APF Properties, Prudential to Buy 28 W. 44th St. for $161M

March 15, 2011
By Barbra Murray, Contributing Editor

The 367,000-square-foot office tower at 28 West 44th St. in Midtown Manhattan will soon come under new ownership. Joint venture partners APF Properties and Prudential Real Estate Investors have signed a deal acquire the property from SL Green Corp. for $161 million.

While 28 West 44th St. is not one of those premier office destinations with steady, long-term flow so deeply coveted by many an investor these days, it still brought out its share of eager buyers.

“With the very easy properties, everyone is chasing those,” Berndt Perl, principal with APF, told CPE. “But with a property like this, one that is a little more Class B than Class A, well, there are always a million people coming out but with these little deviations, the competition in this target range is not as great.”

Located just two blocks from Grand Central Station along Club Row, 28 W. 44th St. originally opened its doors in 1919, and served as the headquarters of the New Yorker magazine from the early 1940s to 1992. Presently, office space in the 23-story building, which also features ground-level retail space, is 87 percent occupied by a list of tenants ranging from credit-worthy to the businesses without big names. The structure, like most office assets in APF’s portfolio, features floor plates that are appropriately sized to give a small company a big presence by taking on an entire floor.

The Class B property, sited in a Class A location, dovetails perfectly with APF’s acquisition strategy, which calls for capitalizing on the presently low interest rates to snap up quality properties in premier locations, and upgrade them to a level that will help lure more tenants. The new owners will submit 28 W. 44th to a sweeping $12 million upgrade.

Quality will be a main selling point, but from the buyers’ perspective, it seems that more than anything, location will be the ultimate key to success for 28 W. 44th.

“There are certain properties where everything is right–high occupancy and all credit tenants with long-term leases, but this one is more interesting,” Perl said. “The way it is now, you could make the argument that it is a lower risk than a trophy property. It’s near Grand Central Station, it’s a great location. We have another building a block away, so we know we can rent it.”

And he believes that the current state of the Manhattan office market also bodes well for the asset’s future. “Supply is not going up tremendously and vacancies are compressing so we see potential for rent growth. Rents are still at a relatively low level, but there is going to be upward movement in the short to medium term. We don’t care when it happens, but we are fairly confident that it will happen within the next few years and we are well positioned to take advantage of it. This is a very low-risk asset.”

The joint venture’s purchase of 28 W. 44th from SL Green is not written in stone just yet. There are the typical conditions to meet, and there is financing to put in place, a task that is in progress. As Perl noted, “We are in the market to get debt financing and we are working with several institutions.”