The Real Deal New York

Investors that bought at market’s nadir to reap mega profits from sale of office buildings

October 10, 2012 02:00PM

As the commercial real estate market improves, there are hefty profits to be made from selling properties purchased when the market was at its nadir, the Wall Street Journal reported. Now, the values of prime properties, which fell 38 percent in the recession’s early years, are within 4 percent of the highs recorded in 2007. Increased values are tied to ever-lower interest rates and more readily available credit.

In a turn-around, midsize commercial real estate players that bought properties at the bottom are the ones selling today, as opposed to bigger names like Starwood and Blackstone, which made similar moves in the 1990s. For example, George Comfort & Sons, the landlord that bought the 1.8 million-square-foot Worldwide Plaza in 2009 for $600 million, is poised to get the largest profit on a building purchased in the recession.

George Comfort has already received bids over $1 billion; its target is $1.5 billion. Final bids for the office building are due on Friday. [WSJ]

  • AvoidStupidity

    It seems the current wave of buyers have chosen to ignore the lessons of history. Record prices for buildings requires record rents to cover debt service, taxes, operating expenses and tenant improvements. Historically this scenerio usually results in forclosure or selling at a loss. Given the current national and global economic climate their is no certainty that companies are going to relocate or expand and pay record rents in the process. Sure some will but the majority are not as we regulary read in the industry publications. You would think these buyer would heed the lessons of history but either the don’t know about real estate history or they choose to ignore it. I suppose as long as lenders are willing to finance these deals they buyers will do them but it has also been proven that many lenders are also ignorant of history.