A New York office building owned by a subsidiary of Related Cos. should be sold at a very reduced price.
Empire Capital Holdings and Namdar Realty Group have agreed to buy the property at 321 W. 44th St. for less than $50 million, according to people familiar with the matter who asked not to be identified citing private information. That would represent a reduction of about 67% from the nearly $153 million paid by Related Fund Management in 2018.
It was a short sale, meaning Related and its lenders, including Canadian Imperial Bank of Commerce, agreed to sell the property for less than the outstanding mortgage amount, the company said. sources. The loan balance for the tower was more than $100 million, one of the sources said. Short sales have become more common in the office sector as values have fallen below loan amounts.
The 10-story building in Manhattan’s Hell’s Kitchen neighborhood is approximately 220,000 square feet (20,400 square meters). Tenants include Battery Studios and advertising agency AKA.
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 a request for comment.
U.S. office buildings saw their valuations fall as borrowing costs rose and demand faltered due to increased remote working. While newly built or renovated towers have been successful in attracting tenants at high rents, older buildings have struggled to fill space.
The market has largely frozen over the past two years as lenders and landlords struggle to agree on prices, holding on to assets instead of being forced to sell them at fire-sale prices. But looming deadlines and rising costs are starting to push more homeowners to cut their losses. Banks, which often don’t want to take over management of office buildings, also have an incentive to work with landlords on transactions to find buyers for the properties, including short sales.
A few transactions, including this transaction, have shed light on how investors value buildings. Other office buildings sold recently include 1740 Broadway, which black stone Inc. purchased for $605 million in 2014. The private equity firm ultimately canceled its investment in the tower and agreed with its lender to sell the property for about $186 million this year.
Empire Capital, which invests in commercial real estate on behalf of wealthy families, is actively seeking deals amid recent real estate market turmoil. The company purchased 1200 Sixth Ave. and a stake in Mercedes House. The company also teamed up with partners to purchase 1330 Sixth Ave. to Blackstone and developer RXR in 2022 for a significant discount.
Empire has also partnered with Namdar previously to purchase other office towers. The pair bought 830 Third Avenue in 2022.
Related Cos. continues to be a major office landlord. The company was a key developer behind Hudson Yards, which attracted tenants such as Steve Cohen’s Point72 and Meta Platforms Inc., Facebook’s parent company. Founding partner Steve Ross is also bet big on office space in West Palm Beach, attracting tenants such as Goldman Sachs Group Inc. since the start of the pandemic.
