Buying power

Brokers and investors all over the world had hoped last year that city real estate plays would become more plentiful and affordable. Indeed, investors still maintain they are focused on obtaining core assets with New York, the favored world location.

“The market is active and on a strong and stable upswing,” said Douglas Harmon of Eastdil Secured who shepherded last year’s blockbuster sale of 111 Eighth Ave. to Google. “Today there are ample creative solutions to overleveraged or problem properties, and New York City is the epicenter for the world’s investment dollars seeking a safe, liquid, more stable home. For stabilized and core properties the market is sizzling.”

Among other projects, Harmon is currently working on the sale of 245 Fifth Ave. for Joseph Moinian and Goldman Sachs’ Whitehall Funds. The 310,000-square-foot building in the Flatiron district by Madison Square Park was purchased in 2007 for $190 million. But sales have lagged as area owners moan that if they sell an asset, they have nowhere to put the proceeds.

“You are seeing great pricing and a lot of demand and you would think sellers would be responding to it, but they haven’t,” noted Nat Rockett of Cushman & Wakefield. “They say, ‘So I sell this and then what? Why would I trade out of a New York asset and then do what?’”

Office sales therefore have become as rare as white rhinos and many are simply recapitalizations wherein new or current equity buys a percentage.

For example, TIAA-CREF sold a partial interest in the empty former Pfizer building at 685 Third Ave. to Future Funds of Australia. SL Green Realty Corp. bought out the 49.9 percent stake it didn’t already own at 521 Fifth Ave. for $122,604,300 or $502 per square foot, revaluing the building at $246 million.

Harmon and his colleague Adam Spies of Eastdil Secured are conducting the final marketing stages of two jumbo buildings: the sale or recapitalization of the 2.4 million square-foot Starrett Lehigh Building in Chelsea whose value could reach approximately $1 billion and the sale of a 49 percent stake in Paramount’s 2.3 million square-foot 1633 Broadway. That will soon become the Allianz Building for its new 266,000 foot tenant. Value is being pegged at almost $2 billion.

The CB Richard Ellis team of Darcy Stacom and Bill Shanahan is currently pitching 750 Seventh Ave. for Hines. That 600,000 square foot office building in Times Square is 99 percent leased to tenants including Morgan Stanley and is also expected to garner many bids.