New Debt City!
How it helped New York boom—and how the bad times now are good news
by Tom Acitelli January 22, 2008
This article was published in the January 28, 2008, edition of The New York Observer.
This article was published in the January 28, 2008, edition of The New York Observer.
“Look at Harry’s deal, for example. He bought how many billions of dollars of real estate for only $50 million?”
Adelaide Polsinelli sells real estate all day for her clients as a top broker at Besen & Associates. She was talking last Thursday about developer and landlord Harry Macklowe’s recent troubles. In February 2007, Mr. Macklowe bought several New York office towers for $7 billion in one of those titanic deals that perfectly reflected this decade’s rowdy, triumphant real estate market.
It was big, first of all: The portfolio included seven prime office towers in Manhattan, North America’s most coveted office market. It had big names: Mr. Macklowe is one of the most well-known landlords in New York, with a portfolio that includes the General Motors Building at 767 Fifth, which he bought in 2003 for $1.4 billion. It involved big amounts: Worldwide Plaza at 825 Eighth Avenue sold for $1.73 billion as part of the deal, the second-biggest building buy in U.S. history.
And, like so much of the recent real estate market, it included a lot of debt.
Mr. Macklowe’s Macklowe Properties put up $50 million for the portfolio; the rest came from lenders. Now, the bills are coming due in early February—one year to the month since the purchase—and “Harry” has put his prized building up for sale: He’s retained ace brokerage CB Richard Ellis to market the GM Building, arguably the world’s most valuable.
Mr. Macklowe is perhaps the most extreme example of real estate debt as the animating factor of the New York City economy right now. Without debt, the city would go broke.
Not exactly, perhaps, but it would be a very different place. It would not be as shiny or as profitable for investment, nor as largely buffeted as it is now from the housing market woes afflicting most of the United States. It would be New York, but it would not be the record New York of the past several years.
Adelaide Polsinelli sells real estate all day for her clients as a top broker at Besen & Associates. She was talking last Thursday about developer and landlord Harry Macklowe’s recent troubles. In February 2007, Mr. Macklowe bought several New York office towers for $7 billion in one of those titanic deals that perfectly reflected this decade’s rowdy, triumphant real estate market.
It was big, first of all: The portfolio included seven prime office towers in Manhattan, North America’s most coveted office market. It had big names: Mr. Macklowe is one of the most well-known landlords in New York, with a portfolio that includes the General Motors Building at 767 Fifth, which he bought in 2003 for $1.4 billion. It involved big amounts: Worldwide Plaza at 825 Eighth Avenue sold for $1.73 billion as part of the deal, the second-biggest building buy in U.S. history.
And, like so much of the recent real estate market, it included a lot of debt.
Mr. Macklowe’s Macklowe Properties put up $50 million for the portfolio; the rest came from lenders. Now, the bills are coming due in early February—one year to the month since the purchase—and “Harry” has put his prized building up for sale: He’s retained ace brokerage CB Richard Ellis to market the GM Building, arguably the world’s most valuable.
Mr. Macklowe is perhaps the most extreme example of real estate debt as the animating factor of the New York City economy right now. Without debt, the city would go broke.
Not exactly, perhaps, but it would be a very different place. It would not be as shiny or as profitable for investment, nor as largely buffeted as it is now from the housing market woes afflicting most of the United States. It would be New York, but it would not be the record New York of the past several years.
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