A New York office building owned by a Related Cos. subsidiary is up for sale 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, say people familiar with the matter who asked not to be identified citing private information. That would be a discount of about 67% from the nearly $153 million Related Fund Management paid for it in 2018.
The deal was a distress 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 people said. The loan balance on the tower was more than $100 million, one of the people said. Distress sales have become more common in the office sector as values have fallen below loan amounts.
The ten-story building in Manhattan’s Hell’s Kitchen district has an area of around 20,400 square meters. Tenants include Battery Studios and the advertising agency AKA.
Brokerage business CBRE The sale was handled by Group Inc. Spokespeople for Related, Empire and CBRE declined to comment. Representatives for Namdar and CIBC did not immediately respond to a request for comment.
Office real estate across the U.S. has plummeted in value due to rising borrowing costs and falling demand due to the rise of telecommuting. While newly built or renovated towers have been able to attract tenants at high rents, older buildings have struggled to fill their spaces.
The market has been largely frozen over the past two years as lenders and owners struggled to agree on a price. They held on to their assets rather than being forced to sell them at knockdown prices. But looming maturities and rising costs are forcing more and more owners to limit their losses. Banks, which often do not want to take on the management of office buildings themselves, also have an incentive to work with landlords to find buyers for the properties, including through distress sales.
Some deals, including this one, have shed light on how investors value the buildings. Other office buildings that have recently been sold include 1740 Broadway, the Black Stone Inc. bought the tower in 2014 for $605 million. The private equity firm eventually wrote off its investment in the tower and reached an agreement with its lender to sell the property this year for around 186 million dollars.
Empire Capital, which invests in commercial real estate on behalf of wealthy families, has been actively seeking deals amid recent real estate market turmoil. The firm bought 1200 Sixth Ave. and a stake in Mercedes House. The firm also teamed up with partners to purchase 1330 Sixth Ave. from Blackstone and developer RXR at a deep discount in 2022.
Empire has previously partnered with Namdar to acquire additional office towers. bought 830 Third Ave. in 2022.
Related Cos. continues to be a major owner of office real estate. The company was one of the main developers behind Hudson Yards, which has attracted tenants such as Steve Cohen’s Point72 and Meta Platforms Inc., the parent company of Facebook. Related founder Steve Ross is also Betting large in the office sector in West Palm Beach, with tenants such as Goldman Sachs Group Inc. since the beginning of the pandemic.