Big Loss: Midtown Manhattan Office Building Sells at 97% Discount
Big Loss: Midtown Manhattan Office Building Sells at 97% Discount
Picture being in Midtown Manhattan, and witnessing the jaw-dropping sale of a 920,000-square-foot office building at 135 West 50th Street. It was sold for an unbelievably low price of just $8.5 million on Ten-X, an online auction site, marking a staggering 97% discount from its original value.
The surprising element lies in the fact that Ten-X typically deals with smaller and less prestigious properties, making this sale an anomaly. However, UBS, the Swiss bank that owns the building, decided to take a chance and listed it on Ten-X through their brokers at JLL, despite expecting significant losses.
The building, classified as a Class A property from the 1960s, recently underwent a $76 million renovation but is currently only 35% occupied. Interestingly, UBS had previously sold the building to Safehold in 2019 for $285 million but retained a long-term lease, a factor that potentially impacted the building's value in the recent sale.
Ten-X, previously known as Auction.com, has primarily focused on residential real estate since its establishment in 2007. It expanded into commercial properties in 2016 and was acquired by CoStar Group in 2020 for $190 million.
UBS's choice of Ten-X for the sale emphasizes their urgency for a quick transaction, despite incurring a substantial loss. The deal is anticipated to be finalized within the next 30 days. This bold move in the real estate world illustrates how even major institutions are turning to online platforms for rapid sales.
Key Takeaways
- A Midtown office building sold for $8.5 million on Ten-X, at a 97% discount.
- UBS listed the 920,000-square-foot property at 135 West 50th Street for $7.5 million.
- Ten-X president Steven Jacobs mentioned UBS's need for a quick sale despite a significant loss.
- The 1960s-era building underwent a $76 million renovation and is 35% occupied.
- The sale is expected to be completed within the next 30 days.
Analysis
The sale of the 135 West 50th Street building mirrors a distressed commercial real estate market, exacerbated by low occupancy rates and high renovation costs. UBS's decision to sell via Ten-X underscores a shift towards online platforms for swift transactions, despite substantial losses. This move could prompt other financial institutions to reconsider their real estate holdings, potentially leading to a surge in similar distressed asset sales. Short-term impacts include financial strain on UBS and a dampened market for high-end office spaces. In the long term, this trend could reshape the commercial real estate landscape, favoring more agile and digital-savvy buyers and sellers.
Did You Know?
- Ten-X:
- Explanation: Ten-X, originally known as Auction.com, is an online platform specializing in the auctioning of real estate properties. Founded in 2007, it initially focused on residential properties and expanded into commercial real estate in 2016. In 2020, it was acquired by CoStar Group for $190 million. The platform allows for quick transactions and has been utilized by major institutions like UBS for selling properties at significant discounts due to its efficiency and the potential for rapid sales.
- Safehold:
- Explanation: Safehold is a real estate investment trust (REIT) specializing in ground leases. Ground leasing involves the ownership of land while the structures built on the land are leased to tenants. In the case of the 135 West 50th Street building, Safehold purchased the property from UBS in 2019 for $285 million, with UBS retaining a long-term lease. This arrangement can affect the market value of the property, as the lease terms can limit the flexibility and potential returns for new owners.
- Class A Property:
- Explanation: In real estate, properties are often categorized into different classes based on their quality, location, and amenities. Class A properties are typically the highest grade, featuring modern amenities, superior construction, and are located in desirable areas. Despite being a Class A property, the 135 West 50th Street building faced challenges such as low occupancy, significantly impacting its market value and leading to its sale at a steep discount.