Investment market appealing to broader investor.

A distinct buyer profile has typically motivated market activity in past real estate cycles. Today's real estate market appears to have a broader investor profile but remains mostly driven by non-institutional investors.

Over the past 12 months, the Manhattan office market has seen a flurry of investment sales activity based on the following drivers:

* Abundant capital: Both debt and equity capital markets are oversupplied with capital and express difficulty in finding investment.

On the debt side, commercial mortgage backed securities issuance is on pace to surpass $200 billion globally, approximately double last year's record, with nearly $150 billion issued in the U.S alone.

* Low interest rate environment: The combination of low Treasury rates and narrow spreads from aggressive debt lenders have helped facilitate investment and drive investor returns.

* Aggressive pricing from non-institutional buyers: For the past few years, institutional players, most of which are limited by leverage, have been forced to sit idle as private high net worth investors and syndicators drive market activity.

For these investor groups, returns on real estate have continued to outperform alternative investments such as the stock market. Until the contrary occurs, capital from these groups will continue to pour into real estate and drive activity. Increased activity from exchange buyers has also helped push up prices.

* Continued wave of foreign capital: Offshore investors continue to invest in the U.S. with New York as a primary, and in some cases, the only focus. The United States' stable markets, weak dollar, and more transparent and institutional-like real estate investment platform attract such investors.

* Downtown residential condominium conversion trend: On a price per square foot basis, buildings in Downtown historically have sold, and continue to sell, at a significant discount to office buildings in Midtown Manhattan.

This differential is even more evident today, offering greater potential upside and return for investors as buildings in Downtown Manhattan can be purchased for a fraction of replacement cost.

This coupled with an increased demand for residential product (New York City's residential vacancy rate of 3.1% is one of the lowest in the U.S.) has resulted in condominium converters driving the Downtown market for properties well-situated for conversion.

While cap rates for closed deals are somewhat unreliable and rarely published, Real Capital Analytics (RCA) reports a 5.64% weighted average cap rate for 132 properties closed or under contract in the past 12 months, and a 5.36% weighted average cap rate for 72 properties closed or under contract in the past six months.

With the low interest rate environment helping drive the real estate investment to record pricing, investors seem to place little emphasis on near-term cash yields and more weight on total return (IRR).

Select transactions in the last 12 months characterize the current New York real estate investment climate:

* Sale of a 39.5% interest of the Seagram Building to RFR Holdings valuing the property at $647 million, or $789 per sq. ft.

* $1.72 billion ($614 per sq. ft.) acquisition of the MetLife Building at 200 Park Avenue by a joint venture led by Tishman Speyer

* $180 million sale ($400 per sq. ft.) of 261 Fifth Avenue to The Feil Organizatin

* $350 million ($353 per sq. ft.) acquisition of 1107 Broadway by The Chetrit Group

* The $149.3 million ($386 per sq. ft.) acquisition of 1180 Avenue of the Americas by TMW Property Funds

* $214 million ($577 per sq. ft.) acquisition of 222 East 41st Street by Anglo Irish Bank 

* $164.5 million ($190 per sq. ft.) acquisition of 110 William Street by Swig Burris Equities

* $355 million ($323 per sq. ft.) acquisition of 180 Maiden Lane by Joe Moinian.