Commercial Observer – January 18, 2022

Plus

21 Bo Menkiti has big plans for DC 26 How to build a greener warehouse 30 Doubts cloud NYC’s carbon rules JANUARY 18, 2022

ESG & SUSTAINABILITY ISSUE

In Mod We Trust Andrew Staniforth and his mentor MaryAnne Gilmartin are plotting a modular empire with Assembly OSM.

NEEDED CUTTING EDGE Durst.org

Dynamic View Glass – installed on all midrise and tower floors – automatically tints to reduce glare, mitigate direct sun, and control heat gain while preserving 825 Third’s signature unobstructed views.

Leasing Inquiries

Additional Leasing Contacts

Ashlea Aaron 212.257.6590 AAaron@durst.org

Thomas Bow 212.257.6610 TBow@durst.org

Lauren Ferrentino 212.257.6596 LFerrentino@durst.org

Bailey Caliban 212.257.6535 BCaliban@durst.org

NEEDED CUTTING EDGE Durst.org

Dynamic View Glass – installed on all midrise and tower floors – automatically tints to reduce glare, mitigate direct sun, and control heat gain while preserving 825 Third’s signature unobstructed views.

Leasing Inquiries

Additional Leasing Contacts

Ashlea Aaron 212.257.6590 AAaron@durst.org

Thomas Bow 212.257.6610 TBow@durst.org

Lauren Ferrentino 212.257.6596 LFerrentino@durst.org

Bailey Caliban 212.257.6535 BCaliban@durst.org

Tint: 1

Tint: 2

Tint: 3

Tint: 4

AUTOMATICALLY TINTING WINDOWS ALL VIEWS, NO BLINDS

One of only two NYC office buildings outfitted with Generation 4 View Glass.

Durst.org

Tint: 4

Tint: 3

Tint: 2

Tint: 1

SETTING THE STAGE FOR THE FUTURE

Control any (or every) individual window with your mobile device.

Windows automatically tint according to sun position and weather.

Leasing Inquiries

Additional Leasing Contacts

Ashlea Aaron 212.257.6590 AAaron@durst.org

Thomas Bow 212.257.6610 TBow@durst.org

Lauren Ferrentino 212.257.6596 LFerrentino@durst.org

24/7 tinting lessens heat gain and loss, decreasing HVAC use and increasing energy efficiency.

Durst.org Bailey Caliban 212.257.6535 BCaliban@durst.org

Substantial reduction in glare means less eye strain and fewer headaches – improving employee wellness.

Each smart window panel is network-enabled so video conferencing, presentation, and streaming capabilities can be added.

Leasing Inquiries

Additional Leasing Contacts

Ashlea Aaron 212.257.6590 AAaron@durst.org

Thomas Bow 212.257.6610 TBow@durst.org

Lauren Ferrentino 212.257.6596 LFerrentino@durst.org

Bailey Caliban 212.257.6535 BCaliban@durst.org

Tint: 1

Tint: 2

Tint: 3

Tint: 4

AUTOMATICALLY TINTING WINDOWS ALL VIEWS, NO BLINDS

One of only two NYC office buildings outfitted with Generation 4 View Glass.

Durst.org

Tint: 4

Tint: 3

Tint: 2

Tint: 1

SETTING THE STAGE FOR THE FUTURE

Control any (or every) individual window with your mobile device.

Windows automatically tint according to sun position and weather.

Leasing Inquiries

Additional Leasing Contacts

Ashlea Aaron 212.257.6590 AAaron@durst.org

Thomas Bow 212.257.6610 TBow@durst.org

Lauren Ferrentino 212.257.6596 LFerrentino@durst.org

24/7 tinting lessens heat gain and loss, decreasing HVAC use and increasing energy efficiency.

Durst.org Bailey Caliban 212.257.6535 BCaliban@durst.org

Substantial reduction in glare means less eye strain and fewer headaches – improving employee wellness.

Each smart window panel is network-enabled so video conferencing, presentation, and streaming capabilities can be added.

Leasing Inquiries

Additional Leasing Contacts

Ashlea Aaron 212.257.6590 AAaron@durst.org

Thomas Bow 212.257.6610 TBow@durst.org

Lauren Ferrentino 212.257.6596 LFerrentino@durst.org

Bailey Caliban 212.257.6535 BCaliban@durst.org

TABLE OF CONTENTS

1 Whitehall Street, 7th Floor New York, NY 10004 | 212.755.2400

Max Gross Editor-in-Chief

Cathy Cunningham Deputy Editor, Finance

Tom Acitelli Deputy Editor, News

Greg Cornfield, Chava Gourarie Associate Editors

Rebecca Baird-Remba, Andrew Coen, Emily Fu, Mark Hallum, Celia Young Staff Writers

26

Nicholas Rizzi

Josh Rozbruch

Web Editor

Social Media Editor

Robyn Reiss Executive Director

SALES Brigitte Baron Partnerships Director

Natalie Reichel Senior Account Manager

4 NEWS BRIEFS

No More Neutral on Green Warehouses

Amy Cogan

Lease Deals

The booming industry is taking sustainability more and more seriously, and here’s why.

Sophia Homa

Columns

Client Success Managers

10 FINANCE Debt Deals of the Week

Sales Executive Senior Client Success Manager

Ryan Leigh, Gabriela McNichol

Petra Durnin and VincentCharles Hodder.

ChartFinance

MARKETING & EVENTS Ashley Roseman

Breaking in the Law

14 FEATURES

Senior Events Manager

New York’s momentous Local Law 97 to curb carbon emissions sows confusion.

Emily Benner Event Coordinators

CREFC Up Close

21

The annual meeting of CRE finance pros was live for the first time since 2020.

DESIGN, PHOTO & PRODUCTION Jeffrey Cuyubamba Art Director

Julia Cherruault Photo Editor

Josh Haas

14

Vice President, Product

Charles Taffet Senior Prouduct Manager

Some Assembly

32

Assembly OSM builds expectations for modular construction.

The Sit-Down Averse to the Metaverse Proptech isn’t convinced — yet.

2 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

24

IT Manager

OBSERVER MEDIA Joseph Meyer

ENDNOTES

Bo Menkiti.

Ramon Encarnacion

Chairman

Michael Rose

34 The Plan

Chief Executive Officer

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The Future in Focus

COM M E RCIAL

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R ESIDE NTIAL

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R E TA I L

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FINANCE

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BRIEFS

News TOWN AND GOWN

Finding a sizable parcel of land up for grabs in New York City is like finding a needle in a haystack, but one lucky buyer recently found (and bought) that needle.

Columbia University snapped up the former Fairway Market assemblage at 2328 12th Avenue in Harlem for $84 million in an allcash deal, Commercial Observer learned last week.

The 2.5-acre site hit the market in August 2020, with Cushman & Wakefield’s Eric Roth, Adam Spies, Robert Shapiro, Tyler Signora and Harry James handling the marketing and sale, as first reported by CO. A Fairway supermarket once occupied the location, which spans three full

city blocks between 12th Avenue and the Henry Hudson Parkway and comprises eight lots in total. The property currently includes a 68,000-square-foot parking lot; a 13,000-square-foot vacant warehouse; a 41,000-square-foot vacant building; and some prime, high-grossing billboard space that’s visible to highway drivers, as well as train riders on Amtrak’s Hudson line.

The site — which was the only space remaining between the university’s new Manhattanville campus and the Hudson River — has the potential for 219,000 square feet of new development, although Columbia’s future plans for it are for now unclear.

Happily for the school, the high-profile

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Columbia University Snaps Up Former Fairway Site for $84M CHECKED OUT: The Fairway in Harlem closed in 2020 following a bankruptcy filing. location already sits within Columbia’s expansive zoning — the Special Manhattanville Mixed-Use Zoning District — which allows myriad potential uses.

Although Columbia was the eventual victor, the sale drew fierce competition from various developers of industrial, film studio and life sciences properties, sources familiar with the sale said, the spacious location being a pretty ideal spot for any of

the aforementioned uses.

The assemblage was previously owned by the Glickberg family, founders of Fairway Market. The popular Fairway location at the site shuttered in 2020 following the retailer’s Chapter 11 filing.

Officials at Columbia University weren’t available for comment. A C&W spokesperson declined to comment. —Cathy Cunningham

Janno Lieber will be the next chair of the Metropolitan Transportation Authority, pending approval from the New York Senate.

Lieber has held down the fort as interim chair since Pat Foye stepped down in June 2021 to run the Empire State Development Corp. Gov. Kathy Hochul nominated Lieber in early January to run the agency on a permanent basis.

Before leading the MTA, Lieber was the agency’s chief development officer, where he oversaw major projects such as the expansion of the Long Island Rail Road between Floral Park and Hicksville in Nassau County, and the East Side Access project that will extend the LIRR into Grand Central Terminal from Queens.

But it’s his work as a champion for congestion pricing that has Regional Plan Association President Tom Wright most excited.

“New York City doing congestion pricing is essentially showing the nation how to move forward in a new direction, both to manage the limited supply of our street

4 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

space and to create new revenue streams [for the MTA],” Wright said. “Janno has shown enormous sophistication and leadership on this issue.”

Wright said he believes that having a leader in the agency with a background in building out the region’s transit system will be the best bet as New York recovers from the pandemic.

“Janno has been all along a prime advocate for saying that even as we bring the system up to a state of good repair, even as we modernize the subway signals and put in more bus express lanes, we also need to be able to do the long-term capital projects that create more capacity and more coverage,” Wright said.

From 2003 to 2017, Lieber was president of World Trade Center Properties, where he managed planning, design and construction aspects of Silverstein Properties’ rebuilding of Lower Manhattan after the attacks on 9/11.

Riders Alliance, a transit advocacy organization, also applauded Lieber’s

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Transit Advocates Applaud Janno Lieber’s Nomination as MTA Chair

FULL SPEED: Lieber has won accolades for work in the public and private sectors. nomination, but said that in order for him to be successful, Hochul needs to account for the needs of the MTA. “Janno is a seasoned leader at a crucial moment for the transit system,” Riders Alliance policy and communications director Danny Pearlstein said. “The governor

must make sure he has the resources necessary to make transit as attractive as possible by providing affordable, frequent and accessible service.”

It was unclear as of last week when the state Senate will take up Lieber’s nomination. —Mark Hallum

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Manhattan Investment Sales Reach Pre-Pandemic Levels: Report

WORKING IT: Most of the trades in 2021 were for office properties.

With 100 deals totaling over $6.2 billion, Avison Young says in a recent report that investment sales activity in Manhattan in the fourth quarter of 2021 was at a level unseen since 2018.

The fourth quarter, in fact, claimed 61 percent of the year’s dollar volume, though three-quarters of the deals themselves closed in the first three quarters.

“The Manhattan investment sales market recorded the highest quarterly dollar volume since the third quarter of 2018 and the largest for total transaction count since the fourth quarter of 2018, a strong indication of investors’ restored confidence in the Manhattan market,” James Nelson, head of Avison Young’s Tri-State Investment Sales Group, said in a statement.

About 56 percent of the money spent on acquisitions in 2021 was for office properties while 23 percent of the pie chart indicated multifamily transactions. Alternatively, in terms of transactions themselves, 46 percent of sales involved multifamily and 14 percent involved office space.

“The multifamily sector accounted for the largest share of transaction activity in the fourth quarter, which can be attributed to the influx of demand from residents flocking back to the city in the second half of the year,” Nelson continued. “Momentum in this sector is poised to continue as we anticipate a wave of 1031 [exchange] capital to hit the market in the first half of 2022 that we haven’t experienced in close to a decade.”

In the Manhattan retail market in the fourth quarter, Avison Young tallied 16 investment sales for just under $530 million in total dollar volume, which represented 178 percent and 328 percent increases, respectively, off the trailing four-quarter average.

Office space accounted for 14 transactions for $3.55 billion. As for development sites, there were 13 transactions for $473 million and mixed-use saw 46 transactions for just over $1.47 billion.

The report tracked office transactions above $5 million and retail transfers above $1 million in Manhattan south of 96th Street. —M.H.

The Real Estate Board of New York (REBNY) is urging Albany lawmakers to act on what it says is the need for 560,000 new housing units in New York City as the population is expected to hit 9 million by 2030, something that has not escaped the attention of officials since a similar New York University study came out in 2016.

AKRF, an environmental, planning and engineering consulting firm, and REBNY released their own study last week that highlights the progress — or lack thereof — the city has made in meeting this need. Projects currently in the pipeline only meet about 14 percent of this demand.

REBNY is calling on Gov. Kathy Hochul to kick a building boom into high gear while also praising proposals made in her 2022 State of the State address in early January to invest $25 billion in either building or preserving 100,000 units of housing for low-income New Yorkers.

“This report underscores the critical need to produce more rental housing and dire consequences our city will face if Albany fails to act,” REBNY President James Whelan said.

“We are encouraged by Gov. Hochul’s proposals, which set out a clear path to help address the housing crisis, and look forward to a robust conversation on affordability and urgent need to build. By working together with the private sector, our leaders in government can help make sure New York City is an affordable place to live for everyone.”

Hochul’s office did not respond to a request for comment.

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DREW ANGERER/GETTY IMAGES

REBNY Wants Hochul to Help Deliver 560K New Housing Units

REACHING: The city needs a lot of housing.

With about 79,500 units currently in the development pipeline, REBNY claims there is an incremental need for over 485,000 units by 2030.

In 2018, NYU’s Furman Center for Real Estate and Urban Policy followed up on its 2016 study with another one led by former de Blasio appointee Vicki Been — who was doing a stint in academia at the time — showing a 24 percent drop in the number of apartments allocated for low-income New Yorkers.

When asked by WNYC’s Brian Lehrer in a May 2018 appearance, then-Mayor Bill de Blasio seemed to suggest that the supply and demand effects of capitalism on the housing market meant the problem would sort itself out. City Hall, however, would monitor and guide the process considering the impending population boom.

“The bottom line here is it’s not shocking that in the free-enterprise system the development would follow where the money is,” de Blasio said in that interview. “If the money is in the smaller apartments, that’s what the developer is going to do. I don’t like that, but I understand the free-enterprise system.

Our job is to counter that and balance that in every way we can. So we have an affordable housing plan to build and preserve in place 300,000 apartments. That’s enough for almost three-quarters of a million people, so they can live affordably in New York City.”

De Blasio’s successor is also focused on the rapid production and preservation of affordable housing.

“The mayor and the administration are laser-focused on creating the affordable housing New York needs,” Charles Lutvak, a spokesperson for New York Mayor Eric Adams, told Commercial Observer. “We will continue working across agencies and with partners in and out of government to deliver for New Yorkers.”

REBNY also believes there is a current demand for 227,000 new homes right now, which it says would help attract and retain workers, giving them a life within reasonable proximity to workplaces.

Of those 227,000 units, REBNY said 50,000 of them are specifically needed to replace unsafe housing that may have dangerous occupancies that do not comply with safety ordinances. Another 16,000 of those would simply be making up for an increase in homelessness since 2000. —M.H.

Thor Equities Sells North Carolina Life Sciences Asset Alexandria Real Estate Equities has acquired The Lab, a life sciences asset in North Carolina’s Research Triangle Park, for $80 million, a source familiar with the sale told Commercial Observer.

Thor Equities sold the 72-acre life sciences complex after acquiring it in December 2020 for $20 million. After minor redevelopment work, the company made 10 times the equity on this deal, according to a source familiar with the sale. The assemblage of six buildings is situated at 104 T.W. Alexander Drive, in the middle of a leading research and development hub.

The majority of the property is leased to biotechnology company AgBiome. It is close to North Carolina State, Duke University and the University of North Carolina. In addition to the six buildings that comprise The Lab, the property includes a vacant land parcel and over 1 million square feet of development potential.

“The sale of this best-in-class asset demonstrates the demand for high-quality space in top-performing markets. It was an opportune time to sell these six buildings and we look forward to identifying new opportunities in this region and beyond,” said Jack Sitt, executive vice president of Thor.

Alexandria Real Estate Equities declined to comment. —Emily Fu

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LEASES

Roku 240,000 Relocation

Roku signed what will likely be one of the biggest office leases of 2022 at 5 Times Square, landlord RXR Realty announced early last week.

The publicly traded manufacturer of streaming boxes leased 240,000 square feet on the top eight floors of the 39-story building, the New York Post first reported. RXR CEO Scott Rechler told the paper that Roku was growing so quickly that it had to add 100,000 square feet to its original 140,000 during negotiations. Asking rent for the long-term deal was reportedly in the $90s per square foot.

Roku is relocating from 70,000 square feet at 414 West 41st Street.

Dan Birney and Alexandra Budd represented RXR in-house, along with CBRE’s Bob Alexander, Ryan Alexander, Mike Affronti, Alex Benisatto, Taylor Callaghan and Nicole Marshall. Sacha Zarba and Frederick Fackelmayer of CBRE represented Roku.

“This major commitment by Roku speaks not only to the resilience of the office market in New York City, but also to the continued growth of the technology sector as a whole in New York,” Zarba said.

Originally constructed in 2002 with EY as the anchor tenant, the 1.1 million-square-foot office tower is now being modernized with a new lobby and a 48,000-squarefoot amenity center. —Rebecca Baird-Remba

Seton Education Partners

Carter, Ledyard & Milburn

73,000 New

36,124 Relocation

Seton Education Partners will be leasing 73,000 square feet at 1956 Jerome Avenue in the Mount Hope community of the Bronx, where the organization plans to develop a K-8 school.

OPEN Impact Real Estate helped broker the deal on behalf of Seton, which will build the school from the ground up via a 39-year triple-net lease. The structure will be developed by an affiliate of Bolivar Development.

Brilla Public Charter School will occupy all seven floors of the building, which is in the boundaries of Community School District 9, and will be known as Brilla Pax Elementary and Middle School, according to OPEN. The asking rent was about $50 per square foot, according to OPEN. OPEN’s Stephen Powers and Lindsay Ornstein, alongside Jake Cinti and Alexander Smith of Transwestern Real Estate Services, represented Seton.

Bolivar was represented internally

by CEO Jim Lester and its principal, Peter Fine.

OPEN says the school is expected to be open in time for students to enroll in the 20242025 academic year.

The project has benefited from the Jerome Avenue Neighborhood Plan, a rezoning launched by former Mayor Bill de Blasio’s administration in 2018, and will be the third development by Bolivar within the scope of the new zoning area.

—Mark Hallum

Corporate law firm Carter, Ledyard & Milburn has leased 36,124 square feet at Fosun International’s 28 Liberty Street in the Financial District.

The 168-year-old firm will relocate from 2 Wall Street to the entire 41st floor of the landmarked and recently renovated office tower, according to JLL. Asking rent in the long-term deal was in the $70s per square foot. The deal brings the 60-story, 2.2 million-square-foot building to more than 95 percent leased.

JLL’s Kenneth Siegel and John Wheeler represented Carter Ledyard in the transaction. Isabella Chen of Fosun Hive handled the transaction in-house for Fosun, along with JLL’s Peter Riguardi, Mitchell Konsker, Daniel Turkewitz, Michael Berman and Eliza Gordon.

The renovation has added 200,000 square feet of new belowgrade retail space, including an Alamo Drafthouse Cinema and a food hall, as well as Union Square Hospitality Group’s Manhatta restaurant in the 60th-floor penthouse. The last major office lease signed in the building was with insurance company AIG, which took 220,000 square feet at the property in July 2020. —R.B.R.

8 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

CLSA Americas

Mancini Duffy

16,563 Relocation

12,000 Relocation

The capital markets and investment firm CLSA Americas is moving 10 blocks north to 16,563 square feet at The Durst Organization’s 1155 Avenue of the Americas.

CLSA inked a deal to relocate to the entire 17th floor of the 42-story building from its offices on the 15th floor of Paramount Group’s 1301 Avenue of the Americas, according to Durst. Asking rent was $90 per square foot in the 10-year lease.

The deal at 1155 Avenue of the Americas closed in the last week of December 2021, according to Durst’s Rocco Romeo, who represented the landlord in-house alongside Tom Bow and Tanya Grimaldo.

“Having a full floor was essential to them in terms of privacy [and] exclusivity,” Romeo told CO. “The floor has very few columns on it so it works well to allow for large open spaces.”

CLSA plans to build out the firm’s new offices in the Midtown property before moving in during the third quarter of 2022, after its lease ends for its current offices, Romeo added.

The 790,000-square-foot 1155 Avenue of the Americas was renovated in 2019, when Durst spent $130 million on more window installations, a new lobby, fans and elevators, adding to its appeal, said Romeo.

CBRE’s Clyde Reetz represented CLSA. —Celia Young

Architectural company Mancini Duffy is moving about 10 blocks north and one avenue west to new digs at 520 Eighth Avenue.

The design firm will relocate from the 19th floor of 275 Seventh Avenue to the 25-story office building between West 36th and West 37th streets in a 12,000-squarefoot, 10-year deal, according to JLL’s Charles Gerace, who represented the tenant in the transaction.

Asking rents at the building range between $45 and $55 per square foot, according to PropertyShark.

“We found a space with great natural light and nice views from a great New York City landlord,” Gerace told Commercial Observer.

“It was just a better operational fit for them all around.”

Mancini’s deal for its new space, on part of the 23rd floor of GFP Real Estate’s 860,000-square-foot office building, closed at the end of 2021. The firm, which worked on the design of the rooftop ice-skating rink on Pier 17 and Peloton’s old headquarters at 125 West 25th Street, wanted to recommit to Manhattan, said the company’s CEO, William Mandara.

GFP’s Matthew Mandell represented the landlord in-house.

Mancini plans to move into the space in the first quarter. —C.Y.

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LEFT TO RIGHT: CUSHMAN & WAKEFIELD, PROPERTYSHARK, PROPERTYSHARK, PROPERTYSHARK, COSTAR GROUP

LEFT TO RIGHT: COURTESY OF COSTARR GROUP, OPEN IMPACT REAL ESTATE, FOSUN INTERNATIONAL, DURST ORGANIZATION, GFP REAL ESTATE

Lease Deals of the Week

LEASES

LEFT TO RIGHT: CUSHMAN & WAKEFIELD, PROPERTYSHARK, PROPERTYSHARK, PROPERTYSHARK, COSTAR GROUP

LEFT TO RIGHT: COURTESY OF COSTARR GROUP, OPEN IMPACT REAL ESTATE, FOSUN INTERNATIONAL, DURST ORGANIZATION, GFP REAL ESTATE

Lease Deals of the Week Russell Investments 8,568 Relocation Real estate services firm Russell Investments has signed for 8,568 square feet for five years at Beacon Capital Partners and MetLife’s 575 Fifth Avenue, Cushman & Wakefield announced.

C&W handled the negotiations for both tenant and landlord with Nick Masi and David Mainthow representing Russell Investments and Josh Kuriloff, Matthias Li, Andrew Braver and Eric Hazen representing Beacon and MetLife.

The asking rent was not disclosed.

The Seattle-based company is relocating its New York City office from 1095 Avenue of the Americas.

Chris Gulden of Beacon said in a statement that Russell Investments will join other well-known tenants such as private equity firm Charlesbank Capital Partners in getting access to a “best-in-class” work environment.

The Fifth Avenue address is a 40-story, 513,740-square-foot office tower that was refinanced in 2019 with $309 million from TPG Real Estate Finance Trust on the money Beacon Capital borrowed in 2015 to purchase a 50 percent stake in 575 Fifth Avenue that year, Commercial Observer reported.

Beacon Capital Partners and MetLife also recently completed a $30 million capital improvement program that included a new lobby and a bike room. In addition, tenants get access to an amenity center that includes a café, a lounge, a barbershop and a kitchen. —M.H.

Allbirds

Amen Clinics

8,000 New

7,500 Relocation

Allbirds signed an 8,000-squarefoot lease with The Bromley Companies at 120-122 Fifth Avenue in the Flatiron District, Cushman & Wakefield announced last week.

The clothing and shoe company will be moving into the twofloor space at the Bromley building after The Gap moved out in the summer of 2021 after nearly 30 years. The retail space on West 17th Street and Fifth Avenue will serve as Allbirds’ U.S. flagship store via what C&W described as a “longterm” arrangement.

C&W’s Alan Schmerzler, Sean Moran and Pat O’Rourke represented the landlord in the transaction while Allbirds was represented

by Matthew Seigel and Skye Taylor of Lantern Real Estate Advisors + Partners.

“As generational owners of 120 and 122 Fifth Avenue, we are deeply invested in creating the most compelling spaces for our tenants to thrive, and we believe Allbirds represents one of the most compelling omnichannel retailers today,” Peter Tong, a senior vice president at Bromley, said in a statement.

C&W indicated that the asking rent was $350 per square foot.

The sudden vacancy left by The Gap marked the first time in four decades that the retail location had been empty, having been home to the first Barnes & Noble superstore in the nation prior to the clothing store.

Lantern did not respond to a request for comment, and Allbirds declined to comment. —M.H.

The private brain clinic chain, Amen Clinics, is moving east to 228 East 45th Street.

Amen Clinics is known for its radiation-heavy treatment of chronic traumatic encephalopathy, or CTE, a brain condition caused by repeated blows to the head, according to National Public Radio. Amen Clinics snagged 7,500 square feet at the Midtown East building, relocating from its smaller offices at 16 East 40th Street.

Asking rent was in the range of the $40s to the $50s per square foot in the 10-year deal.

The deal, which closed more than two months ago, puts Amen Clinics in the 16-story building between Second and Third avenues in the next month, according to Summit RE Partners’ Daniel Hassett, who represented the tenant. The tower is also home to the meditation nonprofit, the David Lynch Foundation, an organization founded by the director of the cult classics “Blue Velvet” and “Twin Peaks,” David Lynch, Commercial Observer reported.

The property is owned by Beckrose Estates and managed by Steinberg & Pokoik. The management company did not respond to a request for comment.

Resolution Real Estate’s Ira Fishman, Dana Moskowitz and Brett Weiss represented the landlord in the deal. Fishman declined to comment.

Amen Clinics disputes NPR’s characterization of its treatment, and says it is not known for treating CTE. —C.Y.

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Meltzer, Lippe, Goldstein & Breitstone 5,835 Relocation Law firm Meltzer, Lippe, Goldstein & Breitstone signed for 5,835 square feet at 70 East 55th Street in a 10-year lease negotiated

by Cresa, the brokerage announced last week.

By relocating from its current location at 460 Park Avenue between East 57th and East 58th streets, the firm will get the entire 19th floor to itself in the 27-story, Class A office building called Heron Tower and located between Madison and Park avenues.

“The firm wanted the benefits of a full-floor space in a centrally located Class A building,” said Nicholas Markel, a vice president at Cresa. “We negotiated an excellent transaction for them, which included build-to-suit provisions that meet their requirements for space, amenities and privacy.”

JLL’s Diana Biasotti represented the landlord, Amtad. The landlord could not be reached for comment and JLL did not respond to a request for comment.

The asking rent was not disclosed.

The 51-year-old law firm employs over 70 attorneys who represent clients in a variety of fields such as real estate, corporate, labor, estates, construction, environment and bankruptcy. —M.H.

Club Champion 5,399 Relocation

The Daily News Building on East 42nd Street is getting a new retail tenant.

Golf club fitter and retailer Club Champion has leased 5,399 square feet in a long-term deal for its flagship store in the base of the Art Deco office tower at 220 East 42nd Street, according to Newmark.

The retailer, which specializes in fitting and customizing golf clubs, will occupy 4,372 square feet on the ground floor and 1,027 feet on the lower level of the Midtown East building. Asking rents for the space range from $150 to $200 per square foot.

The store, which will have 90 feet of frontage on East 42nd Street, is scheduled to open in the next few months. The retailer is moving from a nearby temporary storefront at 850 Second Avenue, between East 45th and East 46th streets.

Newmark’s Ariel Schuster and Mitch Heifetz represented the tenant, while Ross Berkowitz and Jason Wecker, also of Newmark, represented the landlord, SL Green Realty Corp.

“This is a great location for Club Champion as it puts the brand right in the heart of the Grand Central shopping district where a lot of their targeted audience is present,” Heifetz said. —R.B.R.

COMMERCIALOBSERVER.COM | JANUARY 18, 2022 | 9

FINANCE

Debt Deals of the Week WICKED SMAHT

Cronin Development has landed $345 million of construction financing for a planned mixed-use condominium development in Boston’s Seaport District, Commercial Observer has learned.

Madison Realty Capital originated the loan for Cronin to complete its 22-story, 114-unit residential and retail development called St. Regis Residences at 150 Seaport Boulevard. The project will also comprise 10,211 square feet of retail space.

“Boston’s Seaport District is expanding rapidly, but high barriers to entry and long entitlement processes have constrained the supply of luxury condominium offerings,” Josh Zegen, managing principal and co-founder of Madison Realty Capital, said in a statement. “We are pleased to expand our presence in Boston to deliver an attractive and complex financing solution mid-construction for a significantly pre-sold property to Cronin Development, a developer with over 20 years of experience developing and managing real estate projects in the Boston area.”

The property will contain a mix of one-bedrooms to six-bedroom penthouse units with waterfront views. Its amenities include fitness

COURTESY MADISON REALTY CAPITAL

Boston Condos Set to Rise With $345M Loan From Madison Realty Capital

A rendering of the St. Regis Residences project in Boston’s Seaport District.

and wellness center with spa and jacuzzi, bistro-style restaurant with waterfront dining, tenant lounge, pool, boardroom, business center, catering kitchen, wine vault and two guest suites.

The St. Regis project adds to Madison Realty Capital’s active transaction volume in Boston. Some of its notable transactions in New England’s largest city include a $165 million loan to Scape North America for the development of a 451-unit multifamily project in Boston’s Fenway neighborhood and a $314 million construction loan to Raffles Boston Back Bay Hotel & Residences.

“We are thrilled to engage Madison Realty Capital as a single source of financing to complete this luxury residential product, which will be the last waterfront residential development in the Seaport District,” Jon Cronin, founder of Cronin Development, said in a statement. “Madison Realty Capital was able to leverage its knowledge of the Boston condominium market to quickly and efficiently provide us a tailored financing solution during the construction process that will enable us to complete the project in the near term.”—Andrew Coen

The Peebles Corporation and El Ad Group have landed a $229.4 million refinance for 108 Leonard Street, the developers’ luxury condominium building in Tribeca, Commercial Observer has learned.

J.P. Morgan provided a $184 million senior loan in the deal, while Lionheart Strategic Management was in the $45 million mezzanine spot, sources said.

Walker & Dunlop’s Keith Kurland, Aaron Appel, Jonathan Schwartz, Adam Schwartz, Ari Hirt and Michael Ianno negotiated the debt, while J.P. Morgan’s Aaron Casden led the deal on behalf of the bank, sources said.

The asset, also known as Tribeca’s historic Clock Tower Building, features 167 residential units, 30,000 square feet of streetlevel retail and 20,000 square feet of wellness-driven amenities.

In 2019, Mack Real Estate Credit Strategies provided a $450 million condo inventory loan for the asset, as reported by The Real Deal.

The W&D team also arranged that financing.

Designed by architects Stephen D. Hatch and McKim, Mead, and White, the Beaux-Arts-style building — which has an alternate address of 346 Broadway — was erected in 1894 and previously served as the headquarters of New York Life Insurance, then New York Criminal Court.

D on Pe eble s’ Peebles Corporation acquired the asset — the single largest building ever sold by the City of New York at the time — for $160 million in December 2013, beginning the condo conversion project with partner El Ad in 2016 and restoring the National Register of Historic Places-listed

10 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

building to its former glory.

Sales at the project launched in early 2019 and have been off to the races, with some high-profile buyers garnering headlines since.

According to the New York Post, those buyers include Zoe Jackson, producer of “Project Runway” and “Top Chef”, who paid $6.4 million for a unit at the building; Keith Urban and Nicole Kidman, who grabbed a two-bedroom apartment for $3.5 million; and billionaire Gildo Pallanca Pastor, who took the cherry on the cake and snapped up the 2,618-square-foot penthouse for $8.7 million in December 2021.

Officials at Lionheart didn’t immediately respond to requests for comment. W&D, J.P. Morgan and Peebles Corporation officials declined to comment. El Ad officials couldn’t be reached.

—Cathy Cunningham

COURTESY PEEBLES CORP

JP Morgan, Lionheart Lend $229M on Tribeca Clock Tower Building

A rendering of 108 Leonard.

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FINANCE

Bank OZK Supplies $66M Construction Loan for Manhattan Luxury Condo Pair William Gottlieb Real Estate has secured $66 million in construction financing for two luxury condominium development projects in Manhattan’s West Village, Commercial Observer has learned.

Bank OZK provided two separate, floating-rate, four-year construction loans of $29.1 million and $36.9 million for 540 Hudson Street and 144-150 Barrow Street, respectively. When completed, each project will feature 26 residences in a supply-constrained neighborhood.

Walker & Dunlop’s Aaron Appel, Keith Kurland, Jonathan Schwartz, Adam Schwartz, Michael Diaz and Sean Bastian arranged the debt.

The 48,535-square-foot property at 540 Hudson Street includes 6,000 square feet of retail space on the ground floor and below grade.

YIMBY reported the seven-story condo has one-bedroom units measuring 670 square feet, two-bedroom layouts averaging 1,200 square feet and a 1,820-squarefoot three-bedroom penthouse.

Building amenities include fitness center, outdoor entertainment space, and rooftop terrace and lounge, according to iNewHomes.

The second project, at 144-150 Barrow Street, was formerly the landmarked Keller Hotel and will be converted to a condo, also with retail at the base. The developers intend to maintain the historical facade and neon “Hotel” sign.

Representatives for Bank OZK declined to comment. William Gottlieb Real Estate did not return requests for comment.—Emily Fu

One Wilshire.

Located at 624 South Grand Avenue, One Wilshire is 89 percent leased to major interexchange and local exchange carriers, financial services companies, data communication companies and internet service providers.

Demand for data center space has skyrocketed over the past few years due to increased data usage, including streaming services and virtual connectivity. JLL anticipates the demand for faster, safer and more reliable content delivery will continue to propel the data center market.

Goldman Sachs and GI Partners were not immediately available for comment.

JLL’s Kevin MacKenzie, Brian Torp, Jake Wagner, Samuel Godfrey and Darren Eades facilitated the financing.—Greg Cornfield

MSD Partners, CanAm Lend $63M on Miami Residential Tower Mast Capital has nabbed a $62.5 million debt package to spearhead the acquisition and pre-development financing of a Miami residential tower project, Commercial Observer can first report.

MSD Partners and CanAm Enterprises supplied the loan for Mast’s planned development at 1420 S Miami Avenue, located in Miami’s Brickell neighborhood.

“MSD is pleased to support the development of this exceptional residential project in Miami, partnering with Mast Capital, a bestin-class developer with extensive experience in the market,” said Adam Piekarski, who co-heads MSD’s real estate credit business with Jason Kollander.

The financing is collateralized by half of Mast’s $103 million acquisition of the entire 2.8-acre, full-block development site. The land was previously purchased by an affiliate of China Communications Construction Company in 2014 for $74.7 million, according to property records.

When completed, the project will include three towers with one featuring luxury condominium units and the other two allocated

COURTESY MAST CAPITAL

540 Hudson Street.

The owner of the One Wilshire tower in Downtown Los Angeles has landed $389.3 million in refinancing for the 661,553-square-foot property.

Goldman Sachs provided the 10-year, fixed-rate, non-recourse, interest-only loan to the building’s owner, GI Partners. JLL announced the deal and represented the seller.

Property records show that GI Partners acquired the tower from Hines for $437.5 million in 2013.

The 30-story tower includes both data center and office space, and it’s one of the largest internet exchanges in the world. The international telecommunications industry considers the building the most important point of connectivity between the United States and the Pacific Rim, with 13 on-site generators, data risers, a multitower antenna array and fiber connectivity to the rooftop.

COURTESY GARY FRIEDMAN/LOS ANGELES TIMES VIA GETTY IMAGES

COURTESY YIMBY

Goldman Sachs Provides $389M Refi for LA’s One Wilshire Tower

A rendering of 1420 S Miami Avenue. for rental apartments. All told, the development will comprise 400 condos, 850 rental units and 1,650 parking spaces.

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Mast is partnering with Bostonbased Rockpoint Group on the rental portion of the development.

Officials for Coconut Grove,

Fla.-based Mast did not immediately return a request for comment.

Newmark’s Jordan Roeschlaub and Dustin Stolly arranged the financing alongside Nick Scribani, Chris Kramer, Daniel Matz and Dan Morin. (Matz joined Newmark last June in the brokerage firm’s new Miami office from Mission Capital Partners to help bolster the firm’s debt and structured finance team’s presence in the Southeast region.)

“The site is undoubtedly one of the last remaining development opportunities of comparable scale in all of Brickell,” Stolly said in a statement. The acquisition, he added, comes “at a critical point in time for South Florida real estate.”

He added that Newmark’s Miami office will also help serve as a “strategic vantage point” for its business across the entire Sun Belt.

“The Southeast, with business and tax-friendly markets like Nashville, Raleigh and Atlanta have become a magnet for the technology and crypto industries,” Matz said. “Many of our clients have figured this out, whether from New York or California. Now South Florida has raised that bar.”—A.C.

COMMERCIALOBSERVER.COM | JANUARY 18, 2022 | 11

FINANCE

ChartFinance Distress in Office Sector Continues While Lodging Sector Improves “CRED iQ monitors distressed rates — DQ + SS percent— and market performance for nearly 400 metropolitan statistical (MSAs) across the U.S., covering over $900 billion in outstanding commercial real estate debt,” wrote Marc McDevitt, a senior managing director at CRED iQ. “Distressed rates for the current month and month-over-month changes are presented below, by property type, for some of the 50 largest markets.

This month, distress in the office sector became more apparent, accounting for four of the 10 largest percentage increases in distress by market sector. Conversely, the hotel and lodging sectors continue to exhibit improvement — nine of the 10 biggest improvements by market-sector distress were for retail or lodging.

“The Chicago market exhibited notable increases in distress this month, which was largely caused by the transfer of two loans to special servicing. The $100 million 135 South LaSalle loan transferred to special servicing due to insufficient cash flow following the departure of Bank of America from the collateral

property at lease expiration in July 2021. The collateral is a 44-story, 1.3 million-square-foot office tower, but is classified by servicer data as mixed-use (other) due to a ground-floor retail component. Additionally, the $240 million 181 West Madison loan transferred to special servicing this month due to the bankruptcy of the sponsor, HNA Group. The collateral is a 50-story office tower located in the Central Loop of the Chicago Central Business District. This is the second consecutive month that the Chicago office sector has appeared as a market with one of the 10 largest month-overmonth increases in distress.

“The Raleigh office market exhibited the second greatest month-over-month increase in distress following the delinquency of the $20.8 million Brier Creek Corporate Center I & II loan. Occupancy at the collateral property declined to 24 percent after its largest tenant, biopharmaceutical company UCB, vacated at lease expiration in March 2021.

“The top five distressed markets remained

unchanged from the prior month. The Minneapolis MSA has the highest overall distressed rate at 23.1 percent. New Orleans (15.28 percent), Louisville (14.19 percent), Cleveland (11.76 percent), and Milwaukee (10.98 percent) round out the list of markets with the highest rates of distress. Following an increase in distress within the Allentown, Penn., MSA, Sacramento (0.54 percent) now has a firm position as the market with the lowest percentage of distress among the Top 50 MSAs. “Overall, most individual CRE markets have exhibited improvements in the rates of distressed properties over the past year. Nine of the top 10 distressed markets have shown improvement over the trailing 12 months. Minneapolis, with the highest level of distress, exhibited nearly a 13 percent improvement in 2021 when its distressed rate declined by 3.4 percent from 26.5 percent in December 2020 to 23.1 percent in December 2021. Of the top 10 distressed markets, only Milwaukee’s distressed rate increased during 2021.”

Source

Top 10 Distressed CRE Markets (Percentage of loans that are delinquent or in special servicing)

12 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

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COVER

By Cathy Cunningham | Photographs by Sasha Maslov

Andrew Staniforth and MaryAnne Gilmartin at SHoP Architects’ offices.

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Andrew Staniforth and MaryAnne Gilmartin first saw the potential for modular construction in Brooklyn years ago. Now, Staniforth, as CEO of Assembly OSM, is taking it to new heights coast to coast.

Assembly (n): A group gathered together in one place for a common purpose. f there’s one thing the past two years have taught us, it’s that just because things were done in a certain way for a long time, it doesn’t necessarily mean the old way was the right way.

The commercial real estate industry has been a sometimes reluctant beneficiary of change and innovation. But, one firm is pushing the boundaries when it comes to an ageold process that was previously, quite literally, set in stone.

Modular construction startup Assembly OSM was founded by Chris Sharples and Bill Sharples, two of the founders of SHoP Architects, in 2019. While the Sharples brothers continue to oversee the company’s strategic direction, Andrew Staniforth took the reins as CEO late last year.

Its mission is clear: Assembly aims to turn the preconceived notion of modular construction on its head through the delivery of architecturally beautiful, high-rise buildings that are greener, cheaper and faster to construct.

The new modular Think of modular construction and what comes to mind may be stock Lego pieces, put together in an impersonal manner. Right?

Wrong. Just ask MaryAnne Gilmartin, who serves as an adviser to Assembly.

“We don’t want to make people think about prisons and dormitories when we think modular,” Gilmartin, the founder and CEO of MAG Partners, said. “We want to go back to [architect, inventor and futurist] Buckminster Fuller, and recognize that when you have controlled environments, you can deliver unbelievable beauty.

Utilizing the technical know-how of former engineers from the automotive and aeronautics industries, Assembly utilizes cutting-edge technology in every step of its building delivery process, from digital twin manufacturing models — or, real-time virtual representations of the physical construction process — through to eventual on-site installation Sustainability is a crucial part of its business plan. On the construction front, its

buildings have 30 to 40 percent less embodied carbon and a reduction of 60 to 70 percent of on-site emissions. Assembly has also designed its properties to be upgradable and disassembled as markets change, or at the end of their useful life. Further, drawing from a preapproved supply chain allows developers to track the sustainability of each product.

“We feel that attacking this problem from all angles is the only way we will be successful at moving the industry forward,” Staniforth said.

In addition to its eco-friendly approach, Gilmartin said the key void Assembly is filling today centers around innovation.

“It’s a connect-the-dots void,” she said. “As developers, we accept the fact that the way we do things is inherently inefficient, and there has to be a better way. What Assembly is doing is pushing the bounds of that conversation to a place of saying, ‘We can do it better, we can deliver it cheaper, and we can make it beautiful.’ I don’t think that trifecta has been demystified by the development and building community, and I actually don’t think there are many competitors trying to solve that same problem.”

The apartment As this article was going to press, Staniforth was focused on getting Assembly’s first deal locked down, a 130,000-square-foot multifamily building in Manhattan. Details on the property are still under wraps but — to give eager eyes a taste of what automated architecture can look like — the company put a prototype of a completed one-bedroom unit on display in Harrison, N.J., in late October 2021.

“We’re at a point where what Bill and Chris have built over the last three years at Assembly is now ready to release into the world,” Staniforth said. “Over the last few weeks, we’ve had people come out to our facility in Harrison and see our first units being built. MaryAnne was one of them, and I jokingly said we need one of those roller-coaster flashes that go off when you walk into the unit because everyone’s reaction is, ‘This is amazing,’ because the preconceived notions of modular and prefab just aren’t applicable to that first unit — at all.”

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Gilmartin described the apartment as “stunningly beautiful.” She added: “What hit me was the absolute upgrade in every way to the original thought of a ‘modular unit.’ It has evolved significantly in its application to high-end, luxury condominiums, and you can now produce that luxury look and feel at a price point that allows renters at all price points to experience a level of luxury. That’s very, very difficult to achieve presently in construction.”

Assembly buildings are delivered in about half the time and allow developers to reduce both interest and carrying costs, and hold less contingencies, all of which result in an overall less expensive building. Thanks to the cutting-edge technology utilized in their prefabrication, Assembly buildings are also higher quality and more sustainable, making it a win-win for both the developer and the end user.

Technology is the backbone of Assembly, and the company has added engineers from Boeing, SpaceX and Tesla to its team, including Boeing’s former chief technology officer, John Tracy.

Those engineers know how the advanced manufacturing industry has operated most efficiently within the aeronautics and automotive industries, and have helped Assembly implement two fundamental concepts applicable to real estate construction: a single source of product information (or digital twin) and a widely distributed supply chain, where subcomponents — for example bathrooms and kitchens — are manufactured by different suppliers across the country and are ready to roll without delays when it comes time to deliver the building.

Bringing all of these capabilities together, Assembly has also built its own software and combined it with products like Catia, used for computer-aided engineering, and 3D technology so that custom-made buildings can be digitally modeled and manufactured like cars and airplanes have been for decades.

As a developer, “My end of the business is never really going to be on the forefront of innovation,” Gilmartin said. “I think that in some ways this discussion around modular and process innovation and delivering quality in a more efficient way is like a war cry for

intelligence in real estate.”

And those who understand the true benefits of that intelligence are the ones who’ve been watching the construction space for a very long time, Gilmartin said.

It started deep in the Forest Modular construction isn’t a new concept to Gilmartin or Staniforth. In fact, the construction of Brooklyn’s Pacific Park, which included Barclays Center as well as the erection of a high-rise modular tower, was a bonding moment for the two at Forest City when the young Staniforth joined the firm as an intern in 2011, his first job out of the University of Pennsylvania.

On Staniforth’s very first day, Gilmartin handed him a set of plans for Tower B2, now known as 461 Dean Street, the first modular tower next to the arena, and said, “We’re trying to figure this out. Can you take a look at it?” He’d never received a set of plans, let alone looked at anything like it.

“I think that the baptism by fire that we had at Forest City really allowed me to be involved in things that most 20 year olds wouldn’t have exposure to,” he said.

Staniforth wasn’t the only one thrown into the deep end when it came to the project, though.

“None of us had ever built an arena before,” Gilmartin said. “It was about getting the best and the brightest people around the table, including the architects, and figuring out how to do this in a way that was different and lasting. Andrew was a big part of that. The arena process confirmed that he’s a superstar, and then he just needed additional time and exposure.”

Gilmartin described herself as an “episodic mentor” in Staniforth’s career since then, available for counsel when big moments or career opportunities have come his way. Or, from Staniforth’s perspective, “at every pivotal moment.”

A pull toward technology and innovation during his time at Forest City presaged his next move — to urban infrastructure, planning and innovation firm Sidewalk Labs (a subsidiary of Google) — and, after Gilmartin created L&L Mag in 2017, she brought Staniforth over there, where he

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COVER

began working on Terminal Warehouse, the firm’s reimagined former shipping warehouse in West Chelsea. (It should be noted that while Staniforth was working on that project, Commercial Observer named him to its Top Young Professionals in commercial real estate list.)

Staniforth credited Gilmartin with steering him to the places that held learning opportunities. “Sidewalk was a big shift,” he said. “But MaryAnne has always been this force of, ‘Find things that challenge you professionally, and find where you can add value to the industry, to the company, to the ecosystem,’ and for the past 10 years, that’s the way I’ve approached everything.”

Looking back in the context of what Staniforth is now doing at Assembly, Gilmartin described their Forest City modular accomplishments as “important, but not enough. We demonstrated that a building could stand up if 60-plus percent of it was built in a factory — and that’s not an insignificant contribution. What’s now been taken to a much more sophisticated level, is that you can build modules and not sacrifice aesthetics and architecture.

It’s a new dawn Staniforth’s new role requires many problem-solving skills in an industry resistant to change.

“Understanding the benefits that stem from changing the way that we build buildings — for more affordable housing, and all of the benefits of having a much broader, inclusive workforce who participate in construction — and then being able to keep those benefits at the forefront as you do something that changes the way that stuff has happened for generations is a very clarifying process in terms of what I have to focus on,” he said.

As CEO, his first task was setting a very clear and concrete internal mission at the company. “Once you establish that North Star of values, everything centers around that,” he said.

One of his core leadership philosophies is being transparent with both his team and the broader real estate community to drive home the things for which Assembly stands.

Cultivating a diverse and inclusive workforce at every stage of the construction process is one prime example.

“Transparency empowers people to make decisions, and I’m transparent about needing to have a more inclusive workforce and pull different pockets of populations into the construction field, because they’ve been traditionally cut out,” he said. “It’s really important to codify that internally, and then everyone, as they analyze the decisions in their own day, consent around that, and my leadership team doesn’t have to be involved in those decisions. Everyone knows what we’re optimizing for. And that’s part of what I’ve been doing over the past six weeks — getting those concepts just on the table and talking about them very openly.”

One of the big exercises as Assembly grows 16 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

GO STANIFORTH AND PROSPER: Long gone are the days of boring or impersonal modular construction. Assembly OSM is delivering technologically advanced, aesthetically pleasing high-rise buildings that are faster to build, less costly and more sustainable than ever before. the team is hiring people that match its values and its mission, and can help it continue to achieve those goals.

Time is money Developers may take some convincing along the way, but Gilmartin is confident the argument for modular is ready to be made.

“It’s a case of trust and verify in doing these early projects and taking a group of doubting Thomases and converting them,” she said.

“You don’t have to be on the higher plane in the world of developers, you can actually be a bit of a lunkhead — and I say that affectionately. As developers we want to get the job done, and make money.”

The benefits should be easy enough for the lunkheads to grasp: Assembly’s building delivery methodology eliminates the potential for human error, shortens project timelines and removes the guesswork from construction costs, thanks to the prefabricated advance pipeline of materials involved.

“We all know that there’s a dire need for housing, and the market is there for it. But as a developer, you don’t know what it’s going

to cost,” Gilmartin said. “The innovation that Andrew is working on is going to allow us to be much more certain about cost and time. Time is money and there are so many things that can go wrong when there’s a bigger human factor involved. And I think that this idea that Andrew is going to use the automotive industry and the aeronautics industry to do a better job of delivering for the built environment is something that’s just next level, and beyond anything we were thinking about when we built B2 as a modular building.”

What’s also key — perhaps especially in New York, where buildings’ outward appearances’ are judged like dogs at Crufts — is that design aesthetics won’t be sacrificed along the way.

“The ethos of our company comes from ShoP. And design is so important,” Staniforth said. “At the end of the day, people want to live in places that are beautiful and safe and healthy. When you put that at the forefront of how you approach a manufactured product, you get around some of the preconceived challenges of modular and prefabricated work.”

Breaking down those walls — no pun intended — the company is already in

conversations with several of the industry’s starchitects.

“COOKFOX or Norman Foster will be able to design an Assembly building,” Staniforth said, adding that beauty will be one thing that differentiates his firm from others in the modular space. “You don’t have to pick out a building from an assembly line. On the back end, we’ll make it super efficient to execute.

But on the front end, it’s going to look beautiful and custom-made with your architect’s stamp on it.”

Staniforth expects Assembly to complete three deals in the next year, likely in New York City and California, where the company has already completed a lot of the pre-approval processes and is ready to rock.

“We started at Forest City with an idea, and it was a hairy, crazy idea that was a jumpstart on this whole idea of doing things better, faster and more progressively in the built environment,” Gilmartin said. “For me, it’s deeply gratifying to see that very early idea turned into something as sophisticated and as promising as what Assembly has put together today.”

Well, that’s pretty OSM.

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— M1-5 zoning allows for life science and light manufacturing use — Tenant discounted access to extensive amenity and fitness center at Mercedes Club at nearby building

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MARY ANN TIGHE

CEO, Tri-State Region 212-984-8128 MaryAnn.Tighe@cbre.com

DAVID STOCKEL

Senior Vice President 212-984-6606 David.Stockel@cbre.com

BRETT SHANNON

First Vice President 212-984-8188 Brett.Shannon@cbre.com

ARKADY SMOLYANSKY

Senior Vice President 212-984-8355 Arkady.Smolyansky@cbre.com

REEVES MCCALL

Senior Associate 212-984-7103 Reeves.McCall@cbre.com

ADAM D. WEISSLEDER

Senior VP/ Director of Leasing 212-337-7763 aweissleder@merprop.com

AMY FABIAN

Vice President / Leasing 212-337-7775 afabian@merprop.com

2ND — 14,035 RSF

LEASED

(12’1” H)

LEASED MAIN LOBBY

MAUREEN PESCATORE

Leasing + Marketing Coordinator 212-337-7755 mpescatore@merprop.com

LOBBY

5O,OOO RSF FULL-FLOORS AVAILABLE

WEST 57TH STREET

It’s everyone’s business to be here.

Space to prove your hypothesis.

OFFICE SPACE — Architecturally-distinct features that include above-standard ceiling heights, mushroom columns, and oversized windows — Live load capacity of 120 lbs. per SF — Zoning that allows for industrial / manufacturing use — Exceptional column spacing: West Building

East Building

• 22'4" north to south

• 19'9" north to south

• 20' east to west

• 18'8" east to west

— Above-standard ceiling heights: West Building

East Building

• 2–6 Floors: 12'1"

• 4–6 Floors: 12'1"

• 1st Floor: 13'7"

• 2nd Floor: 13'9" • 1st Floor: 15'10"

LIFE SCIENCE SPACE — M1-5 zoning allows for life science and light manufacturing use

— Above-standard freight capacity with multiple cars

— Roof space available for tenant equipment

— 10+ watts per SF of electrical capacity

— 200KW generator available for tenant use, with potential additional capacity available

It’s everyone’s business to be here.

Space to prove your hypothesis.

OFFICE SPACE — Architecturally-distinct features that include above-standard ceiling heights, mushroom columns, and oversized windows — Live load capacity of 120 lbs. per SF — Zoning that allows for industrial / manufacturing use — Exceptional column spacing: West Building

East Building

• 22'4" north to south

• 19'9" north to south

• 20' east to west

• 18'8" east to west

— Above-standard ceiling heights: West Building

East Building

• 2–6 Floors: 12'1"

• 4–6 Floors: 12'1"

• 1st Floor: 13'7"

• 2nd Floor: 13'9" • 1st Floor: 15'10"

LIFE SCIENCE SPACE — M1-5 zoning allows for life science and light manufacturing use

— Above-standard freight capacity with multiple cars

— Roof space available for tenant equipment

— 10+ watts per SF of electrical capacity

— 200KW generator available for tenant use, with potential additional capacity available

58TH STREET UP

DN

DN

LAB STATION

LIFE SCIENCE SPACE 6TH FLOOR TEST FIT

UP

WEST 58TH STREET UP DN

LAB 2

OV. HD. GAR. DR.

UP

CONSUMABLES

SHIPPING AND RECEIVING

STORAGE RAMP UP

GAS/TANK STORAGE

DN

UP

LAB STORAGE

CHEMICAL STORAGE

BIO WASTE STORAGE

WORKSCAPE

MEN

WASTE STORAGE

BENCHING

CHIMNEY

WOMEN

CORE RESTROOM

GLASSWASH

ICE

BOILER ROOM (BELOW)

LAB STORAGE

COLLABORATIVE SPACE

176

LAB SUPPORT

CONFERENCE/MEETING

Wide open for your big plans.

9

1O

CORE RESTROOM

MECH ROOM

COLD ROOM

SEATS

OFFICES

3

GW UP

OFFICE AREA

LAB AREA

CUBICLES

MECH ROOM

123

MECH ROOM

DOCUMENT STORAGE

MECH ROOM

MECH ROOM MECH ROOM

RAMP UP

LAB 1

MEN

SERVER ROOM

— Full floors of 50,000 RSF each

WOMEN CORE RESTROOM ADA

STORAGE

— New lobby designed by Dan Shannon and MdeAS

UP CORE WOMEN RESTROOM

MECH ROOM

KITCHEN

UP DN

DN

UP

— Three lobbies (two on 57th street and one on 58th street)

CORE

UP DN RESTROOM UP

DN

TENANT SECURIT Y

DN

UP

STORAGE UP

57TH STREET UP

DN

EL. CL.

UP UP

UP

FILL IN SLAP OPENING

ELECT ROOM WATER METER ROOM

UP DN

UP

OV. HD. GAR. DR.

LOBBY

UP

RAMP UP

58TH STREET

WEST 57TH STREET UP

DN

DN

UP

— M1-5 zoning allows for life science and light manufacturing use — Tenant discounted access to extensive amenity and fitness center at Mercedes Club at nearby building

— Two drive-in freight elevators on 57th street with access to all floors

MORE INFO 525 W 57ST.COM

WEST 58TH STREET COPY AREA

UP DN OV. HD. GAR. DR.

UP

DN STORAGE RAMP UP

UP

MEN

OFFICE SPACE 6TH FLOOR TEST FIT

CHIMNEY

WOMEN STORAGE ROOM CORE RESTROOM

BOILER ROOM (BELOW)

CORE RESTROOM

MECH ROOM

UP

MECH ROOM

MECH ROOM

WORKSCAPE

SEATS

COLLABORATIVE SPACE MECH ROOM

BENCHING

279

CONFERENCE ROOMS

CAFE

7

MECH ROOM MECH ROOM

RECEPTION TOTAL HEADCOUNT

1 28O

BOARD ROOM

1

COLLABORATION AREAS 21

RAMP UP

MEN IT ROOM

ELECTRIC

WOMEN CORE RESTROOM ADA

WEST BUILDING

WOMEN

CORE RESTROOM

COFFEE BAR

WELLNESS

MECH ROOM

(12’1” H)

UP

DN

DN

UP

UP COREDN

RESTROOM

UP

EAST BUILDING

6TH — 36,040 RSF

6TH — 13,985 RSF

DN

DN

TENANT SECURIT Y

UP

(12’1” H)

CONTIGUOUS BLOCK – 86,348 RSF LEASED

5TH — 36,323 RSF (12’1” H)

STORAGE UP

57TH STREET UP

DN

EL. CL.

UP FILL IN SLAP OPENING

UP

UP

ELECT ROOM UP UP

DN

WATER METER ROOM

OV. HD. GAR. DR.

LOBBY

UP

4TH — 14,070 RSF

LEASED

(12’1” H)

RAMP UP

LEASED

WEST 57TH STREET

MARY ANN TIGHE

CEO, Tri-State Region 212-984-8128 MaryAnn.Tighe@cbre.com

DAVID STOCKEL

Senior Vice President 212-984-6606 David.Stockel@cbre.com

BRETT SHANNON

First Vice President 212-984-8188 Brett.Shannon@cbre.com

ARKADY SMOLYANSKY

Senior Vice President 212-984-8355 Arkady.Smolyansky@cbre.com

REEVES MCCALL

Senior Associate 212-984-7103 Reeves.McCall@cbre.com

ADAM D. WEISSLEDER

Senior VP/ Director of Leasing 212-337-7763 aweissleder@merprop.com

AMY FABIAN

Vice President / Leasing 212-337-7775 afabian@merprop.com

2ND — 14,035 RSF

LEASED

(12’1” H)

LEASED MAIN LOBBY

MAUREEN PESCATORE

Leasing + Marketing Coordinator 212-337-7755 mpescatore@merprop.com

LOBBY

5O,OOO RSF FULL-FLOORS AVAILABLE

WEST 57TH STREET

THE SIT-DOWN

Bo Knows DC

Developer Bo Menkiti sees potential in workforce housing and opportunity zones in the nation’s capital as well as just outside of Boston

By Andrew Coen Menkiti, founder and CEO of Washington, D.C.-based Menkiti Group, credits much of his success as a commercial real estate developer to his days as a two-sport college athlete at Harvard University.

Menkiti, who played hockey and baseball for the Ivy League school in the late 1990s, said life lessons from both sports propelled his work ethic into the business world. He was part of a Harvard baseball team that reached three straight NCAA Tournaments, but said his experience on the ice as a goaltender for the The Harvard Crimson served as especially valuable preparation for life as a real estate executive.

“Being a goalie in hockey is similar to leading a business in that you’re the last line of defense, but a goalie can never win the game,” Menkiti said. “You’re in this position where you can try and back people up and make sure everybody’s okay, but, ultimately, you’re counting on your team to win the day.”

The Menkiti Group has developed more than 2 million square feet and manages 1.5 million square feet of assets in D.C. and Worcester, Mass. The firm has invested more than $225 million, including $185 million in

emerging neighborhoods throughout the nation’s capital, according to the company.

Some of Menkiti’s chief projects include the 788,000-square-foot Bond Bread Factory development near Howard University and the two-phase MLK Gateway designed to revitalize D.C’s Anacostia neighborhood.

Menkiti, a Somerville, Mass., native, spoke to Commercial Observer about the impetus behind launching his real estate firm, efforts to strengthen underserved neighborhoods, and the role opportunity zone equity can play in financing future developments.

His comments have been edited for clarity and length.

Commercial Observer: What was the impetus behind founding your own firm and have you always had that entrepreneurial spirit?

Bo Menkiti: I think I always had an entrepreneurial spirit. In college I ran a cleaning business and that’s how I paid my way through college. I was a bartender, and then I ran a nonprofit for a summer program for college students in these housing developments in Boston and this is where I first really saw the power of the built environment and the way people live.

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I hired 15 college students to go live in the Mission Main housing development in Boston and run a summer program for kids. At that time this housing development was like 30 percent occupied and it was totally deteriorating. It was the first time experiencing how challenging the physical space was.

You previously told CO that your turn to real estate came when you were working at the nonprofit College Summit, and your elderly neighbor in Columbia Heights died.

How did that change things for you?

It got me thinking that I thought I was changing the world and I wasn’t even present for the person on the other side of my little flimsy row house wall.

I started looking around, saying, “Well, what kind of impact could you have in the place where you’re living? What could this neighborhood use?” I said, “There’s a bunch of vacant houses and I should fix them up.”

I didn’t know anything about real estate and I said, “I’m going to get a real estate license,” because somehow in my mind that was going to teach you how to fix houses, which it doesn’t [laughs].

I ended up selling six houses during this really brief time and I said, “Wow, you could

COMMERCIALOBSERVER.COM | JANUARY 18, 2022 | 21

THE SIT-DOWN

Certainly one project that is going to have a major impact in a largely underserved area of D.C. is your MLK Gateway project, for which you just launched the second phase. Speak about the significance of this development and also the role that the public sector has played in bringing it to fruition.

Our macro investment philosophy and strategy has been that you want to focus on cities that have strong macroeconomic and demographic fundamentals and D.C. obviously does. Within those cities you want to look for neighborhoods that are on the other side of perception, on the other side of some metaphorical dividing line.

And, if you think about historically in this country, the way infrastructure and physical space has been used, it oftentimes divides people, a lot of times based on race or

‘What you’re seeing is the traditional institutional money looking for ways that it can morph and it can reach different pockets.’ class. In this case, with D.C., we’ve always had east of the Anacostia River, and for the longest time we’ve had concentrated poverty and lack of economic opportunities.

Anacostia is a neighborhood that had really come to represent everything that was forgotten east of the river and people that had not been invested in. This opportunity to create both a physical gateway and a mental gateway to this neighborhood was really important.

Tell me more about how the project came to be.

I met a guy named Antoine Ford, who owned a cybersecurity company called Enlightened, and he had actually grown up in Carver Terrace, a housing project in D.C. and had gone on to have a very, very successful career. We were talking one night and he was telling me how he wants to make a difference in the city. And I said, “Well, you know, if you really care about that why don’t you move from your downtown on Connecticut and K Street and move your offices to Anacostia and make a difference?” I got him looped into the project and put together a vision for MLK Gateway I. Then we were able to acquire some adjacent properties and some things across the street, and that gave us the opportunity for MLK II. MLK I has a new headquarters for Enlightened. The second phase of it is going to have the new headquarters for the D.C. Department of Housing and Community Development.

The mayor has had a very intentional strategy of locating 22 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

some of the agencies east of the river as economic drivers and that’s going to be a big piece of the second phase, which is under construction. We also acquired a small strip center near it, and put a new barbecue restaurant in there and a dental clinic; and have built something called the Anacostia House, which will be launching soon and is a small, nonprofit and small business kind of incubator space that was built all by people in the community.

You used some opportunity zone equity for this project. Is this a tool you think that can be viable for commercial real estate going forward?

The opportunity zone program has often been used for its tax advantages, but it provides a tremendous opportunity to focus capital on areas and on projects that might not normally be focused on. Both MLK I and MLK II have extremely complex financing. There are at least four layers in the capital stack. They have new market tax credits.

There’s opportunity zone equity. There’s this neighborhood prosperity fund, which is basically a grant program from the district for some of the retail tenants, and then there’s traditional debt.

In this case, opportunity zone equity was able to play a really catalytic role in filling a gap and ensuring that over time you could get private capital. MLK I was one of the first projects in the country to use new market tax credits and opportunity zones and municipal funding. I think it really can be a demonstration of the potential of how the opportunity zone program can be used in highly impactful projects. And, for MLK II, leveraging the district lease as a catalyst opportunity and equity was really helpful. There are also new market tax credits in that deal.

These are very challenging deals to put together.

There’s a lot more opportunity zone equity in the second phase of the project because you can then leverage the district lease to create this longer-term vision of the return for your investors.

Another big project of yours is the Bond Bread Factory development near Howard University. Talk about the importance of this project and its potential for linking the neighborhood more to a very vibrant university.

Bond Bread is just a really cool project because it has such a connection to history. Without spending half your time on our history lesson, it’s in the Shaw neighborhood, which was named after Colonel Robert Gould Shaw, who was the commander of the 54th Massachusetts, which was the first African-American Army regiment.

If you think about the history of U Street, when the district implemented racial codes and sundown laws in the Jim Crow area, they forced all the Black businesses to locate around Howard University because it was the only safe place for them to locate. It was the relocation of middle-class African-American people and businesses to U Street that created the conditions and the vibrant culture that later created U Street, sort of this Black Broadway. It was where Duke Ellington and jazz and Howard Theater sort of came from. And so this was an example in history of Howard University playing an integral role in the surroundings to facilitate how things develop.

Over the past few years, U Street has become one of the hottest young, professional, yuppie places to live. So you have this really interesting intersection of this very old, local neighborhood, a starkly Black institution, and a very highly gentrifying community all coming together.

Bringing together all those people and creating a place where they can interact and engage one another and enjoy what’s a great neighborhood becomes really a great opportunity and challenge of a project like this. So we’re really honored that Howard selected us to take the lead on this project.

COURTESY OF MENKITI GROUP

make a lot of money from brokerage and you could take that cash and reinvest it in these neighborhoods and you can make a difference.” And so that’s kind of how it started with this idea that you could connect the activity of brokerage and the cash generation of that with investing in and making an impact in neighborhoods.

Bo Menkiti.

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FEATURE

You’re involved with a number of neighborhood redevelopment projects in the D.C. region. For these developments to be successful, how important is it for local leaders to try and boost the region’s affordable housing stock?

From a policy standpoint the City Council has been very aggressive, as has our mayor in trying to find ways to fund affordable housing. We know we have a significant affordable housing crisis in our city, but the challenge is that a lot of the policy is really focused at the bottom level of the housing spectrum.

I always say that D.C. has ended up with a barbell housing market. You can live in D.C if you are qualified for varying deeply affordable housing, or if you’re really, really wealthy; and that’s actually not good for the long-term health of the city. In the name of preventing people from being displaced, we basically displaced all the working people and the middle class from D.C. I think there’s a huge opportunity in our region for workforce housing and this will be people making 60 percent to 120 percent of area median income. That’s sort of been overlooked, and things have been put in place to kind of disincentivize the creation of that type of housing.

Let’s turn from D.C. to another city you’re very active in, Worcester, Mass. First off, how did you first start getting involved with Worcester and also speak about some of the real estate opportunities there, given its close proximity to Boston while also having a big college presence?

Worcester has such potential, but it’s always been kind of like the ugly stepchild of Boston and so it has this gritty, sort of like, pride to it that is really cool.

We got involved with Worcester because my late father bought a building there and so I came up there and got to know the people in Worcester. Later, the economic development team from Worcester came to D.C. for a conference and we showed them some stuff we were doing and they said, “Wow, this is what we need.” They had long had a plan for this neighborhood called the theater district, the area around Hanover Theatre, which is one of the top theaters in America. It has a quarter of a million people go through it every year. It’s lit 200 nights a year. We bought a half-million square feet right around this little area, so we’ve been very dedicated to that.

We believe that the macroeconomic conditions and demographic conditions in Worcester are very strong and that there are these pockets of neighborhoods where thoughtful and focused investment in the capital and good development can create a sense of place and space that can empower and build off the great things that Worcester has.

Lastly, how do you see the commercial real estate environment shaping up in 2022 and where are the biggest opportunities?

Looking at 2022, it’s going to be an interesting time.

You’ll start to see further evolution around how the pandemic has affected the different elements of our industry.

I think we’re going to see increasing calls for diversity and youth in the industry and how it evolves.

And it’s very flush right now; there’s a lot of capital seeking deals, but it’s in very structured ways. I think what you’re seeing is the traditional institutional money looking for ways that it can morph and it can reach different pockets. And the reality is that there’s value in a lot of these neighborhoods that are right under our noses in our major cities. If we can figure out how to unlock that value, that becomes a priority from a financial standpoint for investors, but also on a social standpoint for communities and for industry, and that’s where we like to play.

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COMMERCIALOBSERVER.COM | JANUARY 18, 2022 | 23

FEATURE

Proptech is decidedly unimpressed by the metaverse’s real estate prospects. That doesn’t mean it’s staying away.

By Philip Russo | Illustration by André da Loba

o be or not to be. That seems to be the question facing the proptech industry regarding real estate in the metaverse.

And the answer so far seems to be, by and large: not.

“In terms of virtual land, it’s very speculative right now because the companies that are selling and kind of transacting don’t have really anything engaging,” said Bryan Colin, co-founder and CEO of View Labs, a provider of video and digital technologies that combine real, mixed-reality and digital worlds for real estate. “It’s kind of like we’re selling some space in a world that will be developed, hopefully will build this type of engagement, and people will come back and buy it.”

The problem, Colin added, is that such metaverse “property” only has speculators buying in the hope of reselling at a higher price.

“There’s not really a way to monetize it elsewhere because 24 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

there’s not people spending any money on it,” he said, contrasting the trend with cryptocurrencies like Ethereum and Bitcoin, which have developed into national currencies or investment platforms upon which businesses are being built.

As of today, real estate in the metaverse is a classic “fake-ittil-you-make-it” technology meme, a virtual world without real people or objects, purpose or profit, that may or may not imitate real life. It’s also capable of exaggerating reality through the creation of 5,000-foot towers and endless properties to be developed, and it’s inhabited by who knows who and for who knows what ultimate purpose.

Of course, some investment advisers are ready to tout a gold rush to metaverse real estate speculation as the next big thing in 2022, asking investors to bet on blockchain and cryptocurrency platforms to support virtual worlds of property transactions.

However, is there even agreement on what the metaverse is, let alone what its application is, if any, in real estate and

proptech? Like the early days of the internet when it was capitalized as “Internet,” the “metaverse” is today sometimes given the uppercase first letter, perhaps to signal its uniqueness, newness and to add gravitas.

Doubts surround it, though, whomever its fans and whatever its capitalization.

“But real estate investing in the metaverse still is highly speculative, and no one knows for sure whether this boom is the next big thing or the next big bubble,” as The New York Times put it in November 2021.

The Wall Street Journal joined the conversation last week with a video that attempted to explain the value of real estate in the metaverse.

In another attempt to link property to the metaverse, Christopher Mitchell, CEO and co-founder of proptech company Geopipe, which bills itself as “the authoritative wholeEarth digital twin, built by AI,” last year wrote a blog post on the symbiosis between the actual digital twinning of real estate

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FEATURE

and its applications in the metaverse. While aptly describing the technological depth and potential of the metaverse, the blog post did not address how value would be realistically created and grow in such a virtual environment.

Indeed, though, even finding a useful definition of the metaverse can be challenging.

For instance, Tony Parisi, a self-identified “Metaverse OG, entrepreneur and investor,” has attempted to define the metaverse in his Seven Rules of the Metaverse: Rule #1. There is only one Metaverse.

Rule #2: The Metaverse is for everyone.

Rule #3: Nobody controls the Metaverse.

Rule #4: The Metaverse is open.

Rule #5: The Metaverse is hardware-independent.

Rule #6: The Metaverse is a Network.

Rule #7: The Metaverse is the Internet.

Everything clear now?

Closer to real estate’s reality, James Dearsley, proptech expert and co-founder of Unissu, a U.K.-based global proptech community and procurement services website, offered these written thoughts on the subject to Commercial Observer: “Is the metaverse a fad?” Dearsley asked rhetorically. “Yes. Are you late to the party? No. It is just about to get going. This

trend isn’t going to be for everyone. Most in our industry won’t have a clue. They may wake up to this ‘trend’ in a few years, when their kids or grandkids tell them about these virtual worlds. They will be too late.”

However, Dearsley points to already existing, non-real estate-centric metaverse sites on which, he said, “Deals are already being done and where we are seeing a new asset class being established that will be completely decentralized in terms of transactions and market forces.

“With virtual HQs and digital showrooms already being built on metaverse platforms like Decentraland and Cryptovoxels, a market will be established for brokering deals,” Dearsley said.

At this time, existing real estate industry personnel such as agents, brokers and appraisers are not qualified to support such endeavors, but such platforms are, “a demonstration of how new technology trends will establish new roles, perhaps including ‘Virtual Land Broker,’ ‘Meta Property Consultant’ and the like,” said Dearsely. “Given the deals already out there, these might be quite lucrative in coming years. No previous experience needed.”

Bottom line, though, Dearsley said he isn’t actually seeing property transactions of note being done by companies or individuals at this point in time in the metaverse. “Nope. It’s too early,” he concluded.

However, in yet another qualifier to the possible imminency

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and worth of metaverse-based real estate transactions, Dearsley, along with a few proptech experts who declined to comment on the record for this article, said that they were either preparing or considering webinars and other types of discussions for the near future on such possible virtual property market opportunities.

Given such discussions, it might be important to remember a truism in the world of technology startups: It is better to be late with your innovation than to be too early.

View Labs’ Colin is among those keeping this in mind, despite his reservations that it’s too early for property transactions of real worth in the metaverse.

“We are getting involved very shortly,” he said. “Digitizing physical space is something that we’ve done for a long time and it really fits into our vision of what the metaverse should be at a future stage. And certainly the engagement gets me very excited when I look at the numbers from Fortnite and from Roblox, the kind of early generation of what the metaverse looks like. Roblox is getting 49 million unique daily users a day.

“These are substantial numbers and the younger generation has clearly shown that this is the kind of digital entertainment that they like and they come back to it. I think that leads to a lot of exciting opportunities when you have really good content alongside it.”

COMMERCIALOBSERVER.COM | JANUARY 18, 2022 | 25

FEATURE

Sustainability shifts are pushing warehouse developers to plan for a greener future

By Patrick Sisson | Illustration by Giordano Poloni hen Heather Arias looks at the altered landscapes of Southern California’s Inland Empire, a flat stretch of semi-arid scrub and grassland that in recent decades has traded citrus trees and horse farms for expansive constellations of big-box warehouses, she sees an industry that won’t slow down. As the chief of the transportation and toxics division of the California Air Resources Board (CARB), the state’s powerful air quality regulator, she is concerned about the direct impact that bumper-to-bumper truck traffic and massive facilities abutting homes and schools have on the Inland Empire’s communities.

“Why would a consumer care that someone in California is getting huge diesel exposure from trucks and warehouses?” said Arias, whose rules impact a region that handles 40 percent of seaborne imports into the U.S. “They don’t think about it.”

Arias certainly does. She would argue that the success of the warehouse industry and its related parts — what’s normally shorthanded as “the supply chain” — suggests that it’s time to devote resources to make a significant change.

In recent years, CARB and sibling agencies in the state have unrolled a series of regulations, including an Indirect Source Rule forcing large warehouse owners to track their emissions and ultimately pay for the impacts of pollution, as well as the Advanced Clean Truck and forthcoming Clean Fleets rules that would push the shipping industry towards electrified freight transportation, part of what Arias calls a system-wide effort to green everything from warehouses and trucks to ports and shipping.

Arias simply says the goal is a sustainable and safe industry, cutting the dangerous nitrogen oxide and particulate emissions that overwhelmingly come from the tailpipes of trucks. She has a straightforward message for transportation, logistics and warehouse operations.

“The writing is on the wall; we’re going to zero emissions,” Arias said. “Plan ahead.”

The growing regulatory and social pressures to rein in emissions, exemplified by 26 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

CARB’s actions in the nation’s busiest port and warehouse market, are just two aspects of the renewed attention being paid to the fast-evolving supply chain. It’s frankly been hard to ignore. Despite the impacts of the pandemic, warehouse and industrial real estate has multiplied at a nearly improbable clip.

In 2021 alone, more than 532 million square feet of warehouse space was absorbed nationwide, 568 million square feet was under development and vacancy still declined, according to Cushman & Wakefield, hitting 3.7 percent, a new record high. Billions of dollars are flowing to new startups claiming to unsnarl the shipping industry, and even mundane assets such as trucking terminals are receiving new investor interest. Available capacity has declined in 20 of the last 22 months, per Zac Rogers, a Colorado State University assistant professor of supply chain management who tracks the industry.

Logistics operators simply have no place to put the cascading river of stuff flowing to and from warehouses.

Nationwide, “e-commerce represented 14 percent of retail sales last year, and will hit 25 percent in the mid-2020s,” Rogers said.

“There’s just no possibility of overbuilding to keep up with the demand. We’ll continue to see huge net absorption, and the hole we’re in will require years of big deliveries to close.”

Rogers and others see clear economic incentives around sustainability steering the industry through its current period of record growth. Ever-faster delivery guarantees and the emergence of the multibillion-dollar quick-grocery business means warehouse expansion has ramped up in dense urban areas — literally, in the case of a new class of multistory facilities.

LogisticsIQ predicts rapid expansion of so-called micro-fulfillment centers, with their numbers growing roughly 50 percent a year. Not only has this “reversed 50 years of logistics sprawl,” said Dave Mullaney, principal at RMI, an energy and sustainability think tank, but the placing of more smaller facilities near and within cities is highlighting the environmental impact of shipping, and prevents logistics facilities from moving

across municipal and state borders to avoid regulations.

He also pointed to a rush to promote electrification: Amid Biden administration investments in EV charging stations, brands and clients seeking to green their operations to meet environmental, social and governance goals and consumer expectations, and the recent exporting of California’s Advanced Clean Truck rule to five more states, including New York and Washington, the industry is recalibrating how it moves goods, and how warehouses can function as charging centers. Leading brands such as Rivian, Tesla and Daimler AG are developing electrified trucks, and the expansion of the Clean Truck rule may accelerate a pledge to hit 100 percent clean truck sales by 2050.

All of these current and projected shifts in regulation mean that developing without sustainability in mind risks creating stranded assets, or massive facilities that require expensive retrofits in the future.

“If you’re deciding the next truck you’re going to buy, you think about what your client wants,” Mullaney said. “The big question for warehouse operators is, if I want to be a preferred supplier for certain customers, what types of charging equipment and investments should I be making now.”

The shift required for warehouse operators and developers, while coming into focus, isn’t completely clear. A JLL survey of more than 700 global logistics leaders taken last summer found that automation and smart technology are seen as more important and immediately relevant to changes in warehouse design, but the desire to cut costs has made energy efficiency a key goal.

In California, for example, the development of the new World Logistics Center in Moreno Valley, set to be the size of six Pentagons, will include a $47 million investment in electric vehicle tech, solar panels, on-site chargers, and even grants for local residents to purchase air filtration systems, due to a settlement and agreement with local environmental groups.

This megaproject may showcase what development looks like in the era of the Indirect

Source Rule. Iddo Benzeevi, president and CEO of Highland Fairview Properties, which is developing the site, told the local Desert Sun newspaper it would be the most sustainable warehouse in the nation.

Prologis, which boasts nearly 1 billion square feet of space in 19 countries, has been tracking its environmental performance for more than a decade, and already designs around what could be called a futureproofing strategy, making sure new facilities have the right wiring and roof orientation to support vehicle charging and solar panels. The firm’s new Eindhoven DC4 facility in the Netherlands showcases this vision. There, Prologis turned a former waste dump into a

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fully electrified 430,000-square-foot facility that boasts electric heat pumps, vehicle chargers and battery energy storage.

Ethan Gilbert, who leads the firm’s ESG efforts, said Prologis already has initiatives around water conservation, more high-efficiency building facades and material selection all geared towards sustainability. Gilbert views the firm’s moves as being “prepared for the transition,” capturing clients whose own ESG goals push them towards a more sustainable supply chain. He sees the ability to sell Prologis’ network as a big advantage going forward, as long as it’s focused on modernization, including an expected push toward

automation. McKinsey expects the warehouse automation industry to be worth $51 billion annually by 2030.

“What’s the base tech a warehouse will need in the future — smart building concept, thinking about the new ways warehouse space will need data, analytics and sensors, to better perform,” Gilbert said. That also includes additional energy needs, further adding emissions unless warehouses adopt more renewable energy production.

Gregory Healy, the California-based head of Savills industrial service group in North America, sees the same big push for increasing sustainability in industrial real estate coming

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mostly from consumers. He points to REI’s distribution center in Goodyear, Ariz., a net-zero facility, showcasing the pressure felt by the warehouse industry. Brands seeking to court eco-conscious consumers will increasingly place a premium on green shipping. Savills is currently collaborating with Sun Company, an Arizona firm, to develop an off-grid, renewable-powered warehouse outside of Tucson.

“This shift is based a lot on social impact and social media,” Healy said. “Consumers want to be aligned with companies engaged in sustainability.”

There’s a significant upfront expense to creating green warehouses, but Healy sees

operating costs, especially for electrification, bringing great savings over the long run. As trucking standards and overall shipping and logistics industry regulations push for greener transportation, warehouses will be pushed to become key nodes in an emerging sustainable shipping network that will be increasingly attractive to clients and tenants.

“What does a 2022 warehouse network look like, that isn’t tied to infrastructure put up in the ‘80s or ’90s, which couldn’t handle what we’re doing today anyways?” Rogers said.

“This is a chance to rethink, as we expand.”

COMMERCIALOBSERVER.COM | JANUARY 18, 2022 | 27

COLUMNS

TEAM GREEN

With ESG, Commercial Real Estate Needs to Take a Much Broader View To begin that shift, the industry must look Commercial real estate has taken a turn beyond specific ESG goals and data points, toward pursuing a clearer conscience in and take a broader view of the millions of recent years, as everyone from developers small, yet incredibly meaningful decisions and owner-operators to private equity firms made every year about where and what to rush to publish and implement environmenbuild. These choices have a massive influtal, social and governance (ESG) plans. These ence not just on a given building’s success or road maps are increasingly a prerequisite for failure, but on the course of entire investors, who are now demanding neighborhoods and communities. not just profits, but business pracWhether a building houses luxtices that also play a role in mitiury apartments, office space or gating the climate crisis and other a grocery store, it sets the course societal issues. for how its occupants will comAs more firms divulge the mute to and from the sites, move details and early returns of their around for daily errands, get kids ESG plans, it’s becoming increasto school, and perform countless ingly clear that their approach may be too narrowly focused to make a Vincent-Charles Hodder. other functions.

Predicting mobility patterns and truly meaningful difference. engineering outcomes is difficult in any case The industry’s primary short-term focus — even with large-scale infrastructure projappears to be on environmental impact, parects that take decades. Naturally, it presents ticularly the reduction of property-related caran even greater challenge for owners or develbon emissions to net zero. Again and again, opers making much smaller, faster decisions however, the initiatives outlined to reach that at the building level, given their limited access goal focus on systems within the buildings to data and on-the-ground research. The end themselves. This may placate some investors result is that everyday real estate decisions and other audiences for now, but as demand tend to reinforce our already car-dependent, for real reporting and results from these iniemissions-heavy city systems. tiatives grow, CRE players will increasingly Examples abound. Suburban developments need to consider their buildings’ effect on the tend to offer space at the expense of nearby entire neighborhood-based ecosystem.

grocery stores, schools or transit stations.

Large-scale retail locations are often in places that cannot be easily accessed by anything but a car. Employer decisions about office site selection generally neglect the importance of nearby amenities that would allow employees to run household errands from the office hub, displacing trips that might otherwise be done by vehicle.

Accounting for these factors can not only help reduce overall carbon emissions — transportation was the single largest contributor of U.S. greenhouse gas emissions in 2019 — but can fuel the growth of broader, less cardependent urban development. In addition to reducing carbon emissions and other environmental benefits, the design of truly walkable and bike-friendly neighborhoods have broader social impacts, such as eliminating food deserts and increasing proximity to gainful employment.

Calls for adoption of this new concept have grown in recent years. These ideas, however, are still noticeably absent from ESG initiatives being rolled out across all corners of commercial real estate.

This is unsurprising, as most real estate developers researching a given property have no better access to data on nearby transportation and other amenities than what’s offered

on Google Maps, let alone analytics that explore how well a site lives up to the standard of a “15-minute city.” The end result is that, even for developers who search for ways to create sustainable neighborhood and transportation outcomes, it’s hard to know where and what to build.

The demand for more responsible development in commercial real estate appears unlikely to recede. The industry is already experiencing massive demand for new tools that can capably track and analyze building-level energy use and other critical data, and investors — along with retailers, employers, tenants and home buyers — are likely to begin weighing even broader impacts that will need to be measured in kind.

This represents an enormous challenge for the thousands of individual developers, owner-operators and other CRE firms. However, it is one that they will need to rise to meet, and those that are quick to adopt the required technology can take heart that their efforts will not only please their partners and customers, but also help to create a better, more sustainable world.

Vincent-Charles Hodder is the co-founder and CEO of location intelligence platform Local Logic.

HIRE CALLING

How to Stop the Great Resignation and Keep Office-Based Workers Happy In November 2021, U.S. employees quit their jobs in unprecedented numbers — a new high of 4.5 million — though the unemployment rate fell to 4.2 percent and the number of job openings decreased to 10.6 million from October. Though resignations are common, U.S. Bureau of Labor Statistics data reveals the nation’s quit rate has been increasing since June 2020. According to a recent report, one in four people quit their jobs in 2021, well above 2019 and 2020 levels.

Young and experienced employees are leaving their jobs to either accelerate their careers or completely reevaluate their approach to work. The industries with the highest resignation rates are tech and health care, two industries with traditionally high turnover rates. According to a tech trends report, the tech industry has an 18.3 percent turnover rate globally. Similarly, the average health care turnover rate in 2019 was 17.8 percent.

Unironically, health care workers are in high demand due to the pandemic, and the tech industry is typically the catalyst for economic and commercial real estate recovery.

Burnout and underappreciation play a big part in the turnover across industries.

According to one report on job and career satisfaction among tech professionals, 36 percent reported high burnout levels in 28 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

sense of belonging at work.” When the work of second-quarter 2021, up from 32 percent in former employees gets piled onto the remainfourth-quarter 2020. Over the same period, ing employees, burnout increases and many those reporting little to no burnout declined employers don’t increase compensation for from 38 percent to 31 percent. those now doing two and three jobs.

Startlingly, reports indicate that the workEmployers need to be intentional about force has lost more than 2 million women crafting a workplace that better supports since the pandemic began. According to a employees. Regular employee satisrecent report, in August 2021, the faction surveys, with true transparrate of women who quit their jobs ency, ensure employers have their hit a high of 5.5 percent, compared finger on the pulse of their workwith 4.4 percent of men. The rate force. Leadership should be eduof women quitting decreased to 4 cated on how to be inclusive, create percent in November, but still outa culture of feedback and provide paced the rate for men. support. Prioritizing physical and Reasons for the mass exodus mental health by offering health of women are clear. According to and wellness programs, childcare, one report, more working women Petra Durnin. flexible work options, competitive have had significant disruption salaries and innovative amenities in their lives from the pandemic are no longer “nice to haves,” but necessary. than men. Another report found that 28 perCommon company recruiting practices cent of mothers who stopped working did so are actually contributing to hiring issues to provide childcare for children out of school too. Assessing bottlenecks and streamlining compared with just 12 percent of fathers who processes can help ensure that candidates stopped working. Additionally, often the role aren’t left wondering if they’ve been ghosted of caretaker for sick parents or other relatives by a potential employer or lost in an abyss of falls on women rather than men. approvals. Moving quickly on top candidates In a recent survey, 40 percent of employspeaks to a well-organized company and helps ees said they were “at least somewhat likely” minimize downtime from open positions. to quit in the next three to six months, half Many employers use recruiting because they didn’t feel valued or have “a

management or marketing systems to filter or rank candidates, but these systems are erroneously excluding viable candidates from consideration. Qualified, highly skilled candidates can be overlooked because they do not exactly match the criteria in job descriptions.

Outdated metrics and software systems also contribute to passing over qualified candidates, resulting in approximately 27 million “hidden” workers in the U.S. Updating job descriptions can help widen applicant pools to include those candidates who might not possess every desired qualification. Employers should also establish new metrics for evaluating talent to uncover other barriers in the process. Additionally, companies should evaluate compensation levels to ensure they are staying competitive.

The pandemic shifted priorities for many employees. Employers can retain their valuable top talent by recognizing their employees are a competitive advantage. By embracing a flexible workplace, providing growth opportunities, supporting working parents and revising hiring practices to find the best talent quickly, employers can avoid burnout and an exodus of valuable talent.

Petra Durnin is the head of market analytics at Raise Commercial Real Estate.

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FEATURE

Emissions Omission

New York’s rollout of Local Law 97 — a first-of-its-kind set of rules aimed at shrinking buildings’ carbon footprint — has been full of holes so far. Will that change under Eric Adams?

By Rebecca Baird-Remba | Ilustration by Spencer Alexander early three years after then-Mayor Bill de Blasio signed a groundbreaking law aimed at forcing building owners to reduce their carbon footprint, the New York real estate industry and many of its observers claim that implementation of the environmental legislation has been slow and that the city office responsible for enforcing the law doesn’t have the funding or staff to do so. Some charge that the city itself isn’t on track to comply with its own rules.

Local Law 97, passed by the City Council in March 2019, requires owners of buildings that are 25,000 square feet or larger to begin reducing their greenhouse gas emissions starting in 2024 and to meet lower benchmarks every five years until 2050.

The law created a new office within the Department of Buildings — dubbed the Office of Building Energy and Emissions Performance — that would handle enforcement of the new emissions standards. Gina Bocra, the chief sustainability officer at the DOB, leads the six-person office. Her team oversees the complex rulemaking process for the law, processing applications from owners who want a variance because they can’t meet the law’s requirements, and deciding penalties for owners who don’t comply with the emissions standards. They will also, ultimately, be responsible for monitoring buildings’ emissions — largely via reports submitted by landlords — and for auditing specific properties to ensure that they are reporting their energy use truthfully.

“Too few people are working on this in DOB,” said Adam Roberts, the director of policy for the Architects Institute of America, one of the groups that advocated for the law.

“The city has not devoted enough resources to the Department of Buildings. If we don’t have 30 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

enough staff at the Department of Buildings, landlords are going to be able to lie [about emissions] and get away with it.”

Spokespeople from DOB and Mayor Eric Adams’ office didn’t return requests for comment by press time on the issues surrounding Local Law 97 implementation.

Roberts said that he had heard from his members — many of whom are architects employed by the city government — that the city does not have a concrete plan for its own buildings to meet the emission standards set

by Local Law 97.

“City buildings are not on track to comply,” Roberts said. “One of the first things the mayor [de Blasio] did during the pandemic was choose to stop public works. Your school is going to open a year later, as is your library and your police station. So the city buildings are also a year behind on complying.”

He added that even new public buildings that are under construction or in the pipeline don’t seem to take Local Law 97 into account.

“There also has not been a real cohesive effort to make new or existing city buildings comply,” Roberts said. “And that’s really unfortunate, because the city is the one that provides services for the most vulnerable. It does not seem like they are undertaking any massive campaign to retrofit buildings. If the city isn’t planning for 2024 and 2030, they’re not going to be able to comply. We’ve asked many times and they are not going to be on the path to compliance.”

Supporters of Local Law 97 say it will be hard to convince private-sector landlords to retrofit their buildings and reduce their energy usage if the city isn’t planning to do the same.

“And if the city isn’t complying and they’re championing the law, how do we expect everyone else to take it seriously?” asked Roberts.

“And the economic benefits and jobs won’t come about if there’s no compliance. And the quality of our homes and offices continues to decline compared to other cities in America.”

The city has announced plans to buy electricity from a Canadian hydropower transmission line, the Champlain Hudson Power Express, in order to power its own buildings.

The hydroelectricity project, one of two set to bring “clean” electricity to the five boroughs by 2027, is being built by Blackstone and Hydro-Québec.

One of de Blasio’s last acts in office, on Dec. 22, 2021, was to sign an executive order with a Local Law 97 implementation plan for city agencies. The press release from the mayor’s office promised to “invest in cost-effective emissions reductions opportunities,” reduce

energy consumption at city buildings 20 percent by 2030, and expand solar installations at city properties “to generate more than 110 million kilowatt-hours of solar energy per year by 2025, enough to power 26,000 New York City homes.” The order also required city agencies to develop plans for reducing their specific carbon footprints as part of their capital plans.

“I think there’s a bigger question about how serious this effort was and will be,” Roberts said. “It was done in the last days of the administration, received no press coverage, and wasn’t even floated with the multitude of groups who advocated for the law.

This is the first time I have even heard about it, and, based on conversations with my colleagues at other organizations, I don’t think they are aware that the former mayor made

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this announcement.”

Meanwhile, the Real Estate Board of New York slammed the city for its glacial rollout of programs that are supposed to be implemented as part of the Climate Mobilization Act, which was the package of laws passed in conjunction with Local Law 97.

Alex Shapanka, a vice president of policy for the real estate trade organization, said that the rollout of the Property Assessed Clean Energy financing program — commonly known as PACE — was delayed by 18 months to two years after climate legislation passed. PACE loans, which are also offered by the state’s energy agency, are a common tool landlords use to help finance the upfront costs of making energy efficiency upgrades.

“It was approved by the city but the first

loans were not granted until the end of 2021,” Shapanka said. “It took them almost two years to get the program up and running and then allow applicants to receive money. They were talking about this program being available without actually conferring the benefits.”

He pointed out that developers of new commercial buildings couldn’t apply for the financing until mid-2021, and the city still has not finalized rulemaking and guidelines for new commercial applicants.

Shapanka also noted that the city had delayed the release of a number of reports required by Local Law 97, including a carbon trading study — released 10 months late in November 2021 — as well as reports on the city’s greenhouse gas emissions in 2018 and 2019. The city has also pushed back the release

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of its long-term energy plan — which was supposed to include benchmarks for decarbonizing its energy grid — another six months, until the middle of 2022.

Several large landlords are also still waiting for major pieces of guidance from the DOB on the law, sources told Commercial Observer.

DOB officials have told them the rulemaking process may not be complete until 2023 or 2024. The buildings department has also been slow to notify the owners of roughly 90 buildings who applied for a variance to the law regarding whether or not they are eligible for a reduction in emissions standards. Major commercial owners and their staff — many of whom are facing hundreds of millions of dollars in necessary renovations and upgrades — have struggled to plan for the law’s upcoming

deadlines in 2024 and 2030 without the DOB guidance.

Anthony Malkin, the president and CEO of Empire State Realty Trust, is the only landlord serving on the main advisory board responsible for Local Law 97 implementation and declined to be interviewed for this story.

Alex Heil, the vice president of research for the nonpartisan, nonprofit Citizens Budget Commission, argued that the law wouldn’t be effective until landlords had more concrete guidelines from the DOB. “This is a complex piece of legislation that is going to have a big impact on the sector that produces 70 percent of the greenhouse gas emissions for the city,” he said. “It’s not like anybody who owns real estate is going to do this a couple months before. The more certainty you provide, the more effective these policies will be.”

Pete Sikora of advocacy group New York Communities for Change, who was heavily involved in advocating for the law and now serves on the city’s advisory board, defended the slow rulemaking and implementation process.

“Do they want a poorly thought out, slapdash rulemaking process?” he asked. “The industry is saying things are moving too slowly but there’s a contradiction there.

Either you want it to be fine, well-thoughtout categorizations of those different kinds of uses and occupancies, or you want it to be fast.”

He added that the advisory board, along with the DOB and the city’s Department of Finance, were working on more fine-grained ways of evaluating commercial buildings. For example, the law, as written, treats all office buildings the same. Sikora said the city’s guidance would create different emissions standards for office buildings with more energy-intensive uses, such as data centers.

He also felt that the DOB’s energy efficiency office had not received the necessary staff and funding.

“One thing the city did not do well was allocate enough staff lines to that office,” Sikora said. “But they did allocate $10 million a year to the accelerator to guide building owners for advice.”

However, his greatest fear is that Adams would water down the law, either by lowering the financial penalties for landlords or by not giving the DOB enough staff and funding to enforce it.

“When Eric Adams’ spokespeople talk about the law, they’ve been using the industry’s lingo, and saying, ‘We agree with the law but the structure of the law is unfair, these penalties are unfair.’ We want to see the Adams administration continue the good work of this issue, an issue that New York is at the forefront of. Eric Adams should not listen to the real estate industry and weaken this law or cut the penalties.”

He added that it’s “certainly the wrong thing to do substantively and morally, and a big mistake politically. It’s our hope that Adams listens to his better angels rather than the real estate devils whispering in his ear.”

COMMERCIALOBSERVER.COM | JANUARY 18, 2022 | 31

EVENT

ALL EYES ON NO. 2: Derek Jeter, center, holds the keynote conversation on stage with Trepp CEO Annmarie DiCola and TPG CFO Bob Foley.

KICKOFF: CREFC Chair Eric Thompson, a senior managing director at KBRA, delivers opening remarks.

SERIOUS TALK: The CREFC conference featured a variety of panels on a number of CRE finance topics.

The Captain and the Hope Baseball god Derek Jeter gave the keynote at the first in-person conclave of the CRE Finance Council since 2020 — but the real highlight was a sense of optimism 32 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

By Andrew Coen he CRE Finance Council (CREFC) held its first in-person annual Miami conference since January 2020 last week with major safety protocols in place, which attendees said demonstrates that the commercial real estate industry can press forward in 2022 amid continued challenges that the COVID-19 pandemic has posed.

While some of Wall Street’s largest banks scrapped their usual networking parties held in concert with CREFC, many commercial real estate finance professionals said they were nonetheless excited to take part in the conference held from Jan. 9 to 12 at the Loews

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EVENT

PHOTOGRAPHS COURTESY OF CREFC

FROM THE TOP: CREFC Executive Director Lisa Pendergast addresses conference attendees at the Loews Miami Beach Hotel.

Miami Beach Hotel and reconnect with their peers. CREFC required vaccines and masks to attend, along with daily temperature checks.

“Generally, the industry wants to demonstrate that we can get back to some sense of normality,” Bill Sexton, the new CEO of Trimont Real Estate Advisors, said on the morning of the conference’s first day while in the firm’s poolside cabana. “It’s nice to see people being sensible, but also demonstrating that we are hopefully moving beyond this hiatus we have had for the last two years.”

CREFC did not provide exact attendance figures for the conference’s in-person portion.

The organization provided a virtual option for those who did not feel comfortable attending live amid a wave of COVID cases this winter

due largely to the omicron variant.

Dozens of firms set up cabanas in the vicinity of the hotel’s pool area, which provided the chance for safe, outdoor meetings without the need for masks. The weather largely cooperated, with sunny skies on Day One and temperatures in the low 70s before rain arrived late the next day.

The cancellation of traditional soirees hosted by big investment banks held on the eve of the conference Jan. 8 provided a bit of a “different atmosphere,” according to Ronnie Levine, a senior managing director at Meridian Capital Group.

“It’s more intimate with small dinners and people getting together for a drink one-onone,” Levine said from Meridian’s cabana early

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on the first day. “I think that has changed the dynamic a little bit.”

CREFC’s Women’s Network & Diversity and Inclusion Committee hosted a networking reception under a tent at the Loews Miami Beach Hotel beachfront that drew a large crowd as the sun set Jan. 9. Another beach party was held the next evening, sponsored

by Wells Fargo and Caldwalder, which was more sparsely attended as heavy rain swept through the area.

Common themes that resonated with attendees in conversations and on panels were general optimism that real estate fundamentals will be strong in 2022, with omicron likely just a bump in the road due to its more minor symptoms and cases already peaking in New York and other major metros.

How rising interest rates will affect cap rates, the future of Class B properties as more companies allow remote working options, and whether conference-hosting hotels are poised for comebacks from lost volume during the pandemic were also widely discussed among commercial real estate finance professionals.

The multifamily sector was a hot topic, too, at CREFC, with many optimistic that the asset class will continue to soar in 2022 even when interest rates rise. Lenders who spoke on a Jan. 10 afternoon panel, “There’s No Place Like Home: Multifamily and Housing Trends and Outlook,” indicated that the Federal Reserve raising interest rates this year would only increase demand for rental apartments since it will drive up costs for owning a home.

“It creates more demand for rental housing,” Chris Hoeffel, president of CoreVest, said during the panel, held in the hotel’s ballroom. “I think the net-net effect of tapering will be positive.”

Commercial mortgage-backed securities lenders in attendance forecasted an active year for CMBS loans in both single-asset single-borrower and conduit deals. They said this would be aided largely by refinancing opportunities for debt issued 10 years ago

— after the Great Recession — at far higher interest rates. A number of CMBS securities that are also scheduled to mature in 2023 and 2024, coupled with short-term commercial loan obligations (CLOs), also maturing, indicates busy times ahead for the CRE securitization market.

“We’re at the front end of this sort of wave,” Rich Highfield, who leads Greystone’s CMBS lending platform, told CO in a meeting at CREFC. “There is a pool of opportunity between maturing CMBS and the maturing CLOs.” The highlight of CREFC for many attendees was very likely the keynote from former New York Yankees captain Derek Jeter, who spoke early in the afternoon on Jan. 10 before a packed ballroom. It was part of a discussion moderated by Trepp CEO Annmarie DiCola and TPG RE Finance Trust CFO Bob Foley. The recent Baseball Hall of Fame inductee, who is also part owner and CEO of Major League Baseball’s Miami Marlins, touched on a number of topics, including the similarities between sports and business when it comes to the importance of working together as a team.

Just prior to Jeter hitting a home run with an enthusiastic crowd (there had to have been a lot of Yankees fans in attendance) CREFC Executive Director Lisa Pendergast received the organization’s Woman of the Year award for her commitment to advancing the trade group’s influence in the industry and in the finance markets. Pendergast, who has led CREFC since September 2016, was excited to bring the conference back to Miami this year after holding it remotely in January 2021, just as vaccines for COVID-19 were rolling out.

“A key CREFC mandate is to bring the industry together to facilitate meaningful discussions about the future of commercial real estate finance, and we achieved that this year,” Pendergast said. “We saw a great turnout, both in person and virtually, and want to thank all of those who joined us.”

COMMERCIALOBSERVER.COM | JANUARY 18, 2022 | 33

470 PARK AVENUE SOUTH

The Plan

WHO’S WHO FOR 470 PARK AVENUE SOUTH

COURTESY OF MKDA, GENSLER

LANDLORDS: SJP PROPERTIES, PGIM REAL ESTATE ARCHITECTS: GENSLER, MKDA MEP: AMA GROUP STRUCTURAL: THORNTON TOMASETTI

POST-PANDEMIC PARK AVENUE: The owners of 470 Park Avenue South decided to revamp the building before COVID-19 struck, but they happened to make pandemic-friendly choices, including a new large backyard with a firepit and a bar (top and lower left). A connected kitchen and lounge round out the space (middle and bottom right).

By Rebecca Baird-Remba Although the owners of 470 Park Avenue South started its renovation in 2019, their plans for the Midtown South office tower happen to work well in the pandemic era. SJP Properties and PGIM Real Estate decided to convert the building’s rear yard into an outdoor lounge area with seating, a bar and a firepit, which turned out to be a prescient choice for 2022.

A redesign of the ground floor — led by Gensler and MKDA — allowed for the creation of the backyard and a connected indoor 34 | JANUARY 18, 2022 | COMMERCIAL OBSERVER

kitchen and amenity space. The outdoor patio features wood walls and benches, plantings, tables and chairs, a long marble bar, and lounge seating arranged around a gas-powered stone firepit.

Moving indoors, there’s a large white marble bar and matching countertops, blonde wood cabinets, and a white marble backsplash that extends to the ceiling in the kitchen area.

There’s also a shuffleboard table, a row of white leather midcentury arm chairs arrayed around small, dark wooden cocktail tables, next to a long white leather bench seat. One

wall is exposed brick that’s been painted white, while the opposite one is coated with panels meant to resemble dark brown leather.

The $15 million revamp of the 300,000-square-foot building also includes a new 14th-floor terrace, renovated elevator cabs, a new heating and cooling system, facade updates, new windows, and a prebuilt suite on the second floor. Construction started in 2019, and is scheduled to wrap by the end of 2022.

“In the years since we acquired this property, we have continued our thoughtful

repositioning — even in the midst of a global pandemic — with an evolving workforce and real estate landscape in mind,” said Alexander Erdos, a senior vice president at SJP. “The shift in priorities of office tenants has only further strengthened the importance of not just common areas that can facilitate safe, team-based work, but also outdoor amenities, which were previously unheard of in this submarket.”

SJP and PGIM purchased the 17-story building between East 31st and East 32nd streets for $245 million in December 2018 from Norges Bank Real Estate and Nuveen.

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