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RE recovery: it's all in the bank.

The two essential ingredients of our industry's recovery are a long-awaited surge of economic growth and the return of lending institutions a financiers of real property ventures. These factors are intertwined. To revive New York's economy, regulators must loosen their excessively tight grasp on lending institutions, and lenders should give sound properties the financing they merit.

I know an owner who has two tenants ready to sign leases for sizable blocks of office space. Why is he complaining these days? Because the bank holding the mortgage on that building won't release funds for tenant improvement work. The deal is so near, but yet so far.

I've also heard about a hotel valued conservatively at $100 million with an outstanding mortgage of $8 million. Remarkably enough, the bank called the loan in. In a saner environment, the owner would be able to borrow $40 or $50 million on that property to do work that would enhance its worth.

Unfortunately, such stories are not uncommon lately.

However, this is the right moment for lenders to act affirmatively. We're beginning to see some notable lease commitments. Although the market is hardly robust, there are some encouraging statistic. Cushman & Wakefield reports that leasing in lower Manhattan for the year through the end of the March - 960,000 square feet - was the second highest figure in three quarters and 180,000 square feet more than were leased in the prior quarter. The news was even better in midtown according to that brokerage, where 4.3 million square feet were leased in the first quarter of 1992, the highest quarterly total in twelve months and 39 percent ahead of last year's pace for the same period.

If we look at the year's midtown leasing statistics up until the end of May, leases in excess of 100,000 square feet account for 21 percent of 6.7 million square feet leased to that date in 1992. The six commitments in that category were by Coudert Brothers, the Israeli Mission to the United Nations, Fish & Heave, Haythe & Curley, Scholastic Inc. and Billboard Publications. The two 100,000 square-feet-plus leases signed in lower Manhattan so far this year were by the New York City Economic Development Corporation and the Securities Exchange Commission.

When owners have the capital to meet their tenant's special space requirements, the pace of lease-signings will pick up. With a lid on new development for the next several years, the renovation, re-fitting and leasing of existing office space will account for most of our industry's employment. It will take much longer than It should to absorb that space though, if lenders don't take a more positive realistic stance toward commercial property.

I don't mean to paint the banks as culprits. The recent recession has sapped morale throughout the business community. Regulators, responding to pressure created by the savings-and-loan scandal, are compelling lenders to be more cautions than is good for the economy. In a recent report, Senator Alfonse D'Amato pointed out that over the past year, banks increased their holdings in high-yield government securities by 21 percent, or $92 billion. During that period, bank assets increased by 5 percent, or $182 billion. That's a risk-free investment strategy for banks whose confidence is at a low ebb. The deficit-ridden federal government also comes out a winner. Unfortunately, these funds are following toward government to retire the national debt-instead of toward private investors when who can create jobs and elevate productivity.

The case hits home here in New York where construction trades unemployment is hovering around 50 percent and, as I mentioned before, lease signings are stalled for want of capital to undertake tenant improvement work. A more enlightened approach by the banks toward such financing can accelerate economic recovery here. People will go to work preparing space where other people will earn livelihoods. The wheel will turn again and another upswing in the business cycle can take hold.

Journal Square

100% leased

Robert P. Antonicello, president of Antonicello & Company, Inc., a commercial real estate services firm based in Jersey City has announced that they have successfully completed their assignment at Journal Square Plaza in Jersey City.

Panepinto pointed out that Journal Square Plaza is now 100 percent leased at a time when many buildings are struggling to retain high occupancy levels.
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Title Annotation:Review and Forecast, Section I; real estate industry
Author:Spinola, Steven
Publication:Real Estate Weekly
Date:Jun 24, 1992
Previous Article:Waiting for a jump-start.
Next Article:As prices fall, investor caution advised.

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