CMBS 2.0 Starts Simple, But Not for Long
NEW YORK CITY—The re-emerging CMBS
market is expected to generate about
$10 billion in new issues this year—a far
cry from the $230 billion originated in
2007, but a measurable improvement
over the nearly dead market of the past
two years. The re-launch of securitiza-
tion has thus far been relatively plain-
vanilla, focusing on lower-profile assets
such as office and retail properties in
secondary and tertiary markets. However,
cautions Charles Roberts, a partner in
the corporate department with Paul,
Hastings, Janofsky & Walker LLP, “It
can’t stay simple.”
For one thing, said Roberts and his
Paul Hastings colleagues during a media
briefing at the law firm’s Midtown offices,
lenders will gradually regain their appe-
tite for more complex, and perhaps risk-
ier, transactions. For another thing, no
clear consensus has emerged on the rela-
tionship between senior bondholders
and B-piece buyers as the so-called CMBS
2.0 gathers momentum.
At present, says Ronald Lanning, of
counsel in the firm’s corporate depart-
ment, new-issue CMBS transactions fol-
low one of two basic models: the old-style
arrangement whereby the B-piece buyers
reserve the right to appoint a special
servicer and deals in which that right
falls to holders of the topmost tranches.
The question remains whether enough
B-piece buyers will be willing to enter
CMBS transactions with fewer rights.
preparing a $1.2-billion securitized
NEW YORK CITY—Jones Lang LaSalle Hotels
has promoted Amelia Lim from executive
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Lim is a 15-year industry veteran who has
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transactions for major property owners and
corporate clients throughout the US.
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Northern ’Burbs Inch Toward Recovery
The adjacent suburban office markets of Westchester County in New
York and Fairfield County in
Connecticut are still mired in the
economic conditions that challenge
landlords around the US. In both
locales, certain submarkets are faring better than others.
Westchester County Year-Over-Year
Class A Office, Q3 Change
New Leasing: 210,512 sf
Asking Rent: $30.88
Source: Cushman & Wakefield
Fairfield County Year-Over-Year
Class A Office, Q3 Change
New Leasing: 422,614 sf
Asking Rent: $33.78
Current NYC Leasing Market’s a Tough Call
My standard response when people ask about recent trends in the
New York City commercial real estate leasing market is: “In a
typical market, you could ask 20 commercial real estate brokers
for an opinion about market trends and get 40 different answers.
Ask the same group today and you’ll probably get 80.”
That’s not only because in New York City, real estate experts
tend to play to their audiences. In fairness, this
is a tough market to call. If you own a Class
class A trophy office building, you probably
have a much
market trends than if you own a class C prop-
erty. Never in recent memory have we seen so
many clear examples of flights to quality.
Interestingly, these flights are not due
solely to location. The definition of quality still includes tradi-
tional factors such as building prominence, proximity to trans-
portation, modernity of systems and functionality of floor plates.
However, these days, a landlord’s creditworthiness is higher on
tenants’ lists of concerns than ever before.
As a friendly competitor mentioned recently, we are in a
building-specific market—a market where a 20,000-square-foot
By David L. Hoffman Jr.
tenant choosing between two similar properties could feel a lot of
love from a less financially secure landlord with a vacancy problem, while getting a lot of pushback from another, more secure
landlord with limited vacancy. Today, most tenants with expiring
leases come charging out of the gates assuming they’ll be able to
write their own tickets. In some cases, they may be right but usually only in situations where the landlord may be a bit shaky.
There is no doubt the New York City leasing market has
improved dramatically over the past 18 months. The largest
looming question is whether the momentum is sustainable or if
growth will be thwarted by the overhang of shadow space; difficulty in obtaining new or restructured financing; volatility in the
financial services business and continued weakness in the
national and global economies.
Long term, the market’s fundamentals are sound and that
New York City is an outstanding place to own real estate. It just
might take some time before those 20 brokers reach more of a
David L. Hoffman Jr. is the New York City-based executive managing
director and principal with Cassidy Turley Commercial Real Estate
Services. He may be contacted at firstname.lastname@example.org.
The views expressed here are the author’s own.