The Real Deal New York

Westbrook puts $1B NYC portfolio up for sale

Pvt.equity firm lists 295 Madison, 444 Madison and four residential buildings through Eastdil
By Adam Pincus | April 29, 2013 08:30AM

In a test of how much the office and residential investment markets have recovered since the boom, the private equity firm Westbrook Partners is offering for sale a six-building Manhattan portfolio that is expected to fetch about $1 billion, real estate sources said. 

Midtown-based Westbrook, headed by CEO Paul Kazilionis, acquired most of the buildings in 2007 and invested millions rehabilitating them. Douglas Harmon and Adam Spies, senior managing directors of investment firm Eastdil Secured, are the exclusive sales brokers for the properties, the largest portfolio to hit the Manhattan market this year, a review of listings shows.

The office assets are the 300,000-square-foot 295 Madison Avenue, at 41st Street, which Westbrook acquired in July 2007 for $180 million in a joint venture with the Moinian Group; and 444 Madison Avenue, a 490,000-square-foot office building, stretching from 49th to 50th streets, which Westbrook acquired alone in 2007 for $313.8 million.

The residential buildings — with a total of about 750 rental units and nearly 50,000 square feet of retail — are the Astor, a 212-unit building built in 1901 at 235 West 75th Street on the Upper West Side; the Metro, a 264-unit building at 301 West 53rd Street in Clinton, built in 1979; the 107-unit LexLofts at 90 Lexington Avenue in NoMad, built in 1957; and The Adjacent 88 Lexington Avenue, a tower built in 1927 with 180 units. (Unit counts were obtained from the residential data site StreetEasy.)

“Westbrook has executed on its business plan and increased the [net operating income] over the last several years,” Spies said. Yet, “there is still some meat on the bones.”

About 10 percent to 15 percent of the apartments in the residential buildings are rent stabilized, and, while almost all of the office space in 295 Madison is leased, rents are $5 to $7 per square foot below market, he said.

Buyers can purchase any combination of the assets, and there can be multiple purchasers, Spies said.

Westbrook declined to comment. Moinian did not immediately respond to a request for comment.

The total acquisition cost in 2007 and 2012 for the six properties was $880.4 million, figures from city property records show. Westbrook has been actively buying and selling in recent months. Along with Fortress Investment Group and Atlas Capital Group, in December it purchased the large St. John’s Center in Soho in a deal valued at $540.8 million. And as part of a joint venture with Magnum Real Estate Group, in February it sold a 17-building portfolio to Kushner Companies for $130 million.

The average price per square foot for Class A Midtown office space was $783 per foot in 2012, according to Cushman & Wakefield. Although that has been on a steady rise from the low of $335 per foot in 2009, it is still below the market peak of $941 per foot in 2008.

The most valuable asset, by original purchase price, is the 42-story 444 Madison. After buying the property in 2007, Westbrook inked a deal with retailer Burberry to install the high-end apparel maker as the building’s largest retail tenant and a major office tenant with naming rights. Westbrook also converted a number of floors from multi-tenancy to single tenants. Furthermore, in a sign of the desirability of the property’s location, private investment firm Ellis Lake Capital earlier this month leased the entire 40th floor, with 5,400 square feet, paying some of the highest rents in the city at more than $100 per square foot. The property is more than 95 percent leased, data firm CoStar Group show.

Westbrook acquired most of the residential buildings about six years ago. The firm purchased 90 Lexington from AFA Asset Services for $30.5 million and the Astor for $109.1 million — both in August 2007. In May 2007, it purchased the Metro for $165 million from Extell Development. More recently, in August 2012, Westbrook paid a company affiliated with Halstead Property $82 million for 88 Lexington Avenue.