Risanamento May Lose on Sale of Barneys Building
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Risanamento SpA may lose as much as $50 million on the planned sale of its stake in 660 Madison Ave., the Manhattan office building housing the flagship store of Barneys New York.
Risanamento, a Milan-based real estate company, bought the office portion of the 23-story tower at East 61st Street last August for $375 million, or $1,453 a square foot, a record price a square foot at the time for American offices. Manhattan office values have since fallen as much as 15%.
“I would be surprised if it traded at the same price,” the president of Real Capital Analytics, a New York-based property research firm, Robert White, said. “But I don’t think it’ll be a bloodbath.”
A spokesman from Risanamento, Alberto Brunelli, declined to comment on the sale. The company announced the plan to divest 660 Madison and a complex in Milan’s Santa Giulia commercial area on June 26.
Risanamento fell 1.3 cents, or 1.3%, to 1.006 euros in Milan. Shares have dropped 81% in 12 months.
The company, which reported a loss of 39 million euros for the first quarter, is under pressure from its banks to sell assets and bring in partners, Merrill Lynch’s London-based analyst Bernd Stahli wrote in a May 20 note to investors.
“It would probably be a very long battle to try to regain credibility,” Stahli wrote. “Arguably it is not worth it and the banks may just push for an orderly windup.”
The Madison Avenue building is in the heart of Manhattan’s Plaza District, where average office rents are the highest in America, at $119.14 a square foot, according to a report by CB Richard Ellis Group Inc. The Barneys store is owned separately. Risanamento said June 26 it would be picking “a leading international broker” to market the property “during the next days.” The company has still not publicly identified a broker for the property.
Manhattan office properties bought near the market’s peak and now being sold at a loss include Wachovia Corp.’s pending sale of 1372 Broadway and Deutsche Bank AG’s 850 Third Ave. and Park Avenue Tower, sold earlier this month for approximately $825 a foot.
They were bought by New York investor Harry Macklowe as part of a seven-building package for which he paid an about $1,070 a foot. Deutsche Bank took back the two buildings from Macklowe when he defaulted in February on $5.8 billion of debt he’d used to buy them the year before.
A partnership led by Wachovia Corp. last week agreed to sell 1372 Broadway for $294 million, $41 million less than the building was valued when Wachovia bought an 85% share last year.
“These are instances where we are seeing sellers under some pressure to liquidate,” Real Capital’s Mr. White said. “That has largely been the exception to the rule in New York.”
The Madison Avenue building is in the Plaza District, named for its proximity to the Plaza Hotel, where sale prices have been highest. The tower’s office space comprises 255,000 square feet.
The General Motors Building, a block away on Fifth Avenue, was sold for about $1,400 a square foot in June, and 650 Madison Ave., across East 60th Street, was sold in April for $1,133 a square foot. Those are the two highest prices in New York this year on a per-square-foot basis, Mr. White said.
Both prices included the retail space, which isn’t part of the 660 Madison offering.
Tenants include the financial firms Colony Capital LLC, Dickstein Partners, and Gleacher & Co. LLC, and offices of the Dolce & Gabbana SpA luxury fashion house, according to CoStar Group Inc., a real estate information service.
Deutsche Bank AG provided Risanamento with $275 million of financing. One portion, a $50 million high-interest mezzanine loan was sold by Deutsche Bank in September to Shorenstein Properties LLC, a San Francisco-based office building company that stepped up its investments in high-yield real estate debt last year. That portion was secured by a stake in a corporation that indirectly controlled the ownership of the 660 Madison offices.
The Italian newspaper Milano Finanza reported on July 3 that Risanamento was discussing the sale of properties in Milan with Limitless LLC of Dubai, a state-owned real estate developer. Limitless is a unit of Dubai World, a holding company for the government of Dubai.