East End Capital formed a partnership with a private family office and took out a $95 million loan to acquire and reposition three Manhattan office buildings. LoanCore Capital provided the financing in a deal which reflects an appetite for Manhattan submarkets that continue to increase in popularity.
Two of the buildings are in the Midtown/Penn Plaza, Garment District submarket. The 21-story, 74,283 square-foot building at 580 Eighth Ave., stands between W. 38th and W. 39th streets. Its tenants include companies in the fashion, construction and design industries. The property is near the partnership’s second building, an 18-story, 117,518 square-foot showroom and office building located at 251 W. 39th St., between Seventh and Eighth avenues. This building’s tenants include fashion, media, advertising and manufacturing businesses.
Both properties are located near Penn Station and the Moynihan Train Hall project that’s underway. The submarket’s proximity to Times Square as well as Hudson Yards is further driving changes in the neighborhood.
The partnership’s third building is located in the Midtown South area where the Flatiron and Gramercy Park neighborhoods meet. The eight-story, 35,075 square-foot building at 36 E. 20th St. is between Broadway and Park Ave. South. With close proximity to Madison Square, Union Square and Gramercy Park, its 3,700 square-foot footplates have attracted fashion and TAMI tenants.
Transwestern’s 2018 Q4 Manhattan office report noted that Midtown South’s availability rate dropped again from Q3, falling from 9.6% to 8.9%—the lowest level it has seen since 2016. The brokerage firm’s research report also pointed out that Midtown South’s average asking rent continued to climb. In Q4 rents rose 4% to $79.99 per square foot, reaching an all-time high, only 18 cents below Midtown’s asking rent.
“We will keep a particular eye on the Midtown South market, which is pulling into close distance of Midtown’s asking rent,” says Danny Mangru, research manager at Transwestern.
A JLL capital markets team led by Aaron Appel, Jonathan Schwartz, Mark Fisher, Matt Collins and Patrick Cotter handled the debt assignment. The property owner was represented by Doug Heitner, Sara Ho and Isaac Stern at Kasowitz Benson Torres LLP.
“As one of New York City’s premier real estate firms, East End is perhaps one of the most qualified operating managers to reposition these underperforming assets and execute the proposed business plan with its partner,” said Schwartz.
The owners are planning to aggressively reposition and re-tenant all three properties. East End Capital will oversee the capital improvements, manage the buildings and serve as the leasing agent.