The Real Deal New York

Invesco in contract for $125M Gramercy rental

Building sale marks one of three recent ones in which buyers bypass brokers to make deals

March 09, 2011 04:04PM
By Adam Pincus

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Atlanta-based global investment firm Invesco and its operating partner, Adellco, signed a contract to buy Gramercy Park residential building the Elektra for $125 million, two industry sources said.

Invesco and Adellco agreed in January to buy the 32-story high-rise from a partnership that also includes Adellco and is led by a J.P. Morgan Investment Management fund, the sources said. J.P. Morgan bought the building in 2006 for $92.5 million.

This past December, investment sales firm Holliday Fenoglio Fowler began marketing the 166-unit building located at 290 Third Avenue, between 22nd and 23rd streets, which it said was 97 percent occupied, an article from commercial trade publication Real Estate Alert said.

Insiders said the deal with Invesco was struck without using Holliday Fenoglio Fowler, because Invesco approached Adellco directly with the offer, and Adellco had the right of first refusal. However, at least one source believed HFF would still get brokerage credit. Adellco and HFF did not respond to requests for comment. Invesco declined to comment.

This was not the only deal struck in the past few months in which the buyer approached the seller directly, sources said.

In two recent sales, including the building at 1412 Broadway in December and a mezzanine loan at 535-545 Fifth Avenue in February, the buyer and seller came to an agreement without the direct mediation of the seller’s broker, industry professionals said.

Another broker, who was not involved in any of these transactions, said in an e-mail, “This is not a good story for investment sales brokers.”

But others said in general just the fact that a broker is hired — even if it does not bring in the buyer — encourages bidders to firm up deals.

“The minute I am engaged, dozens of calls flood directly to ownership,” said David Schechtman, senior director at Eastern Consolidated, and a broker who was not a party in any of these transactions.

In the first example, Norman Sturner’s Murray Hill Properties sold 1412 Broadway for $152.5 million to Virginia-based Harbor Group International. Although the deal was marketed by the team of four Cushman & Wakefield brokers who moved to Jones Lang LaSalle last May, there were potential buyers that the seller wanted to approach alone. One was Harbor Group, which ultimately made a winning offer, but not through the brokers, sources close to the deal said.

In another example, SL Green Realty in February bought a $19.5 million mezzanine note on Joseph Moinian’s 535-545 Fifth Avenue at a 6 percent discount, Crain’s reported. The seller was Marathon Asset Management.

Although the note was fully marketed by Mission Capital Advisors with a number of bidders through a competitive process, SL Green went directly to the seller to make the purchase with the top bid, a source said, before the final bids were due. In the end, the real estate investment trust consulted Mission Capital on the offer, the source said, but after the buyer and seller had agreed on the sale.

“We believe the process was open and transparent,” Scott Schwartz, co-head of Marathon’s real estate group, said. During the selection process there was an active dialog with buyers, and “after several weeks it sold to the highest bidder in the market,” he said.

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