CBRE Vice Chairman Jeffrey Dunne was thrilled to see the massive $420 million Harborside deal – the one that saw 601W Cos. acquire three luxury office buildings on the Jersey City waterfront from Veris Residential – get to the finish line this week.
Deals like this one – in a tight-money market like this one – don’t get done quickly or easily.
Dunne, however, was just as excited to see how the office market has changed since this deal was agreed upon last October. How much it’s changed, he said, from even the start of the year.
There definitely is renewed hope – and interest, he told ROI-NJ.
“The interest in leasing activity, tours, people looking, kicking the tires, whatever they’re doing – is far greater in the last 60 days than it was at the beginning of the year, as well as the fourth quarter,” he said. “We’ve seen that. And that’s a good sign.”
Why? Dunne had a funny answer – and then some serious analysis.
“Your next question is going to be: ‘Why is that?’ And the answer is, ‘I don’t know,’” he joked. “But I do know it’s happening because I talk to the leasing people, and I see the proposals.
“Maybe Corporate America has finally decided they know what their post-COVID plan is – and they’re starting to execute on it.”
Although not necessarily for deals of this size. After all, the Harborside acquisition currently sits as the largest office deal in the country for 2023 – and the biggest in New Jersey history.
Dunne doesn’t expect to see more deals like this, mainly due to the difficulty of getting financing.
“Large loans are very hard to come by,” he said. “Getting a regional or local bank to do it $10 million, $20 million or $40 million loan is a lot easier than a loan of this sort. So, we’re seeing activity, but it tends to be more on the smaller side.”
Brokering the big deal
The brokers who helped Veris Residential sell Harborside 1, 2 and 3: CBRE’s Jeffrey Dunne, Bill Shanahan and Roland Merchant and Cushman and Wakefield’s Andy Merin, David Bernhaut and Frank DiTommaso.
At $420 million, it is the largest office sale to date in the country.
This is not to say that the market for large Class A office space is dead. Quite the contrary, Dunne said. The best of the best, trophy class as he called it, remains hot.
“I think the better offices in the better locations, the properties that are better kept and have deep amenities like Harborside does, are going to outperform the market,” he said.
“If I looked at occupancies pre-COVID as opposed to now, I would have far higher occupancies in the trophy offices now. The losses are coming in the more commodity-like average buildings.”
This, despite the challenging nature of getting big deals done moving forward, Dunne said.
“I think if you’re going to see larger deals in the future, you’re probably apt to see two things: One is they might be assuming an existing loan, and two, there might be seller-financing involved.”
So, how did Harborside – the massive deal of deals – get done?
Teamwork, Dunne said.
Dunne’s team at CBRE and the team at Cushman and Wakefield, led by executive vice chairman Andy Merin, did their roles. Ultimately, it came down to the buyer and seller – both of which were willing to be patient and work through financing and equity hurdles that are now part of any deal, Dunne said.
“If I had a theme, it would be that we had a great buyer and seller in terms of working together,” he said.
And a great piece of property.
“The real estate helps,” he said. “This was really, really good real estate. If it was marginal real estate, it wouldn’t have gotten done.”