Author Topic: the death of the urban office building  (Read 24144 times)

Nomad

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Re: the death of the urban office building
« Reply #140 on: September 15, 2020, 08:24:54 AM »
At JPMorgan, Productivity Falls for Staff Working at Home

 ‘Creative combustion’ has taken a hit, KBW analysts say
 JPMorgan CEO Dimon discussed bank’s findings with KBW

https://www.bloomberg.com/news/articles/2020-09-14/at-jpmorgan-productivity-falls-for-younger-employees-at-home?srnd=premium

You can really smell the desperation wafting out of Manhattan - big writedowns must be looming.

I'll give 1:2 odds on the JPM "study" being completely non-empirical. This is my favorite part by far:

Quote
Work output was particularly affected on Mondays and Fridays, according to findings discussed by Chief Executive Officer Jamie Dimon in a private meeting with Keefe, Bruyette & Woods analysts


fareastwarriors

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Re: the death of the urban office building
« Reply #141 on: September 15, 2020, 11:24:27 AM »
At JPMorgan, Productivity Falls for Staff Working at Home

 ‘Creative combustion’ has taken a hit, KBW analysts say
 JPMorgan CEO Dimon discussed bank’s findings with KBW

https://www.bloomberg.com/news/articles/2020-09-14/at-jpmorgan-productivity-falls-for-younger-employees-at-home?srnd=premium

You can really smell the desperation wafting out of Manhattan - big writedowns must be looming.

I'll give 1:2 odds on the JPM "study" being completely non-empirical. This is my favorite part by far:

Quote
Work output was particularly affected on Mondays and Fridays, according to findings discussed by Chief Executive Officer Jamie Dimon in a private meeting with Keefe, Bruyette & Woods analysts

JPMorgan Sends Some Traders Home After Worker Contracts Covid-19

https://www.bloomberg.com/news/articles/2020-09-15/jpmorgan-sends-some-traders-home-after-worker-contracts-covid-19?srnd=premium

Spekulatius

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Re: the death of the urban office building
« Reply #142 on: September 15, 2020, 12:05:29 PM »
Quote from: Nomad

I'll give 1:2 odds on the JPM "study" being completely non-empirical. This is my favorite part by far:

[quote
Work output was particularly affected on Mondays and Fridays, according to findings discussed by Chief Executive Officer Jamie Dimon in a private meeting with Keefe, Bruyette & Woods analysts
[/quote]

Monday’s and Fridays less productive? I would like to know what’s the difference to being in the office then?
Life is too short for cheap beer and wine.

Gregmal

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Re: the death of the urban office building
« Reply #143 on: September 15, 2020, 12:12:19 PM »
Quote from: Nomad

I'll give 1:2 odds on the JPM "study" being completely non-empirical. This is my favorite part by far:

[quote
Work output was particularly affected on Mondays and Fridays, according to findings discussed by Chief Executive Officer Jamie Dimon in a private meeting with Keefe, Bruyette & Woods analysts

Monday’s and Fridays less productive? I would like to know what’s the difference to being in the office then?
[/quote]

Liquor supply 25 ft away vs down the block?

Foreign Tuffett

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Re: the death of the urban office building
« Reply #144 on: September 15, 2020, 12:16:26 PM »
Quote from: Nomad

I'll give 1:2 odds on the JPM "study" being completely non-empirical. This is my favorite part by far:

[quote
Work output was particularly affected on Mondays and Fridays, according to findings discussed by Chief Executive Officer Jamie Dimon in a private meeting with Keefe, Bruyette & Woods analysts

Monday’s and Fridays less productive? I would like to know what’s the difference to being in the office then?

Liquor supply 25 ft away vs down the block?
[/quote]


Hungover on Mondays and half sloshed on Friday afternoons
Former Teldar Paper Vice President

thepupil

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Re: the death of the urban office building
« Reply #145 on: September 15, 2020, 12:41:14 PM »
JPMorgan Sends Some Traders Home After Worker Contracts Covid-19
https://www.bloomberg.com/news/articles/2020-09-15/jpmorgan-sends-some-traders-home-after-worker-contracts-covid-19?srnd=premium

while this does not affect the 2,3,5 year outcome of office REITs, I am surprised they didn't trade down on this.

It’s an awful headline / data point.
« Last Edit: September 15, 2020, 12:58:12 PM by thepupil »

fareastwarriors

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Re: the death of the urban office building
« Reply #146 on: September 15, 2020, 09:32:11 PM »

thepupil

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Re: the death of the urban office building
« Reply #147 on: September 16, 2020, 06:15:54 AM »
there are so few post-covid trades of big buildings going on, but here's one

https://therealdeal.com/2020/09/16/what-tenants-are-paying-at-shvo-and-deutsche-finances-big-red-building/
https://therealdeal.com/chicago/2020/08/12/aig-goldman-lend-on-shvos-big-red-buy-in-chicago/
https://en.wikipedia.org/wiki/CNA_Center

Chicago "Big Red" building (I think of it as the CNA building because Loews' CNA was there for a long time and it's a pretty unique building. If you have visited Chicago, you probably recognize it, if of course, when you visit places your idea of a good time is gazing the skyline and thinking of cap rates / rent per foot etc.

The building is 1.2 million square feet, and was purchased for $376 million or $313/foot.

It last traded for $108 million in 2016. CNA sold it to be redeveloped, so without more effort, we don't know what the 2016 buyer's basis is, but I assume they made substantial $ on this.
https://www.chicagobusiness.com/article/20151216/CRED03/151219886/cna-selling-big-red-moving-hq-to-new-office-tower

AIG and Goldman Sachs are providing an 8 year interest only loan. Not sure of the rate, can't find it.

$240 million (63% of the price)

The property is 90% leased at $21.60 / foot which is below market of $40 / foot.
Northern Trust is the biggest tenant for 45% of the space. Their lease goes to 2035.
chicago Housing Authority is 18% to 2037
These two pay $21 / foot and $18 / foot respectively

Average base rent per square foot in the building is in the low-$20 range, well below market rates for the East Loop submarket, where gross asking lease rates are more than $39 per square foot.

If there were no operating costs/property taxes, etc., this would be a 6.2% cap rate, but is probably actually a VERY low cap rate, BUT rents are 1/2 of market, so it's tough to really think about what the cap rate is. The rents won't reset for a very long time in some cases.

I think this is a bullish comp overall for basically any office REIT, but it's just one data point.

If a building in Chicago where the biggest tenants are locked into paying $21 / foot for a long time is worth $313 / foot, what do you think the class A portfolio in sunbelt cities* that's paying $40 / foot, that is CUZ is worth? What do you think theMart (VNO's Chicago asset / huge tech hub) is worth?

if one can get 63% 8 year IO financing on this, what do you think the finacning looks like for better buildings in better geographies.

*as in cities that aren't going bankrupt like Chicago.

« Last Edit: September 16, 2020, 06:20:07 AM by thepupil »

cherzeca

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Re: the death of the urban office building
« Reply #148 on: September 17, 2020, 12:26:13 PM »
"Data from Brivo, a company that provides access-control systems for workplaces, shows that “unlocks” at offices—when someone uses their credentials to enter an office—in late August were down 51% from the end of February. By comparison, visits to manufacturing and warehouse locations, where fewer jobs can be done remotely, remained down by a third."

https://www.wsj.com/articles/americas-offices-sit-half-empty-six-months-into-the-covid-19-pandemic-11600344000?mod=hp_featst_pos4

thepupil

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Re: the death of the urban office building
« Reply #149 on: September 17, 2020, 01:48:04 PM »
"Data from Brivo, a company that provides access-control systems for workplaces, shows that “unlocks” at offices—when someone uses their credentials to enter an office—in late August were down 51% from the end of February. By comparison, visits to manufacturing and warehouse locations, where fewer jobs can be done remotely, remained down by a third."

https://www.wsj.com/articles/americas-offices-sit-half-empty-six-months-into-the-covid-19-pandemic-11600344000?mod=hp_featst_pos4

thanks for sharing. these numbers are shockingly high. I am amazed that half of people are back in some places. the NYC REITs have been saying 10%-20% of people are back and I would've guessed 15-25% elsewhere (in the US). this article is very different than what my impression is from following the REITs.

weird.

trying to think if there a reason that locks/unlocks would overstate occupancy? data seems suspiciously good to me.

Maybe the nuance is that higher rent type of tenants (tech/finance/law etc) that are in the blue chip buildings are functioning better remotely whereas some others are more eager to get back to the office?

Vornado speaking yesterday at BofA
Quote
So, it's going to take some time. Today the utilization rates remain in the low double-digits, that's up from the summer, but we expect that to be 20%, 25% probably as we get further on the [year], as companies are going to remain conservative. But at the same time we're also selectively starting to hear companies that had planned to come back January 1, that are now saying, You know what, let's make that October. Maybe it's going for a third, maybe it's for half.

« Last Edit: September 17, 2020, 02:01:59 PM by thepupil »