smaller New York-based firms but still check the boxes for the larger, national institutional clients that represent more than 60 percent of our firm’s business today,” Ziff said.

In a year when construction loans were the quintessential needle in a haystack, Ackman-Ziff managed to secure a $228 million development loan from PNC for RXR Realty’s restoration of Pier 57.

The firm is in growth mode, and its partners made a key decision to expand Ackman-Ziff to 50 professionals last year with new outposts across the country. The advisory firm also built out joint venture equity and investment sales practices. “We achieved our objectives in being both a powerful New York-centric and national capital advisory group,” Ziff said.

With last year’s objectives achieved, 2017 is already off to a roaring start.

The firm already has $1 billion in transactions under its belt for the first two months of 2017.

“What’s driving growth is our focus on getting better and the team we have here,” Ziff said. “We have great people whose individual and collective businesses are ramping up nationally. It’s really always about the people.”—C.C.

Simon Ziff.

Patrick Hanlon.

Russell Schildkraut.

new york community bank The Premiere Bank for New York City Multi-Family Finance

54 | APRIL 5, 2017 | COMMERCIAL OBSERVER

COURTESY ACKMAN-ZIFF

38

Simon Ziff, Patrick Hanlon and Russell Schildkraut

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TOP 50

39

Head of CMBS Finance at Barclays Capital Last Year’s Rank: 27

While Barclays’ overall lending volume decreased to $3.5 billion from $7.1 billion due to market conditions, the bank remained busy on the bookrunning front.

In addition to nine conduit securitizations, Barclays led or co-led seven standalone securitizations in 2016.

“Our objective is to be one of the more meaningful players in the commercial mortgage-backed securities space for both large loan standalone deals and [our] bread-andbutter conduit business,” Larry Kravetz said.

On the conduit side, Barclays led a $100 million financing of the Hyatt Regency in Jersey City, N.J., a $95 million loan for 215 Park Avenue South, and a $130 million fixedrate loan for a portion of 1166 Avenue of the Americas in Manhattan.

Of that last deal, for a building with three separate condo components, Barclays provided the borrower, Edward J. Minskoff Equities, with the loan it was looking for, then “securitized it into A-note, B-note and mezzanine debt,” Kravetz said.

“When you have a building that has multiple office condominium components, it gets

Larry Kravetz.

pretty complicated,” Kravetz said. “It’s a good example of our ability to work through those complications.”

As for noteworthy standalone deals, Kravetz referred to the company’s $700 million refinancing of the 1.3-millionsquare-foot Easton Town Center in Columbus, Ohio, which he referred to as one of the top-performing retail centers in the country.

And while 2016 was a tough year for CMBS lenders—the year started slow and ended with the implementation of the long-awaited risk retention regulation—Kravetz sees better times ahead not only for Barclays but also for the industry as a whole. “[People ask], How does this look compared to 2007 and that era?” Kravetz said.

“The significant difference is that the industry has maintained really strong discipline.

So while there’s good liquidity for real estate borrowers, it remains disciplined. I don’t see anything close to a real estate bubble or going off the cliff from the lending side, which has kept things from getting out of hand on the buy side as well.”—L.G.

Jeff Friedman and Mark Zytko Co-Founders and Principals of Mesa West Capital New

Last year, Mesa West reaped the benefits of having expanded its physical footprint. The Los Angeles-based private lender saw its originations increase to $2.8 billion in 2016, up from $2.1 billion the year prior.

That ramp up in deals is in part due to the Mesa West’s recently opened Chicago office, Jeff Friedman said. Roughly 80 percent of the firm’s overall business was split along the coasts, between its locations in Los Angeles and New York City, while the remaining activity came from Chicago, Denver and Texas.

“2016 was a good year across all of our product [offerings],” Mark Zytko said. “It’s just a continuation of growth, and we were able to react quickly and provide long-term loans that have custom elements.”

What differentiates the debt fund from a large bank, insurance company or CMBS shop, said Friedman, is that with those lenders, borrowers are “forced to accept the structure that is provided by a large institution,” where Mesa West provides customers with 56 | APRIL 5, 2017 | COMMERCIAL OBSERVER

more flexibility. “It’s more about trying to make our loan fit the transaction than having the transaction fit our loan,” he said.

Friedman pointed to a $280 million acquisition loan the firm provided to Brightstone Capital Partners and Artisan Realty Advisor’s purchase of the Lantana Media Campus in Santa Monica, Calif. The borrowers were buying the property in an off-the-market transaction, so the financing needed to be closed quickly.

Growth is coming from more than just debt deals though: This January, the company closed its fourth fund with a total of $900 million in capital, and in its core-lending fund, Mesa West increased its commitments to $1.2 billion.

“We’re excited about market opportunity,” Friedman said. “We’ve been fortunate to attract the capital we’ve been able to attract and also build our relationships with borrowers and intermediaries. We’re excited to continue to grow out platform going forward.”—D.B.

Jeff Friedman.

Mark Zytko.

FROM TOP: MARIAN GOLDMAN; COURTESY MESA WEST CAPITAL

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TOP 50

41

Steven Kohn, Gideon Gil, Alex Hernandez and Dave Karson President of Equity, Debt & Structured Finance; Senior Managing Director; Senior Managing Director; Executive Managing Director at Cushman & Wakefield Last Year’s Rank: 42

Steven Kohn.

Gideon Gil.

Alex Hernandez.

Dave Karson.

42

Greg Murphy.

58 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Greg Murphy Head of Real Estate Finance Americas at Natixis Real Estate Capital Last Year’s Rank: 31

With $3.2 billion in loan origination in 2016—flat year-over-year—Greg Murphy and his team at Natixis prides themselves on handling complex loan transactions in a manner unlike other firms.

“We have a broad, integrated platform that’s fairly unique,” Murphy said. “We have a fixed rate that we do for commercial mortgage-backed securities and floating rate that we do for balance sheet on the same platform offered by the same banking teams to the same clients. We’re able to offer solutions and certainty in a way our competitors can’t.”

Of the bank’s more prominent deals last year was a $229 million, five-year, fixed-rate loan for RFR Holding and Tristar Capital’s purchase of Urban Union, a 12-story, 296,000-square-foot Class A office building in Seattle that will house offices for Amazon.

“We were able to break that financing down into three pieces,” Murphy said. “We kept the senior [debt], which we’re going to securitize, and then we sold two subordinated tranches in order to optimize that transaction and make it more efficient for the borrower.”

Natixis completed a similar $233 million deal, also to Tristar, for the purchase of a three-building office complex in Sunnyvale, Calif., that will be used exclusively by Apple. The bank also provided $208 million to Hana Asset Management for its purchase of a 761,824-square-foot headquarters facility for pharmaceutical firm Novo Nordisk in Princeton, N.J. Murphy acknowledges the industry’s recent bumps, but with business brisk, he said that for lenders that are “making sure [they’re] cautious and doing [their] homework…there are reasons to feel optimistic” about the year to come.—L.G.

CLOCKWISE FROM TOP LEFT: SASHA MASLOV/FOR COMMERCIAL OBSERVER; COURTESY CUSHMAN & WAKEFIELD; COURTESY GREG MURPHY

It’s a Game of Kohns at C&W’s 1290 Avenue of the Americas office, where Steven Kohn and his team of 80 are busy arranging deals on the properties that surround them, including the $850 million financing of 1301 Avenue of the Americas—right across the street.

“1301 [Avenue of the Americas] was our largest loan in 2016, and we closed that with three life insurance companies [MetLife, AXA Financial and New York Life Insurance Company]. Its size and the complexity of having three lenders involved made it the most interesting transaction for me,” Kohn said.

While the overall origination volume dipped slightly to $7.9 billion in 2016 from $8.5 billion in 2015, the team executed some of New York City’s most buzzed-about transactions. Another jewel in C&W’s crown was the combined $315 million refinancing of 10 Times Square and 1410 Broadway on behalf of L.H. Charney Associates.

“I think 2016 was pretty comparable to 2015. The first quarter of the year was a little challenging on the capital markets side, so that got the year off to a slow start, but then we had a great finish,” Kohn said, adding that the deluge of 10-year debt rolling and subsequent need for refinancing bumped up the debt side of the business.

While Kohn, Alex Hernandez, Gideon Gil and Dave Karson lead the charge, Managing Directors John Alascio, Mark Ehlinger and Chris Moyer play critical roles in the team’s successes.

“We’re also working closely with the investment sales team that came over [Douglas Harmon and Adam Spies, who joined C&W from Eastdil Secured in October], and that’s been terrific. The combined capital markets team here has really grown,” Kohn said.—C.C.

TOP 50

COURTESY MATT GALLIGAN

43

Matt Galligan.

Matt Galligan President of CIT Real Estate Finance Last Year’s Rank: 34

CIT originated $2.25 billion worth of loans in 2016, primarily for the “repositioning of office buildings as well as Class B multifamily transactions,” according to Matt Galligan.

The bank was busy financing workforce housing in Southern California.

“This is inexpensive housing relatively close to where people work,” Galligan said.

“Our clients are buying 30- to 40-year-old garden apartments and putting $7,500 [in upgrades] per unit. They improve them, then they rent them at reasonable rates. We’re doing a lot of work in that market.”

Other deals Galligan is proud of from last year include two that, coincidentally, both involved $65 million loans: one for

Extell Development Company and Parkland Group’s Four Seasons five-star luxury resort in Vail, Colo., and another for Madison Capital and Vornado Realty Trust’s buy of a 34,000-square-foot retail and office facility at 606 Broadway on the corner of Broadway and Houston Street in Soho.

Despite the recent market turmoil, Galligan maintains a positive outlook for the business climate ahead. “[The industry is] off to a bit of a sluggish start, but things seem to be improving in terms of transaction volume,” he said.

“Overall, there’s not a large amount of supply outstripping demand, which is very good at this point, so I think we’ll come through this cycle in a very positive way.”—L.G.

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60 | APRIL 5, 2017 | COMMERCIAL OBSERVER

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Brian Harris.

TOP 50

44

Brian Harris and Michael Mazzei Co-Founder and CEO; President of Ladder Capital Last Year’s Rank: 48

Michael Mazzei.

Brian Harris.

45

Shawn Rosenthal.

62 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Michael Riccio.

Shawn Rosenthal and Michael Riccio Executive Vice President; Co-Head of Production at CBRE Capital Markets New

CBRE’s capital markets team as a whole advised on more than $39 billion in commercial real estate debt transactions. And following suit with the brokerage as a whole, Shawn Rosenthal and Michael Riccio both had solid years.

Rosenthal, who is based in Manhattan and focuses on structured and permanent finance transactions, originated $1.6 billion in loans in 2016, up from $667.5 million the year before.

The Hartford, Conn.-based Riccio, who deals with institutional clients nationwide, saw his loan volume grow to $1.1 billion in 2016, up from $600 million in 2015.

Last year, Rosenthal arranged a $250 million loan for the purchase of 693 Fifth Avenue, a $350 million construction loan for 787 11th Avenue (which followed a $180 million loan in 2015 for the same property) and a $220 million loan for the purchase and renovation of 441 Ninth Avenue.

Riccio’s deals included a $250 million loan for the 14-million-square-foot Becknell Industrial

Portfolio, which includes more than 140 Class A properties around the U.S., and $174 million for the Virginia Gateway, a 666,000-square-foot shopping destination in Gainesville, Va. Given this, it’s unsurprising that both are bullish on CBRE’s prospects for 2017.

“We’re seeing the debt capital markets as very healthy,” Rosenthal said. “We still see the construction lending market as challenging for ground-up construction projects, but we see the rest of the market as extremely healthy and competitive.”

“Real estate is a very favored asset class these days for institutional investors, particularly U.S. real estate,” Riccio said. “It delivers really strong relative value, so it’s very attractive, and we think the fundamentals are solid and stable with few exceptions. We predict 2017 will be a solid year for our firm, and we consider ourselves a pretty good barometer of the market.”—L.G.

FROM TOP: COURTESY LADDER CAPITAL; COURTESY CBRE

While the commercial mortgage-backed securities business lagged in the first two months of 2016, Ladder Capital stayed busy, and nearly half of its business was driven by its bridge-lending platform.

The company’s contributions to CMBS dropped to $1.8 billion in 2016 from $2.6 billion the year prior, while its bridge lending debt for the year totaled $1.5 billion.

“The profit driver last year was our bridge loan portfolio,” Brian Harris said. “When conduits basically shut down, borrowers started taking out shortterm bridge loans and weren’t as concerned about rates.”

While Ladder provided a number of loans on transitional assets in Harlem and Soho in Manhattan, one if its larger deals was a $107 million loan for the Panasonic Corp.’s headquarters at Two Riverfront in Newark, N.J. “If everything was working every minute of every day, we would never do anything else but the conduit business,” Harris said. “Risk retention is going to change all of that, so that’s why a lot of people dropped out of the business.

“We like to stay in the conduit business if we can,” he continued. “We create loans, drive them through the car wash called the rating agencies and spit out AA and AAA bonds. When it doesn’t work, we go buy bonds, and we owned $3 billion of those last year and sold a good part of them already.”—D.B.

TOP 50

MIREYA ACIERTO/PATRICKMCMULLAN

46

Greta Guggenheim.

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Greta Guggenheim CEO of TPG Real Estate Finance Trust Last Year’s Rank: 24

After leaving Ladder Capital (the firm she co-founded) in the summer of 2015, Greta Guggenheim was in a bit of a holding pattern until she started her new gig in January of 2016: CEO of TPG Real Estate Finance Trust.

But she had a big job ahead of her, so maybe a small respite helped her.

“2016 was an important year for getting the infrastructure and team in place—and getting the word out,” Guggenheim said.

That included assembling an asset management, servicing, origination, financing and legal team (which totals 26 people). And jumping straight into the fray.

“Last year, we had fundings of about $1.3 billion,” Guggenheim said. This was a jump from 2015, when the debt fund started, where it was about $1 billion.

TPG’s biggest deal of the year was the purchase of $300 million in loans from Credit Suisse. “It was five balance sheet Libor-based loans, one of the larger loan portfolio sales of 2016,” Guggenheim said. The loans were backed by properties across the country.

Aside from that big deal, “the rest of our business is originating $50 million-plus transitional loans throughout the U.S.,” Guggenheim said. “All have some value-add component. [We] did a lot with major private equity, focusing on properties that they can lease up or reposition and create more value.”

Guggenheim, who is in the midst of corporate fundraising, is mum about what the future holds except to say this: “We expect it to be a very good year in terms of origination numbers.”—M.G.

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TOP 50

Chairman, President and CEO of Arbor Realty Trust New

“We’re the leading small balance lender in the country,” Ivan Kaufman said, referring to Arbor Realty Trust being named the top Freddie Mac multifamily small balance lender for 2016, an honor it also enjoyed in 2015.

“We service our customers in the multifamily sector in this space, which is not an easy space to operate in,” he said. “Small loans require a tremendous amount of expertise, process and automation, all of which we bring to the table.”

Originating $4.6 billion in debt in 2016 (up from $3.9 billion the previous year) and fulfilling 739 transactions (up from 644), Arbor has been active with loans of all sizes, according to Kaufman.

Kaufman said part of the company’s success can be attributed to its investment in technology via Arbor LoanExpress, its proprietary processing platform that allows for easy tracking of the loan process.

“We’re able to effectively manage a high

volume of transactions in a very efficient and productive way,” he said, emphasizing his firm’s deal variety. “We’re able to operate throughout the capital structure very effectively. Not only are we an agency lender for Fannie Mae, Freddie Mac and [Housing and Urban Development], but we’re one of the more active bridge lenders, mezzanine lenders and preferred equity lenders, [and we] provide equity.”

Part of that variety had to do with the company’s $276 million purchase of its privately held Arbor Commercial Mortgage last July. Kaufman noted that the acquisition streamlined numerous processes for the firm as a whole.

“We combined the balance sheet capability of providing transitional lending and bridge lending with an agency platform in Fannie and Freddie under one roof,” Kaufman said. “So we are now a fully integrated services platform that can provide all sorts of financing.”—L.G.

Ivan Kaufman.

48

Willy Walker.

66 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Willy Walker Chairman and CEO of Walker & Dunlop Last Year’s Rank: 46

Walker & Dunlop’s growth streak continued in 2016, according to Willy Walker.

The company’s servicing portfolio finished out the year with $63.1 billion under management, up a hefty 26 percent from $50 billion in 2015. Origination volume also exceeded its prior plateau for the eighth consecutive year, increasing to $19.3 billion in total volume last year from $17.8 billion in 2015.

W&D began its investment sales advisory practice in 2015 and increased its deals to nearly $2.6 billion in 2016 from $1.52 billion in its initial year. Finally, total revenues for the company grew 23 percent to $575 million from $468.2 million in 2015.

“I think one of the big reasons that we performed as [well] as we did is that a lot of our competitors were thinking that we are at the end of our cycle, and we viewed it as an opportunity to grow,” Walker said.

One of W&D’s strategies last year was growth through acquisition—an approach the firm is familiar with, especially following its purchase of Engler Financial Group and Johnson Capital’s loan origination and

servicing platform over the last two-and-ahalf years. In January 2016, W&D announced it acquired the loan origination platform Deerwood Real Estate Capital, and in October, it scooped up George Elkins Mortgage Banking Company.

Following the two mergers, however, W&D decided to dispose of its commercial mortgage-backed securities business in November, cutting some employees (though a spokesman said it “absorbed” a majority of workers).

“The increasing capital intensity of the CMBS business, coupled with limited desire by our core client base for CMBS financing, led us to the decision to exit the business,” Walker said in the company’s third-quarter 2016 public filing. “This was not an easy decision.”

While Walker claimed there weren’t any mega-transactions last year (meaning $1 billion-plus), the company did secure $672 million in Fannie Mae-backed financing for The Scion Group, Singapore-based investment firm GIC and Canada Pension Plan Investment Board’s acquisition of University House Communities in June 2016. —L.L.G.

FROM TOP: TONY LOPEZ; COURTESY WILLY WALKER

47

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TOP 50

CEO; CIO and Managing Partner at Mack Real Estate Credit Strategies New

Mack Real Estate Credit Strategies originated $2 billion in 2016 and projects that number will rise to $3 billion in 2017 with 50 percent slated for financing on transitional assets across New York City.

“Our average loan is over $200 million these days, and I would say there is a tremendous supply-demand imbalance for our capital,” Peter Sotoloff said. “There are plenty of very good borrowers that can’t get [what they need] from their traditional sources, if they can get it at all. That’s due to the regulatory environment, post-global financial crisis. We are able to fill that void.”

MRECS’ most notable deals of 2016 included a $135 million of first mortgage for a nine-property, 300,000-square-foot office and retail portfolio in Boston’s Kenmore Square for Related Fund Management; a $765.5 million recapitalization for Steve Witkoff’s 370,000-square-foot mixed-use hotel and retail project at 20 Times Square; a $305 million loan for the Lightstone Group’s 800-foot-tall luxury condo tower at 130 William Street; and a $200 million loan to refinance Meadow Partners’ 66 United Nations Plaza.

After a robust 2016, Sotoloff said he expects more of the same for 2017.

“There’s a certain discipline in the market

today that’s creating a further supply-demand imbalance,” he said. “That’s creating the opportunity for alternative lenders like ourselves to dominate the market share.”—L.G.

Richard Mack.

Peter Sotoloff.

50 Mark Masso.

68 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Matthew Masso Head of Commercial Real Estate Finance at Credit Suisse New

When Mark Brown renounced his throne as the head of the commercial real estate finance group at Credit Suisse in January, he handed his commercial mortgage-backed securities crown over to Matthew Masso. Brown remains at Credit Suisse in a senior advisory role, but Masso now has pretty big shoes to fill.

Credit Suisse weighed in as the eighth most active CMBS bookrunner last year, according to data from Commercial Mortgage Alert, racking up $4.8 billion in volume across 19 deals, or 6.3 percent of market share. It also contributed approximately $1.5 billion

of loans to U.S. CMBS deals—$1.2 billion to conduit and fusion transactions and $362 million to single-borrower deals, ranking in 14th place out of 27 CMBS contributors.

In November of last year, it hit the market with a $767 million conduit deal, collateralized by 53 properties secured by 199 commercial properties.

Masso joined the bank’s CMBS secondary trading group in June 2013 after a 10-year stint in Bank of America Merrill Lynch’s CMBS capital markets group, according to his LinkedIn profile. —C.C.

FROM TOP: COURTESY MACK REAL ESTATE CREDIT STRATEGIES; PAUL BRUINOOGE/PATRICKMCMULLAN

49

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TOP 50

Honorable Mention Sir Chris Hohn Founder of The Children’s Investment Fund Management

Sir Chris Hohn’s London-based hedge fund—which he founded in 2003 as an offshoot of his charitable organization, The Children’s Investment Fund Foundation—has played an increasing role in commercial real estate financing in recent years, particularly in New York City.

Following an active 2015 that saw Related Companies and Oxford Properties Group call on TCI Fund Management to provide an $850 million construction loan for their 15 Hudson Yards residential tower, the developers once again turned to the fund to finance the Far West Side mega-development last year—this time in the

form of $1.2 billion in debt financing for their mixed-use tower at 35 Hudson Yards.

TCI Fund Management also provided a $265 million loan to developer Ian Schrager for his 160 Leroy Street condominium development in the West Village—indicative of the firm’s willingness to finance the luxury condo sector in recent years.

It was also reportedly among the prospective lenders in talks with Ziel Feldman’s HFZ Capital Group for a $1.2 billion financing package for the developer’s Bjarke Ingels-designed, mixed-use mega-project at 76 11th Avenue in Chelsea, near the High Line.—R.M.

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Debt Deals of the Week XIN CITY

XIN Snags $108M Construction Loan for Hell’s Kitchen Condo Bank of the Ozarks has provided a $108 million loan to XIN Development International for the construction of a seven-story, 82-unit residential condominium project in Hell’s Kitchen, Commercial Observer can first report.

E a ster n Con s ol id ate d ’s Adam Hakim and James Murad arranged the financing. Hakim also secured a $27 million bridge loan from Bank of the Ozarks when XIN acquired the 615 10th Avenue site—formerly a gas station and convenience store—for $57.5 million in January 2016.

“This is a fantastic location for XIN Development, in the heart of the rapidly developing Midtown West section of Manhattan,” Hakim said in prepared remarks.

“XIN Development is an experienced sponsor that has developed high-end residential buildings with luxury units and an array of amenities in other parts of New

York City.”

The development, located between West 44th and West 45th Streets, will include 71,699 square feet of residential space and 36,053 square feet for retail on the ground floor and lower level.

Can Tavsanoglu, the director of acquisitions and finance at XIN Development, added, “It was a pleasure working with Adam and James at Eastern Consolidated as well as the entire Bank of the Ozarks team to close our second transaction in the last 15 months.”

XIN Development President John Liang discussed the developer’s plans for the Hell’s Kitchen project with CO last year in an interview that took place at The Oosten, the company’s 489,000-square-foot residential and retail development at 429 Kent Avenue in Williamsburg.

Officials at Bank of the Ozarks declined to comment.

—Cathy Cunningham

A rendering of 615 10th Avenue.

SDK Millbridge Gardens.

72 | APRIL 5, 2017 | COMMERCIAL OBSERVER

COURTESY MERIDIAN CAPITAL GROUP

Meridian Arranges $71M NYCB Loan for NJ Garden Apartments A New Jersey-based multifamily owner scored a $71.3 million financing from New York Community Bank, sources have told Commercial Observer.

Dr. Dinesh Khosla of SDK Apartments is using the proceeds of the loan to refinance old debt on SDK Millbridge Gardens at 1341 Blackwood Clementon Road in Clementon, N.J. Meridian Capital Group’s Zev Karpel and Judah Hammer

negotiated the mortgage, which carries a fixed rate of 3.75 percent.

“Meridian leveraged its strong lender relationships to secure a below-market fixed rate despite the sharp rise in interest rates in November and December of 2016,” Karpel said through a spokesman. “Additionally, the lender held the rate for 100 days in a very uncertain environment.”

SDK Millbridge Gardens

comprises 848 garden-style apar tment s ranging from 850-square-foot one-bedrooms, where rents start at $804 per month, to 1,000-square-foot two-bedrooms, where rents reach up to $1,553. The property is located in Southern New Jersey, roughly 30 minutes away from Philadelphia.

Representatives for NYCB and SDK Apartments declined to comment.—Danielle Balbi

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FINANCE

The Clermont in Fort Greene.

RICHMAC Lends BRP $30M for Refi of Brooklyn Apartment Building BRP Companies has snagged a $30 million refinancing from RICHMAC Funding for The Clermont in the Fort Greene neighborhood of Brooklyn, Commercial Observer has learned.

The new loan carries a seven-year term with a fixed rate. It is being used to replace old debt on the building, but it was not immediately clear where the financing was from.

The property, located at 375 Myrtle Avenue, occupies almost the entire block between Adelphi Street and Clermont Avenue. It contains 13 one-bedroom units, 37 two-bedrooms and two three-bedrooms ranging from 704 square feet to 1,313 square feet. It has maintained an average occupancy rate of 96 percent or greater, according to the lender. The most recent two-bedroom, two-bathroom apartment leased in the building for $3,550 per month, according to StreetEasy.

The Clermont also has 13,100 square feet of retail space on the ground floor, which is fully occupied by Walgreens, Greene-Ville Grocer and day care center A&E Carousel.

BRP began assembling the site in 2004 and completed the sixstory building in 2008. The total development cost was $28 million, the lender said.

A representative for BRP did not respond to a request for comment.—D.B.

74

British Prime Minister Theresa May officially kick-started the U.K.’s exit from the EU last Wednesday by triggering Article 50 of the Lisbon Treaty.

“I am writing to give effect to the democratic decision of the people of the United Kingdom,” May wrote in an open letter to Donald Tusk, the president of the European Council. “I hereby notify the European Council in accordance with Article 50(2) of the Treaty on European Union of the United Kingdom’s intention to withdraw from the European Union.”

The letter formally sealed the U.K.’s decision—or 52 percent of its voters’ decision, rather—to cede its EU membership. Two years of negotiations, at maximum, will now ensue to iron out the details of the contested divorce.

When the referendum took place last June, a “Chicken Little” feeling that the sky was falling was the reaction from market participants on both sides of the Atlantic. Sources that Commercial Observer spoke with at the time of the vote questioned whether the separation would enhance New York’s position as a “safe haven” for real estate investment or, conversely, entice opportunistic money toward London properties.

Now that the dust has settled, nine months later, the feeling appears to be more relaxed

WPA POOL/GETTY IMAGES

COURTESY RICHMAC

Theresa May Kicks Off Brexit Negotiations, but the Sky Is No Longer Falling

COME WHAT MAY: May has kickstarted Brexit. regarding whether London or New York will eventually come out on top.

“London is second only to New York in my opinion,” said Robert Lawrence, an executive managing director at The Singer & Bassuk Organization. “London is absolutely the capital of Europe. That’s not going to change. I don’t think you’re going to see people pulling out of London investments or real estate prices crashing because of Brexit.

If anything, my guess is there will actually be neutral to positive effects.”

Lawrence continued to say that while he

does foresee an influx of foreign investment into New York following the split, it likely won’t be a consequence of there being less investment in U.K. real estate. “I think that [Brexit] clearly destabilizes Europe, and it’s a major disadvantage to those countries.”

Gabriel Silverstein, a managing director at Angelic Real Estate Investors, agreed. “From an investment side, I don’t see New York or the U.S. seeing a tremendous shift in terms of new investment—regardless of what the end structure of the exit is or whatever the permanent U.K.-EU relationship ends up as,” he said.

Silverstein went on to say that even a hair-raising event like Brexit isn’t necessarily significant enough to change investor appetite. “Large-scale investment decision-making is like driving a big ocean liner. It isn’t a speed boat—you don’t just slam the thing 90 degrees to the left or the right because of one or two events, even if they are big events.

Courses are plotted long in advance and that, to me, is going to continue.”

At the end of the day, in a time when expecting the unexpected has become the norm, it’s harder to spook market participants. “Brexit was, to me, not a surprise, and neither was Trump [winning the election] in the U.S.,” Lawrence said.

Keep calm, and carry on.—C.C.

CW Realty Management Nabs Williamsburg Development Site for $43M Cheskie Weisz’s CW Realty Management has picked up a development site on the North Williamsburg waterfront for $42.5 million, paying six times what the seller did just nine months earlier, according to public records.

The assemblage includes two industrial sites at 187 Kent Avenue and 48 North 3rd Street, which are currently home to a trio of low-slung warehouses. The L-shaped property fronts the full block on Kent Avenue between Metropolitan Avenue and North 3rd Street.

The seller is Flushingbased SWGI Realty, headed

by Sam W. Gee. Gee picked up the pair of lots for $7.2 million in July

| APRIL 5, 2017 | COMMERCIAL OBSERVER

of last year, and he just flipped them for six times that price. A representative for Gee declined to comment on the sale.

CW filed plans for a 96-unit, 83,000-square-foot rental building at the site in January. According to building applications, the mixed-use development will include 61,000 square feet of residential space and 22,100 square feet of ground-floor retail. The development will also include a 170-car garage and a landscaped roof deck. Diego Aguilera Architect applied for the permit.

“I am super excited to redevelop this wonderful piece of property with 400 feet of frontage on Kent, Metropolitan and North 3rd

SOME ASSEMBLAGE REQUIRED: A rendering of 187 Kent Avenue.

Street,” Weisz wrote in an email to Commercial Observer. “There is an inexhaustible demand to live in this desirable part of Williamsburg, and I am going to tap this demand.”

San Diego-based BofI Federal Bank gave Weisz a $28 million loan, including $23 million for

the acquisition and $5 million to replace old debt.

Weisz originally entered a contract on the property for $45 million in September 2016. With the final sale price of $42.5 million, he’s paying $512 per square foot for his planned project.—Rebecca Baird-Remba

“An extremely talented real estate group with an impressively deep bench: the team is ideal for handling the most complex matters.”

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Fried Frank Real Estate Where major real estate transactions happen

Sony Building Counsel to Chelsfield and co-counsel to the Olayan Group in the US$1.4 billion acquisition of the former Sony Building at 550 Madison Avenue.

Citigroup Counsel to Citigroup in the US$2 billion exercise of its option to purchase 388-390 Greenwich Street, its 2,350,000-square-foot headquarters in Tribeca, one of the largest office leasing transactions in history.

Macy’s Downtown Brooklyn Counsel to Tishman Speyer in the closing of its US$270 million real estate transaction with Macy’s Inc. to enable the re-creation of Macy’s Downtown Brooklyn store.

Attorney Advertising.

1285 Avenue of the Americas Counsel to RXR Realty and C&K Properties in the purchase of 1285 Avenue of the Americas for approximately US$1.6 billion.

Penn Station Counsel to Vornado, Related and Skanska on the redevelopment of Penn Station, including the redevelopment of the James A Farley building and construction of Moynihan Train Hall.

Manhattan West Counsel to Brookfield Property Partners on all aspects of the development of Manhattan West, a proposed US$20 billion development in the Hudson Yards District, including its recent lease to the National Hockey League.

One Vanderbilt Counsel to SL Green in connection with the proposed development of One Vanderbilt, a 1,200-foot, 65-story office tower to be located directly across from Grand Central Terminal.

Hudson Yards Counsel to The Related Companies in connection with the development of the 26-acre Hudson Yards on the West Side, the largest private development in Manhattan since Rockefeller Center.

Pier 57 Counsel to RXR Realty in the US$350 million redevelopment and leasing for Pier 57, a 480,000-square-foot retail complex and outdoor space in Hudson River Park. friedfrank.com

FINANCE

HEAD OF GLOBAL ORIGINATIONS AT PGIM REAL ESTATE FINANCE

Marcia Diaz

By Cathy Cunningham

Commercial Observer: How did you get your start in the industry?

Diaz: I grew up in Ventura, Calif., which is a small coastal town one hour north of Los Angeles. I was born and raised there—my mother actually still lives there. I went to Stanford University. Right out of college, I went to work for a retailer that was a precursor to Macy’s department stores. I wanted to be a buyer, but I very quickly learned I was working investment banking hours in retail but on retail pay. So I went back to [school] and got my MBA at University of California, Berkeley, and it was really [there] that I was first exposed to real estate investment. Berkeley has a very strong real estate program, and I took an intro class by Ken Rosen, a well-known real estate economist, and I thought, “Gosh, this is so interesting.”

CATHY CUNNINGHAM/COMMERCIAL OBSERVER

What appealed to you?

[Rosen] would bring in industry people to lecture us so we got to hear investors, brokers and bankers speak. I loved how real estate had so many components to it and how much of a relationship business it was. When I was in retail, I enjoyed the interaction with people and the sales aspect, but it lacked the analytical side. So I looked at real estate, and I thought, “Here’s a way to have the people side but also use the analytical side of my brain.”

M

arcia Diaz weighed in at No. 17 on Commercial Observer’s Power 50 list (along with PGIM President David Durning) for good reason: PGIM Real Estate Finance, the commercial mortgage arm of Prudential Financial, originated close to $14 billion last year and just began offering financing on core-plus assets. As the head of global originations for the life company, Diaz oversees production both nationally and internationally and ensures that PGIM’s multibillion-dollar lending machine is running smoothly. Diaz talked to CO about her 27-year career with Prudential and how her role, and the role of the life company itself, has evolved.

76 | APRIL 5, 2017 | COMMERCIAL OBSERVER

What was your first job in real estate?

I was in the real estate club at Berkeley, and we had “day on the job” work experiences. I selected Prudential Realty Group, which was the largest domestic owner of real estate in the 1980s and 1990s, and set up a day on the job in its San Francisco office.

The rest is history—I interviewed with them in 1990 and ended up getting a job with [what then was] Prudential Mortgage Capital Company, the real estate debt investment arm. I’ve been with Prudential ever since.

Can you walk us through the evolution of your role at Prudential?

I started on the debt investment side doing new mortgage loan originations in June 1990, and I was very excited. But by January 1991 the market had shifted and our office became a workout and foreclosure office. Some of the country had already experienced that downturn, but Los Angeles—where I was based—was one of the last markets to be hit. I was disappointed because I thought it was an adversarial environment, but in retrospect it was a great experience. I think every lender and every real estate investor should have to go through workouts before they lend or invest any money. You understand why you’re negotiating certain provisions and why they are important [in a transaction]. From the real estate perspective, you get to see everything that can go wrong, and it makes you a much better real estate investor.

I did that for three years and then took an opportunity on our equity side to work on an asset management team. I oversaw a couple of big, mixed-use office developments in L.A. and San Francisco and learned

that side of the business, which included overseeing leasing. Downtown L.A. office rents at the time were basically negative—they were leasing properties just to cover operating expenses. So again, another good learning experience.

In 1994, Prudential was setting itself up to go public, and it ended up liquidating all of the equity real estate from its general account. A decision was made from a stock perspective that it was a drag on the balance sheet. I had the option to stay on and work through selling the portfolio or take an early severance package. I had around five years of experience behind me, so I took the package and went to work for a sister company—Prudential Securities Investment Banking. I worked on a few equity secondary offerings for a couple of real estate investment trusts. Then the initial public offering market closed. So, I didn’t get as much exposure as I wanted, but I worked for the next few years on some M&A transactions and private placements. Again, a very good experience, but it was much more capital markets-focused, and I wanted to get back to the real estate. Part of Prudential’s strategy was to get rid of the investment banking group, and so I got another severance package.

[In 2000] I got a call from Paige Hood [now, PGIM’s chief investment officer] who was running the western region at the time for Prudential Mortgage Capital Company. He said, “Marcia, we need someone to reopen our L.A. office.” At the time they had been running all of the debt out of San Francisco. Since then I’ve been back on the debt side and really worked on growing the L.A. office. In 2007, I took over the western region and expanded my role to oversee more offices nationally.

Then, a few years ago when Dave Twardok retired and Dave Durning ascended to his role as president of the company, I was promoted to oversee production nationally, and last year, international offices were rolled underneath me as well.

What was the most interesting market cycle to work through?

I’d say 1990 to 1994. I was brand new to the market and it was the Savings and Loan Crisis when there was no capital and no commercial mortgage-backed securities market to speak of. REITs were becoming [what they were] because it was a way to raise equity. It was a unique time in that there was no capital for real estate, and markets were fundamentally out of whack.

In the 2008 to 2010 cycle, the real estate markets were still pretty strong, and it was much more of a capital markets downturn. It was almost scarier to see Lehman Brothers going bankrupt. We continued to lend and actually made some of the best loans during that cycle. We had a workout group, but we came out very well—we didn’t take a lot of losses, and the market rebounded faster.

What are your day-to-day responsibilities at PGIM? My primary role is overseeing originations. I’m not in deals any more, although I do play a credit role on

t r o

i r a

g o f

m I R s

l

f p w m

the West Coast where I price certain transactions. I love the real estate, so if it means having to go meet with borrowers or tour the properties, I happily do that.

A lot of my time is spent on talent management and making sure that there are the right people in the right offices and regions so we can keep this machine rolling and keep generating out this $14 billion to $15 billion every year.

[Another big part of my job is overseeing] our analyst program. Our platform is leveraged with analysts who do a lot of the financial analysis so that the loan officers can really focus on relationship building.

Then, as we’ve been starting to expand our asset management capabilities and focusing on raising third-party money, I’ve been pulled in to assist in marketing and pitching PGIM Real Estate Finance’s origination platform. We have a really strong platform, so for me it’s enjoyable to talk about it.

When you’re pulled in to assess a deal, what are you looking for?

There are certain general parameters that we’re looking for, especially in the core mortgage space. We like to be in primary markets, so we ask whether this is a product type we want to invest in. We like office, industrial, retail and multifamily assets—we will do some hotels or self storage occasionally—but beyond that, we ask, “Is this borrower an expert in what they do, and do they really know this market?”

While we aren’t recourse lenders, we take the borrower and

their abilities very seriously, because they’re the ones that are overseeing the asset. One of the key things that I can do is understand how things can go wrong—so we make sure we run our downturn analyses.

How has the role of the life company changed in the market?

All life companies are starting to expand their appetite outside of core mortgages. It seems like different companies have launched core-plus products, maybe even some mezzanine products and also construction loans because the banks aren’t doing them. You’re starting to see the life companies find different pockets of money, and a lot of it is third-party money—it’s not necessarily coming from their general account. We have this origination platform, and we see a need in the market, and so we say, “Hey, we can originate these loans.”

Is PGIM still active on the construction lending side?

We had started a construction permanent program about three years ago, specifically for multifamily. We saw it as a way to compete for stabilized [multifamily] product because, at the time, the government agencies were hands-down winning all of the stabilized product against life companies. The agencies couldn’t do unstabilized product, so we thought we could get into a deal early and win it that way. By the middle of last year, we had taken on a lot of construction loans, and

those projects were in their process of getting completed and leased-up. In terms of where we were in the market cycle, a lot more supply was coming online in the markets we were in and rents were peaking, so we made a decision to ease back on construction lending. Also, we were winning a lot of stabilized business without it because the agencies had raised their pricing to an amount where the life companies were starting to be much more competitive again.

What trends are you seeing so far this year?

In the life company world, people are needing to compete.

Generally speaking, underwriting standards have not been compromised, but we’re starting to see interest-only and more prepayment flexibility in lower-leveraged deals. That’s the big trend. I would say that historically PGIM has had the ability to compete on prepayment flexibility, and that seems to be an area that more people are being more flexible in.

You’re a busy woman! What do you do for fun?

When I was younger, I would have said I like to go travel, but now I don’t want to get on a plane! I’m a college football fan, so in the fall I always go to a couple of my alma mater games in the Bay area. I live by the beach, and I enjoy a staycation because I travel so much—I really enjoy just hanging out and relaxing in Southern California. I’m an avid reader, so thankfully I can do that on the plane or on the beach. The next personal trip I really want to take is an African safari.

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| APRIL 5, 2017 | 77

FINANCE

ChartFinance Refinancings Overshadow Acquisition Debt in 2016 “When the final tally for 2016 commercial mortgage-backed securities issuance came in, not many in the industry were surprised that it came in below initial expectations,” said Sean Barrie, an analyst with Trepp. “By the halfway point of the year, it was expected that the predictions of $100 billion in private-label CMBS would not be met. Concerns about risk retention, a blowout in spreads and a bevy of maturing debt below modern lending standards can all be counted as influences for this dip. Still, nearly $16.7 billion of 2016’s total (just under 25 percent) was tied to debt issued for acquisitions. J.P. Morgan Chase topped the leaderboard

for that category with 98 loans totaling $3.17 billion. Wells Fargo came in second with $2.01 billion, though the firm did issue the most loans for acquisitions with 200. Citigroup was not far behind in third place with $1.87 billion across 122 notes. Deutsche Bank, which was the top bookrunner for all CMBS in 2015, doled out 54 acquisition loans totaling $1.68 billion. Morgan Stanley and Bank of America Merrill Lynch teamed up for over $1.3 billion in acquisition debt last year, but Morgan Stanley alone issued the largest acquisition note of all with the $471.8 million Genesis Healthcare Portfolio.”

Source:

Acquisition Loans and Refinancings in CMBS in 2016 Acquisition

878

$16.7 billion

Refinance

2094

$40.27 billion

J.P. Morgan Chase

98

$3.17 billion

Wells Fargo

615

$7.34 billion

Wells Fargo

200

$2.01 billion

J.P. Morgan Chase

190

$6.88 billion

Citigroup

122

$1.87 billion

Citigroup

289

$4.8 billion

Deutsche Bank

54

$1.68 billion

Morgan Stanley/Bank of America Merrill Lynch

183

$3.12 billion

Morgan Stanley/Bank of America Merrill Lynch

88

$1.31 billion

Morgan Stanley

118

$2.45 billion

Morgan Stanley

33

$1.09 billion

Deutsche Bank

100

$2.09 billion

Credit Suisse

46

$861.5 million

CCRE

105

$1.93 billion

Goldman Sachs

16

$833 million

J.P. Morgan Chase

11

$1.48 billion

CCRE

53

$819.6 million

Goldman Sachs

54

$1.45 billion

Deutsche Bank/J.P. Morgan Chase

15

$414.9 million

Deutsche Bank/J.P. Morgan Chase

59

$1.33 billion

24-7 78

| APRIL 5, 2017 | COMMERCIAL OBSERVER

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M R

DAN WITH A PLAN

Multifamily Money-Making 101 percent loan-to-value has become com“The key to success is action, and the essenmonplace. These agencies will even allow tial in action is perseverance.”—Sun Yat-sen you to “resize” the loan as soon as one year Each property type has its obstacles. after closing if you are able to achieve rental Retail and office have to deal with fickle growth. Many lenders have recently impletenants where huge work letters are usumented “bridge-to-agency” programs, which ally required. Hotels and assisted living allow for easier construction loans until the facilities are operating businesses. On borrower is able to qualify for permanent the surface, multifamily seems the most financing. This is a huge benefit stable property type. After all, as previously developers had to there is no shortage of peoraise additional equity to cover ple to pick from if your propthe shortfall during the construcerty is well maintained, well tion phase, which would eat into located and priced right. This their returns. With interest rates is no secret and that is why cap staying relatively low, borrowing rates on multifamily properties 75 to 80 percent of total project across the country have comcosts at sub-5 percent results in pressed to the 4.5 to 5.5 percent huge positive leverage. Generally, range today from 7 to 8 percent a Dan E. Gorczycki developers are building into a 7 to decade ago. Despite the reduced 8 percent unleveraged cash-on-cash return. yields, multifamily investment sales volOnce you layer in the leverage and sell on ume set a record in 2016 with $150.3 billion stabilization at a roughly 5 percent capiin transactions. talization rate, the simple math results in Besides the macroeconomic and demand extraordinary returns. trends, favorable financing on multifamNow, if one qualifies for a 40-year fixed-rate ily is also spurring development. Fannie Housing and Urban Development (HUD) loan, Mae and Freddie Mac have loosened their the returns are accentuated. HUD was formed reins, so obtaining 10-year, fixed-rate to spur development in low- to middle-income financing upon stabilization with an 80

areas, and there, the spigot has opened further. What makes HUD so desirable is that financing for the construction-permanent loan can be as high as 85 percent LTV and the interest rates are sub-5 percent. If that isn’t lucrative enough, that interest rate is fixed for 42 years (including the construction period).

This is one of the best-kept secrets in real estate as fortunes have been made by developers simply locking in long-term annual gains for life using loans from HUD. But HUD does have its drawbacks. First, that type of financing can’t be used in areas where the income is extremely high or the loan per unit is high (so very few New York City loans). Second, it can’t be prepaid for 10 years (though you could sell the property with the loan in place). Lastly, the loan covenants make it difficult for borrowers to pull equity out of the deal (though you could earn marketrate fees on various items).

As far as partnership structures, developers are able to invest as little as 5 to 10 percent equity into any one deal as institutional equity partners can’t get enough of quality multifamily deals with experienced sponsors. While these equity providers will want a 9 to 11 percent preferred return (minimum

yield paid before any other distributions), they will often incentivize developers with a sizable “promote” of 20 to 30 percent. The “promote” is a disproportionate sharing of the cash flow after a certain return hurdle is achieved by the equity investor. In many cases, a developer can get to a 50/50 split after an 18 percent internal rate of return is attained—not bad if you only invest 5 percent of the equity requirement.

So are multifamily developers worried about a possible recession or slowdown impacting their returns? Hardly. While cap rates will rise almost lockstep with interest rates (usually on a six-month lag), rental apartments are somewhat countercyclical. If people can’t afford to buy homes or are worried about falling housing prices, they are even more likely to be renters of apartments.

So barring a depression where rents would plummet substantially, multifamily investment for developers using low interest-rate debt is the elixir in any environment.

Dan E. Gorczycki is a senior director at Avison Young New York LLC where he arranges debt, equity and joint structure capital for all property types, including multifamily.

STEIN’S LAW

Attorneys: Deal Makers or Deal Breakers?

Every commercial real estate deal involves attorneys. Sometimes, they get in the way of the deal. Sometimes, they make the deal. It’s mostly up to the client to decide which.

If a client is easygoing and practical and wants to keep things simple, that’s what their attorney will do. Conversely, if clients want to slow down a deal, make points, pound on the table, put on some other show or break new ground in legal documents and issue spotting, then that’s what their attorneys will do.

Attorneys are rarely “out of control” or independent actors frustrating the will of the parties, as sometimes suggested. Instead, they follow their clients’ instructions or expectations.

In any transaction or document, any smart attorney can always raise more issues or concerns—ways to make the document more favorable or, often, just work better and make more sense. One can always draw more lines, define more gradations, deal with complex hypothetical eventualities that no one else thought of before, or add complexity and nuances. No document is perfect or comment-proof. That’s true no matter how many smart and careful attorneys have already edited and negotiated it. There’s always room for more, if that’s what the client wants.

80 | APRIL 5, 2017 | COMMERCIAL OBSERVER

protecting the client from tomorrow’s risks Conversely, if the client wants the attoreven when the client wants to focus on the ney to just give something a “limited” or “big euphoria of making a great deal today. picture” review, that’s possible too. But it’s If the attorney’s review process takes harder. The attorney worries, legitimately, too long or causes too many iterations of about missing something. In other words, documents, then “time kills all deals,” and somewhere in the hundreds of pages of docthere’s an increasing risk that the transacumentation, something might be wrong. tion won’t happen at all. But if the Or the same point will get made deal doesn’t happen at all, then a half dozen times but in inconat least the client doesn’t face sistent ways that invite future whatever risk the attorney was disputes. trying to prevent, and the attorEither way, the facts might—and ney avoids any risk of a malpracoften do—play out in the one way tice claim. Attorneys don’t get that highlights precisely whatever sued for “not making a deal.” The little nugget of imperfection the claims happen when the attorney attorney missed because the clidoes make a deal, but it’s someent wanted the attorney to just look Joshua Stein how imperfect. So attorneys may at the big picture or move really naturally put more emphasis on fast “just this one time” to meet preventing mistakes than on preventing the urgent timing needs of the transaction. deals. It’s up to the client to control that, if Then, even though the attorney may have the client wants to control it. been doing exactly what the client wanted, Ideally, the attorney and the client work the attorney gets blamed. Of course, the clitogether over time on a series of transactions. ent wanted speed and practicality and low That way, the attorney learns how the client cost but also probably wanted perfection, too. thinks and what the client cares about, tailorThe attorney’s concern about missing ing the attorney’s approach accordingly. Some something creates the mindset that leads to clients have a short list of major concerns, “nitpicking” and “overthinking” and “persuch as limiting any personal exposure in a fectionism.” But one might also describe the commercial mortgage loan or a “good guy” attorney’s role as “the voice of the future,”

lease guaranty. As long as the attorney deals with those major concerns and the documents don’t contain anything otherwise truly awful, the client may be willing to leave lesser concerns to deal with if and when they arise.

The client might assume that if that happens, he ought to be able to negotiate something, especially if he expects to maintain good relations with the other side. That’s a reasonable business decision. But it can create unease if an attorney worries about being blamed for imperfections or omissions. And when those imperfections or omissions do arise, will the client remember its earlier business decision?

If a client has two or more law firms working on a matter—for example if the “money partner” has its own counsel, looking over the shoulder of counsel to the “developer partner”—that can worsen the dynamics described above. Neither set of attorneys wants to miss anything the other might catch. This can set off a race to perfection and “over-lawyering” as each team strives to be more conservative and careful than the other.

Again, it’s up to the clients to control that. But it’s more than twice as hard to control when twice as many attorneys are involved.

Joshua Stein is the sole principal of Joshua Stein PLLC.

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8:30 AM • TEMPERATURE CHECK: A CMBS UPDATE

Chris LaBianca, Managing Director, UBS Investment Bank Ronnie Levine, Senior Managing Director, Meridian Capital Group Lea Overby, Managing Director, Structured Finance Research & CMBS Analytics, Morningstar Credit Ratings, LLC Robert Verrone, Managing Member, Iron Hound Management MODERATOR | Paul Vanderslice, Co-head of U.S. CMBS, Citigroup

9:50 AM • THE NEW REALITY: TRADITIONAL VS NON TRADITIONAL LENDING

Jeff DiModica, President, Starwood Timothy Johnson, Senior Managing Director and the Head of U.S. Originations, Blackstone Real Estate Debt Strategies George Klett, Executive Vice President & Chairman of the Commercial Real Estate Committee, Signature Bank Alan Wiener, Group Head, Wells Fargo Multifamily Capital Simon Ziff, President, The Ackman-Ziff Real Estate Group LLC MODERATOR | Jay Neveloff, Partner & Chair, Real Estate, Kramer Levin Naftalis & Frankel LLP

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The Takeaway Data courtesy of

February saw a nearly 17 percent uptick in the number of mortgages filed with the New York City Department of Finance to 953 from 815 the month prior. Manhattan and Brooklyn experienced the biggest increases, with both boroughs seeing a 27 percent bump in financing activity. Refinances and acquisitions were neck-and-neck, both increasing in volume by 17 percent and 18 percent, respectively. Loans on vacant lots saw the most dizzying jump, to 72 mortgages in February from 43 mortgages in January, a 67 percent increase.

Refinances vs. Purchases Both refinances and purchases with financing activity increased slightly.

Top Lenders J.P. Morgan Chase and Signature Bank switched places as the first and second most active lenders, respectively, in February.

Capital One held steady in third place, Flushing Bank jumped up to fifth place from 10th and Customers Bank was new to the list.

BANK

JANUARY

BANK

FEBRUARY

Signature Bank

97

J.P. Morgan Chase

62

J.P. Morgan Chase

83

Signature Bank

52

Capital One

43

Capital One

47

New York Community Bank

28

New York Community Bank

34

Dime Community Bank

24

Flushing Bank

31

Cathay Bank

19

Dime Community Bank

22

Investors Bank

14

Investors Bank

22

Ponce De Leon Bank

13

Customers Bank

21

Valley National Bank

13

Valley National Bank

19

Flushing Bank

12

TD Bank

17

Wells Fargo

12

Cathay Bank

16

720 618

Most Active ZIP Codes—Financing Nearly all of the most active ZIP codes in February were in Brooklyn, while there was one in Manhattan and one in Queens.

233 197

ZIP CODE JAN. FEB.

JAN. FEB.

REFINANCES

PURCHASES

Total Sales by Borough Sales across the borough decreased with the exception of Brooklyn, where the volume increased by 20 percent. (Staten Island is not tracked.)

364

356

JANUARY

11237

20

11385

ZIP CODE FEBRUARY A

11216

29

20

B

11221

23

11221

19

C

11385

23

11216

16

D

11219

20

11217

16

E

11222

19

11238

16

F

11212

19

11211

16

G

11217

19

11222

15

H

11233

17

11226

15

I

10011

17

10466

15

J

11238

16

I

14T

HS

T

E

C

A

G J

64 48

95

77

58 54

JAN. FEB.

JAN. FEB.

JAN. FEB.

JAN. FEB.

JAN. FEB.

ALL

MAN.

BRONX

BROOK.

QUEENS

82 | APRIL 5, 2017 | COMMERCIAL OBSERVER

H

F

177 147

B

Customers Bank provided a $37.5 million loan to refinance a five-story rental building at 10-16 Lexington Avenue in the Clinton Hill area of Brooklyn.

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3/31/17 3:59 PM

Charles in Charge FEATURE

10 reasons investors should pay attention to commercial real estate in Boston

F

By Tom Acitelli

or commercial real estate investment, the Boston region remains one of the choicest of markets.

It’s not simply because it’s less expensive than New York or San Francisco—though there’s that too— but because New England’s most populous region—4.6 million residents and counting—offers a diverse array of investment opportunities and some phenomenally solid fundamentals.

Here are the top reasons why investors should keep their eye on the area.

Office vacancy is the lowest it’s been since before the Great Recession.

This one’s pretty straightforward: Office vacancy in Greater Boston—which, besides Boston itself, includes neighboring cities such as Cambridge and Newton—fell to 13.8 percent in 2016, according to JLL. That is the lowest in at least 10 years. In Cambridge in particular, the vacancy rate is positively 84 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Manhattan-like: It was 3.8 percent at the end of 2016, CBRE tracked.

Office asking rents are the highest they’ve been since before the Great Recession.

Not surprisingly, given the low vacancy rate, office asking rents in Boston are at their highest on average since before the economic collapse in 2008. The city’s average direct asking rent was $33.99 per square foot in 2016, according to JLL, ahead of 2015’s $33.72, and well ahead of 2007’s $29.68.

These higher rents include even Class B space.

The average asking rent for Class B office space in downtown Boston was $46.04 a square foot at the end of 2016, according to CBRE, the highest since at least the start of 2000. This historic rise has meant that Class B rents have been outpacing those for Class A for years now. The Class A average was $59.95 a foot in 2016, well below a post-2000

peak of $70.23 in 2007. According to CBRE, this discrepancy has driven many otherwise Class B tenants “to consider low-rise options on the lower floors of Class A towers,” further shrinking vacancy.

Job growth in the Boston region is exploding—just look at GE. These strong fundamentals are only possible because of the Boston region’s steady job growth. “In 2016 alone, Greater Boston added over 50,000 new jobs,” JLL noted in its fourth-quarter 2016 market report. “As a result of this solid, long-term growth, the unemployment rate for the Boston metropolitan statistical area is near historic lows this quarter at 2.6 percent, the lowest rate of any major metro area in the U.S.” An illustrative point for this trend was General Electric’s decision in early 2016 to relocate its headquarters from Fairfield, Conn., to Boston’s Fort Point neighborhood. The company plans to open a 2.4acre, three-building corporate campus for more than 800 workers in 2018.

And look at the biotechnology industry.

Boston has more biotechnology workers than any other area of the U.S., according to a report from the Biotechnology Innovation Organization, a trade organization, and TEConomy Partners, a tech consultant company. Based on the latest 2014 figures, the Boston region edged out second-place New York by 1,200 employees. The area also commands some of the briskest venture capital investment in biotechnology, with Massachusetts overall second only to much larger California. (Massachusetts is actually No. 1 on a per-capita basis, according to the report.)

Boston’s office landlords are upgrading existing spaces and adding relatively little new inventory.

Landlords are undertaking or planning upgrades for large blocks of space at several prime Boston office properties in an effort to draw tenants—and spruced up office stock is something any investor should take note of.

The 13-story 399 Boylston Street revamped

its lobby, for instance. At 500 Boylston Street nearby, owner Hines plans to build a six-story office and retail addition in place of a courtyard in front of the 25-story building.

Meanwhile, new office development is pretty scarce in Boston. The key Back Bay submarket added the 442,000-square-foot 888 Boylston Street in December 2016, the first new high-rise in that area since 2001. The 400,000-square-foot 121 Seaport Boulevard, currently wrapping up construction, will be the only new office addition in Boston’s Seaport District in 2017. Much of the city’s ballyhooed construction boom instead centers around apartments, condos, hotels and dorms, keeping vacancy that much tighter in the office market.

Eataly et al.

Beyond brick and mortar—or the lack thereof—downtown Boston and its environs have become more attractive areas to work.

One case in point: the late-November opening of a 45,000-square-foot, three-level outpost of the Italian specialty juggernaut Eataly

in Back Bay’s Prudential Center. It’s the sort of amenity that would have seemed unlikely in the city’s core in years past. Now, along with new restaurants, food trucks and public spaces, the likes of Eataly seem natural. And Eataly is hardly the only one: In April 2015 the higher-end grocery store Roche Bros. opened a two-level location in Downtown Crossing.

most part, hotel development is not keeping up anywhere near with demand. The dynamic can lead to spectacular returns for sellers: That Godfrey hotel cost $83 million to build—and then German real estate fund Union Investment snapped it up for just under $174 million as it opened.

The hotel market is one of the nation’s hottest—and tightest.

As for Boston’s multifamily market, it’s nearly impossible to find one with better fundamentals.

The nightly occupancy rate for hotels in Boston and Cambridge has been over 80 percent since 2013, according to Pinnacle Advisory Group. That makes the region one of the tightest nationally. What’s more, the average daily room rate has marched steadily upward from under $200 at the start of the decade to more than $250. Revenue per available room now stands at more than $200.

And there are no signs of a slowdown.

Some major projects came online in 2016— the 242-key Godfrey boutique hotel in Boston’s Downtown Crossing neighborhood was perhaps the most notable—but, for the

Boston-area apartment rents have been among the highest in the nation for several years now, according to real estate listings site Zumper, which releases a monthly analysis of apartment sales in major U.S. markets. The latest, for April, pegged the median monthly rate for a one-bedroom at $2,200—behind only San Francisco, New York and San Jose.

Despite an historic building boom—more than 6,100 apartments came online in 2016— this rental dynamic does not seem likely to change. The region continues to add residents, including through its dozens of colleges, ensuring that demand continues to outpace supply.

The region remains a relative steal.

For all its fundamental strength, growth potential and streetscape attractiveness, the Boston region remains a relative bargain for commercial real estate investors compared with other U.S. cities such as New York. The most expensive commercial building sale in Boston in 2016 was Union Investment’s $452 million purchase of the 17-story 101 Seaport Boulevard, which went up just the year before. That deal penciled out to $1,027 a square foot, a record for a large office building in the city. Such a going rate would be normal for a Class A Manhattan skyscraper.

In general, Boston investment sales trade for about one-third the price per square foot of similar properties in Manhattan, according to commercial real estate firm Transwestern, and for nearly half of ones in San Francisco.

Tom Acitelli, a former editor of Commercial Observer, is the editor of Curbed Boston. You can reach him at tacitelli@gmail.com COMMERCIALOBSERVER.COM | APRIL 5, 2017 | 85

GETTY IMAGES

BOSTON STRONG: In addition to low vacancy rates, high office rents, exploding job growth, a thriving hotel market, an exploding multifamily market and even an Eataly is making Beantown more attractive than ever.

Floored to Ceiling A look inside CBRE’s tech revolution, led by David Eisenberg

By Rey Mashayekhi Photography by Michael Nagle

T

he offices of Floored, on the ninth floor of an unassuming building at 159 West 25th Street in Chelsea, resemble the platonic ideal of a tech startup’s New York City office: white walls and high ceilings, an open floor plan occupied by rows of desks holding large-screen desktops, guitars hung on the walls and a nook featuring Ping-Pong and foosball tables.

This is “CBRE South,” as Floored’s founder and former chief executive officer, David Eisenberg, described it on a recent March afternoon. Eisenberg relinquished his CEO title in January, when CBRE acquired the tech firm for an undisclosed amount.

He now serves as CBRE’s senior vice president of digital enablement and technology—a key figure in the brokerage giant’s effort to propel its technology operations into the future and give the company an advantage over its rivals in a rapidly competitive sector of the real estate business.

Floored, which Eisenberg launched in 2012 with partners Dustin Byrne and Judy He (who are now vice presidents at CBRE), develops interactive, three-dimensional mapping technology enabling real estate users to preview and plan commercial property layouts. CBRE brokers now use Floored’s products to help clients who are looking for new office space virtually “walk” through a potential location they are vetting; those clients who are retrofitting or renovating an existing space can use the technology to shape and preview what the changes will look like. The technology is meant to save the brokerage’s clients up to hundreds of thousands of dollars in architectural costs and countless hours they would normally spend physically touring spaces.

“The primary challenge is, how do you prove your relevance when [this technology] hasn’t been needed in the past?” Eisenberg said of the impact Floored is trying to make in commercial real estate. “The real estate industry has been fine without software. You have to say, ‘Test our technology versus a scenario where you don’t have it. Do you move faster? Do you

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| APRIL 5, 2017 | COMMERCIAL OBSERVER

save money?’ And I think we found that you can prove investing in technology and automation is a good idea.”

Eisenberg is a 32-year-old Harvard University graduate who lives on the Upper West Side with his wife and 11-month-old daughter. Having majored in psychology, he started his career at global management consulting firm Bain & Company before pivoting into the tech startup world; he was among the first employees at e-commerce apparel retailer Bonobos and subsequently joined personal marketing startup TellApart, which was acquired by Twitter for a reported $479 million in 2015.

“When I was at university, there was a tectonic shift that happened with people oriented in the financial and consulting worlds moving toward technology,” Eisenberg said. He noted the impact of Facebook on this shift in mindset; Eisenberg was at Harvard when Mark Zuckerberg founded the social media giant from his Harvard dorm room, and while he does not know Zuckerberg personally, he counts himself “in the first 1,000 users of Facebook.”

“I think a lot of my friends, rather than going to Goldman Sachs or Bain or McKinsey & Company, decided to look at venture capital or look at becoming an early employee at Facebook,” he said. “That turned out not just to be the right call in terms of impact on the world but also the right financial call.”

Floored, Eisenberg said, was started not with the idea of creating a real estate tech company but as a 3D imaging software firm that eventually “backed into real estate as being the obvious application” for its products. (The company raised $1.1 million in a December 2012 seed funding round led by investor Charlie O’Donnell’s Brooklyn Bridge Ventures, according to startup database Crunchbase.)

“It was about how to deliver personalized marketing solutions to this industry that was doing none of it whatever,” Eisenberg said. “There was no personalized marketing that was happening [in real estate] because it was perceived as being too expensive and there was no tooling in place—it was all in

the broker’s pitch, all in their voice. And we actually built something enabling brokers to do something visual on a unique, client-by-client basis.”

Floored’s initial lack of familiarity with the real estate business would prove both gift and curse, according to Eisenberg; while the company’s focus and orientation as a tech and software firm, first and foremost, meant it was “far easier for us to recruit high-quality software engineers—folks from MIT and the Ivy League,” it was also entering an industry in which it had little in terms of experience, background knowledge or preexisting relationships. But Floored would come to develop those and began by marketing its technologies to major landlords and property owners across New York; even before its acquisition by CBRE, Floored’s clients included the likes of Related Companies, Equity Office and Hines.

“We said let’s try to get Blackstone [Group], Related and Tishman Speyer as customers,” Eisenberg noted. “We thought those folks might have the more sophisticated apparatus to evaluate us and have the most properties to deploy us against. There are others who start from the bottom-up, where they try to build a crowdsourcing solution. That wasn’t us.”

Floored came to fruition at a time when the real estate tech, or proptech, sector was beginning to pick up momentum and major companies were starting to see the potential of investing in technological development. In an industry that often has a reputation for being stuck in its ways, the firm’s success—and CBRE’s investment in it—is proof that times are changing.

“Real estate folks are entrepreneurs at heart, they’re capitalists at heart, and so if there’s something better, cheaper, faster, they’ll take a look at it for sure,” according to Eisenberg. “However, we found that you really have to prove it—you have to prove that it is faster, cheaper, better, and in the absence of that proof, the industry can move somewhat slowly because there’s an embedded risk-averseness to dealing with real estate.”

CBRE came calling last year, acquiring the

David Eisenberg.

COMMERCIALOBSERVER.COM | APRIL 5, 2017 | 87

EMILY ASSIRAN/ COMMERCIAL OBSERVER

POWER PLAYER

POWER PLAYER

then-36-person firm and integrating it into its platform of existing tech-based offerings—a platform that has now been consolidated as CBRE Vantage, a centralized suite of the brokerage’s proptech products and services. Leading the effort has been Chandra Dhandapani, who joined CBRE as chief digital and technology officer last July after 17 years as a technology executive at Capital One. “We’ve done mergers and acquisitions in the past, but the Floored deal was different in that it was our first major tech-centric acquisition,” Dhandapani said. “We were looking to modernize our tech infrastructure, and Floored brings that.”

While Floored may have been the brokerage’s first serious acquisition in the proptech sector, CBRE “has been investing in tech for several years,” Dhandapani added, and it has developed relationships with other real estate tech firms—such as VTS, which signed an enterprise agreement with the brokerage in 2015 enabling CBRE to access VTS’s expansive leasing and asset management data offerings.

With a collection of proptech services— including the Real Capital Markets-powered Deal Flow, a listings marketplace, and Asset View, which manages property performance indicators—CBRE Vantage was built with the motivation of “bring[ing] together what technological capabilities we already have in-house and have leveraged from third parties” and enabling the brokerage to “highlight what we have” to clients, Dhandapani said.

It is a portfolio of tools and products that CBRE brokers say they have already reaped benefits from. “Anytime a tenant goes to a building and gets serious about their options, they need to see if [the space] fits or not, and the only way to do that is a space layout,” said Ben Friedland, an executive vice president at the brokerage. “Historically, you need to get an architect involved. But Floored can do that in a matter of seconds.”

Friedland said that Floored’s real value comes “not on the actual space tour,” when clients physically view a location for themselves, but before, when they can consider an interactive simulation of the space in question that allows them to whittle down their list of potential options.

“When we’re out looking at space, it can often be difficult for the tenants to visualize how the space works for them,” he said.

“Executives have the ability [with Floored] to visualize their entire work experience, from coming out of the elevator to going to their corner office, and can even see what the views are like from that specific floor of that building.”

As a result of CBRE’s investment, Floored is now in expansion mode. The firm’s workforce, which currently stands at 42 people, “should be 50 percent larger by the end of this year,” Eisenberg said, adding that the company is at work on improving and growing its product offerings. For outside 88 | APRIL 5, 2017 | COMMERCIAL OBSERVER

EISENBERG OF THE BEHOLDER: After getting scooped up by CBRE, Eisenberg’s Floored fiefdom at 159 West 25th Street in Chelsea is now known as “CBRE South.” observers, the time and money that CBRE is investing in its new acquisition and similar segments of its business are evidence of the growing influence and importance of the real estate tech sector at large.

“What’s interesting to me about the [Floored] acquisition is not only did CBRE inherit this platform but also their CEO and a team of about 30 software engineers and tech developers who can be flexible with taking the product a step further,” said Mariel Ebrahimi, the co-founder and CEO of real estate tech conference series DisruptCRE. But Ebrahimi noted that CBRE is far from alone among major commercial brokerages that have invested on the proptech side. JLL, for instance, has worked to build its own tech offerings both internally and through partnerships. In November 2016, the firm enhanced a preexisting relationship with Berlin-based proptech firm Leverton via a cooperation agreement enabling JLL to

further deploy Leverton’s automated lease abstraction software—”deep-learning” technology that digitally identifies and extracts data from corporate documents like leases and contracts.

JLL has also made moves in the virtual reality software space through a partnership with Sunnyvale, Calif.-based tech firm Matterport, allowing the brokerage to access Matterport’s 3D library of real-world spaces.

(A JLL spokesman did not return a request for comment.)

Cushman & Wakefield, meanwhile, has partnerships with real estate tech advocacy organization MetaProp NYC, as well as companies with aggregated tech product offerings like DMG Information and Accruent.

C&W also teams with the more traditional behemoths of data and software—think IBM, Microsoft and Oracle—on analytics and other initiatives, according to Adam Stanley, the brokerage’s global chief information officer.

“We’re still partnering with some of the really large firms, because even though people think they’re dinosaurs, they still have a lot of money in research and development,” Stanley said.

Stanley added that C&W views strategic partnerships with proptech firms, rather than mergers and acquisitions, as “in most cases the best alternative.”

“There’s always a risk, when you make an acquisition of a tech player, that you limit their ability to actively sell to the market and be open to a broader level of competition,” he said. “We still for the most part feel that the partnership route is the best route for us.”

While Stanley refuted the notion of a “tech arms race” among the giants of commercial real estate brokerage (“We don’t think of it as an arms race…Our clients and customers must be the focus and not our competitors”), CBRE’s purchase of Floored, as well as forays by rival firms into the proptech sector, indicate how the industry’s major players have placed heightened importance on the role technology plays in real estate—and will continue to play in the future.

“When you start acquiring technology companies, you’re making a pretty large statement that tech and data are the future of our business,” said Nick Romito, the CEO of VTS. Romito said Floored has the potential to transform the nature of the commercial office leasing business.

“I see a world where, within five years, whether it’s a 3D product or something else, the process of looking at a space is going to happen from your desk,” he said. “You don’t have to go out and tour 50 different spaces.

That’s going to change.”

But Eisenberg is under no illusions about the challenge that lies ahead for his firm— nor is he overly concerned with others in the real estate tech space trying to emulate his company’s success.

“I don’t think this is easy—even if you knew exactly what our strategy was, I don’t think it’s an easy thing to copy,” he said.

“One of the reasons why there are so few winners in the proptech space is that this is not just about building great technology: It’s also about nailing distribution in a very complicated industry that has a lot of fragmentation.”

And while joining the CBRE empire may mean Floored now has an advantage with regards to distribution—with its technology now to be used by brokerage professionals across the world—Eisenberg knows that his firm’s position means expectations are higher than ever.

“The challenge for us is that it’s hard to move the needle at a company as sizable as CBRE,” he said. “We have signed up for that challenge; we are measured on how much we move the needle on CBRE’s total revenue, which is a number very high up in the billions [$13.1 billion in 2016]. For us to show a dramatic impact at CBRE, we need to be one of the most successful proptech companies, period.”

THE SIT-DOWN

ONE-WAY

CRICKET SASHA MASLOV/ FOR COMMERCIAL OBSERVER

Denis Hickey, Lendlease’s CEO of the Americas, talks about his journey from professional sportsman to NYC’s go-to guy for constructing supertall buildings

Denis Hickey.

G

By Liam La Guerre

oogling “Denis Hickey” results in two very different profiles: ESPN and Wikipedia introduce you to the professional Australian cricket player; Bloomberg and LinkedIn reveal the chief executive officer of the Americas arm of the Australian construction and development giant Lendlease.

Actually, they’re the same person—even though the cricket part of Hickey, 51, is a long time in the past. But even back when he was playing cricket in the summers, he was working with a property development company in the winters.

“I tried to bridge the two together. I was

playing and working and that became unsustainable,” Hickey told Commercial Observer at the company’s offices at the MetLife Building at 200 Park Avenue. “It was sort of bizarre. I had to give one of them up, and I thought, ‘Well, I’m 28 years old, and I’m not very good at cricket, so I’ll give that up, and I’ll go to work.’ ” Since 2014, when Hickey left Lendlease Australia to assume his current role, work has consisted of growing Lendlease’s business in the United States, which has been around since 1999 and constructs supertall buildings, such as Hines’ MoMA Tower at 53 West 53rd Street, Vornado Realty Trust’s 220 Central Park South, JDS Development’s 111 West 57th Street and Extell Development Company’s Central

Park Tower. Lendlease is also developing a 55-story condomium with Victor Group at 281 Fifth Avenue. Last year, Lendlease’s American business had revenue of $3.2 billion.

Under Hickey’s stewardship, the company is diving into ground-up development, infrastructure projects and creating an investment management fund. Lendlease also recently partnered with Turner Construction Company to win the bid to construct the $1.5 billion Jacob K. Javits Center expansion. He discussed all that and more.

Commercial Observer: What is it like working in America?

Hickey: To come here and work on the

U.S. business is different. We don’t have the presence in some of the markets that we do in Australia, but I love working in the U.S. I think the U.S. is a fantastic country, and I think our business is very strong. I’ve moved my four kids [ages 14 to 22] over and my wife.

We are fully acclimated. We bought a house here on the Upper West Side, and we are here for the long haul.

Do your kids still have the accent like you?

The two youngest ones’ accents are changing. The older ones, they are fine.

Where did you grow up?

I grew up in Victoria and then moved to COMMERCIALOBSERVER.COM | APRIL 5, 2017 | 89

THE SIT-DOWN

Melbourne. I was one of six kids. I was No. 5. I had no idea what I wanted to do…

As I was doing cricket, I always wanted to [earn] a degree. So I did a commerce degree, and one thing kind of led to another, and I fell into [real estate]. A company [called the Jennings Group] said, while I was doing my sport in the latter half of my career that I could work for that company, and they kind of taught me the business. And that’s how I fell into real estate.

So you didn’t plan for a corporate life as a second career after cricket? It just happened?

To be quite honest, the money for cricket in Australia is not like U.S. professional sports, so I always was mindful that at the end of my cricket career, what was I going to do? Even when I was 20. So I never wanted to be in a position where I was full-on sport, got to the end of my career and thought, What now?

What was your role at the Jennings Group?

I started off in marketing and new business. Then I moved into operations then to regional management. Then [chief operating officer], then CEO—over an eight-or nineyear period. That business built 5,000 homes a year.

Starting in marketing, without knowledge of the business, and then becoming the CEO in under a decade—how did you do that?

I was lucky. I had really good mentors.

And I had people who believed in what I could potentially be, rather than what I had done. I was lucky to be given opportunities to take on roles that others might have thought I wasn’t qualified for. And that opportunity sort of catapulted me to a whole range of different experiences.

Why would you take that job during the financial crisis?

I remember going home to my wife and saying, “I’ve been approached to run ING Real Estate. They have about $15 billion of assets. They’ve got six businesses. But the job is…restructure all of the debt, the equity, sell some businesses and merger some businesses. There are more reasons for me not to take this job than to take it.”

90 | APRIL 5, 2017 | COMMERCIAL OBSERVER

JAVITS GIANT: Lendlease was rencently awarded the $1.5 billion Javits Center redevelopment project (top); among other projects in Lendlease’s pipeline are big ones in New York like 220 Central Park South (bottom right). Island Palm Communities is military housing in Hawaii that Lendlease owns (bottom left).

But, I said, “I am going to learn a lot here and that was fascinating.”

How did it turn out in the end?

We ended up refinancing $5 billion of debt. We sold about $4 billion of assets.

Internalized one of their businesses. Kind of sold two other businesses. ING ended up being very happy with that.

How did you get to Lendlease?

Our Global CEO Stephen McCann gave me a call and he convinced me that Lendlease is a great place to be. So I decided to join in about mid-2012 and I was in the Australian business as a CEO of our development business there with the view to come into the U.S…My assignment was to come here and take the business that we have here, which was a good business in 2012, but to grow it and to make it more diverse.

When you say diverse, what do you mean?

So Lendlease as a business globally does four things: Construction. We build everything from hospitals to high-rise residential, to arenas to retail to condos. Globally, that part of our business has a backlog of about $20 billion. We do both construction management and design-build. The second part of our business is we do infrastructure. So we do roads, rails, ports, tunnels, plants. We not only build those: We do the design-build for those, and we also bring in equity for those for a public private partnership solution. The third thing we do is that we are an investment manager. We manage third-party money in real estate investment. And we manage about $25 billion in third-party capital. And then the last thing that we do is that we are a genuine developer from ground up. We buy the sites, take them through zoning, we do the

development management, we bring the equity. And we develop across all of the asset classes. Shopping malls, offices, condos, multifamily, you name it. At its heart, Lendlease is a developer. That’s its core. But in the U.S. we really did just construction.

So what we are looking to do is how do we do more of those activities in the U.S. that we do in the other markets.

How do you go about expanding the business?

We have capital, but the U.S. doesn’t need our capital. So it’s really about capability.

You’ve got to be able to say, what can you bring to the equation. And we really focus that construction on the six gateway cities: Boston, New York, D.C., Chicago, San Francisco and L.A. We want to become meaningful in those markets and quite diverse in construction and do a mix of design-build as well as construction management.

CLOCKWISE FROM TOP LEFT:GOVERNER CUOMO/FLICKR; SASHA MASLOV/ FOR COMMERCIAL OBSERVER; COURTESY SHOP; COURTESY COSTAR GROUP; COURTESY COSTAR GROUP; COURTESY ISLAND PALM COMMUNITIES

After the Jennings Group, what did you do?

I was running that when I was about 33 years old, and then I left that business and moved to Sydney, and I became the CEO of [the development side of Stockland]—a REIT and development company together.

That company had a market cap of about $1 billion, and when I left, it had a market cap of about $14 billion. And again, after about nine years, I thought it was time to do something different, and I got head hunted to go and run ING Real Estate in Australia.

It suffered badly in the recession.

partnership] solution. And we don’t do anything particularly in that space [here]. We do it in other parts of the world, such as Europe and Australia.

Why don’t you do PPPs in America?

Some of it has to do with legislation. How you can actually construct a PPP? Can the cities or the states enter into this kind of agreement? A lot of the existing founding models here are through tax increments financing solutions, which are not prevalent in other cities. So there needs to be a raft of legislation change that will enable the formation of PPP. Different cities and states are different.

PPPs are more common in California than they are in any other state, so if you look at it and you look at the amount of infrastructure, whether it’s roads or rails or bridges, just the amount of infrastructure that needs to be built in the U.S. is enormous. And the government can’t fund all of that, so getting the private sector to fund some of that is going to be an accelerator.

Talking about your work, what’s your stance on union versus nonunion construction jobs?

We believe in merit-based and what we call “open shop.” So it’s not nonunion, and it’s not union. We are using both. We will look at what it is on the merits. We have no predisposition to be able to say one against the other. On some of our sites, we’ll have predominantly union, but there may be one or two people who aren’t union, but they’ve got the skills and the capability that fits the criteria. So we actually think that that’s the right solution.

CLOCKWISE FROM TOP LEFT:GOVERNER CUOMO/FLICKR; SASHA MASLOV/ FOR COMMERCIAL OBSERVER; COURTESY SHOP; COURTESY COSTAR GROUP; COURTESY COSTAR GROUP; COURTESY ISLAND PALM COMMUNITIES

HIGH AMBITIONS: Denis Hickey (left) is building some extremely prominent New York City towers, including 111 West 57th Street (center) which towers over Midtown, as well as 53 West 53rd Street (right) .

How is it going expanding into the development business?

So we’ve built a very experienced development team here in New York and the rest of the country. And we took probably 18 months to assemble that team. We now have six projects across the U.S. in development. Those projects are worth $5 billion. So that’s a big pipeline [with] about 5,000 [rental] apartments and condos plus a mix of office and retail. It’s a meaningful part of our business now.

Tell us about winning the Javits Center project.

It’s a $1.5 billion project. It’s a design-build job from our point of view. It’s exciting. We are thrilled to be able to do that for the city.

We are in the middle of working through the contracts. So we can’t [give too much] detail.

How did your partnership with Turner Construction [on Javits] come about?

We’ve worked with them over the last few years and we’ve teamed up on a couple of things. We looked at the LaGuardia Airport [renovation] together with Turner. We [both] pulled out of LaGuardia Airport, and we’ve spoken with them on a number of opportunities. They are a very good builder, and we think we bring [greater] capability together and complementary skills.

Where are you in the expansion of the rest of the business?

So we are in the process of building an investment management business. We have been approached by a number of local and global investment partners to build that platform. We like multifamily as an investment class. And our vision is to create a meaningful portfolio of multifamily assets over the next three to five years.

And what are your plans to expand in

infrastructure?

We are really focused on three parts of that in the infrastructure space. So we like the telecom sector, and we like telecom infrastructure, whether that’s rooftops or poles.

Telecommunications towers, we like that.

We want to be a developer and an owner of that asset class.

Why? When you look at data usage—the “internet of things”—[there’s a lot of] infrastructure that needs to be provided…That’s a really good asset class. The inspiration is there to get an infrastructure asset class north of $2 billion to $3 billion over the next period.

What are the other two infrastructure assets that Lendlease is looking at?

Energy. So we like solar and battery solutions. And then the last thing that we are looking at there is the PPP [public private

How did Lendlease come to own housing on military bases?

In the early 2000s, the U.S. government decided to privatize or joint venture its accommodation across the military bases. So Lendlease at the time had a company called ATCUS Lendlease, and we bid and won several programs with different parts of the U.S. military. So what we do is we manage about $8 billion worth of real estate there. That’s 40,000 homes and about 20,000 hotel rooms. We manage circa 50 military bases across the U.S. And we are also equity partners with the U.S. government across those assets. So we co-own those and develop and manage them for a long period of time.

Are you seeing housing and lodging on bases expanding?

Well, all of the housing over the last 15 years has been privatized across the military. The lodging or the hotels for the army has been privatized. The Air Force, the Navy, the Marines haven’t been privatized yet, so that’s an expansion opportunity for us. And then what happens to the U.S. military as it moves and as it grows and as it reshapes, we’ll be partnering with the Department of Defense to figure out how that happens.

COMMERCIALOBSERVER.COM | APRIL 5, 2017 | 91

ENDNOTES

The Party Circuit

Diane Mandel Lansco and Eric Le Goff

Panelists from left to right: Susan Fine, Ryan Engel, Jonathan Mechanic, Isaac Chera and Gene Spiegelman.

PHOTOGRAPHS BY MICHAEL CALABRETTA/COMMERCIAL OBSERVER

TALKING RETAIL, E-COMMERCE WITH COMM OBSERVER March 30, 1221 Ave. of Americas

O

nline shopping, falling rents and the draw of trendy outer borough neighborhoods may all threaten Manhattan’s retail market, but the city’s biggest retail players remain optimistic about upscale stores signing leases along prime strips like Fifth Avenue.

“The brick and mortar retail experience must improve” in order to compete with online retail, said Gene Spiegelman, Cushman & Wakefield’s vice chair of retail services, during Commercial Observer’s Future of Retail breakfast panel last week. Barnes & Noble failed to adapt, and Amazon may be taking its place with brick-and-mortar stores that offer a curated, “connoisseur’s experience,” Spiegelman said.

Other speakers included Susan Fine, the president of Oases Development; Isaac Chera, a principal of Crown Acquisitions; and Ryan Engel, the director of business development and real estate for cycling company Peloton. The discussion was moderated by Jonathan Mechanic of the law firm Fried Frank, Harris, Shriver & Jacobson.

Retail rents in neighborhoods like Soho and Meatpacking will continue to tumble, the panelists 92 | APRIL 5, 2017 | COMMERCIAL OBSERVER

Linda Alexander and Adam Malitz.

Parkin Lee and Howard Walter.

agreed. As a consequence, “retailers will feel stronger and demand more concessions,” said Chera. The decline in rents can be blamed on a glut of available space and an overall slowdown in consumer spending, according to the Real Estate Board of New York’s fall 2016 Manhattan retail report. Average asking rents for retail space slid in every single Manhattan neighborhood during the fourth quarter of last year, with Madison Avenue, Times Square, Flatiron and Fifth Avenue between 49th and 60th Streets seeing some of the biggest drops, per data from C&W. Landlords struggling to fill space will likely start looking for short-term tenants, explained Fine. And food halls are ideal short term tenants, said Fine, who transformed a corridor in the 59th Street-Columbus Circle subway station into a mall with mom-and-pop shops. “I would have them lease this space as a food hall,” she added, referring to the basement of 1221 Avenue of the Americas where the

Risa Letowsky and Eric Menkes.

panel took place.

“Great retail is about the synergy, about the magic of the street,” said Fine. “I think we’re going to see what you see on the streets of Paris and Tel Aviv in New York,” she enthused, adding that food halls help recreate that feeling in an indoor space.

Meanwhile, demand for retail space in the outer boroughs has only grown over the last few years. “We’ve tripled our sales volume in Brooklyn and Queens,” Spiegelman said.

Chera noted that more national chains are starting to open outposts in the outer boroughs.

Retail rents are rising in several prime Brooklyn corridors, including Fulton Street in Downtown Brooklyn, 86th Street in Bay Ridge and Seventh Avenue in Park Slope, according to a REBNY report. Franklin Street in Greenpoint saw the most dramatic increase, shooting up 41 percent to $89 a square foot in the past year.—Rebecca Baird-Remba

DATA

ChartLease / Sale Lease charts reflect deals closed or announced from March 27 to March 31.

Information on leases, sales and financing deals can be sent to Max Gross at mgross@commercialobserver.com.

Office

SQ. FEET

TENANT

LANDLORD

205 Hudson Street

94,740

WeWork

Newmark Grubb Night Frank’s David Falk, Peter Shimkin, Kyle Ciminelli, Trinity Church Wall Street, Norges Bank Ben Shapiro, Jonathan Franzel and Brittany Silver represented the landlord; Real Estate Management and Hines Michael Schoen of Savitt Partners represented WeWork.

40 Flatbush Avenue Extension (Brooklyn)

25,000

Callen-Lorde Community Health Center

40 Flatbush Realty Associates

Cushman & Wakefield’s Carri Lyon and Mitzi Flexer represented the tenant; Joseph Jemal of ISJ Management represented the landlord.

28-40 West 23rd Street

25,000

S’well Bottle

Andy Roos and Michael Cohen

CBRE’s Ben Fastenberg represented the tenant.

1212 Avenue of the Americas

14,802

America Press

Stawski Partners

CBRE’s Edward Goldman, Sam Seiler and Derrick Ades represented the landlord; Stuart Eisenkraft of CBRE represented the tenant.

233 Park Avenue South 13,450

T. Rowe Price

Orda Management

Newmark Grubb Knight Frank’s Brian Waterman, Andrew Peretz and Brent Ozarowski represented the landlord; JLL’s Kirill Azovtsev and Lisa Kiell represented the tenant.

96 Bogart Street (Brooklyn)

7,500

MySpace NYC

David Moore

Lane Sanders and Max Lu of M Properties Group represented the landlord; the tenant was represented in-house by Shawn Mullahy.

434 Broadway

7,230

Modern Post

Savanna

Benjamin Bass and Kip Orban of JLL represented the landlord; Daniel Lolai of LSL Advisor represented the tenant.

1350 Broadway

3,362

Ciena Communications

Empire State Realty Trust

Brian Hay and Tim Hay of CBRE represented the tenant; Keith Cody and Lindsay Godard of ESRT represented the landlord in-house.

350 Fifth Avenue

3,135

Helios and Matheson Analytics

Empire State Realty Trust

David Stockel of Transwestern and the Ezra Company represented the tenant; Shanae Ursini of ESRT represented the landlord in-house.

Retail

SQ. FEET

TENANT

LANDLORD

BROKERS

168 39th Street (Brooklyn)

78,000

ABC Carpet & Home

Jamestown

Kathe Chase of Industry City represented the landlord in-house along with SCG Retail’s Chase Welles; the tenant did not have a broker in the deal.

463 Seventh Avenue

4,247

Rose and Olive

The Arsenal Company

David Levy of Adams and Co. represented the tenant and the landlord.

2460 Broadway

3,930

Sweetgreen

N/A

David Abrams and Brandon Eisenman of RKF represented the retail co-op owner; SCG Retail’s Jacqueline Klinger and Taryn Brandes represented the tenant.

2040 Broadway

3,525

Roche Bobois

Sherwood Equities

Greenberg Group’s Zack Gross represented the tenant; RKF’s Ariel Schuster and Andrew Connolly represented the landlord.

Sale

BROKERS

BUYER

SELLER

SQ. FOOTAGE

AMOUNT

BROKERS

125 Fifth Avenue (Brooklyn)

Avery Hall Investments

Pick Quick Foods

N/A

$46.5 million

N/A

187 Kent Avenue and 48 North 3rd Street (Brooklyn)

CW Realty Management

SWGI Realty

83,000 (to be built)

$42.5 million

N/A

121 Spring Street

60 Guilders

Kate D. Levin

3,200

$28 million

N/A

COMMERCIALOBSERVER.COM | APRIL 5, 2017 | 93

MORGAN & MORGAN AT 850 THIRD AVENUE (BROOKLYN)

The Plan

TENANT: MORGAN & MORGAN ARCHITECT: ZAMBRANO ARCHITECTS INTERIOR DESIGN: MKDA CONSTRUCTION MANAGER: SALMAR PROPERTIES ENGINEER: MGE LANDLORD: SALMAR PROPERTIES LAWLESS: Law firm Morgan & Morgan’s tech and marketing department moved into an office with bright colored furniture (top left), a boardroom with modern and traditional elements (top right), exposed brick walls (bottom right), and uncovered ceilings and polished concrete floors (bottom left).

By Liam La Guerre Law firms have been slow to adapt to modern workplace trends, but that doesn’t appear to be the case for the national personal injury firm Morgan & Morgan (at least for its marketing and tech divisions) in a former warehouse building in Sunset Park, Brooklyn.

The offices at Salmar Properties’ 850 Third Avenue (also known as the Liberty View Industrial Plaza) looks like a children’s playroom with bright primary colors for furniture and carpeting. The colors were used to highlight the industrial features of the warehouse, according to MKDA Creative Director Edin Rudic.

94

| APRIL 5, 2017 | COMMERCIAL OBSERVER

“In order to expose the industrial, we need something to oppose it,” Rudic, who designed the space, said about the colors. “If you have industrial next to industrial, it won’t be revealed.”

The Florida-based law firm moved its departments into a 17,000-square-foot portion of the fourth floor in July of last year.

There are 54 workstations, five private offices, one executive office, two lounges, a café and one boardroom in the office.

One can still glean the industrial aesthetic of the 1920 building, including exposed brick walls and polished concrete floors and columns. The ceilings are also uncovered and reveal vents and other mechanicals. The colors of the furniture, such as bright red and

blue chairs and multicolored carpeting, make the office look appealing to younger workers.

“They wanted to attract younger people to work there and have a younger work environment that caters to the tech and marketing sectors,” Rudic said.

And youth is so much on display that, get this: The office has concrete columns that have been lathered with a special material that turns them into dry erase boards. Plus, near the café, there are (millennial prerequisite) foosball and pool tables, and two breakout rooms for small private meetings with funky wallpaper and overdyed rugs. And those meeting rooms have sliding barn doors with door knockers on them—because why not?

The 14-seat glassed boardroom matches the rest of the offices’ bizarre mix of elements.

It highlights industrial theme-exposed ceilings, carpeting, gothic-styled chandeliers and sleek modern chairs. The furniture is much less bright, save for classical-style chair legs that support the table, which were painted in what we have to call Big Bird yellow.

“The chairs are white, the table is gray wood, the columns are concrete, the carpeting is gray, the chandelier is black. The only color in this room is in the legs,” Rudic said.

“It’s a traditional kind of look, but it’s modernized. And it becomes a little bit more eclectic.”

Rudic added, “There is no straight set to this—it’s what feels right.”

PHOTOGRAPHS COURTESY OF MKDA

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moderated by Michael Stoler, Host of The Stoler Report and Managing Director of Madison Realty Capital—to dive into the factors affecting the New York City market.

Left to right: Judy Guarino, Chase; Michael Stoler, Madison Realty Capital; Joseph Harbert, Colliers International; Lester Petracca, Triangle Equities; Michael Maturo, RXR Realty LLC; Joanne Potell, Cushman & Wakefield; Eric Gural, Newmark Holdings.

Visit chase.com/CML-NYCMarket for insights from the event, including the panelists’ views on co-working and hoteling, tenant incentives, the impact of tourism and more.

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For more commercial real estate insights, visit: chase.com/CRE-insights

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Manhattan

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$16,000,000

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7-yr Hybrid

5-yr Hybrid

5-yr Hybrid

7-yr Hybrid

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OFFICE

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