East End Capital, whose principals include alumni of Broadway Partners, signed a contract to purchase what is believed to be its first building, 256 W. 38th St.
Real estate sources said the firm paid about $275 a square foot, or roughly $27 million dollars, for the 97,000-square-foot building between Seventh and Eighth Avenues in the garment district.
Two of East End’s principals, Jonathan Yormak and David Peretz, formerly worked for Broadway Partners, which is run by Scott Lawlor. Broadway Partners was one of the biggest buyers of real estate during last decade’s boom but lost several properties during the bust, including the John Hancock Tower in Boston.
Mr. Yormak had been Broadway Partners’ chief operating officer, but left in 2009 as the company came under increasing pressure from lenders. Neither he nor Mr. Peretz returned calls for comment.
East End’s third principal is Richard Ruben, whose family is a major owner and developer of Manhattan real estate. It is unclear when the trio formed East End.
The West 38th Street property is 75% occupied and rents average $27 a square foot, according to CoStar Property. Sources say the property isn’t especially noteworthy, but with so little real estate for sale in the city, many buyers are grabbing hold of whatever they can get to gain a foothold in Manhattan.
Meanwhile, market fundamentals are improving.
In the first quarter of this year, leasing activity reaching its highest quarterly total since the end of 2006, according to Cushman & Wakefield Inc. Leasing activity for the first quarter soared 34% to 7.6 million square feet from the corresponding period in 2010. The surge in leasing helped lower the vacancy rate to 10%, from 10.5% at the end of last year and 11.6% in the first quarter of 2010.
The increased leasing activity is pushing rents higher. In midtown, net effective rents, which are what the tenant pays after accounting for perks like construction allowances and free rent, rose 24%, to $57.82 per square foot, in the first quarter from the year-earlier period. That spike follows a 48% plunge in rents, to $46.54 a square foot, in the two years that ended in the first quarter of 2010. Nonetheless, overall asking rents in Manhattan are essentially flat, falling slightly, to $54.73 in the first quarter from the corresponding year-ago period.
The stronger leasing market spurred a massive uptick in property sales and refinancing. In the first quarter, about $5.5 billion of sales transactions were completed, up 133% from a year ago. The market has already notched 40% of the total activity that was completed in all of 2010.