Interviews James Emden Executive Managing Director of ABS Partners.

0:00 Speaker 1 Good morning. This is Mike Stoler for the Stolar Real Estate Report. People were saying, happy days are here again. The office market looks like it’s doing very well. We know that retail is doing rather well and industrial, but what’s really happening in the office market today. I have my friend James Enden, who is an executive managing director

0:20 at ABS Realty Partners. Thanks for being here.

0:23 Speaker 2 Thank you, Michael.

0:24 Speaker 1 So what’s should we call it? Happy days are here again?

0:28 Speaker 2 I would say in a number of the markets in New York, happy days are here again. The high end market, the plaza market, Hudson Yards, Park Avenue. The rents are you know, one and fifty dollars a foot. Even areas like sixth Avenue. If you needed forty thousand feed in a prime building in the upper part of that property,

0:54 it would be difficult to find the right space. So I would say the strong markets I’ve mentioned, they’re doing very very well. I think the B buildings are beginning to lease space, depending on where they’re located, depending on the ownership of the property. If they’re financially strong, they have issues with the debt, do they have the money

1:18 for the work and the free rent and things of that sort for a tenant.

1:21 Speaker 1 So to the landlords, are they offering these concessions?

1:25 Speaker 2 Yes, the concessions are still there, but I think that in the stronger properties, the concessions are slowly starting to diminish.

1:35 Speaker 1 And what’s your thoughts about the Hudson Yards neighborhood in addition to the related properties.

1:41 Speaker 2 I think Hutton Yards is booming. You come out of a restaurant at nine o’clock at night, there’s people everywhere. So I think that there are a lot more people living over there. Even though it was a tough ride for related in the beginning, I think they’re doing better now.

2:02 So I think Hunsgnards has developed into its own community.

2:06 Speaker 1 Now, what about Penn Central, I mean with what Tornado has done.

2:10 Speaker 2 I think what Brnado has done to Pen one and Pen two has really set that whole market in a different direction that where it was a few years ago. And that’s why most of that space and one and two was leasing up.

2:26 Speaker 1 And what type of rent they’re getting.

2:29 Speaker 2 Hundred and ten, one hundred and fifteen, hundred and twenty foot depending on where they are in the properties. So I would say the rents have gone up at least ten percent or ten to fifteen percent in the last twelve months alone. And I think Bernardo has helped the area with what they’ve done across the street with the

2:51 hotel that they tore down, and I think that that in time will help that area. Along with the result that’s pending.

3:01 Speaker 1 Let’s talk about the rezoning. What is the status of it.

3:04 Speaker 2 I think that they’re moving towards rezoning a lot of that garment center area for residential use, and I think that that will help the residential problem over time. It’s not going to happen in one year. It’s going to take at least three, four or five years, but I think this year that rezoning could take effect.

3:26 Speaker 1 Now, with regard to the rezoning, what’s going to happen to the buildings like thirteen thirty seventh Avenue and Avenue in the America’s the Avenue in America’s properties, What do you think of that?

3:38 Speaker 2 Well, I think all those buildings, I mean in the thirteen thirty, even the American location, are a pretty well leased. The only property that still has most of all the vacancy is one thirty five West fiftieth, which was sold last year for eight and a half million dollars if you remember, because of the ground lease issue, and it

3:59 was by an investor or somebody out of I think out of Texas. They have not leased any space yet in one thirty five West fiftieth, but the prior owner put a lot of money into the lobby, the elevators, things of that sort. So the ceiling heights a low.

4:17 I mean, there’s issues. It’s a side street building, but I think in time, because the avenue buildings have rented, that that space will be rented. But I think the rents will be thirty to fifty sixty dollars a foot.

4:34 Speaker 1 Now, what’s going to happen to the sea buildings?

4:37 Speaker 2 Well, I think the sea buildings there are still a number of properties that are in trouble, and I think that every building has its own issues, depending on who the lender is and the loan and the equity and the debt, and the amount of vacant space that they have available, and do they have the funds to lease

4:58 a tenant to space and a CC plus tye property. I would say the older buildings like down on Wall Street or the West Side, or even a building like a fifty third I mean third avenue was doing a lot better now because of the conversions of the thing.

5:18 Speaker 1 I think you can call a third avenue the accountant’s room.

5:21 Speaker 2 Okay, yes, so I think that you know, there’s four or five million feet from the Fiser buildings to the Dirst building to o He’s forty second three hundred is forty second, which was David Werner who bought it and then flipped the upper part of the building to a residential conversion group. And then you have sl Green converting

5:46 the base starting now in seven fifty third. Seven sixty seven third was sold some months back for I think about eighty million dollars to a conversion operator. But that’s the red brick property, so it’s perfect for conversions. And I’m sure I’ve left out a few. I heard recently that the Emigrant Savings Bank building, which is owned by

6:09 Milstein sixties forty third is also going to be converted. So I think with all of that going on, and then even Rudin. Rudin owns a building at three fifty five Lex around fortieth Street, and all the tenants got notices at the beginning of the year that they had to vacate by the end of twenty five because they’re

6:32 converting three fifty five LECs into residential.

6:37 Speaker 1 I mean the neighborhood is becoming significantly residential.

6:42 Speaker 2 That’s correct, and I think that that’s also helping the numbers with reference to where those conversions are taking place, with reference to the availability or vacancy, whatever you call it.

6:53 Speaker 1 Okay, what about Loyal City in Downtown Brooklyn.

6:57 Speaker 2 I think Loyal and City is not leasing as expect the way they expected, and Downtown Brooklyn’s having issues as well. I think those two markets are slow because I still think people want to be in New York and I see it coming back strong, and if they can find the right space, they’d rather stay here.

7:18 Speaker 1 What about co sharing, I think that you.

7:22 Speaker 2 Know, the all the main ones industrial convene are at least up. I was recently at an industrial three floor occupancy that they have at two point fifteen Park Avenue South, which is an sl green Billy, and it’s one hundred percent occupancy, filled with all types of tenants and they’re getting big numbers, you one hundred and twenty hundred and

7:49 thirty feet. They pay five six seven thousand a month for it. So I think that the coworking companies. The good ones are doing well.

8:00 Speaker 1 Are people still making conversions with regard to well, you know, residential changes regarding basically amenities to keep tenants in these B and C buildings.

8:16 Speaker 2 Again, it’s all tied into economics. I think that the A they’re doing it. I think some of the B absolutely, but it depends on you know, the cash flow and it’s a big number. So you know, again, if they can’t rent the space and they don’t see future potential, they’re going to hold back on spending that money and

8:40 then identities into the debt and when it comes up, and will they have to put more equity in the property in order to fix the debt on it on a five or seven or ten year term. So everything is, every building is different.

8:56 Speaker 1 So as I started before with happy days, you here again, what do you see for the year in where where will we be?

9:06 Speaker 2 I think in the high markets that I mentioned, the high end markets I think will be in very good shape. I think you’ll begin to see things happening in the new development stage. Citadel will get approval this year from downtown from the Mayor’s office, and I think you’ll begin to see three point fifty park and forty fifty second

9:28 coming down next year. I was also just recently informed that Wasn’t Properties, which has the MTA side of three forty three. Madison is negotiating, from what I’m told, with Bank of America Merrill Lynch for a large release, So I think the end of the year will be.

9:47 Speaker 1 Will be strong good. I’d like to thank Jim Endon for being here.

9:51 Speaker 2 Thank you Michael for having me