Sturner Recapitalizes 1412 Broadway
“We are happy to report that we have concluded the purchase and recapitalization of 1412 Broadway,” began a recent email sent by Murray Hill Properties owner Norman Sturner to his investors.
This is the 400,000-square-foot, Class B garment-district building at 39th Street that Mr. Sturner and his partners bought for $177.5 million in December 2006, right at the height of the frenzied real estate market.
After searching for new investors from within the ranks of New York real estate’s moneybag set, Mr. Sturner told The Commercial Observer that he ended up recapitalizing the building using money from funds managed by his firm. “It’s a great coup for us,” Mr. Sturner said. “I’m unhappy that my partner asked to be bought out, but we did what we had to do.”
His partner also has reason to be unhappy.
Mr. Sturner’s funds paid $5 million to purchase and retire a $20 million mezzanine loan from TIAA-CREF—wiping out $15 million for that investor. “In addition, we completed the equity recapitalization by purchasing our joint-venture partner’s interest in the property totaling $68.5 million for $6 million,” Mr. Sturner wrote in his email. “As you can see we have reduced the previous capital stack from $197.5 million to approx $120 million…”
That, in turn, wiped out more than $60 million for his investment partner. But it means that Mr. Sturner and friends now own the building, by his calculations, for under $300 a foot.
Mr. Sturner said he is optimistic about the future of the building, which he is busy converting from a strictly garment-district mainstay into one more amenable to tenants from other industries. Right now it has a vacancy rate of about 20 percent.
Mr. Sturner plans to finish up his renovation of 1412—he’s replacing all of the elevators, modernizing the electrical systems, installing energy efficient windows and the like—lease up the remainder of the building and then find an investment partner or purchase the entire property.
By then, perhaps, the investment market will have turned for the better.