By Daniel Geiger
The company, which has been an active buyer of Manhattan office buildings in recent months, is said to be paying around $900 million, a figure that would make the sale one of the highest-priced commercial office deals in the city this year.
The 2.3 million s/f property is being sold by a partnership between the investor Mark Karasick and the real estate investment company Shorenstein Properties, which has owned the property together for about six years, according to sources.
The deal appears to be a big bet by RXR on the future of the neighborhood. Located at 601 West 26th Street, occupying the full block between 11th and 12th Avenue, the building will be near the nexus of a large commercial office district and residential neighborhood that is expected to sprout at the West Side rail yards, three blocks to the north. Although the development of the yards has not yet begun, developers and city planners have been banking on a transformation of the area into Manhattan’s next popular frontier for office tenants.
The Related Companies, the developer of the yards, has said that it will break ground on the multibillion dollar rail yards project as early as next year, and other developers like Joseph Moinian have purchased parcels and properties in the surrounding vicinity to build commercial and residential buildings as the neighborhood’s popularity takes hold and demand for space materializes.
The city is also on schedule toward completing an extension of the No. 7 Subway line in late 2013 that will bring a badly needed mass transaction connection to the area, infrastructure that is expected to enhance the area’s commercial potential.
For now, however, the Starrett-Lehigh Building is a westerly outpost, distant from Manhattan’s main commercial thoroughfares and remote from transportation. The building is well leased, according to sources, to a host of corporate tenants including the advertising firm McGarryBowen, apparel companies Tommy Hilfiger, Club Monaco, Hugo Boss, and Martha Stuart’s eponymously named media company Martha Stuart Omniliving. The lack of vacancy would appear to protect RXR over the near term, putting off the need for leasing, perhaps until the neighborhood’s transition begins and the building can benefit from the changes that are expected in the surrounding area.
People familiar with the building say that Karasick and Shorenstein were encouraged to sell the property by the recent sale of 111 Eighth Avenue, an over three million s/f property that was purchased by that building’s biggest tenant, Google, for almost $2 billion at the start of the year. In many ways, the Starrett-Lehigh Building is a similar asset, with huge, sprawling floors over a 100,000 s/f in size and a loft-like style that attracts tenants in creative industries like media, advertising, and technology. Bjarke Ingels Group, the architect behind the Durst Organization’s pyramidal proposal for the Upper West Side, recently signed a lease in the building.
People familiar with the property say that 601 West 26th Street lacks the infrastructure that 111 Eighth boasts, however, includingrobust connections to fiber optic cabling that run under that building and other communication conduits. It wasn’t clear by press time if RXR is planning to do improvements on the property. According to information on Shorenstein’s website, the building underwent a $30 million renovation in 1998.
Neither RXR nor representatives for Karasick or Shorenstein could be reached for comment. A brokerage team from the company Eastdil Secured led by executives Adam Spies and Doug Harmon handled the sale. Neither Spies nor Harmon could be reached.