Investment Sales

Channeling Gordon Gekko in Wall Street, Massey Knakal chairman Robert Knakal in his weekly commentary ran down the benefits of a voracious Street when it comes to real estate investment. Taking us back, Mr. Knakal lays out how the stock crises of the past two decades (the dot-com bust, Enron, WorldCom, subprime-backed securities) have spurred a healthier appetite for investment in the bricks-and-mortar tangibility of real estate.

Investors, now more than ever, want to understand what they are investing in. Real estate is so transparent. It is so easy to understand. The income is what the income is, as are the condition of the property and the operating expenses.

Natural gas and heating oil costs are expected to rise considerably as the nation slides into winter, according to a Wednesday New York Times story. (Rising heating oil prices “could be New England’s own Katrina,” wrote one Vermont newspaper recently.) In New York City, these increases could affect building sales as traders must deduce future heating costs not based on today's numbers--or last year's--but on the anticipation that such costs are going to keep going way up. These deductions affect the pricing of buildings on the sales block.

Here was Robert Knakal, chairman of investment-sales firm Massey Knakal, last month in a company release:

Right now we are seeing, for the first time since drilling began in the 1850’s, prices climbing for 7 consecutive years.

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A 91-unit apartment building at the corner of West End Avenue and 101st Street has traded for $83 million, an uplifting note in an otherwise dreary market.

An entity called Sterling American Property Fund IV bought the building, 845 West End Avenue, from Nostra Realty Corp on July 24, according to a deed that entered city records yesterday.

The purchaser had to put down $23 million for the purchase (27.8 percent) and got $60 million in financing from Valley National Bank, according to CoStar.

The 13,398-square-foot building was built in 1930. Two-bedroom apartments in the building rent for between $6,250 and $8,500 a month, according to streeteasy.com.

Correction: The building's square footage is 200,981.

Marquee New York properties notwithstanding, foreign investors are fast losing interest in an American commercial real estate market increasingly buffeted by the credit crisis.

According to an Associated Press report published in today's International Herald Tribune:

"Middle East investment is expected to be flat or down this year compared to a banner year in 2007. More than half way through the year, Mideast investors have shelled out $2.7 billion for U.S. assets, according to Real Estate Analytics Inc., a New York-based real-estate research firm. But at that pace, this year's total sales will likely fall far below last year's $8.2 billion in deals.  read more »

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It's a divorce that may soon dwarf the Brinkley-Cook debacle in ugliness.

The banking industry, pressured by regulators to reduce its exposure to the collapsing real estate market, has been squirming out of its loan obligations to developers, killing projects midstream, according to developers quoted in an article in today's Wall Street Journal:

"As lenders rush to curtail their real-estate exposure and preserve sorely needed capital, they are triggering lawsuits from builders that say the banks have unfairly cut off their construction financing, stopped their projects midstream and forced their companies to the brink of bankruptcy.

'Lender-liability lawsuits are coming. It's only just beginning,' says Michael Hackard, a lawyer in Sacramento, Calif.  read more »

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Soon, we'll be as blase about the bad economic news as we were -- oh so recently -- about the good news.

But not yet. On today's downbeat wire, Reuters reports that, "Commercial real estate prices fell 3.5 percent in May, the biggest drop since at least December 2000, as a slowing economy took a toll on property values, Moody's Investors Service said on Monday."

"Commercial real estate prices, as measured by Moody's/REAL Commercial Property Price Index, are down 5.7 percent from a year earlier and 8.8 percent from their peak in October 2007, Moody's said in a report.

May's decline marked three straight months of negative returns for the index, Moody's said in a report."

For more on this dispiriting development, click here.

The comparative weakness of the dollar and the tanking American economy, coupled with New York City's international cache, have made New York top dog among American cities in its ability to soak up the international real estate dollars, according to Forbes.

The other cities in the top 10 -- which is based on an annual Association of Foreign Investors in Real Estate Survey -- include: 10-Orlando; 9-Phoenix; 8-Las Vegas; 7-Chicago; 6-Boston; 5-Seattle; 4-San Francisco; 3-Los Angeles; and 2-Washington, D.C.

According to the article:  read more »

New York holds the top spot, but not because of the much celebrated pied-à-terre buyers in Manhattan using the weak dollar to buy into pricey neighborhoods, a trend that has flattened out, says Jonathan Miller, president of Miller Samuel, a New York appraisal firm.

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On June 25, as tennis lovers raptly followed the progress of Rafael Nadal and Roger Federer, Serena Williams and her sister Venus on the grass courts in England, a separate Wimbledon drama was happening stateside.

That day, JP Morgan Investment Management closed on the purchase of The Wimbledon from P&H Associates. The building, a 28-story, 230-unit apartment complex at 200 East 82nd Street on the Upper East Side, sold for $150 million.

“The credit crunch has taken its toll on the multifamily market in Manhattan over the last year, with very few transactions completed, but the sale of The Wimbledon ─ at such a strong pricing level ─ verifies there is still a market for prominent buildings with strong fundamentals,” said Jubeen Vaghefi, a managing director at Jones Lang LaSalle, in a statement.  read more »

Haim Revah and partners "emerged unscathed in their refinancing of the iconic Lipstick Building, a New York office tower it bought near the top of the market in 2007 for $607 million," the Wall Street Journal reports this morning.

Mr. Revah's Metropolitan Real Estate Investors and partners had a $60 million loan from Goldman Sachs due July 10, tomorrow. The partners were able to refinance, however, and reduce the principal owed the banking giant.

The Lipstick Building, at 885 Third Avenue, is nearly full, the Journal notes, though a small space remains available on the 33rd floor.

Ronald Winston, son of the founder of the eponymous Harry Winston jewelers, has sold the firm's flagship building at 718 Fifth Avenue for $62 million, according to city records.

Paramount Group, which made the purchase, is apparently on a shopping spree that would make even Harry proud. Albert Behler's Paramount is apparently snapping up 1301 Avenue of the Americas, the Credit Lyonnais Building, for a staggering $1.5 billion.

Neither Paramount Group's spokeswoman nor the spokesperson for Harry Winston could be reached for comment.

Over $13.8 billion in Manhattan investment sales closed or went under contract in the first six months of 2008, a precipitous drop from the $34 billion in sales volume done in the first six months last year. Nearly half of this 2008 volume came via foreign investors.

The numbers come from brokerage Cushman & Wakefield's latest quarterly Manhattan market report, released this morning during a breakfast at Midtown power eatery Michael's.

The dismal investment sales numbers--which cover building, property and portfolio sales--aren't a surprise, really. Nor is the increase in the amount of foreign investment (it accounted for maybe 12 to 15 percent of investment sales in previous six-month periods).  read more »

... Look at real estate in other American cities. And what better cities for comparison than the nation's second and third largest?

Tribune Company potentate Sam Zell is considering selling the Chicago Tribune Tower and the Times Mirror Square complex, home of the Los Angeles Times. He could get as much as $150 million for the Tribune Tower and $235 million for the Times Mirror compex, The Wall Street Journal reports.

A little perspective: Were the 950,000-square-foot Tribune Tower in Manhattan, it would likely fetch as much as $1,000 a square foot, even in this current, rather bearish market. That means Mr. Zell could get nearly $1 billion from its sale. In Chicago, he's lucky if he gets 15 percent of that.

Just sayin'.

Boston Properties chairman Mort Zuckerman appeared on Fox Business Channel on Wednesday. He talked about his record buy of the GM Building, the development at the World Trade Center site, and the foreign investment in city real estate. He also, apropos of nothing (as far as we can tell), took himself out of the 2009 mayoral campaign:

“If you ever hear anybody or me talking about that, you have the right to send me to a serious shrink.”

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My colleague Dana Rubinstein has inside details about the record GM Building deal in today's Observer.

The Wall Street Journal asks the burning question: Why did Mort Zuckerman and partners pay so much for a tower where most of the leases are locked in for several more years?  read more »

Early on Tuesday afternoon, Mort Zuckerman told a REBNY luncheon that he and his partners were closing on the approximately $2.8 billion purchase of the GM Building "as we speak."

At 4:38 p.m., a deed hit city records marking a $690 million transaction between Mr. Zuckerman's group and Macklowe Properties, the former owner of the GM Building, for the office tower at 761 Fifth Avenue (an address for the GM Building).  read more »

The GM Building sale is "closing as we speak." That's according to Mort Zuckerman, who is addressing a Real Estate Board of New York luncheon this afternoon.

Mr. Zuckerman's Boston Properties, along with partners including Goldman Sachs, negotiated the purchase of the Macklowe Properties building late last month in a deal that valued it at around $2.8 billion. It's the most expensive building sale ever.

A group called Fintal Holding S.A. has sold 690 Madison Avenue -- the home of the larger of Madison's two Luca Luca stores -- to an entity called Omandis N.V. for an even $50 million.

A spokeswoman for Luca Orlandi, of the eponymous Luca Luca, yesterday confirmed the designer was selling the building and looking to relocate the store to Fifth Avenue.

Investors, their pockets bulging with foreign capital, will set down in Manhattan this September to eye local real estate investment opportunities, rub shoulders, and draw American investment overseas.

Cityscape -- the firm that put on a popular Dubai convention last year -- will host the the Cityscape USA exhibition on Sept. 10 and 11 at the Jacob Javits Center.  read more »

The trading of smaller apartment buildings in Brooklyn and Queens stood out in an otherwise lackluster first quarter for New York City apartment building sales, according to a new report from research site PropertyShark.

The report tracked apartment buildings that are at least two-family, as well as mixed-use buildings.

The citywide numbers:  read more »

The first few days after the biggest U.S. building sale ever was inked, things at the GM Building were “pretty much routine” in the words of one doorman, save for the presence of a few unofficial, four-legged tenants seen scampering among the stuffed animals at FAO Schwartz.

Not many people who work at the GM Building appeared to notice that Harry Macklowe had hammered out a deal with Mort Zuckerman and partners on Saturday to sell the jewel in his real estate crown for about $2.8 billion. By now, longtime GM tenants have surely grown accustomed to a changing of the guard every so often. Manhattan's most expensive office tower has had four different owners since 1991—five if you count Sheldon Solow—some of whom have shaken things up, and others less so.  read more »

Billy Macklowe, president of Macklowe Properties since 2002, is expected in the next few weeks to succeed his father as chairman of the firm, according to the Wall Street Journal this morning.

The succession, not entirely voluntary on Harry's part, is fallout from the nearly $4 billion deal cut over the weekend that cost the Macklowes ownership of their jewel, the GM Building at 767 Fifth Avenue, as well as three other Midtown towers.  read more »

A group led by Boston Properties chairman and Daily News publisher Mort Zuckerman is set to buy the GM Building from the embattled Harry Macklowe for about $2.9 billion, according to a Saturday morning announcement from Mr. Zuckerman's firm. (The announcement can be read here.) It is the biggest building sale in U.S. history, trumping the $1.8 billion deal for 666 Fifth Avenue, which closed in early 2007.

Mr. Zuckerman's group, which includes Goldman Sachs and Morgan Stanley as investors and advisers, also is set to buy three other midtown towers belonging to Mr. Macklowe: 540 Madison Avenue, a 39-story building at 55th Street; 125 West 55th Street, a 23-story building between Sixth and Seventh avenues; and the 44-story Two Grand Central Tower between Lexington and Third avenues.

The four-tower deal, according to Boston Properties, totals approximately $3.949 billion, including $1.4655 billion in cash and the assumption of $2.4735 billion in fixed-rate debt. The sale of the GM Building is expected to close in June and the others shortly after.  read more »

Still waiting...

Two days after the New York Post declared an announcement was imminent about Mort Zuckerman's effort to buy Harry Macklowe's GM Building (and assorted other towers), we're still waiting.

"[W]e should learn all of the details today, when the pact is due to be announced," the Post reported on Wednesday.

Sorry to sound so impatient, but what a tease!

We'll touch base later.

"[W]e should learn all of the details today, when the pact is due to be announced," the New York Post declared on Wednesday, referring to the ongoing negotiations between Mort Zuckerman's Boston Properties and Harry Macklowe over the fate of his beloved GM Building and four other Manhattan towers.

But, like with much of the Macklowe saga, now in its fourth month, fresh news remained scarce. Yesterday passed with nary a peep from Mr. Macklowe or Mr. Zuckerman.  read more »

From the Post today:

A partnership of Kirk Kerkorian's MGM Mirage and investment company Dubai World has held discussions about buying the Drake Hotel site from developer Harry Macklowe...

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The number of apartment buildings sold in Manhattan above 96th Street in the second half of 2007 dropped 29.5 percent from the first half of the year, according to a new report. The report, prepared by appraisal firm Miller Cicero for investment-sales brokerage Massey Knakal, shows also that the number of walk-up and elevator apartment buildings in Upper Manhattan fell by 30.8 percent from the first half of 2007.

Apartment building sales also dropped in Manhattan below 96th Street. Sales of walk-ups were down almost 50 percent from the first half of 2007. Sales of elevator buildings, however, increased 13.5 percent.

Sales of apartment buildings borough-wide fell 27.5 percent from the first half of 2007 through the second.  read more »

It’s a sign of the times: Japanese firm Hiro North American Properties’ sale of the office tower at 650 Madison Avenue has closed, and, at $680 million, it’s the biggest building sale of 2008 so far (and the only over $400 million). Wasn’t too long ago—10 months, give or take—that $680 million for a Midtown building was ho-hum.

Not anymore. In the fourth month of 2008, $680 million is the new $1 billion. It’s a deal to be picked apart. So let’s do so.  read more »

Eastdil Secured has been hired to market Harry Macklowe's 1.765 million-square-foot office tower at 1301 Avenue of the Americas, according to the Post. The tower could set a single-building sales record, even in this cooling investment sales climate.

If it gets anywhere over $1,000 a square foot--eminently possible for a top-shelf Midtown building--1301 Avenue of the Americas could sell for at least $1.765 billion, which would put it just a shade below the all-time building record of $1.8 billion, which belongs to 666 Fifth Avenue and its owner, Kushner Companies.  read more »

Real estate investor Eyal Ofer has closed on his $525 million purchase of 120 Park Avenue from tobacco giant Philip Morris' parent company, Altria. The Observer reported on the deal in November. Altria is moving its headquarters to Richmond, Va., leaving much of the 643,000-square-foot building up for lease.

Also, it should be noted: The closed deal represents one of the largest investment-sales transactions of 2008 so far.  read more »

Robert Knakal, the chairman of investment-sales brokerage Massey Knakal, wrote in his March "Message from the Chairman" that the volume of property and property-portfolio sales in New York will drop "approximately 20% in 2008."

Why?

"... 2007 will be remembered as the year we started to pay for the Fed keeping interest rates too low for too long."  read more »

I wrote in this week's print edition of The Observer on whether 2008 would be as strong a year as 2007 for investment sales. Long story short: Not likely, because of the credit crunch. Also, 2007 set a remarkable benchmark, one perhaps best-illustrated by investment sales in Lower Manhattan.  read more »

Bloomberg News is reporting that Harry Macklowe plans to sell the GM Building this month. Bids for the 50-story building, arguably the world's most valuable, are due on Feb. 15. And Mr. Macklowe owes billions to his creditors by Feb. 9 (or they need to give him an extension by that date).

So the timing for a multi-billion-dollar sale of the GM Building at 767 Fifth Avenue would not be more opportune for the embattled Mr.  read more »

The Wall Street Journal this morning lays out the stakes for Harry and Billy Macklowe. Bottom line, they owe billions to Deutsche Bank and hedge fund Fortress Investment. They used the billions to finance the epic $7 billion purchase of seven Manhattan office buildings one year ago this month.

Now, the bills are due something awful and the Macklowes may face the disappearance of much of their hard-won empire:  read more »

Just shy of a year since it went to contract, SoHo's 600 Broadway closed for $71 million--more than $1,000 a square foot. We broke the news last year that a group of investors lead by Alex Adjmi bought the six-story home of Pottery Barn from Enterprise Assett Management, and today the Jan. 16 deed was filed in city records.  read more »

We're tempted to wax hyperbolic about the potential sale by Harry Macklowe of the GM Building, so, what the heck, we will: It could fetch a truly historic record, perhaps becoming the biggest single biggest building sale of our lifetimes (and the average age of The Observer's real estate desk is 27.5 right now).

Here's the quick math first, then the historical benchmarks. Most top-flight office towers in New York trade now for at least $1,000 a square foot.  read more »

You're not imagining it: Foreigners really are buying up more of Manhattan lately, and it's not just the condos they adore. They love whole buildings and whole building portfolios, too, apparently.

Foreign buyers account for one-third of the more than $2.6 billion in investment sales in Manhattan currently under contract, according to a report out this morning from brokerage Cushman & Wakefield.

Istithmar has announced the $1.15 billion sale of the former Helmsley Tower at 230 Park Avenue. A partnership between a Goldman Sachs fund and Monday Properties bought the 34-story tower, which Istithmar itself bought in 2005 for $705 million.

The Observer talked with Istithmar CEO David Jackson earlier this year. News of 230 Park's imminent sale was already out.

The Lower East Side building housing Streit's matzo factory has been put on the sales market, Curbed reports. The building, at 148-154 Rivington Street, has been the home of Streit's since 1925; Massey Knakal's marketing it, and it can be torn down or converted into another use. Streit's itself is moving, though it's not clear where.

Larry Silverstein's firm announced on Thursday that it had bought 1177 Avenue of the Americas for over $1 billion. Silverstein properties partnered with the California State Teachers’ Retirement System, and the joint venture bought the midtown tower from Paramount Group.

The Observer broke the news of the deal last month. It's the third big purchase Mr. Silverstein has made with CalSTRS.

SL Green, the city's largest office landlord, announced on Wednesday that it had closed on its $1.575 billion purchase of the two-tower office complex at 388-390 Greenwich Street. Citigroup, the seller in the deal, occupies the 2.6 million-square-foot towers completely and will remain there under a 13-year lease. The Canadian investment firm SITQ was a minority partner in the purchase.

The Observer broke the news of the deal earlier this month.  read more »

The $157 million sale of 470 Park Avenue South has popped up in public records, with the ever-active SL Green shedding yet another Class B property from its portfolio. The buyer, records show, is the insurance giant TIAA-CREF, which seems to have been a relatively inactive trader in the Manhattan real estate scene.  read more »

The sale of 450 Park Avenue has closed for $509 million, according city records. The final sale price means that Somerset Partners bought the 325,000-square-foot Class A office building for just over $1,566 a square foot--a per-foot amount that Bloomberg News has called a U.S. record. Taconic Investment Partners was the seller.

The Observer broke the news of the deal in July.

It seems the Deutsche Bank-owned building at 31 West 52nd Street sold to Albert Behler’s Paramount Group for just shy of $600 million, according to SL Green, the city's biggest office landlord.

Last month, we reported that the building went for more than $500 million, though SL Green today released a slideshow from its investor conference that had a list of recent deals including 31 West 52nd Street (even though, to our knowledge, SL Green wasn't involved in this particular one). The price: $595 million, or $812 a foot for the 723,000-square-foot building.

We have a call out to Paramount to confirm, but haven’t yet heard back.

SL Green, the city's largest office landlord, has agreed to buy Citigroup's two towers at 388-390 Greenwich Street for over $1.575 billion.

SL Green CEO Marc Holliday announced today during the public company’s investor conference that SL Green, in a partnership with the real estate firm SITQ, had gone to contract on two buildings in Lower Manhattan totaling 2.6 million square feet--the size of 388-390 Greenwich.  read more »

A grand old building with the grandest of tenants is going into the hands of a New Jersey-based real estate company.  read more »

The median sales price of Manhattan apartment buildings below 96th Street rose above $500 a square foot for the first time in the first half of 2007, according to a new report from investment-sales brokerage Massey Knakal and appraisal firm Miller Cicero.

The sales price for elevator apartment buildings reached $517 a foot in the first half of the year and the price for walkups reached $508 a foot. These medians were both sizable increases from the first half of 2006.

Other highlights from the report, including stats on Upper Manhattan apartment buildings, after the jump.  read more »

The Waldorf-Astoria Hotel has traded hands as part of one of the biggest property deals in New York City in 2007.

The Shareholders of Hilton Hotels Corporation turned over the hotel at 301 Park Avenue to BH Hotels LLC for $572,343,007, according to real property transfer tax records entered with the city on Nov. 21. Hilton also sold the Hilton New York at 1335 Avenue of the Americas for $757,804,148 and two contiguous lots at 102-108 West 57th Street for $68,989,066.  read more »

Elad Properties is in contract to sell its office building at 250 West Street for about $205 million to a Russian group of investors, according to a source familiar with the deal.

The building sold for about 30 percent more than what Elad paid for it in June 2006, when they bought the building from Citigroup for $142 million.

The sale comes as cash floods in from the company’s condo sales at The Plaza, which is also soon to open its hotel portion.  read more »

Rockrose Development Corp.’s big $228 million buy of 230 Park Avenue South came through on city records today.

Maybe the brothers Tom, Fred and Henry Elghanayan, who own Rockrose, wanted a deal close to home: the 13-story office building sits just four blocks south of Rockrose's offices at 290 Park Avenue South.  read more »

An Upper West Side apartment building has sold for $109,122,536, city records show, with Westbrook Partners buying the 224,000-square-foot building at 235 West 75th Street from AFA Asset Services. The building has 212 apartments, according to PropertyShark.  read more »