Hurricane Aftermath Disrupts NY-NJ Markets
Hurricane Sandy’s record storm surge and whipping winds left commercial real estate owners throughout the New York metropolitan area assessing damages and altering plans for marketing and buying properties.
While the worst devastation hit homes and small businesses along the New York and New Jersey coastlines, there was unprecedented flooding in Lower Manhattan, where some office and apartment buildings may be unavailable for weeks or even months as owners clean up and make repairs.
Meanwhile, transportation and communication problems disrupted marketing and deal flow. For example, while Midtown and Upper Manhattan properties were spared significant damage, property tours on nearly every building for sale were scuttled for several days. “Everything shut down,” one broker said.
In New Jersey, hard-hit by coastal and inland flooding, multiple deals have been shelved or delayed as owners grapple with the effects on their holdings before consummating new deals.
“The focus is, if you own a bunch of assets, you want to make sure they’re up and running properly,” one area broker said. “That takes precedence over a new deal for most people. Decisions to buy, decisions to sell take a little bit of a back seat while I make sure I get my own house in order.”
The storm’s impact also may give buyers pause. Take the listing for a seaside hotel in Asbury Park, N.J. The 254-room Berkeley Hotel, owned by Amsterdam Hospitality of New York, is at 1401 Ocean Avenue, across the street from the beach and boardwalk. The listing, valued at about $40 million, is being handled by Carlton Group. The hotel appears to have escaped largely unscathed, and the immediate area suffered moderate damage. But the large-scale property destruction in other Jersey Shore communities might temper investor appetite for hotels in the region.
At least one listed New Jersey apartment building located in the teeth of the storm also seems to have made it through with minimal damage. The 128-unit Juliana, at 600 Jackson Street in Hoboken, has an estimated value of about $70 million. Finalists submitted second-round bids on Monday, and a winner was expected to be chosen this week or next. HFF is shopping the property for a partnership between Invesco Real Estate of Dallas and Milestone Group of New York.
Investors will likely insist that any damage at properties be fixed before completing a purchase. And owners that were considering whether to list a property, even if it isn’t directly affected by the storm, may want to wait. “Sellers who don’t have to sell by yearend will be better served by waiting until the dust settles in order to get the necessary attention and pricing,” a New York broker said.
Another challenge moving forward, one broker said, will be the availability of due-diligence firms, engineers, environmental consultants and other ancillary service providers that are key to a deal’s closing. Many of those firms may be tied up in projects related to storm cleanup, which could slow some deal flow.
The damage and disruption in Lower Manhattan may prove to be a boon for office buildings farther north as tenants scramble to find temporary office space. One owner of Midtown properties had inquiries from tenants at multiple downtown buildings, including Four New York Plaza, 32 Old Slip and 180 Maiden Lane.