Tuesday, May 27, 2008

Boston Properties Buy Confirms '08 Predictions

News of Boston Properties' $4B purchase of the GM building and other Manhattan assets from the Macklowe family shows that a lot of the predictions for 2008 are coming true. For example:

  • It has been apparent for a while that many buyers were over-leveraged and it was only a matter of time before it caught up to them. This may be the biggest example yet of a sale forced by the tightening capital markets, but it probably won't be the last.
  • Coming into 2008 everyone said low-leverage buyers, such as REIT's, would be the most active in 2008 - Boston Properties doesn't disappoint here. Although assumed debt represents 63% of this transaction, that's far below the almost 99% leverage Macklowe used last February to buy the EOP portfolio that now has him in trouble as the loans come due.
  • Many market observers predicted that the major players would consolidate in major markets as riskier secondary and tertiary markets bear the brunt of the downturn. Trophy office properties in Manhattan certainly qualify as major and this looks like a low-risk buy even at a record-setting price.
Thoughts on any other '08 predictions that are coming true?

Llenrock Group

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