In Commercial Observer’s annual recap of this month’s top investment sales of the year in New York City, we wrote that there would be no such sales of at least $ 1 billion in 2021, just like in 2020.
Not quite, in fact.
The 25-story, 697,958 square foot office and retail building in 441 Ninth Avenue, known as Hudson Commons, closed on December 17 for $ 1.033 billion. It is New York City’s largest investment sale by dollar volume since 2019, according to data provider PropertyShark and city archives.
The Manhattan-based private company Cove property group and the Baupost Group, a Boston-headquartered hedge fund, sold the building to the Los Angeles-based company CommonWealth Partners, another private real estate company.
A CBRE team led by Darcy stacom and Bill shanahan, and including Doug Middleton and Alana bassen, negotiated the deal. The team began marketing 441 Ninth in September, and they contracted in November – a pretty quick turnaround, especially given the challenges the pandemic has brought to the New York office market, including high vacancy rates, lots of sublet space, and the endurance of teleworking.
There was competition nonetheless, Stacom said.
“We had very wealthy and institutional international families as well,” she said of the investors vying for the 441 ninth.
The repositioning of the building has probably put it on its billion dollar mark. The property ended up ticking virtually every box on the modern real estate wishlist, including sustainability, amenities and well-being.
Cove and Baupost bought the address four years ago this month for $ 330 million. It was then an eight-story building that began life in the early 1960s as a bonded warehouse and this developer Harry macklowe converted into an office in the 1980s. The new owners built a 17 story glass and steel addition, and spent at least the purchase amount to reposition it as a hotel-like office building with a concierge trained in hotels and restaurants rather than property management, free fruit bowls in the lobby and space with amenities, and signature scents for the common areas (it’s pine right now for the holidays). There are even bespoke events that Hudson Commons tenants can book through said concierge.
The building has 14 outdoor terraces over 14 floors and emphasizes air filtration and contactless technology, including visitor registration via an app – all health-conscious features particularly popular in the midst of the pandemic. “We didn’t have to do a lot of renovations” Amit Patel, a partner of Cove and its COO, said changes to 441 Ninth due to COVID. “The only thing we have done is add bipolar ionization filtration in the lobby and common areas. “
The building is also one of the few office buildings in New York City to achieve LEED Platinum certification for sustainability from the American Green Building Council. Such a distinction resonates particularly with office tenants who, more and more, wanna be seen – by their employees and the public – as respectful of the environment.
In many ways, then, the owners of Hudson Commons anticipated the trajectory of a large number of retail spaces in New York, as the developers started running to turn it into a more desirable and remunerative Class A office space.
This is especially common in a post-COVID landscape where office owners have to provide reasons for workers to come beyond the usual. Phone a welcoming approach rich in amenities Also gives owners an edge when trying to attract businesses, most of which use the workplace as a recruitment and retention tool.
“In the future, we think the office as a product class wants to be a bit of a cultural standard bearer,” said Kevin Hoo, Managing Partner of Cove. “If there is no incentive for companies to recruit and keep their talent locally because you are not providing a space that is ambitious – it is better than [workers] have it at home – then it’s going to be difficult.
Or, as Patel put it, “It’s a 700,000 square foot office building that’s run like a boutique hotel. “
Lyft and platoon anchor the building, which is 75 percent leased. Some 670,000 square feet of office space and 16,000 square feet of retail space are available, and office floors range from 16,000 to 50,000 with ceiling heights of 14 to 28 feet.
The last billion dollar investment sale in New York City was barely a block away from the 441 Ninth. WarnerMedia sold its office condos to 30 meters from Hudson to a subsidiary of the Related companies for $ 2.2 billion. This agreement, which implied that WarnerMedia re-letting the space, closed in June 2019.
Next year will be different. Already, Googlethe $ 2.1 billion buyout of Manhattan St. John’s Terminal is queued to close after the new year. The general speed of investment sales also accelerated in the second half of 2021. And black stone is said to be about to buy a 49 percent stake in A West Manhattan for $ 2.85 billion; this sale would also close next year. More offers are made now that in the pre-vaccine depths of COVID in 2020.
As for the 441 Ninth, CBRE’s Stacom saw the sale coming. Incidentally, she had helped negotiate the 2016 trade at Cove and Baupost, and she negotiated SL Green Realty Corp.the sale of $ 953 million of 410 10th Avenue end of 2020. She said she felt 441 Ninth would capture the interest of investors.
“When we started this marketing, I compared it to GM building future and a lot of people laughed at me, ”said Stacom (she negotiated the $ 2.9 billion sale of the GM building to 767 Fifth Avenue In 2008, then the largest office building business in US history). “Once they came over and saw the real estate, they were like, ‘I understand, I really understand.'”
Tom Acitelli can be contacted at [email protected]