Murray Hill’s $265 M. Chinese Savior
Jim Hanas May 17, 2011, 8:33 a.m.
The bank was just weeks away from taking over Murray Hill’s prized 1180 Sixth Avenue when a Chinese investor stepped in to save the tower.
“We got into a tight situation in that a mezz holder, the Shorenstein Group, bought the equivalent of the B-note,” said Norman Sturner, president and CEO of Murray Hill Properties, “and at some point in time, started a foreclosure.”
The financing deal, which included a $100 million equity investment and a $165 million financing, has just closed, and Murray Hill remains the operating partner on the property, which they bought four years ago at the height of the market. Mr. Sturner said he expects a long-term partnership with the Chinese investor, and together they’re already eyeing several Manhattan investments.
“The Middle East politically is on fire. Japan theoretically is on fire, the euro is under enormous pressure,” said Mr. Sturner, “so that in all three of those situations, if you’re a billion-dollar company or multi-gazillionaires, you want to get out of your domestic currency.”
In many cases, that means Manhattan real estate.
The mystery investor on the 1180 Sixth financing is just one of several thickly veiled companies from the Middle East and China which are quietly working with some of the city’s most established real estate names.
“The partnership that we put together is kind of like a marriage,” said Howard Michaels chairman of the Carlton Group, which arranged the financing. “They wanted to be invested in the market and looked for a counterparty, a qualified operating partner that has an infrastructure and a leasing team here on the ground.”
Carlton recently arranged a similar transaction with a mystery European equity partner for Harry Macklowe at 737 Park Avenue.
“The whole distressed cycle is not playing out as many had originally thought,” said Dan Fasulo, director of research at Real Capital Analytics. “There are not distressed assets for sale through Cushman & Wakefield. You have to be a little more creative and team up with distressed owners in some sort of recapitalization; try to pursue the loan-to-own.”
Moreover, this is likely just the beginning. “With everybody who borrowed money, that will cause a great deal of pain when the CMBS loans begin to come down,” Mr. Sturner said. “Billions of dollars are coming due in ’10, ’11 and ’12, and the answer to a lot of that difficulty is coming from overseas.”