Carl Schwartz, a partner at Hunton & Williams in New York City, says the uptick in partial-interest deals is related to two major factors: distress and the desire to gain local expertise. "They may be overleveraged and they may need to bring somebody in, and there has been lot of that over the course of the past few years," he says. "We've seen an increase in those types of transactions where somebody is bringing in a new capital partner to deleverage a transaction and in some cases, they are taking over and leaving the former owner in some sort of a carry position."

A prime example is when investment and management firm Paramount Group Inc. recapitalized a 49% interest in its 48-story, class A office tower at 1633 Broadway in Midtown, after affiliates of Morgan Stanley and Bank of America Merrill Lynch exited the partnership in the building. Paramount's new partners in the property include affiliates of Beacon Capital Partners LLC and Paramount Group's Real Estate Fund IV. In addition, SL Green Realty Corp. acquired a preferred equity interest as well.

Nearby, private equity giant Blackstone Group put a 49.9% stake in the World Apparel Center, at 1411 Broadway, on the market, giving co-owner the Swig Co. the opportunity to find a new partner in the property. The building—located between 39th and 40th Streets in the Garment District—is valued at $700 million to $750 million, sources say.

The trend has also taken place in the retail sector. Over the summer, Vornado Realty Trust paid $707 million for the 666 Fifth Ave. retail space currently controlled by a partnership of the Kushner Cos., Crown Acquisitions and the Carlyle Group. On the office side, Vornado took a 49.5% stake in that portion of the 41-story 666 Fifth, entering into a JV with Kushner to recapitalize the property last December.

Woody Heller, executive managing director and group head at Studley, notes that the trend is related to increases in market pricing, but could also be driven by concerns about tax rate changes by the end of the year. "You could sell the property or sell an interest," he says. "A lot of people don't want to give up leasing and/or control of their asset, but they are interested in monetizing a portion of its value before the tax laws change or in the context of this interest rate environment, which is extremely favorable. Selling a partial interest is a way to do that without having to completely sell the asset and/or give up the fee stream associated with its operation."

And the trend, while growing rapidly in New York, is not limited to Manhattan assets alone. Most recently, a joint venture of Blackstone, SL Green and two other New York City-based companies recapitalized the debt on the Cabi Portfolio, a 31-property collection of Southern California office buildings. In a recap totaling $746.8 million, Blackstone is now the majority owner of the JV, and minority partners include Gramercy Capital Corp. and Square Mile Capital Management LLC.

During the recent 2012 ICSC/NAIOP Capital Markets conference in Midtown Manhattan, Adam Metz, senior advisor at Manhattan-based TPG Capital, said that despite the shakeups in the commercial real estate sector, the company recently took a 43% stake in Orlando-based Parkway Properties Inc., which it used to purchase the Hearst Tower in Charlotte's CBD, a secondary market where it needed a local partner with expertise and boots on the ground. "We are looking for a story," he said. "We like those markets, whether it's Florida, Atlanta or Houston, and we think the fundamentals are going to do much better."

Paul Curcio, a principal at Prudential Real Estate Investors' Parsippany, NJ office, said from an economic standpoint, PREI hasn't changed the way it approaches new ventures. "Obviously back in 2007, we were getting into more of a waterfall structure and maybe we weren't getting as much equity from our partners," he said during the ICSC/NAIOP discussion. "On that front, I would say we are now very focused on getting the right alignment. It's all about integrity; either they're going to do what they say they will, or not. Where we have spent more time is on our documents, making sure that if our partners aren't living up to their side of the equation we can get them out, and pretty quickly if we need to."

On the capital side, Metz said the rise of sovereign wealth funds has had a huge influence on the JV marketplace. In addition, pension funds are also making a mark on the industry. Peter Ballon, vice president and head of real estate investments for the Americas of the Canada Pension Plan Investment Board, said at the conference that CPPIB recently partnered with the Goodman Group on raising $890 million toward a new logistics and industrial partnership, making it the board's first direct JV investment in the US. Under the deal, Goodman and CPPIB have targeted an equity amount on a 55/45 basis, representing $490 million and $400 million, respectively.

Ballon's fellow panelist, Michael L. Ashner, chairman and CEO of Bostonbased Winthrop Realty Trust, said the REIT recently formed a 50/50 JV to acquire Sullivan Center, an office/retail property in Chicago's East Loop, for $128 million after buying an existing $146.6-million mortgage loan on the 942,000-square-foot property. Ashner said Winthrop restructured the loan into a $100-million non-recourse mortgage loan by a third party lender and helped its JV partner profit.

But overall, he said partnerships go back to the principal point—human capital. "To some extent, people are going to have character, or they aren't," he said. "They will stand by and assist and work through a bad investment or they won't. You will make that judgment generally in the beginning." Ashner said one element that has changed in Winthrop's JVs is the terms of its debt covenants, "so we can quickly get more control if we need to."

Landis, who has an assemblage near Times Square on the southwest corner of 42nd Street and Ninth Avenue, has had several investors approach the company about potentially partnering, recapitalizing or selling the deal. "We are always looking to talk to people and have an open dialogue," he says. "But people overall are not very motivated to sell unless they have to. It is very, very challenging, especially in Manhattan and the core markets throughout the country, to find good opportunities. People are getting increasingly frustrated. So unless someone is forced to sell or is in a foreclosure situation, owners are saying let's recapitalize the asset and let's take some capital out and be able to use it for other potential acquisitions or opportunities or to pay down debt.' "

This enables the owner to still retain ownership of the asset "and give someone the ability to put in fresh capital," Landis says. "That's why there are a lot of recapitalizations instead of sales, and it makes a lot of sense. It is something we have explored on a couple of our properties here in Manhattan."