Real Estate Record Hits Hurdle
When the private equity firm Somerset Partners announced last month it was acquiring 450 Park Ave. for $1,589 a square foot, a record for a Manhattan office building, it was hailed nationwide as a sign of the historic strength and high demand in the city’s commercial real estate market. Now, just weeks later, the firm is struggling to close the $510 million deal, beset by the rising cost of debt.
The purchase of the 321,000-square-foot office building, at the corner of East 57th Street, is only the latest of several high-profile deals that are in turmoil. Metropolitan Real Estate Investors, an Israeli investment group, only just closed on its acquisition of the Lipstick Building at 885 Third Ave. and 292 Madison Ave. after struggling to secure permanent financing, and Harry Macklowe is reportedly in trouble with his $7 billion acquisition of several Manhattan skyscrapers from the Blackstone Group.
At the time these blockbuster deals were struck, they were touted as signs of an escalating real estate boom. Now that they are in trouble, real estate insiders say it portends a potentially severe downturn.