2 Startups Buy Distressed NY Tower
07.13.2011 | Real Estate Alert

2 Startups Buy Distressed NY Tower

Two new firms have teamed up to buy a half-leased Manhattan office building in an off-market deal.

GreenOak Real Estate and East End Capital, both of New York, paid $30 million last week for the 120,000-square-foot property at 256 West 38th Street. The seller was Eretz Group, a local investment firm. At the $250/sf price tag, the projected stabilized yield is 9%. East End will manage the property.

The buyers plan to upgrade the lobby, facade and elevator system, lease up the vacant space and sell the building in a few years. The property, between Seventh Avenue and Eighth Avenue, was built in 1924 and renovated in the past decade.

The largest tenant is United Auto Workers. The other tenants use their space as garment showrooms.

GreenOak and East End, both nascent fund shops, look to make off-market, value-added investments in major markets. GreenOak, which was launched last year by former Morgan Stanley executives Sonny Kalsi, John Carrafiell and Fred Schmidt, is seeking to raise $400 million of equity for a fund dubbed GreenOak U.S. The vehicle, which shoots for a 15-20% return, lined up roughly $150 million of initial equity in February. It will buy office, retail and hotel properties nationwide. The company is separately seeking to raise $500 million for a Japanese investment fund called GreenOak Japan. An initial equity close is expected in the fall.

East End was formed in December by investor Richard Ruben and Broadway Partners alumni David Peretz and Jonathon Yormak. The shop is seeking to raise $50 million for East End Capital Fund, which would target 12-15% returns, mostly via mostly office and residential purchases in the Boston-to-Washington corridor. Investors have heard the firm is nearing a first close.