FAST Food King Dennis Riese thinks it’s time to be the Cash King.
Now he’s selling a slew of properties – in addition to 604 Fifth Ave., which we already reported he is selling. There’s a growing consensus that real estate has topped out and Riese wants the money.
“Then I’ll be ready to buy when things ease up,” he said.
Riese will also have a war chest of more than $50 million – which is the expected proceeds for those properties being sold through Peter Hauspurg, chairman of Eastern Consolidated Properties.
“He has such a fabulous collection of corners,” said Hauspurg. “We just picked five to sell.”
The “Riese’s Pieces Portfolio” includes the northeast corner of 56th Street at 677 Lexington Ave., home to Houlihan’s and other fast food; the old Lone Star Cafe Building at 61 Fifth Ave. at the southeast corner of 13th Street, which is now a deli; the retail condo blockfront on the west side of Second Avenue between 64th and 65th streets occupied by CVS; the southwest corner of 86th and Lex, with an apartment building and stores, plus the northeast corner of Third Avenue and 34th Street, which has more apartments and stores. All of the retail leases have cancellation clauses.
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The Arlington, Va. based. J.E. Robert Co., making its first foray into big-time city property, is in contract to buy 1412 Broadway from S.L. Green Realty Corp. The firm is a buyer of bulk-lien sales from New York City.
The sale price could not be learned. The 390,000 square foot building was bought two years ago by the REIT for about $80 million. Calls to the firm’s investment adviser, Doug Harmon, were not returned.
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In July 1998, the predecessor to Jones Lang LaSalle was shopping the glitzy, 1 million-square-foot trophy property at 450 Lexington Ave. for the Royal Dutch Shell Pension Fund. The market tanked and offers dried up.
But now, brokers are competing for the sale.
The 40-story skyscraper was designed by Skidmore Owings Merrill and developed by Mets’ owner Fred Wilpon of Sterling Equities with Hines Interests. The building is on a ground lease from the United States Post Office that runs for about another 88 years.
The Post Office stamps up the four ground floors, and then the rest of the fully leased building is host to the law firm of Davis Polk Wardwell and other tenants.
Even in 1998, while select buildings like Trump’s General Motors trophy were going for more than $500 a foot, this Grand Central area high-tech high-rise was never expected to sell in that range. That’s because the eventual winner will be paying a “market” rent with step-ups – a.k.a., “increases” – to the government.
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New and renewing World Trade Center tenants could be socked with nearly $3 per square foot more in real estate taxes if a reworked Downtown incentive plan doesn’t count them in – and the city insists the next owner pay full taxes.
According to Insignia/ESG, the Center’s payment in lieu of taxes (PILOT) is currently $3.56 per square foot, while full taxes would be $6.22 a square foot, a difference of $2.66, and those figures go up starting July 1.
The Downtown program, however, provides a $2.50-a-foot abatement that could cut the increase but only if the Trade Center buildings are included in the next version.
The current Downtown program was to end on March 31, but when leasing dried up in January and February, the push was on to keep it going. It’s been extended through May 20, and they are bargaining for a three to five year renewal – with the Trade Center included.
Meanwhile, the city is insisting any 99-year lease of the WTC is equivalent to a sale, and is demanding full taxes once the Port’s lease has been signed with Silverstein Properties.
To get over the legal hurdle, the Silverstein deal could take the form of a 49-year lease with a similar renewal. Whatever it is, it will likely be approved by the Port Authority at a board meeting tomorrow. A Silverstein spokesperson said the deal is “not a 49-year lease.”
“It will be a long-term lease, and longer than 39 years,” a source insisted of the pact. “The RFP said, ‘up to 99-years.'”
The original high bidder, Vornado, wanted a 39-year lease but the Port refused.
Broker Mary Ann Tighe, a vice chairman of Insignia/ESG, warns that if the city insists on collecting full property taxes, small tenants will get hit, not the big tenants that negotiated tax caps.
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