2012’s Biggest Money Makers

The Real Deal

Sellers: Sitt Asset Management, Carlton Associates
Address: 1370 Broadway
Total profit: $68.9 million
Annual return on equity: 158 percent

The third most profitable Manhattan building sale of the year was not a flashy Fifth Avenue deal. Instead, it involved a bread-and-butter investor simply buying a property ahead of the market’s curve. In July 2003, Sitt Asset Management and Carlton Associates — the family that launched the Duane Reade drugstore chain — purchased the 275,055-square-foot office building 1370 Broadway at 37th Street for $57.2 million. That was just under the wire, before the boom in investment sales volume and value began the following year. Getting in at such a low price point allowed the Sitt brothers (Eddie, Ralph and David), along with Carlton, to cash out when they took a $60 million mortgage in 2006, city records show. However, because they spent money on upgrades and build-outs for tenants as well as brokerage fees, and saw what appears to be a slim annual profit margin, TRD estimated that $5 million of equity remained tied up with the building. With such little equity in the building, the sellers yielded the extremely high annual return on equity of 158 percent when they sold the property in April to Normandy Real Estate Partners for $123.8 million.

Adam Pincus

Patience Is A Virtue

Tuesday, January 10, 2012

Buyers becoming frustrated as the competition increases.

Building buyers are becoming discouraged by the increased competition for properties but no one is giving up. Real estate investment trust are finding they have an edge to get deals as sellers will take their operating partnerships units as partial payments.

There is also a lot of local and foreign money chasing deals, which is causing prices to rise. This explains why cap rates are touching record lows while prices are approaching 2007's in every asset but hotels.

"Offices are creeping up (and) apartments are ahead of 2007 in cap rates and closing in on prices per foot," says Eric Michael Anton of Brookfield Financial. "Residential condo prices are almost there and retail condos are more aggressive than in ' 07."

"We've been actively looking at properties in the Metropolitan area and becoming increasingly frustrated," says Scott Landis, principal of the Landis Group, which focuses on Class A offices and hotels. " We have patient money and it's our own family money, so we are being disciplined. If I have an opportunity that makes sense, I will take it. And we are also looking outside our comfort area."

Landis has assemblage on the southwest of 42nd Street and 9th Ave. But they are not ready to build.

"We cleaned up the corner and it's a great site," he says. "With everything going on with Related, Yotel and Vornado, it will be great to have something in that location."

Another investor Norman Sturner. "Anything that shows up, there is a buyer for."

Sitt Asset Management is now concentrating on retail properties and using a long-term horizon to make their numbers work. The company just expanded Victoria Secret at 2 Herald Square, where they will be adding 30,000 square feet in their current 25,000-sqaure-foot spread.

Sitt has also purchased properties in the Meatpacking District and sources said is now looking in SoHo. The company did not return calls for comment.

Because SL Green Realty Corp. can offer operating partnership units - essentially a stock with restrictions- to sellers, it's president Andrew Mathias, reported at the Bloomberg Commercial Real Estate Conference that a lot of sellers with tax issues are asking the company to buy their properties.

"They got burned with the 1031s and would rather take (operating partnership) units and ride with SL Green than sell for a 1031 (tax-free exchange) and have to find another property," Mathias says. A recent deal to buy a residential and retail portfolio included SLG paying with some of these operating partnership units, as did last months deal to take a stake in Joseph Moinian's 180 Lane.

By Lois Wiess

Patagonia inks deal for Meatpacking District store

The Real Deal

In another sign that the Meatpacking District is shifting towards the mainstream — and away from its haute couture reputation — the outdoor clothing retailer Patagonia signed a lease last month for ground-floor and lower-level space in a commercial building owned by Sitt Asset Management and the Carlyle Group.

The new store at 414 West 14th Street between Ninth Avenue and Washington Street, will be the Ventura, Calif.-based company’s third location in New York. Patagonia opened its first store, its flagship at 101 Wooster Street in Soho, in 1995; four years later, it opened a second city store on the Upper West Side, at 426 Columbus Avenue between 81st and 82nd streets. Patagonia also leased about 3,100 square feet at 313 Bowery, a source familiar with the deal said.

Patagonia signed a lease for the Meatpacking District space in late July. It is composed of 3,741 square feet on the ground floor and 3,780 square feet on the lower level of the five-story building; the space has been vacant since the building was redeveloped in 2009.

“The Meatpacking [District] as a fashion destination was pioneered by the luxury retailer Jeffrey; however, with the success of the High Line more people — New Yorkers and tourists — are drawn to this area on the far West Side and hence, the interest in the area from contemporary brands,” such as Patagonia, Lisa Rosenthal, a managing director at commercial brokerage Lansco, said. She was not involved in this transaction. Rosenthal added that high fashion and luxury brands remained in the Meatpacking District, but were shifting to Gansevoort and Washington streets, among others.

In 2010, Levi Strauss & Co. signed a deal for the neighboring space in the building, and some of 14th Street’s high fashion tenants have left, like Yigal Azrouel, which moved to Madison Avenue, and Stella McCartney, which is now in Soho.

The asking rent was not available, but a broker familiar with the area said asking rents there are about $375 to $400 per foot for ground floor space. David Sitt of Sitt Asset was quoted in The Real Deal in 2009 saying the firm was asking $800 per square foot during 2008.

The CBRE Group team of Amira Yunis, an executive vice president, and Matthew Krell, a senior associate, represented Patagonia.

Sitt Asset Management, headed by family members Eddie, Ralph and David, partnered with Washington, D.C.-based investment firm the Carlyle Group to purchase the more than 100-year-old building in 2007 for $70 million.

A spokesperson for Crown Retail Services, which was representing the building’s owners, declined to comment, as did Ralph Sitt, speaking on behalf of his family’s company.

CBRE, Crown, Carlyle and Patagonia did not immediately respond to requests for comment.

Adam Pincus

Sitt Asset Buys 113 Spring

NY Post, 3rd Item

Sitt Asset Management has signed a contract to buy 113 Spring St. in SoHo for $32.5 million. The 18,550-square- foot building on one of the best blocks between Greene and Mercer streets was quietly marketed through Richard Baxter et al at Jones Lang LaSalle. Neither Baxter nor Ralph Sitt returned calls for comment.

Current retail tenant Frye Boot signed a 12,000-square- foot triplex during the market doldrums at a blended rent of $75 a foot.

The Sitts recently closed on 450 Broadway for $11 million and are also in contract to buy a three-store retail co-op at 208 Fifth Ave., which backs onto 1130 Broadway.

Lois Weiss

Sitt Asset pays $11 million, plans renovation for Soho retail building

The Real Deal

Sitt Asset Management paid $11 million for 450 Broadway, a five-story retail building in Soho, sources told The Real Deal today. The sale has not yet hit public records. The 13,760-square-foot property, between Grand and Howard streets, belonged to the late Jacob Wiesenfeld, a textile company owner who purchased the building for an undisclosed sum in 1988.

Sitt Asset plans to fix up 450 Broadway, including redoing the façade, with the aim of signing a net lease for the entire property with a mid- to high-level fashion tenant.

Currently, only the basement and first two levels are occupied: the former owner occupied 2,000 square feet of the building, according to Property Shark, and the ground-floor is home to a beauty supply shop.

That tenant’s lease is due in September 2014, while a tenant on the second-floor is on a month-to-month rental agreement, David Sitt of Sitt Asset said.

Sitt Asset has not ruled out a secondary option of converting the currently vacant upper floors to residential condominiums or rental apartments. The building is zoned as a loft building with retail stores, public records show.

The company has not yet retained a leasing broker, but expects to find one at the International Council of Shopping Centers’ annual convention in Las Vegas, which kicks off on May 20, Sitt said.

“Soho is probably one of the most sought after retail areas,” he said. “We chose this partly because we love Soho and we love the area, and [Broadway is] probably one of the most high-traffic retail streets in New York, if not the world.”

In fact, a recent TRD analysis found that in the last year Soho was the busiest neighborhood in Manhattan for retail leasing activity.

Ivan Hakimian, the founder of HPNY, negotiated the sale, industry sources said. He did not immediately return a call seeking comment.

Leigh Kamping-Carder

Normandy closes on $125 million purchase of Sitt’s 1370 Broadway

The Real Deal

Normandy Real Estate Partners finalized its $125 million purchase of the 275,000-square-foot office building 1370 Broadway today, according to several sources. The sellers were Sitt Asset Management and Carlton Associates, the latter of which is the investment arm for the founders of Duane Reade, the Cohen family.

In November, the transaction was reported to be in contract for the same price to New Jersey-based Normany, which is led by managing principals Finn Wentworth, David Welsh and Jeff Gronning.

The 17-story office building, which is at 37th Street, counts company Jay Suites, an executive office firm, as one of its tenant and also houses offices for clothing retailer Esprit. The building has an availability rate of 36 percent, figures from data firm CoStar Group show.

The building was marketed by Eastdil Secured brokers Douglas Harmon and Adam Spies. They did not return calls seeking comment. Normandy and Sitt did not return calls seeking comment. And, a representative from Carlton was not available to comment.

The sale closed today at the offices of Fried, Frank, Harris, Shriver & Jacobson, the attorneys for Normandy, a source close to the deal said.

Sitt Asset and Carlton Associates bought the building in 2003 from SL Green Realty, at the time paying $57.18 million.

Adam Pincus

O, Hark the Herald Angels Superstore

Monday, January 9, 2012

The Victoria's Secret Angels are spreading their wings into a 50,000- square-foot flagship superstore in Herald Square.

The Post has learned that Sitt Asset Management has bought out a parking garage operator at its 2 Herald Square building and has signed a deal with Victoria's Secret to take over the 30,000-square-foot lower level garage.

Currently, the lingerie company occupies a 20,000-square-foot store and 5,900 square feet of offices at the building, which sits on the prominent northeast corner of 34th street in Herald Square. H&M also has a 66,000-sqaure-foot store in the property.

Victoria's Secret will be spending several million dollars in renovation costs, sources said, for a spread that will be large enough to have its own runway for fashion events.

"I think that's pretty spectacular," said retail broker Robin Abrams of the Lansco Corp., who was unaware of the transaction. "Victoria Secrets sales are pretty strong and they are one of the lucky retailers whose business is doing extremely well."

November same-store sales at Limited Brands, the owner of Victoria's Secret, climbed 7 percent, topping analysts' expectations.

While a corner store at that location could now command a rent of $750 a foot, lower level space is significantly discounted.

"I could see the landlord getting somewhere around $75 a foot, more or less. It's tough to know without seeing the space and the height of the ceilings and number of columns," said Abrams. The exact financial arrangements could not be determined.

A Victoria's Secret spokeswoman did not respond to a request for comment.

Ralph Sitt of Sitt Asset Management did not return calls for comment, either.

He was, however, spotted backstage recently with some of the supermodels at the Victoria's Secret fashion show television taping at the Armory.

By Lois Wiess

Broadway Lands Normandy

NY Post

 Normandy real estate partners are scooping up the office building at 1370 Broadway on the SW corner of West 37th Street for $125 Million dollars.

Sources said the 275,000SF property went into contract just before thanksgiving. The factoring business, Rosenthal & Rosenthal is the largest tenant with 57,000SF.

Douglas Harmen, Adam Spies and, Kevin Donner of Eastdil Secure have been marketing the fashion-oriented building on behalf of Sitt Asset Management.

The Sitt Family bought the renovated building in December 2003 from SL Green for a mere $57.18 million and, upgraded the elevators. The current mortgage is just $60 million.

None of the parties returned calls or emails by press times.

Broadway buildings have been the focus of a number of Eastil-led transactions this year that include the recaps of L&M'S 195 Broadway and 200 5th Ave; the nearly $2 billion recap of 1633 Broadway for Paramount; the bankruptcy sale of 1007 Broadway to the Witkoff Group; and the sale of 1450 Broadway to Zar City for $204 million. 

Lois Wiess

Levi’s makes it official at 414 West 14th Street

The Real Deal

Jeans retailer Levi Strauss & Co. has inked a deal for 2,616 feet on the ground floor and the 2,000-foot lower level of the fully rehabilitated 414 West 14th Street retail and office building near the High Line. The six-story property, owned by Sitt Asset Management and the Carlyle Group, was completed in February but stands vacant. As The Real Deal first reported in December, the Meatpacking District space will be the San Francisco-based company’s fifth Manhattan location, adding to spots in Soho, and the Union Square area. A Levi’s spokesperson said then that the company was looking to be “opportunistic during the economic downturn,” by expanding globally. Levi’s new store is expected to open this fall, and the lease is for 10 years with a five-year option. The asking rent on the ground floor space was $400 per square foot, though brokers had said in December that they expected Levi’s to score a significant discount

 

180 Madison sale closes for $146M

The Real Deal

Sitt Asset Management’s sale of a 275,000-square-foot office building at 180 Madison Avenue to the Claret Group has closed for $146.2 million. Sitt paid $91.5 million to buy the building from SL Green four years ago. The 23-story tower, built in 1927, is also known as 24 East 34 Street.

Sitt Buying 2 Herald Square for $500M

CoStar

Another prominent Manhattan office/retail property is changing hands at top dollar. 

In the latest deal, the Sitt family-controlled Sitt Asset Management has agreed to acquire the 316,532-square-foot building office and retail building at 2 Herald Square in Manhattan from RFR Realty LLC for $500 million. 

RFR, the New York firm led by Aby Rosen and Michael Fuchs, acquired the property, also known as the Marbridge Building, in 2000 for $92 million or $290.65 per square foot. This deal pegs the price per square foot at about five times that amount. 

The property is fully leased with rents averaging $47.74 per square foot, according to CoStar information. Tenants include Publicis New York and retailers H&M and Victoria's Secret. 

The Cushman & Wakefield team of Richard Baxter, Ron Cohen, Scott Latham and Jon Caplan brokered the sale of the 12-story building, which was constructed in 1909. 

Founded by Ralph Tawil more than a decade ago, Sitt Asset Management is a family-owned real estate investment firm with a large portfolio of office buildings, shopping centers and residential developments. The firm is run today by Tawil's grandsons, Eddie, Ralph, David and Jack Sitt.

ICSC: Victoria’s Secret takes 60K sf at 2 Herald Square

The Real Deal

Lingerie retailer Victoria’s Secret inked a 60,000-square-foot lease to take two additional floors above its flagship retail location in Herald Square to use as offices, training space and storage.

The store, a division of the Ohio-based public company Limited Brands, signed a lease during the first quarter of 2013 for floors four and five at 2 Herald Square, a 380,000-square-foot office and retail building at the corner of Broadway and 34th Street, owned by Sitt Asset Management, David Sitt, a principal with the firm, told The Real Deal.

The company does not plan to use the floors — each about 30,000 square feet — for selling space, although having the additional stock space should allow the company to merchandise more efficiently, a person familiar with the deal said.

Prior to the new lease, Victoria’s Secret occupied the ground level and a portion of the second floor on a lease that runs to 2016, with three renewal options of five years each, the source said. The retailer signed the new lease for just 3.5 years, with additional options, so that it expires at the same time as its existing agreement. The asking rent was about $60 per square foot.

Sitt Asset represented itself in the transaction, while Richard Hodos, an executive vice president at CBRE Group, represented the tenant. Hodos and Limited Brands did not immediately respond to a request for comment.

The retailer is taking space formerly occupied by ASA College.

Another major tenant in the building, H&M, occupies the ground, and parts of the second and third floors.