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By: Ilana Siyance
Manhattan’s commercial real estate still seems to be struggling, with vacancies and lower prices.
The 23-story office building at 135 West 50th Street in Midtown, located between 7th and Sixth Avenue, sold for just $8.5 million. As reported by the NY Times, on Wednesday the building was sold in an unusual online auction for a shocking 97.5 percent discount.
In 2006, the same building had sold for $332 million. The enormous glass building, which takes up half a block and offers close to one million square feet of space, had once served as the headquarters for Sports Illustrated and enjoyed vibrant occupancy from prominent tenants including the New York Telephone Company (which later became Verizon) and retail jeweler Zales. Currently, the building has a whopping 65 percent vacancy rate—making it one of the least occupied large buildings in Manhattan. The sale, which did not include the land but only the building, reflected just a single buyer’s bid.
The recent sale is undeniable proof of the continuous adverse effect of the Covid-19 pandemic on office buildings in the Big Apple. Developers, brokers and industry experts were all stunned at the outcome. Per the NY Times, David Sturner, a developer whose father’s firm had owned and sold the building in 2006, was shocked by the sale price. The building “certainly wasn’t the greatest asset we owned”, but was a “solid” property, said Sturner. “What’s shocking is how fast the valuations dropped now that we’ve seemingly reached bottom, or close to it,” he added. He said the price reflects the new reality for Manhattan’s office sector. Owning most office buildings is no longer considered a safe investments, Sturner added. Like it or not, companies have shifted more than temporarily to hybrid and remote work options for many employees.
The building at 135 W. 50th St., centrally located across from Radio City, was built in 1963. After the pandemic the building even underwent a series of visible upgrades, in an effort to lure tenants back. The building’s longtime owner, an investment fund managed by UBS Realty Investors, was working to sell the building for below $50 million. That deal fell apart, however, leaving UBS Realty to undertake a two-day, public online auction on real estate auction site Ten-X. The auction site also lists suburban strip malls, motels and apartment buildings. There were dozens of properties for sale by the site at the same time, and the building’s starting bid was set to $7.5 million. There were just seconds left to the auction when the first and only bid came in at $8.5 million. The sign that had read “reserve not met,” quickly turned green and changed to “reserve met”.
According to Ten-X, the reserve price is usually set at around three times the starting price. The auction’s clock was actually extended three times, but only for a total of 10 minutes and 30 seconds. The hammer price was roughly 2.5 percent of what the sellers had paid for the behemoth building. UBS Realty Investors declined to comment. The identity of the new owner will be announced after the sale officially closes, which usually takes roughly 45 days.
Despite the rock bottom price, the seller is still taking on a significant risk. The land the building sits on is owned separately by a publicly traded real estate firm, which collects a monthly lease. The building is only 35 percent occupied, down from about 40 percent a year ago.
