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Aby Rosen, the co-founder of RFR Realty, is known for his expensive taste in art, penchant for partying, and celebrity friends.
- Prominent landlord Aby Rosen, who controls the Chrysler Building, has abruptly retreated from two major real estate acquisitions in recent weeks as pandemic crisis overtook New York City.
- The coronavirus has upended the city's $30 billion commercial real estate sales market and has prompted buyers, sellers, and lenders to rethink transactions.
- Major institutions such as Brookfield Properties, Blackstone Group, and Related have meanwhile pulled major assets from the market.
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The owner of some of Manhattan's most recognizable office spires has abruptly stepped away from a pair of major commercial real estate acquisitions, the latest sign of the deep chill that has been cast over the city's multi-billion-dollar real estate investment market by the coronavirus crisis.
Aby Rosen, the co-founder of RFR Realty, a real estate investment firm that controls several prominent Midtown office towers, including the Chrysler Building and the Seagram Building, has put a $400 million deal to purchase the 36-story, 600,000-square-foot office tower at 900 Third Avenue on hold. A source with direct knowledge of the deal said that Paramount Group, the seller of the property, anticipates that Rosen may still complete the acquisition once the pandemic crisis eases.
Separately, Rosen, a German-born real estate investor known for his expensive taste in art, penchant for partying, and celebrity friends, also cancelled his plans last month to buy a nearly 30,000-square-foot retail space in Times Square that had been on the market for $200 million. That space, located at 1600 Broadway in the base of an apartment tower, is home to a large M&M-themed store.
Through a spokeswoman, RFR Realty declined to comment for this article.
The turnabout for Rosen reflects the uncertainty and concerns that have engulfed the real estate market amid the pandemic, which has paralyzed the country's and the city's economy. Unable to occupy their spaces due to social distancing, many office and retail tenants have stopped paying rent, cutting off some landlords from the revenue they need to make mortgage payments, pay partners, and cover other expenses.
Banks and lenders have also pulled back from lending on major real estate deals as questions loom how long the virus will encumber commerce and daily life, and whether the crisis will touch off a recession that could pull the real estate market into a longer slowdown.
"Banks are still lending but they're reserving money for their core clients and they're being hyper-selective," said Dustin Stolly, who co-heads Newmark Knight Frank's debt and structured finance group. "Then there's a number of issuers of commercial mortgage-backed securities who are sitting on loans they haven't been able to securitize and so they're on the sidelines right now."
Stolly said he couldn't comment on any specific situations where commercial real estate buyers were having trouble raising the debt to close deals. He also noted that the Federal Reserve's new $2.3 trillion stimulus plan is targeted to help revive the CMBS markets and encourage lenders to extend new debt to borrowers.
The city's booming sales market could tank
Last year, about $30 billion worth of commercial real estate was sold in New York City, about $5.5 billion of which was done in the first quarter, according to data from Robert Knakal, the chairman of New York investment sales at the real estate services firm JLL.
Knakal said that about $4.9 billion of sales transactions had been completed in the city in the first quarter of this year, a decline of about 11% from the first quarter a year ago.
"I would say the market is cautious right now," Knakal said. "Getting new transactions under contract is challenging."
Rosen is already under pressure to close another large deal to purchase the office building at 522 Fifth Avenue from Morgan Stanley for around $350 million. RFR Realty made a $30 million non-refundable deposit to enter into contract to purchase that property, a source with direct knowledge of the transaction said.
RFR would lose that sum if it is unable to raise financing and close, although the contract grants RFR Realty six months to raise the money, with extensions beyond that that can be triggered if RFR adds millions of additional dollars to its non-refundable deposit, the source said.
Being stuck under contract for a major real estate acquisition has suddenly become a precarious position. Last month, the Wall Street Journal reported that a real estate investment group lost a $35 million deposit when it couldn't close on an $815 million purchase of 220 East 42nd Street, a 37-story office property, after it failed to raise the necessary debt financing.
Sellers pull major deals from the market
The city's rocky sales market has prompted some sellers to cancel or postpone large-scale property offerings.
A partnership between Brookfield and the Blackstone Group recently pulled One Liberty Plaza, a 2.3-million-square-foot office tower in Lower Manhattan, from the market, a source directly familiar with the matter said. (Note: Business Insider's office is located at One Liberty Plaza). The pair had been seeking as much as $1.7 billion for the building.
The large real estate developer Related, meanwhile, has called off an effort to sell the recently built Equinox Hotel at 33 Hudson Yards, according to a source. The offering also included a block of office space in the building.
Blackstone declined to comment. A spokesman for Related didn't respond to a request for comment.
"You can only sell a building once and if your results are not optimal you can't get a do-over," Knakal said. "You want to make sure you do it right, and the current circumstances are not optimal because of the uncertainty."
To be sure, the city's commercial-sales market has shown signs of life as well.
Last week, Brookfield Asset Management completed a deal to buy 315 West 33rd Street, a residential rental, office and retail property, for nearly $450 million from the large New York City focused office real estate investment trust SL Green. Notably, Brookfield negotiated to assume the $250 million mortgage that SL Green had on the property, eliminating the need to have to arrange new financing.
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