Harry Macklowe at 737 Park Avenue: So Close, Yet So Far
Laura Kusisto June 7, 2011, 4:46 p.m.
With the deadline approaching for Harry Macklowe to seal the deal at 737 Park Avenue, he is so close, yet so far from securing the equity he needs.
Mr. Macklowe has hired the Carlton Group’s Howard Michaels to help him search for another partner for the deal (Mr. Michaels told The Observer a couple of weeks ago that a mystery European investor was the initial partner). So far, Mr. Macklowe has secured a $250 million mortgage, which is equal to the purchase price of the building, according to an email by Mr. Michaels, cited to The Observer by a source.
Mr. Macklowe has also offered to put in $30 million, according to the source. But he’s on the hunt for a $75 million mezzanine loan or preferred equity partner. Mr. Macklowe did not respond to requests for comment; Mr. Michaels declined to comment.
The pre-war building is currently configured as an apartment tower, and Mr. Macklowe is expected to convert it to a condo, requiring around $50 million of renovations. But here’s the rub: 20 percent of the building is still occupied by rent-regulated tenants, who will either need to die or be bought out, slimming a developer’s margins.
That presents a challenge worthy of Harry Macklowe–the deft developer who brought us the Apple cube outside the GM Building and 510 Madison (not to mention, the forthcoming 70-story condo tower on the Drake site). Units will on average have to sell for $4,000 to $5,000 a foot, according to an expert source familiar with the building–surpassing reigning condo king 15 Central Park West.
But combining Mr. Macklowe’s development acumen and the building’s status as a rare pre-war condo is enough to pull it off, said another source familiar with the transaction. “I know that there are a lot of investors interested,” the source said. “It’s a pretty unique situation to have a pre-war condo on the market. Co-op boards are difficult and a lot of people who are going to be very excited that it’s like a pre-war co-op, but it’s a condo.”
The deal is expected to close in July—if all the pieces fall into place—and the potential sky-high sale price could set the benchmark for a new boom.