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1992: confidence emerges from rubble.

1992 may have been the year of the turnaround. While values do not appear to be increasing and there is said to be more pain to come for some, a new-found confidence seems to be rising from the rubble.

This is due, in part, to long-waited increases in office leasing activity. All across the region large blocks of ClassA space were swallowd up by a bluechip tenants that had been on the sidelines.

Many of these deals occurred in midtown Manhattan and on Sixth Avenue. The largest of the deals was signed for some 300,000 square feet by the Internal Revenue Service at Durst's 1133 Avenue of the Americas. Price Waterhouse took more than 300,000 square feet at Americas Tower on Avenue of Americas between 45th and 46th Street. The deal was the start of an amazing comeback for a building that was almost not completed.

Other major leases on Corporate Row' included: News America for 230,000 square feet at 12 11 Avenue of the Americas and CIT for 180,000 square feet.

Elsewhere in the city big takers included: Courdert Brothers at 200 Park Avenue and Frederick Atkinson at 1515 Broadway.

Downtown there were few deals of significance, except Prudential Securities' commitment for 1 million square feet and the decision of the Mercantile Exchange to move to a new space on Greenwich Street.

The level of actual office space absorption decreased, however, because many of these tenants left large holes in Class-B buildings. In many of these deals, price was sacrificed due to concessions that are rumored to have been heavy.

On the retail scene, there seemed to be a healthier turnover of space. While Alexander's went out of business and Macy's closed a number of locations, discount retailers were eager to bid for the empty space. The Gap continued to spread itself around the city, including a new locale in the former Automat at 42nd and Third. And, due to favorable lease conditions, the city and the metropolitan area welcomed some retailers who had never before operated here.

There were a number of building sales this year, signaling that values may have stabilized and sellers are becoming more realistic. Many foreclosed multi-family properties changed hands. In a sale that was a benchmark for how low values have sunk, the lenders to Bruce Eichner's 1540 Broadway agreed to sell the brand-new empty structure for $119 million to Bertelsmann, the German conglomerate.

The 'credit crunch' continues to be a factor in the industry. More banks failed such as First New York Bank for Business and Crossland Savings, which held some 1O,O(X) co-op loans.

Winners and Losers

In 1992, the wrath of the recession] came down on some of the industry's biggest and most powerful. Olympia & York, the Big Apple's largest commercial owner, finished the year barely keeping itself in control of its New York portfolio and out of U.S. bankruptcy court. In recent months, the company's 55 Water Street was turned over to bondholders and 320 Park Avenue was sold to Mutual of America.

In Westchester, Lowell Schulman, the county's largest commercial owner gave or sold all his properties to their lenders. The pension fund manager, Aldrich Eastman is now managing many of them.

Industry in Court

Owners scored some legal victories in 1992. The former owners of 1 New York Plaza were awarded a $33 million tax refund because assessments did not reflect asbestos contamination. The estate of So1 Goldman also received a sizable reimbursement because an Upper East Side property that was intended for development by Goldman -- but never was -- was assessed on the basis of its potential value.

New York State's tough rent laws, however, were strengthened in court. A judge ruled that, despite the Resolution Trust Corporation's mandate to get the highest value for the properties they dispose of, rent-stabilized tenants in a co-op cannot be evicted or forced to purchase.

The industry added two more laws to its rulebooks. Clouroflourocarbons were outlawed in the city as of July 1; the Americans with Disabilities Act (ADA) went into effect in January; and residential brokers found themselves grappling with the Department of State's new disclosure law, which requires them to distinguish between "client and customer."

The results of efforts toward legislative change were mixed. The City Council voted to broaden the city's Industrial and Commercial Incentive Program to include Downtown renovations. Lobbyists and legislators, however, were not able to push through H.R. 11, a bill that would have reversed some of the damage the industry has experienced due to the 1986 tax law.

Roar of Development Now a Whisper

1992 was probably the first year in a decade that bulldozers and cranes were not a pervasive sound in the city, with a new office building at 565 Fifth Avenue the only commercial topping out

The New York City and State agreed to release Prudential and Park Tower from their combined obligation to build four office towers in the Times Square area. After a decade of legal victories, the public/private project was free to proceed in an economic climate that could not support it.

In Westchester the economy and environmental challenges killed the David's Island Project and the City of New York finally terminated the certification of Riverwalk, another highly contested project.

There were some developments on the drawing boards this year, promising that the developer will not become a dinosaur. In court, Mort Zuckerman cleared the way for his plan to buy the Coliseum site and build a residential tower. The year ended with the question of whether or not he would purchase it at all.

Donald Trump celebrated the new year with an approval for his Riverside South and REW hears there may be some financing announcements soon.

A development team, led by Phil Aarons announced Lincoln West, a significantly pre-leased and pre-purchased as-of-right project for New York City's West Side.

The construction and design fields did find some work in the public sector and by looking abroad.

Changing Faces

The industry lost some players and others made changes. Steve Siegel returned from a hiatus in development and became president of Edward S. Gordon. Jim Kuhn, formerly of Mendik & Company, closed his own shop and joined Newmark. Bruce Mosler and company of Riverbank merged with the Galbreath Company. Brokers Charles Borrok and Jerry Cohen, long time members of Wm. A. White, went over to Cushman & Wakefield and that triggered a restructuring at their former firm. The residential firm Albert B. Ashforth sold to several brokers and its director.

In 1992, the industry mourned the passing of some its members last year, such as: Henry Hart Rice of James Felt Realty, Louis Smadbeck of Win. A. White, Michael Klauber of Michael Klauber Realty, H. Bert Mack of the Mack Company, James Biggatt of Win. A. White and Peter Sharp.

New York City got a new deputy mayor for Economic Development, Batty Sullivan, and Dinking granted a freeze in the property tax rate.

The city played host to the Democratic National Convention and industry members seized the opportunity to meet out-of-towners and, in some cases, hosted parties to show off their space.

Based on the articles that comprise this supplement it is overwhelmingly evident there is optimism. In his inaugural speech last week, President Bill Clinton said there is nothing wrong with America that cannot be fixed by what is right with America. Could this not be true for real estate as well?
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Title Annotation:Review & Forecast Section I; real estate market experiences improvement with increase in office leasing activity
Author:Fitzgerald, Therese
Publication:Real Estate Weekly
Date:Jan 27, 1993
Previous Article:Apartment complex sold in Yonkers.
Next Article:Positive ideas to help change the times.

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