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Wednesday, August 12, 2009

J.P. Morgan Shops Its Space: Needs the Cash not the Losses

*now you know that the 3Q rigging is in. Expect banks to have RECORD profits AGAIN. Too bad this stuff is as worthless as ever, but there is no accounting for GREED....
Lender Seeks to Unload Properties Following Bear Stearns and Washington Mutual Acquisitions
J.P. Morgan Chase & Co. is marketing 23 office properties across the nation in an effort to rid itself of excess space. But the bank's timing, amid the worst property market in decades, means any sale is likely to come with sizable concessions.

The portfolio of properties for sale, with a combined 7.1 million square feet of space, includes four notable towers: One Chase Manhattan Plaza, near Wall Street; Four New York Plaza, also in the Financial District; the former headquarters of Washington Mutual in a downtown Seattle skyscraper that also houses the city's art museum; and a landmarked 1929 Art Deco building in Houston, the former headquarters of Texas Commerce Bank. The portfolio is believed to be the largest single portfolio of office properties to hit the market this year and could raise more than $1 billion.

J.P. Morgan already has moved many employees of its investment bank into Bear's former headquarters in Midtown Manhattan, which is located around the corner from J.P. Morgan's corporate offices on Park Avenue.

But selling such a large swath of real estate won't be easy. Values for office space have plummeted as corporations reduce staff. And with financing hard to come by, fewer deals are getting done. Across the country, $5.7 billion in office-building sales closed in the first half of 2009, compared with $30.9 billion in the first half of 2008, according to research firm Real Capital Analytics.

Just eight office buildings were sold in Manhattan in the first half of 2009, at an average price of $470 a square foot, according to Real Capital Analytics. In the same period last year, 43 properties changed hands in Manhattan at an average price of $877 a square foot.

Real-estate experts say that in order to sell some of the buildings, J.P. Morgan must offer incentives, including guaranteeing a building's income stream by structuring a sale-leaseback transaction. "They're not going to be able to sell Chase Manhattan Plaza without leasing back a significant amount of space," said Dan Fasulo, head of research at Real Capital Analytics.

In 2005, 2006 and 2007, investors would pay a premium for a building with vacant or soon-to-be vacant space under the assumption new tenants would pay even higher rents. Today in many ways the reverse is true, as investors look for buildings with high occupancy, high-quality tenants and stable rents.

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