Every so often, a building comes on the block that immediately transcends all others available, even if it’s a bit smaller than some of its neighbors.
The Philip Johnson trophy, the Lipstick Building at 885 Third Avenue, is officially up for sale. Tishman Speyer and its investment partner, Prudential Real Estate Investors, are looking to sell the entire building, said Bill Shanahan, the investment-sales broker at CB Richard Ellis.
“Well, obviously it’s one of New York’s icons,” said Mr. Shanahan, who is marketing the building along with brokering legend Darcy Stacom. “I mean, everyone knows it. You see it and you know it’s Lipstick.”
The skinny, sleek and richly curved tower is 34 stories and 580,000 square feet. It was built in 1986, and designed by Mr. Johnson and John Burgee.
Some buildings, like the World Wide Plaza at 825 Eighth Avenue, sell for jaw-dropping prices like $1.73 billion. Lipstick isn’t that sort of building. Nor will it be a landlord’s biggest moneymaker.
But it certainly will be among its most elegant, and a powerful symbol to mark a portfolio—as Tishman Speyer, the current owner, boasts it on its Web site, along with some of its other prized trophies.
Investment-sales sources think the building could go for anywhere from $850 to $1,000 per square foot—not a watershed sales mark, but a number that will push its sale price close to $500 million.
The building’s main tenant is the elite law firm Latham & Watkins, which controls more than 300,000 square feet (and with rents that are a little below market, said one source, which could mean discounts for a buyer).
The current owner, Tishman Speyer, purchased the Lipstick Building for $235 million in 2004. It then sold 49 percent of the building to Prudential Real Estate Investors in 2005 for reportedly $164 million (do the math and you can see already how Tishman Speyer is making a pretty good profit).
Tishman Speyer has the strongest monopoly on trophies in the city. The company’s portfolio includes Stuyvesant Town and Peter Cooper Village, the Chrysler Building, Rockefeller Center, the New York Times building at 229 West 43rd Street and the Met-Life building above Grand Central.
In January, Tishman Speyer sold one of its trophies, 666 Fifth Avenue, to Kushner Companies for a record-breaking $1.8 billion. (Jared Kushner, a principal at Kushner Companies, is the publisher of The New York Observer.)
No one at Tishman Speyer would comment for this story; but it’s probably safe to say that this deal has more to do with their investment partner than with Tishman Speyer selling off its trophies.
Simply put, Prudential thinks this is a good time to cash out. A subsidiary for Prudential, Pramerica Real Estate Investors, owned a portion of 666 Fifth Avenue, and Prudential also owns 1180 Avenue of the Americas, a 340,000-square-foot building that Mr. Shanahan and Ms. Stacom are currently marketing.
It was also Tishman Speyer that purchased Stuyvesant Town and Peter Cooper Village from the insurance giant MetLife for a record-smashing $5.4 billion last year. Prudential, no doubt, is playing catch up with its insurance rival in a Manhattan investment-sales market where $1,000 a foot for buildings is now far from unusual.
WELCOME TO NEW YORK, THE REAL-ESTATE CAPITAL of the world. Your first coup: Spanish Harlem.
A British real-estate firm will make its debut in the city with a massive $225 million portfolio buy of 47 buildings in East Harlem and seven condo units in the East Village.
The firm, Dawnay, Day Group, purchased the property from the RE Group.
“It’s sort of a watershed deal for these guys,” said Stuart Gross, a broker at Eastern Consolidated who represented Dawnay, Day Group. “They have a very substantial portfolio in the U.K., but they sought to get out of the U.K. and just acquired a portfolio in Germany; and this is their first entrance into the U.S.”
It’s a watershed for another reason, too: the sheer price. Stephen Siegel’s SG2 paid $300 million last month for a Bronx portfolio, a price that the East Harlem portfolio deal stands near. Eastern’s Marcia Rose Yawitz, who represented the RE Group, said that in her 34 years in real estate, deals like this have been, well, sort of rare.
“There have been some larger portfolios, but I don’t remember anything like this—47 buildings,” she said.
The portfolio includes 1,137 residential units and 55 commercial units that stretch from East 100th to East 122nd streets and from Park Avenue to the F.D.R. Drive. It also included seven condo units at 214 East 9th Street.
The brokerage Eastern Consolidated represented both sides of the deal.
It was a portfolio that was hotly contested, said Ms. Yawitz. She said there were some very familiar names competing for this, but it was the London dollars that won it—perhaps due in no small part to how far the British pound can go in the U.S, with each pound worth nearly $2.
“The conversion is a pretty good deal for them,” said Ms. Yawitz. “It wasn’t the main reason they bought it, but it’s obviously a contributing factor.”
Now, Dawnay, Day Group will be in the business of figuring out rent stabilization and hiking up rents where they can in an increasingly gentrified part of the city.
Mr. Gross told his clients that the area was changing.
“East Harlem—that’s their first investment,” he said. “Who would have thought that? When you stroll down 116th Street, it’s like you’re in any part of the city. It’s gone through dramatic improvement thus far and will continue in its equalization of rents.”
Ms. Yawitz seconded that.
“This is for young guys out of college who want their own apartment and want to stay in Manhattan,” she said. “Queens is not where the action is.”
Peter Hauspurg, the C.E.O. of Eastern, also brokered this deal, along with Peter Carillo. Eastern’s Scott Ellard and Zachary Bennett were analysts in the deal.
The Associated Press reported the sale on Monday.