A New York City office building owned by an affiliate of Related Companies is to be sold at a deep discount.
Empire Capital Holdings and Namdar Realty Group have agreed to buy the property at 321 W. 44th St. for less than $50 million, said the people, who asked not to be identified discussing the privacy of the property, a discount of about 67% from the roughly $153 million that Related Fund Management paid for it in 2018.
The transaction was a short sale, according to people familiar with the matter, meaning Related and its lenders, including the Canadian Imperial Bank of Commerce, agreed to sell the property for less than the remaining mortgage balance. The tower had a mortgage balance of more than $100 million, one of the people said. Short sales have become more common in the office sector as values fall below the loan amounts.
The 10-story building in Manhattan's Hell's Kitchen neighborhood has about 220,000 square feet of floor space, and tenants include Battery Studios and advertising agency AKA.
Real estate brokerage CBRE Group Inc. handled the sale. Spokespeople for Related, Empire and CBRE declined to comment. Representatives for Namdar and CIBC did not immediately respond to requests for comment.
Office property valuations across the U.S. have plummeted as rising borrowing costs and demand slumps due to the rise in remote work. While new and renovated towers have been able to attract tenants with higher rents, older buildings have struggled to fill vacancies.
The market has been largely frozen over the past two years as lenders and owners couldn't agree on prices and held on to assets to avoid being forced to sell them at bargain prices. But looming maturities and rising costs are starting to pressure more owners to cut their losses. Banks that don't want to take over management of office buildings also have an incentive to work with landlords on deals, including short sales, to find buyers for the properties.
This transaction and others like it highlight how investors are valuing buildings. Other office buildings that have sold recently include 1740 Broadway, which Blackstone bought for $605 million in 2014. The private equity firm eventually wrote off its investment in the tower and agreed with lenders to sell the property this year for about $186 million.
Empire Capital, which invests in commercial real estate on behalf of wealthy individuals, has been actively seeking deals amid the recent real estate market turmoil. The firm bought stakes in 1200 Sixth Ave. and Mercedes House. The firm also teamed up with a partner to buy 1330 Sixth Ave. from Blackstone and developer RXR at a deep discount in 2022.
Empire has previously partnered with Namdar to buy other office towers. The two companies purchased 830 Third Avenue in 2022.
Related Inc. remains a major office owner. It is the master developer of Hudson Yards and has attracted tenants such as Steve Cohen's Point72 and Facebook parent Meta Platforms. Related Inc. founder Steve Ross has also made a big bet on office space in West Palm Beach, landing tenants such as Goldman Sachs Group Inc. since the pandemic began.
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