The demand for Manhattan commercial properties has continued to rise at a record pace during the first two months of 2005. The president and chief executive of Cushman & Wakefield, Bruce Mosler, said, “Based upon early indications, I expect the sales volume to increase to over $15 billion in 2005.” Last year, according to the New York capital markets group of Cushman & Wakefield, total real estate investment sales for the city rose to $14.3 billion from $9.97 billion in 2003, an increase of 43.4%.

The sentiment that sales volume will increase this year was shared by five guests on my most recent TV show, on which Mr. Mosler appeared. The others included the chief operating officer of Gramercy Capital Corporation, Hugh Hall; a principal of Swig Burris Equities and Brown Harris Stevens, Kent Swig; the president of Allan Riley Company, Allan Riley; a principal at Apollo Real Estate Advisors, L.P., Richard Mack, and the managing director at Beacon Capital Partners, Adam Popper.

My guests said they feel that the combination of the lowest long-term interest rates in 40 years; pension plans’ and investors’ acceptance of real estate as an asset to be included in investment portfolios; the influx of foreign investors, and, lastly, continually rising prices support the optimism. Surprisingly, though, one of the leading investment brokers in New York is not a believer, and said he expects a decrease in sales this year. He said, “There are a tremendous amount of plebeian inexperienced investors, and I am almost certain that in 2005, a major hiccup will take place. I do not expect interest rates to be the reason, but a confluence of events, which will have a significant effect on sales.”

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The chairman and co-founder of Murray Hill Properties, Norman Sturner, is bullish on investment sales for the year. “This year, we will continue to scour the market for as-yet-unseen assets that may come to market, with a need for our type of hands-on value-added facets,” said Mr. Sturner. “Barring any real dislocation in Washington, D.C., we think 2005 will continue to be a great year for assets bought and sold in New York City.”

This year may be the one in which major corporations will sell many of their corporate real estate assets to capitalize on the opportunities in the market. Earlier this month, Verizon announced it entered a contract to sell the 27-story, 500,000-square-foot landmark building at 101 Willoughby St. in Downtown Brooklyn. The purchaser is Berkshire Capital, which paid $74 million, or $148 a square foot, and plans to convert the building into residential condominiums. Last month, the company entered into a contract to sell three sites. They are at 563 11th Ave., 604 W. 43rd St., and 605 W. 42nd St. Joseph Moinian bought the properties for about $124 million and plans to develop a residential condominium.

According to industry sources, more than 40 investor groups have spent time evaluating the pros and cons of purchasing Verizon’s building at 1095 Avenue of the Americas. The 42-story, 1.228 million-square-foot tower at the corner of 42nd Street, across from Bryant Park and the new Bank of America headquarters, is expected to be sold for close to $800 million. The New York Sun has learned that a number of serious investors have decided against making a bid for the property, based on the projected selling price. Two of the investors said that in order to pay that price, they would have to expect to charge rents of close to $90 a square foot.

Last week, MetLife announced plans to market its 58-story, 2.8 million square-foot building at 200 Park Ave. The tower, built in 1963, is under a long-term land lease. Even though the property is under a land lease, many industry leaders feel the price could exceed $2 billion, or $725 a square foot, making this sale the highest selling price of a building. That sale price would exceed that of the September 2004 sale of the GM Building at 767 Fifth Ave. for $1.4 billion to the Macklowe Organization. MetLife also announced plans to sell its former headquarters at One Madison Ave. The 50-story, 1.360 million-square-foot building, built in 1909, has major tenants including Credit Suisse First Boston, Guy Carpenter, and MetLife. According to industry insiders, the selling price might exceed $750 million.

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Last week, in his capacity as a private real estate owner, the chairman of the MTA, Peter Kalikow, entered a contract to sell the landmark 29-story, 1.052 million-square-foot former headquarters of AT&T at 195 Broadway, built in 1916. The buyers are a partnership of GE Asset Management and L&L Acquisitions, whose principals include David Levinson and Robert Lapidus, paying about $300 million after closing costs, or $300 a square foot. Mr. Kalikow purchased the building in 1983 for $74 million.

A senior investment sales broker said, “A number of old line real-estate owners are taking advantage of the hot investment market and selling their properties.” One of those is Rose Associates, which last month entered into a contract to sell its 28-year-old, 50-story, 845-unit market-rate rental apartment building, “The Sheffield,” at 323 W. 57th St. The buyer is a partnership of Serge Hoyda, Yair Levy, and Kent Swig, who have agreed to pay $418 million, or $494,765 a unit. The building also includes six floors of office space. Financing for the acquisition and conversion of the property into condominiums will be provided by Credit Suisse First Boston. The partnership of Hodya, Levy, and Swig will close next month on the purchase of two residential buildings and a development site on Amsterdam Avenue, also planned for conversion into condominiums.

According to industry insiders, a 1,200-unit market-rate rental complex, Riverton Houses in Harlem, will be marketed for sale later this week. The complex stretches from 135th Street to 138th Street and from Madison Avenue to Fifth Avenue. The buildings were built and developed by Metropolitan Life Insurance Company, which also built Stuyvesant Town and Peter Cooper Villages. Industry sources, including myself, expect the selling price will exceed $120 million.

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The Sun has learned that an office building in the Chelsea Section off 10th Avenue will be offered for sale during the second quarter. Based on the rent roll, the selling price should exceed $250 million.

Sales of office buildings for conversion to residential condominiums will help fuel the sales volume in 2005. The Sun has learned that a number of buildings on Fifth Avenue are expected to be put up for sale. The president of Newmark Global Real Estate Advisors, James Kuhn, said, “It would seem that any Class B office building in Manhattan that has expirations in the next five years has a value as a residential conversion twice that of an existing office building. We saw it with the sale of the Toy Center at 200 Fifth Ave., just as we have in Lower Manhattan over the last couple of years.”

In January, a partnership of the Chetrit Brothers and Mr. Moinian entered a contract to purchase the 15-story, 670,592-square-foot International Toy Center at 200 Fifth Ave. and its companion site, the 16-story, 337-square-foot building at 1107 Broadway. The purchase price is about $360 million, or $350 a square foot. Another office building expected to be for sale is the nine-story, 112,000-squarefoot property built in 1892 at 160 Fifth Ave. It is expected to be marketed for sale as an opportunity for conversion to a residential condominium. The property will probably sell for close to $50 million.

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Later this year, Elad Properties, which bought the Plaza Hotel last year, intends to begin marketing the condominium units at the former International Gift Building located at 225 Fifth Ave., which it purchased in spring 2004. The Sun has learned that the initial prices for the condominiums will be begin at $1,500 a square foot.

In April 2004, the New York City Employees’ Retirement System and Tishman Speyer Properties purchased the 34-story, 587,000-squarefoot Lipstick Building at 885 Third Ave. The partnership paid $235 million, or $400 a square foot. Last week, Tishman Speyer announced that it is selling a 49% interest in the building. According to industry insiders, the total sales price for the building could exceed $500 a square foot, or $293 million. Tishman also announced last week that it is planning to sell the 264,500-square-foot office building at 40 Broad St., which was built in 1982. The property is a few blocks from a number of residential condominium conversions in Lower Manhattan. If the property is sold for conversion to residential, it could fetch in excess of $250 a square foot.

Unfortunately, no one can predict the future with complete accuracy. Yet at this time, it looks like a another record-breaking year for investment sales in the city.