12/14/2011

Manhattan Office Listings Hit Speed Bump

Several large Manhattan office listings have languished in recent weeks as economic uncertainty and other factors have crimped prices, taking some of the sizzle out of what had been a strong sales market this year.

The buildings at Five Times Square, 711 Third Avenue, One Exchange Plaza and 200 West 57th Street have either been pulled from the market or are no longer actively being shopped. Meanwhile, the tower at 1211 Avenue of the Americas, which went on the block in June, still hasn’t sold.

While a few buildings have traded in recent weeks, investors and brokers agree the market has hit a soft patch, with prices slipping from the levels reached early this year. Market pros said that the combination of concern about instability in Europe, a reduction in the availability of securitized mortgages and a fear of overpaying in an unstable economy have caused some listings to be “dead on the vine.”

“Sellers are not willing to take a lower price, and right now, bidders are becoming a little more reserved,” said one broker. That has caused the bid-ask spread to widen out.

The slowdown seems to be primarily affecting the largest listings and those priced most aggressively. But core investors flush with capital remain willing to pay up in selective cases, and some buyers are hedging their bets by pursuing stakes in properties, rather than outright purchases.

CBRE began shopping the 1.1 million-square-foot Five Times Square in September for AVR Realty of Yonkers, N.Y. AVR, which bought the property for $1.3 billion, or $1,165/sf, near the top of the market in January 2007, hoped to exceed that price. But little interest materialized, and bids were never taken. CBRE is now telling investors that the building, at Seventh Avenue and West 42nd Street, is no longer being actively marketed.

Also in September, SL Green began shopping the leasehold interest in the 570,000-sf building at 711 Third Avenue and a 50% interest in the underlying ground. Market players estimated that the property, between East 44th and East 45th Streets near Grand Central Terminal, was worth roughly $200 million. New York-based SL Green took bids via CBRE, but rejected them and pulled the listing.

The buzz is that the bids came in near the low end of SL Green’s expectations. There was speculation that the REIT was less motivated to sell because in the meantime, it found a buyer for One Court Square, a 1.4 million-sf office complex in Queens, across the East River from Manhattan. An investment group that includes syndicator David Werner agreed to pay roughly $490 million, or $350/sf, for the Long Island City property. Eastdil Secured is the broker.

Broad Street Development, a New York shop led by investor Raymond Chalme, put the 338,000-sf One Exchange Plaza, at 55 Broadway in Lower Manhattan, up for sale in June via Eastdil. It was expected to attract bids of around $140 million, or $414/sf, providing a 6% initial annual yield. But the offering has stalled.

A Feil Organization partnership decided in recent weeks to temporarily shelve its listing of the 180,000-sf building at 200 West 57th Street. The property, which is 96% leased, was expected to command in the neighborhood of $145 million, or $805/sf. But before CBRE took formal bids, the partnership decided it might get a better price by delaying the marketing campaign until the spring. The Feil team should benefit from recently expanding the lease of the largest tenant, Continuum Health Partners of New York. The hospital operator now leases 20% of the space, up from 12%, classifying it as an anchor tenant. The property, built in 1917, is at the northwest corner of Seventh Avenue.

Beacon Capital, a Boston fund shop, is seeking to sell or recapitalize the 2 million-sf building at 1211 Avenue of the Americas via Eastdil. But a big roadblock is the sheer size of the deal — the property is estimated to be worth at least $1.8 billion, or $900/sf. Most of the bids are believed to have been for preferred-equity stakes, rather than full ownership. After six months on the market, no deal appears imminent.

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