Risk Analyst Eurasia Group Calculates the Odds at 149 Fifth Avenue
By Jotham Sederstrom January 10, 2012 1:16 pm
reprintsWhen in 2006 the real estate investor Joseph Moinian bought the office building 475 Fifth Avenue in partnership with the firm Westbrook Partners, the Eurasia Group—a tenant in the building—saw it as an opportunity. The company had years left on its lease, but word quickly spread among tenants that Mr. Moinian was going to offer handsome buyouts to empty the building so he could gut renovate the skyscraper and re-lease it at sky-high rents.
Mr. Moinian’s strategy hardly seemed audacious at the time. The economy was hot, Manhattan rents were rising by the month and prime office space was in strong demand.
Having grown rapidly since it moved into 475 Fifth Avenue, the Eurasia Group was flying high too. Executives at the firm were ready to take the money and use it to relocate into a larger office that could house the company’s expanding staff.
But as is often the case in both life and New York’s unpredictable real estate market, things didn’t go as planned. Mr. Moinian wound up buying most of the tenants out of their leases at 475 Fifth and embarking on a thorough overhaul of the property. But before he came around to a deal with the Eurasia Group, seismic obstacles knotted his plans. The economy collapsed, the real estate market tanked and Mr. Moinian’s grand vision for the property became one of the many unfortunately timed projects whose economic underpinnings rested on market conditions that had suddenly vanished.
Buyouts stopped and construction froze almost overnight. With little hope of leasing space at the rates necessary to justify the project’s cost, Mr. Moinian and Westbrook eventually were forced to walk away from the building, turning the keys over to the lender, the British bank Barclays (BCS).
The Eurasia Group couldn’t as easily be rid of the situation. It found itself in one of the most uncomfortable scenarios a tenant can experience: captive in a building with no true owner. Despite the horror stories of suspended services and maintenance so associated with foreclosures, Alec Allenstein, the Eurasia Group’s chief operating officer, said Barclays remained a responsible steward of the property.
What was problematic was the condition of the building after months of unfinished construction. Namely, 475 Fifth Avenue’s once beautiful lobby had been stripped down to the cinder blocks.
“We had this beautiful Art Deco lobby with glass and marble that we loved and it had been taken down to the concrete,” Mr. Allenstein said.
Being one of the sole occupants in an otherwise nearly vacant property was also eerie. “Going up to our floor, it would kind of feel a little shaky,” he said, noting the elevator’s sparse use.
