650 Madison May Be a Steal for Ashkenazy

At a reported price of nearly $700 million, 650 Madison Ave. in Midtown Manhattan may turn out to be a bargain for Ashkenazy Acquisition Corp., according to local deal-watchers. Led by investor Ben Ashkenazy, the Manhattan-based private firm was reported by RealEstate Weekly’s Dan Geiger to have submitted the winning bid for the 600,000-square-foot office tower owed by Hiro Real Estate Co. “I think (Ashkenazy) got a great deal,” Dan Fasulo, director of market analysis for Real Capital Analytics Inc., told CPN this morning. “This asset easily would have traded for 10 percent higher earlier in 2007.” Representatives of Ashkenazy could not be reached for comment, but the acquisition of 650 Madison would mark the firm’s entry into the rarified world of Manhattan office investment. High-end retail represents the lion’s share of Ashkenazy’s coast-to-coast portfolio. Among other assets, Ashkenzay owns Barneys New York stores in Manhattan, Chicago and Beverly Hills. In February 2007 the firm bought an 84-year ground lease for Union Station in Washington, D.C. , which includes 213,000 square feet of retail and 109,700 square feet of office space. Ashkenazy’s latest acquisition is located on Madison Ave. and 60th Street in the Plaza District, perhaps Midtown Manhattan’s premiere office property location. Named for the famed Plaza Hotel, the submarket is also the home of Macklowe Properties’ closely watched GM Building, which may soon command a record price of $3 billion-plus. Fundamentals for such trophy properties are largely unaffected by national economic uncertainty. Manhattan buildings like 650 Madison command some of the nation’s top office rents, exceeding $100 per square foot. At the same time, the capital markets upheaval has lowered investment sales pricing. Lenders are reluctant today to underwrite deals based on projections of future income, and are generally unwilling to loan buyers as much of an asset’s sale price as they were a year ago. Without such leverage, buyers must bring down their bid prices, Fasulo explained. “I think we’re in a window of tremendous opportunity for investors who have cash available and are willing to take risks,” he said. Fasulo speculated that Ashkenazy will invest significantly in upgrades to make 650 Madison even more competitive. For example, the new owner might tap the building’s potential by adding some retail space on the second floor.