Tuesday, January 13, 2015

Terrorism Risk Insurance Act Extension Signed into Law

Just last night, President Obama signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2015 (H.R. 26). The bill is a six-year extension of the terrorism risk insurance program and also includes The Council’s long-sought NARAB provision to create an interstate agent/broker licensure clearinghouse.

The "trigger” for an act of terrorism covered under the law will move from $100 million in 2015, to $200 million in 2020 (increasing $20 million each year). Additionally, the bill also increases insurer co-shares from 15% to 20% over the next five years. 

Meanwhile, on Monday, The Council asked the Treasury Department for regulatory guidance clarifying the TRIA coverage gap, which is creating some marketplace issues. The issues stem from two facts: 
  1. Because the old act expired, the new law technically is a brand new law and not an extension of the old law; and 
  2. Many carriers had conditional exclusion riders on the terrorism component of their coverage that said that if the law expires the coverage is terminated.

Read an in-depth summation from law firm Steptoe & Johnson.

Monday, January 12, 2015

Asian Investment Seizes a Tenth of Russia's Commercial Real Estate Market

Investors from Asia and the Near East sprang from nowhere to make up 10 percent of investments in Russian commercial real estate in 2014, according to a study by real estate consultancy Cushman & Wakefield.

The numbers show "a trend of capital from Western Europe and the U.S. gradually leaving as players from the East enter," the report said, adding that Asian investors didn't close any investment deals in the Russian commercial real estate market in 2013.

As Asian investors made their entrance, European capital froze up, spooked by slowing economic growth and Western sanctions over Russia's support for separatists in eastern Ukraine.

European capital accounted for just 9 percent of total investment last year, down from 29 percent in 2013. Meanwhile Russian investors' share rose from 71 percent in 2013 to 81 percent in 2014.

Widespread concern over the state of Russia's economy dealt a harsh blow to the total volume of investment in commercial real estate, which fell to $4.2 billion in 2014, according to Cushman & Wakefield.

The market had seen $8.1 billion in investment in 2013 and $8.8 billion in 2012, according to consultancy Jones Lang LaSalle.

Cushman & Wakefield forecasts that investment will fall further to $2.5 billion in 2015, with some projects under significantly more pressure than others.

"Deals denominated in foreign currency have suffered to a greater extent from the current situation," said Irina Ushakova, head of capital markets at Cushman & Wakefield. The Russian ruble fell about 40 percent against the U.S. dollar last year and is still viewed as volatile, adding significant uncertainty to any projects using foreign currencies.

Projects with ruble-denominated investment and cash flows have a higher chance of reaching closure, Ushakova said

Sunday, January 11, 2015

Baron of bland buildings soars to the top—on a shoestring



Gene Kaufman certainly ranks as one of the city's most prolific architects. During the third quarter alone, he had 16 residential and hotel projects totaling well over 1 million square feet underway around town. Yet for all his commercial success, one thing largely eludes him: even a smidgen of love from critics.

When he filed permits for a 79-room hotel in Chelsea last year, for instance, a local real estate blog referred to the designer as the "dark lord of architectural blandness." Weeks later, another critic called the designer's execution of the world's tallest Holiday Inn, which opened its 492 rooms downtown in October, "another atrocity courtesy of Gene Kaufman." Such snipes—some of which are unfit for publication in a family newspaper—have increasingly dogged Mr. Kaufman as he nears 30 years at the helm of his namesake architecture firm.

Yet his skill in landing jobs—this year, another 40 Kaufman properties will be either designed or built—speaks volumes about what it takes to succeed in New York as an architect, as well as, for better and for worse, why the city looks the way it does. The fact is that in a metropolis with some of the nation's highest land and building costs, Gene Kaufman Architects delivers more of the one thing developers -value above all else: profit.

"The value of a [hotel] project when we do it is usually a couple million dollars more than if somebody else does it," said Mr. Kaufman, seated at his desk behind a high, undulating black partition in his SoHo office. "That's why people come to us."

Just ask the city's most prolific hotelier, Sam Chang. In 1997, the then-aspiring developer of smaller, budget hotels—many in the boroughs outside Manhattan—tapped Mr. Kaufman for a seemingly impossible project. It was a proposed 65-room Hampton Inn in the South Street Seaport Historic District, a project where the architect first demonstrated an odd mix of ingenuity and shrewdness that helped launch his career.

The hostelry's location was perfect, but the size of the lot and zoning constraints made it nearly impossible to build enough rooms to cover land and construction costs. Somehow, the designer would have to find a way to shoehorn more rooms.

"So we told them that we will put in this brand-new thing, and people will come to stay in the hotel just to see it," Mr. Kaufman said. "It's called a flat-screen TV."

True, the sets were initially budgeted to cost $10,000 a pop, but they also took up far less valuable space than traditional TVs—enough to allow Mr. Kaufman to shrink the width of each room enough to squeeze in one additional room onto each floor. That change alone was enough to boost the hotel's projected revenue, quickly persuading the chain's executives to go ahead with the project, which indeed has proved wildly successful.

Since then, Mr. Kaufman has designed about 50 hotels, often with Mr. Chang's McSam Hotel Group as the developer, and has found myriad ways of reconfiguring rooms and shrinking construction schedules and costs, all while sticking to guidelines imposed by many hotel chains on everything from ceiling heights in the lobby to room layouts.

Among other things, he has an in-house team of consultants focused on getting projects through labyrinthine bureaucracies like the city's Department of Buildings. The fact that his designs often feature plain-Jane façades, and buildings set back from the street wall to ensure that every floor is exactly the same size, also help cut costs.

The world's tallest Holiday Inn (99 Washington St.), Candlewood Suites (339 W. 39th St.) and 347 Bowery are beloved by clients but loathed by critics of Kaufman-designed hotels.

Similarly, on the residential side, Mr. Kaufman has a reputation for keeping costs low enough that developers can afford to take chances on projects in iffy areas that others had written off. More than 20 years ago, he and a developer tried to persuade the city to grant permits for an apartment project in Williamsburg, Brooklyn, where they insisted that they could make good money charging monthly rents of a then-¬unheard-of $1 per square foot.

"They said, 'How are you ever going to get that much money?'"

For the developer, that bet would have paid off handsomely, as rents in the area have since quintupled.

Scores of designs for shoestring apartment buildings and budget hotels that others insisted would never pencil out have handsomely enriched Mr. Kaufman's clients and his own firm, but they have also come at a cost to the 56-year-old's reputation. One writer referred to him as the designer of "craptastic apartment buildings." Yet even some of his harshest critics concede that his budget designs simply reflect what his clients want and what city zoning rules allow.

When Mr. Kaufman was tapped in 2006 for a planned seven-unit residential project at 314 John St. in Prospect Heights, Brooklyn, for example, he produced two very different façade designs. His client, the developer Aljohn Group, cited costs in opting for the cheaper one, since the prices for other elements of the building, such as the foundation and plumbing, are fairly standard.

"At the end of the day, everything in New York City always comes down to money," said Nikolai Fedak, founder of blog New York YIMBY [Yes in My Backyard]. "While rich people are willing to pay the price for top-level design, it just so happens most New Yorkers aren't rich, and neither are the people who come here to visit" and stay in a hotel.

Developers of luxury properties can afford to hire starchitects and set a higher aesthetic bar because they know their buyers will cough up enough cash to justify all the additional sums spent on the finer points of a building—from custom-made windows to marble-clad bathrooms. But for those who aim to build for everybody else, the same math does not work.

"It's very 'in' to say architects can do design on any budget," Mr. Kaufman said in his deadpan delivery. "But I think a lot of criticism [of my buildings] is actually from people who want something for nothing."

Others insist that New York has to offer not just striking properties for those few who can afford them, but something for everybody else, too.

"We need hotels and residential buildings that are not exclusively for the very rich," said Kenneth T. Jackson, a history professor at Columbia University. "To the extent that Gene Kaufman is helping to provide those units, that's a good thing."

And while Mr. Kaufman has designed pricey projects as well, it is the blander ones for which he is known. Oddly enough, they seem out of keeping for a man who has so many connections to high art and design. After graduating from Cornell University, he interned at an architecture firm in Switzerland and went on to work as an associate for world-renowned Uruguayan architect Rafael Viñoly—the designer of what now stands as the tallest residential tower in the hemisphere, 432 Park Ave.—before starting his own firm.


Bowing to the greats

During the last real estate boom, he designed a Williamsburg condo inspired by the design of French architect Le Corbusier, a titan of modernism. And since purchasing a majority stake in well-regarded architecture firm Gwathmey Siegel & Associates in 2011, Mr. Kaufman has led a campaign to save an upstate government office building, designed in the (all too) brutalist style by Paul Rudolph.

Outside the office, he is a devoted museumgoer, along with his wife, Terry Eder, a successful classical pianist. In recent months, Mr. Kaufman has been attempting to purchase the name and assets of their beloved but bankrupt New York City Opera.

It is less surprising, then, that Mr. Kaufman is currently designing a ground-up development of artist studios in Bushwick, Brooklyn, and that he also has done many higher-end projects that have been better received by the same people who criticize his budget hotels. Among those is his design for Hilton's boutique brand, Indigo, in the financial district. YIMBY grudgingly praised it as "actually somewhat appealing." In the same vein, Mr. Kaufman's vision for a Thor Equities hotel on Canal Street was deemed "not that ugly," by Curbed.com, which also described an upcoming project of his a few blocks west as "surprisingly pleasant."

And on the residential side, Mr. Kaufman's work in today's hyperpricey Williamsburg bears little resemblance to designs he came up with in the late 1980s. His work there includes projects such as the Lucent and the Decora.

Even when he's had big bucks to spend, though, Mr. Kaufman's designs have stirred the wrath of some critics. A daring design for a condo on the Bowery prompted The Village Voice to note that the building "may as well come emblazoned with a rainbow 'F—k You!' sign."

But like him or loathe him, it is the pricier side of Mr. Kaufman that the city may be seeing more of as a result of changing market dynamics. The designer's longtime collaborator, Mr. Chang, notes that stratospheric land and construction costs are making budget-hotel development a thing of the past.

"People think there will be a lot more new [budget] hotels, but I think construction will completely slow down," said Mr. Chang, who, having built more of them than anyone else, announced last year that he is retiring.

Saturday, January 10, 2015

10 Best Boutique Hotels in NYC


10. The Bowery Hotel

This Manhattan hotel offers free Wi-Fi, a lobby bar and outdoor lounge, and rooms that have a flat-screen TV with cable channels. The Bleeker Street underground station is 5 minutes’ walk away.

Plush bedding along with an iPod docking station and a mini bar are offered in every room at New York City’s Bowery Hotel. Guests can enjoy city views from the oversized windows.

Gemma Restaurant serves breakfast, lunch, and dinner. It features Italian cuisine as well as an Italian wine list.

Enjoy a workout in the fitness centre or use the fax and photocopying services at your convenience. A daily newspaper, complimentary bicycles, and a complimentary film library are also provided.

Times Square is 20 minutes’ underground journey from The Bowery Hotel. Washington Square and New York University are 10 minutes’ walk away. Rooms start at $485 a night.


9. Lowell Hotel

Located in Manhattan's Upper East Side, this upscale hotel is one block from Central Park. The 5-star hotel features 2 fine dining restaurants. Every room offers a flat-screen TV.

Hotel Lowell features spacious rooms furnished with marble bathrooms and a DVD/VCR player. A nightly turndown service and free New York Times newspaper are also provided.

Manhattan Hotel Lowell has a fully-equipped gym with modern equipment. Guests can arrange restaurant, entertainment and transportation reservations at the concierge desk.

On-site dining is possible at The Pembroke Room or The Post House, a gourmet steak and chop house. Room service is also available 24-hours at the Hotel Lowell in Manhattan.

Hotel Lowell is 5 blocks from Midtown with boutique shops and international restaurants all within walking distance. Carnegie Hall is a 15-minute walk away. Rooms start at $720 a night.



8. Andaz 5th Avenue

The Andaz experience begins the moment you arrive through the bronze-colored doors of our Manhattan hotel on 41st Street and are greeted by an Andaz Host. Have a drink in the lounge while checking in via iPad, or simply en-route to your luxury Manhattan hotel room. Arrival is at your pace, your style.

Andaz 5th Avenue offers uncomplicated and attentive service by real people who are passionate about New York City and their role at one of the most unique hotels in Manhattan.

Renowned designer Tony Chi has created loft-like rooms with oversized bathrooms in travertine marble, with walk-in rain shower, double sinks, and porcelain foot baths. 12' foot floor-to-ceiling windows with views of 5th Avenue and the New York Public Library are standard in all rooms, which starting at 322sq ft are among the largest in NYC. Many of the 47 spacious suites offer private balconies or landscaped terraces. Non-alcoholic mini-bar beverages and snacks, wireless Internet, local phone calls, and access to the gym at our Midtown New York hotel are complimentary, and entertainment is provided by the Geneva Sound System with iPod docking and a 42” HDTV. Rooms start at $355 a night.

7. Casablanca Hotel

This boutique Manhattan hotel is located in the Theater District and steps from Times Square. The hotel offers a daily complimentary continental breakfast, free Wi-Fi and 24-hour access to refreshments.12

The accommodations at Casablanca Hotel include a flat-screen cable TV, DVD player and iPod docking station. A bathrobe and slippers are supplied in the en suite bathroom.

Live piano music can be enjoyed on Friday nights at the Casablanca Hotel – New York City and a social reception with cheese and wine is offered nightly in the Club Room. The continental breakfast includes items like pastries, yogurt and fruit.

Guests can also enjoy Italian cuisine at the on-site Tony’s di Napoli Restaurant.

Bryant Park and Rockefeller Center are within 7 minutes’ walk of the hotel. Rooms start at $342 a night.

6. Hotel Giraffe

Located in the NoMad neighborhood, this boutique New York City hotel is within 10 minutes’ walk of Union Square Park and Chelsea. There is a rooftop garden and free Wi-Fi.

Decorated with photography from the 1920’s and 1930’s, each room at Hotel Giraffe includes amenities like an iPod docking station and flat-screen cable TV.

Every night, guests of Hotel Giraffe – New York City can enjoy a wine and cheese reception in the Club Room. Passes to the off-site New York Sports Club are available.

The complimentary continental breakfast served each morning includes fruit, yogurt, pastries and more. The on-site Bread & Tulips Restaurant serves Italian cuisine.

Madison Square Park and access to the 28th Street underground rail station is within 2 minutes’ walk of the hotel. Rooms start at $370 a night. 


5. Bryant Park Hotel


Centrally located in Manhattan, this boutique hotel is directly across the street from Bryant Park and New York Public Library. The luxury hotel features a 24-hour gym, Free Wi-Fi, and modern rooms.

The stylish rooms at Hotel Bryant Park are decorated with hardwood floors, handmade Tibetan rugs, and leather furniture. Each features a 32-inch LCD TV and Bose CD player. The marble bathrooms include bathrobes and spa toiletries.

Bryant Park Hotel features a modern lobby with red furniture and black marble. A helpful concierge desk is available and the gym offers personal trainers. An evening reception with complimentary drinks is available. Free parking is offered Friday and Saturday.

On-site dining includes the award-winning Koi Restaurant which serves Japanese cuisine. The Cellar Bar offers signature cocktails, music entertainment, and a one-hour open bar for hotel guests Monday through Friday.

The 42nd Street Subway Station is one block from Bryant Park Hotel. Times Square and the Empire State Building are a 10-minute walk away and Fifth Avenue is a half-block away. Rooms start at $325 a night.


4. Library Hotel

Located within 2 minutes’ walk of Bryant Park and Grand Central Terminal, this boutique Midtown hotel offers free Wi-Fi, a library and an evening reception with wine and cheese.

Decorated with the theme of a traditional American library, the rooms at Library Hotel include amenities like a flat-screen cable TV and an iPod docking station. A bathrobe and slippers are also provided.

A complimentary continental breakfast with pastries, cereal, and yogurt is served daily in the Reading Room. Fresh fruit, coffee, and tea are available throughout the day. Guests of Library Hotel have access to an off-site fitness centre.

The on-site restaurant, Madison & Vine, serves daily lunch, dinner, and weekend brunch. The rooftop bar and Poetry Garden offer literary inspired cocktails and city views.

Times Square and the Empire State Building are within 15 minutes’ walk of the hotel. The New York Public Library is 2 minutes' walk away. Rooms start at $419 a night.


3. Crosby Street Hotel

Located on a cobbled street in the SoHo neighborhood, this contemporary design hotel features a beautiful inner courtyard and an on-site terrace restaurant. Free Wi-Fi is available throughout the hotel.

The Crosby Street Hotel offers bright, modern rooms with high ceilings and full-length windows. Each is equipped with flat-screen cable TV, DVD player and iPod docking station.

Guests of Crosby Street are welcome to work out in the 24-hour gym or relax in front of the fireplace in the plush drawing room. Films are shown in the hotel’s private theater each Sunday.

The Crosby Bar and Terrace serves gourmet items including breakfast and brunch. An afternoon tea with pastries and sandwiches is offered daily.

The Crosby Street Hotel is adjacent to the Museum of Modern Art Design and 1 block from the Spring Street subway station. Rooms start at $675 a night.


2. The Mark

Located in Manhattan just 1 block from Central Park, this boutique hotel features The Mark Restaurant. With an artistic design, Mark Hotel includes a state-of-the-art gym and spacious guest rooms.

Free Wi-Fi, an iPod docking station and 32-inch flat-screen TV are included in all modern rooms. The large marble bathrooms boast a large soaking tub and mini flat-screen TV. Each room is decorated in ebony and sycamore furnishings.

The Mark Restaurant by Jean Georges serves European and globally seasoned dishes. Signature cocktails and classic drinks are featured at Mark’s Bar.

The Mark features a concierge desk for guests’ convenience various activities can be arranged. Frederic Fekkai Salon is on site and offers hair and beauty treatments.

The Whitney Museum of American Art is 3.5 blocks from this luxury hotel. The 77th Street – Lexington Subway Station is 2 blocks away. Times Square is 15 minutes away by subway. Rooms start at $625 a night.


1. The Greenwich Hotel

This New York City hotel is located in the city’s elite Tribeca neighborhood. It features an underground pool and fitness center, as well as an on-site restaurant and spa.

All 88 rooms at the Greenwich Hotel are individually decorated with luxurious goods from around the world. The rooms include free Wi-Fi access and a minibar stocked with free snacks.

The Greenwich Hotel has a knowledgeable concierge staff to help guests plan their stay in New York. Other features include the on-site Shibui Spa, offering a variety of massages and treatments.

Locanda Verde is the hotel’s on-site restaurant. It serves drinks and Italian cuisine in a relaxing and casual setting.

The Tribeca Performing Arts Center and Washington Market Park are both about 3 blocks from the Greenwich hotel. LaGuardia Airport is 10 miles away. Rooms start at $575 a night.

Friday, January 2, 2015

2015 CMBS Outlook

The economy, coupled with low interest rates, contributed to continued growth in the commercial real estate and securitization markets. Property fundamentals for most CRE segments improved, fueling the appetite for CMBS investment. As demand increased, credit standards continued to ease as competition among loan originators progressed through the year. Credit metrics continued to weaken as leverage climbed to new post crisis highs and debt service trended downward despite lower interest rates and the prevalent use of interest-only loan structures.

Despite the slowdown at the start of the year, the economy posted meaningful growth through the remainder of the year, ending the Q3 at 3.9%. In addition to the economic expansion, employment figures scored solid gains throughout the year, as approximately 241,000 jobs were added in each of the last 11 months, lowering the unemployment rate to 5.8% from 7.0% a year earlier. The increase in payrolls is no longer contained in the technology and energy sectors but has broadened over the past year to include health care and leisure & hospitality, which contributed to economic growth in many regions of the country. This bodes well for commercial real estate (CRE) fundamentals across the U.S.

As the economy continues to expand, KBRA believes that real estate fundamentals will remain stable across all of the property type segments, many of which will experience flat to modest growth. However, the multifamily and lodging sectors are standouts, having experienced marked gains over the past few years. The performance of these two sectors in many markets is at or above that experienced during the height of the last real estate cycle. About Kroll Bond Rating Agency KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).