3Q14 CAPITAL MARKETS REPORT FOR THE INTELLIGENT INVESTOR
Capital Markets Report Table of Contents 3 Market Summary 4 Overview 5 TAMI Impact: Submarket Rental Rate Increases 6 Supply Chasing Demand: Space Under Construction 7 Mainland to Manhattan: Investment Activity 8 Mainland to Manhattan: EB-5 Visa Issuance 9 Significant Investment Sales: Recently Completed 10 Significant Investment Sales: Pending & Available 11 Investment Activity Index: Overall Rankings 12 Investment Activity Index: Growth Cycle 13 Investment Activity Index: Top 10 Cities 14 Investment Activity Index: National Backup 15 Economic Indicators 16 Lending vs. Equity 17 Unemployment Rate: International 18 Unemployment Rate: Domestic 19 TAMI Employment 20 Energy Employment 21 Office-Using Employment 22 Leasing Analysis 23 Leasing Activity by Market 24 Overall Rent & Vacancy 25 Availability & Vacancy Rate 26 Overall Asking Rents by Market 27 Availability Rate & Asking Rents: Submarkets 28 Lower Manhattan Resurgence 29 Top-Tier Taking Rents 30 Rental Rates: Base Taking 31 Rental Rates: Net Effective 32 Commercial Development Pipeline 33 Commercial Development Horizon Map 34 Commercial Development Backup 35 Capital Markets Intelligence 36 CMBS Issuance 37 Loan Sale Advisory: Commercial Mortgage Maturities 38 Delinquency Percentage 39 Total Balance by Property Type 40 Delinquency Balance by Property Type 41 Loan Sale Advisory: Distressed Property Levels 42 United States Foreign Capital Distribution 43 Buyer Distribution 44 Seller Distribution 45 REIT Performance 46 Major Metropolitan Cities Sales Volume 47 Manhattan Sales Volume 48 Manhattan Foreign Capital Distribution: 49 Lower Manhattan Activity Surge 50 Office Building Sales: Half Billion Dollar Transactions 51 Office Building Sales: Recession Flippers 52 United States Office Building Sales: $/SF 53 Manhattan Historical Office Building Sales: $/SF 54 United States Office Building Sales: Cap Rates 55 Manhattan Historical Office Building Sales: Cap Rates 56 Cap Rates by Property Type 57 Historical Top-Tier Transactions: Price & $/SF 58 Development Site Volume 59 Development Site Sales: Fee Pricing 60 Development Site Sales: Residential & Hotel 61 Development Site Pricing 62 Transferable Development Right Sales 63 Residential Condominium Pricing 64 Luxury Condominium Pricing 3Q14 CAPITAL MARKETS REPORT 2
3Q14 MARKET SUMMARY
3Q14 Market Summary Overview Competition for land acquisition has spiked in certain major markets as investors and developers pocketed with capital have multiplied. There is huge demand for core product, but foreign and fund-mandated buyers have helped compress cap rates, pushing pricing higher and making it tough for traditional investors to close deals. Capital investment from China is strongest in primary markets such as New York, Chicago, Los Angeles and the Bay Area. China has been an active participant in the EB-5 program receiving more than 80% of the grants over the past three years. Multi-family housing near transportation hubs remains the overall safest real estate play in the gateway cities. Carved-out retail condominiums in well traveled metro corridors have experienced rapid growth in value. Desire for new commercial space remains strong in primary markets such as New York City, Washington, D.C., Boston, Houston and Seattle where 42 million square feet is currently under construction. Technology employment bases in New York and San Francisco continue to grow rapidly while footprints in London and Los Angeles have become more pronounced. Positive absorption, declining vacancy and steady rental growth paced commercial activity in the third quarter. 3Q14 CAPITAL MARKETS REPORT 4
3Q14 Capital Markets Intelligence TAMI Impact: Submarket Rental Rate Increases (3Q12-3Q14) Bay Area California Three of the top five leases in San Francisco during the third quarter were from the technology industry as Uber, Google, and Citrix all signed substantial leases. Technology tenants in the area continue to drive the demand for space accounting for 48% of the total RSF demand. New York Six of the ten largest leases were signed by TAMI tenants in the third quarter, all occurring in Midtown South or Downtown. Midtown South activity for TAMI tenants represented 31% of all leasing for the third quarter. Los Angeles Westside leasing activity was dominated by technology and media companies, accounting for 32.8% of Los Angeles County s total leasing this quarter. 4 out of the top 5 new leases signed this year where in technology/media related industries including Verizon, justfab.com and edmunds.com. Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 5
3Q14 Market Summary Supply Chasing Demand: Space Under Construction United States Construction activity is ramping up 100% across all product types, except for apartments, which remains substantially below pre- 80% recession peaks. The multi-family construction 60% pipeline is 81% of the prior peak with much of the new construction occurring in downtowns and 40% nearby mixed-use neighborhoods, which have become locations of choice for millennials and empty 20% nesters alike. 0% Office Industrial Retail Apartment Source: Census Bureau, CoStar, Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 6
Millions 3Q14 Market Summary Mainland to Manhattan China Ramps Up New York Presence Chinese Investment Activity in United States Chinese investors have accepted lower cap rates and longer periods of return in exchange for the strength and stability that the New York market offers over the San Francisco/San Jose 18.7% Chicago 12.4% Manhattan 28.3% long term. Chinese Investment Activity in New York City Los Angeles 27.2% Houston 3.9% $3,000 $2,500 $2,000 $2,270 $2,550 Other Cities 9.5% $1,500 $1,000 $894 $500 $0 $150 $200 2010 2011 2012 2013 2014 YTD Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 7
3Q14 Market Summary Mainland to Manhattan EB-5 Visa Issuance by Year # of Visas Issued vs. % of Visas Issued to Chinese Investors 2014 is the first time in the 10,000 10,000 program s 24-year history that the entire annual allotment of EB-5 8,000 7,641 8,564 85.0% (estimated) visas will be claimed. China has been the most active 80.5% participant in the program with an 6,000 80.1% estimated 85% of EB-5 visas granted in 2014 going to Chinese 4,000 4,218 investors. 3,463 2,000 0 50.9% 69.5% 1,443 1,885 28.2% 45.9% 2008 2009 2010 2011 2012 2013 2014 # of EB-5 Visas Issued % of EB-5 Visas Issued to Chinese Investors Source: Newmark Grubb Knight Frank; Bureau of Consular Affairs, U.S. Department of State. 3Q14 CAPITAL MARKETS REPORT 8
3Q14 Market Summary Significant Investment Sales Recently Completed $451,064/Key $1,857,143/Key $592,417/Unit $1,011,080/Unit $431/SF $563/SF $1,191/SF $1,210/SF $1,371/SF 140 West 42 nd Hilton Garden Inn Times Square 157 West 57 th Park Hyatt 305-315 East 86 th &160 East 88 th 229 Chrystie Street 180 Maiden Lane 150 East 42 nd Street 245-249 West 17 th Street 65 East 55 th St. Park Avenue Tower 287 Park Avenue South Hotel Built in 2013 282 rooms 37 floors DiamondRock Hospitality Co. purchased Highgate Holdings JV Walton Street Capital JV Crown Acquisitions JV Ashkenazy Acquisitions sold Sale price: $127,200,000 Newly constructed hotel located between Avenue of the Americas and Broadway Hotel Built in 2014 210 rooms 73 floors Hyatt Hotels Corporation purchased Extell Development Company sold Sale price: $390,000,000 Opened in August and is the first five-star hotel to open in Manhattan in over a decade Residential Built in 1964 844 Total Units 21 & 15 floors The Chetrit Group JV Stellar Management purchased Schneider & Schneider Inc. sold Sale price: $500,000,000 Upper East Side class B rental buildings with street retail Residential Built in 2005 361 Units 14 Floors Ashkenazy Acquisitions purchased AvalonBay Communities sold Sale price: $365,000,000 Whole Foods leases space in the base level of the property Building is 95% occupied, with 72 apartments paying affordable rents Office Built in 1984 (renovated in 2000) 1,090,000 SF 32 floors Murray Hill Properties JV Clarion Partners purchased SL Green JV Moinian Group sold Sale price: $470,000,000 SL Green purchased partial interest in 2011 to resolve a troubled situation Office Built in 1954 (renovated in 1998) 1,600,000 SF 42 floors David Werner RE JV 601W Companies JV Harry Skydell purchased Hiro Real Estate Co. sold Sale price: $900,000,000 Japanese investor Hiro purchased the tower in 1987. Major tenants include Wells Fargo and Mount Sinai Medical Center Office Built in 1909 (renovated in 2013) 281,294 SF 12 floors NY REIT purchased Savanna JV Atlas Capital Group sold Sale price: $335,000,000 The property is 93% leased to Twitter, Room & Board and Flywheel Office Built in 1986 620,000 SF 36 floors Shorenstein Properties sold Blackstone purchased Sale price: $750,000,000 Shorenstein bought the property in 2008 for $1,080/SF Park Tower Group still retains a 5% ownership stake Office Built in 1893 93,328 SF 9 floors Cheerland Investments purchased United Charities Corporation sold Sale price: $128,000,000 Cheerland plans to turn the 19 th century office building into residential condominiums 2Q14 CAPITAL MARKETS REPORT 9
3Q14 Market Summary Significant Investment Sales Pending & Available $316,667/Key $757,000/Unit $882,000/Unit $532/SF $684/SF $769/SF $873/SF $1,071/SF $1,516/SF 250 West 43 rd Hotel Carter 400 Chambers St TriBeCa Park 41 River Terrace TriBeCa Pointe One Wall Street 21 Penn Plaza 386 Park Avenue South 55 West 46 th Street (floors 22-34) 230 Park Avenue 1095 Avenue of the Americas Hotel Built in 1929 600 units 22 floors On the market for sale from Estate of Tran Dinh Truong Chetrit Group to purchase Looking for approximately: $190,000,000 Hotel needs at least $125m for safety and infrastructure upgrades Residential Ground Lease Built in 1998 396 units 27 floors On the market for sale from Related Companies Looking for approximately $300,000,000 Property is nearly fully leased with condo-level amenities Residential Ground Lease Built in 1998 340 units 42 floors On the market for sale from Rockrose Development Looking for approximately $300,000,000 Class A residential rental building with retail space Office Built in 1930 1,100,000 SF 50 floors On the market for sale from Bank of New York Mellon Corp. Harry Macklowe to purchase Looking for approximately $585,000,000 The 50-story limestone tower will likely be sold to a developer as a residential/hotel conversion Office Built in 1931 380,000 SF 16 floors On the market for sale from Savanna Looking for approximately $260,000,000 Savanna purchased the building in 2011 for $137 million Transaction would garner a three year gain of over 89% Office Built in 1927 (renovated in 2012) 260,000 SF On the market for sale from William Macklowe Looking for approximately $200,000,000 After acquiring the property for $111.5 million in 2012, the owners implemented renovations to façade, elevators, lobby and entrance Office Built in 2013 315,000 SF 34 floors On the market for sale from Extell Development SL Green to purchase Looking for approximately $275,000,000 SL Green is in contract to purchase the top 13 floors after Extell failed to find tenants to lease the space Office Built in 1929 (renovated in 2005) 1,400,000 SF 34 floors On the market for sale from Monday Properties JV Invesco JV South Korea s National Pension Service Looking for approximately $1,500,000,000 The Helmsley Building last sold in 2011 for $769.8 million Office Built in 1972 (renovated in 2008) 1,484,325 SF 42 floors On the market for sale from the Blackstone Group Looking for approximately $2,250,000,000 Blackstone acquired the property in 2007 and has completed a $300 million renovation since then 2Q14 CAPITAL MARKETS REPORT 10
3Q14 Market Summary Investment Activity Index United States Overall Rankings RANK CITY RANK CITY RANK CITY RANK CITY 1 New York City 11 San Diego 21 Westchester/Fairfield 31 Tampa/St. Petersburg 2 San Francisco 12 Orange County 22 Las Vegas 32 Honolulu/Hawaii 3 Los Angeles 13 Dallas 23 Nashville 33 Virginia Beach/Norfolk 4 Boston 14 Miami 24 Minneapolis/St. Paul 34 Pittsburgh 5 Washington, D.C. 6 Houston 7 Chicago 8 San Jose 9 Seattle 10 Denver 15 Austin 16 Phoenix 17 Northern New Jersey 18 Philadelphia 19 Atlanta 20 Inland Empire 25 Baltimore 26 Sacramento 27 Portland, OR 28 San Antonio 29 Orlando 30 Raleigh/Durham 35 Charlotte 36 Tucson 37 Oklahoma City 38 Columbus 39 Kansas City 40 Salt Lake City Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics, census.gov, Real Capital Analytics, Costar, Realtor 3Q14 CAPITAL MARKETS REPORT 11
3Q14 Market Summary Investment Activity Index Growth Cycle 1 40 New York San Francisco Los Angeles Charlotte Jacksonville NGKF Capital Markets Investment Activity Index is a quarterly real estate measure of the top cities in Boston Tampa the United States. Houston Surging Recovering Oklahoma City The statistics contained in the index are derived from various sources and cover 15 different 10 30 metrics, which we aggregate and rank. Denver San Diego Emerging Recovered Raleigh/Durham The Investment Activity Index is not meant to show which markets are the strongest over a long period of Orlando Miami San Antonio Austin Portland Dallas Philadelphia Atlanta Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics, census.gov, Real Capital Analytics, Costar, Realtor 20 time, but to illustrate the current vitality and capital investment strength by city and property type. 3Q14 CAPITAL MARKETS REPORT 12
3Q14 Market Summary Investment Activity Index Top 10 Cities Investment Sales Rank Billions New York City 1 $43.6 Los Angeles 2 $27.6 Chicago 3 $17.0 Dallas 4 $14.9 Houston 5 $13.8 San Francisco 6 $12.6 Boston 7 $11.7 Atlanta 8 $11.2 Seattle 9 $9.7 Washington, D.C. 10 $9.5 Office SF Under Construction Rank MSF Houston 1 17.7 New York City 2 8.3 Dallas 3 6.3 San Francisco 4 5.6 Boston 5 5.1 Washington, D.C. 6 4.9 San Jose 7 4.2 Seattle 8 3.6 Minneapolis 9 3.1 Pittsburgh 10 2.9 Median Home Price % Change Rank % Inland Empire 1 28.4% Las Vegas 2 24.1% Houston 2 23.1% Denver 4 20.7% Sacramento 5 19.3% San Diego 6 17.7% Austin 7 15.7% Atlanta 8 15.3% Chicago 9 15.2% Nashville 10 14.1% New Housing Units Rank # of Units Houston 1 51k Dallas 2 37k Los Angeles 3 25k Atlanta 4 24k Washington, D.C. 5 24k Austin 6 20k Miami 7 19k Seattle 8 19k Phoenix 9 18k Orlando 10 15k Multi-family Cap Rates Rank Cap New York City 1 4.0% San Francisco 2 4.3% Los Angeles 3 4.8% San Jose 4 4.9% Seattle 5 5.0% Boston 5 5.0% San Diego 7 5.0% Orange County 8 5.4% Denver 9 5.7% San Antonio 9 5.7% Retail Absorption Rank MSF Houston 1 2.9 San Antonio 2 1.8 Dallas 3 1.3 Chicago 4 1.2 Los Angeles 5 1.1 Boston 6 1.0 Philadelphia 7 1.0 Inland Empire 8.9 Orange County 9.9 Washington, D.C. 10.8 Office Absorption Rank MSF Atlanta 1 1.8 New York City 2 1.8 Dallas 3 1.5 Boston 4 1.3 Houston 5 1.1 Los Angeles 6 1.1 Denver 7.8 Orange County 8.8 San Jose 9.8 San Francisco 10.8 Office Cap Rates Rank Cap New York City 1 4.2% San Francisco 2 4.2% Seattle 3 5.5% Washington, D.C. 3 5.5% Boston 5 5.6% San Jose 6 5.7% Denver 7 5.8% Los Angeles 8 5.9% Austin 9 6.1% Orange County 10 6.2% Hotel Cap Rates Rank Cap New York City 1 5.4% Orlando 2 6.0% Orange County 3 6.2% San Francisco 4 6.4% Phoenix 4 6.4% Los Angeles 6 6.5% Inland Empire 7 6.6% San Jose 8 6.7% Boston 9 6.9% Seattle 10 7.0% Retail Cap Rates Rank Cap New York City 1 4.4% San Francisco 2 5.5% Los Angeles 3 6.1% San Diego 4 6.2% Chicago 4 6.2% Miami 4 6.2% Orange County 7 6.3% Washington, D.C. 7 6.3% San Jose 9 6.5% Boston 9 6.5% Retail Rents Rank $ New York City 1 $93.29 San Francisco 2 $35.85 Honolulu 3 $34.57 Miami 4 $28.94 San Jose 5 $28.00 Washington, D.C. 6 $24.62 Los Angeles 7 $24.27 Westchester/Fairfield 8 $22.84 Orange County 9 $22.39 San Diego 10 $22.37 Office Rents Rank $ New York City 1 $63.64 San Francisco 2 $58.21 San Jose 3 $36.96 Washington, D.C. 4 $36.77 Boston 5 $33.70 Los Angeles 6 $31.92 Miami 7 $30.21 Honolulu 8 $30.17 Austin 9 $29.45 Seattle 10 $29.26 Office $/SF Rank $/SF New York City 1 $717 San Francisco 2 $568 Washington, D.C. 3 $554 Boston 4 $529 San Jose 5 $406 Denver 6 $384 Los Angeles 7 $380 Seattle 8 $375 Chicago 9 $286 Houston 10 $285 Hotel $/Unit Rank $/U New York City 1 $559k San Francisco 2 $299k Miami 3 $286k San Diego 4 $268k Houston 5 $243k Boston 6 $235k Seattle 7 $217k Chicago 8 $216k Washington, D.C. 9 $194k Phoenix 10 $177k Retail $/SF Rank $/SF New York City 1 $1,802 San Francisco 2 $1,150 Washington, D.C. 3 $503 Miami 4 $501 Los Angeles 5 $485 Chicago 6 $476 Orange County 7 $322 San Jose 8 $318 Seattle 9 $287 Westchester/Fairfield 10 $265 Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics, census.gov, Real Capital Analytics, Costar, Realtor 3Q14 CAPITAL MARKETS REPORT 13
3Q14 Market Summary RANK New York City 1 San Francisco 2 Los Angeles 3 Boston 4 Washington, D.C. 5 Houston 6 Chicago 7 San Jose 8 Seattle 9 Denver 10 San Diego 11 Orange County, CA 12 Dallas/Fort Worth 13 Miami 14 Austin 15 Phoenix 16 Northern New Jersey 17 Westchester/Fairfield 18 Atlanta 19 Inland Empire 20 Philadelphia 21 Las Vegas 22 Nashville 23 Minneapolis/St. Paul 24 Baltimore 25 Sacramento 26 Portland, OR 27 San Antonio 28 Orlando 29 Raleigh/Durham 30 Honolulu/Hawaii 31 Tampa/St. Petersburg 32 Virginia Beach/Norfolk 33 Pittsburgh 34 Charlotte 35 Tucson 36 Oklahoma City 37 Columbus 38 Kansas City 39 Salt Lake City 40 Property Type Sales (All) Office Caps Office $/PSF Retail Caps Retail $/PSF Hotel $/Unit Hotel Caps Multifamily Caps Office U/C SF Office Leasing Retail Leasing Home Sale % Change New Housing Units Office Rents Retail Rents RANKED CITY #1-10 RANKED CITY #11-20 RANKED CITY #21-30 RANKED CITY #31-40 Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics, census.gov, Real Capital Analytics, Costar, Realtor 3Q14 CAPITAL MARKETS REPORT 14
3Q14 ECONOMIC INDICATORS
3Q14 Economic Indicators Lending vs. Equity Dow Jones Industrial Average vs. 30-Year Fixed Mortgage Rate 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 18,000 15,000 12,000 9,000 30-year fixed mortgages have lacked true direction thus far in 2014 despite expectations of rising rates. The 30-year rate remains higher than its decade low of 3.4% at the end of 2012. The Dow Jones Industrial Average has historically been a leading economic barometer and has increased 14.7% in the past 12 months. 2.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 6,000 Dow Jones Industrial Average 30-Year Fixed Mortgage Rate Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 16
Greece Spain Portugal Italy Ireland France Sweden Canada Israel United Kingdom Australia United States Germany Japan Hong Kong Switzerland 3.5% 3.3% 3.0% 7.4% 7.0% 6.4% 6.2% 6.1% 5.9% 4.9% 12.3% 11.1% 10.2% 13.9% 24.5% 27.0% 3Q14 Economic Indicators Unemployment Rate International At 5.9%, the United States 30.0% unemployment rate continues to improve with a decline of 1.6% over 25.0% the past 18 months. The United States unemployment 20.0% rate fell below 6% for the first time since July 2008, however this can be attributed somewhat to a 62.7% 15.0% labor force participation rate; its lowest level since the first quarter 10.0% of 1978. 5.0% 0.0% Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics not seasonally adjusted 3Q14 CAPITAL MARKETS REPORT 17
Portland San Diego United States Pittsburgh Raleigh/Durham San Jose Houston Seattle Denver Austin Oklahoma City 6.6% 6.2% 5.9% 5.9% 5.7% 5.5% 5.4% 5.3% 4.8% 4.6% 4.4% Atlanta Los Angeles Philadelphia Miami Chicago New York City United States Washington, D.C. Dallas Boston San Francisco 6.7% 6.6% 6.3% 6.3% 5.9% 5.6% 5.5% 5.5% 5.4% 8.0% 7.7% 3Q14 Economic Indicators Unemployment Rate Domestic 8.0% Primary Markets Professional and business services, 5.0% retail trade, and healthcare in the primary markets are seeing 2.0% continued employment growth. A majority of the ICE markets unemployment rates remain near or below the national average. These economies produce significant 8.0% ICE Markets (Intellectual Capital & Energy) revenue from intellectual capital (technology) and energy industries, 5.0% which are non-traditional sectors that continue to surmount the more 2.0% traditional ones. Primary Markets ICE Markets Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics data not seasonally adjusted; United States adjusted rate is 5.7% 3Q14 CAPITAL MARKETS REPORT 18
Bay Area New York City Los Angeles Boston Seattle Atlanta Dallas Washington, D.C. San Diego Minneapolis Bay Area New York City Los Angeles Boston Seattle Atlanta Dallas Washington, D.C. San Diego Minneapolis 3Q14 Economic Indicators TAMI Employment Metropolitan Areas 400,000 Total TAMI Employment 300,000 385,059 200,000 288,016 285,961 205,528 100,000 149,068 135,860 132,813 0 114,796 113,733 107,603 TAMI Employment as a % of Total Employment 12.0% 9.0% 6.0% 3.0% 0.0% 12.4% 3.4% 5.1% 8.4% 8.5% 5.9% 4.3% 3.9% 8.6% 6.1% TAMI = Technology, Advertising, Media, Information Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics 3Q14 CAPITAL MARKETS REPORT 19
Houston Dallas Oklahoma City Chicago Denver Pittsburgh New Orleans Tulsa Odessa Birmingham Baton Rouge Houston Dallas Oklahoma City Chicago Denver Pittsburgh New Orleans Tulsa Odessa Birmingham Baton Rouge 3Q14 Economic Indicators Energy Employment Metropolitan Areas 150,000 100,000 139,766 Total Energy Employment 50,000 40,652 23,854 21,343 17,108 16,857 15,351 12,795 10,067 9,487 6,167 0 15.0% Energy Employment as a % of Total Employment 13.6% 10.0% 5.0% 0.0% 5.0% 1.3% 4.1% 0.5% 1.3% 1.6% 2.9% 3.1% 2.0% 1.7% Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics 3Q14 CAPITAL MARKETS REPORT 20
Thousands 3Q14 Economic Indicators Office-Using Employment New York City 1,350 The NYC office-using employment 1,300 1298.4 1290.1 level is nearing its peak level in 2001, as the information and 1,250 1244.4 financial industries both saw post-june gains. These gains 1,200 1,150 1,100 1,050 1,000 950 900 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 mitigated the slight decrease in employment for professional and business services during the twomonth span. Overall, office-using employment has seen an increase (2.1%) since last September. Professional and business services (2.8%) and financial activities (2.2%) deserve most of the credit, with information employment (-0.4%) seeing a slight dip during this time period. Source: NYC Office of Management and Budget/NYC Office of the Comptroller; Seasonally Adjusted 3Q14 CAPITAL MARKETS REPORT 21
3Q14 LEASING ANALYSIS
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q08 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 MSF 3Q14 Leasing Analysis Leasing Activity by Market Manhattan 14.0 13.0 12.0 11.0 10.0 9.0 8.43 MSF 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Midtown Midtown South Downtown Average Velocity Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 23
3Q14 Leasing Analysis Overall Average Asking Rent & Overall Vacancy Rate Manhattan 70 60 11.0% $54.43 $60.72 $63.64 12.0% 10.0% 50 8.0% 40 7.1% 6.0% 30 20 4.6% 5.0% 4.0% 10 2.0% 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3Q14 0.0% Average Asking Rent ($) Vacancy Rate (%) Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 24
3Q14 Leasing Analysis Availability / Vacancy Rate Manhattan 15.0% 13.8% 12.0% 10.6% 9.0% 8.3% 7.1% 6.0% 3.0% 2008 2009 2010 2011 2012 2013 2014 Availability Vacancy Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 25
3Q14 Leasing Analysis Overall Asking Rents by Market Manhattan $95.00 $85.00 $91.92 While average rental rates in Manhattan are considerably higher than the trough in 2010, Midtown rents have been relatively flat for $75.00 $74.59 the past 15 months. Asking rents in Midtown South $65.00 have increased at a faster pace $55.00 $56.96 $47.06 $56.56 $50.14 than Midtown and Downtown, up more than 45% since the 2010 bottom. $45.00 $35.00 $25.00 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Midtown Midtown South Downtown Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 26
3Q14 Leasing Analysis Availability Rate and Average Asking Rents Market / Submarket Overall Availability Rate Average Asking Rent MIDTOWN 12.0% $74.59 Eastside 8.7% $61.04 Grand Central 11.4% $62.62 Park Avenue 12.3% $92.18 Sixth Avenue / Rock Center 9.6% $76.77 Upper Fifth / Plaza 13.1% $101.69 Westside 12.8% $67.15 MIDTOWN SOUTH 9.5% $56.56 Chelsea 4.6% $58.80 Flatiron / Union Square 12.8% $59.04 Hudson Square 11.2% $63.52 Lower Sixth Avenue 7.7% $53.11 Park Avenue South 8.2% $53.05 Penn Station 10.4% $55.49 Soho / Noho 6.3% $65.10 Times Square South 9.5% $52.44 Village 7.6% $82.76 DOWNTOWN 10.7% $50.14 City Hall / Insurance 8.0% $42.17 Financial 12.1% $46.04 WTC 9.6% $73.71 Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 27
3Q12 3Q14 2012 2014 3Q12 3Q14 3Q-2Q12 3Q-2Q14 3Q14 Leasing Analysis Lower Manhattan Resurgence Class A Comparative Statistics 20.0% 2,900,000 $55.00 $45.00 $44.86 16.0% 17.2% 2,200,000 +2.3 MSF $50.00 $52.29 $42.00 12.0% 10.9% 1,500,000 $45.00 $44.51 $39.00 $38.84 8.0% 800,000 $40.00 $36.00 4.0% 100,000 $35.00 $33.00-537K 0.0% -600,000 $30.00 $30.00 Availability Rate Absorption Asking Rent Taking Rent 3Q14 CAPITAL MARKETS REPORT 28
3Q14 Leasing Analysis Manhattan Top-Tier Office Transactions: Taking Rents 200 The average base-taking rent for 175 150 42 47 21 15 deals at or above $100/SF in 2014 is $133.54/SF compared to $123.39/SF for all of 2013. The average weighted base taking 125 16 51 42 17 12 48 20 rent in 2014 for the 18 deals in excess of $125/sf is $165.87. 100 26 30 24 20 buildings have completed deals with base taking rents at or above 75 2 1 $100/SF in 2014. 50 86 99 97 18 16 76 92 98 114 25 47 49 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD $75.00 - $99.99 $100.00 - $124.99 + $125 Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 29
3Q14 Leasing Analysis Office Rental Rates: Net Effective vs. Base Taking Direct Deals, Five Years (+) Plaza District Class A $75.64 $85.10 $89.79 Average taking rents in Midtown are 22% higher than in Midtown South and 72% more than Downtown. $64.07 Taking rents in the Plaza District, Midtown $67.35 $71.49 which has the highest concentration of trophy assets, have increased $44.73 18.7% in the past two years. Midtown South $49.18 $58.18 $36.85 Downtown $38.02 $41.40 Manhattan $51.36 $57.04 $59.92 $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 $100.00 2012 Base Taking Rent 2013 Base Taking Rent 2014 Base Taking Rent Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 30
3Q14 Leasing Analysis Office Rental Rates: Net Effective Direct Deals, Five Years (+) Plaza District Class A $73.19 $76.39 $77.02 Average Midtown South net effective rents have increased three consecutive years and Midtown $60.81 $59.48 $60.01 are now 34% higher than Downtown rents. Lower Manhattan remains the least $43.88 expensive of the three major New Midtown South $46.19 $52.86 York markets, offering significant concessions on large transactions. Downtown $33.09 $33.31 $39.52 Manhattan $52.81 $51.21 $52.98 $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00 2012 Net Effective Rent 2013 Net Effective Rent 2014 Net Effective Rent Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 31
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019+ MSF 3Q14 Leasing Analysis Manhattan Commercial Development Pipeline 14 12 10 2013 4 WTC 250 West 55th Street 51 Astor Place 2014 1 WTC 2015 10 Hudson Yards 7 Bryant Park 430 West 15th Street 2016 390 Madison Avenue 2017 3 WTC 425 Park Avenue 55 Hudson Yards 2018 30 Hudson Yards 8 6 2019+ One Vanderbilt Avenue Manhattan West 50 Hudson Yards 3 Hudson Boulevard 2 WTC 347 Madison Avenue Hudson Spire 4 2 New Construction 81.3 MSF Expected Delivery 13.4 MSF Potential Delivery 16.2 MSF 0 Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 32
3Q14 Leasing Analysis Commercial Development Horizon Map FAR WEST SIDE 4b 5 1 3 HUDSON BOULEVARD 3c 5 3a 7 BRYANT PARK MANHATTAN WEST 3d 3b 2 4a 425 PARK AVENUE 4b 450 WEST 33rd STREET ONE VANDERBILT AVENUE 2 3a 3b 3d 3c Retail space 341-347 MADISON AVENUE 4a 390 MADISON AVENUE 55 HUDSON YARDS 1 10,30 & 50 HUDSON YARDS WORLD TRADE CENTER AND DOWNTOWN 2 WTC 1 1 WTC Memorial 2 3 4 3 WTC 4 WTC WTC Transportation Hub
3Q14 Leasing Analysis FAR WEST SIDE Rendering not yet available THE RELATED COMPANIES THE MOINIAN GROUP 10 Hudson Yards 55 Hudson Yards 30 Hudson Yards 50 Hudson Yards 3 Hudson Boulevard BROOKFIELD PROPERTIES 5 Manhattan West 450 West 33 rd Street TISHMAN SPEYER 1 Manhattan West Hudson Spire 1,700,000 SF 1,300,000 SF 2,600,000 SF 2,300,000 SF 1,869,000 SF 1,700,000 SF 4,400,000 SF 2,800,000 SF 2015 2017 2018 2020 2019 2016 (Renovation) TBD 2019 MIDTOWN WORLD TRADE CENTER HINES INTERESTS L&L HOLDING COMPANY, RREEF L&L HOLDING COMPANY 7 Bryant Park 390 Madison Avenue 425 Park Avenue SL GREEN One Vanderbilt Avenue MTA 341-347 Madison Avenue PORT AUTHORITY OF NY/NJ 1 World Trade Center 2 World Trade Center SILVERSTEIN PROPERTIES 3 World Trade Center 4 World Trade Center 473,000 SF 841,471 SF 670,000 SF + FAR 1,550,000 SF 550,000 SF 3,000,000 SF 2,800,000 SF 2,500,000 SF 2,300,000 SF 2015 2016 2017 2020 TBD 4Q 2014 TBD 2018 Existing 3Q14 CAPITAL MARKETS REPORT 34
3Q14 CAPITAL MARKETS INTELLIGENCE
3Q14 Capital Markets Intelligence CMBS Issuance United States $250 $228.6 $200 $198.4 $166.5 $150 $100 $77.8 $92.6 $86.1 $68.6 $50 $32.7 $48.4 $0 $12.1 $11.6 $2.7 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD Source: Newmark Grubb Knight Frank, Commercial Mortgage Alert 3Q14 CAPITAL MARKETS REPORT 36
3Q14 Capital Markets Intelligence Loan Sale Advisory: Commercial Mortgage Maturities United States 2014 $400.00 $350.00 $77 $79 $84 $85 $88 $95 Bank: $187 B CMBS: $69 B Insurance: $24 B Other*: $84 B $300.00 $250.00 $23 $53 $25 $62 $24 $24 $69 $99 $25 $110 $26 $137 $95 $85 *Includes Fannie Mae, Freddie Mac, bridge loans and hard money loans $200.00 $150.00 $100.00 $213 $211 $187 $158 $129 $126 $26 $24 $38 $28 $137 $134 $69 $22 $19 $108 $59 $21 $35 $51 $21 $50.00 $80 $34 $54 $0.00 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Bank CMBS Insurance Companies Other Source: Newmark Grubb Knight Frank, Trepp with Federal Reserve Flow of Funds Data 3Q14 CAPITAL MARKETS REPORT 37
3Q14 Capital Markets Intelligence Delinquency Percentage United States 12.0% CMBS tracked by Trepp declined to $527.36 billion from $532.79 billion 10.0% in August, so the percentage of loans that are now more than 30- days late increased to 6.05% from 8.0% 6.1%. 6.0% 4.0% 2.0% 6.05% The volume of CMBS loans that are more than 30-days delinquent declined to $31.8 billion in September from $32.5 billion a month earlier. Last month, however, $1.8 billion of loans were liquidated, effectively removing them from the delinquency rolls. 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 National DQ % - All Property Tyes Source: Newmark Grubb Knight Frank Research and Analysis; data provided by 3Q14 CAPITAL MARKETS REPORT 38
Billions 3Q14 Capital Markets Intelligence Total Balance by Property Type United States $300.0 Issuance by property type has been consistent with CMBS 2.0 $250.0 Uptick in Retail and Lodging are tied to significant portfolio loans. $200.0 $150.0 $165.4 $152.1 $100.0 $50.0 $62.0 $61.6 $0.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $22.2 Office Retail Multi-Family Lodging Industrial Source: Newmark Grubb Knight Frank Research and Analysis; data provided by 3Q14 CAPITAL MARKETS REPORT 39
Billions 3Q14 Capital Markets Intelligence DQ Balance by Property Type United States 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Office Retail Multi-Family Lodging Industrial Source: Newmark Grubb Knight Frank Research and Analysis; data provided by 3Q14 CAPITAL MARKETS REPORT 40
Billions of Dollars 3Q14 Capital Markets Intelligence 2Q14 Loan Sale Advisory: Distressed Property Levels United States $400 Troubled: $64.1 B REO: $50.1 B Resolved: $265.9 B $350 $300 $250 $200 $150 $100 $50 $0 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 Troubled REO Resolved Source: Newmark Grubb Knight Frank, Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 41
3Q14 Capital Markets Intelligence Foreign Capital Distribution: All Property Types United States (Percentages are 2014 Year-to-Date Totals) Origin of Capital Top 5 Countries by Year 2014 YTD Country Properties Volume Canada 294 $8,163.2 Norway 73 $3,964.4 Japan 27 $3.094.4 China 37 $2,549.7 Boston 10.7% Hong Kong 9 $1,893.0 Total 682 $34,857.0 San Francisco/San Jose 8.5% Chicago 3.5% Washington, D.C. 6.6% Manhattan 21.2% 2013 Country Properties Volume Canada 408 $11,194.3 China 34 $3,136.9 Los Angeles 8.5% Germany 58 $2,384.0 Singapore 10 $2,204.6 Israel 60 $2,189.6 Total 899 $36,952.2 Dallas / Houston 3.6% 2012 Country Properties Volume Hawaii 5.6% Other Cities 27.4% South Florida 4.4% Canada 352 $9,455.0 Germany 25 $2,239.1 Switzerland 29 $1,615.6 UK 33 $1,481.7 Israel 34 $1,473.3 Total 903 $27,179.7 Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 42
3Q14 Capital Markets Intelligence Buyer Distribution: All Property Types United States 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 9.9% 8.6% 10.1% 10.1% 6.0% 6.5% 5.3% 6.4% 24.2% 21.4% 28.5% 31.8% 41.5% 43.7% 34.1% 41.4% 18.2% 15.0% 18.9% 18.4% 2011 2012 2013 2014 YTD Public/REITs Private Institutional User/Other Cross-Border Activity (Previous 12 Months) Buyer Volume Public ARCP $12.1 B Essex Property Trust $4.8 B Kite Realty Group $1.9 B Private Related Companies $2.3 B David Werner RE $1.6 B American Realty Capital $1.2 B Institutional Blackstone $4.8 B JP Morgan $4.7 B Hines $2.9 B Cross-Border Norges Bank $2.1 B Kokusai Kogyo $1.8 B ADIA $1.6 B Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 43
3Q14 Capital Markets Intelligence Seller Distribution: All Property Types United States 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 9.9% 8.6% 10.1% 5.6% 6.0% 6.5% 5.3% 8.2% 24.2% 27.7% 28.5% 31.8% 41.5% 34.1% 41.4% 47.0% 18.2% 18.9% 15.0% 11.5% 2011 2012 2013 2014 YTD Public/REITs Private Institutional User/Other Cross-Border Activity (Previous 12 Months) Seller Volume Public BRE Properties $4.4 B Brookfield Asset Mgmt $1.3 B Prologis $1.1 B Private Cole RE Investments $11.1 B Inland Real Estate $2.9 B KBS REIT II $1.4 B Institutional Blackstone $3.3 B Cerberus $3.1 B Beacon Capital Partners $2.3 B Cross-Border SEB Group $550 M Dubai Holding $511 M Gazit-Globe $400 M Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 44
3Q14 Capital Markets Intelligence REIT Performance: All Property Types REITS as a Percentage of Total Investment by Market (YTD) 30.0% 20.0% 10.0% 8.0% 9.0% 9.0% 9.0% 11.0% 12.0% 12.0% 13.0% 13.0% 15.0% 16.0% 16.0% 18.0% 19.0% 19.0% 20.0% 23.0% 26.0% 28.0% 0.0% Atlanta Miami Washington D.C. Houston Manhattan Denver Dallas Phoenix Los Angeles Chicago San Francisco Boston San Jose Las Vegas Orlando Seattle Orange County Philadelphia San Diego REIT Performance All Property Types REITS Investment Volume by Market ($M YTD) $5,000 $4,000 $4,056 $3,000 $2,512 $2,000 $1,000 $1,685 $419 $446 $704 $646 $1,122 $678 $1,698 $1,805 $1,895 $1,048 $460 $511 $1,228 $1,135 $1,225 $1,425 $0 Atlanta Miami Washington D.C. Houston Manhattan Denver Dallas Phoenix Los Angeles Chicago San Francisco Boston San Jose Las Vegas Orlando Seattle Orange County Philadelphia San Diego Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 45
Manhattan Los Angeles Chicago Dallas Houston San Francisco Boston Atlanta * NYC Boroughs Seattle Washington, D.C. San Jose Denver Phoenix Northern NJ San Diego Orange County Miami Philadelphia Austin Billions 3Q14 Capital Markets Intelligence Total Sales Volume: All Property Types Major Metropolitan Cities (12-Month Totals) $45.0 $40.0 $35.0 $30.0 $25.0 $20.0 Bay Area = 21.8 Billion 3Q14 Significant Transactions City/Property Buyer Price Manhattan 65 East 55 th Street Blackstone $789 M 222 Broadway Deutsche AWM $502 M 180 Maiden Lane Murray Hill jv Clarion Partners $470 M Los Angeles 801 Figueroa Street Cornerstone RE Advisors $190 M 705 West 9 th St. (Residential) ASB RE Investments $160 M 10900 Wilshire Boulevard Tishman Speyer $125 M Chicago Three First National Plaza Hearn Co. $374 M 55 West Monroe Street John Hancock $244 M 101 North Wacker Lasalle $210 M San Francisco One Market Plaza Blackstone $600 M 50 Beale Street Paramount Group $395 M 405 Howard Street Norges Bank jv TIAA CREF $390 M $15.0 $10.0 $5.0 $0.0 * Includes Brooklyn, Queens, Bronx, Staten Island and Long Island Primary Markets ICE Markets Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 46
3Q14 Capital Markets Intelligence Sales Volume by Property Type Manhattan (12-Month Totals) Development Sites 5.6% Hotel 8.0% Warehouse / Flex 1.9% Property Type Volume ($ billion) # of Properties Office $23,005 193 Apartment $7,658 440 Retail $6,175 292 Development Sites $2,399 67 Hotel $3,522 22 Retail 14.2% Office 52.7% Warehouse / Flex $847 28 Totals $43,609 1,042 Apartment 17.6% * Percentages based off of total volume Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 47
3Q14 Capital Markets Intelligence Foreign Capital Distribution: All Property Types Manhattan (12-Month Totals) Number of Properties Purchased Other 28.5% Canada 23.8% Most Active Foreign Buyers - Manhattan Properties Purchased by Company Brookfield Property Partners/ Brookfield Asset Management Crest Realties 4 Delek Group 3 5 Australia 3.2% Singapore 3.2% Norway 3.2% Malaysia 4.7% Bermuda 7.9% China 8.1% Israel 17.4% Cascade Ventures 3 Square Feet of Properties Purchased Other 16.6% Canada 20.6% Norges Bank 2 Australia 6.9% Caisse de Depot 2 Bermuda 8.6% Norway 15.7% Malaysia 8.7% Singapore 9.2% China 13.7% Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 48
180 Water 110 William Two Rector 222 Broadway 90 Broad 5 Hanover Sq. One CMP 160 Water One North End 100 Broadway 65 Broadway 77 Water 30 Broad 80 Braod 100 William 180 Maiden One Wall 61 Broadway One Exchange 3Q14 Capital Markets Intelligence Lower Manhattan Activity Surge: 2013-2014 Office Building Sales Price Per Square Foot $500 $450 $400 $363 $381 $389 $390 $400 $400 $416 $427 $431 $448 $448 $350 $300 $296 $297 $301 $304 $320 $326 $329 $333 $250 $200 $150 $100 $50 $0 2013 2Q14 Sales Available/Pending Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 49
3Q14 Capital Markets Intelligence Manhattan Office Building Sales Half Billion Dollar Transactions 20 16 20 2014 COMPLETED 65 East 55th Street 60 Columbus Circle 450 Park Avenue One Park Avenue Five Times Square 12 11 11 14 7 150 East 42nd Street 388-390 Greenwich Street 222 Broadway 8 7 8 AVAILABLE/PENDING 230 Park Avenue 601 Lexington Avenue 4 1095 Avenue of the Americas 0 3 3 2 2 1 1 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1740 Broadway 1334 York Avenue 530 Fifth Avenue Completed Pending One Wall Street Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 50
86 Trinity 509 Fifth 430 West 14th 1370 Broadway 434 Broadway 104 West 40th 1412 Broadway 511-541 West 25th 15 East 26th 256 Fifth 920 Broadway 222 Broadway 158 West 27th 80 West End Avenue 100 Fifth 200 Lafayette 3Q14 Capital Markets Intelligence Manhattan Office Building Sales Recession Flippers 200% 197.0% Savvy landlords such as Normandy, Savanna, Related, Kaufman and Kushner have 150% 145.0% 130.0% 132.0% 118.2% purchased, renovated, leased-up and flipped assets for a substantial profit in less than three years. 100% 50% 30.4% 40.0% 48.4% 50.3% 51.2% 55.0% 63.9% 72.0% 84.2% 91.8% 101.0% Pending transactions at the following locations will offer significant, short-tern return on investments: 183 Madison Avenue, 386 Park Avenue South and 530 Fifth Avenue. 0% * All calculations are of sale price and do not include pre-existing mortgages or liens Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 51
Manhattan San Francisco Washington, D.C. Boston San Jose Denver Los Angeles Seattle Chicago Houston Miami San Diego Austin Philadelphia Northern NJ 3Q14 Capital Markets Intelligence United States Office Building Sales Price Per Square Foot $800 $700 $717 $600 $568 $554 $529 $500 $400 $406 $384 $380 $375 $300 $286 $285 $265 $262 $261 $260 $252 $200 $100 $0 Primary Markets ICE Markets Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 52
3Q14 Capital Markets Intelligence Manhattan Historical Office Building Sales Price Per Square Foot $1,000 $900 $849 $800 $700 $717 $600 $500 $400 $300 $200 $245 $100 $0 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 53
Manhattan San Francisco Seattle Washington, D.C. Boston San Jose Denver Los Angeles Chicago Houston Phoenix San Diego Dallas Philadelphia 3Q14 Capital Markets Intelligence United States Office Building Sales Cap Rates 8.0% Cap rates on office buildings in 6.0% 5.5% 5.5% 5.6% 5.7% 5.8% 6.2% 6.2% 6.4% 6.7% 6.7% 6.8% 7.0% Manhattan and San Francisco have trended lower in the past year as strong demand in those cities continue. 4.0% 2.0% 4.2% 4.2% Liquidity and projected rent growth have pushed some notable sales in the New York and San Francisco markets towards cap rates in the 3-4% range. 0.0% Primary Markets ICE Markets Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 54
3Q14 Capital Markets Intelligence Manhattan Historical Office Building Sales Cap Rates 8.0% 7.0% 6.9% 6.0% 5.0% 4.0% 4.2% 4.2% 3.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 55
3Q14 Market Summary Cap Rates by Property Type Manhattan 8.0% Despite declining yields, substantial worldwide demand for prime Manhattan opportunities remains. 6.0% 4.5% 5.5% At 4%, cap rates for residential and office property are among 4.0% 4.0% 4.2% the lowest in the country along with Downtown San Francisco. Average hotel cap rates have trended lower in recent quarters as the hospitality sector 2.0% continues to strengthen. 0.0% Residential Office Retail Hotel Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 56
$/SF Billions 3Q14 Capital Markets Intelligence Manhattan Historical Office Building Sales: Price Select Top-Tier Transactions $3.0 $2.8 $2.5 $2.0 $1.5 $1.0 $1.0 $0.8 $1.7 $1.2 $1.5 $1.3 $1.8 $1.7 $1.5 $1.8 $1.0 $1.1 $1.3 $0.7 $1.3 $1.5 $0.5 $0.0 399 Park (3Q02) 111 Eighth (1Q04) 200 Park (2Q05) 1290 AoA (2Q06) 1211 AoA (3Q06) 5 Times Sq. (4Q06) 666 Fifth (1Q07) 825 Eighth (1Q07) 767 Fifth (2Q08) 1301 AoA (3Q08) 111 Eighth (4Q10) 1633 Broadway (2Q11) 550 Madison (1Q13) 650 Madison (3Q13) One CMP (4Q13) 60 Columbus (1Q14) 5 Times Square (2Q14) Manhattan Historical Office Building Sales: Price Per Square Foot Select Top-Tier Transactions $2,500 $2,175 $2,000 $1,500 $1,000 $631 $679 $753 $1,000 $1,205 $1,525 $1,258 $1,507 $610 $790 $1,010 $1,373 $1,285 $1,181 $1,698 $1,218 $500 $0 745 Seventh (4Q01) 399 Park (3Q02) 767 Fifth (3Q03) 111 Eighth (1Q04) 666 Fifth (1Q07) 450 Park (3Q07) 280 Park (4Q07) 767 Fifth (2Q08) 111 Eighth (4Q10) 450 Lexington (3Q12) 450 West 15th (1Q13) 499 Park (3Q13) 550 Madison (1Q13) 650 Madison (3Q13) 60 Columbus (1Q14) 450 Park (2Q14) 65 East 55th (3Q14) Source: Newmark Grubb Knight Frank 3Q14 CAPITAL MARKETS REPORT 57
Billions 3Q14 Capital Markets Intelligence Manhattan Development Site Volume Rolling Average Development site sales volume $4.0 $3.5 has increased 67% in the past two years, however, is well short of 2006-2007 levels. $3.0 $2.5 $2.0 $1.5 As activity has trended higher, pricing has significantly improved and intensified competition among local and foreign developers with the intent to develop high-end retail, residential and hotel properties. $1.0 $0.5 $0.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Newmark Grubb Knight Frank; Real Capital Analytics 3Q14 CAPITAL MARKETS REPORT 58
3Q14 Capital Markets Intelligence Development Site Sales - Fee Pricing Manhattan $600 All Development Site Sales Buyers have paid approximately 10% more on a per square foot $556 basis for a single tax lot site than they have for parcels with multiple $466 tax lots (including assemblages). $400 $420 Buyers have paid about 28% more per square foot for sites with less $325 $332 than 10,000 square feet of lot area. Corner parcels have sold for $200 approximately 23% more on a per square foot basis than sites that are located in the interior of the block. $0 2010 2011 2012 2013 2014 YTD Average $/SF Source: Newmark Grubb Knight Frank; Landauer Valuation & Advisory 3Q14 CAPITAL MARKETS REPORT 59
$223 $285 $415 $490 $565 $296 $402 $334 $330 $320 $453 $430 $368 $747 $413 $492 $509 $1,034 $603 $1,141 3Q14 Capital Markets Intelligence Development Site Sales - Fee Pricing Manhattan Residential Development Site Sales Hotel Development Site Sales $1,200 $600 $800 $400 $400 $200 $0 2010 2011 2012 2013 2014 YTD $0 2010 2011 2012 2013 2014 YTD Average $/SF Highest Paid $/SF Average $/SF Highest Paid $/SF Source: Newmark Grubb Knight Frank; Landauer Valuation & Advisory 3Q14 CAPITAL MARKETS REPORT 60
3Q14 Capital Markets Intelligence Manhattan Development Site Pricing Price Per Buildable Square Foot $1,200 $1,103 $1,141 $1,023 $1,034 $1,000 $800 $740 $743 $747 $815 $816 $853 $864 $894 $905 $918 $600 $400 $200 $0 52 Wooster (Residential/ Retail) 279 Fifth (Residential/ Retail) 120 E. 23rd (Residential) 118 E. 59th (Residential) 455 E. 19th (Residential) 239 Tenth (Residential) 108 E. 7th (Residential/ Retail) 150 W. 34th (Unknown) 1-19 Houston (Retail) 180 E. 88th (Residential) 101 Delancey (Residential/ Retail) 17 E. 12th (Residential) 985 Third (Residential/ Retail) 40 W. 66th (Residential) * Prices reflects a blended rate with air rights Source: Newmark Grubb Knight Frank; Landauer Valuation & Advisory 3Q14 CAPITAL MARKETS REPORT 61
3Q14 Capital Markets Intelligence Transferable Development Right Sales Manhattan $450 $400 $350 $401.37 TDR Sales Per Year Year # 2014 YTD 16 2013 31 2012 15 2011 6 $300 $250 $200 $290.45 2010 3 2009 1 2008 13 2007 22 2006 30 $150 $169.73 2005 14 $100 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD Source: Newmark Grubb Knight Frank; Landauer Valuation & Advisory 3Q14 CAPITAL MARKETS REPORT 62
$873 $1,363 $1,086 $1,142 $1,592 $1,225 $1,210 $1,167 $1,695 $1,229 $1,374 $1,275 $1,911 $1,369 $1,938 $1,928 $2,020 $2,083 $2,081 $1,487 $2,272 $2,617 3Q14 Capital Markets Intelligence Manhattan Residential Condominium Pricing Average Price Per Square Foot $2,000 $3,000 $2,500 $1,500 $2,000 $1,000 $1,500 $1,000 $500 $500 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3Q14 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3Q14 All Condominiums Luxury Condominiums Source: Newmark Grubb Knight Frank; Elliman Report 3Q14 CAPITAL MARKETS REPORT 63
$2,503 $3,438 $3,284 $5,004 $4,290 $3,701 $3,227 $2,669 $2,163 $3,105 $3,208 $2,511 $2,153 $2,462 $4,728 $3,626 $3,594 $3,556 $3,454 $3,353 $4,378 $4,157 $4,969 $4,941 $5,641 $5,559 $6,285 $6,279 $7,266 $8,114 3Q14 Capital Markets Intelligence Manhattan Luxury Condominium Pricing 12-Month Totals $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 212 West 18th Street (Walker Tower) 157 West 57th Street 56 Leonard Street* One Madison Park One Beacon Court 200 Eleventh Avenue 30 Park Place* 99 Jane Street 400 West 12th Street 40 Mercer Street 101 Warren Street 20 West 150 Charles One Morton 53rd Street* (Baccarat) Street* Square 20 Greene Street Average Unit $/SF Most Expensive Unit $/SF * All condo sales at 56 Leonard Street,150 Charles Street, 30 Park Place and 20 West 53 rd Street are a projected minimum blend Source: Newmark Grubb Knight Frank; CityRealty, Street Easy 3Q14 CAPITAL MARKETS REPORT 64
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