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October 3, 2008
Failed Deals Replace Boom in New York Real Estate
The NY TImes
By Charles V. Bagli
Though this article from yesterday's Times does not mention Bruce Ratner's controversial Atlantic Yards project, it goes a long way in explaining the implications of the credit crisis on the local commercial and residential real estate market, and is a must-read for those who are trying to understand the possible effects on Ratner's megaproject:
Developers are complaining that lenders are now refusing to finance projects that were all but certain months or even weeks ago.
While Ratner is searching for an anchor tenant for Building One (formerly known as "Miss Brooklyn")...
Examples of aborted deals and troubled developments abound. Last Friday, HSBC, the big London-based bank, quietly tore up an agreement to move its American headquarters to 7 World Trade Center after bids for its existing home at 452 Fifth Avenue, between 39th and 40th Streets, came in 30 percent lower than the $600 million it wanted for the property.
A 40-story office tower under construction by SJP Properties at 42nd Street and Eighth Avenue for the past 18 months still does not have a tenant.
Ratner has already expressed some marketplace flexibility by issuing two configurations of Atlantic Yards, one devoting more space to commercial tenants, the other favoring more residential space. But Charles Bagli reports that the credit crisis affects both the commercial and residential properties:
Some developers who are currently erecting condominiums are trying to convert to rentals, while others are looking to sell the projects.
Existing bond-financing is also being affected:
Commercial properties are not the only ones facing problems. On Friday, Standard & Poor’s dropped its rating on the bonds used in Tishman’s $5.4 billion purchase of the Stuyvesant Town and Peter Cooper Village apartment complexes in 2006, the biggest real estate deal in modern history. Standard & Poor’s said it cut the rating, in part, because of an estimated 10 percent decline in the properties’ value and the rapid depletion of reserve funds.
The rating reduction shows the growing nervousness of lenders and investors about such deals, which have often involved aggressive — critics say unrealistic — projections of future income.
Posted by lumi at October 3, 2008 7:48 AM