A New York City office building owned by an affiliate of a related company is to be sold at a deep discount.
Empire Capital Holdings Inc. and Namdar Realty Group have agreed to buy the property at 321 West 44th Street for less than $50 million, according to people familiar with the matter who spoke on condition of anonymity. That’s about a 67% discount to the nearly $153 million paid by related fund managers in 2018.
The deal was a short sale, meaning Reliance and its lenders, including Canadian Imperial Bank of Commerce, agreed to sell the property for less than the amount outstanding on the mortgage, people familiar with the matter said. The tower’s loan balance exceeds $100 million, a person familiar with the matter said. Short sales are becoming more common in the office building sector as the value is less than the loan amount.
The 10-story building is located in Manhattan’s Hell’s Kitchen neighborhood and measures approximately 220,000 square feet (20,400 square meters). Tenants include Battery Studios and advertising agency AKA.
Brokerage firm CBRE Group Inc. handled the sale. Spokespeople for Related, Imperial and CBRE declined to comment. Representatives for Namdar and CIBC did not immediately respond to requests for comment.
Office property valuations across the U.S. have fallen sharply as rising borrowing costs and demand fluctuate due to increased remote work. While new or renovated towers are able to attract tenants with strong rents, older buildings struggle to fill space.
The market has largely froze over the past two years as lenders and owners struggled to agree on pricing, allowing them to retain assets rather than be forced to sell at low prices. But looming expiration dates and rising costs are starting to prompt more owners to cut their losses. Banks generally don’t want to take over management of office buildings, but they also have an incentive to work with landlords to find buyers for the properties through deals, including short sales.
Some deals, including this one, shed light on how investors value these buildings. Other recent office tower sales include 1740 Broadway, which Blackstone Inc. purchased in 2014 for $605 million. Agreed to sell the property this year for about $186 million.
Empire Capital, which invests in commercial real estate on behalf of wealthy families, has been aggressively pursuing deals amid the recent housing market turmoil. The company purchased shares in 1200 Sixth Avenue and the Mercedes House. The company also joined forces with partners to purchase 1330 Sixth Avenue from Blackstone and developer RXR in 2022 at a significant discount.
Empire has previously partnered with Namdar to purchase other office buildings. The pair purchased 830 Third Avenue in 2022.
The company in question remains the main office owner. The company is the master developer of Hudson Yards, attracting tenants such as Steve Cohen’s Point72 and Facebook parent Meta Platforms Inc. Related founder Steve Ross has also bet big on offices in West Palm Beach, attracting tenants such as Goldman Sachs Group Inc. since the pandemic began.
