One Wall Street - is it nice?

https://www.wsj.com/articles/investors-retreat-from-commercial-real-estate-bonds-f4bdf040?st=3lylfy2a8f9hepd

Investors Retreat From Commercial Real Estate Bonds

Office vacancies, rising rates have investors demanding greater yields for commercial-mortgage debt

As of Tuesday, the average extra yield, or spread, above U.S. Treasurys that investors were demanding to hold CMBS with a triple-B rating—the lowest broad investment-grade tier—was 9.46 percentage points, according to an ICE BofA index.

This is an odd flex:
"We are excited to offer the very first one-bedroom, one-bathroom condo for rent on the 15th floor of One Wall St"

Closings at One Wall Street commenced back in March of this year. Looks like 42 so far, representing less than 7.5 percent of the number of units. Discounts appear to be anywhere from negligible to 20% off Offering Plan prices.

Another 22 are listed as Contract Signed, bringing the total to 64 sold or just over 11 percent of the number of units. At this sales pace (even using their officially stated sales launch date of 2021-09-14) how do they not end up in trouble?

And 19 went straight to rent by my count….

What's the expected return on those?

The building is beautiful, amenities are very good, but spaces are a bit small for the value

what's up with the major loss in value in this building: https://streeteasy.com/complex/the-beekman-residences

>what's up with the major loss in value in this building: https://streeteasy.com/complex/the-beekman-residences

It was (and still is) overpriced?

For example, you can buy unit PH50 for $10M, resulting in a monthly payment of $68k (assuming 20% down). https://streeteasy.com/building/5-beekman-street-new_york/sale/1645090

Or you can rent the same exact unit for $29k per month. https://streeteasy.com/building/5-beekman-street-new_york/rental/4141953

wow, yeah brutal lol.

If you like owning the A line at $26k/mo in payments (~$6.5k of which tax/maint), why not rent it, 20 floors higher with a better view.. for $13k/mo. And you can keep the $750k down in pocket, not to mention the ~$100k in closing costs.

But what's $850k capital outlay in order to lose another $13k/mo outgoing?

Yeah, welcome to my world…

I’m never sure why people got themselves in this sort of situations in the first place, and how they should extricate. You can see the details for PH50 here:

https://a836-acris.nyc.gov/DS/DocumentSearch/BBLResult

$11.6M purchase, $8.3M loan at 3.25%. Negative carry runs at ~$100K/yr (going on for 6 years now), transaction costs at $1M. So even with a $10.25M sale (1.9% cap rate), it’d still be down $3M on $3.3M equity.

A $9M sale would put the cap rate at 2.1% (still not very good for buyer), but for the seller it’d likely mean a net proceeds slightly lower than the mortgage. The lower the price gets to get to a “reasonable” cap rate, the more upside down the mortgage becomes.

Normally, the lender might have cause for worry from a strategic default. In this situation, I’d be less worried. The lender is JPM and the borrower is head of PR for JPM. It’d make for fun headlines if there were a default, though. “Head of PR at world’s largest bank defaults on loan. Response to inquiries: No Comment!”

I feel bad for the guy, though. Seems stuck between a rock and a hard place. Hopefully being head of PR at JPM pays well.

Weird location too. Not sure what it has going for it.

I guess you can say you are near Tribeca.
And close to FiDi without being in the flood zone.
Pace university crowd.
Mediocre city hall park, plus Brooklyn Bridge traffic..
Too bad J&R is long gone.

Given how much banks/funds moved uptown in last 20 years, you're probably taking a train to work anyway.

Maybe it's a failure of imagination on my part, but you'd think this kind of cash would get you a nicer location these days for $4M 2bed/ $8M 3bed.

>I’m never sure why people got themselves in this sort of situations in the first place, and how they should extricate.

Wonder why the owner is selling. It is not like he will get much cash out. But if he waits 5-10 years he sure will make money on his investment.

>> Wonder why the owner is selling. It is not like he will get much cash out.

While his equity position is down to almost nothing, he’s still carries ~$10M of exposure to the underlying price swings. Strategic default isn’t that great an option to begin with for a wide variety of reasons, and his position at JPM all but makes it impossible.

>> But if he waits 5-10 years he sure will make money on his investment.

Please define “make money on his investment” and explain what makes you so sure it’ll be achieved.

>While his equity position is down to almost nothing, he’s still carries ~$10M of exposure to the underlying price swings.

And now he understands the risks?

>Please define “make money on his investment” and explain what makes you so sure it’ll be achieved.

Heard it from a realtor, possibly on a TV show.

>> And now he understands the risks?

Who knows. Many people bought with misguided notions of fundamentals over the past 20 years, but people can sometimes find religion after being smacked around by reality. In this instance, the decision to purchase was made in 2016 for a 2018 contract. It’s been 7 brutal years, which might lead to a reassessment in some people.

Do you really think there is any upside here, and can you make a coherent argument for it?

Even with the locked-in mortgage rate at 3.25% for several years, he’s looking at a carry of -1%/yr. Appreciation at inflationary rates means that cap gains would be ~2%/yr, yielding +1%/yr. That’s a paltry amount in expectation relative to the risk, but maybe there’s an appropriate place for it in an investment portfolio.

The trouble is, that paltry return assumes that a 2% cap rate will sustain. In a world of 6% mortgages, with future expectations of the same, I’d bet against that. And from your initial reaction, it sounds like you would too.

So if I were in his shoes, I’d cut my losses now. So I get why he’d want to sell. Maybe he’d “make money” by holding on 5-10 years, as in regain the $3M loss. But given the way it’s looking, the situation seems comparable putting $3M on red and hoping you’ll “make money”.

>Do you really think there is any upside here, and can you make a coherent argument for it?

I cannot. I do not understand new construction /luxury prices in Manhattan. How many 0.01% or 0.001% don't yet own a home in Manhattan and strongly feel they need to buy one (when they could rent for way less)? Why build units with minimal closet spaces, but many thousands of square feet of amenities? Why do anything at these prices? Maybe foreigners drove a lot of insanity, but with de-globalization, they will likely be gone for a while.

Is there a hypothetical scenario in which Manhattan market comes roaring back in the next 5 years? I cannot see it, and many asset classes might be better positioned in that scenario anyway, but then in the past I could not see a lot of things in the markets, including crypto and NFTs. Yet, I know a few people that bought and then sold some bitcoin, and bought a house for cash... so what do I know.

What do you all think? Are luxury prices going down or back up? Are prices on old stock going down as well in the next 5 years? Is the per sq ft pricing gap going to narrow in the coming years?

For the specific unit and owner in question, it is probably not a pure financial decision. I am sure the owner bought the place because he loved it (and it is lovely, aside from a few subjective disadvantages, primarily location, as people mentioned above). The owner probably had a life event and needs to move somewhere immediately, hence the simultaneous rent/sell listings.

>> The owner probably had a life event and needs to move somewhere immediately, hence the simultaneous rent/sell listings.

There was probably a life event, or at least a desire to live somewhere else, but that happened one year after closing, in 2019. That’s when the unit first showed up for rent.

Some 479 of the building’s 566 units remain unsold

https://therealdeal.com/new-york/2023/10/03/harry-macklowe-gets-inventory-loan-at-1-wall-street/

and most sold have been the 1brs and studios according to the article.

Other than the penthouse, 30 Park Place isn't holding value from 2015-2017, which makes 1 Wall a tough go. I'd say that 30 Park Place is actually better located.

Anyone checked out the Printemps? There was an article in the WSJ about it ... obviously to get subscribers ahead of the Epstein birthday card revelation.