Apartment bldg sells for $50M.
This may be the largest residential resale transaction.
The 43-story residential building, completed in 1991, was purchased at a sealed bid auction conducted in April. The sale was propelled by mortgagor Crossland Savings Bank, which held a $110 million mortgage for developer Benenson Capital Company, led by Charles Benenson, Laurence A. Tisch & Preston Robert Tisch. The property was never foreclosed.
"I wanted to buy it because its a great opportunity and it's a great time to vote for New York City," said MacDonald from the closing last Thursday evening.
Attorney Jack Weprin, a partner in Goldberg, Weprin & Ustin, handled the closing for the purchasers along with associate Steven Uffner. "I think it's the right time," said Weprin. "I like the idea of foreign money coming into New York."
MacDonald has hired W & M Properties -- Anthony Malkin, president chairman is Peter Malkin, along with William Lie Zeckendorf, to handle leasing and management. "I think they are very aggressive and a very good management company," McDonald said. The two also handle sales at the Alexandria across town at 72nd and Broadway.
Peter Malkin noted that "Tony" and "Will" are the third generation of the families to be working together. Tony Malkin was traveling and not available for comment.
Zeckendorf Realty L.P. and W & M Properties have been working with MacDonald to prepare for the opening. Said Zeckendorf, "Our focus will be property management, rental and sales. It's a superb property with terrific appeal to the U.N., corporate and empty- nester market. The fact that it's empty makes what we plan to do much easier. It's a first- rate property."
MacDonald said his partners, who were not identified at the time of the sealed bid auction, specifically wished to invest in New York City residential real estate. MacDonald has already made other purchases around the country and in New York City.
Wien Malkin & Bettex are counsel to the formal owners, Palais Partners, while Thomas Keltner did most of the work on this transaction, chairman Peter Malkin said.
The 179-units in the elegant condominium, currently known as Le Grand Palais, are brand new and vacant, making it attractive to the group. "This is a luxury building with no brokers or other liens and no reneged units and without a $100 million mortgage," MacDonald added. In fact, original purchasers were given their money back when the offering plan could not be completed with less than 15 percent of the units being sold.
The game plan right now is to sell 15 percent of the units in a bulk sale to obtain the approval of the new condominium plan. Then, MacDonald said, they will rent it up. No bulk buyer is in hand, Zeckendorf admitted, adding that they have had "discussions." A new plan will be submitted in August and they hope to have it out to market in September. "We will definitely have this building in marketing play in September," Zeckendorf added.
There is also about 15,765 square feet of retail on the Second Avenue side comprised of about 6,000 square feet on the first floor and 9,000 square feet on the second.
Andrew Gerringer, vice president of Douglas Elliman, said the new owners paid probably $35 per square foot too much. "It's a 193,000 square foot building with 178,000 for the residential space. So they paid $259 a foot -- I'd be more comfortable paying $225," said Gerringer who had submitted a lower bid on behalf of other investors. "I believe it to be a little high but this says a lot for the market."
Gerringer said the original offering plan had prices of $500 a square foot and up. "Our office was putting in offers in the $300 and $400 range. The bank wouldn't accept them because they were well below the release prices. The building was overbuilt."
"Fifty-million is considered a very aggressive price for that property and was way above the rest of the bids," agreed Peter Hauspurg, president of Eastern Consolidated Properties. "We're sort of amazed that anyone will bid at that level."
Hauspurg noted, however, that if the co-op market upturns in three or four years they will do very well, otherwise it will provide a marginal return.
The building, for the time being known as Le Grand Palais, was finished at the bottom of the market. It remains empty but in pristine move-in condition. Architects Fox & Fowle included a health club containing a 40-foot pool along with details such as apartments with nine-foot ceilings, jacuzzis, and hand-laid parquet floors. High quality granite and marble was used throughout. HRH Construction erected the structure.
MacDonald announced he will hold a contest to rename the building.
"It's a good mixture of studios, ones and twos, with five, full floor penthouse apartments on the top," said Zeckendorf. "The rental market is strong and the condo market is having its best year. Very rarely do you get a superbly finished building that is empty."
"It's a gorgeously finished building but was too much for the market in that location," said Gerringer. "Investors are looking for a 7 to 10 percent return. It will be interesting to see what kinds of prices they get. There are a lot of costs associated with buying and selling."
Abraham Wallach, a senior vice president of First Capital Advisors who had toured the building as a prospective purchaser, said it is lovely and completely ready for occupancy with gorgeous model apartments. The pool had also been filled with water. "There were beautiful penthouses with wonderful terraces and views," he added.
Benenson had purchased the air rights on the west side of the building so that the views were protected but the south side of the building faces "a bunch of derelict buildings" noted Wallach. Because of this, Wallach said, he decided against bidding on the property, noting the original offering plan warns the views could be blocked nearly to the 17th floor. Such a preliminary plan for an 11-story building had been filed for that parcel at the time the original offering plan was written but was disapproved, according to the Buildings Department and nothing has been filed since.
There is nothing to prevent another high-rise to be constructed along Second Avenue blocking that side, Wallach explained.
"My fear was that you buy it as a rental today and if you don't pay too much, you could make an 8 percent or a bit better return," Wallach observed, "but the real money is to be made somewhere down the road selling the units. If they are blocked, it reduces the value."
Zeckendorf noted that zoning laws can change and just because someone could build a building, doesn't mean one will be built.
MacDonald, who was born and raised in San Francisco, has been living in the Big Apple for the past 25 years.
He is an investment banker and specializes in the purchase of property, both in New York City and elsewhere.
According to Malkin: "The building was completed just after the market broke and this infusion is a sense that perhaps the market has hit bottom."
The Electra, an empty building at 290 Third Avenue at 23rd Street, was bought by Beth Israel Hospital for $27 million last November. Parkchester, a 12,000-unit complex in the Bronx, was purchased for more than $100 million more than 20 years ago.
The sale of 320 Park Avenue in March of this year for more than $120 million was the last high price reached in the sale of commercial property this year although the stock transaction for 55 Water Street may top that number.
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|Title Annotation:||building at 250 East 54th Street, New York, New York sells for $50 million|
|Publication:||Real Estate Weekly|
|Date:||Jul 21, 1993|
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