A Manhattan Office Building Just Sold at a 97.5% Discount

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A 23-story Midtown Manhattan office building, once valued at $332 million, recently sold for just $8.5 million in an online auction, reflecting the struggles in the aging office sector.

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A Manhattan Office Tower Just Sold at a 97.5% Discount

A Midtown Manhattan office property recently sold in an unusual online auction at a 97.5 percent discount, a stark sign of the times in a struggling office sector. The 23-story glass building at 135 West 50th Street sold for $332 million in 2006, and it recently changed hands again in the auction at a mere $8.5 million.

Once the headquarters of Sports Illustrated, the aging 1963-constructed building was only 35 percent occupied at the time of the sale. The offices’ longtime owner is an investment fund managed by UBS Realty Investors, which previously tried to sell it for under $50 million in a deal that fell through. 

UBS Realty sold the property through a two-day, public online auction on the Ten-X website, a real estate auction website. The office was listed alongside motels, apartment buildings, and suburban strip malls.

UBS Realty’s loss is not as bad as it seems, though. The company purchased the land (ground lease) in 2006 for $279 million. In 2019, it sold the land to Safehold, a firm specializing in ground leases, for $285 million. Then, it signed a long-term ground lease with Safehold.

UBS bought the building for $332 million, renovated it for $76 million, and bought the land for $279 million. So, in the end, UBS took a massive loss on the building sale but a small gain on the land. The total loss was $385 million, or a 43% loss on its investment.

Many large office buildings nationwide have recently sold at steep discounts of as much as 70 percent, but this recent fire sale is a particularly extreme example. Opportunistic bargain hunters are scooping up aging office properties in hopes of scoring profits when prices eventually bounce back.

Trophy office assets are doing much better than aging office stock without the amenities that today’s best tenants want. The office may not be dead, but the market may not have hit bottom yet, so we can likely expect more distressed deal-making like this for the foreseeable future.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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