An office building in New York owned by an affiliate of Associates Cos. will be sold at a steep discount.
Empire Capital Holdings and Namdar Realty Group have agreed to purchase the property at 321 W. 44th St. for less than $50 million, according to people familiar with the matter, who asked not to be identified citing private information. That would be about 67% cheaper than the nearly $153 million Associate Fund Management paid for it in 2018.
The deal was a short sale, meaning Associate and its lenders, including Canadian Imperial Bank of Commerce, agreed to sell the property for less than the outstanding amount on the mortgage, sources said. The loan balance for the tower was more than $100 million, one of the people said. Short sales have become more common in the office sector as their values have fallen below the loan amount.
The 10-story building in Manhattan’s Hell’s Kitchen neighborhood is about 220,000 square feet (20,400 square meters). Tenants include Battery Studios and advertising agency AKA.
The sale was handled by brokerage company CBRE Group Inc. Representatives for Related Companies, Empire and CBRE declined to comment. Representatives for Namdar and CIBC did not immediately respond to requests for comment.
U.S. office property values have fallen sharply as borrowing costs have risen and demand has fluctuated due to the rise of remote work. While newly built or renovated towers have been able to attract high-rent tenants, older buildings have struggled to fill space.
The market has largely stalled over the past two years as lenders and owners have struggled to negotiate prices, holding on to assets rather than being forced to sell them at fire-sale prices. But looming maturities and rising costs are beginning to push more owners to cut their losses. Banks, which are often reluctant to take over management of office buildings, are also interested in striking deals with landlords to find property buyers, including short sales.
Several deals, including this deal, have shed light on how investors value buildings. Other office buildings that have sold recently include 1740 Broadway, which Blackstone Inc. bought for $605 million in 2014. The private equity firm ultimately wrote off its investment in the tower and agreed with the lender sell the property was worth an estimated $186 million this year.
Empire Capital, which invests in commercial real estate on behalf of wealthy families, has been actively seeking deals amid the recent real estate downturn. The company bought a house at 1200 Sixth Avenue and an interest in the Mercedes House. The firm also teamed with partners to acquire 1330 Sixth Ave. from Blackstone and developer RXR in 2022 at a deep discount.
Empire has also previously partnered with Namdar on other office tower purchases. Pair bought 830 Third Avenue in 2022.
Associates Cos. continues to be a major office owner. The firm was a key developer of Hudson Yards, which has attracted tenants such as Steve Cohen’s Point72 and Meta Platforms Inc., the parent company of Facebook. Corresponding founder Steve Ross is also betting large office in West Palm Beach, attracting tenants such as Goldman Sachs Group Inc. since the start of the pandemic.