NEW YORK CITY—At first glance, many investors likely would say that if they had 230 Park Ave. in their portfolio, they'd hang onto the trophy asset as long as possible. But the strategy of seller Monday Properties—along with the needs of its joint venture partner, Invesco Real Estate—led to the trade of the asset last week, executives with both companies tell GlobeSt.com. The building was sold to RXR Realty.
“Historically, we've focused on office space in New York and Washington, DC but some time ago, we made the strategic decision to start harvesting returns on our New York City assets because values are rising and we want to take advantage of that,” admits Anthony Westreich, chairman and CEO of Monday Properties. “We will redeploy the returns from this sale into other markets and asset classes.”
He declined to say what sectors or markets Monday is headed to next. The company sold 386 Park Ave in October 2012 and 1440 Broadway one year later.
“There's a huge amount of demand right now for fixed assets in stable markets like New York City and there's very little supply so when a building as notable as 230 Park Ave. comes on the market, a lot of capital chases it and it becomes competitive,” Westreich explains.
“This building traded at just under a 3.7% cap rate—the NYC market historically has been about 200 basis points over the 10 year, which is at about 2%, so anything lower than 4% suggests the market is overpriced, which is why I'm a seller. We're looking for more attractive yields.”
The strategy isn't long term, Westreich notes. “We love New York—our headquarters are here—and we're always paying attention to this market; it's just pretty hot right now. We intend to come back, we're just waiting for things to cool down a bit.”
Meanwhile, for its part, Invesco was party to the deal, at least in part, because of tax savings, Greenberg Traurig real estate shareholder Richard J. Giusto—who represented the partial property owner in the deal—tells GlobeSt.com. “What was sold were shares in the REIT that owns the LLC which, in turn, is the fee simple owner of the property—that remains the same entity.
“Selling the REIT interest versus the actual property,” he explains, “created income tax and withholding efficiencies.”
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
