Commercial poperty ‘im Visier’

Deutsche Bank has sold three New York skyscrapers back to the Macklowe group at a discount of 20-30% reports the Wall Street Journal. This could be a watershed moment in the U.S. commercial real estate (CRE)sector. CRE is a sector that is poised for a fall due to a slowing real economy.

“Deutsche Bank is cutting deals to sell three of the seven skyscrapers it took back from New York developer Harry Macklowe in transactions that reflect a 20% to 30% decline from what he paid last year at the top of the market, according to three people familiar with the matter.

Shorenstein Properties has signed a deal to buy a 93% stake in Park Avenue Tower and 850 Third Avenue for about $930 million. Meantime, another of the skyscrapers, 1301 Sixth Avenue, will likely be bought by Paramount Group Inc., for about $1.45 billion, those familiar with the deal said.

The transactions are being watched to gauge where prime Manhattan real estate is pricing in a market in which so few deals are being done. Deutsche Bank — as the seller — is providing debt financing for the distressed properties.”
–WSJ, 11 Jun 2008

MarketWatch followed up on the Wall Street Journal story late last night saying that, “selling three skyscrapers in New York City at a steep discount could pressure commercial real estate prices in the city.” All of this is bad news for the financial sector. In both the UK and the US, financial services equities were way down yesterday. Lehman Brothers fell over 13%. HousingWire reported Washington Mutual denied market rumors that it was subject to regulatory action.

The market is very nervous. Something dramatic in the financial sector is sure to happen soon.