Ceruzzi Properties looks to sell ground under the Lipstick Building
Argentina’s IRSA let option to buy fee position lapseas the South American country’s economy spirals
One of the ripple effects of the economic crisis in Argentina — Latin America’s third-largest economy — is that investors are getting a crack at buying the land underneath Manhattan’s iconic Lipstick Building.
The owner of the 34-story red granite tower, a partnership led by Argentina’s Inversiones y Representaciones Sociedad Anónima, let its option to buy the ground underneath the building at 885 Third Avenue expire earlier this year.
Now the owner of the land, Ceruzzi Properties, is marketing the property for sale.
“We’ve been talking to IRSA about purchasing it, but so far we haven’t been able to reach an agreement,” Ceruzzi Properties president Art Hooper told The Real Deal.
“One of the reasons has been the economy in Argentina,” he added. “I think they’re waiting until after the presidential election” to see if they can put together a deal.
Inversiones y Representaciones Sociedad Anónima, also known as IRSA, owns the 592,000-square-foot Lipstick Building in a partnership with the Marciano Investment Group (the investment firm of Guess Jeans co-founder Paul Marciano) under a ground lease that runs through 2080. The partners had an option to purchase the fee position – or the ground underneath the building – from Ceruzzi Properties, but let that option expire in April.
Argentina’s economy has been on what Forbes described as a “slow-moving train wreck” for the past four years, with the country deep in recession and one of the world’s highest inflation rates. Argentinian president Mauricio Macri’s defeat in a recent primary poll only exacerbated the situation, and he is expected to be replaced following next month’s election.
A representative for IRSA could not be immediately reached for comment. But on the company’s earnings call Tuesday, chief operating officer Daniel Elsztain said the firm is still looking at ways to come up with the funds to execute a deal.
Ceruzzi, meanwhile, has hired longtime broker Chris Peck at JLL to market the fee position, which it bought in 2015 from SL Green Realty in partnership with Shanghai Municipal Investments USA.
SL Green maintains a stake in the fee position through a preferred-equity stake that expires next year.
Hooper said the company has not set an asking price for its stake. But Ceruzzi paid $453 million to purchase the ground four years ago, and rent payments from the building are due to increase as the ground-lease rent resets next year.
Higher rent payments could prove to make things difficult for IRSA and its partner, which are facing a large vacancy at the building as the law firm Latham & Watkins is set to relocate to 400,000 square feet on Sixth Avenue.
Ceruzzi has been working to right the company ship ever since the sudden death of company founder Lou Ceruzzi in 2017. The company and SMI earlier this year brought on Rabina Properties as a partner to get their 76-story condominium development at 520 Fifth Avenue back on track.