3q15 capital markets report - knight frank · 3q15 capital markets report 4 3q15 market summary...

3Q15

CAPITAL MARKETS REPORT FOR THE INTELLIGENT INVESTOR

3Q15 CAPITAL MARKETS REPORT 2

3Q15 Capital Markets Report

2 Market Summary

3 Overview

4 United States Pricing Heat Map

5 Top Regional Buyers

6 United States Outbound Capital

7 Investment Activity Index: Overall Rankings

8 Investment Activity Index: Top 10 Cities

9 Investment Activity Index: National Backup

10 Capital Markets Intelligence

11 Buyer Distribution

12 International Capital: Primary Markets

13 International Capital: Secondary Markets

14 International Capital Matrix

15 International Capital Activity: China to the United States

16 International Capital Distribution

17 Total Sales Volume: Major Metropolitan Cities

18 Sales Volume by Property Type

19 Highest Completed Priced Sales by Manhattan Market

20 Notable Manhattan Investment Sales

21 Manhattan Office Building Sales: $500M+ Transactions

22 United States Office Building Sales: Average Price Per SF

23 Manhattan Historical Office Building Sales: Average Price Per SF

24 United States Office Building Sales: Average Cap Rates

25 Manhattan Historical Office Building Sales: Average Cap Rates

26 Investment Returns: Real Estate Yields

27 Investment Strategies: By Product Type

28 United States Multihousing Fundamentals: Current vs. Historical

29 United States Multihousing Fundamentals: Primary vs. Secondary

30 United States Development Site Sales Volume

31 United States Hospitality Statistics

32 Debt Market Analysis

33 CMBS Issuance

34 Debt Market Update

35 Commercial Mortgage Maturities

36 Lender Composition

3Q15 MARKET SUMMARY


3Q15 Market Summary

Overview

► International capital has accounted for nearly 16.0% of all United States sales activity, year-to-date, up from 10.0% from 2011-2014.

►Capital investment from China to the United States has exceeded $5 billion in 2015, yet United States investment to China has been cut to $1.5 billion, year-to-date.

►Of the ten foreign countries that have invested the most capital in the United States in the past 12 months, all have purchased assets in Manhattan.

Canada and Singapore have invested in each of the 11 largest United States markets over the past 12 months.

►Per square foot averages of institutional quality office buildings in major markets have exceeded the prior peak in 2008.

New York City sale prices are currently 14.6% above the 2Q08 previous high, averaging $973 per square foot.

Asking rents in Manhattan remain 6.9% below the market peak in 2008, and 14.3% below the Midtown 2008 peak.

► Investors are seeking higher yields in secondary markets and non-traditional property types as gateway cities have become over saturated.

►Current commercial and multihousing yields remain significantly higher than the 10-year treasury.

►CMBS debt has experienced the most growth in 2015, expanding from 12.6% to 19.9% of all outstanding debt. Concurrently, banks have cut their outstanding debt by 25.8% since 2014.


3Q15 Market Summary

United States Pricing Heat Map

Office Price Per Square Foot

Office sales in five United States

metropolitan markets currently

average more than $400 psf:

Manhattan, San Francisco, Los

Angeles, Washington, DC

and Boston.

Manhattan and San Francisco

were the only office markets in

the country that averaged higher

than $400 psf during the last peak

in 2008.

Source: Newmark Grubb Knight Frank Research, Real Capital Analytics


3Q15 Capital Markets Intelligence

Top Regional Buyers

All Property Types (Past 12 Months)


West

Company $ Volume

GIC $3.5 B

Hudson Pacific

Properties $3.5 B

Farallon Capital

Partners $3.4 B

Blackstone

$3.1 B

Prologis $2.8 B

Southwest

Midwest

Southeast

Mid-Atlantic

Northeast

Company $ Volume

Brookfield Asset

Management $4.6 B

Blackstone $1.8 B

GIC $1.3 B

Starwood Capital $995 M

NorthStar Realty

Finance $911 M

Company $ Volume

Blackstone $3.1 B

WP Gilmcher $1.3 B

Starwood Capital $1.2 B

Heitman

$1.2 B

NorthStar Realty

Finance

$1.0 B

Company $ Volume

Blackstone $3.1 B

Starwood Capital $2.5 B

Clarion Partners $1.4 B

Hilton Worldwide $1.2 B

Lone Star

$1.2 B

Company $ Volume

TIAA-CREF $904 M

CBRE Global

Investors $858 M

GIC $827 M

Jamestown

$799 M

Principal

Financial $794 M

Company $ Volume

Blackstone $4.7 B

Norges

$3.6 B

SL Green $3.1 B

JP Morgan $2.8 B

OMERS

$2.7 B

3Q15 CAPITAL MARKETS REPORT 7 Source: Newmark Grubb Knight Frank Research

3Q15 Market Summary

$350M invested in

Canada over the past 12

months

$4.5B invested over the

past 12 months in

the Nordics (Starwood - lead

investor, $2.3B)

Investments in

China

totaled $6B during 2013 and

2014, but volume

has been cut to just

$1.5B in 2015

$2.7B invested in

Australia over the past 12

months (Blackstone - lead

investor, $675M)

$1.3B invested in

Latin America

over the past

12 months (largely in Rio de Janeiro,

San Juan and Sao Paulo)

$36B invested over the past

year in the

United Kingdom,

Germany and

Spain with significant

investments from

Blackstone Group and

Lonestar and Simon

United States Outbound Capital


RANK CITY

1 New York City

2 San Francisco

3 Boston

4 Los Angeles

5 San Jose

6 Washington, DC

7 Miami

8 Seattle

9 Chicago

10 Denver

Investment Activity Index

United States Overall Rankings

RANK CITY

11 San Diego

12 Orange County, CA

13 Austin

14 Dallas/Fort Worth

15 Houston

16 Charlotte

17 Phoenix

18 Raleigh/Durham

19 Northern New Jersey

20 Atlanta

RANK CITY

21 Portland, OR

22 Honolulu

23 Nashville

24 Orlando

25 Philadelphia

26 Las Vegas

27 Tampa/St. Petersburg

28 Minneapolis/St. Paul

29 Inland Empire, CA

30 Baltimore

RANK CITY

31 Westchester/Fairfield

32 Sacramento

33 San Antonio

34 Salt Lake City

35 Kansas City

36 Indianapolis

37 Virginia Beach/Norfolk

38 Jacksonville

39 Tucson

40 Memphis

3Q15 Market Summary

Source: Newmark Grubb Knight Frank Research, U.S. Bureau of Labor Statistics, Census.gov, Real Capital Analytics, Costar, National Association of Realtors


Investment Sales

Rank Billions

New York City 1 $53.1

Los Angeles 2 $27.2

Chicago 3 $20.3

Washington, DC 4 $19.9

Boston 5 $18.1

Dallas/Fort Worth 6 $17.9

San Francisco 7 $16.2

Atlanta 8 $16.1

Seattle 9 $13.9

Houston 10 $13.0

Multihousing Cap Rates

Rank Cap

New York City 1 4.0%

San Francisco 1 4.0%

Los Angeles 3 4.8%

San Jose 4 4.9%

Boston 4 4.9%

Orange County 6 5.0%

San Diego 6 5.0%

Miami 8 5.1%

Seattle 8 5.1%

Honolulu 10 5.5%

Retail Absorption

Rank SF

Dallas/Fort Worth 1 751k

Detroit 2 562k

Charlotte 3 333k

Denver 4 311k

Honolulu 5 311k

Northern NJ 6 310k

Cleveland 7 296k

Miami 8 276k

Houston 9 259k

Raleigh/Durham 10 254k

Office Absorption

Rank MSF

San Jose 1 2.35

Chicago 2 1.49

Dallas/Fort Worth 3 1.49

Seattle 4 1.45

Atlanta 5 1.16

Boston 6 1.06

Denver 7 1.04

Austin 8 1.00

Washington, DC 9 .97

Detroit 10 .89

Office Cap Rates

Rank Cap



Boston 3 4.7%

Washington, DC 4 5.1%

San Jose 4 5.1%

Los Angeles 6 5.2%

Seattle 7 5.4%

San Diego 8 5.5%

Miami 8 5.5%


Office SF Under Construction

Rank MSF

Houston 1 8.83

New York City 2 8.63

San Jose 3 8.35

Seattle 4 7.37

Dallas/Fort Worth 5 5.93

Washington, DC 6 4.59

San Francisco 7 4.27

Boston 8 3.50

Chicago 9 3.39

Denver 10 2.60

Median Home Price % Change

Rank %

Raleigh/Durham 1 15.9%

Denver 2 14.7%

Nashville 3 12.8%

Dallas/Fort Worth 4 12.5%

Tampa 5 12.2%

Charlotte 6 11.3%

Louisville 7 11.1%

Jacksonville 8 10.3%

Las Vegas 9 10.2%

Portland 10 10.0%

New Housing Units

Rank # of Units

Houston 1 36.3k

Dallas/Fort Worth 2 30.0k

Atlanta 3 18.4k

Seattle 4 15.0k

Miami 5 13.6k

Washington, DC 6 13.5k

Phoenix 7 13.5k

Los Angeles 8 13.4k

Austin 9 12.2k

New York City 10 11.6k

Hotel Cap Rates

Rank Cap


Honolulu 2 5.9%

Las Vegas 2 5.9%


Los Angeles 5 6.6%


Boston 7 7.0%

Washington, DC 8 7.1%

Memphis 8 7.1%

Northern NJ 10 7.2%

Retail Cap Rates

Rank Cap



San Jose 3 5.2%


Los Angeles 5 5.6%

Miami 6 5.9%

Westchester/Fairfield 6 5.9%

Boston 8 6.1%

Seattle 8 6.1%

San Diego 8 6.1%

Retail Rents

Rank $



Honolulu 3 $34.38

Miami 4 $31.22

San Jose 5 $29.28

Los Angeles 6 $26.30

Orange County 7 $24.06

Westchester/Fairfield 8 $23.25


San Diego 10 $21.96

Office Rents

Rank $



San Jose 3 $41.28


Boston 5 $35.46

Los Angeles 6 $33.72

Miami 7 $31.44

Seattle 8 $31.16

Austin 9 $30.23

Honolulu 10 $29.92

Office $/SF

Rank $/SF

New York City 1 $973

San Francisco 2 $790

Boston 3 $685

Washington, DC 4 $590

San Jose 5 $540

Los Angeles 6 $435

Seattle 7 $398

Miami 8 $380

San Diego 9 $345

Orange County 10 $339

Hotel $/Unit

Rank $/U

New York City 1 $745k

San Francisco 2 $447k

Miami 3 $441k

Austin 4 $355k

Orange County 5 $313k

Honolulu 6 $297k

San Diego 7 $243k

San Jose 8 $223k

Los Angeles 9 $213k

Portland 10 $195k

Retail $/SF

Rank $/SF

New York City 1 $2,513

San Francisco 2 $510

Miami 3 $355

Los Angeles 4 $354

Orange County 5 $339

San Jose 6 $330

Washington, DC 6 $330

San Diego 8 $308

Seattle 9 $261

Honolulu 10 $260

3Q15 Market Summary

Investment Activity Index

Top 10 Cities

Source: Newmark Grubb Knight Frank Research, U.S. Bureau of Labor Statistics, Census.gov, Real Capital Analytics, Costar, Realtor


3Q15 Market Summary

RANKED CITY #1-10 RANKED CITY #11-20 RANKED CITY #21-30 RANKED CITY #31-40

Rank Property Type

Sales (All)

Office

Caps

Office

$/SF

Retail

Caps

Retail

$/SF

Hotel

Caps

Hotel

$/Unit

Multihousing

Caps

Office

U/C SF

Office

Absorption

Retail

Absorption

Home Sale

% Change

New

Housing

Units

Office

Rents

Retail

Rents

Source: Newmark Grubb Knight Frank Research, U.S. Bureau of Labor Statistics, Census.gov, Real Capital Analytics, Costar, National Association of Realtors

New York City 1

San Francisco 2

Boston 3

Los Angeles 4

San Jose 5

Washington, D.C. 6

Miami 7

Seattle 8

Chicago 9

Denver 10

San Diego 11

Orange County, CA 12

Austin 13

Dallas/Fort Worth 14

Houston 15

Charlotte 16

Phoenix 17

Raleigh/Durham 18

Northern New Jersey 19

Atlanta 20

Portland, OR 21

Honolulu/Hawaii 22

Nashville 23

Orlando 24

Philadelphia 25

Las Vegas 26

Tampa/St. Petersburg 27

Minneapolis/St. Paul 28

Inland Empire 29

Baltimore 30

Westchester/Fairfield 31

Sacramento 32

San Antonio 33

Salt Lake City 34

Kansas City 35

Indianapolis 36

Virginia Beach/Norfolk 37

Jacksonville 38

Tucson 39

Memphis 40

3Q15 CAPITAL MARKETS INTELLIGENCE



Buyer Distribution: All Property Types

United States


18.2% 15.0%

18.9% 18.2% 14.2%

34.1% 41.4%

41.5% 42.9%

41.4%

31.8% 28.5%

24.2% 22.7%

24.1%

6.0% 6.5% 5.3% 5.5%

4.5%

9.9% 8.6% 10.1% 10.7% 15.8%

0%

20%

40%

60%

80%

100%

2011 2012 2013 2014 2015-YTD

Public/REITs Private Institutional User/Other International

17.6% 12.4% 14.7%

49.0%

46.6% 35.3%

18.7%

24.7%

25.0%

4.4% 3.2%

5.5%

10.3% 13.1%

19.5%

0%

20%

40%

60%

80%

100%

Tertiary Secondary Primary

Public/REITs Private Institutional User/Other International

Buyer Distribution: By Market Tier

United States



International Capital – All Property Types: Primary Markets

2015


RANK 2015 - YTD VOLUME (B)

1 Canada $13.3

2 Norway $9.3

3 Singapore $8.4

4 China $5.1

5 Australia $2.8

Global Total $58.6

Origin of Capital

Top Five Countries by Year

RANK 2014

$47.4 B

2013

$37.5 B

2012

$27.9 B

1 Canada Canada Canada

2 China China Germany

3 Norway Singapore Switzerland

4 Japan Israel UK

5 Germany Germany Israel

RANK 2011

$24.6 B

2010

$12.3 B

2009

$4.6 B

1 Canada Canada Germany

2 Switzerland Israel Canada

3 Germany UK UK

4 Israel China Netherlands

5 South Korea Germany Switzerland

San Francisco/San Jose

6.1%

Los Angeles

4.3%

Hawaii

2.8%

Houston

2.0%

Chicago

3.5%

Boston

3.9%

New York City

27.8%

Washington, DC

5.2%

Other Cities

28.3%

Miami

2.2%

Seattle

2.7%

Dallas

3.5%

Atlanta

3.2%

Phoenix

3.7%



International Capital – All Property Types: Secondary Markets

2015


While more than 70% of

international investment activity

has occurred in primary markets,

secondary and tertiary markets

have captured more than $13 billion

in transactions this year, a 28.3%

market share.

Several secondary markets have

experienced significant increases

in volume over the past two years:

- Nashville (+19%)

- Minneapolis (+22%)

- Portland (+24%)

- Charlotte (+32%)

- Las Vegas (+38%)

Portland $999 M

Las Vegas $505 M

Memphis $242 M

Nashville $136 M

Charlotte $404 M

Minneapolis $158 M

Philadelphia $130 M

Louisville

$304 M

Cincinnati $198 M

Norfolk $123 M

Detroit $294 M

Milwaukee $108 M

Indianapolis $290 M

Cleveland $205 M Reno

$737 M

Raleigh/Durham $693 M

Richmond $114 M




International Capital Matrix: All Property Types

12-Month Totals

Canada

New York–1095 AoA, 1211 AoA, 645 Fifth,

450 Park, 330 Hudson, 757 Third, 649 Fifth

Boston–500 Boylston, 225 Franklin, 60 State,

222 Berkeley, 100 High, 745 Atlantic

San Francisco/San Jose-1455 Market,

Lombard Place (MH), 374 W Santa Clara (Dev)

China

New York–Waldorf Astoria, 7 Bryant Park,

717 Fifth, Baccarat Hotel, 287 Park Ave So.

San Francisco–225 Bush (Standard Oil),

501 Macara, Burlingame Point (Dev)

Los Angeles–9900 Wilshire (Retail),

Marriott LAX Airport, Luxe City Center Hotel

Singapore

New York-Element Times Square (Hotel)

Los Angeles–15927 Distribution Way (Ind),

7100 Case (Ind), Oakwood Miracle Mile (MH)

San Francisco–2580 El Camino Real (MH),

26203 Production (Ind), 48027 Warm Springs

Chicago – LogistiCenter at Sauk Village (Ind)

Norway

New York–601 Lexington, 11 Times Square,

Hudson Square Trinity Church portfolio

Boston–100 Federal (BoA Building),

Atlantic Wharf, One Beacon

Washington, DC–800 17th (PNC Place),

Republic Square

ManhattanSan Francisco/

San JoseLos Angeles Boston DC Chicago Houston Dallas Denver Seattle Miami

Canada $3.8 B $384 M $1.0 B $3.7 B $800 M $366 M $337 M $890 M $447 M $355 M $90 M

Singapore $230 M $788 M $1.0 B $80 M $292 M $230 M $68 M $321 M $109 M $306 M $125 M

China $4.3 B $185 M $240 M $47 M $113 M $248 M $119 MNo

Acquisitions$26 M $87 M $74 M

Norway $3.9 B $621 M $599 M $712 M $700 M $596 M $79 M $327 MNo

Acquisitions$468 M $125 M

Germany $320 M $445 MNo

Acquisitions$136 M $1.1 B $468 M $435 M $70 M

No

Acquisitions

No

Acquisitions$103 M

Australia $20 M $174 M $112 M $296 M $646 M $10 MNo

Acquisitions

No

Acquisitions

No

Acquisitions

No

Acquisitions$5 M

Switzerland $348 M $20 M $191 M $172 M $367 M $26 MNo


No

Acquisitions$125 M

Hong Kong $396 M $719 M $60 M $32 M $15 MNo

Acquisitions

No

Acquisitions

No

Acquisitions

No

Acquisitions$761 M

No

Acquisitions

UAE $343 MNo

Acquisitions$42 M

No

Acquisitions

No

Acquisitions$24 M

No


No

Acquisitions$230 M

Japan $960 M $23 M $19 M $133 MNo

Acquisitions$16 M

No

Acquisitions$31 M $11 M $10 M

No

Acquisitions

KEY INVESTMENTS




International Investment Activity: China to The United States

2013 2015 2014

China has accounted for more than

$12 billion of investment activity in

the United States over the past

36 months.

Of the 21 China-based entities that

have invested at least $100 million

in the Untied States over the past

three years, only five of the

companies were founded prior to

the 1990’s: Bank of China,

Oceanwide RE Group, Shanghai

Construction Group, China Taiping

Insurance and Dailan Wanda.

$1,950

$1,360

$725

$600

$551

$510

$414

$398

$325

$315

$302

$301

$296

$274

$260

$230

$174

$158

$156

$139

$123

$117

$104

$100

$100

$0 $500 $1,000 $1,500 $2,000

Anbang Insurance Group

Zhang Xin

Fosun

Bank of China Limited

Greenland Group

Dalian Wanda Group

Anbang Insurance Group

Kuafu Properties

Shanghai Municipal

Genzon Group

China Cinda Asset Management

Wanxiang Group

Oceanwide RE Group

Grand China Fund

Shanghai Construction Group

Sunshine Insurance Group

Oceanwide RE Group

China Cinda Asset Management

Shanghai Yudu Group

Kuafu Properties

China Taiping Insurance

China Vanke

Hazens RE Group

Sinopec

Beijing Capital Development Co.




International Capital Distribution: All Property Types

Manhattan (12-Month Totals)

INVESTED CAPITAL $100+ MILLION

Norges Bank Caisse de Depot Anbang Insurance

Norway Canada China

$1 B+

Lotte Group M. Safra & Co. Unizo Bank of China OMERS Al Faisal Holdings

South Korea Brazil Japan China Canada Qatar

$500 M - $999 M

Kuafu Properties China Oceanwide Holdings ADIA Shanghai Municipal Mitsui Fudosan UBS Inditex DekaBank Keck Seng Shanghai Construction Group

China Hong Kong United Arab Emirates China Japan Switzerland Spain Germany Malaysia China

$250 M - $499 M

Sunshine Insurance Group Akelius Ascott Residence Trust Al Khalifa Family Kuwait Finance House China Cinda H&M China Taiping Insurance Grupo CB China Vanke Eretz Group

China Sweden Singapore Bahrain Kuwait China Sweden China Brazil China Israel

$100 M - $249 M

China 23.3%

Norway 21.4%

Canada 20.7%

Japan 5.1%

Brazil 4.7%

South Korea 4.3%

Other 15.6%

International Investment


$53.1

$27.2

$20.3 $19.9 $18.1 $17.9

$16.2 $16.1 $13.9 $13.7 $13.0

$11.8 $10.3 $9.9 $9.3 $9.3 $8.5 $8.3 $8.2

$7.0 $6.6

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* Includes Brooklyn, Queens, Bronx, Staten Island and Long Island

Bay Area = $28.0 Billion


Total Sales Volume: All Property Types

Major Metropolitan Cities (12-Month Totals)


3Q15 Significant Transactions

City/Property Buyer Price

Manhattan

11 Madison Avenue SL Green $2.1 B

NY Palace (Hotel) Lotte Group $805 M

575 Lexington Avenue Angelo Gordon, George Comfort, NTT $510 M

Los Angeles

523 West 6th Street Ivanhoe Cambridge/Callahan $200 M

LA Fashion Mart (Retail) Young Cho $130 M

800 Wilshire Boulevard Omni Group $80 M

San Francisco /San Jose

1355 Market Street JP Morgan Asset Management $936 M

401 Harrison Street (MH) Maximus RE Partners $410 M

888 Brannan Street TIAA-CREF jv Norges Bank $307 M

Boston

500 Boylston Street JPM Asset Management jv Oxford $774 M

222 Berkeley Street JPM Asset Management jv Oxford $565 M

75-101 Federal Street Rockpoint Group $326 M



Sales Volume by Property Type

Manhattan (12-month totals, percentages based on total volume)


Office 48.5%

Multihousing 17.8%

Retail 14.2%

Hotel 11.6%

Land 6.9%

Warehouse/ Flex 1.1%

Property Type Volume - $ Billion # of Properties

Office $25.7 176

Multihousing $9.5 459

Retail $7.6 271

Hotel $6.2 28

Land $3.6 59

Warehouse/Flex $523 (M) 15

Totals $53.1 1,008



Submarket Price $/SF Buyer

MIDTOWN

1211 Sixth Avenue ** Sixth / Rock $895 M $973 Ivanhoe Cambridge/

Callahan Capital

229 West 43rd Street Westside $516 M $1,091 Columbia Property Trust

575 Lexington Avenue East Side $510 M $685 Angelo Godon jv Normandy

and George Comfort & Sons

MIDTOWN SOUTH

11 Madison Avenue Flatiron $2.5 B $1,130 SL Green

110 Greene Street Soho $229 M $1,545 SL Green

131-137 Spring Street Soho $222 M $4,085 Invesco Real Estate

DOWNTOWN

32 Old Slip Financial $477 M $411 RXR Realty

100 Wall Street Financial $275 M $528 Cornerstone RE Advisors

40 Exchange Place Financial $120 M $480 Northwind Group

Source: Newmark Grubb Knight Frank Research

Highest Priced Completed Sales by Market

** 49% interest purchased




* Percentages based on total volume

$1,184/SF $377/BSF $435/SF $1,176/SF TBD TBD

229 West 43rd Street

Retail Condo

45 Broad Street 55 Broadway 787 Seventh Avenue & 1285

Avenue of the Americas

5 Times Square

Trinity Church

Hudson Square Portfolio

Midtown

Retail

Built in 1913 (Renovated in 2008)

250,000 SF

6 Floors

On the market for sale from Africa

Israel USA & Five Mile Capital

Partners

Kushner Properties to purchase

Seeking approximately

$296,000,000

Columbia Property Trust acquired

the office portion from Blackstone

earlier this year for $516 million

Major Tenants Include:

Discovery Times Square

Bowlmor Lanes

Haru Times Square

Guitar Center

Guy’s American Kitchen & Bar

Downtown

Development Site

Lot size approximately 13,200 SF

Approximately 265,000 SF of

development rights

On the market for sale from

LCOR Inc. & CalSTRS

Madison Equities & AMS

Acquisitions to purchase


$100,000,000

LCOR acquired the property for

$14 million from Lehman Brothers

Holdings in 2012

Swig Equities purchased the

office at 45 Broad Street in 2Q06

for $29 million, with plans to build

the Nobu Hotel and Residences,

but lost the property to Lehman

Brothers Holdings in the wake of

the financial crisis

Downtown

Office

Built in 1981

361,000 SF

31 Floors


Broad Street Development

Harbor Group International to

purchase


$157,000,000


ProPublica

The Cancer Research Institute

FedEx Office Shipping Center

AKA One Exchange Plaza

Midtown

Office

Built in 1985 and 1960

3,400,000 SF Total

54 and 39 Floors


AXA Financial


$4,000,000,000

AXA Financial has placed its

100% stake in 787 Seventh

Avenue and 50% stake in in

1285 Avenue of the Americas

on the market

Major tenants Include:

787 Seventh Ave - Wilkie Farr &

Gallagher LLP; BNP Paribas;

Sidley Austin Brown & Wood LLP

1285 A of A - UBS; Paul Weiss,

Rifkind Wharton & Garrison LLP;

BBDO Worldwide

Downtown

Office

Built in 1969 (Renovated in 1994)

1,101,779 SF

37 Floors

On the market for sale from David

Werner Real Estate

Werner acquired the class A

office property from AVR Realty

Co, for approximately $1.5 Billion

in 2014


Ernst & Young

Comcast Cable Corporation

Midtown South

Office

Eleven Property Ground Lease

Portfolio


Trinity Real Estate

Norges Bank Investment

Management is in contract to

become a venture partner for the

eleven property portfolio

The Portfolio is centered on One

Hudson Square, a 1.2 million

square foot office, along with 200

Hudson Square (387,000 SF),

205 Hudson Square (401,000

SF), 12-16 Vestry Street (61,000

SF), and seven other buildings in

the area

Trinity offered a similar, 4

property portfolio earlier this year,

which was expected to fetch

around $1.5 Billion

Notable Manhattan Investment Sales For Sale & Under Contract


Manhattan Office Building Sales

$500+ Million Transactions

2

1

3

11

20

7

1

2

11

5

14

12

7

12

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5-Y

TD

0

4

8

12

16

20

Completed For Sale/Pending


Completed (2015)


730 Fifth Avenue

230 Park Avenue

575 Lexington Avenue

11 Times Square

7 Bryant Park

32 Old Slip

For Sale/Pending

Trinity Portfolio

11 Madison Avenue

229 West 43rd Street



787 Seventh Avenue

590 Madison Avenue

609 Fifth Avenue

5 Bryant Park

5 Times Square

850 Third Avenue

1334 York Avenue




United States Office Building Sales

Average Price Per Square Foot: Institutional Quality

Source: Newmark Grubb Knight Frank, Real Capital Analytics

$973

$790

$685

$590

$550

$435 $398

$380 $345 $339 $325

$294 $273 $272

$240 $236 $235 $233

Ma

nh

att

an

Sa

n F

ran

cis

co

Bo

sto

n

Wa

sh

ing

ton

, D

C

Sa

n J

ose

Los A

nge

les

Se

att

le

Mia

mi

Sa

n D

ieg

o

Ora

nge

Co

unty

Den

ve

r

Hou

sto

n

Chic

ago

Au

stin

Ph

ilad

elp

hia

Dalla

s

Atlan

ta

Nort

he

rn N

J

$0

$250

$500

$750

$1,000



Manhattan Historical Office Building Sales

Average Price Per Square Foot: Institutional Quality


$849

$245

$973

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000



United States Office Building Sales

Average Cap Rates: Institutional Quality


4.0% 4.0%

4.7%

5.1% 5.1% 5.2% 5.4% 5.5% 5.5%

5.7% 5.8% 6.1%

6.4% 6.4% 6.6% 6.7%

Ma

nh

att

an

Sa

n F

ran

cis

co

Bo

sto

n

Wa

sh

ing

ton

, D

C

Sa

n J

ose

Los A

nge

les

Se

att

le

Mia

mi

Sa

n D

ieg

o

Chic

ago

Atlan

ta

Den

ve

r

Hou

sto

n

Ph

oe

nix

Ph

ilad

elp

hia

Dalla

s

0%

2%

4%

6%

8%



Manhattan Historical Office Building Sales

Average Cap Rate: Institutional Quality


4.2%

6.9%

4.0%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

3%

4%

5%

6%

7%

8%



Source: Newmark Grubb Knight Frank Research, Real Capital Analytics, Federal Reserve Bank of St. Louis

Investment Returns

Real Estate Yields vs. 10-Year Treasury Bill

Cap rates of commercial properties

have compressed by 16.2% and

multihousing properties by 13.0%

since 2010. However, the decline

is minimal compared to the

10-Year Treasury Bill, which

declined by 40.5%.

The current yield spreads on

commercial and multihousing

properties are 450 and 380 basis

points, respectively, greater than

the 10-Year Treasury Bill. They

remain significantly more

compelling than alternative

investment vehicles from a

yield perspective.

6.7%

6.0%

2.2%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

US Commercial Cap Rates US Multihousing Cap Rates 10 Year Treasury Bill



Source: Newmark Grubb Knight Frank

Investment Strategies

Gateway Cities

Core: Trophy asset in major

metropolitan area with stable, high

quality tenants on long term leases

offering safe, reliable returns.

Core Plus: Quality property with

ability to increase NOI through

upcoming lease expirations.

Value-Add: Current cash flow with

ability to add future appreciation

through strategic repositioning

and improvement.

Opportunistic: Substantial

enhancements needed, typically

capital intensive projects such as

redevelopments and/or ground

up construction.

RE

TU

RN

RISK

Core 5-7% IRR

Core Plus 8-11% IRR

Value-Add 12-15% IRR

Opportunistic 16%+ IRR


Pri

ce P

er

Un

it

Cap Rate

$525,000

5.0%

$300,000

$75,000

3.0% 7.0%



3Q15

3Q10

United States Multihousing Fundamentals: Primary Markets

Current Metrics vs. 5 Years Ago

Manhattan Boston Washington, DC Chicago Los Angeles San Francisco Seattle Miami




United States Multihousing Fundamentals

Primary Markets vs. Secondary Markets

* Primary markets: New York, Boston, Washington, DC, Chicago, Los Angeles and San Francisco

5.0%

6.5%

4%

5%

6%

7%

8%

2005 2007 2009 2011 2013 2015-YTD

Primary Markets Secondary Markets

Cap Rates

$247,771

$98,282

$50,000

$100,000

$150,000

$200,000

$250,000

2005 2007 2009 2011 2013 2015-YTD


Price Per Unit Over the past 24 months, cap

rates in the primary markets

have compressed by 50 basis

points, while secondary markets

have compressed by only 10

basis points.

The average price per unit in the

primary markets increased by

65.6% over the past decade, more

than double the rate of increase in

the secondary markets (30.7%).



United States Development Site Sales Volume

Primary Markets vs. Secondary Markets


As development site volume has

risen significantly in the aftermath of

the Great Recession, investors have

shown a strong preference for the

primary markets.

Capital flow into the six major

markets has increased by 9.4% in

the past year, compared to a 6.4%

increase in secondary markets.

Year-to-date, there has been over

$44.3 billion invested in

development sites nationally.

$0

$5

$10

$15

$20

$25

$0

$3

$6

$9

$12

$15

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-YTD

Bil

lio

ns

Bil

lio

ns




Source: Newmark Grubb Knight Frank, Smith Travel Research

6.8%

2005 2007 2009 2011 2013 3Q15

-20%

-15%

-10%

-5%

0%

5%

10%

RevPAR Percentage Change

United States Hospitality Statistics

$119.82

67.1%

50%

55%

60%

65%

70%

$70

$80

$90

$100

$110

$120

$130

2005 2007 2009 2011 2013 3Q15

ADR Occupancy

3Q15 DEBT MARKET ANALYSIS


3Q15 Debt Market Analysis

CMBS Issuance

United States

Source: Newmark Grubb Knight Frank Research, Commercial Mortgage Alert

$77.8

$92.6

$166.5

$198.4

$228.6

$12.1

$2.7

$11.6

$32.7

$48.4

$86.1 $94.1

$74.4

$0

$50

$100

$150

$200

$250

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-YTD

Bil

lio

ns


Debt Market Update

Commercial and Multihousing Mortgage Debt Outstanding

Source: Newmark Grubb Knight Frank Research, Trepp, Mortgage Bankers Association


Banks 49.5%

CMBS 12.6%

Life Insurance

10.9%

Others 14.8%

Agency & GSE

12.2%

Banks 36.7%

CMBS 19.9%

Life Insurance

13.5%

Others 14.1%

Agency & GSE

15.7%

Agency and GSE’s continue to lend

selectively, after reaching annual

mid-year limits.

CMBS is experiencing the most

growth, year-to-date, while banks

have slashed their outstanding

commercial and multihousing debt

by 128 basis points.

New development construction

has been fueled by international

lenders such as Deutsche Bank

and Bank of China, particularly in

gateway markets.

2014 2015-YTD


$211 $187

$159 $132 $131

$145 $159 $154

$126

$94

$64

$62

$69 $99

$110 $137

$41 $29

$24

$36

$36

$13

$25

$24 $24

$26

$27

$27 $26 $25

$25

$24

$22

$80

$84 $85 $90

$98

$102 $97

$83

$72

$61

$54

$0

$50

$100

$150

$200

$250

$300

$350

$400

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Bank CMBS Insurance Companies Other


Commercial Mortgage Maturities

United States

Source: Newmark Grubb Knight Frank Research, Trepp with Federal Reserve Flow of Funds Data

2015

Bank: $159 B

CMBS: $99 B

Insurance: $24 B

Other*: $85 B

*Includes Fannie Mae,

Freddie Mac, bridge loans

and hard money loans




20.9% 17.2% 15.6%

20.0% 20.7%

8.4% 4.3%

10.0%

3.6%

14.9% 6.0% 10.9%

5.0% 9.7%

18.3%

15.7%

12.0% 19.9% 2.7%

8.8% 4.4%

11.3%

17.2%

12.8%

13.6%

12.2%

17.3% 22.6%

6.9%

11.8% 5.5%

5.9%

17.0% 27.0%

35.1%

16.1%

12.3% 20.6%

19.3% 19.2%

20.5%

9.7%

15.0% 21.6% 16.7%

12.7% 15.8% 11.0%

9.5%

1.5% 0.5% 2.0% 2.5% 1.6% 2.0% 4.7%

0%

20%

40%

60%

80%

100%

United States Boston Chicago Los Angeles Manhattan San Francisco Washington, D.C.

CMBS Financial Institution Govt. Agency Insurance International Bank National Banks Local Bank Other

Lender Composition

2015-YTD Originated Loans

www.ngkf.com

New York City

HEADQUARTERS

125 Park Avenue

New York, NY 10017

212.372.2000

James Kuhn

President

212.372.2200

[email protected]

Jonathan Mazur

Managing Director, Research

212.372.2154

[email protected]

All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Grubb Knight Frank (NGKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NGKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient’s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.

Newmark Grubb Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and

refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents.

Newmark Grubb Knight Frank Research Reports are also available at www.ngkf.com/research

Africa

Botswana

Kenya

Malawi

Nigeria

South Africa

Tanzania

Uganda

Zambia

Zimbabwe

Middle East

Saudi Arabia

United Arab Emirates

Latin America

Argentina

Brazil

Chile

Colombia

Mexico

Peru

Puerto Rico

Asia-Pacific

Australia

Cambodia

China

Hong Kong

India

Indonesia

Japan

Malaysia

New Zealand

Singapore

South Korea

Taiwan

Thailand

North America

Canada

United States

Europe

Austria

Belgium

Czech Republic

France

Germany

Ireland

Italy

Netherlands

Poland

Portugal

Romania

Russia

Spain

Switzerland

United Kingdom

RESEARCH

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