THE senior note on the former Drake Hotel site that was being pursued by more than 20 bidders has now been whittled down to just a half dozen.
The site, which runs along Park Avenue from 56th Street to 57th Street, was strategically assembled over the last decade by Macklowe Properties, which found itself at the top of a real-estate heap that has since crumbled with the credit crunch.
After more than 20 suitors, including Apollo Real Estate Partners, Related Cos. and Larry Silverstein, expressed interest at first, about six are now left in the second round.
At stake is control of a site that Related’s Steve Ross last week described as “the best piece of property for development in the city,” and that Apollo’s Bill Mack called “one of the great pieces of property in the world.”
Cushman & Wakefield is selling the $224 million note for the beleaguered IStar lender and expects to choose a winner by Thanksgiving and close by year end, sources said.
The new buyer will likely end up using a war chest of cash to land the prize.
Cushman & Wakefield declined to comment.
Speaking on a panel at last week’s NYU Capital Markets conference at the Waldorf-Astoria, Silverstein said he was “staggered” by the number and level of the bids as he was left in the conservative dust.
Deutsche Bank has already served the notices of foreclosure on Macklowe Properties and the note buyer will be expected to participate in the foreclosure’s legal action.
At the height of the market, the all-in cost of the land – which could support up to 600,000 feet with an entrance opposite the Four Seasons Hotel – was $1,300 a buildable foot.
Today, the successful bidder will eventually control the site through litigation for less than half of that.
“The vampires are out and tasting blood,” said one person familiar with the sale process.
But shed a tear for the state of the capital markets because at the end of the transaction, all of the equity will have been wiped out, the mezzanine lenders will have been wiped out, and essentially the new buyer will be obtaining the senior loan – which at one time backed about 35 percent of the investment – for par.
“It’s a very somber situation,” observed Mack.
Vornado Realty Trust President Michael Fascitelli who, like SL Green CEO Marc Holliday , has a real-estate investment trust that’s hunkering down, warned that in times like this, “First protect your own a-, then you can worry about tattooing somebody else’s. Anyone who makes a big bet right now is crazy.”
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Vornado’s Fascitelli told us later that his company’s 100,000 foot deal with Forever 21 for a huge retail piece of 1540 Broadway is not yet closed.
The deal, which has been rumored for months, was said to be close by Real Estate Weekly.
“Every week the media writes the market is getting worse,” said Fascitelli, who blamed that as the reason for the lack of an inked deal.
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Tomorrow at 8 p.m., Walgreens turns on the largest Times Square “spectacular” ever installed.
The 17-story sign, reaching 212 feet skyward, wraps around three sides of One Times Square, which we previously revealed was leased entirely by Walgreens.
The ongoing display on the Times Square “Ball Drop” building will be produced by 12 million low-wattage LEDs and numerous giant plasma-video screens.
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In other Times Square news, law firm Pryor Cashman will be moving to 100,000 feet in Times Square Tower, the Boston Properties-owned building at 7 Times Square.
No. 7 takes up the full block between 42nd and 41st streets between Broadway and Seventh Avenue.
The law firm will move from 410 Park Ave. to the 39th through 41st floors of the 48-story building as part of a 15-year lease.
The space was previously the New York outpost for Heller Ehrman, the San Francisco-based law firm that voted to dissolve in September.
CB Richard Ellis teams represented both sides of the transaction.
