Investor pays $6.5M for Midtown East retail, down from $18.5M in 2016

Updated: An investor through the entity 730 Lexington Ave LLC paid $6.5 million to Amerant Bank through the entity Mcna Properties IV, LLC for the retail building (K2) at 730 Lexington Avenue in Midtown East, Manhattan. The sale price illustrates the steep decline in retail values in some trade areas hit particularly hard by the slow return of office workers following the outbreak of Covid.
The deal closed on October 14, 2022 and was recorded on October 20, 2022. The property has 4,100 square feet of built space and 9,898 square feet of additional air rights for a total buildable of 14,000 square feet according to a PincusCo analysis of city data. The sale price per built square foot is $1,585 and the price per buildable square foot is $464 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)

The latest sale price is just 35 percent of the price Ashkenazy Acquisitions paid for the property in 2018, $18.5 million. It’s neighbors were Victoria’s Secret and The Gap, which has since closed. At the time of the purchase, Ashkenazy took out a $12.95 million loan from Mercantil Bank.
Amerant Bank, successor to Mercantil Bank, acquired title to the property in September 2021, with the value set at $12.74 million.

Prior sales and revenue

The 4,100-square-foot property generated revenue of $1.1 million or $272 per square foot, according to the most recent income and expense figures.

The property

The 730 Lexington Avenue parcel has frontage of 20 feet and is 70 feet deep with a total lot size of 1,400 square feet. The zoning is C5-2 which allows for up to 10 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $6.1 million.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the property since September of 2020. In addition, according to city public data, the property has not received any significant violations in the last year.

Development

There are no active new building construction projects or major alteration projects with initial costs more than $1 million on this tax lot.

The neighborhood

In Midtown East, the majority, or 82 percent of the 61.5 million square feet of commercial built space are office buildings, with hotel buildings next occupying 7 percent of the space. In sales, Midtown East has the 2nd highest sale turnover among other neighborhoods in the city with $3.3 billion in sales volume in the last two years. For development, Midtown East is the most active neighborhood among other neighborhoods. It had 15.1 million square feet of commercial and multi-family construction under development in the last two years, which represents 25 percent of the neighborhood’s built space. There was one pre-foreclosure suit filed among other retail buildings in the past 12 months.

The block

On this tax block, PincusCo has identified the owners of four of the 13 commercial properties representing 760,430 square feet of the 2,123,350 square feet. The largest owner is Vornado Realty Trust, followed by Jack Resnick & Sons and then Amerant Bank.
On the tax block, there was one new building construction project filed totaling 76,739 square feet. It is a 29-unit, 76,739 square-foot R-2 building developed by Neo Que Yau Manager-118east 59th with plans filed September 18, 2014 and permitted July 9, 2015.

The majority, or 98 percent of the 1 million square feet of built space are office buildings, with retail buildings next occupying 2 percent of the space.

Surrounding

Within a 400-foot radius of 730 Lexington Avenue, PincusCo identified six commercial real estate items of interests occurred over the past 24 months.
Of those six items, one was for major renovation including a certificate of occupancy change. It was a permit issued on November 30, 2020 for the $542,000 renovation of 22,553-square-foot M building with no residential units at 715 Lexington Avenue.
Of those six items, three were sales above $5 million totaling $77.9 million.
Of those six items, two were loans above $5 million totaling $122.5 million. The most recent of the two was Cohen Brothers Realty which borrowed $100 million from Fortress Investment Group secured by the 397,354-square-foot, 41-unit office building (O4) on 135 East 57th Street on September 27, 2022.

Update: the name of the buyer has been removed for privacy reasons.

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