Commercial Breaks

New York real estate investors are increasingly sending their money overseas, and their favorite targets are, in descending order, Germany, Australia and Japan, according to a report to be released this week.

“It’s increasing big time,” said Dan Fasulo, managing director of research for Real Capital Analytics, which produced the report.

Mr. Fasulo said the precise amounts of money invested by specific New York City investors wouldn’t be included in the report (nor would the amount breakdown by country), since the information is proprietary. But, he said, New York investors have spent more than $50 billion on foreign commercial real estate in the past two years.  read more »

Here’s how you know the commercial-mortgage-backed securities market is in deep slumber: Goldman Sachs, king of the Wall Street shops, hasn’t originated a CMBS loan in nine months, according to two sources close to the bank.

It’s no secret that banks like Wachovia and Lehman and UBS are no longer issuing securities backed by mortgages with the ease of missionaries distributing Gideon Bibles. Investors have had to start hitting up balance-sheet lenders, like regional banks, and cobbling together smaller loans. But Goldman? Goldman is one of the few investment banks that actually has a CMBS crew in place on Wall Street.  read more »

The Manhattan office space market has increasingly come to resemble the 1999 film Office Space, with rumors of impending layoffs, nervous employees, and frustrated brokers taking copy machines to empty fields and viciously assaulting them with baseball bats.

O.K., that last part isn’t true. But still, this summer has been a bummer! In July, Manhattan’s overall office vacancy rate hit 7.3 percent, according to Cushman & Wakefield. Same time last year, it was 5.8 percent. Asking rents have continued to creep up, but the numbers have been rendered essentially meaningless by a bonanza of concessions from landlords. (You take this space, I’ll give you one year’s free rent and dinner for two at the Four Seasons!)

At the end of July, Colliers ABR’s Robert Sammons—unafraid to look the fearsome ogre in the eye—predicted the vacancy rate would rise to 10.  read more »

By year’s end, some of commercial real estate’s freshest young brokers will give up on the somnolent field and start searching for a new line of work, according to the industry’s older hands.

“This is a cliché, but this is the time when the men are separated from the boys,” said Cory Zelnik, of Zelnik and Company.

It’s apparently an apt cliché: “This market, I hate to say it, separates the men from the boys, the strong from the weak,” said Faith Hope Consolo, chairwoman of the retail leasing and sales division at Prudential Douglas Elliman. The “boys” in this case are the newcomers.  read more »

HSBC employees should soon, from their aerie atop 7 World Trade Center, be able to peer down at the morass of construction at the city-and-state controlled ground zero below.

The massive bank is poised to become landlord Larry Silverstein’s newest tenant at 7 World Trade. Now that HSBC has a lease pending on the 52-story tower’s top seven floors—comprising 280,000 square feet of the tower’s 1.7 million—7 World Trade is nearly full.

A knowledgeable source told us that a lease is indeed “out,” as commercial real estate’s insufferable jargon would have it, meaning that a lease exists, HSBC has a copy and its execs are eyeing the dotted line.  read more »

Entertainment law powerhouse Pryor Cashman, whose clients include Penthouse founder Bob Guccione and numerous American Idol contestants, is in negotiations for 100,000 square feet at 605 Third Avenue, the 44-story glass box of a building owned by Fisher Brothers.

“We are in negotiations for space at 605 Third Avenue and for other spaces as well,” confirmed Ronald Shechtman, Pryor Cashman’s managing partner, in a statement, adding that the firm has reached no agreements with anyone.

Mr. Shechtman later elaborated that the firm right now occupies about 100,000 square feet of contiguous space in three buildings, which means three leases—all of which expire at the end of next year—and three landlords.  read more »

A developer’s at least three-year-old plan for a 61-story Shangri-La hotel and condo project in midtown east is expected to sail through two City Council committees on Aug. 13, paving the way for the entire Council to approve the project the following day and for development to finally begin sometime thereafter.

The Hines Development project calls for a Norman Foster-designed glass tower at 610 Lexington Avenue, at the corner of 53rd Street, with 107 residential condos and 50 condo-hotel units, according to the developer’s Web site. (Recent reports indicate the Shangri-La will instead have 206 hotel rooms and just 17 condos; the developer could not be reached for comment.  read more »

Labor Day has a psychic symbolism for commercial real estate brokers this year that has little to do with the plight of the American worker.

Rather, some are predicting that, once New York City’s deal makers have returned from their Labor Day Hamptons sojourns all bronzed and plump, having spent countless hours running their fingers through the sand while contemplating the fierce expanse of the Atlantic Ocean, office asking rents will start dropping.

“After Labor Day, a lot of people who’ve been on the offensive, they have gotten some feedback and will start to realize that, hey, this economy isn’t as strong as we thought,” said Robert Stella, executive vice president and principal at tenants’ rep CresaPartners, who said he’d likely go to his place up in Connecticut this month.  read more »

In the worsening economic downturn, some real estate investment trusts and brokerages are showing signs of weakness.

On Jan. 2, stocks of Forest City Ratner parent Forest City Enterprises traded at $43.62 a share. On Aug. 4, they traded for nearly half the price, at $25.60. Leading office landlord SL Green, which started the year at $92.56 a share, was trading at $79.67 by Aug. 4. Meanwhile, CB Richard Ellis saw its stock fall from $21.38 on Jan. 2 to $13.45 on Aug. 4.

During its second-quarter earnings call on June 30, CBRE’s president and CEO, Brett White, said that “volume decline in both the capital markets and leasing businesses are approaching the worst decline seen since the early 1990s, and 2001 through 2003.  read more »

The investment side of the commercial real estate industry is rife with tales about buildings sitting pretty, and pretty, and pretty, while brokers and landlords and buyers finagle, and time passes.

There’s the Forbes Building, the American Stock Exchange Building, the four remaining Equity Office Portfolio towers on the market since early this year.

Aside from the oft-repeated truisms that the market is in the dumps, financing is scarce and buyers and sellers are engaged in a pricing stalemate in which both refuse to budge, there might well be another factor.

Back in July 2007, when a buyer had a contract out on a building, that meant there were two players involved—the buyer and the seller.  read more »

Who would’ve thunk that statements Barack Obama made in April would have repercussions in the New York investment sales market in August?

Building owners, fearful that a Democratic administration will raise capital gains taxes (or that a Republican one will do the same, given the proven flexibility of John McCain on myriad issues), are putting their buildings on the market so that they can sell them before Jan. 1. That’s the date at which any midyear ’09 tax hike would likely apply retroactively.

Here’s what unsettled them. On April 16, during the Democratic debate in Philly, ABC moderator Charles Gibson sternly queried Senator Obama about his former promise not to raise capital gains taxes higher than 28 percent—the top rate under Bill Clinton.  read more »

There’s a lovely red brick building on the edge of Tribeca that, like a child of divorcing parents, hangs in the balance—belonging neither here, nor there, and utterly empty inside.

Plaza owner El-Ad Properties bought 250 West Street, a 98-year-old building 11 stories tall, from Citigroup in 2006 for $142 million. Bank workers have since emptied the building, bidding farewell to Robert De Niro’s largely residential fiefdom. And, in November, El-Ad went into contract to flip 250 West to an entity called Coalco for $201 million (a tidy 41 percent markup).

Here’s the funny thing. Now it’s August, more than eight months later, and Coalco has yet to close on the empty building.  read more »

CB Richard Ellis won the latest battle in its blood war with rival Cushman & Wakefield, brokering leases involving over twice as much Manhattan square footage in the first half of 2008, according to the biannual top 50 list from Crain’s.

The divide between CBRE and C&W—the Montagues and the Capulets of the real estate world (minus the romance and murder, as far as we know)—expanded, with CBRE brokering 4.9 million square feet to C&W’s 1.9 million. Last year by June 30, CBRE had brokered 4.3 million square feet to C&W’s 1.5 million.

Stated another way, this year, CBRE appeared seven times in the list of top 10 deals and 26 times in the top 50.  read more »

Enough with the vagaries! We’ve all heard about the loads of space supposedly coming on the market. Now, thanks to Colliers ABR whiz Robert Sammons, we give you the top 10 leasable spaces on the Manhattan block. My, oh my, they are large:

St. John’s Center, at 532-582 Washington Street, leads the pack with 750,000 square feet, available immediately.

Nearly as sizable is 825 Eighth Avenue, better known as Worldwide Plaza, which has 709,000 square feet of space on the block.  read more »

Our condolences to all you landlord reps out there. The Manhattan office vacancy rate may well rise to 10.7 percent by year’s end, according to a second-quarter report from Colliers ABR, and you know what that means—a tenant’s market is coming.

According to said report, released on Tuesday, “23 potential blocks 100,000 square feet or greater [are] expected to hit the market over the remainder of this year which could add just under 9 million square feet to availability (15 percent sublease) and raise the Manhattan overall vacancy rate to 10.7 percent by year-end.”

Robert Sammons, the managing director of research for the brokerage and the author of the report, elaborated for us.  read more »

The buzzards are taking their time picking apart the seven-limbed body of midtown buildings that Harry Macklowe snatched to great acclaim in 2007.

A source has confirmed that Somerset Partners, the outfit that last year bought 450 Park Avenue from Taconic Investment Partners for $509 million, is one of a number of predators circling 527 Madison Avenue, which has an asking price of $240 million; and that Transwestern, a little-known Chicago firm, is tearing off Tower 56 at 126 East 56th Street for $160 million.

But even when those buildings trade, four of the septet—Park Avenue Tower, Worldwide Plaza, 1540 Broadway and 850 Third Avenue—the choicest of meat in good economic times, will remain up for sale.  read more »

During a June 18 appearance on CNBC’s Squawk Box, Steven Roth, New York real estate kingpin and the chairman and CEO of Vornado Realty Trust, suggested that a President Barack Obama could lead the United States out of its economic imbroglio.

“President Obama comes in, O.K.—that’s not a political prediction by the way, this is just a fantasy—and somehow or other, he does what he says he was going to do. He gets us out of the war,” began Mr. Roth in his heavily inflected New Yorkese.

In Mr. Roth’s imagined course of events—related to a deeply skeptical roundtable of pundits—the future president would use the billions of dollars that aren’t wasted overseas, coupled with increased tax revenues, to pay down the deficit.  read more »

Human hubbub may soon be returning to 200 Fifth Avenue, the so-called Toy Building that once housed dozens of toy makers, but that, aside from four retail tenants, now stands empty.

Landlord L&L Holding Company, which just got legal permission to evict Cipriani, has had a number of prominent visitors lately, according to David Berkey, the firm’s executive vice president.

“Some of the major users mentioned in your July 15 article have been through the building on more than one occasion and expressed definitive interest in joining Grey Global,” Mr. Berkey said, referring to the article in which we listed the handful of firms looking for more than 150,000 square feet in today’s Manhattan market: NBC Universal; HSBC Bank; law firms Fitzpatrick Cella Harper & Scinto, Paul Weiss Rifkind, Wharton & Garrison, and Orrick, Herrington & Sutcliffe; and banks Allianz, Natixis, and WestLB.  read more »

Never heard of the Olnicks? Aside from industry insiders, pretty much no one had until July 11, when The New York Times revealed that, amid an affordable housing crisis, Congressman Charles Rangel had been hoarding four rent-stabilized apartments in the Olnick’s Lenox Terrace complex in Harlem.

It may be hard to believe that in a city so consumed with itself, so dedicated to narcissism and self-love, money and power, the Olnicks would shun the spotlight. But do a Nexis search on the family name, and aside from some clips in Real Estate Weekly—which faithfully publishes personnel and small lease announcements—you’ll find nary a hit until this month.  read more »

Leon Charney, a 69-year-old developer and attorney whose colorful career has included stints as President Jimmy Carter’s foreign policy adviser and convicted spy Jonathan Pollard’s lawyer, and who now moderates a public affairs show called The Leon Charney Report, is building a hotel near Bryant Park.

Mr. Charney, who had just returned from China when he spoke with The Observer, said he will replace the five-story office building at 120 West 41st Street—now vacant but for the Simply Pasta restaurant on the ground floor—with a $90 million boutique hotel, which will rise “about” 22 floors and contain a bit more than 100 luxury rooms, a spa and a swimming pool.  read more »

A marvelously polymathic family who lives in perhaps the oldest private home on the Upper West Side plans to sell the property and use the proceeds to create a foundation named after a microbe.

Said microbe, Ochromonas danica, traditionally inhabits Danish bogs, and sometimes the odd laboratory, like the one where landlord Thomas Haines, 74, encountered it back when he was a Ph.D. candidate at Rutgers University. He lovingly calls it a “freak” of an organism, one whose unusual flagellar membrane so sparked his fascination with lipid membranes that he named his dog Danica, his daughter Avril Danica Haines and his property holding company Danica Realty. Now, he plans to call his charitable foundation, which he recently registered with the I.R.S., the Danica Foundation.  read more »

The number of firms looking for at least 150,000 square feet in Manhattan, and the number of buildings that can accommodate them, could more or less now each be counted on one hand. Some contend that the number continues to shrink as the economy worsens. Other’s say there’s always a small universe of big players. Either way, brokers say they find themselves chasing after the same few lookers again and again.

The belle of this dreary ball is probably NBC Universal, which is looking for a place to house its new consolidated business operations center, which will include offices for chief executives like Jeff Zucker; a child-care facility; a conference center; a health care and fitness center; and an employee commissary.

And so when Lynn Calpeter, NBC Universal’s chief financial officer, visited Silverstein Properties’ 7 World Trade Center this month, tongues started wagging, particularly since she’s part of a caravan of muckety-mucks that has passed through the angular tower in recent weeks. Even Mr. Zucker, the president and CEO of NBC Universal, has stopped by.  read more »

Take a look at the latest commercial real estate stats, and maybe you’ll take comfort in the fact that Manhattan’s vacancy rate continues to hold steady at around 7 percent. Maybe you’ll console yourself with soothing thoughts about a tighter than expected market proving all those Chicken Littles wrong.

Or maybe you won’t. Maybe you’ll remember that statistics tend to lag behind reality by a number of months. And maybe you’ll remember the shadow space.

You know it’s there. You’ve heard the rumors. Lehman Brothers is said to be shedding space at 1271 and 1301 Avenue of the Americas, and at 399 Park. JPMorgan Chase is said to be shedding at 270 Park Avenue, and at 277 and 237 and 320. There are murmurings about UBS, the Canadian Imperial Bank of Commerce, MetLife, Pfizer and Bank of America. Indeed, the financial industry appears to be contemplating bulimia and coughing up space that it only recently acquired. But look at CoStar, the bible of the commercial real estate industry, and the spaces remain mysteriously absent. This is shadow space.  read more »

Is James Nelson a Pollyanna?

Mr. Nelson, a partner and managing director at Massey Knakal, believes too much is being made of the tribulations in the city’s sexy, trophy-tower, over-$100 million investment sales market. And too little is being made of the relatively healthy, yet decidedly less glam, more modestly priced market in which his firm specializes.

“As far as the percentage of properties that sell under $100 million is concerned, there are so many more sales,” he said. An obvious, yet oft-overlooked, point.

“Clearly everyone’s been following the Macklowe properties,” Mr. Nelson said, referring to recent trophy-tower transactions that included the record sale of the GM Building.  read more »

The Carlyle Group closed Tuesday on the purchase of an interest in the retail condo at 666 Fifth Avenue, the tower that Kushner Companies bought last year for a then-record $1.8 billion, according to a source familiar with the deal.

The Carlyle Group—the mammoth private-equity group that manages $82.7 billion in 60 funds worldwide and recently, with Ashkenazy Acquisition Corp., bought 650 Madison Avenue for $680 million—is buying in partnership with Stanley Chera’s Crown Acquisitions. The 49 percent stake, as reported by Bloomberg News, in the approximately 90,000-square-foot retail portion, which includes a Brooks Brothers and the NBA Store, is valued in the deal at $525 million.  read more »

Under the new leadership of the dashing Billy Macklowe, Macklowe Properties appears to be lumbering ahead with its complicated and complication-ridden Drake Hotel development.

Either that, or Macklowe Properties is busy assembling a more lucrative parcel in the East 50s around Park Avenue to put on the market—Macklowe was reportedly considering selling the mega-site in May, before successfully selling the GM Building to Mort Zuckerman’s Boston Properties for a record-breaking $2.8 billion.

Either way, Audemars Piguet, the sole tenant in 40 East 57th Street, is out. Capping 14 months of negotiations, Macklowe has bought out the remaining 10 years on the Swiss watchmaker’s lease.  read more »

The commercial real estate market must really be wretched. How else to explain Cushman & Wakefield’s midyear breakfast on Tuesday morning when, in Michael’s glassed-in patio, a couple of ballsy brokers erupted with skepticism, calling into question their bosses’ own stats—to those bosses’ faces. In front of the press.

“If I were sitting in the media looking at the stats, I’d think that someone was drinking the Kool-Aid,” said Joshua Kuriloff, a broker at the firm.

Mr. Kuriloff even uttered the R-word (“recession”) to describe the economy—a term that’s verboten among most real estate types, who favor limper nouns like “contraction,” “slowdown” and “downturn.  read more »

Manhattan property investors are in a funk. Their friends at the investment banks have empty pockets or fresh pink slips. Financing for large deals is scarce. And industry heavyweights are for once publicly bearish.

Peter DeCheser, managing director of capital markets for Jones Lang LaSalle, said using the word “somber” to describe the mood “might be euphemistic.”

“We’re in for a slowdown in volume that would almost be comparable to the early ’90s,” Mr. DeCheser said. “It will become much worse. In the next 30 to 60 days, the proverbial second shoe will drop.”

Normally, getting a real estate type to say something negative about the Manhattan investment-sales market is like eliciting an intelligent comment from Kelly Ripa: damn near impossible.  read more »

Jack Guttman this week cemented his place atop what is perhaps New York City’s largest fine-arts storage and moving company with the purchase of two loft buildings on West 55th Street for $45 million.

Mr. Guttman, who made clear he’s unrelated to the Brooklyn Guttmans (think suspicious fires), has been in the self-storage business for 15 years as head of American Self Storage. He made his first foray into the arts in 2006 with his Chelsea Arts Tower commercial condominiums. But it was just this January that he moved into the immensely sensitive realm of high-art moving and storage when he purchased Hayes Storage (both the business and the building at 305 East 61st Street) for about $30 million.  read more »

Is the $200-a-square-foot office space in trophy towers the new $12 dollar movie ticket—a galling, nerve-grating development that a mere 12 months later becomes the widely accepted paradigm?

At 9 West 57th Street—the stylish Sheldon Solow tower on Fifth Avenue—three firms have recently signed leases at more than $200 a foot, according to a source familiar with the transactions. The source insisted this was “not a story. You’ll start to see that number at the GM Building.”

In a way, that source is right. Rumors of prices like this surface now and again.

And it’s not as though we’re talking Class B space here.  read more »

Jerry Speyer’s loss at the West Side rail yards seems to be working out pretty well for Gary Barnett.

With Mr. Speyer defeated—the chairman of Tishman Speyer Properties fumbled the $1 billion deal with the state to buy the site’s development rights in May, ultimately backing out of an agreement—so, too, has fallen his plan to raze a piece of a former elevated rail line that runs along the rail yards on 30th Street.

Enter Mr. Barnett.

The president of Extell Development is planning a 61-story Steven Holl-designed mixed-use tower on the northeast corner of 10th Avenue and 30th Street, from which he plans an elevated pedestrian bridge to the section of rail line.  read more »

How do we know we’re living in a second Gilded Age? Even as the economy tanks and a record number of small businesses declare bankruptcy, asking rents in the city’s trophy towers continue to float higher and higher into the stratosphere, untethered by such petty concerns as price, according to Jones Lang LaSalle’s until now unreleased 2008 Skyline Review.

In these so-called trophy buildings—midtown towers like One Bryant Park and the GM Building—average asking rents increased 3 percent from the fall of 2007, reaching $122.93 a square foot.

In the past year, asking rents in these upper-crust towers have increased 18 percent from $104.  read more »

Insurance giant AIG has assumed the remainder of Goldman Sachs’ lease at 180 Maiden Lane, which, at 800,000 square feet, is the largest lease transaction so far in 2008.

“We will consolidate several AIG offices in Manhattan to 180 Maiden Lane,” said a source familiar with the deal. “Seventy Pine will remain our corporate headquarters.”

The move will be executed in phases, beginning this September, with AIG fully occupying the 30 floors by 2011.

It’s the largest new leasing transaction of the year. (Advertising firm Saatchi & Saatchi signed a long-term lease for 819,000 square feet at 375 Hudson Street earlier this spring, but that was a renewal.)

Whether this week’s news reinvigorates the sluggish office-leasing market, however, remains in question.

Experts seem anything but jubilant.

The vacancy rate downtown rose to 6.3 percent in May, from 5.9 percent in April, according to Colliers ABR’s most recent commercial real estate report, which blamed the uptick in part on “Goldman Sachs placing large swaths of availability on the market in preparation [for] its relocation to Battery Park City. It will get worse before it gets better, too, as its current [headquarters at 85 Broad Street] is due to be added to availability later this year. …”

Richard Warshauer, a senior managing director at GVA Williams, had similarly sobering words.

“I call this the vacuum-cleaner effect,” he said. “In one stroke, they are taking one large space off the market; in the other case, they are making more space available in several properties.

Mr. Warshauer said the net effect of the AIG lease might actually be negative, with more square footage on the market than before, thanks to the “economics of scale” inherent in consolidating space.

Robert Stella, executive vice president and principal at Cresa, was also rather unimpressed. “It may be a neutral situation,” he said. “It’s really hard to tell.”

drubinstein@observer.com

Domestic players have bought three huge midtown towers once belonging to the beleaguered Macklowe Properties.

Shorenstein Properties has bought Park Avenue Tower and 850 Third Avenue for just shy of $1 billion.

Shorenstein, the San Francisco-based real estate investment firm, bought a 94.5 percent interest in 850 Third, valued at about $300 million, and Park Avenue Tower at 65 East 55th Street, valued at about $630 million, according to a source familiar with the deal.

Both properties were part of the $7 billion portfolio that Macklowe Properties, leveraging the GM Building, purchased from the Blackstone Group last year. A group led by Mort Zuckerman’s Boston Properties closed on the GM Building on Monday.

Meanwhile, Paramount Group is expected to sign for 1301 Avenue of the Americas, the Credit Lyonnais Building, on Wednesday for more than $1.45 billion.

“Here we are, GM, 850, Park Avenue Tower and 1301 Avenue of the Americas—all end up going to very sophisticated local players,” said the source on the Shorenstein purchase. “It should be comforting to investors that the players are local, as opposed to some crazy foreign capital source, which doesn’t necessarily have a handle on the market.”

Cushman and Wakefield’s investment sales team of Scott Latham, Jon Caplan, Ron Cohen and Richard Baxter and Eastdil Secured’s Doug Harmon were involved in the deals. None would comment.

drubinstein@observer.com

West 57th Street is to its easterly counterpart what a deer-hunting, RV-driving homeowner is to his McMansion-owning neighbor—an embarrassment.

“There’s no question there’s a disconnect between the retail value on 57th Street east of Fifth Avenue, which is some of the highest in the city, and that which is west of Fifth Avenue, which is not even in the same area code,” said Richard LeFrak, chairman, president and CEO of the LeFrak Organization.

But not for long.

It’s a “historic inevitability” that, within the next few years, West 57th Street will become home to luxury retail tenants more consistent with East 57th Street, said Robert Freedman, president and CEO of GVA Williams.

Mr. Freedman is basing his predictions on the recent maneuvers of Mr. LeFrak, Vornado Realty Trust, and Sheldon Solow, who, over the past few years, have snapped up and consolidated a number of addresses along West 57th.

“I own 30, 40, 50, 29, 31, 33 and, I think, 49,” Mr. LeFrak said.

Mr. LeFrak co-owns 29-33, 49 and 50 with Vornado Realty Trust, a partnership that arose from something of a nonaggression pact.

“We were competing for the same properties, and I’m very friendly with them,” Mr. LeFrak said. “I think we both accepted that if there’s something on the street [we both want], we’ll talk to each other about it.”

Why purchase all these buildings, aside from that insatiable lust that afflicts all big-time New York developers?

“Some of the purchases I made were to protect [40 West 57th Street]—I have a 700,000-square-foot building there,” Mr. LeFrak said. Not only that, but Mr. LeFrak’s offices are there, he’s spent $30 million rehabbing it, and he has brought Nobu 57 and a high-end chemist (could a chemist be anything but?) to the ground floor.

Once the leases on many of his shlockier tenants along the avenue expire within the next five years or so, Mr. LeFrak said we can expect to see more of the same.

“I think you’ll start seeing some of the tenants on 57th Street that really shouldn’t be here go,” he said. “You’ve seen it already. There was a McDonald’s on the north side of the street that was removed. I don’t want to single out anybody, but I bet you could use your imagination.”

We don’t want to single anyone out, either. (It’s not like we can afford a $1,295 Bridle Check Tote from Burberry, at 9 East 57th Street.)

But a recent walk down 57th Street, from east to west, underscored a vast gulf between the two. The thoroughfare between Madison and Fifth avenues boasted, in addition to Burberry, gilded storefronts by Tourneau, Dior and Yves Saint Laurent. The glitz continued between Fifth and Sixth avenues, with Bulgari and Smythson at the foot of the Crown Building, and Club Monaco across from Bergdorf Goodman.

But then, things began to get, shall we say, less extravagant, with cell-phone outlets, hokey jewelry shops, a Strawberry, a Daffy’s, and some decidedly mid-brow eateries. In short, shops better suited for the diamond district or some lesser retail corridor, like, say, 42nd Street.

That, dear friends, won’t last for long.

“You have to consolidate the owners, so you have a fully integrated retail strategy, and it takes time,” Mr. Freedman said. “It’s marinating now.”

Jeffrey Roseman, executive vice president and principal at Newmark Knight Frank, agreed: “I don’t know if it will replace Madison Avenue for luxury, but it’s definitely changing, and for the positive.”

drubinstein@observer.com

“I got great sleep last night,” Mort Zuckerman said on Tuesday afternoon, the day after he and his partners closed on the most expensive single-building purchase ever. Nine hours of sleep, no less.

As chairman of Boston Properties, Mr. Zuckerman on Monday closed on the $2.8 billion purchase of the General Motors Building, New York City’s most coveted trophy tower in a city teeming with trophy towers. The precise closing happened at 4:42 p.m., when he was at home working on an editorial for his magazine, U.S. News & World Report, the topic of which he wouldn’t reveal. (“You will only find out when you buy the magazine.”)

That Mr. Zuckerman was busy working on something else during the culminating moment of an agonizing four-month-long series of negotiations does not mean that the moment was anticlimactic. He just doesn’t sit in on closings. That, apparently, is what lawyers are for.

“I was absolutely delighted,” he said, about going from the “agony” of negotiations to “the peace” of the done deal. “I’ve been to too many of these [closings],” he added. “I just celebrate them by not having anything to think about.”

And he’d been thinking about it plenty. Much as the real estate world has been riveted by the collapse of Macklowe Properties, the most prominent New York victim of the credit crisis, Mr. Zuckerman said the negotiations with that firm have occupied the bulk of his time for months, even during his recent trip to Israel to celebrate the nation’s 60th anniversary.

“I spent about four hours a day [on the phone] with New York working on this transaction,” Mr. Zuckerman said.

He first announced early Monday afternoon that the deal was closing, during a speech at a luncheon hosted by the Real Estate Board of New York at the Sheraton on Seventh Avenue.

During his remarks, Mr. Zuckerman said Boston Properties was closing on the GM Building at 767 Fifth Avenue “as we speak,” and that the deal underscored his confidence in the New York market, the recession notwithstanding.

“This is the most difficult time we’ve had in 70 years,” said Mr. Zuckerman at the luncheon, as hundreds of real estate types divided their attention between his prognostications and the breaded chicken breast on their plates.

“There are an estimated nine million homes whose mortgages exceed the value of the homes, and no one knows what will happen,” he said. “It brings to mind what Adam said to Eve in the Garden of Eden: ‘Stand back. I don’t know how big this is going to be.’”

That said, “New York, principally Manhattan, stands a little bit isolated, because Manhattan is part of the global economy.”

Boston Properties has a 60 percent interest in the GM Building, heading up a consortium that includes U.S. Real Estate Opportunities I, LP, a partnership of Goldman Sachs and the Dubai-based Meraas Capital LLC. Boston Properties will be responsible for the building’s management and leasing.

The $2.8 billion purchase price includes approximately $890 million in cash, and the assumption of $1.9 billion in debt that matures in 2017.

Boston Properties estimated in a release that it could get twice the current rents at the 50-story, marble and black glass tower.

On Tuesday, Mr. Zuckerman said that Boston Properties had another 60 days or so to close on the other three Macklowe properties it bought in May along with the GM Building—540 Madison Avenue, 125 West 55th Street and Two Grand Central Tower. But at least the most significant purchase is now behind him.

“The thing that is the most important thing is that it got done,” he said.

drubinstein@observer.com

Tenants beware! Time’s running out to lease space in the Bank of America tower at One Bryant Park, the Durst Organization’s shiny and wildly successful new tower on Sixth Avenue.

Apex Capital Management, a private investment firm, based in Hong Kong and New York, that is what real estate types would call “price insensitive,” has agreed to pay more than $160 for each of the 7,300 square feet it leased on the tower’s 37th floor. In so doing, the firm snapped up one of the last remaining spaces in the 54-story green building on Sixth Avenue, between 42nd and 43rd streets. Now only 30,000 square feet remain, all of it also on the 37th floor.

Douglas Durst, the developer of the building, said he hadn’t expected the tower to fill up so quickly—just a month after anchor tenant Bank of America began moving in.

“It feels really good,” Mr. Durst said.

We bet.

Would-be tenants will have to pay through the nose for the remaining offices, and for the chance to rub shoulders with other members of the price-insensitive set—like Al Gore, whose Generation Investment Management finalized its lease in May.

Mr. Durst said he plans to subdivide the remaining square footage into four or five smaller units, with asking rents around $190 a square foot. “We’re finding that the market is for smaller tenants,” Mr. Durst said.

Mr. Durst was represented by in-house brokers Eric Engelhardt and Tom Bow; Apex was represented by GVA Williams brokers Richard Plehn and Greg Wang.

drubinstein@observer.com

Albert Behler’s Paramount Group is one of the last behemoths standing in the competition to pay $1.5 billion for 1301 Avenue of the Americas, the Credit Lyonnais building that Harry Macklowe surrendered to Deutsche Bank earlier this year.

Mr. Behler, the CEO of Paramount Group, last year snapped up Deutsche Bank’s 31 West 52nd Street for a cool $600 million, and is now “a viable contender” for the Sixth Avenue tower, said a source close to the negotiations. Five to six other bidders are still competing for the tower, but Paramount is rumored to be the likely winner.

If the deal closes—and as one source pointed out, “it could swing a few more directions before this is over”—it would be the second-largest building deal this year, following the recent purchase by Mort Zuckerman’s Boston Properties of the GM Building for around $2.8 billion.

Mr. Macklowe was forced to turn over control of 1301 Avenue of the Americas, along with the other six buildings he bought in February 2007 from Sam Zell’s Equity Office Properties (via Blackstone), to Deutsche Bank this spring, after defaulting on the loans used to purchase them. Mr. Macklowe still reportedly holds the titles to the towers.

The former Equity Office portfolio, all of which Deutsche has put on the block, also includes Tower 56, 527 Madison Avenue, Park Avenue Tower, Worldwide Plaza, 1540 Broadway, and 850 Third Avenue.

drubinstein@observer.com

Doom-and-gloom credit crisis notwithstanding, developers requested city approval to build substantially more new buildings in the first four months of this year than in the same period last year, according to Department of Buildings statistics.

We know. It’s a little startling, given the Bear Stearns bailout, rising construction costs and the difficulty in getting credit.

Yet during the first four months of 2008, there were 98 applications for new Manhattan building permits, a 46 percent increase over the same period in 2007, when there were 67.

Breaking down the numbers further, in Community Board 4, which encompasses Chelsea and Hell’s Kitchen, developers requested 16 new building permits, in contrast to just five in the same period last year. In Community Board 5, also known as midtown, there were 10 new building permits requested this year, in contrast to five in the same period last year.

What’s going on?

Séamus Henchy, president of Séamus Henchy and Associates Inc., a project management firm