Insights from the Real Deal

The Real Deal Blogs

Published Nov 1, 2010

Robert Knakal hosts the first installment of The Real Deal’s insights into the New York real estate marketplace, examining land values in the city (see the video above or click here). In 2009, there were 73 development sites sold in the city, a far cry from the market’s peak in 2006 and 2007 when hundreds of sites were sold, Knakal said. But the numbers so far in 2010 have already exceeded the totals in 2009, he pointed out. “The land market most adversely affected has been the Bronx,” Knakal said. This is because “affordable housing funds coming from the city have all but dried up,” he explained. The Queens submarket was surprising, in that there was a 26 percent increase in land value in 2010 from 2009, while the number of land sales occurring in the borough was down about 25 percent. In Manhattan, the amount of buildable square footage of development sites has nearly tripled so far this year in comparison to last year. Knakal, chairman of Massey Knakal Realty Services, predicted that in the future, that market would see an increase in land value. 

Published Nov 8, 2010

In the second installment of the new interview program Insights from The Real Deal, Robert Knakal, chairman of investment sales firm Massey Knakal Realty Services, discusses the impact of last week’s elections on commercial real estate in New York City. Now that the Republicans have control of the United States House of Representatives and will likely gain control of the New York State Senate, he says he expects to “see tax policy that will have positive implications for real estate values moving forward.” In addition, Knakal says the possible increase in the capital gains tax rate from 15 percent to 20 percent is driving a large number of sellers to unload properties before the end of 2010. And with the GOP likely to win back the state Senate, he anticipates a package of 12 tenant-friendly bills passed by the Assembly last year “will face significant challenges getting through the Senate.”

2011 will see a rise in distressed assets sales

Published Nov 15, 2010

In this week’s installment of the new program Insights from The Real Deal, Robert Knakal, chairman of investment sales firm Massey Knakal Realty Services, says he anticipates a rise in distressed asset sales over the next 12 months. That would continue an upward trend that began this year, following a slow 2009 in which few commercial properties that were in default, foreclosure or bankruptcy, traded hands. “In 2009, the volume in the distressed asset area was very low, primarily because banks were simply not in a position to deal with their distressed assets,” he says. “We fully expect that activity in 2011 will be significantly in excess of 2010.”

Source: https://therealdeal.com/new-york/2010/11/15/insights-from-trd-with-bob-knakal-of-massey-knakal-realty-services-2011-will-see-a-rise-in-distressed-assets-sales/

real estate prices to drop amid interest rate hikes

Published Nov 29, 2010

Experts say the weak commercial real estate sales market was supported in part over the past year by low interest rates. But that environment began to change two weeks ago when interest rates jumped by nearly a quarter of a point. In this week’s installment of Insights from The Real Deal, Robert Knakal, chairman of Massey Knakal Realty Services, said the rise in interest rates will push real estate prices down. “A buyer is going to have to offer less money if they still want to maintain the rate of return that they need to achieve on that particular property,” Knakal said. And although interest rates were by no means the only factor in selling a property, it is possible higher rates could lead some sellers to pull properties off the market. “If a seller can’t achieve the price that they need to achieve in order to sell,” he said, “they may take the properties off the market.”

Published Dec 13, 2010

Ailing Anglo Irish Bank underwrote hundreds of millions of dollars in real estate debt in New York during the boom and is now unloading a $51.5 million mortgage secured by a package of apartment buildings
in Upper Manhattan, owned by Vantage Properties.

Anglo Irish, based in Dublin, is in financial distress after billions of dollars in global real estate loans went
bad. Ireland’s central bank reported last month that the bank, which provided financing for projects
such as the Apthorp and 225 Rector Street, is winding down operations. A
representative of the New York office said the bank declined to comment.

The Vantage Properties loan is being marketed by investment sales firm Massey Knakal Realty Services.
Company CEO Robert Knakal declined to comment on the offering, but said in this week’s edition of
Insights from The Real Deal that currently demand for note sales is higher than for actual properties (see
video above).

The Vantage loan was being offered for the face value of the unpaid balance of the loan. Marketing
materials distributed earlier this month by Massey Knakal, and obtained by The Real Deal, said the note
was performing as of November.

The sale of the note highlights the wide variety of loans that are on the market and the complexity of
selling them. Loan sales now make up an ever growing proportion of commercial transactions, yet the
market remains shrouded in secrecy because note sales are rarely recorded in government records and
both the lenders and borrowers often don’t want the offering made public because acknowledging a
property is in distress can further reduce values.

The 474-unit Vantage Properties note, secured by buildings such as 90 Ellwood Street in Fort George and
248 Sherman Avenue in Inwood, has 414 rent-stabilized units and estimated annual gross revenue of
$5.5 million, the marketing materials say.

Neil Rubler, president and CEO of Vantage Properties, declined to comment via e-mail, but added
that, “I also can’t comment on our interest in buying the note, as it’s our policy not to discuss acquisition
efforts.”

Massey Knakal is active in the Bronx as well, marketing two purchase options on notes for major
properties there. The firm is offering an option to buy the $36.5 million note secured by two buildings
with 490 units — Robert Fulton Terrace at 530-540 East 169th Street in Morrisania and Fordham
Towers at 480 East 188th Street in Belmont. Those properties, purchased by a group of investors led by
Mark Karasick in 2007, are
being foreclosed on by special servicer LNR Partners.

The other Bronx asset is a $35 million loan in foreclosure controlled by LNR, that is secured by 10
buildings owned by Milbank Real Estate.

The Milbank portfolio has attracted particular scrutiny from the city and housing advocates who believe
the loan is too high for the 531-unit property, which has estimated gross revenues of $5.9 million for
2010, the marketing materials say. The properties are plagued by housing code violations, with a total of
4,372 in the 10 properties, city officials said.

In fact, today Department of Housing Preservation and Development Commissioner Raphael Cestero
announced subpoenas to order executives of Milbank and LNR Partners to appear at HPD’s offices in
January to discuss the Bronx properties.

Knakal, in his interview with Insights from The Real Deal conducted before the subpoena was
announced, said owners were not deterred by housing advocates.

“Buyers have to have a lot of intestinal fortitude to deal with properties that have rent-regulated
tenants in them from the beginning, so a little bit of pressure from housing advocates doesn’t really
dissuade investors,” he said.

Knakal said activity on note sales was high.

“I would say on the notes we have sold this year, where the collateral has been Manhattan-based
properties, we have gotten a minimum of 50 offers,” he said.

Harold Shultz, senior fellow at the non-profit research center Citizens Housing and Planning Council, said
lenders and special servicers in many cases have been reluctant to sell notes, because they have to mark
down their value.

“But presumably they can’t hold on to them forever. Perhaps this is the beginning of the big sell off,” he
said.

 

insights from Bob Knakal

Published Dec 27, 2010

Rentals in the Frank Gehry-designed tower 8 Spruce Street located near City Hall are going to start next year at about $80 per square foot. One real estate insider said the blended price for the entire 900-unit building — which will be the tallest residential building in the city — could be more than $90 per square foot. This week in Insights from The Real Deal, we spoke with investment sales broker Robert Knakal, chairman of Massey Knakal Realty Services, about comparables that may be used to determine leasing prices in the tower, and what impact the building could have on land values going forward. The project, formerly known as Beekman Tower, is being built by Forest City Ratner, with marketing and leasing by Citi Habitats Marketing Group. The building’s rental website lists prices for studios through three-bedrooms from $2,000 to $15,000-plus.

 

6 billion in note sales

Published Jan 10, 2011

There were more than $6 billion in note sales in New York City last year, much of it in the form of distressed development sites, investment broker Robert Knakal, chairman of Massey Knakal Realty Services said, based on estimates of his firm’s activity and market research.

“Note sale activity was probably on the order of $6 billion to $7 billion,” in 2010, Knakal said, in an interview for Insights from The Real Deal. (See video above.) He estimated banks, developers and investors lost a total of about $5 billion to $6 billion because of the distressed sales.

Because note sales are private transactions that are not required to be recorded publicly, in contrast to property sales, there is no government or independent database that tracks them.

Total commercial property sales in Manhattan for 2010 was $15.3 billion, according to Eastern Consolidated, up 164 percent from 2009, when it was $5.8 billion.

Several brokers interviewed said they believed the number of note sales grew over 2010.

J.D. Parker, vice president and regional manager for investment sales firm Marcus & Millichap, which focuses on sales below $50 million, said his office’s volume of distressed mortgage transactions grew from just a few in the fourth quarter of 2009 to more than 10 in 2010. His office’s advisory work quadrupled, to reviewing about $200 million in notes in the last quarter compared with about $50 million in the same period in 2009.

“Banks are finally coming to grips with taking the loss,” he said, and more are willing to sell their notes.

Data from Real Capital Analytics indicated there were more note sales in 2010 compared with 2009, based on the number of first mortgage sales that resulted in property sales. But the research company cautioned the numbers were not complete because of the private nature of note sales.

There were 12 such property transactions worth more than $908 million combined in 2010 that Real Capital tracked, compared with one sale in 2009 valued at $35 million.

Some of the 2010 sales included CIM Group paying $305 million for the former Drake Hotel site on Park Avenue and 56th Street, and Savanna Partners acquiring 386 Park Avenue South for $42.3 million.

former winick broker ben fox says wal-mart may look at herald square midtown

Published Jan 24, 2011

In his first video interview since being hired away last week from Winick Realty Group, veteran retail broker Benjamin Fox, executive vice president at Massey Knakal Realty Services, says discount giant Wal-Mart Stores might look for locations in Herald Square, near Bloomingdales in Midtown, or in Queens, among other places. Fox was speculating, and is not working with Wal-Mart in the search. In addition, Fox and Robert Knakal, chairman of Massey Knakal, told Insights from The Real Deal that property values often rise after a major chain retailer moves in.

But any opening is far off, Fox said, citing a high-level, internal Wal-Mart memo he had seen. “Everyone is getting way ahead of themselves,” he said. The Bentonville, Ark., global chain began a publicity push this month in New York City, as it tries to open its first store, after abandoning efforts twice before due to community opposition.

commercial pricing weak outside nyc core areas brokers indicate

Published Feb 7, 2011

Commercial firms reported a strong increase in investment sales volume for the city overall in 2010. That activity, coupled with a higher average price-per-square foot for trophy office towers, has given a general impression that prices have risen overall in the city. For example Cushman & Wakefield in January showed a 73 percent increase in pricing from 2009 to 2010 for Manhattan’s prime office towers, even as it noted the sharp rise was based on a limited number of transactions.

But investment sales brokers Robert Knakal, Marco Lala and Shimon Shkury, tell Insights from The Real Deal (see video above) that not all of New York City is seeing strong increases in pricing, and in some areas of the outer boroughs, values are still falling.

Knakal, chairman of Massey Knakal Realty Services, says, “The trends in value continue to slide, however, in Queens and Brooklyn.” Knakal says that even in Manhattan values were weak, citing a Kips Bay owner who was converting a retail space to residential because commercial leasing was too slow.

Lala, an associate vice president of investments at Marcus & Millichap who specializes in Northern Manhattan and the Bronx, tells Insights from The Real Deal that, “There are some areas where I still think there is a lot of pain ahead.” He mentions Melrose, Soundview and the Highbridge areas of the Bronx as examples.

Parts of Northern Manhattan remain flat, says Shkury, president of Ariel Property Advisors. “I believe areas of East Harlem still have a ways to go up,” he says.

 

tighter state budget outweighs short term pain of cuts knakal says

Published Feb 14, 2011

Lawmakers in Albany are reviewing Governor Andrew Cuomo’s proposed budget, and real estate insiders are debating what impact it will have on commercial property in New York City.

Investment sales broker Robert Knakal, chairman of Massey Knakal Realty Services, says the short-term pain would be outweighed by beneficial effects, in this week’s Insights from The Real Deal (see video above).

“The positive benefits coming from these budget cuts are very, very significant, the number one being that the governor can keep to his pledge of a cap on real estate taxes,” Knakal said. Such taxes drive down property values, he says.

But he noted that there were downsides to the cuts as well, including worker layoffs which impact the individuals and add to the available commercial office space.