NYC’s most iconic buildings are falling in value and savvy investors are snapping up deals

New York City is for sale — and it’s going for bargain basement prices. Now, the sales spree is fueling a buyer frenzy that even the city’s most iconic buildings won’t survive.

More importantly, the historic Chrysler Building may soon be sold for peanuts with its operators facing eviction.

In 2019, Aby Rosen’s RFR Holding spent just $75.5 million on the Art Deco skyscraper.

Rosen hoped to return the building to its glory days, perhaps even turning part of the structure into a hotel, and invested $150 million.

But the bargain sale did not include the building’s land, which is owned by Cooper Union. In 2017, ground rent was only $7.8 million, but it has grown to $32.5 million (going to $41 million in 2028).

That’s more than current office tenants pay in rent, and RFR owes the school over $21 million. Now, Cooper Union is trying to terminate RFR’s lease and appointed Cushman & Wakefield to manage the tower, which is only 60% occupied.

Savills is evaluating future options which are likely to include a new lease with a new operator. Meanwhile, the parties are now fighting over the iconic skyscraper in court and declined to comment.

Industry experts say that without a deep rent reduction, no one can afford to make the improvements needed to attract new office tenants at higher rents. But Cooper Union is under a consent decree for past fiscal mismanagement that expires this year, but requires it to cut spending and restore free tuition and needs more than $50 million each year to do so.

RFR is not the only owner in trouble.

Investor Charles Cohen also stopped paying rent on the ground rent, as well as property taxes, on the curved Tower 57 at 135 E. 57th St. and Lexington Avenue. He intended to convert the office building into a residential building, which is not permitted by his ground lease. Now, a state judge has given Cohen the boot, and the property is being marketed with all offers received by JLL’s Andrew Scandalios. Meanwhile, Cohen’s lender, Fortress, is pursuing a UCC sale of a bunch of his properties and a $187 million personal guarantee on a $534 million mortgage he stopped paying this year.

Across the city, brokers say rent-regulated apartment buildings and older office inventory that were once worth, say, $100 million may now be worth $30 million to $50 million. And lenders are getting aggressive in removing bad debts from their books.

“There’s a lot of clearance for lenders and they want to move on from these properties,” said Scandalios, who is handling the sale of 135 E. 57th St. on behalf of the land owners.

“The market went from hibernation to full-throttle action. People will trade for FOMO – fear of missing out. We’re at the bottom and this is the best time to buy in 15 years.”

Adelaide Polsinelli of Compass

“Owners of such properties cannot refinance because they would have to come up with the difference in cash to pay off the mortgage,” said Bob Knakal of BKREA. Instead, they’re handing over the keys — or fighting it out in court.

The drop in values ​​has stunned the industry. The 930,000-square-foot ground lease in the former Sports Illustrated building at 135 W. 50th St. it just sold for $8.5 million – its last tab was $332 million. The new Texas-based owners will now undertake $100 million in renovations, sources said.

In another example, Brookfield’s office building at 1 Liberty St., once valued at $1.5 billion, was recently revalued at $1 billion when it took out a $750 million mortgage to upgrade its facilities.

For buyers looking for a permanent home for their businesses, it’s the opportunity of a lifetime. “We’re seeing a lot of buy-side energy and people want to deploy capital,” Scandalios said.

“User buyers range from fashion and public service organizations to auction houses and financial firms who want to control their own destiny,” added CBRE’s Doug Middleton. “It’s a bit of a herd mentality and they want to make sure they control the physical location in a prime space and won’t be outbid in the future.”

One of those recent buyer-occupier transactions overseen by Middleton was the purchase of the vacant, 69,000-square-foot, cast-iron building at 636 Sixth Ave. along the Ladies’ Mile. The Hotel and Hotel Trade Association paid Nuveen and Union Investment $37.5 million for the retail area and paid Clarion $32 million for the seven floors of vacant office space.

To control the views and its “campus,” JPMorgan Chase is buying 250 Park Ave., an older office building that sits next to its new tower at 270 Park. “It was the right building to check out,” said Darcy Stacom of Stacom CRE, which advised both the bank and its development partner Hines.

However, the buying frenzy is starting to drive up prices for some homeowners. Over a year ago, Stacom said buyers were generally offering $150 to $170 a foot, but “nobody was selling at that price.”

Now, she said, buyers are willing to pay $300 a foot. “That’s why you’re getting so many offers,” Stacom said, noting that buildings are getting 15 to 25 offers. However, these prices are often a third of the original owner’s investment.

“It’s expensive to knock down buildings. It can add a lot. That is why they are trying to convert existing structures.”

Darcy Stacom of Stacom CRE

Sellers well-positioned at the top of the market know their values ​​will rise and are waiting for prices to improve, Scandalios added.

Meanwhile, some buyers are targeting aging office buildings for residential and hotel conversions.

“It’s expensive to knock down buildings,” Stacom said, estimating costs at $35 to $75 per foot. “It can add up a lot. That is why they are trying to convert existing structures.”

Making a pact with the holders of a $500 million mortgage, the 1.2 million-square-foot office building at 111 Wall St. will be converted into 1,500 apartments by conversion guru Nathan Berman and InterVest Capital Partners.

Nearby, Vanbarton, which has converted other Fidi buildings, is in contract to buy 77 Water St. for $95 million, or $175 per foot. It is being marketed by Eastdil Secured on behalf of the Kaufman family company, Sage, which developed it in the 1970s.

Vanbarton is also planning the residential conversion of 1011 First Ave. The Archdiocese of New York is selling the office building for $100 million, in a deal brokered by Middleton, ahead of its move to 488 Madison Ave.

Also uptown, on behalf of Morgan Stanley, a Newmark team is marketing an 11-story boutique office building at 500 Park Ave. on 58th Street – originally the headquarters of Pepsi in the 1960s.

The office floors continue below the base of the adjacent 40-story residential tower. Since the offices are 95% leased, a new owner can upgrade it and add amenities for higher rents.

Adelaide Polsinelli of Compass calls this whole action “The Great Meltdown.”

“The market went from hibernation to full-throttle action,” she said. “People will transact for FOMO — fear of missing out. We’re at the bottom, and this is the best time to buy in 15 years.”