RELATED Cos. is in contract to pay $430 million for a Chelsea office building that has been at the center of a two-year legal battle with Mario Batali’s Del Posto.
Stephen L. Ross, Related’s chairman, yesterday confirmed the deal at 85 Tenth Ave. before he began moderating a panel at a Real Estate Board of New York luncheon. Ross also is chairman of that group.
Related, which developed the mixed-use Time Warner Center but holds primarily a residential portfolio, is expanding into a new asset class with the 600,000 square-foot purchase.
“We have to put our money somewhere,” Ross said.
Ross did not comment on the lawsuit with restaurateur Batali. While the case is currently in the discovery phase, new owner Related is known for working with tenants and does not have a history of being litigious.
The legal battle involves eviction proceedings initiated by the building’s current landlord, Somerset Partners, which claims Del Posto is using space within the building that is not covered by the restaurant’s lease.
Investment broker Douglas Harmon of Eastdil Secured was hired by Somerset to bring the former Oreo cookie factory on Tenth Avenue to market.
Harmon has sold this building a couple of times, along with others nearby, including the Chelsea Market and 111 Eighth Ave.
“This area has been totally transformed into the hottest multi-asset submarket in the city,” he said.
Bruce Beal of Related orchestrated the $717-a-foot deal.
“This is not a typical play for us, but [we jumped on it] given the tenant quality and stature and landmark quality of the building,” he said. “We believe in this area long term. We just invested $400 million across the street and are working on other deals in the area.”
Related’s Caledonia rental and condo project at 17th Street and Tenth Avenue is 95 percent sold at between $1,400 and $1,500 a foot, Beal added. It will include an Equinox sports facility – another of the firm’s holdings.
Keith Rubenstein, principal of Somerset Partners, said it will be up to the new owners to decide how they want to proceed with the lawsuit.
Rubenstein said they were happy with the transaction and their profits and always believed in leaving something on the table for the next guy.
In this case, Related will be able to capitalize in the future on the spread between the low current leases and the pumped-up market.
The offices are 100 percent leased to tenants that include the FBI, Level 3 Communications, Lehman Brothers, Clic quot, the College Sports Network and the restaurant Craft.
Just two small retail spaces are available, according to the CoStar Group.
For Somerset, 85 Tenth Ave. was its first purchase in the city. It paid $294 million for the building in July 2005 – then a record.
“We recognized the inherent value of the High Line district, the water views, the big floors and credit tenants,” Rubenstein said.
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REBNY gave its most promising commercial salesperson award to Randy Modell of ABS Partners.
Modell had star backing for the rookie award from Rosie O’Donnell who bought the building that housed Rosie’s Broadway Kids and For All Kids Foundation.
“Randy’s professional conduct and knowledge and expertise he exhibited was extremely helpful throughout the process,” O’Donnell told REBNY.
Modell told us he’s in the middle of selling a 120,000-foot development site at 108 E. 125th St. to Vornado Realty Trust.
It was on the market for $20 million and is opposite Vornado’s large mixed-use site.
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If you want to get in on the Chelsea action, a block-through development site with 200 feet next to the High Line at 511 W. 21st St. is available for $52.5 million through a group led by Ron Solarz and Eric Anton at Eastern Consolidated Properties.
The site, between Tenth and Eleventh avenues, can be developed with a commercial structure to 98,750 feet as-of-right or larger through air rights purchases.
The tenant in the current 88,000-foot warehouse is willing to work out a deal to vacate prior to the 2008 lease expiration.
Go get ’em.
