It's an empty ghost-town - save for one new Bed, Bath, and Beyond which is doomed from the start. It's in trouble because it's essentially a stone's throw from a now vacant Linen's-N-Things.
So there're all these pretty buildings just sitting there, no doubt with 2006-type debt loads.
CRE is not my gig. Nonetheless I think I can read the listing for the office property a bit.
$30 per square foot, per year times 30,000....
That's $900,000 in total yearly rent....divided by 12 gives:
$75,000 in monthly rent. I wonder how high that is for such space in this area?
Note Midtown Manhattan has dropped from $150 per square foot two years ago to $40-$50 per square foot - at least on a sublet basis. If Manhattan has dropped to that level, I just don't see how this place will command $30 a foot. But, again, I know very little about this business except that the banks who fronted the money are in for a world of hurt.
If we assume that $900,000 is needed to pay the annual debt service on the office building above....we next assume the interest rate at which some Moronic bank gave away the money - which we can use to extrapolate the total loan amount.
Cut that number at least in half and we can figure the dollar loss for the bank. I'm sure it's $7-$9 million alone on this one building - and counting!
Now about the probable loss on the retail space (first pic) which is 8 times as big....whoops!
There's a perception out there that commercial real estate up here in the Northeast is nowhere near as bad as in places like Florida, Arizona, and Michigan.
But I bet that's not entirely true. There's essentially no economy here except the oxymoronical Government Economy. In Massachusetts, if you can't convince a medical professional (or Dunkin Donuts) to lease your space you're pretty much screwed. And this area is slowly losing population.
You gotta love the pictures on The Launch's website:
Imaginary people shopping at imaginary leased stores!
Meanwhile, the banks imagine their loans are worth 100 cents on the dollar....
2 comments:
yah, office rent comps in the market are $12 to $15/sf rents. That's for inferior space and inferior location, but few tenants are electing to "splurge" on the best space in the market these days. That being said, I think that space will command a serious premium to market given its newness, and its proximity to the water shuttle to Boston. People LOVE being on the water with "The Boat" right there. Believe me, asset managers, small local hedge funds (there are many two and three person shops immediately across the street), investment advisors, and other finance "professionals" will love to have that address and access to the city. Honestly, I would not be shocked to see them get $25 or $30 there.
Forget about figuring out the banks' exposure. This one is a complete cluster f*ck. I believe the parcels were subdivided and financed separately (office, retail, apartment, condo, marina), but then some lenders did multiple parcels and pieces of multiple parcels. For example, I believe the office and retail, while separate parcels, were financed by the same two lenders in a co-lending deal - I think TD Banknorth was one of the banks. It's ugly. The equity is underwater, obviously. And the lenders are most likely wiped out close to zero value today - I'll explain below. The banks are most likely in receivership with the developer staying on to complete construction for a cost+ contract. Ultimately, the banks will own it and negotiate with eachother about a buy out. This is all speculation on my part.
Your approach is approximately right, $30 rents x 30,000 office space. Except that the income on a $30/sf rent is probably $20/sf because of taxes and expenses. Regardless, the building is literally worthless - it is a complete washout for all because the leasing is so far behind schedule and the space markets have collapsed. Given what rents are today, what cost to build out the space is today, the terms of leases today, and the carry costs required to be funded to stabilization (i.e. still gotta pay taxes, keep lights on, keep insuracce current, pay security, clear snow, etc. etc.) an investor might pay $500k for the deal - maybe. And that would only be as a token transaction fee to clean up the structure and ensure clean title transfer. It's that bad.
Combine this all with the fact that it was an awful, short sighted design layout, and you have one of the worst debacles in local commercial real estate. The Hingham Shipyard was an ubelievably good opportunity to develop a one of a kind, exceptionally well done project (not necessarily expensive, but just well done) during one of the strongest bull markets for real estate and the capital markets that the world will ever see. But they blew it. It's tragic.
Thanks so much for that *value added*.
BTW, I'll take the under of $25 a square foot for that office space.
I see the water, and the boat, as possibly having appeal for the residential part of the The Launch - but not for the office space.
Offices have to be centrally located amidst the workers, right?
Well there's an ocean on one side....and Quincy on the other. It's a lot of space for the hedgefunds too. I could see a local law firm re-locating there - but that's about it.
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