Sitt Asset to pay $95M for two retail locations: sources

Midtown firm inks deals to buy in Soho and UES

From left: Adelaide Polsinelli of Eastern Consolidated, 138 Spring Street and Jeff Fishman of RKF
From left: Adelaide Polsinelli of Eastern Consolidated, 138 Spring Street and Jeff Fishman of RKF

Midtown-based Sitt Asset Management has signed unrelated contracts worth more than $95 million to buy two retail buildings, one in Soho and another on a prime stretch of Madison Avenue on the Upper East Side, industry sources said.

In the latest deal, inked last week, Sitt joined retail investor Ashkenazy Acquisition in signing a contract to pay about $47 million for 711 Madison Avenue, at the corner of 63rd Street, industry sources said. The seller is Madison Immobilier NV, a company controlled by Jean-Pierre Lehman, a Swiss native.

Adelaide Polsinelli, senior director at sales brokerage Eastern Consolidated, represented the seller and prospective buyers. She declined to comment.

Fashion retailer Roberto Cavalli occupies the ground floor of the five-story building; work is underway to give Cavalli more space in an area formerly occupied by the popular restaurant Le Bilboquet, as well as former residential space on the second and third floors.

Sitt — led by brothers Ralph, Eddie and David — along with Ashkenazy and the properties’ owners did not immediately return calls seeking comment.

And in an unrelated transaction, in January, Sitt signed a contract for a little more than $48 million to buy 138 Spring Street at the corner of Wooster Street in a deal widely marketed by an investment sales team at brokerage RKF, led by executive vice president Jeff Fishman, sources said. The seller was North Carolina-based Rivercrest Realty Associates. Fishman declined to comment.

Office spaces occupy the upper floors of the six-story building; the roughly 4,600 square feet split between the ground floor and a lower level is home to eyeglass retailer Ilori; the store signed a 10-year lease in 2009.

Asking rents in most of Manhattan’s major shopping districts rose over the past year, according to a survey released this week by the Real Estate Board of New York.

On Madison Avenue from 57th to 72nd streets, asking rents rose 10 percent to $1,325 per foot; in Soho on Broadway between Houston and Broome streets, asking rents rose by 36 percent to $750 from the spring of 2012 to the spring of 2013.

The Madison Avenue transaction has several legal elements that make the deal more complex than a traditional building sale, several sources said. The property is owned by a so-called C corporation, and the purchase is structured as an acquisition of the corporation that owns the building, not a purchase of the building itself. The other legal issue is that a former tenant is suing the ownership corporation, and claims asbestos was released during remediation work at the building.

Sign Up for the undefined Newsletter

By signing up, you agree to TheRealDeal Terms of Use and acknowledge the data practices in our Privacy Policy.

Philippe Delgrange, a residential tenant in the building and restaurateur who operated Le Bilboquet for 27 years in the rear of The Building That Had The Address 25 East 63rd Street, filed suit in New York State Supreme Court Feb. 22, claiming construction in the building released asbestos. (Delgrange closed Le Bilboquet in December and is slated to reopen a larger location a few blocks away at 20 East 60th Street this spring.)

If the property was sold outside of a C corporation, the price would be about $60 million, a source said.

Maury Golbert, a tax partner at accounting firm Berdon LLP, told The Real Deal that foreign investors often own property through C corporations to protect themselves against estate taxes, although he is not familiar with the Sitt transaction. From a tax point of view, he said, the C corporation structure has several negative implications. For example, the buyer of the C corporation steps into the original purchase price of the seller, which can hurt the new owner when it comes time to sell.

The sale of a C corporation is rare in New York City, Gary Rosenberg, a partner at the law firm Rosenberg & Estis, said.

“When you buy a C corp. you buy all the liabilities. All the possible liabilities that company could have go to you,” Rosenberg, who also was not involved in the transaction, said.

Often in such cases, Rosenberg said, the buyer will ask for a credit-worthy guarantor to pledge to pay for any additional expenses that arise from the corporation, which in this example could come from the lawsuit.

Industry sources disagreed on the impact of the corporate structure and the asbestos lawsuit.

Several sources close to the transaction, who did not want to go on the record talking about a lawsuit, said the asbestos litigation would be resolved easily. Other real estate insiders said the litigation and the uncertainty it entails caused some of the city’s large retail investors to steer clear of the deal, despite the popularity of the strip. The lawsuit is ongoing with a court date set for late June, state court records show.

For example, just a block away, retail-focused Thor Equities is asking between $1,800 per foot and $2,200 per foot, according to sources, for its retail space at 680 Madison Avenue, between 61st and 62nd streets, which is being renovated.