2011’s strong commercial market was powered by struggling landlords

The value of New York City’s 25 largest commercial property sales increased 23 percent in 2011 to $12.27 billion and the median price per square-foot of an office building rose 18 percent to $696, according to Crain’s, but troubling signs lurked behind the impressive outlay.

Many of the largest deals of the year, including the $1.1 billion SL Green Realty and Vornado Realty Trust paid for 99 percent of 280 Park Avenue, were recapitalizations which bailed out troubled landlords. At 280 Park Avenue, owners Invesco and Broadway Partners were running out of reserves, before Vornado and SL Green stepped in.

The fact that it was Vornado and SL Green, two real estate investment trusts, illustrates another theme of 2011 commercial sales. As lending tightened, REITs took advantage of their easier access to capital and became involved in many of the city’s largest deals. That paved the way for UDR’s loud entry into the Manhattan market.

The recapitalizations of 1 Park Avenue and 450 West 33rd Street were two more high-profile examples of the 2011 market. [Crain’s]