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Weekly Market Report - January 24, 2022

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Brooklyn investment sales surpass 2019 levels, report says

Brooklyn’s real estate market had 1,198 deals worth more than $6.1 billion overall last year, respective increases of 47% and 36% compared with 2020, according to a report from TerraCRG. Both numbers also were up compared with 2019, when there were 953 deals worth $5.2 billion overall. The real estate industry seemed to get more confident as the year went on, with 58% of deals—accounting for 70% of the total dollar volume—happening in the second half of the year. The fourth quarter was the busiest, with 387 deals worth roughly $3.2 billion, while the first quarter was the slowest, at 229 deals worth $659 million.


The largest deal of the year was the sale of The Denizen in Bushwick for $506 million. Atlas Capital purchased it from Yoel Goldman during the fourth quarter. The second largest deal was the $220 million sale of 85 Jay St. in Dumbo, and the third was the $128 million sale of 12 Metrotech Center in Downtown Brooklyn. The Downtown Brooklyn area, which includes Boerum Hill and Gowanus, experienced the most dollar volume, $1.7 billion, while north-central Brooklyn, which includes Bushwick and Crown Heights, had the most transactions: 220.


Part of the reason for 2021 activity surpassing 2019 levels was that 2019 was not a particularly busy year for real estate. Activity in the Brooklyn market peaked in the mid-2010s before tapering off between 2016 and 2019, and a strict new rent law that the state Legislature passed in 2019 curtailed the amount of interest in trading multifamily properties.


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Department Of Finance Publishes Fiscal Year 2023 Tentative Property Tax Assessment Roll


Department of Finance Commissioner Preston Niblack today announced the publication of the tentative property tax assessment roll for Fiscal Year 2023 (FY23). The Department of Finance is required to determine market and assessed values for all properties in New York City annually and issue a tentative property tax assessment roll each year on January 15. The tentative assessment roll for FY23 shows the total market value of all New York City properties is $1.398 trillion, an 8.2 percent increase from Fiscal Year 2022. Citywide taxable billable assessed value, the portion of market value to which tax rates are applied, increased by 8.1 percent to $277.4 billion. Property values for FY23 reflect real estate activity between January 6, 2021, and January 5, 2022, the taxable status date. FY23 values increased from last year but remain below FY21 values for many properties, because the City's economy is still feeling the impact of the pandemic.


“The past year has seen an uneven recovery in our city’s economy, which is reflected in the FY23 tentative assessment roll,” said Department of Finance Commissioner Preston Niblack. “Office and retail leasing activity and hotel occupancies have picked up in recent quarters, but overall office occupancy remains down, and the lack of workers and visitors means that retail stores and hotels continue to suffer. In contrast, the residential market is showing signs of a rebound, with prices and rents rising again.” The roll reflects citywide construction activity, with $9.2 billion in new market value. Manhattan, Brooklyn, Queens accounted for 83.5 percent of overall construction activity in the city, while The Bronx registered the highest percent increase in construction activity among the boroughs at 1.1 percent.


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Inside the push to landmark the beleaguered Roosevelt Hotel


Amid concerns that the Roosevelt Hotel at East 45th Street will be converted to another use by its current owners, Pakistan International Airlines, City Councilman Keith Powers—along with Manhattan Borough President Mark Levine, state Sen. Brad Hoylman and Assemblyman Richard Gottfriend—is calling on the city to landmark the hotel so that it can’t be torn down or altered in any significant way. “As one of Manhattan’s only major hotels that has not yet even partially reopened since the start of the Covid-19 pandemic, we are concerned that its future may be in jeopardy,” Powers wrote in his missive. As of Jan. 20, the building had accumulated $7 million in unpaid severance fees, the HTC claims. The hotel also hasn't complied with the city’s new severance law, which requires any hotel that had not opened as of Nov. 1 to pay its workers $500 per week in severance.


The owners are suing the city over the law to avoid liability for the severance fees. But the law contains an exception for inns that are being converted to another use. To help the hotel’s former staff keep their jobs and their severance payments, the HTC would like the building to achieve landmark status and remain a hotel, it said. But even after a nearly $100 million revamp helped the property become profitable, the Pakistani government debated shedding the property to help its struggling airline. Local developers have been eyeing the site for a potential office project—one that would span an entire city block and could be built much taller than the building’s current 16 stories.


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Judge Lets 245 Park Avenue End Owner Management Contract With SL Green

PWM — backed by Chinese financial services giant HNA Group — filed for bankruptcy in November, blaming SL Green for failing to replace a large tenant in the tower: Major League Baseball. The firm alleges that SL Green’s failure was intentional, because a bankruptcy filing would allow SL Green to foreclose on the property and take it over for itself, according to court records. MLB moved out of roughly 221,000 square feet in the building last year, for 330,000 square feet in the Time & Life Building. While The Rockefeller Foundation temporarily moved into MLB’s space in the 44-story 245 Park for a short sublease, the bankruptcy filing alleges that SL Green failed to find a longer-term replacement and hadn’t secured a new lease at the tower since November 2018.


SL Green owns part of the asset after purchasing a stake in the building in 2018 and was the mezzanine debt lender to HNA. It owns a 49 percent equity interest in one debtor company, 245 Park JV LLC, according to court documents. That limited liability company also holds 50 percent of the $568 million in outstanding mezzanine debt and is the servicer of the mezzanine loans, according to court documents. PWM sought to sever ties with SL Green, which took care of the day-to-day maintenance and operations at the 1.6 million-square-foot tower, when it first filed for bankruptcy. It got its wish on Tuesday, when a Delaware judge ordered that the agreement be severed within the next week. PWC will continue to pay the property manager according to their contract until five business days have passed after PWC notifies SL Green of the cancellation, per court documents.


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Blackstone Property Fund Targeting Small Investors Passes $50 Billion


Blackstone Real Estate Income Trust, a fund sold in increments as little as $2,500, has raised more than $50 billion since it started five years ago. The firm has used the fund, known as BREIT, to buy rental-apartment buildings, warehouses, office buildings, casinos and other property types. Like other funds structured as nontraded real-estate investment trusts, BREIT experienced a decline in fundraising in the early months of the Covid-19 pandemic. But by mid-2020, the pace had picked up, and last year BREIT raised an average of more than $2 billion a month, or close to a 70% share of all the money invested in 2021 in nontraded REITs.


BREIT has lured investors partly by paying them an annual yield of 4% to 5%, far more than corporate and government bonds in recent years. Also, BREIT has loaded up on properties that have enjoyed rising values in recent years, such as warehouses and rental apartments, even as the pandemic has raged. BREIT last year joined other Blackstone investment vehicles in buying data- center owner QTS Realty Trust in a deal that valued the company at roughly $10 billion. The fund also joined a partnership that last year purchased the real-estate assets of the Las Vegas Cosmopolitan casino and hotel in Las Vegas.


Blackstone executives also expect the BREIT to perform well in an inflationary environment. They point out that properties such as warehouses and rental apartments have leases that are reset every few years, which enable them to keep pace or stay ahead of rising prices.