NEW YORK CITY-A partnership of Highgate Holdings, Ashkenazy Acquisitions Corp. and Crown Acquisitions has acquired the former Knickerbocker Hotel and an adjacent 10,000-square-foot lot at 1466 Broadway. The selling price on the 300,000-square-foot asset, which in recent years was positioned for office and which Istithmar World Capital gave back to Danske Bank in March after defaulting on a $300-million mortgage, is believed to be slightly more than $180 million. A Highgate spokesman tells GlobeSt.com the company cannot disclose the exact dollar amount, although a source familiar with the deal says the $180-million estimate is in the ballpark.
The investor interest swirling around the historic property, and the fact that there are now about half a dozen comparable Midtown and Midtown South assets on the market, point to a trend, Real Capital Analytics’ Dan Fasulo tells GlobeSt.com. “Because your core, class A-plus assets are getting this pricey already at this point in the cycle, and there’s still that wall of capital that wants to be in commercial real estate, some investors are beginning to look at going further out on the risk spectrum in order to get higher yields,” says Fasulo, managing director at RCA. That means properties with higher vacancies and other risk factors.
In the case of the Knickerbocker, also known as 6 Times Square, the property is largely vacant and its new owners plan an extensive redevelopment. The partnership plans to convert it into a boutique hotel with high-end retail at the base, and to develop the adjoining lot into a new luxury retail complex, according to a release. Jones Lang LaSalle advised Danske Bank in the sale.
Earlier this week, a pair of office properties under the administration of PricewaterhouseCoopers went on the market. They’re the 250,000-square-foot 183 Madison Ave. and the 270,000-square-foot office condominium at 100-104 Fifth Ave. Studley is marketing both properties, which have vacancies of 30% and 20%, respectively, on behalf of the UK-based PwC joint administrators for Rock Joint Ventures.
“We have seen tremendous interest in both properties, during the first year of the administration, while we have been focused on stabilizing the assets,” says Barry Gilbertson, specialist real estate partner at PwC, in a release. “We have been improving the buildings and enhancing value with new leases often at rental terms above market. Such is the potential of the locations for the intimate apparel industries historically located in the Madison Avenue building, and the advertising, media and hedge fund companies in the Fifth Avenue building.”
Both properties offer colorful histories aside from the fact that PwC took them over in the wake of Rock Joint Ventures’ bankruptcy. The 183 Madison property, built in 1925, was formerly owned by the Belmont family of racetrack fame, while the century-old 100-104 Fifth was home to the Peppermint Lounge in the 1980s. The New York Post reported earlier this week that the properties are expected to fetch in the ballpark of $325 and $425, respectively, per square foot.
Published reports over the past few days have focused on other older office assets expected to sell in the low nine-figure range. Crain’s New York Business reported that SL Green Realty Corp. hopes to realize about $117 million by selling the 93-year-old 19 W. 44th St., while the Post says JLL is marketing RFR Holdings’ 11-story 90 Fifth Ave. and Murray Hill Properties’ 25-story 1412 Broadway. The two properties, which date from 1903 and 1927, respectively, are expected to go for approximately $120 million and $160 million, respectively, according to the Post.
As to whether the pricing on these assets is realistic, Fasulo says it’s too soon to tell. More deal velocity will be necessary to get a handle on valuations, he says. However, he adds, “Some investors are going to be surprised at what these go for.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
