Avison Young Q2 2025 State of the Market

Let's get rolling because we've got a lot to cover today. So thank you as always for joining. I'm James Nelson, I'm principal and head of US Investment Sales here at Avis and Young. Joined here was Scott Singer who co leads our debt and equity group here at Avis and Young, as well as Brandon Poligoff who is also a principal and head of New York City Investment Sales. So for those of you who are joining virtually, I will tell you that we had an in person presentation this morning from Melissa Burch, who is the COO at the New York City Economic Development Corporation. I just did want to say that the great things are underway here in New York. I mean I was just blown away with the amount of projects that the EDC is undertaking. The EDC is a not for profit, they are a government organization, but they are self funded by the city land. So a lot of these developments, RFPs that are coming out, a lot of them on the waterfront, very exciting projects. You know, hundreds of acres that are being RFP'd at this point. Brooklyn Marine Terminal, Coney Island, 1000 units. A new Hunts Point Produce terminal, the Army Terminal. Yes. So it's very exciting. Things are underway and so we're grateful to that work. And if you've not seen what the NYC EDC is up to or might have interest in some of the RFPs, we would really encourage you to visit their website. It's obviously a very good thing for New York. Also I will share that one of the big takeaways I had from that was that at this point New York City has 4.8 million jobs. That's the highest job count that has ever been here in New York. And also we've had the most population growth in the last two years. We're number one. And so that was great to see New York not just with record jobs, but also with record population numbers. Okay, so with that we will jump into the state of the investment sales market and then we'll have Scott talk about the debt and equity markets and then we anticipate that we'll certainly have a lot of questions with the recent primary and some of the other topics that are on your mind. So moving ahead, so looking at the second quarter of sales for New York City and I always have to remind you all this is a rear view mirror indicator because these sales that were closed in the second quarter of this year, many of them were negotiated earlier this year or even at the end of last year, we are looking at multifamily office, retail Development and conversion sales north of 5 million in New York City. And you will see that you compare the first quarter to the second quarter. There's been an 8% decline in $ volume. We're now sitting at about half the 10 year average at $14.28 billion. The 10 year average is 28. So now the positive news though is look up top. And although we misspelled Brooklyn or left off the end, rather got cut off, you will see that the boroughs are posting gains in dollar volume. Brooklyn 36%, Queens 80%, the Bronx 399%. That's a 4x increase in dollar volume. And Upper Manhattan up as well. So yes, Manhattan is down. That's usually if we look at the $1.69 billion that came from Manhattan and we've got 3.43 billion in total New York City sales, half of the dollar volume does come from Manhattan. But you can see that the boroughs have really helped kind of soften the decline there in dollar volume with pickups in each of their respective boroughs. So next, when we look at the number of sales, we're actually, when you look at all the sales across the boroughs, we're actually at a 2% increase in and we are actually nearing the 10 year average of 778 buildings, properties that sell every year at 662. And so if you think about it, for the number one sales market in the country, if not the world, the fact that there's only 770, or excuse me, 662 properties that are estimated to sell this year, that's not a lot to choose from. And that's why inevitably we always find that it becomes a seller's market. But again, positive volume, especially in the boroughs. Even though Manhattan had less transactions in the second quarter, big pickups in the boroughs, especially queens with a 71% uptick, upper Manhattan 140% uptick with 13 trades. Okay, so now we talk about when we annualize these sales 2024 to 2025 in New York City, we are experiencing a 13% decline from 24 to 25. Manhattan is a little bit more significant at 23% where a lot of the larger ticket trades take place. But when you look at the number of sales in New York City, we actually see a 21% increase when you annualize 2025 versus 2024, with Manhattan still posting an 8% increase. So transactions are underway. Even though we'd certainly like to see more significant dollar volume transactions, the fact that transactions are happening is a positive thing. In the market. We also track deals that are in contract. We don't put those into the report, but we are currently tracking over a dozen hundred million dollar plus sales that are in contract that total over three billion dollars. So we already anticipate that the third quarter is going to have more dollar volume in the second quarter. And most notably when you have billion dollar office transactions like 590 Madison Avenue that RXR is reported to be purchasing, we also see that as a huge positive vote of confidence. Not just RXR participating in the market, but Blackstone has been active as well. That's when you have these institutions that are making a bet on New York. We know that others will certainly follow. Brandon, I think also, you know, just, you know, to share anecdotally what's happening with our team right now with transaction volume might be a little helpful as we, we talk about the activity levels.

Yeah, sure. I mean we, I would say right now are the busiest we've personally been since the end of 21 into 22. We have about 20 contracts out. We're under contract to sell about 20 buildings or land, land sites. So for us it's, you know, I think a big piece has been one the, you know, the opportunities presented to us to sell and the motivation behind the seller. But also it feels as though people kind of have a sense of where we are in the world and with interest rates not perfectly, but just that it's not perfect and that we're going to be dealing with volatility. But it's, it's consistent and, and people just want to, want to act. So for us, you know, this summer has been, it feels like we're drinking out of a water hose. But it's, it's been a lot of fun. So I think that should lead to a lot of closings in the third and fourth quarter.

Wonderful. Okay, so moving to what is the, what are the asset classes that are driving the dollar volume discussion? As you can see in 2025, as we annualize, purple being office and office condos. Office historically is always what drives dollar volume in the city is having the largest ticket asset classes. And so far, year to date, if you annualize, there's going to be over $3 billion of office sales. If you compare that back to 2018, there was 14 billion of office sales. So you can see that office still has a long way to go. But you can see in orange, retail has been a pretty significant percentage of the dollar volume as well as green is the development. We had a very Busy first quarter, as you all might remember if you were on the last state of the market with development, that's been a little choppy, a little quieter this quarter, but still when you annualize it, development's still looking very strong and of course multifamily at the base. When we look at the number of transactions, you see that multifamily is really the bread and butter and again a big part of those transactions as well as with the office. So if you look at between multifamily and certainly office, they are contributing for more than half of all the buildings that sell. But again, retail still posting some pretty significant number of transactions as well as development and then conversions, which we're tracking quite closely. Have also still, although maybe not on a number count being as significant, but certainly on a dollar volume and a square footage count. And if you're looking at the running tallies since COVID we've been tracking every office building that's sold and at this point we're up to nine and a half million square feet of office here that's going to be converted to residential. Next we look at the seller composition of who is actually trading. This is, I would call your attention to the cross border activity. So 23 and a half percent of the sellers in New York right now have been foreign. That is more than double the number from last year. So you know, these discussions with tariffs and you know, kind of global macro economic issues, you can see that that seems to have taken a bit of a toll on the amount of foreign sellers saying okay, maybe it's time to exit New York. Although interestingly, after our in person session this morning, an attorney came up who does a lot of work with foreign buyers. And they said, well, the foreign buyers are still and sellers are still here, but they might just be participating in other markets. But you see that private sellers are the Most active at 41% and the institutions a little less active than they were last year. This is the percentage of dollar volume that is transacting. When we look at the buyers who are buyers in the market, again you see the drop off in foreign activity here. Now only about 10% of the buyers are foreign. Look back in 2023 when the capital markets might have been a little more challenged. We had more cash buyers in the market, a lot of foreign buyers taking advantage over a third of the market. The institutions are starting to step up, accounting for 20% of the dollar volume. But still this has largely been a market this cycle driven by private investment. Over 51% of the dollar volume acquired in New York to date has been from private buyers. So we find that interesting in the market that a lot of the private buyers who can be more entrepreneurial a little quicker to move have been opportunistic, especially when there's uncertainty, whereas the institutions tend to move more slowly. So now we're going to talk about the multifamily sales. The average cap rate now reaching 6%. If you kind of average it so far this year it's at 5.9% and 6.40 a foot. I mean, again, huge range in cap rate depending on what, where is it regulated? Is it fair market as tight as 4.9%, as wide as almost 7%. And just some commentary on this is that was with a pretty substantial developer the other day talking about office to resi conversions. It's still something that we very much believe in and we'll cover shortly. But the point being is that when I asked what type of stabilized yield on cost are you solving for in these office to resi conversions, he said that we're looking to end up in the low to 6% yield on cost. And the reality is there's now existing multifamily that's in the market at 6% or even wider. Granted some of that does have, you know, a rent regulated component to it. But also in my travels as head of US Investment Sales and looking at other markets, I can tell you that you're not finding anything in the southeast north of a 5 cap. So you know, New York still offers a premium when it comes to yield. So Bran, if you want to speak to some of the most significant trades, interestingly, they were all outside of Manhattan.

Yeah, sure. The Related Fund Management Multi family portfolio, that was 20, 21 units. So that sold what was interesting there, 13% of the units, all rent stabilized vacant. Also that was under a hundred thousand a door which is also just a, a sign of, you know, where that market has gone. 125 Beach 17th street was purchased by an affordable operator. They're going to be extending the abatement there with units being restricted to no greater than 80% of AMI. And then the last one was also purchased by an affordable developer, I should say affordable operator, that went ahead and leased it to the Institute for Community Living, which is a nonprofit. It'll be income restricted units there as well in exchange for tax benefits. Right.

And now looking at development and again, this was a kind of a surprise. After a very busy first quarter. There was only three development trades in the second quarter. The average price Per buildable, a huge range. And again, we're only averaging three development sites. But on the low end, 233 a building buildable, and on the high end, 765. So averaging at 650. But you see that again, the amount of total buildable that's happening in Manhattan is still well below previous levels. Look at the number of permits being filed year to date, only 811 in Manhattan with New York City at 13,000. So look, if you, if you annualize New York City, we could get to kind of 24,000 units, which is, sorry, more than 25,000 units, which is still less than say what was happening in 21, certainly back 2019 under old 421A. But Manhattan, you know, this is really apparent that 45X is not working in for large scale projects. Because if it was and you could do large scale, I mean, obviously rents are at peak levels in Manhattan and there is a dire supply need that we all know and this is just not meeting the needs. We are not building rental apartments in Manhattan. And so a lot of this activity that we're seeing for rental development is happening in the boroughs, even pushed out further out of zone A and zone B where you don't have the labor requirements or the affordability requirements, where it actually can, you know, pencil to to develop. So with that, Brandon, if you want to speak to some of the development site sales that took place.

Yeah, I mean, 175 Third Street's a perfect example of that. That will be A. There's 750, 000 buildable square feet, which is obviously greater than the 99 000. The 99 unit buildings that you're seeing being filed here. You were grandfathered in for 421A. So this project's feasible to build something of that scale. If that abatement was not there, you'd likely see on this site a number of smaller 99 unit and less buildings. The other sites, you know, the Webster Avenue, that was 112 buildable, part of an assemblage. It'll be dormitory and affordable. And Story Avenue, again, that's four different parking lots. It will be an affordable development site.

Right. And conversions.

Yeah. 675 third. So that was purchased by Metroloft and David Werner. So that building was 293 a foot. So we'll do a conversion there. 98 Montague Street. That was a foreclosure. This was a very famous hotel in Brooklyn Heights that was purchased at 534 foot. The last one's pretty interesting. 300 East 42nd Street. So this building was actually purchased as a short sale by David Werner for 52 million. He then kept the retail at 7 million and spun out the upper portion, the office portion that that is. So about half of that is going to be existing office with tenants in place and then the other half of that is going to be. It was actually purchased by CSC which is a co living company. So they will convert the the remaining vacant portion.

Right. Okay. Retail. So retail cap rates are looking like they're flattening out in the mid 6% range. You know the price per square foot certainly bounces around based on you know what type of high profile sales are taking place. But 13 trades, $321 million a dollar volume. Again the average price per foot now reaching almost 1800 a foot. But look at huge range, $361 to 13,000 a foot. So Brandon will tell you about that $13,000 a foot trade next.

Sure. Yeah. Prince street, that was the corner of Prince and Green, the northwest corner. It's about 9,900 square feet on the ground, lower level and second floor. Ralph Lauren's been there since 2011. They're the purchaser as well. Interestingly, the owner of that one bought the piece for $3 million in 91. So pretty, pretty good return there. 95 to 97 and 107 North 6. This was a. The ink was still drying on leases with Lulu and Abercrombie. But Acadia picked this up for $60 million from two private investors for 60 million which was a 4.15 cap which is pretty eye openening. The Last one was 85 fifth brand new lease with Nespresso. This was a 4.98 cap which for retail co op is a healthy cap rate that was also purchased by Acadia.

Yeah, amazing to see some of these sub 5 cap transactions, especially with the interest rate environment, but certainly a big vote of confidence on the future of retail. So now as we look at office cap rates expanding 6% on average price per foot at 679 a foot. But again, look at this range. $180 a foot, all the way up to $2,400 a foot. What a spread. So dependent on what and where, you know, submarkets occupancy. Is it an end user purchasing the property? Is it a distress sale? Is it a conversion? Well actually the conversions we do put in another category, but still you could see a big range here at the $180 to $2,400 a foot and still only accounting for less than a billion dollars. So for example, that 590 Madison Avenue trade, that sale alone next year, next quarter will more than double this across the the 18 sales that we saw. So Brandon, if you want to speak to these.

Yeah. 522 Fifth Ave. That building needs some love. RFR purchased it for 350, sold it to Amazon for 425 which is 951 a foot. That's across the street from our office at 44th and 5th, 148 Lafayette. This was a, this was an interesting one. So this was purchased by, by Tishman Spire. So this was their first purchase in, in this cycle. They bought it at an eight but two floors that were least above market are vacating so they're going to stabilize around a six. Scott will talk about this more but I think what was interesting, they got 55% leverage but the spread was in the low two hundreds which, which I'd love for Scott to talk about because that was not the case for a long period of time. But you know, it's a vintage pre war building with strong bones, no major capex needed. And then 340 East 42nd street we touched on that was the purchase by David Werner and then this, you know, later spin off of, of that upper portion keeping the retail.

Yeah, I mean we again we have that report of every single office building that's sold since the pandemic and over a quarter of them have been purchased by end users. So that, that has been a very positive trend in that you've got companies that want to establish a permanent presence here in New York and we certainly hope that that that keeps up.

Yeah, we're negotiating a pretty large user purchase of an office building as we speak. So there's still, you're still seeing that that happen.

And with Amazon I had the chance to tour their Lord and Taylor conversion that that massive building where we work used to be and once Amazon asked for their employees all come back five days a week. I think they quickly found out that they didn't have have enough seats for everybody. So that no surprise now they're buying 522 Fifth Ave. You know that $900 a foot price point with you know that they'll need to gut renovate. I mean it's a very strong price point on that. Also we don't have the office leasing stats in here for you all but just you know, and you all probably have been seeing that the availability rate has been tightening. Manhattan it reached as high as 20%. We're down now at 17%. You know, the, the bulk of the office leasing, 75% of it has been targeted at the class A and trophy space. But as that, those vacancy rates, if you just look at class A and trophy really start to tighten up, you're going to see more demand for class B. And also, you know, with the 9 million square feet that's been taken off the market, going from office to resi, that is also going to help improve the office market. So it does seem that we're, we're seeing some really positive trajectory there. So as we look at the historical pricing, again, retail can really bounce around based on, you know, some of the higher profile sales. But you can look interestingly that retail, office and development. Well, development aside, but look at multi and office kind of hitting in that 600 a foot range. Again, if you're gonna, if you're gonna build today in Manhattan, you are looking at, you know, easily $600 a foot, you know, 400, 450 in hard cost plus soft cost. So even if the land were free, you're already in the 600. So these buildings in large part are trading well below replacement cost, which does, we believe, represent an opportunity.

Okay.

So with all this, we look at the cap rates that are expanding and, and we are watching and what Scott will tell us with, with, you know, borrowing costs and how that that impacts. But it does seem that there is an opportunity here for some positive leverage with where cap rates are going. And we continue to watch that. So, okay, the big topic, and I, I should have said also at the beginning, if you all have questions, we, we can take them along the way or wait till we finish. If you want to put them in the chat, that would be a good place to do it. I will tell you actually, as we talk about the mayor, the mayor's impact on.

Hey, James, I'm just gonna say Q A. There's a Q A. That's the place to put it.

Okay. I don't know why I'm not seeing Q A on my dashboard, but as long as you can see it and you want to field the questions there, you can, you can do that and I can monitor the chat. But the, the question of how much impact does a mayor have on, you know, how real estate is operated and you know, certainly we could talk about, you know, what, what with rent regulation and appointing the RGB board, but a lot of this multifamily and what's happened and for development with 45x as well as good cause eviction. All these things came out of Albany. So we know certainly that that is something to look at. But what we really wanted to do was take a rear view mirror look at what has happened to real estate values and rents under two different administrations. So in this chart, what we did was we looked at Bloomberg's last two terms so we could take it the same eight year span and compare it to de Blasio. And what you'll see here is that both of these mayors benefited from, you know, macro economic factors and that the 10 year treasury was compressing. So by the time Bloomberg Left office, the 10 year was at 3%. It had dropped 133 bips after DE Blasio took over. By the time he left office, the 10 year was all the way down to 1.5%. So had a slightly higher compression there. And interestingly, rents went up 17% under Bloomberg and went up 36% under de Blasio, because that's, and that's kind of interesting. Although we know the rent stabilized, rent certainly did not go up as much under de Blasio as he had had three separate years where there was zero percent increases. But the fair market rents went up considerably as a result, multifamily values did climb under both administrations. You know, Bloomberg, pretty big leap from 427 to 636 a foot. That was a 49% increase on a price per foot. Whereas de Blasio, already at that elevated level, topped off another 14.9%. Look what happened to office rents. Office rents actually slightly declined under Bloomberg. We believe that was really a result of a lot of new development, a lot of new supply that needed to be absorbed. And you know, for rents to then have a huge run. Under de Blasio, you see that office rents by the time he left averaged $93 a foot. That was a 50% uptick. And so as a result, you did see office values again make a huge leap under Bloomberg, 79%, whereas de Blasio up 46%. So, you know, the point of this slide is kind of regardless of the administration and their priorities, there's other macro factors such as interest rates that make a major impact on values. And under both of these, you know, very different administrations, you had positive impacts not just on values, but also in rents. So we thought that would be helpful to share with you all. Okay, so we are clearly watching at this point what is going to be taking place with tariffs and the mayoral elections. And then, you know, with this office sector, are we going to continue to see this absorption with the availability rate coming down, that will of course push rents not just in class A, but also class B and even C. And then watching to see with these office to resi conversions, you know, is this. How much more room is there to grow? And certainly with some of these rezonings such as Midtown south, that's gonna. The zoning change alone will allow a lot more of these buildings that might be suffering to allow for conversion or ultimately development. So with that, Scott, we will pass it to you unless there's any questions that you've already received that, that we need to address at this point.

No. Great, let's roll. Let's roll through here and then we can take all the questions at the. At the end. James, if you'll go to the next one. Look, volatility. It one before that.

The.

The volatility is.

Is this the one you wanted?

You have an old version.

Oh, shoot.

I'm gonna move you around, but okay.

Do you want the. Is this the one?

Nope, nope. You got an old version? You can take that. Oh, man.

Do you. Okay. Oh, boy. All right. We can either try to switch if you have a current.

Yes.

Versions.

One sec. I got it.

Okay, I'm going to stop sharing. I was going to ask Brandon if he had any good jokes to tell in the meantime, but that's. That's okay. He seems to departed okay now. Okay, so.

All right. Oh, yep, I got it here.

So, Scott, you're telling me that when I get an email that says final presentation from yesterday at 9:30pm that that I should not consider that final?

Yeah, we might as well.

We obviously are working our analysts and researchers far too, far too hard because they were. There was still yet another version.

Yes, I emailed it to you and I'm going to see if I can pull it up here.

All right.

Okay.

Here'S my joke. The, the treasury move since we started.

Okay, that's good.

Thank you.

Okay. All right, Scott, you're driving.

See it?

Yeah. Thank you.

Great. So give me one sec here. Technical difficulties. All right, so look, volatility is really the name of the game that we've been dealing with. And it feels like a new. Like a new normal in our world. Interest rates, politics, tariffs, national, international, it's. That's what we're dealing with, happily, in the capital markets. What we've seen this year is a. Did that just disappear?

No, we still see it.

Yeah. Okay, good. All right, so look, what we're seeing is renewed strength and all different types of lenders coming back in and really getting active. It's similar on the equity side. But to focus on the debt today, CMBS is ravenous. Even for office. There's competition for deals. Life companies are telling us that they are going to beat the agencies on multifamily financing. That's not really happening yet, but they're, but they're trying and they're getting close. Banks who are not getting selected as the seller servicer or the dust lender for a multifamily deal are also trying to compete and coming up with some really creative ways to win deals. Private credit. So private credit is a buzzword we're all hearing all the time. I think for a real estate group, that's what we've all been calling debt funds or non bank sources for the last eight to 10 years. But what's important is that there's been this massive infusion of new capital into the debt fund space or the private credit space. Now where are we on interest rates? So in these for the last three years, basically since the Russians stepped over the border and the Fed started raising rates, we've been trying to give some insight, maybe not some answers on what's happening with rates. And I think that now how you feel about rates really depends on how far back you look. Okay, this is a slide that our market intelligence team put together. The, the details of what each number is are less relevant than what they wrote here, which is that we've just experienced the most aggressive jump in borrowing rates this century. And they're right. But unfortunately I remember the last century too. And I think if you, as you add perspective, this is a graph that goes back to 1989. So this is 1989 until this year. The blue is the, it was Libor and then it became sofr. So basically short term rates and the orange is Treasuries. And what you see in the blue short term rate is it is actually not so infrequent that we have a massive increase in the short term rate quickly. So why? The reason is that the short term rates are really driven by policy and weird things happen in the world fairly frequently that require government intervention to try to keep the ship sailing smoothly. Now the next one is really my favorite. This one goes back to 1962. This is just the 10 year treasury rate. And when you look at this one, that massive increase that we've seen very recently kind of looks like a blip. And that's the way that I think borrowers should be looking at the recent increases we've flipped up to a level that we were really never below for most of this long history. And when you look at spreads, spreads are quite attractive. We got a proposal the other day for a reasonably full leverage multifamily deal at 92 over treasuries. That's, you know, depending on five year or 10 year, that's, you know, right around 5% and maybe below. So it is. We're in a pretty good borrowing market and even for office now, there's substantial comp, there's substantial competition from cmbs lenders. So why doesn't anyone feel good? I think this next slide describes it, this one, this is very different. This is just 18 months and it shows the 10 year treasury rate at its high and its low in each month over the last 18. So what it shows is that there's been at least a 25 basis point differential each month for the last 18 months. So. And in April last year it was 70 basis points. So that volatility is really driving it. There has not been a single month in a year and a half when there wasn't at least a 25 basis point swing in the 10 year treasuries. That, that is a, that is a big departure from what we've seen really ever before. And, and so what does it mean if you get a rate that sounds great today? You don't know for sure if it'll be there on Friday. If something goes against us, that's not necessarily the end of the world. But it does make decision making challenging. So how do you make decisions to me first, I think you bet on New York no matter who the next mayor is. Although I urge everyone to read Atlas Shrugged for a little bit of, or a lot of insight into what happens if capitalism and ambition are devalued. But as Kevin Swartz on our team said to me yesterday, it's never been a bad idea making a long term bet on this city. Now, that being said, each property has its decision points. So what are we doing? So James and Brandon and often Eric and I do these, we collaborate on more than just these state of the markets. And so we're taking a very collaborative approach now to properties where owners have an interest in selling but aren't sure whether they're going to hit a price target that works for them or maybe the question is can they refinance and get to the proceeds that they need? We did it most recently on the Pearson Court Square deal that got some press last week. That was a deal that Erica Dean chased for A long time. The seller had a very high sales target when they started started and so we went out together, we got very familiar with the property along the way. They, it's been a volatile market. They had a couple buyers going forward and, and they hit the target. But then liberation day happened and, and that was a wrench thrown into the process and so the seller decided to pivot to borrowing. We were intimately familiar with the, with the deal and already knew what the debt opportunities were and wound up closing a deal very, very quickly at an attractive execution before the maturity. And now that client has, will have the opportunity to sell and cash out a little bit farther down the road. So, you know, our feeling is that this market rewards conviction, creativity, collaboration, and we're really, really proud to be working together and we think we're delivering some awfully good solutions across, across our, across our teams. So with that we can, we can take any questions here or James, Brandon, anything you guys want to add we can go back to. There we go.

Scott, I would ask about appetite. One thing that we, we didn't discuss as much in depth is the appetite for ground up development for luxury condos. And one thing we wanted to share with you all, certainly for luxury condos, I mean, we kind of already talked about the muted interest for rental sites, you know, with, with the 45x but, but luxury condos, there's been very strong demand. Part of that is really the shrinking supply. So you have, and this is Corcoran Sunshine as well as Brownhauer Stevens statistics that there's only about 4,000 new construction condos that are on the market in Manhattan. And over a third of those are all at five projects. And some of them are massive projects down in the financial district, Lower east side. So when you take, for example, you know, neighborhoods like the Upper east side, we've seen incredible interest for those because there's real confidence that you can achieve sellouts, you know, well into the three thousands, if not four thousands a foot in some cases. So the question, Scott, is what kind of appetite is there from both equity and debt to do, you know, large scale condo development at this point?

Yeah, the debt side is serious competition for condo projects from a variety of different types of sources at different pricing levels. And it's the lack of supply matters, the borrowing level has decreased. So whereas a senior debt financing at the lowest rate, you know, may have been as high as 75% in some prior markets, now that number is more in the 55 to 65% range, which means that a construction lender's basis is very, very low and looking very attractive. So there's competition in that market. On the equity side, the LP equity market essentially dried up for 23 and 24 and we saw at the beginning of 25 a reopening of interest in making LP equity investments. It is still, there's more talk than delivery, but it is real. And there are enough groups who have shifted back to really wanting to and writing LP equity checks that for a great deal there is substantial competition. It is not a time to do a development deal that is stretched, let's say. So developers have to have experience doing what they're doing, where they're doing it. The, you know, one of the contingency line item matters a lot. So one of the questions that in the construction, lending, investing market in the last few months has been what's the effect of tariffs? Right. And so what we saw being in the market with the development deal over the liberation day was that I think all of this volatility of the last few years has created a resiliency in the lending, investing, developing market. And partly it's technical. When inflation rose to the highest levels, let's say in a generation, and it was unclear how, how far it would continue rising, lenders reacted by requiring massive contingency line items in development deals. And so, and that hasn't backed off. So most development deals have a very large, maybe an over large contingency line item necessitated by a lender and most developers want to do that as well. And so tariffs became an additional tariff contingency has become an additional line item in a construction budget. And it is possible to underwrite tariff risk. It is now in order for a development deal to be attractively financed and invested in while adding to the cost profile, it has to start out as being again a very attractive deal. It's, it's not a, it's not a time to expect to be able to finance deals that are really stretched or problematic in various ways.

Perfect.

Very helpful. Brandon, if you could just speak a little bit to activity post the primary elections. I know we, we've closed at least two or three significant transactions post election. We've signed contracts post primaries. And I think anecdotally, anecdotally you talked about just how, how busy we've been as of late. But just, you know, specifically maybe highlighting some of the transactions that we've closed as a group, contracts being signed post primary just to show that there is still activity in the market.

Sure. I mean we didn't have any hiccups on our closings. We closed the Williamsburg portfolio this week for, or I guess last week for 32 1/2 million. Bronx Post Office last week, 44 million. We signed two contracts last week combined $30 million to since in the last week alone. I'm just looking at myself and I know this is just the greater team, the ones that I've personally sent out. 1, 2, 3, 4, 5, 6 contracts in the last two weeks went out, you know, well over $100 million. Like, there's, it's, it feels busier than it's been. I don't know exactly what the impetus is, but I, I personally have not felt the effects. I think my, my personal feeling is that again, and everyone might look at this differently, the, the people that are really focused on the primary were the same people that were focused on the tariffs, that were the same people that were focused on interest rates, the same people that were focused on Covid. And the people that are actively buying and selling have been the same profile of person that has been pretty steady through it all. So right now, while this is the next thing, people have short memories. And then after the election, it'll be the next thing. And you're always going to have people that are going to really hold on to that and look at that as an angle. And generally those are the people that aren't transacting much. You will also find a lot of people that see an opportunity where pricing is today and they're going to jump in or they're just going to see an opportunity as New York. You know, we spoke about the EDC earlier, the population growth, the rent growth, the limited housing, the office leasing activity, the retail leasing activity. I mean, the fundamentals behind real estate right now in New York City are very strong. And I think a lot of people are seeing that and they want to get in on the action.

I think you should add the decrease in crime to that list. And there's some amazing stats that are coming out through Jessica Tisch's office as well. There's a lot more good news here than we necessarily read about in the papers. Okay, we have a question here from someone I'm having lunch with today. Do I really think life codes can compete with agencies? So the answer is not on the deals where the agencies get to the lowest pricing, and that includes deals that have a serious affordability to them. Now, that can be big. A affordability, meaning rent stabilization or other programs, or simply where the underwriting shows that the units are within a lower price point within the market. And for those deals where the agencies will really stretch down to, I think the lowest quote we've seen is 84 over treasuries. No, the life companies aren't going to get there. But for the fully market rate, higher end the agencies, it's still very aggressive pricing. But the life codes are getting pretty close. And I think simply the fact that they're trying to compete is very, very important. And even if they, if they don't quite get there, if we have, you know, a few different types of lenders who are competing at pretty close to all time low spreads, that's really good for, for borrowers and, and I think overall for the market. Another question. Are community banks really back in the game and sort of, you know, they're trying to be not, not, you know, for certain things. I think there's still significant constraints that the government is putting on many banks of various sizes. They don't want them to land on office. They, they in some cases don't want them to do construction. So it's still very challenging for the, for the community banks. And yet are they active? Yes, they're, they're active. They're lending. It may just be a tighter window or lower leverage.

Yeah. One other thing James, I just didn't mention and I want to, I should also say is there are plenty of sellers too now that are saying to themselves, I was waiting for the interest rates, I was waiting for whatever it may be the primary news hits and they're just like, I'm done. So I think that also we've experienced a lot of that as well. So you know, that increases the amount of properties we have for sale with motivated sellers, which also will improve activity. We didn't really ourselves, we didn't have any deals retraded. But you know, I'm sure there's going to be buildings with rent stabilized tenancy that you know, people are going to need to adjust to. But I don't know if that necessarily kills the market because sellers also readjust expectations. So it, you know, it kind of goes hand in hand.

Absolutely. There was a question on Tishman's acquisition. They, as Brandon mentioned, purchased 148 Lafayette street for $105 million. I think why this is also of note is that this was Tishman Speyer's first office, New York City office acquisition since 2019. So again, when, when you have, you know, and it was actually financed by Blackstone's real estate debt strategy group. So when you have the Tishman's and the Blackstones of the world Engaging in New York City office, that, that can really help get the, the rest of the institutions off the sidelines and engaged in, in the market.

So yeah, and what Scott said too, not to cut you off, but the spread was also remarkable, like you know, around 200 over. I mean that's Scott, I don't know how, I mean you probably weren't seeing that for a long time on office.

No. Last year it was practically impossible to get a bid on office no matter how good it was. With the exception of, you know, giant SASB deals, the office financing market had almost shut down. And we have competition now on a very challenged suburban office building. And when I say challenge, it's a terrific building that the owner has spent a lot of money in, but it lost a large tenant, it is in the process of refilling. And so the, it's, you know, 70% occupied now and trying to do a permanent loan. And in fact we have lenders competing for it. The, the loan sizing is significantly smaller than it would have been. But the spreads even on that challenge dealer are, you know, below 300 spread. So you're talking about pretty good rates coming back. So cmbs, CMBS is very, very important right now to the office market and it is fulfilling the function that it was essentially created for, which is to, to, to fill a vacuum of capital. CBS was this version of CMBS was created in the early 90s when there was a true liquidity crisis. There was no one to finance real estate. So a bunch of smart people on Wall street said there's a need for capital, there's a lack of capital, we could probably charge a lot of money, get paid a lot for investing. And it started as a, as a high rate challenged property type of vehicle. So CMBS has become many more things than that. And, and it is possible to finance essentially all property types now with cmbs. But on the office side, the dominant share of the office deals that get done now at all sizes are going to be cmbs. And that again is very, very, very important and critical. I think. How we doing on time? I think we're getting there.

I think you can answer. There's one more that came in from. Why don't we do one more from on how you would expect floating rate agency spreads to compare to the fixed rate spreads you mentioned of 84 bips being the bottom?

The honest answer is I'm not, I'm not sure. Our clients have essentially been universally taking advantage of fixed rates in this, in this environment. So, but, but ping me directly and we'll, we'll do a little quick market research.

Right. We just have questions that keep coming in. So. Sorry, we, we still have another minute or two, so. Karen, thank you for joining in. Your question on sustainable due diligence that you are seeing investors do today. I mean, you know, specifically to New York City and compliance with, you know, Local Law 97 and carbon. I mean, that's certainly something that investors and operators are certainly looking at as far as sustainability also, you know, Scott, I don't know if you've spent any time looking at C pace financing. I know that's something that we're seeing outside in other markets, but finding ways to finance improvements to make buildings more sustainable, I, I know that's been pretty active in, in other markets. I don't know if that's as prevalent here.

It hasn't been prevalent in the city because there were some, some rules, laws that essentially prohibited it that have now been changed and it has become a possible source. There are pros and cons and challenges to it, but it is certainly something that we're looking at for applicable deals.

Great. Well, we want to thank you all for joining. Obviously, a lot going on in the market and we will certainly track as things progress. We are expecting a big third quarter as a result of some pretty significant transactions that are in contract now. And then we'll have to see how the election plays out and hopefully this momentum that Brandon was speaking of continues for all of our benefits. So thank you again for joining and we look forward to being in touch.

Thanks, everybody.