Unfortunately, I don’t have a crystal ball, nor do I often partake in gambling, but if I were a betting man, I would wager that 2005 will be a record year for sales of commercial property in New York City. According to the Capital Markets Group of Cushman & Wakefield, a record $14.9 billion in sales were reported in 2004, well over the prior record of $12 billion in 2001, which included deals for the World Trade Center and Rockefeller Center. Preliminary reports suggest that sales volume for the first quarter of 2005 was almost $9 billion.

A number of industry leaders agree that we’re in for another record-breaking year, including the managing director at Eastdil, Douglas Harmon, who has been responsible for the highest volume of sales of commercial and residential properties in New York over the past several years. “2005 is the first year that I can remember where almost every form of asset class is establishing new sales-per-square-foot records,” Mr. Harmon said. “Today, investors from around the globe are targeting New York as their prime investment priority. Nothing is out of bounds for purchase: Retail is hot, land is hot, rentals, conversion, A and B buildings, vacant buildings, and industrial properties.”

During the past three weeks, sales volume alone exceeded more than $3.5 billion. On April 1, a joint venture between Tishman Speyer Properties, the New York City Employees’ Retirement System, and the Teachers’ Retirement System agreed to pay $1.72 billion to MetLife for the 58-story, 2.8-million square-foot MetLife Building at 200 Park Ave. It was the highest price ever paid for a single building in America, exceeding the $1.4 billion purchase of the 1.4-million-square-foot General Motors Building at 767 Fifth Ave. by the Macklowe Organization. Sources involved in the negotiations over the MetLife Building said that they felt the insurance company could have fetched an additional $200 million for the signage rights on top of the tower, though they decided in the end not to sell. As reported in Commercial Mortgage Alert, Lehman Brothers is providing $1.2 billion in financing for the deal.

Scott Latham, executive director of the Capital Markets Group of Cushman & Wakefield, told me, “The risk of terrorism and insurance had no real effect on the sale of 200 Park Avenue.” Many of the interested bidders reduced their offers due to the potentially high cost of terrorism insurance for the property.

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Earlier in the week, MetLife entered into a contract to sell its 1.4-million square-foot former headquarters, One Madison Avenue, to SL Green Realty for $918 million. The property occupies an entire city block between Madison Avenue and Park Avenue South between 23rd and 24th streets. One Madison Avenue is comprised of the 1.2-million-square-foot South Tower, 96% of which is leased to Credit Suisse First Boston, and the 267,000-square-foot North Tower, which is zoned for residential and office use. A spokesman at SL Green said that another component of the transaction was the purchase of about 470,000 square feet of air rights, which he said will be used to construct a second tower on top of the North Tower for either office or residential use. As reported in Commercial Mortgage Alert, Credit Suisse First Boston will provide $815 million in debt financing, consisting of a $690-million, 15-year mortgage for the North Tower, and a $125 million loan for the South Tower to fund conversion of a portion of it into residential condominiums.

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On April 1, Ofer Yardeni and Joel Seiden, principals of Stonehenge Partners, closed on the acquisition of The Pennmark, at 304-324 W. 34th St. and 305-319 W. 33rd St. A consortium of investors including CDP Capital-Real Estate Advisory, a subsidiary of Caisse de Depot et Placement du Quebec, paid approximately $240 million to a partnership of JD Carlisle and smaller investors, which developed the property in 2001. The Pennmark is a 33-story, 600,000-square-foot mixed-use building containing 333 luxury residential units and 300,000 square feet of commercial space. Tenants include a 13-screen Loews Cineplex, Landmark Education, Bank of America, and Central Parking Garage. The purchasers do not plan to convert the property into a residential condominium.

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On April 6, a partnership of Yair Levy, Serge Hoyda, and Kent Swig closed a deal to buy The Sheffield, a 50-story, 845-unit market-rate rental apartment building at 323 W. 57th St. The 28-year-old mixed-use building has a 376-unit garage leased to Champion Parking and six floors of office space. The partnership paid $418 million to developer-owner Rose Associates. At a capitalization of almost $545 million, which includes funding for renovation costs, it is the largest deal ever for a single residential building in America. Acquisition financing was provided by CS First Boston. The new owners plan to convert the residential apartments into condominiums at prices averaging $1,100 per square foot.

On the same day, SL Green Realty and Morgan Stanley Real Estate Fund III LP agreed to sell a 265,000-square-foot Class B office building at 180 Madison Ave. to Sitt Asset Management for $92.9 million, or approximately $350 per square foot. The joint venture purchased the building in December 2000 for $41.2 million.

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Last Friday, it was announced that Sloan Capital, a consortium of two Irish billionaires, agreed to pay approximately $79.5 million for the landmarked Rhinelander Mansion, a five story, 28,000-square-foot building at 867 Madison Ave. on the corner of 72nd Street. The seller is German fund operator TMW, which bought the property in 1997 for $36 million. It houses the Polo Ralph Lauren flagship store.

Also last week, Equity Office Properties formally announced that it had entered into an agreement to pay $505 million for a majority interest in the Verizon Building, a 41-story, 1.2-million-square-foot office tower at 1095 Avenue of the Americas. Equity Office will acquire 1.03 million square feet, or nearly 80% of the tower, including approximately 30,000 square feet of retail space, as well as the naming rights for the building. Verizon will retain ownership of approximately 200,000 square feet. As reported in my March 24 column, it is estimated that Equity will have to spend at least $200 million to renovate the tower.

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A number of residential and commercial properties will come on the market during the second quarter. It is expected that New York Life Insurance Company will announce plans later this week to sell Manhattan House, a market-rate residential apartment building that occupies an entire city block between East 66th and East 67th streets and Second and Third avenues. The property is likely to fetch close to $600 million. Industry insiders believe that Metropolitan Life Insurance Company might be interested in selling Stuyvesant Town and Peter Cooper Village. A total of approximately 11,250 market rate apartments are in these complexes, which stretch from East 14th to East 23rd streets between First Avenue and Avenue C. The price could exceed $2 billion.

The president of The City Investment Fund, Thomas Lydon, said, “The demand and the scarcity of top investment properties will cause more sellers to take advantage of an exit at historically high prices. Some of the long-term family owners may decide it is the top of the market and will choose to exit selective properties.”

Robert Ivanhoe, the chairman of the national real estate practice and cochairman of the national REIT practice at the law firm of Greenberg Traurig LP, said, “It is almost as if sellers feel that there is a momentary window of opportunity to achieve historic and once unattainable high prices, and if there was every going to be a time to sell, this is it.”

The president of the Realty Board of New York, Stephen Spinola, said: “You can’t get a better investment than in the City of New York. People are willing to invest in the city. I do not see a bubble in the market, perhaps a slowdown.”

The threat of terrorism and the cost of insurance has had limited or no effect on investors’ interest in purchasing properties in New York City. Nor has the significant increase in real estate taxes for commercial office buildings and rental apartment buildings. “Real estate taxes have increased by 63% in 2000 for office buildings,” Mr. Spinola said. “The increase for residential apartment buildings has been 83% since 2000. There are limitations and we need some form of reduction in real estate taxes.”

I agree with Mr. Ivanhoe when he says, “The lack of good alternative investments, weak stock and bond markets, improvement in the leasing market, the perceived safety of New York City real estate, and the sense that this may be the last hurrah for long-term interest rates being at historic lows have led to the insatiable demand, even at record pricing levels.”

In New York, instead of the calm before the storm, Mr. Harmon asks, “Is this the absolute frenzy before the storm?”

I have to agree with Mr. Harmon, and with the thoughts of Mr. Ivanhoe. “The real question is for how long this window will stay open?” Mr. Ivanhoe said. “While many industry leaders have an opinion, no one really knows. So in the meantime, until something changes, fasten your seatbelts!”

Mr. Stoler is a television broadcaster and vice president of First American Title Insurance Company of New York. He can be reached at mstoler@nysun.com.