Properties Worth $500 Million are now Begging to be Sold at Half that Price

October 16th, 2009

Thanks to the foreclosure catastrophe properties that were worth $500 million in 2007 are now begging to be sold at half the price. Myers Mermel stands outside a ritzy skyscraper on Madison Avenue, his thoughts going back to yester days when he was a realtor with the vision of a vulture. A former banker with Morgan Stanley he had jumped into the real estate business. Mermel had the distinction of flipping the building twice within the span of the last six years. That was when Manhattan properties were skyrocketing.

In 2003 he bought the property for $160 million with the support of a rich family of Los Angeles. He crowded the top floors with hedge funds and their managers. Rent rates began to spike to dizzy heights. In 2006 Mermel and his support group sold the property for $220 million to Broadway Partners. But he retained a minority interest in the unit. This time Mermel and Broadway Partners sold the unit in 2007 to an Italian firm, Risanamento for $375 million. He was lucky to slip out just before the financial tsunami hit the country.

Not to be idle Mermel has been enterprising enough to set up $50 million for a vulture fund. Now he is biding his time to prey on his rivals who were not so fortunate like him.

One of the properties Mermel is eyeing is this same 660 Madison Avenue. The economic collapse led to the falling of prices of office buildings in Manhattan – sometimes by as much as 50%. Mermel calculates that the current worth of the building is $143 million – much than less than its mortgage value of $175 million. The present owners, Risanamento based in Milan is now thinking of unload the tower to ward off bankruptcy. This is encouraging news for Mermel as it will open up doors to pick it up at a bargain rate. One of the engineers while going out for lunch noticed Mermel hanging around and asked if he was coming back. Mermel grinned back and said, “I’m always in the market.”

The skyscraper market in Manhattan is bad but not as bad as during the 70’s when New York was about to be declared bankrupt. Today it is also not as bad as the 90’s when thanks to the Reagan booming the horizon was dotted with empty towers. But as per the observations of the firm of Mermel, Tenantwise the office vacancy rate inclusive of sublease touched 17% by the close of July – it being a 38% spike from what it was in the early weeks of the year.