Lessons from the crash: Post-Lehman long-term buyers

By Adam Pincus

The financial crises that followed the collapse of Lehman Brothers froze lending and also cast extreme uncertainty over valuations, leading to a dramatic fall in transactions and pricing.

Yet in 2009 and 2010, buyers nonetheless purchased billions of dollars in New York City real estate, a portion of that at a steep discount.

While mainstream economists see the possibility of a recession rising or even here, others see the potential for a far darker future with a more severe credit squeeze that would force many to sell.

Hear David Schechtman of Meridian Capital Group talk about the Lehman Brothers aftermath and lessons it may have for another downturn. Tuesday, July 26 at 2 p.m. MORE INFORMATION

With an eye to that scenario, PincusCo took a look back at who bought in the immediate aftermath of the 2008 recession, with closings in 2009 and 2010, and also continued to hold those properties.

Many of the office deals were headline grabbing at the time, including George Comfort & Sons leading a group that in 2009 bought Worldwide Plaza at 825 Eighth Avenue for $590 million, down from the $1.7 billion from Macklowe Properties paid for it in 2007.

And in a smaller deal, in 2010, a group paid $140 million for the office building at 417 Fifth Avenue to Moinian Group and Goldman Sachs, who had bought the property for $250 million in 2007.

Also in 2010, RXR Realty snagged what looked like a great deal, buying 1330 Avenue of the Americas for $400 million, a nearly 25 percent discount off the $498 million that Macklowe Properties paid in 2006. But in a cautionary tale for the office market, that building just sold for $325 million, The Real Deal reported, a few days ago, lower than the 2010 price.

The city did not just see office deals, however.

Stellar Management paid $68 million for 666 West End Avenue, which it is marketing as the Windemere rental building which now has a $119 million mortgage from 2020, indicating a substantial increase in value.

Stonehenge NYC paid $67 million in 2010 for 555 Sixth Avenue in Chelsea, formerly owned by the bankrupt St. Vincent’s Hospital.

In addition, dozens of investors in smaller multifamily properties were extremely active in this period. PincusCo has records for tens of thousands of owners but we do not have all ownership mapped out, so this information by owner is likely to be incomplete.

Watermark Capital Group, which includes Meir David Tabak as a member, bought at least seven walkups in those two years for a total of $5.125 million; Zalmen Management, which includes Juda Klein as a member, bought at least nine properties for $18.7 million in Brooklyn, the Bronx and Manhattan; Viking Management, which includes John Ilibassi as a member, bought at least four properties for $22.4 million, in Manhattan and Brooklyn, including 41 East 7th Street in the East Village.

Other active buyers include Ved Parkash with at least four buildings, Stanley Gallant with 16 buildings acquired for $27 million; Leopold Kaufman with six buildings for $3.7 million; Joseph Popack with six buildings for $33.15 million, and many more.

Buying during a downturn, however, is no guarantee the assets won’t be in trouble later. Zalmen Wagschal was a buyer of at least five Brooklyn walkups in 2009 and 2010 for a total of $3.1 million, and three of those are have been involved in foreclosure cases in the past two years.