With International Investors On The Prowl, More Big-Ticket NYC Assets Hit The Market

In the past month, a flurry of prominent Manhattan commercial properties has hit the market, and all are asking top dollar. But which buyers are ready and willing to shell out hundreds of millions in an ever-changing market remains a question.

Among those properties are The Ritz-Carlton Central Park hotel, which hit the market last month seeking $400M, and The Row hotel, surrounded by Broadway theaters, asking $350M. 

Brokers are adamant that these are no trial balloons, nor are they bait for the opportunity funds that are increasingly eyeing the post-pandemic waters. Instead, some sellers have hit a wall, creating a need to shed jewels from their collection, and buyers, especially international ones, are more than willing to bite.

The activity follows a year of hesitation from buyers and sellers. Just $9.7B in commercial properties traded hands last year, 55% less than in 2022 and 72% below the trailing 10-year average of $34.2B, according to Avison Young data.

“For a lot of these assets, it has not been the right time,” said Jay Morrow, who leads Hodges Ward Elliott’s New York hospitality investment advisory practice.

Morrow said that his brokerage has been hesitant to tell prospective sellers they can secure a strong bid for their properties — even if it means losing business.

“However, it is starting to turn,” Morrow said. 

Last year, the few noteworthy sales included the Qatari sovereign wealth fund's $623M purchase of the storied Park Lane Hotel and Milan-based Prada doling out $835M for a couple of Fifth Avenue buildings.

Overall, the New York City metro area was the third-most-active market for cross-border capital in 2023 after being 15th in 2022, according to data provided by ​​MSCI Real Assets. 

Brokers say investment from overseas is only poised to grow this year. Many are fielding more calls from Asia and the Middle East, especially as international travel increases. 

“Having global capital sources investing into the U.S. and into New York is what makes [large price tags] more palatable,” Morrow said. “Domestically, there aren't as many groups that are writing $400M checks.”

Danielle Ash, a partner in the real estate group at Adler & Stachenfeld, said that while sovereign wealth funds are regularly interested in notable properties, family offices and high net worth individuals are also making more of a buzz.

“Generally, they seem to have the most flexible capital,” Ash said. “If they see something they really like, they don't need to justify it to a massive board in the same way. So they have a little bit more of an ability to jump on those.”

That doesn’t mean U.S. investors aren’t eyeing the market. 

RXR and Ares Management Corp. are seeking to acquire Manhattan offices using a new $1B fund. Lone Star Funds has raised $2B for its seventh opportunistic real estate fund and has targeted $6B in equity. Starwood has a $10B target for its latest investment fund.

But such funds are either in the process of raising capital or largely sitting on the sidelines, brokers said. And regardless, those funds may not be willing to shell out the cash that sellers of trophy assets demand. 

“There’s no opportunism in trophy assets,” said Darcy Stacom, CBRE's former top broker who is launching her own firm next month. “Why would somebody sell a trophy now at an opportunistic price? That just doesn't make any sense. Where people can be opportunistic is not in the trophy space.”

Stacom is marketing a portfolio of largely retail properties owned by the Duell family for $300M, according to Bloomberg. It includes 5 E. 57th St., a tower off Fifth Avenue that houses a David Yurman flagship. 

When high-profile buildings get shopped around, the news causes a splash. It can bring attention to the sellers and raise questions as to why they may want to sell. A low offering price may signal desperation, Ash said.

The Row Hotel, the fifth-largest hotel in New York City, is in the middle of a foreclosure battle as it operates as a migrant shelter. Its listing price equals roughly $263K per room. 

Barings, facing vacancies, has put 100 Wall St. on the market. It is asking $125M for the office tower, less than half of the $270M it paid for it a decade ago, which set a record for Lower Manhattan. The property is being marketed as a potential residential conversion, The Real Deal reported.

And Jeff Sutton's Wharton Properties, which was the seller on both of Prada's Fifth Avenue acquisitions, also unloaded 717 Fifth Ave. to France-based Kering for $963M. That building had been at the center of a foreclosure suit after defaulting on a $300M loan.

Trophy buildings often have complex ownership structures, which can complicate a sale. At 717 Fifth Ave., for instance, SL Green owned an 11% stake. 

“It's not easy to put it on the market. It takes a lot of coordination from different parties. It takes a lot of approvals internally,” Ash said. “When you see these kinds of assets coming on the market, it has a lot more to do with the particular position of the existing ownership structure — what their debt structure looks like, what their operating expenses look like, the risks and issues that they're dealing with at the time.”