In a headline-grabbing deal in November, the Leona M. and Harry B. Charitable Trust sold the 605-unit Park Lane Hotel for $653 million.
But what didn’t make it into the headlines was that the Central Park South property — which was picked up by an investment team that included the Witkoff Group, Jynwel Capital and Highgate Holdings — was the last crown jewel in the legendary estate’s New York City portfolio.
The company behind the estate, long run by legendary landlord Harry Helmsley, and then by his widow Leona Helmsley, accumulated a massive property portfolio in New York City and across the country valued at $5 billion at the time of Harry’s death in 1997. Leona began to dismantle the 25-million-square-foot New York City empire right away. But when she died in 2007, there were still dozens of properties remaining.
In the last four years, however, the estate sold off more than $2 billion of New York City assets in more than 20 transactions, an analysis of its sales by The Real Deal revealed. (Click here to view the chart.)
“When there is no one around with a motivated interest, it’s probably best for an insensitive executor to manage cash [rather] than properties,” said Edward Minskoff, whose family has been in New York City development for several generations.
In addition to the Park Lane sale, in October the estate sold its 63.75 percent interest in the Empire State Building, where it owned a majority interest in the iconic tower’s sublease, as well as a tiny interest in the partnership that owned the building’s “fee interest,” or the actual property, as distinct from the leasehold interest. Together those sales raked in $491.6 million for the estate.
Now, with its crown jewels gone, the estate is poised to sell its very last property interests in New York City.
Its stakes in the sub-leasehold of the 762,927-square-foot office building at 112 West 34th Street and the leasehold at the 916,111-square-foot 1400 Broadway are expected to transfer to the Empire State Realty Trust, a recently launched real estate investment trust managed by Helmsley’s former partner Peter Malkin and his son Anthony.
The stakes in those properties, which were tied up in litigation for years, are the last interests that the estate has, or will, sell to the REIT. It’s already sold seven others to the REIT, including the Empire State Building interest.
With the Helmsleys now long gone, and the estate’s last New York City properties expected to transfer soon, TRD analyzed what happened to their Big Apple buildings and how much they sold for.
We looked at the 24 New York properties the estate owned as of May 2009, which were listed in court documents in connection with Leona’s death. The estate made no purchases since then because its main mission is the disposition of its assets.
In court documents, the estate’s trustees put the value of the entire portfolio at $5.2 billion, although they noted that $2 billion of that was in municipal bonds. They also said the estate had “more than 80 interests in real property” in 17 states.
And there is no doubt that the estate has benefited greatly from timing its sales to the improving Manhattan investment sales market.
“Certainly we are in an upswing over the last two or three years in Manhattan, and throughout the country, and [the estate has] been a big beneficiary of that,” said Dan Fasulo, managing director at data firm Real Capital Analytics.
The old timers
Harry Helmsley first got his start in New York City real estate in 1925, and began buying properties in 1936. He eventually owned or managed as much as 28 million square feet, most of that with partners, including bigwigs of the time like Lawrence Wien, Bernard Kayden and Irving Schneider.
Harry amassed the kind of empire that is typically held on to by subsequent generations, but he had no children of his own. Leona, his second wife, did have children, but when she died, the remaining properties were directed to the estate, which turns over the proceeds from its property sales to the Helmsleys’ charitable trust.
Today the estate is led by five trustees: Leona’s sister-in-law Susan Rosenthal, Leona’s grandsons Walter and David Panzirer, Leona’s friend John Codey and her attorney Sandor Frankel.
A look at the estate’s portfolio provides a unique lens into a vibrant period of New York City real estate history. That’s largely because when Helmsley made his mark in the business, in the 1930s through the 1980s, property owners shared buildings with groups of friends, family and business associates.
“This is the way the old timers did deals in New York. There was a lot of syndication, and Helmsley was one of those guys,” said Fasulo. “Given the complex nature of its partnerships, it should not be surprising that unwinding many of the assets was complex.”
The proceedings were so complex that in 2009, the estate’s trustees — which at that time include Leona’s brother, Alvin Rosenthal, rather than Alvin’s wife — argued in Manhattan’s Surrogate’s Court for an advance payment of $4.5 million for their efforts, which they were awarded in 2012.
Helmsley’s ownership interests varied widely. In some instances, he owned and controlled properties alone. In other cases, he owned the land, but leased it long-term to another entity. He also owned stakes in leaseholds at properties owned by other entities. And in a few instances, including the Empire State Building, he owned portions of the operating sublease. All of those complicated arrangements were, of course, inherited by the estate.
Insiders said investment sales powerbroker Darcy Stacom, of CBRE Group, provided brokerage and advisory services to the estate on most, or all, of its sales as it sold off these final 24 New York City properties. Neither the estate nor Stacom, who served as long-time property advisor to Leona Helmsley, responded to requests for comment.
But those properties sold at prices ranging from $1.6 million for a tiny lease fee in an office building to the $653 million Park Lane Hotel sale.
In addition to the aforementioned sales, other high-profile properties that the estate sold since 2009 include the New York Helmsley, a hotel at 212 East 42nd Street, which Host Hotel & Resorts snapped up for $313.5 million and converted into Westin New York Grand Central; the Carlton House at 680 Madison Avenue, a hotel which Extell Development and private equity firm Angelo, Gordon teamed up to buy for $164 million and are now converting to condos; and a 50 percent stake in 1333 Broadway, which was sold to Empire State Realty Trust for $82.1 million.
In many cases the Helmsleys’ ownership partners bought up their stake.
The Benenson family, one long-time partner, bought the estate’s 40 percent stake in the land under the residential co-op called the Beekman at 575 Park Avenue for $5.76 million in 2010, according to Real Capital Analytics. Richard Kessler, chief operating officer at Benenson Capital Partners, said “we were constantly looking for the opportunity to do something here, and when the opportunity presented itself, we took advantage of it.”
He declined to discuss the pricing.
Kenneth Patton, who served from 1980 to 1992 as COO of Helmsley’s management and brokerage company, Helmsley-Spear, said many people didn’t realize how extraordinarily vast Harry’s portfolio was beyond his trophy properties. In part that may be why few in the industry are aware that the estate was such an active seller since 2009.
Speaking about the sale of the Helmsley estate’s final New York City properties, Jones Lang LaSalle investment sale broker Richard Baxter noted “nothing last forever.”
“Look around the city,” he said. “It is rare that you are going to find people owning buildings that their family built.”