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Manhattan Office Market 2 ND QUARTER 2015 RE PORT A NEWS RECAP AND MARKET SNAPSHOT Pictured: 1001 Avenue of the Americas

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Page 1: Manhattan Offi ce Market - New York Real Estate News · Manhattan Offi ce Market ... Partnership for New York City: New York’s Future as the World Financial Capital ... to stronger

Manhattan Offi ce Market2 N D Q U A R T E R 2 0 1 5 R E P O R TA NEWS RECAP AND MARKET SNAPSHOT

Pictured: 1001 Avenue of the Americas

Page 2: Manhattan Offi ce Market - New York Real Estate News · Manhattan Offi ce Market ... Partnership for New York City: New York’s Future as the World Financial Capital ... to stronger

Looking Ahead

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Partnership for New York City: New York’s Future as the World Financial Capital

The report released in June concluded that while New York City remains the preferred location of global fi nancial companies to establish their headquarters, there is a growing trend to relocate jobs and business operations to lower cost, more business-friendly locations that are beyond the city’s border. A comprehensive survey was conducted in collaboration with Gerson Lehrman Group (GRG), intending to better understand how the fi nancial industry is evolving; and what measures are required to solidify New York’s competitive advantage as a global fi nancial center. Collected data represents an overview of the responses from 50-fi rm respondents that included large banks, insurance companies and asset managers, private equity fi rms, hedge funds, and fi nancial technology (FinTech) startups; and represent about 1/3rd of the total industry employment in the city. Additionally, observations were included from 8-real estate fi rms that were surveyed; along with interviews from other related experts in the fi eld.

Financial Industry – an economic snapshot

• Contributes 20% of the city’s economic output, representing twice that of the next top-grossing industry.

• Accounts for nearly 1/3rd of the city’s private sector payroll, despite accounting for only 8%, or about 310,000 of the city’s private sector jobs in 2013; of which 23,000 jobs are high-technology in the areas of software, data processing and network management.

• Accounts for at least $18 billion, or 18% of the city’s annual tax revenues.

• Has a signifi cant impact on the creation of new jobs outside the industry. Typically for every job added in the fi nancial sector, 2 jobs are created in such industries as healthcare, hospitality (hotel and food services), and retail trade. The commercial banking sector has a higher ratio of 1:3.5 versus the 1:2 for most other sectors. Over 700,000 jobs currently depend on the fi nancial services industry.

• About 71% of the industry’s employees live in New York City and comprise a vital segment of the city’s middle class. Average employee earnings are $266,000 annually — a fi gure that is somewhat skewed by the 53% employed in the higher income bracket of securities brokerage earning an average of about $356,000 annually.

• Since 2000, the industry’s infl ation-adjusted payroll has declined 6.7% in contrast to the 4.7% fi gure that represents the city’s overall private sector payroll decline.

• Amongst the 50-fi rm respondents 62% reported that they expanded New York City operations over the past 3-years; but only 52% expect further expansion in the upcoming 3-5 years, primarily due to cost pressures, lack of government incentives, and competition from domestic and international fi nancial hubs which are prompting operation relocations to states including Florida, Delaware, New Jersey, Pennsylvania, California, North Carolina.

• Rate of job growth has slowed to about 50% of that of the city’s overall private sector — a rate that is expected to accelerate over the next 5-years. While the FinTech sector presents opportunity for job growth, companies have been attracted away from New York City to stronger high-tech cultures in lower cost cities such as Silicon Valley, San Francisco, Texas, Stamford, CT, Nashville, D.C. Metro as well as Canada and London.

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Looking Ahead

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Partnership for New York City (cont’d)

Suggested Recommendations to Maintain New York City’s Competitive Edge include:

• Increased investment in the currently overloaded transportation system; and improved airport capacity.

• Upgrades to the city’s digital infrastructure which currently lags behind competitors.

• Expand the NYS Excelsior Jobs Program to provide tax incentives for retention of middle wage jobs, including the fi nancial industry.

• Reform New York City and State tax structure to reduce income tax on high earners to a maximum of 50% as compared to the current 54%; and eliminate the city’s Commercial Rent Tax which imposes a 6% surtax on large commercial tenants.

• Prepare New Yorkers for fi nancial services jobs to strengthen the city’s job pool by working with industry and educators to develop a “roadmap” of career opportunities; plus coordinated public and private investment in non-profi t organizations that have a proven record of preparing students for fi nancial industry positions.

• Increased efforts to build on the success of programs such as Fintech Innovation Lab. The annual program which assists startups developing innovative technology products targeted at fi nancial services customers is run by the Partnership Fund of New York City and Accenture. In addition, government and industry should work with venture capitalists to identify promising new fi rms and expand procurement of local tech vendors.

Offi ce of the NYC Comptroller: NYC Quarterly Economic Update 1Q15

The report released in May revealed a continued strengthening of the city’s economy, surpassing the rate of economic improvement on the national level which was sluggish during the 1st quarter.

Real Gross City Product (GCP) – Grew at an estimated annual rate of 3.5%, in comparison to the negligible advanced estimated 0.2% rate nationwide. The growth in the 1st quarter represents a 25% increase of the 2.8% rate of the 4th quarter. The city’s GCP accounted for just over 4% of the nation’s total economic output in 2014.

Venture Capital Investment (VC) – Totaled about $1.4 million representing a year-over-year surge of 45.2% in the New York metro area (NYMA); and the highest 1st quarter level in 14-years. Average deal sizes have swelled, indicated by the rise in total dollars despite a drop of 16 deals from the 119 made during the 1st quarter of 2014. VC investment in the NYMA represented 10.4% of the national total of $13.4 billion; up 1.4% year-over-year.

NYC Personal Income Tax Revenues – Rose 4.9% year-over-year to an estimated over $3 billion in the 1st quarter. While the fi gure represented the highest 1st quarter level on record, it rose at a slower rate than the steeper 10.8% year-over-year change in the 4th quarter.

Sources: http://pfnyc.org/wp-content/uploads/2015/06/2015-06-world-fi nancial-capital.pdf http://comptroller.nyc.gov/wp-content/uploads/documents/Q_Econ_Update_1Q15.pdf

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In the News

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Second Avenue Subway – Progress Update

After several opening delays, Metropolitan Transportation Authority (MTA) offi cials reportedly expect that Phase 1 of the long-awaited Second Avenue subway line is on track to open by December 2016. Currently about 82% complete, but the remaining 18% will be the most diffi cult to complete and includes installing communication, electrical, fi re-safety and signal systems. In addition, the stations are still a work-in-progress and the installation of elevators, stairways, turnstiles, and platform fl ooring not completed.

The fi rst phase will run from a new stop at 96th Street to an existing station at East 63rd Street, which will be getting an upgrade. The 3-newly created stations at 72nd, 86th and 96th Street will be served by the existing Q-line; but ultimately an added T-line which is part of later construction phases, will also stop at the 3-new stations.

The congested urban area throughout which Phase 1 construction took place resulted in heightened challenges throughout the project, the Upper East Side area having about 100,000 people per square mile according to MTA offi cials. In total, some 583,600 cubic yards of rock and 460,300 cubic yards of soil equating to over half the volume of the Empire State Building have reportedly been excavated; and about 8,780-feet of the total 13,220-feet of track have been laid with most of the third-rail system yet to be installed. The new stations will feature a column-free design similar to those in Washington, D.C.; be the fi rst to be outfi tted with sound-absorbing panels along the ceiling; have air-tempering systems to cool platforms; and be equipped with WiFi.

Although the project has a long way to go before the completion of its intended full length span that will stretch from Harlem’s East 125th Street to Lower Manhattan’s Hanover Square, the Second Avenue line whose vision dates back to the 1920s has made great strides since modern construction began in 2008. However a shortfall in funding could prompt further delays with Phase 2 of the project, which is just one of many on the MTA’s project list. To date, the project has reportedly generated $842 million in wages, created 16,000 jobs, and produced $2.87 billion in economic activity.

Harlem Activity Highlights

Corn Exchange, 81-85 East 125th Street (Harlem) – Artimus Construction has introduced 25,000 square feet of offi ce space to the market, following the recently completed full restoration of the historic building located at the corner of Park Avenue. The project was awarded to the company by the city’s Economic Development Corporation which took control of the property in 2003, selling it to Artimus affi liate 125th Street Equities LLC, for roughly $1.472 million in 2011. In 2013, the $16 million renovation plans were approved by the Landmarks Preservation Commission. The building which received landmark status in 1993 was originally constructed in 1883-84 as the home of the Mount Morris Bank.

The restoration required preservation of the landmarked base 2-fl oors, which total about 10,000 square feet and currently being marketed for retail use; and reconstruction of the 3rd- 7th fl oors. In addition to adding modern amenities to receive LEED-certifi cation, new heating and cooling systems were installed. Now taking its place once again in the burgeoning neighborhood of Harlem along the very active 125th Street corridor, ownership is hoping to attract technology or educational non-profi t tenants.

The City of New York / 2322-2336 Third Avenue (Harlem) – The 20-year renewal of approximately 100,000 square feet is reportedly the 2nd time the city has renewed and extended their lease. City agencies Child Care Center and the Department for the Aging Beatrice Lewis Senior Center have been tenants at the building since 1973. Currently occupying the entire 5-story building, the city’s Human Resources Administration and the Administration for Child Services have also established offi ces at the property over the years.

Sources: http://www.nytimes.com/2014/10/30/nyregion/harlem-landmark-is-reborn-from-the-base-of-the-old-corn-exchange-bank.html?_r=0 http://cityroom.blogs.nytimes.com/2012/02/16/for-a-harlem-landmark-last-legs-or-fi rst-steps/ http://www.dnainfo.com/new-york/20120308/harlem/corn-exchange-building-will-have-new-look-with-old-fl avor

Corn Exchange - Rendering

72nd Street Station Entrance - Rendering

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New York City’s Unemployment

• According to the New York State Department of Labor’s fi gures, the city’s unemployment rate fell to 5.9% (not seasonally adjusted) at the end of May; in comparison to 6.5% at the end of the 1st quarter. Year-over-year fi gures resulted in a 19.18% improvement from the 7.3% rate of May 2014.

• Unemployment on the National level fell to 5.2% at the end of May, decreasing 5.45% from the 1st quarter fi gure of 5.5%. Year-over-year fi gures resulted in an 11.86% improvement from the 5.9% rate of May 2014.

• Employment activity in New York City’s private sector resulted in the gain of 67,500 jobs for the 3 month period between February 2015 and May 2015. Year- over-year fi gures resulted in a 2.7% gain of 94,600 jobs; in comparison to 1.8% and 2.6% year-over-year growth for New York State and the nation respectively. Educational and Health Services continued to lead the way, followed by Professional & Business Services. While job numbers continue to rise, the rate of increase was comparatively more moderate than that of the previous year.

Weekly Wages

Overall weekly wages in New York City averaged $2,138 at the end of the 4th quarter 2014, representing a positive 5% improvement year-over-year according the recent report released by the U.S. Department of Labor. The Information sector boasted an over 7.5% increase year-over-year, in contrast to the Education & Health sector that came in at the low with a rate of increase equaling 3.17%.

Vacancy for Class A & B offi ce space fell 3.8% over 1st quarter’s 8.33% fi gure, resulting in an 8.01% vacancy at the end of the 2nd quarter. Downtown accounted for the strongest quarter-over-quarter improvement, shrinking 8.12% resulting in a vacancy of 10.62%; solidly rebounding from a 1st quarter rise. Midtown and Midtown South continued a downward trend at a more moderate decline of 1.72% and 1.37% resulting in respective vacancies of 7.75% and 4.40%. The vacancy rate in Midtown’s Penn Plaza neighborhood rose sharply in part due to 7 Bryant Park coming online, introducing over 180,000 square feet of new inventory.

Absorption closed the 2nd quarter at positive 1,395,942 square feet, representing a rebound over 1st quarter’s negative 496,405 square feet. All 3 major commercial submarkets saw improvement during the quarter, Downtown boasting the highest fi gure.

Rental Rates rose moderately in the 2nd quarter. The overall weighted average asking rent for Class A & B offi ce space of $59.65 per square foot represented a 0.55% increase over the previous quarter, as the rate of increase continued to slow as compared to 1st quarter’s 0.90%. Class B asking rents continued to account for the more signifi cant increase of 4.88%, while Class A asking rents saw a slight reversal of negative 0.63%.

Sources: http://www.bls.gov/schedule/archives/all_nr.htm

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

2Q2004

2Q2005

2Q2006

2Q2007

2Q2008

2Q2009

2Q2010

2Q2011

2Q2012

2Q2013

2Q2014

May

2015

NYC Unemploy Rate US Unemploy Rate

855,200

664,500

446,200

414,300

182,900

882,300

686,500

452,400

426,900

186,400

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

NYC Yr-over-Yr Job StatisticsMay 2014 Job#'s May 2015 Job#'s4Q2013 Weekly Wage 4Q2014 Weekly Wage

2Q 2015Total Class A Class B

Vacancy

Rental Rate

Net Absorption

Market Snapshot: Class A & B

Source: NYS Department of Labor and US Department of Labor, Bureau of Labor Statistics

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12.42%

2.55%

8.13%

5.13%

5.00%

6.31%

0.00% 5.00% 10.00% 15.00%

Downtown

Midtown South

Midtown

9.89%

9.45%

9.33%

9.53%

9.00%

6.20%

5.93%

5.53%

5.43%

5.60%

0.00%

3.00%

6.00%

9.00%

12.00%

2Q14 3Q14 4Q14 1Q15 2Q15

Class A Class B

2Q2014

3Q2014

4Q2014

1Q2015

2Q2015

Thousands

Removed Added

2Q2014

3Q2014

4Q2014

1Q2015

2Q2015

Thousands

Removed Added

2Q2014

3Q2014

4Q2014

1Q2015

2Q2015

Thousands

Removed Added

34,749

33,145

32,718

33,298

32,0273,779

3,699

3,504

3,420

3,295

$40.00

$45.00

$50.00

$55.00

$60.00

$65.00

0

10,000

20,000

30,000

40,000

2Q14 3Q14 4Q14 1Q15 2Q15

Thou

sand

s

Lease SF Class AB Sublease SF Class AB

Lease Rent AB Sublease Rent AB

468

1,338

97

(626)

1,648

(51)

345

526 129

(252)

1,000

500

0

500

1,000

1,500

2,000

2Q14 3Q14 4Q14 1Q15 2Q15

Thou

sand

s

Net Absorption Class A Net Absorption Class B

$56.20

$90.38

$66.06

$43.79

$69.19

$53.31

$0.00 $50.00 $100.00

Downtown

Midtown South

Midtown

Class A Class B

930

143

575

98

106

244

(500) 0 500 1,000

Downtown

Midtown South

Midtown

Thousands

2nd Quarter 2015

Vacancy WTD Average Asking Lease Rent Net Absorption

Quarter-over-Quarter

Vacancy Lease & Sublease Sq. Ftge Net Absorption

Quarter-over-Quarter Inventory Changes

Downtown Midtown South Midtown

Class A & B Statistics At A Glance

*Buildings 75,000 SF and larger; vacancy and absorption calculations based upon move-in date versus deal signing date

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Submarket Statistics Overview: Class A & B Offi ce

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Manhattan Inventory Vacant Sq. Ftge. Vacancy Rate WTD Avg Rent PSF

Net Absorption

SubmarketsDistricts

Total RBA*

Direct Sq. Ftge.

Sublet Sq. Ftge.

Total Sq. Ftge.

Direct Vacancy

Sublet Vacancy

Overall Vacancy

DirectAsking

Year-to-DateSq. Ftge

Downtown 109,652,518 11,059,372 583,362 11,642,734 10.09% 0.53% 10.62% $55.02 115,499

City Hall 14,746,021 745,321 1,981 747,302 5.05% 0.01% 5.07% $50.69 85,000

Financial District 41,755,471 4,424,039 275,447 4,699,486 10.60% 0.66% 11.25% $47.60 -689,760

Insurance District 12,046,306 465,501 1,170 466,221 3.86% 0.01% 3.87% $42.47 148,338

TriBeCa 6,647,455 198,867 120,000 318,867 2.99% 1.81% 4.80% $67.00 6,706

World Trade Center 34,457,265 5,226,094 184,764 5,410,858 15.17% 0.54% 15.70% $65.89 565,125

Midtown South 59,985,039 2,330,274 306,712 2,636,986 3.88% 0.51% 4.40% $72.44 272,849

Chelsea 10,417,320 206,346 20,643 226,989 1.98% 0.20% 2.18% $51.94 -13,707

Flatiron 21,589,773 712,452 111,800 824,252 3.30% 0.52% 3.82% $74.36 430,749

Gramercy Park 10,288,334 922,466 19,460 941,926 8.97% 0.19% 9.16% $72.39 -99,245

Greenwich Village 4,353,399 142,832 3,000 145,832 3.28% 0.07% 3.35% N/A 45,219

Hudson Square 9,393,521 249,386 147,870 397,256 2.65% 1.57% 4.23% $75.48 -86,796

SoHo 3,942,692 96,792 3,939 100,731 2.45% 0.10% 2.55% $76.15 -3,371

Midtown 271,578,059 18,637,115 2,405,255 21,042,370 6.86% 0.89% 7.75% $63.01 511,189

Columbus Circle 32,157,669 1,476,377 286,314 1,762,691 4.59% 0.89% 5.48% $57.46 -217,865

Grand Central 52,773,745 4,851,334 349,621 5,200,955 9.19% 0.66% 9.86% $63.63 515,440

Murray Hill 11,144,764 497,832 59,215 557,047 4.47% 0.53% 5.00% $53.89 2,949

Penn Plaza/Garment 46,974,585 3,359,672 550,477 3,910,149 7.15% 1.17% 8.32% $55.29 -794,280

Plaza District 80,641,592 5,824,512 646,277 6,470,789 7.22% 0.80% 8.02% $67.31 176,696

Times Square 44,323,129 3,301,202 506,391 3,807,593 7.45% 1.14% 8.59% $71.02 137,155

U.N Plaza 3,562,575 16,581 16,666 33,247 0.47% 0.47% 0.93% $60.87 -9,007

Grand Total 441,215,616 32,026,761 3,295,329 35,322,090 7.26% 0.75% 8.01% $59.87 899,537

*Buildings 75,000 SF and larger; vacancy and absorption calculations based upon move-in date versus deal signing date

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Leasing - Landlords Reach to the Sky to Maximize Revenues

Efforts to squeeze more revenue out of real estate assets has prompted owners and developers to look up, taking advantage of building rooftop space to help lure tenants and extra retail business. Rooftop observatories and venues date back to the early 1900s when buildings like the former Hotel Astor, now the site of the offi ce tower One Astor Place at 1515 Broadway, offered a vast rooftop garden for public gatherings in the heat of the summer. However in subsequent years their popularity dwindled with the introduction of air conditioning wich transitioned rooftops into a destination for air conditioning units, fans and power generators.

New York City’s competitive real estate market brings a return to rooftop attractions, offering extra amenities for tenants; and added attractions for tourists as owners and developers attempt to make their assets distinctive. The following examples of some of today’s popular rooftop and observatory destinations that further substantiate the growing trend, despite some concern amongst real estate analysts of possible over-saturation:

World Trade Center Observatory – The newest attraction that opened the end of May featuring panoramic views from 1,250 feet above ground on fl oors 100-102 of One World Trade Center. Visitors are able to view a time-lapse video of the development of New York City’s skyline from the 1500s to present during the approximately 47 second elevator ride to the observatory level. In addition to other high-technology features, visitors are offered the choice of 3-sky-high dining options. Legends Hospitality LLC which was awarded the contract to run the observatory reportedly spent close to $80 million on the venue; hoping to attract about 3.2 million visitors.

The Empire State Building – Offers an outdoor deck on the tower’s 86th fl oor as well as an indoor deck on the 102nd fl oor. Visitation continues to rise with annual revenues reportedly reaching $111.5 million in 2014, from $40 million a decade ago. The deck now accounts for 40% of the building’s entire revenue with a reported profi t in 2014 of $82.5 million.

Top of the Rock at Rockefeller Center – Offers 360º views on the 70th fl oor of 30 Rockefeller Plaza via 3-viewing decks. In addition, the building’s cocktail bar SixtyFive has an outdoor terrace for guests on the 65th fl oor.

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Sources: http://skyscrapercenter.com/building/30-hudson-yards/13325 • http://chelseanow.com/2013/02/hudson-yards-set-to-alter-skyline-transform-neighborhood/ http://www.nytimes.com/2015/06/01/nyregion/up-on-the-roof-top-fl oor-attractions-help-maximize-revenues.html?_r=0 https://www.zagat.com/b/new-york-city/10-hot-new-rooftop-scenes-in-nyc#1

Landlords Reach to the Sky (cont’d)

In addition - Manhattan:

Whitney Museum of American Art, 99 Gansevoort Street – The May opening of the new facility in the Meatpacking district offers an 8th fl oor terrace for museum visitors featuring water views of the Hudson River and food.

Jane Hotel, 113 Jane Street – The once private-party bar and rooftop at the 5-story boutique hotel in the West Village opened to the general public in mid-May offering cocktails and food with views of the Hudson River.

Roof at Park South Hotel, 124 East 28th Street – The rooftop cocktail lounge atop the boutique hotel in the NoMad neighborhood offers views of Murray Hill and the Chrysler Building.

Skylark, 200 West 39th Street – The cocktail lounge located on the 30-32nd fl oors in the Garment District building offers multi-level indoor spaces and an open-air rooftop terrace with views of the Hudson River, The Empire State Building, and Midtown Manhattan.

Catch, 21 Ninth Avenue – The rooftop eatery atop the 3-story landmark building located in the Meatpacking district offers views of Lower Manhattan and MePa.

Brooklyn:

The Gorbals, 98 North 6th Street – The restaurant offers rooftop dining as part of the 4-story Space Ninety 8 concept store from clothing retailer Urban Outfi tters located in Brooklyn’s Williamsburg.

Sheltering Sky at McCarren Hotel, 160 North 12th Street – The rooftop lounge atop the 8-story boutique hotel in Williamsburg offers views of the East River, East Manhattan, and parts of Williamsburg and Greenpoint.

Northern Territory, 12 Franklin Street – The bi-level Greenpoint eatery offers rooftop dining with views of the East River, Williamsburg and Greenpoint.

New rooftop destinations on the horizon:

30 Hudson Yards – The tower being developed by Related Companies and Oxford Properties will reach a linear height of 1,287 feet and expected to feature a cantilevered public observation deck at approximately 1,102 feet. The tower that is expected to begin construction this year will be anchored by Time Warner, Inc.

70 Pine Street – The former AiLife tower that is being redeveloped by Rose Associates into a mixed-use residential and extended stay building will be featuring a boutique-size observatory. In addition a 4-story restaurant will spread across fl oors 62-64 and 66, and be run by Spotted Pig restaurateurs April Bloomfi eld and Ken Friedman as a result of a recently signed deal announced in May. The venue reportedly comes at a price tag of about $5 million to create and will be open to tenants, guests, and the general public. The repositioned building is expected to open by the end of the year.

75 Rockefeller Plaza – The 33-story offi ce tower that is currently under renovation by RXR Realty will reportedly see the addition of multiple outdoor decks with the focus of attracting new tenants such as the Bank of America which reportedly has a lease out for 200,000 square feet at the tower.

St. Cloud at the Knickerbocker Hotel, 6 Times Square – The hotel that fi rst opened in 1906, and recently reopened following the completion a $240 million redevelopment will be featuring a rooftop space offering dining and a cigar lounge.

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The continued popularity of shared offi ce space, while establishing 2 major New York City players — WeWork and Regus, is seeing several other smaller fi rms on the rise. WeWork launched in 2010 offers offi ce aesthetics more attractive to freelancers and creative types, taking advantage of the changing vibe in Midtown South to take the offi ce suite business model to the next level. The 1989 launched Regus offers offi ce-centers that utilize a more traditional executive suite model. Providing fl exibility and little capital investment for small and startup companies, some providers seem to be devoid of concerns of oversaturation; claiming that the facilities are larger and nicer offering amenities that a small company could not fi nd in a lease on their own.

Leasing - Co-working Space Providers Continue Expansion Mode

NYC’s Largest Share Offi ce Providers

Company Total Sq. Ft. in NYC # of Locations

WeWork 1.85 Million 21

Regus 1.47 Million 48

The company has 4-more locations on the way

Jay Suites 228,000 7

Virgo Business Centers 192,000 6

Corporate Suites 169,155 9

PowerSpace 153,000 4

Emerge212 (SL Green) 120,000 3

Select Offi ce Suites 106,000 2

Alley NYC 92,000 3

TheYard 80,000 4

ServCorp 62,715 4

Tech Space 59,345 3

Cowork.rs 57,774 2

Micro Offi ce Solutions 35,300 6

Grind 22,374 2

Projective Space 12,700 2

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Co-working Space Providers (cont’d)

A recent report took a close look at WeWork to try to predict whether or not the high-profi le co-working space provider would be able to weather an economic downturn. The company’s rapid rate of growth during an escalated real estate market has some sources viewing the company as fi nancially vulnerable. However WeWork’s founders are not new to running a company during challenging times, having launched their predecessor startup Green Desk in 2008 at the height of the economic crash by converting a single fl oor of a DUMBO warehouse into an eco-friendly co-workspace; ultimately expanding to 7-locations in Brooklyn and Queens before selling their stake and reinvesting the money into the launch of WeWork in 2010.

To date, WeWork has reportedly leased over 3 million square feet of offi ce space globally with future reported plans to lease over 50 million square feet over the next 5-years. The company’s footprint in New York City accounts for over half of their existing space, equating to about 1.85 million square feet; making them one of the city’s largest tenants. An overview of the report attempts to present supportive information to help predict the company’s ability to withstand a reversal of the current rising economic tide.

Lease Terms: Typically 10-15 years

Lease Rent: In some cases, landlords offer discounted rates in exchange for WeWork’s commitment of large blocks of space — Rudin Management’s 110 Wall Street was cited in example. The entire 300,000-square-foot building was leased to WeWork who also assumed much of the cost of renovations, having incurred severe damage during Hurricane Sandy; and previously only about 60-70% leased. According to a landlord spokesperson, the deal made sense; and in the event that the tenant defaulted, they would be left with an improved building.

Tenant Rent Premiums: Companies sublet space on a month-to-month basis, taking advantage of numerous amenities and networking opportunities. The subtenants (dubbed members) pay a signifi cant premium in exchange; an expense that some members have noted is signifi cantly offset by the business they derive through the membership network.

Profi t Margins: In one cited example, a tenant at 261 Madison Avenue pays an estimated $200 per square foot in comparison to the low-$40s per square foot base rent that WeWork pays for their roughly 44,000-square-foot footprint at the building. While some of the rent/premium income generated goes towards expenses including space renovation, on-site management and offered amenities, it still leaves room for a comfortable profi t margin.

Tenant Profi le: The majority of WeWork’s subtenants are small businesses, that despite frequently seen as primarily tech startups, come from a mix of industry sectors.

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Month Sq. Ft. Location

February 240,000 85 Broad Street

April180,00072,000136,118

8 Times Square (1460 Broadway)77 Sands Street - Dumbo Heights (part of former Watchtower complex in Brooklyn)*315 West 36th Street

*Nearing expansion deal on top of the 90,000-square-foot deal at 81 Prospect Street signed last year

Co-working Space Providers (cont’d)

Economic downturn – trying to predict

Some anticipate that small businesses would be the fi rst to disappear at the onset of another economic downturn; and with shorter-term contracts could potentially leave providers with long-term leases and large blocks of vacant space. However a reported analysis of data compiled between 2007 and 2011 based upon research from the Federal Small Business Administration showed that small fi rms with less than 10-employees barely declined, in contrast to companies with 100-499 employees that incurred the steepest decline; concluding that shared offi ce space demand is unlikely to fade in an economic crisis. Some sources further point out that leasing activity would likely escalate due to the fl exibility of short-term opportunity at a time when companies may become weary of making long-term commitments; and staff reductions giving rise to the need for the kind of shared services such as accounting, legal, and IT that are generally offered by companies such as WeWork and Regus.

In comparison to some of the more conservative companies that prefer to lease space at market lows, We Work continues to expand its footprint at peak pricing; but on the plus side, expansion during a peak market has made it easier for the company to raise capital from investors which according to reports has totaled $570 million to date. Having also generated revenue from the sale of a roughly 37% ownership stake which observers predict will further bolster WeWork’s ability to weather a downturn despite paying high rents.

Leasing activity by WeWork in 2015 has brought the announcement of several new deals in the city. In addition, talks of the debut in the city of the company’s recently launched WeLive at 110 Wall Street will bring a block of residential micro-units and community living facilities atop the offi ce tower; offering a residential version of the company’s current offi ce-shared product. Rumors have also resurfaced of a potential combined WeWork/WeLive development project being considered at the Brooklyn Navy Yard. While it has been anticipated that at some point even with rent discounts, the city could become too overpriced and prompt WeWork to further explore more affordable cities, many agree that the company’s business model is here to stay. Although some sources suggest ownership or becoming a developer as a next step, a company spokesperson commented that it would be contrary to the company’s foundation as an asset-light business whose success in part has come from the emphasis of building community and selling atmosphere and service.

Source: http://www.nydailynews.com/life-style/real-estate/wework-alternative-working-home-swanky-buildings-nyc-article-1.1044412 http://www.bloomberg.com/news/features/2015-05-21/wework-real-estate-empire-or-shared-offi ce-space-for-a-new-era- P.12PPPPP.1P.1P.12.121212222

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Leasing Activity

Big Block Tenants in the Market

Cushman & Wakefi eld, the Manhattan-based global real estate company that was recently acquired by DTZ is reportedly in the market for 300,000-square feet to serve as a new consolidated global headquarters to house DTZ, Cushman & Wakefi eld, Massey Knakal, and Cassidy Turley. Currently located in about 175,000 square feet at 1290 Sixth Avenue, the company in a team effort with DTZ has launched the preliminary stages of the search. Some sources have noted that nearby 1271 Sixth Avenue could present a potential site, offering adequate space as a result of the upcoming relocation of Time, Inc. to Lower Manhattan’s 225 Liberty Street that will result in roughly 1.9 million square feet being vacated at the Sixth Avenue tower. Cushman & Wakefi eld’s 10,222-square-foot outpost at 1 World Trade Center, leased last year in a 10-year signing that resulted in the company’s relocation from 100 Wall Street will most likely be maintained.

Historic Timeline Snapshot of Acquisitions:

November 2014: DTZ – The global commercial real estate services fi rm whose origins date back over 255 years was acquired by private equity fi rm TPG Capital1 last year for $1.1 billion. The DTZ brand was launched in 1993. Their 24,327-square-foot New York City offi ce located at 1271 Sixth Avenue is currently being offered for sublease.

January 2015: Cassidy Turley – The real estate company was acquired by a private equity consortium backed by TPG Capital, PAG Asia Capital2, and Ontario Teachers’ Pension Plan3 for an undisclosed price that has been estimated to be roughly $557 million. Cassidy Turley offi cially launched in 2010 through the ownership consolidation of 4-fi rms in 2008. Headquartered in St. Louis, MO expanding over the next 4-years, the company continued to grow through several mergers and acquisitions ultimately establishing 60 countrywide offi ces. Their approximately 47,000-square-foot New York City offi ce is located at 277 Park Avenue and currently serves as the combined offi ce for both DTZ and Cassidy Turley.

January 2015: Massey Knakal – The real estate company was acquired by Cushman & Wakefi eld for roughly $100 million per reports. Founded in 1998, at the time of acquisition, Massey Knakal had over 200 employees providing real estate services throughout New York City, Westchester County, Long Island, and New Jersey. Currently headquartered in 40,738 square feet at 275 Madison Avenue through a 15-year expansion deal announced last July.

May 2015: Cushman & Wakefi eld – The real estate company with origins dating back to 1917 reached a deal with DTZ to be acquired for $2 billion from Exor SpA. The investment arm of Italy’s Agnelli family, Exor SpA acquired a 67.5% stake in the fi rm in late 2006 for $565.4 million, subsequently increasing their ownership stake to 81%. The newly combined company will retain the Cushman & Wakefi eld brand. The acquisition is expected to be completed before the end of the year.

1TPG Capital: a global private investment fi rm founded 1992 (formerly Texas Pacifi c Group) and headquartered in Fort Worth, TX and San Francisco, CA.2PAG Asia Capital: one of the largest Asian-based alternative investment managers3Ontario Teachers’ Pension Plan (OTPP): the largest single-profession pension plan in Canada. An independent organization that invests the pension fund’s assets and administers the defi ned benefi t pensions for active and retired teachers in Ontario.

Sources: http://www.wsj.com/articles/tpg-backed-dtz-to-acquire-cushman-wakefi eld-1431317451

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Leasing Activity (cont’d)

Large Vacancy on the Horizon

Norton Rose Fulbright / 666 Fifth Avenue (Plaza) – The law fi rm will be vacating roughly 107,000 square feet upon relocating to a similar size offi ce at 1301 Sixth Avenue in the fall of 2016.

Ironshore / 1 State Street (FiDi) – The insurance company will be vacating abut 54,000 square feet upon relocating to a 100,000-square-foot space at 28 Liberty Street (FiDi).

Large Blocks of Space that became Vacant in the 2nd Quarter

1700 Broadway (Midtown/Columbus Circle) – 119,093 square feet as a result of DC Entertainment ending its nearly 80-year presence in New York City, relocating the company’s comic book unit to Burbank, CA in an effort to consolidate all operations. The move was fi rst announced in 2013.

7 Bryant Park (Midtown/Penn Plaza) – 184,751 square feet was introduced to the market upon delivery of the newly constructed tower.

114 West 41st Street (Midtown/Penn Plaza) – 63,724 square feet came online as a result of knitted sweater manufacturer Hamphshire Group securing an amended lease agreement allowing the company to return 4 of the 5-fl oors originally leased, but never occupied.

1 Liberty Plaza (Downtown/World Trade Center) – 263,509 square feet of the former Goldman Sachs space that came online last year with an April 1st occupancy.

Notable Move-ins

WeWork / 205 East 42nd Street (Midtown/Grand Central) – 122,129 square feet. The deal announced in December added a new outpost for co-working space provider. The new space spans 7-fl oors including the building’s penthouse unit on the 21st fl oor which features an outdoor area.

875 Third Avenue (Midtown/Plaza) – 117,972 square feet.

- Troutman Sanders: The law fi rm moved into the 87,216 square feet that spreads across entire fl oors 15-17 in a relocation deal announced last May; vacating about 145,000 square feet at 405 Lexington Avenue as a result of the 15-year signing.

- JPB Foundation: The philanthropic agency moved into the 30,816-square-foot space on the tower’s entire 29th fl oor; having signed a 15-year lease earlier this year.

Estée Lauder / 28-40 West 23rd Street (Midtown South/Flatiron) – 100,000 square feet. The cosmetic company will use the expansion space for its Aramis and Designer Fragrance divisions, along with digital and social media staff. The deal announced in February will see the company add entire fl oor 6-9 to their existing 3rd fl oor space for a total footprint of about 166,000 square feet.

Bank of New York Mellon Corp (BONY)/ 2 Brookfi eld Place, 225 Liberty Street (Downtown/World Trade Center) – 3576,658 square feet The bank relocated upon selling their former headquarters at 1 Wall Street in October, relocating about 850 of their 1,700 employees, with the remainder being shifted to the BONY owned building at 101 Barclay Street. The 20-year deal that spans entire fl oors 17-23 was announced last June.

Macmillan Science & Education / 1 New York Plaza (Downtown/FiDi) – 176,121 square feet. The publisher, a subsidiary of Holtzbrinck Publishing Group consolidated offi ces spread across 3-Manhattan locations. The 17-year lease was announced in March 2014, and will spread across entire fl oors 46-48 and a portion of the 45th fl oor.

1 World Trade Center (Downtown/World Trade Center) – 166,287 square feet.

- High 5 Games: The content creator for online gaming leased 87,663 square feet spread across entire fl oors 58-59 in the 15-year deal announced in November.

- xAD: The mobile ad startup leased 43,849 square feet across the entire 60th fl oor in a 10-year deal announced in November.

- Servcorp: The Australia-based co-working & virtual space provider leased 34,775 square feet across the entire 85th fl oor in a 15- year deal announced last August.

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Submarket ReCap: Midtown

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Offi ce Rents to Reach New Heights

The ground breaking of the long awaited 425 Park Avenue (Midtown East) being developed by L&L Holdings Co. arrived in early June along with news that the developer will be seeking asking rents of $250 per square foot and north for offi ce space on the upper fl oors of the tower being built on speculation. The 47-story, 670,000-square-foot tower will include a 14,000-square-foot high-end eatery operated by chef Daniel Humm and restaurateur Will Guidara, known for the Michelin-starred restaurant Eleven Madison at 11 Madison Avenue in the Flatiron. Construction is expected to be completed in 2018; and will be the city’s fi rst tower to receive Well Building Standard Certifi cation. The mid-$200 pricing will also reportedly be a fi rst, even amongst such renowned buildings as Salow’s 9 West 57th Street and the GM Building at 767 Fifth Avenue which have successfully commanded rents just over $200 per square foot.

In addition, nearby 432 Park Avenue, a mixed-use project that is currently under construction by Macklowe Properties and Los Angeles, CA-based CIM will include a 6-story, 71,000-square-foot offi ce component owned solely by Macklowe that will seek asking rents nearing $200 per square foot. Tenants of the luxury offi ce space will be able to utilize the high-end amenities from the attached residential condominium including a pool, gym, and private restaurant and lounge.

New to Market

MetLife / 3 Bryant Park aka 1095 Sixth Avenue (Penn Plaza/Garment) – The insurance company has introduced roughly 355,924 square feet to the market as a sublease in preparation of their relocation to their namesake building at 200 Park Avenue. The sublease includes a private ground fl oor lobby; and spreads across fl oors 13-20, 23, and 39-41. In March, the company signed a lease for 430,000 square feet that will consolidate their Manhattan offi ces. Relocation is expected to begin in December 2016 and proceed in phases for a mid-2017 completion.

Previously it had been reported that MetLife was in discussions with the tower’s co-owners Canadian-based fi rm Cambridge and Chicago, IL-based Callahan Capital Partners to release them from their existing lease, freeing up the space to re-rent at the higher current market price. Evidently MetLife has decided to sublease the space and take advantage of the escalated rents that will allow the space to be offered to a subtenant at an attractive rate while potentially still netting a profi t. Remaining term on the space was not released.

Midtown Class A and B

Vacancy 7.75%

Rental Rate $63.36 per sq. ft.

Net Absorption 330,832 sq. ft.

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Submarket ReCap: Midtown (cont’d)

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Lease Deals to Watch For

Pershing Square Capital / 250 West 55th Street (Columbus Circle) – The hedge fund is reportedly close to signing a lease for 49,000 square feet spanning entire 34th- and 35th fl oors at the Boston Properties tower. The relocation deal would result in an expansion from their current 31,000-square-foot offi ce just a few blocks away at 888 Seventh Avenue (Columbus Circle).

Morgan Stanley / 750 Seventh Avenue (Times Square) – The fi nancial fi rm is reportedly nearing a deal to renew its over 400,000 square feet at the tower. Currently headquartered at nearby 1585 Broadway, several of the company’s key divisions including its wealth management business are housed at the 7th Avenue building. If the renewal moves forward, the decision to remain in place will follow in the footsteps of JPMorgan Chase who earlier this year opted to remain in 230 Park Avenue and 383 Madison after exploring relocation options; further substantiating the more conservative approach that fi nancial fi rms are taking with regard to their offi ce space.

Bank of America / 75 Rockefeller Plaza (Plaza) – The Charlotte, NC-based bank reportedly has a lease out for 200,000 square feet at the tower that is currently undergoing a $140 million modernization program. RXR Realty had acquired the 99-year leasehold in 2013 from former Harrods department store owner Mohammed Al Fayed. The tower previously served as the home of Time Warner, which had been leasing and self-managing the building since 1993; ultimately subleasing the space and deciding not to renew its lease that expired in 2014.

Hogan Lovells / 55 Hudson Yards aka 550-570 West 34th Street (Hudson Yards) – The Washington, D.C.-based law fi rm is reportedly considering a move to the 1.3 million-square-foot tower. The announcement comes just about 2 weeks following the 83,000-square-foot deal signed by law fi rm Boies Schiller & Flexner. The fi rm is currently located at 875 Third Avenue (Plaza), where they have been a tenant for 13-years. The 111,000-square-foot offi ce spread across 3-fl oors is under a lease that will be expiring in 2017.

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Submarket ReCap: Midtown (cont’d)

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Lease Deal Highlights - 2nd Quarter 2015

Skadden Arps Slate Meagher & Flom LLP / 1 Manhattan West aka 400 West 33rd Street (Penn Plaza/Hudson Yards) – The law fi rm signed a 20-year lease for 550,000 square feet spread across entire fl oors 28-43 within one of the two planned offi ce towers at Brookfi eld Property Partners L.P.’s Manhattan West complex. The deal announced mid-April will allow Brookfi eld to begin construction of the 2.1 million-square-foot tower located on the southwest corner of 9th Avenue at 33rd Street. The relocation will represent a downsizing from the company’s current footprint of approximately 644,671 square feet at 4 Times Square (Times Square); and is expected to take place sometime in 2020 upon expiration of their current lease.

The building is slated for a 2019 delivery and fi nanced by a $1.25 billion construction loan co-led by lenders Wells Fargo Bank, N.A., Deutsche Bank AG New York Branch, The Bank of New York Mellon, and the Toronto-Dominion Bank; and Brookfi eld investing $850 million for a total project cost for the tower of $2.1 billion.

Norton Rose Fulbright / 1301 Sixth Avenue (Columbus Circle) – The law fi rm will be making a parallel move in the fall of 2016 from its current location at 666 Fifth Avenue (Plaza). The fi rm’s new 107,215-square-foot offi ce will be similar in size to the 5th Avenue offi ce and spread across entire fl oors 29-31, and part of the 28th fl oor. The Paramount Group building which incurred a signifi cant rise in vacancy upon the bankruptcy of law fi rm Dewey & LaBoeuf in 2012, resulting in over 470,000 square feet being vacated, now boasts a current occupancy of roughly 92%.

Texas Pacifi c Group (TPG) / 888 Seventh Avenue (Columbus Circle) – The private equity fi rm which owns real estate company DTZ, and soon to add Cushman & Wakefi eld to the mix, has committed to remain at the tower another 10-years. The renewal/expansion deal will see the company expand from its current 80,000-square-foot offi ce to a total of 100,000 square feet spread across entire fl oors 33-38; expanding from an original footprint of 20,000 square feet when they fi rst came to the building 10-years ago. Asking rent for the space was reportedly $115 per square foot.

Interpublic Group (IPG) / 909 Third Avenue (Plaza) – The global advertising fi rm will be expanding its presence at the tower as a result of an 112,300-square-foot sublease from sublandlord Forest Laboratories. Currently leasing roughly 220,000 square feet at the SL Green tower, IPG’s corporate group will join other IPG agencies, relocating from 1114 Sixth Avenue (Times Square) into the new space that spans across entire fl oors 23-25 and part of the 20th fl oor.

Bank of America / 1133 Sixth Avenue (Times Square) – The North Carolina-based bank will be expanding its presence at the tower to roughly 205,000 square feet, adding 115,000 square feet in a 15-year deal announced mid-June. The expansion space will spread across fl oors 17, 39, 40, 42 and 43. The bank exercised its 5-year option, negotiating the additional 5-years to make the deal that had a per square foot asking rent in the $90s.

Nike / 855 Sixth Avenue (Penn Plaza) – The Beaverton, OR-based athletic footwear company will be relocating from their current offi ce at Google’s 111 Eighth Avenue as a result of an 11-year, 147,000-square-foot deal for the entire offi ce component of the mixed-used building currently under construction by The Durst Organization. The space that will spread across entire fl oors 3-6, plus a portion of the 2nd fl oor had a reported asking rent of $78 per square foot; and boasts double-height ceilings on the 6th fl oor with a 15,000-square-foot roof deck for Nike’s exclusive use. The 570,000-square-foot mixed-use development is expected to be completed in 2016.

The deal marks the 3rd large relocation announced over the last year from Google’s headquarters, as the technology giant continues its efforts to free up space at the building they have been unable to fully occupy since acquiring it in 2010. It was not clear whether or not Nike received a buyout of their lease of about 90,000 square feet that included a renewal option and the potential extension of their stay at the building through 2025. Other recent relocations include:

Deutsch Inc – The advertising fi rm relocated to 330 West 34th Street (Penn Plaza) earlier this year, vacating over 134,000 square feet.

WebMD – the online health information and news provider negotiated a buyout deal with Google for the company’s remaining term of November 30, 2015, vacating approximately 100,000 square feet.

Boies Schiller & Flexner / 55 Hudson Yards aka 550-570 West 34th Street (Hudson Yards) – The law fi rm is the fi rst lease signing at the roughly 1.3 million-square-foot tower currently under construction by co-developers Related Companies, Oxford Properties Group, and Mitsui Fudosan America, Inc. The 83,000-square-foot space will spread across 3-fl oors at the tower to be designed for creative atmosphere similar to the fi rm’s current offi ce which has a small art gallery; and there are even considerations to add music in the form of a Steinway baby grand player piano in an open space. The new tower that will open onto a new park and 7-train subway station is expected to deliver in 2018; and is intended to attract service-type tenants that move to the Hudson Yards complex but require smaller fl oor sizes. The fi rm will be relocating from 575 Lexington Avenue (Plaza) where they occupy about 100,000 square feet, being able to take advantage of housing its staff in a smaller space. The deal is the second major shift by a law fi rm to the neighborhood, Skadden Arps Slate Meagher & Flom’s recently signing to anchor Brookfi eld Property Partners L.P.’s 1 Manhattan West, 400 West 33rd Street.

Source: http://www.wsj.com/articles/55-hudson-yards-signs-its-fi rst-tenant-1433812340

55 Hudson Street - Rendering

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Submarket ReCap: Midtown (cont’d)

P.18PPPPP.1P.1P.18.181818888Source: http://www.wsj.com/articles/vornado-could-give-new-yorks-penn-station-area-new-lease-on-life-1428421290

Lease Deal Highlights (cont’d)

Yodle / 330 West 34th Street (Penn Plaza) – The Manhattan-based online advertising platform for small businesses moved into its new offi ces in April. The company’s relocation had been announced back in July however, it now seems that their new offi ces will be larger than the 85,000 square feet originally reported. Relocating from 50 West 23rd Street (Chelsea), Yodle’s new headquarter location will spread across the 18-story building’s entire top fl oors for an updated square footage of 114,000 square feet. Initially about 85,000 square feet will be occupied, growing into the remainder over the next 2-years with an expect increase in staff from 300 to 550 in 3-years. In order to secure the deal, ownership Vornado Realty Trust agreed to build a dramatic 30-foot by 60-foot glass skylight that sits across the central staircase connecting the 3-fl oors, fl ooding the space with natural light. Vornado invested $6.4 million building out the new offi ce, with Yodle contributing $2.2 million plus an additional $1 million for furnishings. Despite the tenant’s preference for a 15-year lease, the lease that carries rents in the mid-$60s will only run for just over 9-years with the landlord hoping rents in the area will rise over the next decade.

More recently, footwear and sports apparel retailer Foot Locker negotiated a lease for 145,000 square feet that will spread across entire fl oors 2-4 at the tower. The deal has a term of at least 10-years, and will see the company relocate from 112 West 34th Street (Penn Plaza) where they just renewed the lease for their 34,200-square-foot retail fl agship location.

A dominant landlord in the area around Pennsylvania Station, Vornado plans to invest hundreds of millions of dollars to improve their over 8 million-square-foot portfolio in the neighborhood. Efforts have already been initiated with last May’s announcement of the planned closure of at least 10 fast-food eateries along the retail passageway inside Penn Station’s Long Island Rail Road hub which the REIT controls through its 1 Penn Plaza tower. Vornado is hoping to spark a revitalization of the area that currently remains somewhat gritty and congested with commuters. A June meeting of a committee of Community Board 5, which oversees the area, brought the announcement of Vornado selecting Oslo, Norway-based architectural fi rm Snohetta to create a “framework” for the redesign of their buildings and street-level spaces in the district; creating a similar concept of the public plaza the fi rm designed for the Times Square area.

While planning is still in preliminary stages, some of the more prominent ideas include tearing down the retail space currently occupied by Duane Reade and Kmart, and adding new retail on the block of the REIT’s 1 Penn Plaza building which sits one block north of the railway station. In addition, suggestions to help alleviate the commuter congestion in the area that the company has agreed to cover the associated costs include:

• Closing off a portion of West 33rd Street to vehicular traffi c beginning around July 19 through October 11th in order to collect data to be used to devise a more permanent solution to commuter congestion that may lead to a permanent pedestrian area near Madison Square Garden;

• Reducing the vehicular lanes along 32nd Street to a single lane to widen space for pedestrian foot-traffi c along Vornado-owned Hotel Pennsylvania and Manhattan Mall that make up the entire north side of that block;

• Possibly installing some additional entrances to Penn Station.

As one of the two designated developers for part of the proposed expansion of Penn Station into the Farley Post Offi ce’s redevelopment into the new mixed-use Moynihan Station, Vornado’s further redevelopment plans for the area will most likely require city or state approvals; but the company intends to work closely with the city and the 34th Street Partnership, which represents the area’s retailers.

While suggestions by some sources include the creation of a curated food hall which has had success in the city, exemplifi ed by MePa’s Gansevoort Market and the Plaza Hotel’s Plaza Food Hall, current efforts by some landlords with properties in the area include:

1359 Broadway – The Empire State Realty Trust (ESRT) is currently seeking an upscale eatery to occupy the 13,900-square-foot multi-level space at the base of the tower located at West 36th Street. The asking rent for the 6,200 square feet of ground level space is in the low $200s per square foot.

210 West 31st Street – Onyx signed a $6.5 million, 99-year net lease with the Province of St. Mary of the Capuchin Order, planning to demolish the existing 12,544-square-foot structure and erect a modern 3-story, 30,000-square-foot retail building which will include a 7,500-square-foot roof for outdoor dining. Ownership is hoping to attract an upscale bar and grill restaurant and ground fl oor asking rent in reportedly $350 per square foot.

However, some sources comment that without residential construction, the ability to attract better food options could be challenging. Further noting that people typically seek out eateries close to their homes or in areas that offer a good nightlife, both of which are currently lacking. While Madison Square Garden (MSG), which recently underwent a renovation and Pennsylvania Station are the main draw to the area, MSG’s future at the location is uncertain due to the impending renovation and expansion of the transportation hub as part of the proposed Moynihan Station redevelopment project; and the high volume of foot-traffi c that fl ows through Penn Station is transient and probably less apt to want to linger as they rush to-and-fro to catch trains home.

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Submarket ReCap: Midtown (cont’d)

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Lease Deal Highlights - Double Header Spring Openers

The month of April brought news of multiple deals at 2 of SL Green’s buildings. According to the landlord’s website, both deals required extensive work with multiple tenants to create the large blocks of space.

Bloomberg / 919 Third Avenue (Plaza) – The data and media company signed on for a 15-year, 254,556-square-foot lease that will spread across 8 fl oors at the 47-story, 1.5 million-square-foot tower.

WeWork / 315 West 36th Street (Garment) – The fast growing co-working space provider has leased the entire 9-story, 136,118-square-foot commercial component of the 17-story building in a 15-year deal. The space has a separate entrance as a result of a divided lobby that was created upon repositioning the upper 7-fl oors into residential condominiums around 2003.

Another duo of signings at One Worldwide Plaza, 825 Eighth Avenue (Clinton-Hell’s Kitchen) by co-owners George Comfort & Sons, RCG Longview, DRA Advisors, and the New York REIT brings the tower to 98.2% occupancy. Although details of the 2-deals were not released, they totaled 103,000 square feet.

Rubenstein Associates – The public relations fi rm signed a lease for 68,000 square feet spread across 2-fl oors at the tower.

David Barton Gym – The high-end fi tness club leased 35,000 square feet adding its 6th location in the city.

Source: http://www.nytimes.com/2003/01/31/nyregion/residential-real-estate-more-apartments-in-garment-district.html

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Submarket ReCap: Midtown South

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Bowery - Developing Enclave for Creative Tenants

The neighborhood that overlaps sections of the East Village, Chinatown, the Lower East Side, and Little Italy is starting to enjoy rising leasing activity amongst creative tenants. In part due to an overfl ow from the tight offi ce market in SoHo. TAMI (technology, advertising, media and information sectors) start-ups typically begin in co-working locations, but space requirements can quickly change when injected with an infl ux of funding from a venture capital investor prompting the immediate need to expand. Instacart, the San Francisco, CA-based startup that provides rapid grocery delivery for companies including Whole Foods and Costco recently raised $220 million in a Series C funding round prompting the company to open its fi rst New York City offi ce and relocate from a co-work space at 72 Allen Street to a 3,000-square-foot space at 580 Broadway (SoHo).

Although some sources point out that currently there are not many properties available yet that can accommodate TAMI tenants, or many in the midst of rehabilitation, there are some proactive developers ready to take on commercial projects and turn them into turnkey spaces hoping to take advantage of the signs of a growing interest. Approximately 20 startups have already established outposts in the area with some willing to do the renovation work themselves such as AppFigures, a tech company that builds reporting systems for mobile apps with clients that include eBay, Evernote and PBS relocated from Midtown to 133 Chrystie Street in 2013; and Bureau Blank, a creative agency focused on organizations and government at 273 Grand Street.

Midtown South Class A and B

Vacancy 4.40%

Rental Rate $71.65 per sq. ft.

Net Absorption 36,699 sq. ft.

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Midtown South - Bowery (cont’d)

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161 Bowery - Caspi Development is currently rehabilitating the building located between Delancey and Broome Streets. The 1920s structure recently received a Wired Certifi cation Silver rating from WiredScore for its fi ber optic Internet connection that was installed as part of the building upgrades that are underway; and further considering the additional installation of a fi xed wireless Internet provider as backup. As tenants vacate, fl oors in the 7-story building are being renovated with installation of numerous data ports, outlets, and kitchenettes that include amenities like wine refrigerators.

72 Allen Street – Located between Broome and Grand Streets, co-working space provider Projective, is currently in the process of upgrading its connectivity capabilities of the company’s 3rd fl oor space. Other start-ups include Stripe, a company that enables the acceptance of payments over the Internet; Buffer, which serves as a network to facilitate the cross-sharing of social media; and formerly Instacart.

Additional activity in the area that is expected to further drive demand for space along the corridor includes:

190 Bowery – A yet to be named consortium of businesses including Trunk Archive, a full service image licensing agency; CLM, Streetersand Management + Artists, global management agencies for the creative industries sector recently signed a lease to occupy 29,750 square feet spread across entire fl oors 2-6 of the 35,617-square-foot landmark. The graffi ti-covered former Germania building that for several years served as the home and offi ce of photographer Jay Maisel, is currently undergoing a restoration of its façade, but will reportedly maintain most of its gritty-feel to refl ect the Bowery of old.

250 Bowery - The International Center for Photography (ICP) will be relocating their facility from 1133 Sixth Avenue having closed on the acquisition of the 11,009-square-foot retail unit that is located at the base of a 24-unit residential condominium completed in 2013.

While the neighborhood currently boasts affordable space, it may be short-lived due to an uptick in buildings that have been sold and slated for redevelopment of signifi cant renovations that will drive rents higher down the road.

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Submarket ReCap: Midtown South (cont’d)

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Lease Deal to Watch For

Google / Pier 57 “Superpier” (Chelsea) – The Mountain View, CA-based technology company is continuing to expand its footprint in the city, signing a letter of intent (LOI) to take 250,000 square feet at the former Marine and Aviation building that has been rebranded as Superpier. If the deal closes, it will leave only 50,000 square feet of the 300,000-square-foot offi ce component that is part of the planned 560,000-square-foot offi ce/retail redevelopment project by co-developers Youngwoo & Associates and RXR Realty. Heightened attraction to the pier brought the mid-May announcement of negotiations with American chef celebrity Anthony Bourdain to create his Bourdain Market in the entire 100,000-square-foot retail component at the planned redevelopment project.

Lease Deal Highlights - 2nd Quarter 2015

PayPal / 95 Morton Street (Hudson Square) – The company has leased 95,000 square feet in a 12-year deal at the building where current asking rents are reportedly $80 per square foot. Currently sharing an offi ce with parent company and online auction site eBay, PayPal will relocate from 625 Sixth Avenue (Chelsea/Flatiron) to its own offi ce this summer as a result of the spin-off underway of the e-payment fi rm. The new location will boast a branded lobby and entrance on Barrow Street.

Ralph Lauren / Starret-Lehigh Building, 601 West 26th Street (Chelsea) – Fashion design fi rm Ralph Lauren is expanding its presence at the tower by about 60,000 square feet for a total footprint of roughly 100,000 square feet. The expansion space will be shared by the company along with its Club Monaco subsidiary, which has its global headquarters at the 11th Avenue and West 26th Street location. Asking rents at the building, pending fl oor level, reportedly range from the $50s to the $70s per square foot.

400 Lafayette Street (East Village/NoHo) – Back-to-back signings by 2 technology tenants will fi ll over 50,000 square feet on the building’s top fl oors. Asking rents for both spaces were reportedly in the high-$60s.

• SeatGeek – The online ticket-sales startup that is currently based at 235 Park Avenue South (Gramercy Park) will occupy 27,000 square feet spread across the entire 4th fl oor as a result of the 7-year deal.• DraftKings – The Boston, MA-based virtual fantasy sports platform will occupy the entire 5th fl oor at the building as a result of the 5-year signing for the 23,500-square-foot space.

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Submarket ReCap: Downtown

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LoMa’s Leasing and Financial Incentives Renewed

News in the fi nal days of June brought the welcomed announcement of Albany’s approvals to renew several Lower Manhattan business and developer incentive programs. The programs that were created in the aftermath of 9/11 to help stimulate leasing activity and rebuild the neighborhood were due to expire at the end of June. Supporters of the need to extend the programs had pointed out that although great strides have been made, efforts are far from complete as the World Trade Complex remains a work-in-progress. Large amounts of space that will need to be leased at both 2 World Trade Center, which has yet to break ground; and 3 World Trade Center, which is currently under construction will require a continuation of the incentives.

In contrast, critics that had hoped to see an end to the incentive programs commented that the neighborhood has signifi cantly rebounded and no longer needs the advantage of special incentives to attract residents and businesses, substantiated by very strong leasing activity and relocations of large companies to the area over the last few years.

Lower Manhattan Incentive Programs Snapshot:

Commercial Revitalization Program (CRP) was developed with the goal of rehabilitating older building stock in Lower Manhattan. The New York City Department of Finance provides benefi ts under CRP through two tax incentives: $2.50 real estate tax abatement and a Commercial Rent Tax Special Reduction. These benefi ts apply to nonresidential or mixed use premises located in designated abatement zones. Applicants are also required to make certain minimum expenditures to improve the eligible premises.

Industrial & Commercial Abatement Program (ICAP) is administered through the New York City Department of Finance. It is a benefi t for developers that provides a partial exemption from or abatement of property taxes for up to 25 years for eligible industrial and commercial buildings south of Murray Street that are built, modernized, rehabilitated, expanded, or otherwise physically improved. Eligibility for ICAP benefi ts may also allow a participant to receive reduced energy rates through the Lower Manhattan Energy Program (LEMP).

Lower Manhattan Energy Program (LEMP) is administered by the New York City Department of Small Business Services (SBS). The program provides qualifi ed buildings energy at discounts of up to 45% off of standard rates. Benefi ts which are available for 12 years are provided to property owners, who may choose to pass along savings to their tenants (government agencies, personal service providers, public benefi t corporations, and retailers are not eligible).

Lower Manhattan Relocation Employment Assistance Program (LM-REAP) is administered by the New York City Department of Finance and provides a $3,000 tax credit per employee, per year to businesses that relocate to Lower Manhattan from outside of the 5 boroughs. The credit may be taken against the NYC General Corporation Tax, the Banking Corporation Tax, the Unincorporated Business Tax, and / or the Utility Tax.

Sale Tax Exemption is administered by the New York State Department of Taxation and Finance and provides an exemption from the sales tax on goods purchased for the build-out of offi ce space in Lower Manhattan (south of Murray Street).

Downtown Class A and B

Vacancy 10.62%

Rental Rate $54.27 per sq. ft.

Net Absorption 1,028,411 sq. ft.

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Submarket ReCap: Downtown (cont’d)

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World Trade Center Transportation Hub’s “Oculus” Opening Nears

The retail centerpiece of the over $3.9 billion transit hub will be opening to limited pedestrian traffi c in July; although the storefronts along its concourses are not expected to debut until later this year. The north-south passageway of the winged white structure that creates the appearance of a bird in fl ight, will link the NJ PATH train platforms to new entrances on both Vesey and Liberty streets. As construction barriers continue to diminish on the multi-building site, the congestion of pedestrian traffi c continues to ease with the recent opening of a 25-foot wide section of sidewalk between Church and Greenwich Streets on the north-side of Liberty Street. In addition, plans to open the second of 4-new white marbled PATH platforms and the removal of a temporary fl oor-to-ceiling barrier in the PATH mezzanine will allow a fi rst glimpse of the Oculus’ vast skeleton-like interior; and a ringside view of construction progress as it moves towards an expected early 2016 completion.

The temporary entrance to the PATH train located on Vesey Street is expected to begin demolition in the coming months, the project incurring several construction staging challenges as a result of the Port of Authority of NY & NJ’s (PANYNJ) decision to maintain service of the PATH’s 50,000 daily commuters and those on the 1-subway line. Already Platform B of the PATH has opened to commuters; and Platform C is currently being reconstructed. Glass panels are being installed in the skylight and between the rib-like columns of the outer structure. Already the opening of the northeast corner of the memorial plaza is allowing pedestrians to walk the entire length of the site for the fi rst time since September 11, 2001. Full completion of the transit hub’s construction is slated for some time next year; and in addition to adding new retail, will connect 11-subway lines and the NJ. PATH train.

Sources: http://www.downtownny.com/grow-your-business/leasing-and-fi nancial-incentives • http://www.panynj.gov/wtcprogress/wtc-observation-deck.cfm http://www.nytimes.com/2015/05/07/nyregion/as-oculus-at-world-trade-center-opens-so-does-a-neighborhood.html

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Submarket ReCap: Downtown (cont’d)

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Santiago Calatrava’s Oculus

Oculus Retail - Renderings

One World Observatory Entry Santiago Calatrava’s Oculus

“Oculus” Opening Nears (cont’d)

Another milestone step forward came in May as the complex continues to reincorporate into the daily life of Lower Manhattan. On May 29, the 120,000-square-foot observatory at One World Trade Center opened to the public. At an elevation of about 1,250 feet on the tower’s 100-102 fl oors, the One World Observatory will provide visitors a spectacular view of New York City; and is projected to attract an estimated 3.8 million annual visitors. Dedicated, state-of-the-art elevators ascend to the top in approximately 60 seconds. The venue will be run by Legends Hospitality, LLC.

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Submarket ReCap: Downtown (cont’d)

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Lease Deals to Watch For

News Corp. & 21st Century Fox / 2 World Trade Center aka 200 Greenwich Street(World Trade Center) – The media companies controlled by Rupert Murdoch reportedly signed a non-binding but detailed letter of intent (LOI) in early June to lease a total of about 1.3 million square feet on the lower fl oors of the tower under separate leases at the yet to be constructed tower. If the deal moves forward for a relocation from the companies’ current Sixth Avenue locations, it will help jumpstart the construction of the 4th tower on the site; as well as further substantiate Lower Manhattan’s shift from a fi nancial sector dominated neighborhood to a mixed blend of industries that now include a signifi cant presence of media, technology and creative tenants.

Both media companies currently have offi ces under several different leases at 1185- and 1211 Sixth Avenue (Times Square) that are due to expire in 2020. Negotiations with Silverstein Properties are ongoing; and decisions by the 2-companies will likely be made by the end of the year in order to give adequate time to plan for the future of thousands of employees and work out economic and contractual details.

In response to the potential deal, a redesign of the 2.8 million-square-foot tower was created to accommodate studios, newsrooms and open fl oors that will meet the specifi c requirements of both media companies; shifting away from the original design that was intended mainly for fi nancial fi rms. In addition, about 50,000 square feet of retail space will be included and controlled by World Trade Center retail operator Australian-based Westfi eld Group.

Construction activity at the World Trade Center site has picked up momentum as the multi-structure project draws closer to becoming a completed reality. 3 World Trade Center (aka 175 Greenwich Street) is once again rising at a steady pace, temporarily halted until additional fi nancing was put into place in November. The building recently underwent some minor design modifi cations, removing the previously intended spires located in the corners of the tower’s rooftop to better blend with the roofl ines of 2- and 4 World Trade Center. Advertising fi rm GroupM will be the anchor tenant in 516,000 square feet, having signed a lease in 2013. The 80-story development will rise to a linear height of 1,170-feet; and house 2.5 million square feet of offi ce space and 300,000 square feet of retail space within its multi-level podium.

2 World Trade Center - Rendering

World Trade Center - Former Rendering World Trade Center - New Rendering

World Trade Center - Looking South

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Submarket ReCap: Downtown (cont’d)

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Lease Deals to Watch For (cont’d)

Moody’s / 1 World Trade Center (World Trade Center) – The credit-rating provider is nearing a deal to lease 80,000 square feet that will further expand the company’s presence in Lower Manhattan. Currently headquartered next door at 7 World Trade Center, the company was unable to expand the 15-fl oor, approximately 600,000 square feet they currently occupy at the latter tower since it is currently 100% occupied, prompting Moody’s to seek alternative locations. Moody’s has been headquartered in the neighborhood for over 100-years, having relocated to the World Trade Center from 99 Church Street (City Hall) as a result of a 20-year signing in 2006. The expansion deal is signifi cant for One World Trade Center as it marks the fi rst sizeable deal for the tower by a fi nancial-services fi rm.

Lease Deal Highlights - 2nd Quarter 2015

Gucci / 195 Broadway (World Trade Center) – The luxury fashion house will be adding its name to the growing roster of fi rms relocating to Lower Manhattan, having signed a 10-year lease for 83,964 square feet. The new offi ce that spreads across the building’s entire 11th- and 12th fl oors will be somewhat smaller than the roughly 100,000 square feet the company currently occupies at 685 Fifth Avenue (Plaza). Gucci will be paying a $53 per square foot base rent that will escalate to $58 per square foot in the 6th year. The asking rent previously reported in April was $55 per square foot.

Ironshore / 28 Liberty Street (FiDi) – Fosun International signed their fi rst major deal since taking control of the former 1 Chase Manhattan Plaza building in 2013. The U.S. insurer will be leasing 100,000 square feet spread across 3-fl oors at the tower, doubling their presence in the city from their current 50,000-square-foot offi ce at 1 State Street Plaza (FiDi). Fosun reportedly acquired a 20% interest in the company last August, signaling that the China-based investment fi rm may intend to fi ll the tower with companies it controls both here and in Asia. The asking rent for the space was at least $80 per square foot according to sources.

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Sale Activity

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Manhattan’s sale market remains tight for Class A offi ce buildings with fewer than 250 that are 450,000 square feet or larger according to sources. As the city’s economy continues to improve, rising asking rents combined with a limited inventory are driving investor interest. Despite new offi ce towers rising in the Far West Side and Downtown, the effect on Class A inventory is diminished by ongoing residential conversion of older stock, exemplifi ed by the Chetrit Group’s repositioning of the former Sony headquarters at 550 Madison Avenue into residential condominiums.

Further tightening the sale market where current demand by investors to acquire assets in “gateway’ cities remains high, is the anticipation that several existing landlords as well as newcomers including pension funds and foreign investors intend to hold the acquired assets for the long-term. However some sources point out that an unforeseen change in circumstances could shift long-term plans, referencing as example the surge in acquisitions by the Japanese in the 1980s that at the time were considered long-term holders, but abruptly came to an end a decade later brought on by a global recession. Today, only a few of the properties purchased by Japanese investors in the 1980s are still held in ownership as a result.

Looking Ahead

At a time when foreign investment has been on the rise in the city, a loosening of the Foreign Investment in Real Property Tax Act (FIRPTA) may be nearing passage. Already passed through the U.S. Senate fi nance committee, the 2-proposed bills will move for a vote by Congress before the end of the year. Viewed by real estate developers and owners as a deterrent of foreign investment in the U.S., FIRPTA was enacted in 1980 which authorized the United States to tax foreign persons on dispositions of U.S. real property interest; requiring the transferee to deduct and withhold a tax equal to 10% (or other amount) of the total amount realized by the foreign person on the disposition.

If the proposed amendments are passed, foreign pension funds will be allowed to invest in U.S. real estate without paying capital gains taxes on the proceeds of those investments; potentially unlocking a signifi cant amount of foreign capital that can be put to use for real estate development, improvements, and investments in New York City. According to fi gures compiled by Washington, DC non-profi t the Real Estate Roundtable, investments by foreign pensions over recent years represent an estimated $3.7 billion in capital gains taxes that could be saved over the next 10-years.

Data refl ects a sample of sold buildings over 100,000-square-feet

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Quarter-over-Quarter Sale Statistics

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Sale Activity (cont’d)

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7-Factors Contributing to the City’s Flourishing Investment Sales Market

Recent sale activity trends reported show a growing number of new investors from both the national and global levels entering New York City’s real estate market. Many fi rst time buyers are not limiting themselves to single acquisitions; eager to enter the New York City market which for the last 20-years has reportedly been considered the major leagues of all commercial real estate markets.

• Urbanization: There is an increasing trend of a growing number of the nation’s people to shift from rural settings to the city. This trend has been signifi cantly apparent in New York City. The demand to live and work in the city is projected to bring another million people to New York City within the next 15-years.

• Population Growth: The city’s growing population has a signifi cant effect of the underlying fundamentals of commercial real estate. The growing talent pool is a catalyst for local company growth; generates increased demand for housing spurring development; boosts consumer numbers for the city’s retail stores.

• Safe Haven: New York City continues to be considered a safe haven for investment, offering high levels of liquidity eliminating investor concern for future asset sales.

• Investment Gains: The rising values of New York City’s commercial real estate inventory gives investors a higher probability of fi nancial gains; further heightened by the increasing value of unused air right. Investors have the potential to retain an asset while generating gains from the proceeds of transferrable development right sales — a sale option that is unique to New York City.

• Economic Stability: Long-term national economic stability in the U.S. has been a major factor in attracting foreign investors.

NYC Real Estate Investment Cooperative (REIC) Launched

Continued rising rents and the threat of being priced out of spaces has prompted a group of about 200 New Yorkers from diverse neighborhoods, professions, ethnic backgrounds and tax brackets to organize a collective group to allow its members to leverage investments in order to secure permanently affordable commercial properties in New York City. Launched with the intention of establishing fi nancial strength in numbers that will allow members to pool their money in order to invest in land and buildings through a real estate co-op. If the cooperative succeeds, it will likely be the fi rst of its kind in the city with a primary goal of preserving space for small businesses as well as social service and arts organizations.

The structure of the co-op remains to be established, but options include becoming a limited-liability corporation; or the group could incorporate as a cooperative, which is classifi ed as a non-profi t in New York. The collective decisions made by the co-op’s shareholders will determine the type of properties to be purchased for the portfolio. Organizers have already received online pledges of over $1.2 million according to reports; but intend to complete the co-op’s incorporation before accepting any money. With an initial goal of developing a “list of realistic properties and the money to secure at least one of them within two years,” the success of the co-op will hinge upon the solid commitment of its members.

Sources: http://www.irs.gov/Individuals/International-Taxpayers/FIRPTA-Withholding • http://nycreic.com/

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Sale Activity (cont’d)

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New to Market

609 Fifth Avenue (Plaza) –SL Green Realty and Wharton Properties have introduced the 160,000-square-foot building that includes 50,000 square feet of unused development rights to the market. Some sources anticipate a sale may fetch in the neighborhood of $600 million ($3,750 per square foot). The retail space is currently home to American Girl Place in a current lease that is due to expire in 2018. A tenant since 2003 in the 4-level, 42,500-square-foot space previously occupied by offi ce supply retailer Staples, the 15-year deal signed by parent company Middleton, WI-based Pleasant Company was valued at $100 million. The retail space is currently generating $8.9 million per year representing about 63% of the 80% occupied building’s total current rent revenue according to reports; offering buyers of the corner property located at East 49th Street an opportunity to take advantage of the corridor’s rising retail rents. According to the Real Estate Board of New York’s (REBNY) Spring 2015 Retail report, asking rents for ground level space along the 5th Avenue corridor are now averaging $1,200 per square foot between 42nd Street and 49th Streets; and $3,683 per square foot between 49th and 59th Streets.

Tower 45, 120 West 45th Street (Times Square) – SL Green has introduced the 443,956-square-foot building to the market, hoping to fetch over $350 million ($788 per square foot). The 40-story tower is currently about 90% occupied and reportedly about 50% of the leases amongst the roster of tenants expire in 5-years. The building last traded in 2007 for $285 million ($641 per square foot); and in 2014 renovations to the lobby, 15-story atrium and elevators were completed.

229 West 43rd Street (Times Square) – The Blackstone Group has introduced the 479,000-square-foot offi ce component of the former New York Times building to the market seeking, to fetch about $525 million ($1,096 per square foot). Large lease signings over the last 2-years include 10-year deals with technology companies Yahoo taking 176,201 square feet; and Collective Media taking 57,929 square feet. The unit spreads across the top 12 fl oors of the 16-story tower. Blackstone had acquire the condo interest in 2011 for $160 million ($334 per square foot), investing an additional $105 million ($219 per square foot) in renovations to attract internet and communication companies to the space. The 250,000-square-foot retail component is currently in contract for $296 million ($1,184 per square foot) to Kushner Companies.

370 Lexington Avenue (Grand Central) – The partnership of Sherwood Equities and JPMorgan Chase have introduced the 27-story, 261,000-square-foot building to the market. Sources anticipate a sale could fetch a price as high as $300 million ($1,149 per square foot). The corner property located at East 41st Street was acquired for $155 million ($594 per square foot) in 2008 at the time of the economic downturn. Currently nearly fully occupied and catering to smaller offi ce tenants, if the sale price reaches expectation, it will further affi rm how prices in the city’s market have rebounded. Current tenant leases typically range 3-5 years allowing new ownership the potential to take advantage of upticks in rent with greater frequency.

434 West 33rd Street (Penn Plaza) – Non-profi t Planned Parenthood will be selling their 72,497-square-foot condominium, opting to lease space instead and relocate Downtown to a roughly 65,000-square-foot offi ce at 123 William Street (Insurance). The condo unit is situated at the base of a 13-story, 146,000-square-foot building and last traded in December 2011 for $34.834 million ($480 per square foot) according to city records. Sources indicate that Brookfi eld Offi ce Properties is in talks to acquire Planned Parenthood’s unit as well as the remaining condo interest which is currently owned by investment fi rm Vectra Management Group. A sale to Brookfi eld would result in the developer gaining complete control of the block of properties within their multi-building Manhattan West project that is bound by 9th- and 10th Avenues to the east and west, and 33rd- and 31st Streets to the north and south.

4-Building Hudson Square Portfolio (Hudson Square) – After 3 months since Trinity Real Estate introduced the portfolio to the market as a 75-year leasehold deal that required a single, upfront payment from the purchaser, the company has decided to rethink the offering that source predicted could fetch $1.25 billion or more. The portfolio that is about 98% leased and totals roughly 2,018,412 square feet reportedly requires substantial capital investment; and the requirement of the upfront payment likely a turn-off to bidders. Trinity is now considering increasing the offering to the sale of leaseholds for up to 11-buildings; but industry sources feel that the offering could be too large a prospect for a single buyer to acquire in a single deal. Respondents to the initial offering included Vornado Realty Trust, SL Green Realty, Ivanhoe Cambridge, and Brookfi eld Offi ce Properties. The original offering included:

- One Hudson Square, 75 Varick Street, a 1,173,231-square foot building;

- 200 Hudson Street, a 383,841-square-foot building;

- 205 Hudson Street, a 401,083-square-foot building;

- 12-16 Vestry Street, a 60,257-square-foot building.

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Sale Activity (cont’d)

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Sale Deals on the Horizon

Kohlberg Kravis Roberts / Hudson Yards – The private equity fi rm is reportedly considering the purchase of a 400,000-square-foot condo at the Hudson Yards project being co-developed by Related Companies and Oxford Properties Group. Currently located in a 161,000-square-foot offi ce it has occupied for close to 20-years at 9 West 57th Street (Plaza), the move would represent a signifi cant increase in the company’s footprint in the city. In addition, sources noted that at a likely current rent in the neighborhood of $180 per square foot, an acquisition of the larger space would probably not represent a fi nancial stretch for the fi rm.

Plaza Hotel, 768 Fifth Avenue (Plaza) – Ongoing efforts by Indian conglomerate Sahara Group to sell the hotel to raise the $1.6 billion in bail money needed to release the company’s founder Subrata Roy from his current incarceration in New Delhi, India has gotten a 4-month extension. Billionaire brothers David and Simon Reuben are reportedly paying over $800 million to satisfy the technically defaulted loan debt held by the Bank of China. The payment will retire the debt on the Plaza Hotel as well as the 2 other hotels — Lower Manhattan’s Dream New York and London’s Grosvenor that are owned by the Sahara Group. Earlier this year, the Bank of China had seized control of the Grosvenor, appointing and administrator to begin marketing the property. The Dream Hotel is also being marketed for sale, but the loan payment restores Sahara Group’s ability to renegotiate loan terms with the new lender, or a third party.

The Reubens’ plans for the 3-hotels is unclear at this time and whether or not they intend to seek control if the loan they provided is not cured within the 4-month grace period. However, news of the sale of both the hotels has triggered legal action from JTS Trading LTD that will further stall a sale. The Hong Kong-based company reportedly claims they were shut out of a previously struck deal to fi nance the purchase of the 3-hotels, getting a 70% stake in exchange for its $860 million investment.

Sale Deals to Watch For

Midtown

Bush Tower, 130 West 42nd Street (Times Square-Garment) – China Vanke, reportedly the largest publically-traded developer in China is in contract to acquire an undisclosed majority stake in the 235,000-square-foot tower for $125 million. The property last traded in 2013, Tribeca Associates and Meadow Partners acquiring the ground lease for $65 million. As a result of the impending sale Tribeca Associates will retain a stake in the lease and remain as operator of the property, while Meadow Partners will exit its equity interest. The building is currently about 41% leased, representing a close to 50% reduction in tenancy since the 2013 ground lease acquisition.

Midtown South

331 Park Avenue South / 114 East 25th Street (Flatiron) – Crowdfund platform Prodigy Network is reportedly in contract to purchase the 2-building portfolio totaling roughly 96,900 square feet for a total of $100 million ($1,032 per square foot); and as part of sale, MetroLoft will remain as developer. The deal for the former F.M. Ring portfolio buildings comes just about 6 months after MetroLoft acquired the portfolio for a total of $76 million ($784 per square foot) from Extell Development.

Prodigy plans to redevelop the portfolio into a hybrid live/work project, a newly developing trend prompted by the challenges of startup company employees securing affordable living space in the city. Co-working space provider WeWork has similarly launched “WeLive,” a concept the company is currently pursuing near Washington, D.C. that may debut in Manhattan with reports of a planned block of small residential units and community facilities being constructed atop 110 Wall Street in the Financial District.

• 331 Park Avenue South – Redevelopment of the 49,500-square-foot building purchased for $51 million ($1,136 per square foot) will reposition the 12-story building into 100 residential units and 20,000 square feet of workspace. Up to $20 million is planned to be raised to help fi nance the estimated $120 million project via a crowdfund campaign.

• 114 East 25th Street – Redevelopment of the 52,000-square-foot building purchased for $49 million ($942 per square foot) will reposition the 12-story building into 41 residential units and 25,000 square feet of workspace. Up to $25 million is planned to be raised to help fi nance the estimated $74 million project via a crowdfund campaign.

Prodigy will also be redeveloping 17 John Street (FiDi) as a hotel hybrid that has been branded “cotel” offering a mix of hotel, co-working space, and a networking environment. A crowdfund campaign successfully raised $25 million to help fi nance the project.

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Sale Activity (cont’d)

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Sale Deals to Watch For (cont’d)

Midtown South (cont’d)

11 Madison Avenue (Flatiron) – SL Green Realty Corp. is in contract the 2,348,115-square-foot building for $2.285 billion ($973 per square foot). In addition, the REIT will pay roughly $300 million in costs associated with lease-stipulated improvements to the property. The pending deal comes just one month after it was announced that co-owners Sapir Organization and Los Angeles, CA-based CIM Group had put the 29-story art deco tower on the sale block — some sources anticipating the sale would fetch over $2 billion ($852 per square foot). SL Green which owns adjacent 1 Madison Avenue had been previously cited as a potential bidder; along with expectations that some foreign buyers would have had interest in the tower.

The Sapir Organization had acquired the building in 2003 for $675 million ($287 per square foot); subsequently selling a 49% interest to CIM Group in 2011 for $464.4 million ($404 per square foot). In 2012 the co-owners introduced the building to the market, ultimately deciding to take if off before the end of that year. The building is currently about 97% leased and anchored by multinational fi nancial fi rm Credit Suisse through approximately 2036. Newcomers to the building include electronics fi rm Sony, online reviews site Yelp and talent agency William Morris Endeavor Entertainment as a result of large lease signing completed last year.

The transaction is expected to close in the upcoming 3rd quarter; and according to some analysts, SL Green expects to fi nance the purchase with $1.3-$1.4 billion of 10-year, fi x-rate debt through collateralized mortgage-backed securities (CMBS). In addition, the REIT reportedly expects to refi nance and/or recapitalize stabilized assets; and also sell a portion of non-core assets through a 1031 exchange with a goal to achieve Manhattan asset sales at an average cap rate less than 3.5% — well below the 4.6% acquisition cap rate of 11 Madison Avenue. Planned asset sales that potentially include the land (fee) under the Lipstick Building, 885 Third Avenue (Plaza) could generate another $1.1-$1.2 billion.

Properties that have already hit the market include:

131-137 Spring Street (SoHo) – The 68,000-square-foot building was introduced to market in December and expected to fetch around $300 million ($4,412 per square foot).

609 Fifth Avenue (Plaza) – The 160,000-square-foot building that includes 50,000 square feet of unused development rights is expected to fetch around $600 million ($3,750 per square foot);

120 West 45th Street (Times Square) - The 443,956-square-foot building is expected to fetch $350 million ($788 per square foot)

155 West 23rd Street (Chelsea) – The Kaufman Organization is reportedly fi nalizing a ground lease from Extell Development under terms that were not disclosed, making it the 5th property amongst the 14-building former F.M. Ring portfolio that the company has acquired under a ground lease acquisition. The 12-story, 71,100-square-foot building located between 6th- and 7th Avenues had been acquired by Extell for $18.736 million ($264 per square foot) in 2014 as part of the F.M. Ring portfolio acquisition. The 4-other properties that Kaufman, along with Iowa-based Principal Real Estate Investors, currently controls the ground lease under a 99-year deal are 119-125 West 24th Street, 19 West 24th Street, 13-15 West 27th Street, and 45 West 27th Street which are also located in Chelsea.

Downtown

100 Wall Street (FiDi) – Cornerstone Real Estate Advisors, the Hartford, CT-based subsidiary of Massachusetts Life Insurance Company, is reportedly in contract to acquire the 480,000-square-foot building for $275 million ($573 per square foot) just over 2 months after a sale was announced. Real Estate investment fi rm Savanna had acquired the building in 2011 for $124.5 million ($259 per square foot), investing another $26 million in upgrades.

The sale that is expected to close this summer will mark the 3rd change in ownership since 2007 when Broadway Partners purchased the building for $134 million ($279 per square foot), subsequently defaulting on the loan resulting in Lehman Brothers taking control of the property. Lehman ultimately sold the building to Savanna in a deal that included the assumption of a $117 million senior loan and a $7.5 million mezzanine loan. Since 2011 Savanna has signed 355,000 square feet in deals, 40,000 square feet of which were recently signed bringing the building’s occupancy up to 97%.

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Sale Activity (cont’d)

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Sale Highlights

Midtown

717 Fifth Avenue (Offi ce Condo) (Plaza) – Beijing-based Anbang Insurance Group closed in May on the acquisition of the approximately 350,000-square-foot offi ce portion of the building for $415 million ($1,186 per square foot). A 3-year, $260 million acquisition loan was secured from lender Bank of China that includes a 2-year extension option. A partnership between Wharton Properties and SL Green owns the building’s approximately 110,000-square-foot retail component. This is the 2nd large deal transacted by Anbang in the city this year, having acquired the Waldorf Astoria Hotel in February for $1.95 billion.

7 Bryant Park aka 1045 Sixth Avenue (Penn Plaza) –The Bank of China has closed on the long-term leasehold of the 473,672-square-foot development that delivered this year for roughly $596.855 million ($1,260 per square foot). The 28-story, state-of-the-art tower was built on speculation by co-developers Houston, TX-based Hines and JPMorgan Chase & Co’s asset management arm. The deal does not include the land beneath the tower which is owned by minority-stakeholder Pacolet Milliken Enterprises; or the cost of building out the roughly 60% of offi ce space that the bank intends to occupy that typically runs $150-$200 per square foot. The remaining 184,751 square feet is being marketed for lease to other tenants at a time when the 6th Avenue Corridor has seen an uptick in leasing activity.

230 Park Avenue (Grand Central) – Long Island-based RXR Realty acquired the 1.295 million-square-foot tower for $1.2 billion ($927 per square foot) from the partnership of Monday Properties, Invesco, and South Korea’s National Pension Service. A 7-year, $785 million acquisition loan was provided by American International Group. New ownership plans to upgrade the building that is currently about 94% leased, adding new retail and offi ce space to increase its value.

Introduced to the market last year, the former Helmsley Building recently completed a $200 million capital improvement program making it the fi rst pre-war building to receive LEED-Gold certifi cation. The building last traded in 2011 for $760 million ($587 per square foot); and is currently about 93% leased with 70,000 square feet of base retail space that reportedly offers expansion potential.

200 West 57th Street (Columbus Circle) – The Feil Organization and Boston-based private equity fi rm Rockpoint Group acquired an 83.5% stake in the 135,051-square-foot building for $120.4 million ($1,068 per square foot). Prior to the sale, Feil was co-owner of the property with RCG Longview, the latter having purchased the building in 2004 for $125.7 million ($931 per square foot). The building located at 7th Avenue is currently about 98% leased.

Argonaut Building, 224 West 57th Street (Columbus Circle) – The Eretz Group purchased the 170,000-square-foot landmarked tower for $213.8 million ($1,258 per square foot) from Lebanon-based M1. Non-profi t Open Society Foundation currently occupies the majority of the offi ce space in the 10-story building with 2-retail condominiums totaling roughly 34,000 square feet at the base; and a 20-car basement level parking space. The building is located directly across the street from Extell Development’s planned Nordstrom Tower at 217-225 West 57th Street.

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Sale Activity (cont’d)

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Sale Highlights (cont’d)

Midtown (cont’d)

Olympic Tower, 641 Fifth Avenue (Midtown East) – The joint venture of Crown Acquisitions and Oxford Properties Group acquired the remaining 50.13% stake in the 505,000-square-foot offi ce/retail condominium unit for roughly $651.595 million ($1,290 per square foot) from related entities of the Onassis Foundation. Situated at the base of the mixed-use tower, the duo now owns 100% of the commercial unit having paid $418.9 million ($1,693 per square foot) for a 49.87% stake in 2012. Currently 100% leased to the National Basketball Association (NBA), luxury goods company Richemont, and MSD Capital spread across the 400,000 square feet of offi ce space; and Cartier, Armani/AX, H. Stern, Versace, and Jimmy Choo fully occupying the 105,000-square-foot retail component.

240-248 West 40th Street (Garment) – The partnership of Olmstead Properties and Jonathan Rose Cos has acquired the 160,000-square-foot building for $85 million ($531 per square foot) from Boston-based AEW Capital Management and an employee investment fund of the former Colliers ABR (later becoming Cassidy Turley, and now DTZ). The building’s over 145,000-square-foot offi ce component is currently occupied by fashion fi rm Donna Karan who is headquartered at nearby 550 Seventh Avenue in a lease that reportedly expires in July 2016. A $60 million acquisition loan was secured to fund the purchase from lender Aareal Capital Corporation. New ownership is planning to invest another $15 million for building upgrades and lease-up improvements, bringing in a 3rd undisclosed institutional partner to help fi nance the investment. The property last traded in 2013 for $63 million ($394 per square foot).

142 West 36th Street / 234 West 39th Street (Garment) – A partnership of Waterman Interests and USAA Real Estate are acquiring the 2-building portfolio totaling 209,815 square feet for $118 million ($562 per square foot) from a partnership led by Herald Square Properties. The deal further substantiates the growing interest in the area near the Penn Station neighborhood that is anticipated to undergo revitalization, making it more attractive to future offi ce tenants. About 75% of the leases for both buildings which are currently about 95% occupied are reportedly due to expire in 5-years, allowing new ownership to further capitalize on the neighborhood’s expected improvements.

• 142 West 36th Street – The 16-story, 118,349-square-foot building last traded in 2013 for an undisclosed price.

• 234 West 39th Street – The 10-story, 91,466-square-foot building last traded in 2014 for $31 million ($339 per square foot); and includes 30,000 square feet of unused air rights for potential future expansion.

Midtown South

200 Lafayette Street (SoHo) – LaSalle Investment Management purchased the 5-story, 85,000-square-foot offi ce condo for $125 million ($1,471 per square foot), just 3 months following its introduction to the market by General Growth Properties. Department store chain J.C. Penney had leased the entire building in 2012; ultimately abandoning plans to open a store at the location, returning both the 30,782 square feet of retail space and the top fl oor offi ce space to the landlord. The offi ce component is currently fully leased, J.C. Penney retaining the 3 lower fl oors; and yogurt manufacturer Chobani occupying the top 2-fl oors as a result of a lease secured last year. General Growth will retain the retail component that will serve as the home of San Diego, CA-based luxury home décor chain Pirch who will be making their East Coast debut next year.

437-439 West 16th Street (Chelsea/MePa) – The Horowitz family trust controlled by investors Steven and Howard Horowitz acquired the 23,536-square-foot building for $44.4 million ($1,886 per square foot) from long-time owner of over 30-years Kleinberg Electric. The majority of the building is currently leased to upscale hardware and home furnishings chain Restoration Hardware through a triple-net lease signed in 2013 that stretches to 2029. In 2018, the company will expand into the entire building, adding its RH Contemporary Art gallery upon existing tenants Picturehouse and Small Dark Room vacating the building’s lower fl oors. The building is located a few blocks north of Restoration Hardware’s new 5-story fl agship at 9-19 Ninth Avenue which is being redeveloped by Aurora Capital Associates and William Gottlieb Real Estate.

Uptown

801 Madison Avenue (Upper East Side) – White Plains-based Acadia Realty Trust purchased the 5-story, 6,450-square-foot building for $33 million ($5,116 per square foot) from investor Ameri Maurizio of Midtown-based accounting fi rm Funaro & Co. Last trading over 30 year ago, the mixed-use building is comprised of upper level offi ces atop 5,000 square feet of retail space that is partially occupied by Italian menswear retailer Davide Cenci.

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Foreign Investment: Potential Looming Variables Could Impact Future Activity

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EB-5 Foreign Investor Program:

The quickly approaching September renewal of the federal program that has signifi cantly increased in popularity in recent years may face some changes by Congress when parts of the program expire in September. Billions of dollars are being invested by foreigners in hotels, condominiums, offi ce towers, and public/private works in the hope of qualifying for U.S. visas (green cards). Although the program has been around since its inception in 1990, it is only since the 2008 recession when traditional lending became scarce that developers turned to the EB-5 program to fund their real estate projects.

The program has in some ways become a victim of its own success, resulting in a lengthy, labor-intensive and complex process that can become further bogged down by bureaucracy. The processing time for the I-526 alien immigration petitions, the fi rst step of the EB-5 Green Card process to obtain permanent resident status is currently 14-months; up from 6-months in 2011. Due to the high volume of Chinese investors, a Chinese “retrogression” or wait list putting all applicants at the end of the line has been imposed on May 1st by the U.S. Citizenship and Immigration Services (USCIS) that oversees the program.

According to some reported statistics:

• 1,885 Visas issued in 2010

• 8,564 Visas issued in 2013

• 10,000 Visas issued by August 2014 – the maximum annual allotment allowed to be issued by the program with a fi scal year that ends in October

• 10,000 Visas issued by May 2015

Sources: http://www.uscis.gov/i-526 • http://www.hooyou.com/eb-5/overview.html • http://www.cnbc.com/id/ http://atimes.com/2015/04/kaisa-default-shows-beijings-tough-stance-on-market-misbehavior/ http://www.wsj.com/articles/kaisa-default-fears-hit-property-bonds-1420622658

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Foreign Investment (cont’d)

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Funds raised for some New York City projects include:

• $600 Million from 1,200 investors was raised last December by Related Companies to fi nance the construction of the foundation of 3-towers at their 17-million-square-foot mixed-use complex in the Hudson Yards. In total, Related has raised $800 million in EB-5 money and controls 1/3rd of the EB-5 market nationwide through an in-house regional center.

• $577 Million from 1,154 investors has helped fund Pacifi c Park Brooklyn (formerly known as the Atlantic Yards project) being co- developed by Greenland Holdings and Forest City Ratner Companies.

• $200 Million for the 1.8 million City Point project in Downtown Brooklyn led by Acadia Realty and Washington Square Partners (1Q15- Brooklyn); representing 42% of the project cost.

• $250 Million from 500 investors has helped fund 30 Park Place, the Four Seasons condo-hotel project being developed by Silverstein Properties in Lower Manhattan.

• $247 Million was raised in 4-rounds for the expansion of the Steiner Studios in the Brooklyn Navy Yard.

• $180 Million from 360 investors to help fund the 625 West 57th Street mixed-use development being constructed by the Durst Organization, representing 26% of the project cost.

• $150 Million from 300 investors for the New York Wheel project on Staten Island being built by Plaza Capital, a project that had diffi culty attracting conventional lenders unable to analyze the fi rst-time project for conventional bank fi nancing.

• $100 Million was raised for the planned mixed-use residential/dormitory project being constructed by Extell Development. The EB-5 debt reduced the funding gap between the senior loan and the equity that the developer would have to kick-in on its own.

• $90 Million from 180 investors is being raised by the New Jersey-based Victor Group for the 60-story condominium project that the company is co-developing with construction fi rm Lend Lease at 281 Fifth Avenue.

• $75 Million raised in 2011 for the International Gem Tower, a commercial condo at 50 West 47th Street constructed by Extell Development.

• $75 Million raised by NYC subway system vendor Transit Wireless to install underground Wi-Fi.

• $60 Million from 120 investors for the fi rst building that will be part of a 2-building rental development at 363-365 Bond Street in the Gowanus neighborhood of Brooklyn being constructed by the Lightstone Group through their in-house regional center.

• $22 Million was raised for the Charles condominium at 1355 First Avenue by the Victor Group that delivered last year.

Currently foreigner investors can apply for legal U.S. residency visas for their family, including any dependent under the age of 21; and since each family member is applied toward the 10,000 annual visa allotment, it is rapidly used up. Investors applying through the EB-5 program have the advantage of a shortened processing time of about 22-26 months, as opposed to the several years for other visa programs. Overall, it takes about 5-years for foreign investors to complete the immigration process. For this reason EB-5 loans typically have 5-year terms; and investors can only receive repayment, an amount that cannot be guaranteed, after their permanent green card is approved.

The program has typically attracted middle-class and upper middle-class Chinese who represent about 80% of the visa issuances made through the program over the last few years according to sources; further noting that China’s super-wealthy prefer to maintain legal residences in low tax jurisdictions, opting to take advantage of the 10-year tourist visas to the U.S. than to pay U.S. taxes.

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Foreign Investment (cont’d)

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Thorough research of the project by foreign investors is essential before placing their investment because if the project fails, they can lose both their investment as well as the opportunity to secure green cards. For qualifi cation under the current program, foreign investors are required to show legitimate proof of funds and:

• Invest $1 million in a U.S. business, creating 10 direct jobs for American workers

Or the more popular, “pilot” or regional center program:

• Invest $500,000 in a business entity designed to create jobs in a an area of high unemployment - “Targeted Employment Area” (TEA) which has been approved by the Immigration Service, create 10 jobs of which both direct and indirect are considered.

Construction costs and certain soft costs like architectural fees can be factored in to determine how many jobs will be created by the project when calculating the total amount of funds that can be raised through the EB-5 program. In addition, funds raised through the program are typically less expensive than other fi nancing sources. Investors are typically willing to accept a lower rate of return on their investment since the primary focus is on the potential to obtain green cards.

Both critics as well as proponents of the program see room for improvement of some aspects where it falls short:

• Fraud – Although New York City has yet to have a major problem, several well-documented cases of fraud have occurred primarily involving developers who misrepresented themselves to investors and then failed to deliver a completed project or wind up with a funding shortfall. Concerns have spurred increased regulatory oversight by both the U.S. and China in 2011. The Chinese government imposed regulations on marketers of EB-5 projects with escalated due diligence by visiting the projects themselves.

• Transparency & Oversight – Some sources point out the need for enhanced inter-agency collaboration, particularly between the U.S. Citizenship & Immigration Services — the arm of the Department of Homeland Security that runs the program, and other government commissions and departments.

• Location – While projects are supposed to be located in areas of high unemployment, several are in the more prosperous neighborhoods due to the incorporation of contiguous lower unemployment census tracts in calculations.

• Risks – Investor funds are typically placed in an escrow account and released once the EB-5 application is approved. However, some loans have “early release” provisions that allow the developer to access the funds prior to application approvals with assurances that the money can be refunded. In the event the application is denied, the developer is required to return the money and could incur an funding shortfall as a result.

It is anticipated that as Congress reviews the existing program, concerns including the rapidity with which the annual allotment of visas are issued will be addressed; the $500,000 threshold will be raised; and the practice of using contiguous census tracts may be curtailed, which could create major ramifi cations since there are reportedly very few areas in Manhattan as example that have high enough unemployment rates to qualify.

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Foreign Investment (cont’d)

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Chinese Investors/Developers – An Overview:

Industry experts are projecting that the volume of investment from China could swell to $50 billion over the next few years. However recent moves and philosophy changes by the Chinese government could affect cash fl ow. Since many of the country’s investors are reportedly government offi cials or work for state-owned companies, a recent corruption crack-down on these offi cials would signifi cantly affect the market.

The 1st-wave of Chinese investors reportedly from key cities such as Shanghai and Beijing, where ties with international business partners were most likely already in place and accustomed to Western business norms and negotiating styles.

A 2nd-wave is expected to now include investors from smaller cities where it has been found through the EB-5 program’s expanded reach, have similar income levels of the 1st-wave of Chinese investors and in some cases more. It is expected that this new breed of investors will move beyond solely residential investment and development, expanding their interests to include commercial properties as well; although it is anticipated that the 2nd-wave will be less accustomed to U.S. business practices and as a result may require Western businesses to acclimate to longer negotiations and more due diligence.

The 3rd-wave which is just starting brings institutional investors to the U.S. They are primarily interested in long-term, income generating commercial investments that can be leveraged by cash fl ow.

To better familiarize and educate themselves with Western business procedures many of the Chinese companies have made their debut on Western soil through a partnership structure, reportedly intending to extract as much knowledge as possible from their U.S. co-developers. Necessary connections with the required industry players are simultaneously established, ultimately enabling them to go solo on future projects. Chinese investors are typically eager to participate on the front line versus just writing a check and watching from the stands. Even the practice of forming a joint venture is new to the Chinese investor, the legal framework allowing the formation of partnership introduced by the Chinese government only 8-years ago in 2007.

This hands-on approach is atypical of most other foreign investors that have come from countries including Canada, Europe or South America. It has been pointed out that while co-development presents what appears to be an ideal learning situation, the tendency of Chinese companies to attempt to dominate all aspects of a project has given rise to another challenge they will need to confront. Sources go on to comment that while they might be able to handle small or mid-sized development projects, the expertise required to independently build on a large scale will take a long time to acquire.

Land acquisitions also present a new learning opportunity since negotiating for land in the U.S. is considerably different than in China where most development sites are purchased directly from the government through what has been described as a “dialogue” with little negotiating required.

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Foreign Investment (cont’d)

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High Leverage Levels Trigger Some Concerns

As the Chinese property market continues to soften, concerns that some of New York City’s highly leveraged Chinese investors could be vulnerable. News earlier this year that China-based Kaisa Group Holdings became the fi rst Chinese developer to default on U.S.-dollar-denominated bonds, reportedly sent tremors through the world of real estate and fi nance. While it was later noted that the company’s troubles may have been a one-off incident tied to a recent corruption investigation of a company offi cial, it reinforces the fact that these companies do not have limitless funds. Other Chinese development companies are expected to default or reschedule their debts, being held down by the weakened property market. As China now opens up the economy to competition, sources predict that defaults will continue at a rate similar to that of the U.S. and Europe.

Chinese developers are reportedly the most active issuers of dollar-denominated bonds with reportedly $66 billion in dollar (or offshore) bonds outstanding. Issuance of dollar bonds by some companies currently active in New York City include:

$2.7 Billion - Issued by Pacifi c Park Brooklyn co-developer Greenland Holdings in 2014;

$1 Billion – Issued by Soho China Ltd, the family that controls The Sungate Trust which is a stakeholder in the GM Building, 767 Fifth Avenue;

$1 Billion – Issued by China Vanke, China’s largest publicly traded developer. The company acquired a majority stake in the currently under construction 100 East 53rd Street (formerly 610 Lexington Avenue) earlier this year.

$475 Million – Issued by Xinyuan Real Estate, parent company of XIN which is developing the Oosten condominium project at 421-429 Kent Avenue in Brooklyn’s Williamsburg neighborhood. The company which was hard hit last quarter by China’s declining housing market reportedly incurred a 26.4% slide in year-over-year revenues, with profi ts shrinking by 55.4% according to the company’s recently released earnings report.

While Chinese fi rms whose primary business is real estate development will continue to be affected by the rise and fall of the country’s property market, others that are more diversifi ed are less vulnerable such as:

- Anbang Insurance Group which acquired the Waldorf Astoria, 301 Park Avenue and the offi ce component of 717 Fifth Avenue as a condominium unit earlier this year;

- Sunshine Insurance Group which agreed to purchase the Baccarat Hotel, 20 West 53rd Street earlier this year;

- Fosun International which acquired 1 Chase Manhattan Plaza last year.

In 2014, Chinese investors reportedly accounted for 85% of the 10,692 EB-5 applications fi led; but other countries are developing a growing interest in the program – particularly amongst the emerging markets. It is anticipated that Brazil and Venezuela will become frontrunners since they don’t have treaties of commerce with the U.S. and therefore their citizens are not eligible for any other type of investor visas.

Country 2014 Filings 2013 Filings

South Korea 225 N/A

United Arab Emirates 121 2

Vietnam 121 46

Russia 100 70

Nigeria 50 23

Egypt 37 N/A

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Lending: Israeli Debt Issuances by U.S. Real Estate Industry Surges

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The Moinian Group closed on a $361 million ($1.4 billion shekels) bond issuance on the Tel Aviv Stock Exchange (TASE), reportedly the largest debt offering on TASE to date by the U.S. real estate industry. Backed by about 15 properties within the developer’s portfolio, the issuance closed in May at an interest rate of 4.2%. Funds from the bond debt will assist in fi nancing several of Moinian’s development projects including 220 Eleventh Avenue (Chelsea) which was acquired in 2002 for an undisclosed price; and 572 Eleventh Avenue (Clinton/Hell’s Kitchen) which was acquired in 2004 for $5.9 million. Interest by the Israeli market in New York City assets has reportedly been high due to the transparency and liquidity of the city’s real estate market; while also favoring the kind of debt that is supported by a packaged portfolio which typically performs better versus that of a single asset backing.

The total U.S. real estate industry debt issuance in 2014 totaled an estimated $700 million; and is predicted to reach about $2 billion in 2015 according to industry sources. The number of New York City developers resourcing TASE to fund projects continues to increase, recently adding Wharton Properties to the growing roster and a $500 million prospectus that was reportedly published in early May. Other New York City fi rms that have tapped into the Israeli bond market include Extell Development, Related Companies, GFI Capital Resources Group, Brookland Capital, the Lightstone Group, and JDS Development Group.

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Lending: Some of Lending’s Big Players

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As domestic banks are reportedly becoming a little more restrictive, several foreign lenders have stepped up and now play a signifi cant role in the funding of many of the city’s larger development projects. The fi nancing of residential condominium construction has become very attractive to hedge funds because they offer the potential for high returns for their investors; while other construction lenders such as international banks are willing to accept lower returns, opting for Manhattan projects which are perceived as safe. The infl ux in interest by foreign lenders has heightened competition to the advantage of developers that have been able to secure cheaper funding, with interest rates typically a function of the magnitude of the borrower in terms of real estate holdings.

In addition to competitive interest rates, when comparing loan structures,those of foreign lenders tend to offer simpler versus domestic lenders that typically reduce risk by syndicating the debt which can add complications when loans need to be renegotiated.

Talos Capital Limited – The affi liate of the Children’s Investment Fund, a U.K.-based hedge fund launched in 2004 that donates a large share of its profi ts to its eponymous charity, has reportedly committed $1.7 billion to Manhattan condo developments including:

• $400 Million - 432 Park Avenue residential condominium project by Macklowe Properties;

• $600 Million – 30 Park Place mixed-use Four Seasons condo-hotel project by Silverstein Properties;

• $450 Million – 520 Park Avenue residential condominium project by Zeckendorf Realty.

United Overseas Bank – the Singapore-based lender has provided:

• $860 Million – MoMA Tower, 53 West 53rd Street mixed-used project by the partnership of Houston, TX-based developer Hines, Goldman Sachs and Singapore-based developer Pontiac Land Group;

• $170 Million – 125 Greenwich Street residential condominium project by Michael Shvo and Bizzi & Partners;

• $1 Billion in combined senior and mezzanine loans – 220 Central Park South residential condominium project by Vornado Realty Trust.

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Lending: Crowdfunding Competition Intensifi es

Sources: http://www.thestreet.com/story/13140281/1/ranger-direct-lending-fund-plc-completes-ipo-on-london-exchange.html http://www.crowdfundinsider.com/2015/04/66419-real-estate-crowdfunding-platform-acquire-creates-unique-avenue-to-seek-liquidity-for-investors/ P.42PPPP4P.4P.4P.42.4242424222

The new lending option continues to pick up steam as its presence within the real estate industry swells. Overall investment via crowdfunding platforms reportedly surpassed a $1 billion total in 2014; and is expected to reach $2.5 billion this year, as a growing number of companies from start-ups to established investment fi rms are testing the waters. In 2014, international real estate investment-banking fi rm Carlton Group launched a crowdfunding website for accredited investors; and now Manhattan-based real estate fi rm Thor Equities is reportedly working to launch their own company platform to be dubbed Invest Thor, that is intended to provide an additional avenue to raise funds for the company’s projects.

Some of the more established start-ups are focusing on efforts to make their platform stand out amongst the growing number of companies.

Fundrise – The Washington, D.C.-based crowdfund platform has raised enough venture capital to pre-fund its deals and allow the company to close mezzanine loans with its own money, assuming the risk of fi nding retail investors online; thereby eliminating the lag in time that borrowers must typically wait to raise the funds from the crowd campaign. Earlier this year the company initiated a campaign offering investors an opportunity to buy into a $2 million share of the $1.6 billion in tax-free bonds issued to fi nance the further construction of 3 World Trade Center.

Sharestates – The Great Neck, Long Island-based crowdfund startup is bringing in institutional investors as anchors. The company recently reached an agreement with investment fi rm Ranger Direct Lending Fund, an affi liate of Dallas, TX-based Ranger Capital Group, to invest up to $30 million that will make up a large portion of an individual deal thereby reducing the time needed to close.

Prodigy Network – The New York-based platform reportedly boasts the fi rst U.S. crowdfund startup to raise over $100 million in equity; having had the advantage of crowdfunding buildings in founder Rodrigo Nino’s native Colombia long before the practice became legal in the U.S. Prodigy boasts deal sizes larger than their competitors in part due to established foreign investor connections.

Acquire Real Estate – The Manhattan-based platform has become the fi rst site to create an exchange that offers investors a tool to put their equity interest up for re-sale. The proprietary tool allows the investor to put all or part of an Acquire investment up for sale to the Acquire Crowd, offering possible liquidity for investments that are traditionally long term and illiquid through a live, blind auction. The liquidity is dependent upon bidding activity resulting in the successful sale of the investment through the auction. Acquire’s crowd investing platform, a variation of typical crowdfunding, is reportedly the only platform completely founded by real estate executives.

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Lending: Developing Trends

Sources: http://citybizlist.com/article/262996/clarion-partners-closes-mezzanine-loan-for-midtown-manhattan-hotel P.43PPPP4P.4P.4P.43.4343434333

Bank Lends Hand to Affordable Housing Landlords

The partnership of Manhattan’s Amalgamated Bank and a New York City branch of Atlanta, GA-based Trimont Real Estate Advisors are reportedly offering low-interest loans averaging around $5 million to owners of affordable housing buildings to help fund property improvements. In an effort to support the Mayor’s initiative and help rehabilitate thousands of affordable units, the lending team will lend up to a total of $100 million. As part of the partnership arrangement Amalgamated Bank will advance the money, while the city-based Trimont branch will draw up and service the loan agreements and connect the bank with interested applicants. In addition the loans will also help fund a limited number of new construction projects; with most of the money distributed through both city-sponsored programs that pair affordable developers with lenders, as well as outside of city programs with established guidelines for determining what constitutes an affordable project. It is predicted that the loan program will rehabilitate about 1,000-units; and upon loan repayment, the funds will be redistributed for other projects as they arise.

Investors Shift to Lending

The city’s tight real estate market and soaring property prices has given rise to some new entrants in the lending market as mezzanine loans become a lucrative business. Attracted by current double digit interest rates on commercial properties, lenders also have the advantage of being fi rst in line to take control of a real estate asset at a discounted rate in the event of a foreclosure. Prior to the recession, mezzanine loans could exceed the full purchase price to cover acquisition costs and property improvements; but in today’s market, they rarely cover more than 90%.

• RXR Realty – The Long Island-based developer and Texas-based REIT Northstar recently raised a $2 billion investment fund, and intend to dedicate a portion of its activities to making mezzanine loans in the city.

• Clarion Partners – The real estate Investment manager closed on an over $10 million mezzanine loan in April on behalf of an undisclosed investor for the 35-story, 401-key Hilton Garden Inn, 237 West 54th Street that opened last year.

Other city developers considering a similar direction reportedly include Silverstein Properties and Rudin Management Company. However some industry sources point out that escalating mezzanine debt which is pegged to short-term interest rates, could give rise to concerns of a repeat of the last property bubble. Mezzanine debt will become more expensive as interest rates rise bringing about a higher potential for defaults by owners that may become over-leveraged as a result.

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Lending (cont’d)

1WELL Building Standard: The newly created standards were the result of the collaborative effort doctors, scientists, and real estate professionals that intend to create environments that include quality air, water, and light to better the health and wellness of tenants. The International WELL Building Institute conducts tests and inspections to ensure the project has met the required standards for certifi cation.

Sources: http://www.wsj.com/articles/park-avenue-offi ce-towers-mount-a-comeback-1433282652 http://www.globest.com/news/12_1124/newyork/offi ce/Full-Financing-Comes-to-425-Park-Ave-358554-1.html?CMP=OTC-RSS P.44PPPP4P.4P.4P.44.4444444444

Reported Loans Secured – 2nd Quarter 2015

Midtown

425 Park Avenue (Plaza) – The development team led by L&L Holding Co. secured a $556 million loan from lender MassMutual Financial Corp. to fund the development of their planned 47-story, 650,000-square-foot offi ce tower. Additional funding will be provided by Tokyu Land Corp, a subsidiary of Tokyu Fudosan Holdings, one of Japan’s largest publicly-listed real estate fi rms, which became an equity partner in the project for an undisclosed price in 2014.

Construction start of the project being built on speculation has been delayed since the site’s 2006 purchase in part due to existing tenants with lease terms running through 2015; and the lengthy period of uncertainty when the developer’s partner Lehman Brothers Holdings Inc.’s fi led for bankruptcy protection in 2008, ultimately selling its stake to the Morgan Stanley real estate executive-led GreenOak Real Estate in 2013. The building’s design will be aimed towards attracting smaller tenants that typically hold-off on real estate decisions until 1 to 2-years ahead of lease expirations, further giving rise to concerns of securing project fi nancing.

The development will be the fi rst major new offi ce building to rise along the famed avenue in over 40-years; and the fi rst to receive the WELL Building Standard1 certifi cation which focuses on enhancing people’s health. Interior demolition of the existing building is now underway and construction is expected to be completed in 2018. Leasing is anticipated to fetch an average rent price in excess of $150 per square foot.

Crown Building, 730 Fifth Avenue (Plaza) – The partnership of New York developer Jeff Sutton and Chicago, IL-based General Growth Partners secured a $1.25 billion mortgage for the $1.78 billion acquisition of the 366,200-square-foot building from New York-based Winter Properties and Spitzer Enterprises. The deal went into contract in December less than 2-weeks after the sale was announced. Financing was provided by lenders Deutsche Bank, Morgan Stanley, Goldman Sachs and Citigroup. New ownership will be introducing an Aman Hotel across fl oors 4-24 in the tower as a result of a $500 million ($1,724 per square foot) deal for the roughly 290,000-square-foot condominium unit with Michael Shvo and Russian hotel developer Vladislav Doronin of the Amanresorts hotel brand.

Located on the southwest corner of 57th Street, reportedly the city’s most expensive real estate crossroads with Bergdorf Goodman, Tiffany, and Louis Vuitton on the other 3-corners. The building’s approximately 35,000 square feet of retail space that is currently home to Bank of America, Piaget, Bulgari and Mikimoto reportedly offers potential signifi cant value. The sellers had purchased the building through an auction sale in 1991 for $93.6 million, which at the time was half-vacant. Famous for its golden top, the building is currently about 98% occupied.

757 Third Avenue (Plaza) – Toronto, Canada investment manager Bentall Kennedy secured a 15-year, $205 million loan from lender New York Life Real Estate Investors for the $360 million acquisition of the 510,000-square-foot building that was announced in March. The building is currently about 98% leased due to the absorption of 130,357 square feet by tax consultant fi rm Grant Thornton upon relocating to the building last year.

245 Park Avenue (Grand Central) – Brookfi eld Property Partners secured an additional $200 million in debt on top of an existing $800 million loan from lender Bank of China. The “additional cash-out advance” brings the debt that was originally secured in 2010 to $1 billion, while reportedly keeping the loan-to-value ratio on the property below 50%.

655 Third Avenue (Grand Central) – The Durst Organization secured a 3-year, $75 million loan that carries a fl oating interest rate over the London InterBank Offered Rate (Libor) from lender J.P. Morgan Chase to refi nance recent upgrades to the 425,000-square-foot building.

1156 Sixth Avenue (Times Square) – APF Partners secured a $48 million refi nance loan for the 80,000-square-foot building from lender New York Community Bank. The 7-year permanent debt at a fi xed interest rate in the mid-3% range includes a 5-year extension option and 5-years of interest-only payments, followed by a 30-year amortization schedule. The building located at the corner of West 45th Street is currently undergoing a $4 million renovation.

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Lending (cont’d)

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Midtown (cont’d)

100 East 53rd Street formerly 610 Lexington Avenue (Midtown East/Turtle Bay) – The development team of RFR Holding, Chinese-based Vanke Holdings, and China Cinda Asset Management secured a $360 million loan to fi nance the construction of the planned approximately 61-story, 273,598-square-foot high-end residential development from the Industrial and Commercial Bank of China (ICBC). The project that originally began as an intended condo-hotel development in 2007 broke ground last year and is expected to be completed in 2017.

33 West 46th Street (Midtown West) – The undisclosed LLC ownership of the 38,259-square-foot building secured a 10-year, $19.5 million refi nance loan from lender Morgan Stanley at an interest rate reportedly on the low 4% range. The new debt will retire $18 million of previous acquisition and bridge debt provided by G4 Capital Partners. The building which underwent a comprehensive renovation program is now 100% leased.

7 Penn Plaza aka 370 Seventh Avenue (Penn Plaza) – The Feil Organization secured a $50 million loan from lender San Francisco, CA-based First Republic Bank. Details of the loan were not disclosed, but proceeds from the debt will reportedly fund recent upgrades at the 368,000-square-foot tower.

525 West 52nd Street / 540 West 53rd Street (Clinton/Hell’s Kitchen) – Taconic Investment Partners secured a $200 million comprised of a $170 million building loan and $30 million project loan from lenders Wells Fargo Bank and the New York State Housing Finance Agency (HFA) to fi nance the construction of a 466,204-square-foot mixed-use project. Taconic will be co-developing the 2-building project that will house 392-units, of which 79 will be designated for affordable housing; and 32,298 square feet of retail space with investment fi rm Ritterman Capital and non-profi t Clinton Housing Development Company. Press released late last year announced a nearing deal by upscale grocer Urban Markets to anchor the project’s retail component with a 27,416-square-foot lease.

525 West 52nd Street / 540 West 53rd Street Rendering

100 East 53rd Street - Rendering

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Lending (cont’d)

1Interim Multiple Dwelling:

1. Residential occupancy by three or more families living independently from one another during any consecutive twelve month period from January 1, 2008 through December 31, 2009 for buildings (or two units in buildings located north of West 24th Street and south of 27th Street and west of 10th Avenue and east of 11th Avenue);

2. Structures or portions thereof that at any time were occupied for manufacturing, commercial, or warehouse purposes; and

3. Structures or portions thereof that lack certifi cates of compliance or occupancy pursuant to § 301 of the Multiple Dwelling Law.

Source: http://www.nyc.gov/html/loft/html/home/expansion.shtml P.46PPPP4P.4P.4P.46.4646464666

Midtown South

501-515 West 17th Street aka 113-127 Tenth Avenue (Chelsea-High Line) – HFZ Capital Group reportedly secured over $1 billion in fi nancing to close on the $870 million acquisition from New Jersey-based Edison Properties. Lender JPMorgan Chase, Black Rock and SL Green provided fi nancing for the sale that closed in early May. According to city records, a loan totaling $350 million was provided by JPMorgan with the remaining 65% of the fi nancing package in equity. HFZ is reportedly planning to redevelop the currently operating parking lot the spans an entire square-block into an approximately 800,000-square-foot mixed-use project that will include a hotel, residential condominiums, and ground level retail on site that is bound by West 17th- and West 18th Streets to the north and south, and 10th Avenue and the West Side Highway to the east and west.

525-531 West 27th Street aka 526-532 West 28th Street (Chelsea) – Co-developers Centaur Properties and Greyscale Development Group secured a $115 million loan from lender Bank of Ozarks. Funds from the 3-year fl oating rate debt will fi nance the construction of the 2-building, 135,000-square-foot condominium project dubbed Jardim comprised of 36-units and a 12,000-square-foot retail component. The parcel which runs block-through and included 100,000 square feet of unused development rights was acquired in 2013 for $45 million ($333 per buildable-square-foot) .

Downtown

48 Wall Street (FiDi) – An affi liate of MacDonald & Cie secured a $70 million refi nance loan from lender MetLife. The 15-year debt reportedly carries a loan-to-value ratio of 54%; and retires previous fi nancing provided by Capital One in 2008. The former Bank of New York Building last traded in 1998, followed by a complete gut renovation in 2001.

32 Old Slip (FiDi) – RXR Realty secured a $325 million loan to close on the acquisition of the 36-story, 1,132,340-square-foot building from lenders GE Capital Real Estate (recently acquired by Blackstone Group) and Wells Fargo. The 5-year debt for the $675 million acquisition carries a fi xed interest rate below 3%, with interest-only payments for the full term. Simultaneous to the purchase, RXR reportedly fl ipped the land for an undisclosed price to a partnership that includes Brooklyn investor David Werner in a 150-year leaseback arrangement. It was further announced that Melohn Properties paid $197.5 million for an undisclosed interest in the land, but it is not clear if it was an additional transaction or part of the David Werner deal.

The building last traded at the height of the market in 2007 when Beacon Capital acquired the building for $751 million ($663 per square foot); and is currently anchored by American International Group in a 260,000-square-foot lease that is due to expire at the end of 2017. New ownership is planning to reposition the building, shifting from its current corporate look to a more creative tech-friendly aesthetic that may include putting a café in the lobby and outdoor seating in the surrounding plaza area.

175 Franklin Street (TriBeCa) – Bahram Benaresh secured a 2-year, $10.3 million bridge loan from Industrial & Commercial Bank of China (ICBC) at a 1% over prime interest rate, with a fl oor of 4.25% and 2-years of interest-only payments. The short-term debt will reportedly close out a $9.5 million in fi nancing that had been provided by G4 Capital Partners in July 2013. Ownership is intending to convert the 6-story, 12,000-square-foot building into luxury residential units, but due to a remaining Interim Multiple Dwelling1 (IMD) unit that is rent stabilized and occupied, conversion of the building to legal multiple dwellings in accordance with the New York City Loft Board remains delayed. Yet despite the lack of a temporary certifi cate of occupancy, ICBC moved ahead with the loan for the building that is nearly vacant. Marketing for the ground fl oor retail space has begun and once the property is stabilized, long-term fi nancing will be pursued.

111 Murray Street formerly 101 Murray Street (TriBeCa) – Co-developers Fisher Brothers, Witkoff Group and Howard Lorber secured a $445 million loan from a group of lenders including Blackstone Real Estate Debt Strategies, M&T Bank, and Deutsche Bank. The construction loan will fund the team’s redevelopment of the former St. John’s University ancillary building into a high-end residential condominium tower. Plans were fi led in September for the 365,162-square-foot residential condominium formerly dubbed 101 Tribeca. The development is expected to reach a linear height of 792-feet; and be comprised of 157 residences and 2,887 square feet of ground level retail. Foundation work will begin soon with an anticipated 2019 project completion. The property had been acquired in July 2013 for $223 million; and demolition of the existing structure has recently been completed.

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Notable Transactions

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Sale

Address Submarket District Sq. Ftge Sold Price Purchaser32 Old Slip Downtown FiDi 1,132,340 $675,000,000 RXR Realty

230 Park Avenue Midtown Grand Central 1,294,808 $1,200,000,000 RXR Realty

1407 Broadway Midtown Penn Plaza 1,100,000 $330,000,000 Shorenstein Realty Services

7 Bryant Park Midtown Penn Plaza 473,672 $596,855,492 Bank of China (leasehold)

730 Fifth Avenue Midtown Plaza 366,200 $1,780,000,000 Jeff SuttonGeneral Growth Partners

717 Fifth Avenue Midtown Plaza 350,000 $415,000,000 Anbang Insurance Grp (condo)

641 Fifth Avenue Midtown Midtown East 251,317 $651,595,100Crown AcquistionsOxford Properties Group(condo - 50.13% stake)

142 West 36th Street234 West 39th Street Midtown Penn Plaza 209,815 $118,000,000 Waterman Interests

USAA Real Estate

240-248 W 40th Street Midtown Penn Plaza 160,000 $85,000,000 Olmstead PropertiesJonathan Rose Cos

200 West 57th Street Midtown Columbus Circle 112,768 $120,400,000 Feil OrganizationRockpoint Group (83.5% stake)

Lease

Address Submarket District Sq. Ftge Tenant28 Liberty Street Downtown FiDi 100,000 Ironshore (relocation)

195 Broadway Downtown World Trade Center 83,964 Gucci (relocation)

123 William Street Downtown Insurance 65,000 Planned Parenthood (relocation)400 West 33rd Street1 Manhattan West Midtown Penn Plaza 550,000 Skadden Arps Slate Meagher & Flom (relocation)

1460 Broadway Midtown Times Square 180,000 WeWork

855 Sixth Avenue Midtown Penn Plaza 147,000 Nike (relocation)

330 West 34th Street Midtown Penn Plaza 145,000 Foot Locker (relocation)

95 Morton Street Midtown South Hudson Square 95,000 PayPal (relocation)

119-125 West 24th Street Midtown South Chelsea 83,686 Anheuser-Busch InBev

601 West 26th Street Midtown South Chelsea 60,000 Ralph Lauren (expansion)

The Manhattan Offi ce Market Report is produced quarterly by:Jamie Mason | Director of Marketing & ResearchABS Partners Real Estate, LLC

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For More Information Please Contact:

212.400.6060 • www.absre.com

200 Park Avenue South, 10th Floor, New York, NY 10003

Although the information furnished is from sources deemed reliable such information has not been verifi ed and no express representation is made nor is any implied as to the accuracy thereof. Sources: CoStar Group, The Real Deal, Crain’s New York Business, The New York Times, New York Post, New York Yimby, and Commercial Observer

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