UPDATE, Tuesday September 4, 1:41 p.m.: Caspi Development and its partners sold two Bowery office buildings to national developer and landlord Marx Realty for a combined total of $48.5 million.
The properties are located one block away from one another at 135 and 161 Bowery on the Lower East Side and were owned by a joint venture including Caspi, RWN Real Estate Partners and Artemis Real Estate Partners. A fourth company, Ultimate Realty, had a stake in 161 Bowery.
The owners acquired 161 Bowery for $12.75 million in 2014 and 135 Bowery for $16.2 million one year later. The partners netted about $19.5 million by selling the office buildings to Marx Realty.
As The Real Deal reported in 2015, the lead developer’s principal Joshua Caspi aimed to transform the LES strip into an office market focused on tech tenants. The ownership teams of both 135 and 161 Bowery undertook gut renovations of the properties and signed leases with tenants including social media company Kik Interactive, Warner Music, trading technology firm Tradewind and visual effects company Lola.
Avison Young’s Tri-State Investment Sales Group, led by James Nelson, brokered the deal. Nelson said Joshua Caspi was the main point of contact on the owners’ side for both properties.
Nelson said the now that the partners completed their plans for the Bowery buildings, “they’re looking for notably heavy construction projects where they can get in, do a gut rehab, improve, sell and then move on.”
Caspi Development did not immediately respond to TRD’s request for comment. When reached by phone, Joshua Caspi said “That’s all correct except the sell part… I’m not a seller of anything usually… We rarely sell, however one of the partners is [on] a seven-year life span [cycle].”
He identified Artemis as the partner he was referring to but added that the ownership team “collectively saw it as a good price point to sell in the market.” Caspi noted that, with RNW, his company is continuing their “very specific conversion program for boutique office buildings” with new properties in Tribeca and Williamsburg.
The Bowery deal was put in motion when Nelson identified Marx as a potential buyer after the company sold a retail complex in Louisville, Kentucky and was looking for new property in order to complete a 1031 tax-free exchange.
Marx is a division of Merchants National Properties and has a commercial portfolio that spans 4.3 million square feet nationally. President Craig Deitelzweig said the deal represented “a perfect fit for our growth strategy” to increase the company’s footprint in New York and that Marx was looking for more properties to snap up along the Bowery and in LES more broadly.
“We just think it has great upside potential and the reason for that is there’s not that much supply of office properties in that market,” he explained. “People really want to be there.”
Since the deal went into contract, Deitelzweig said Marx has brought aboard one new tenant — Warner’s recently-acquired entertainment and pop culture website UPROXX — at a rent “in the $70s [per square foot]” range. He said the buildings’ current average hovers around the mid-$60s.
Deitelzweig said Marx plans to renovate both lobbies with the hope of raising rents in the office buildings by $10 per square foot. He said both properties are fully-leased.
The Bowery sale is the second multi-property deal for Avison Young’s nascent investment sales group with Nelson at the helm. The broker left Cushman & Wakefield in January to build the now six-month-old team in the Canadian company’s New York office. Nelson’s group’s first deal was the sale of three office condominiums at 420 Fifth Avenue for $54 million.
Editors’ note: Article updated to include comment from Joshua Caspi and reflect the correct total value of the deal according to deed documents.