Only three Manhattan office buildings worth more than $30 million were sold in the first half of year, as buyer and sellers failed to agree on pricing and credit stayed tight, according to a report by real estate services company CB Richard Ellis Group Inc.
Buyers are seeking distressed pricing, said the report released on Tuesday. Owners do not want to sell at distressed pricing, and lenders have largely withdrawn from the market.
Not only have banks and life insurers recoiled from financing deals, the commercial mortgage-backed securities market, which accounted for roughly half of the financing in the past few years, has been moribund for about a year.
When the CMBS market shut down, that really shut off the financing mechanism that allowed a lot of these large transactions to get done, Enoch Lawrence, senior vice president, CBRE Capital Markets, said in a statement.
The three sales compare with an average 32 seen in the first half of the past five years, the report said.
Sales of office buildings valued at more than $30 million, fell to a total of $767.5 million in the first half of the year, 91 percent off the five-year average of $8.2 billion.
The properties that changed hands had various other factors that affected pricing, the report said.
The sale of 1334 York Avenue had been under contract for more than a year and was the subject of litigation. Its buyer was also a tenant.
The building at 30 West 47th St had air space rights and significant retail space in the Diamond District. It also was part of deal that began in 2008.
The sale of 1540 Broadway was as distressed sale that included seller-financing.
CBRE Valuation & Advisory Services, estimates that the cap rate -- which roughly corresponds to the yield in the first year of purchase -- rose to about 7 percent for a leased prime Manhattan office in the first half of the year, up from 3.9 percent seen at the top of the market in 2007.
On Monday, the U.S. Federal Reserve extended until mid-2010 an emergency lending program designed to boost credit to the ailing commercial real estate market.
The Term Asset-Backed Securities Loan Facility (TALF) for newly issued commercial mortgage-backed securities, a program that has yet to get off the ground, was extended to June 30, 2010 from its prior sunset date of December 31 this year.
(Reporting by Ilaina Jonas; Editing by Ted Kerr)