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For sales: 1993 year of opportunity.

Beginning in the second quarter of 1992, the New York City market experienced a substantial increase in the number of building purchases. By analyzing this activity, it becomes apparent that the market is dramatically different than it was in the past. Those brokers and advisors that are capable of meeting the demands of the new marketplace will find 1993 a time of opportunity.

The Midtown market activity is predominantly from users that are taking advantage of current market conditions where there is an oversupply of available space and pricing which is substantially less than we have seen in years. International and domestic users are converting requirements which had previously been for leasing space to that of purchasing. There have been approximately 20 transactions in the Midtown market since 1992 and 14 of these have been by users. Pricing has ranged dramatically from a low of $35 per square foot for CBS' purchase of The Ed Sullivan Theater to a high of $468 per square foot for Banco Mercantile de Venezuela's purchase of 11 East 51st Street. The purchases at the top end of this range have been for buildings in prime central core locations and involve buildings that are less than 20,000 square feet in size, while those at the lower end are for much larger buildings that will require considerably more work in their redevelopment.

The Downtown market is being dominated by investors not adverse to risk, with a longer term prospective focused on prices per square foot which have settled to levels that equal rates that could previously be achieved in leases. It is interesting to note that beginning in the second quarter of 1992 transactions were trading at $35 to $56 per square foot and the four transactions which have gone to contract in 1993 range from $11 to $29 per square foot. All of the investment activity in the downtown market which has occurred since 1992 involves 'C' and 'B" quality buildings, with a majority of the "A" quality buildings either in various stages of workOuts with the lenders or still in the foreclosure pipeline, not yet having been put on the open market for purchase. It will be interesting to see how lenders resolve the tremendous disparity in "book value' versus what the market will bear. It is not unlikely that the lenders' balance sheets will not handle the devastating write downs required to sell these properties and as a result will be forced to take the properties in and absorb substantial leases going forward. Unless a creative structure can be devised it is likely that this will keep the top quality buildings in the downtown market tied up for the foreseeable future.
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Title Annotation:Commercial Sales & Leasing; increased sales of New York, New York commercial buildings expected to continue in 1993
Author:Latham, Scott R.
Publication:Real Estate Weekly
Date:Mar 24, 1993
Previous Article:The new deal.
Next Article:Owners adapt leases to meet tenant needs.

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