The sale of a half-empty Manhattan building — for less than $1m of its pre-recession price — is being seen as the final hurdle in the American commercial property market recovery.
The six-storey office block at 246 Fifth Avenue was bought at auction for $19m (£11.6m) by the New York-based developer, HH Realty Equities, which paid a hammer price only a million dollars its value at the 2007 height of the property boom.
The auction was conducted online and underscores the market’s faith in a pan-America property recovery.
The building’s previous owner defaulted on $14.5m (£8.8m) of debt that was part of a $3.6bn (£2.2bn) commercial-mortgage backed securities deal. Reaching $20m (£12m) in 2007, the property’s value fell as low as $8.4m (£5.1m) in September, 2012.
“If this building is back to the peak, that means everything in the city is back to the peak,” said Ben Thypin, of New York property research company, Real Capital Analytics.
HH Realty was advised on the acquisition by restructuring specialists, Iron Hound Management, with financing from Starwood Property Trust. The property, which is currently 40 per cent leased, is occupied by companies renting small spaces but it is believed the new owners of the Fifth Avenue building are considering converting it into residential or hotel space.
The surrounding area has undergone a transformation over the past couple of years and was considered a rental area prior to the successful construction of nearby condominiums.
Near record-low interest rates are continuing to lure buyers with the prospect of cheaper financing and rising returns. Lenders are beginning to off-load distressed properties and loans as rising earnings give them a cushion to absorb losses. While investors, confident that the recovery is sustainable, have pushed prices on commercial mortgage-backed bonds to the highest level in two years.
And the speed at which the US property market has revived, gaining strength almost week by week, has staggered many analysts. Despite a flat month in March this year, August prices had recovered to mid-2003 levels but were still 34.5 per cent lower than the 2007 peak. Just four months later, and marked by the Fifth Avenue sale, they have recovered 70 per cent of their losses since bottoming out in December, 2009, boosted mainly by the demand for the prestige office sites in America’s largest cities.
The upward graph dipped slightly earlier this year, according to property researchers Green Street Advisors, because of a rise in Federal Reserve mortgage interest rates but is now back on track to make a full recovery by early next year.
Previous Post
Demand fuels Development in Wellingborough
