Sovereign Partners pays $113M to Pearlmark for Tower56 in Midtown East

Sovereign Partners through the entity T56 Owners, LLC paid $113 million to Pearlmark through the entity Tower 56 Real Estate Owner, L.L.C. for the office building (O4) at 126 East 56th Street in Midtown East, Manhattan.
The deal closed on April 4, 2023 and was recorded on May 2, 2023. The property has 171,591 square feet of built space according to a PincusCo analysis of city data. The sale price per built square foot is $658 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 seller bought the property on September 18, 2008, for $158 million. The signatory for Pearlmark was Douglas W. Lyons and Michael O’Malley. Douglas Lyons is a managing principal at Pearlmark.  The contract date was February 10, 2023.

The Real Deal reported Cyrus and Darius Sakhai’s Sovereign Partners was the buyer.  Pearlmark will retain a small stake in the new ownership, the report said. Adam Spies, Doug Harmon and Josh King of Newmark, formerly of Cushman & Wakefield, were the brokers.

Prior sales and revenue

Prior to this transaction, PincusCo has no record that the buyer Sovereign Partners had purchased any other properties and has no record it sold any properties over the past 24 months.
The seller Pearlmark had not purchased any other properties and had not sold any properties over the same time period. The 171,591-square-foot property generated revenue of $14.4 million or $84 per square foot, according to the most recent income and expense figures.

The property

The office building in Midtown East has 171,591 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 60 feet and is 100 feet deep with a total lot size of 6,025 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 $76.1 million.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the property for the past 24 months. In addition, according to city public data, the property has received $935 in OATH penalties 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 81 percent of the 62.6 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 $3.9 billion in sales volume in the last two years. For development, Midtown East is the most active neighborhood among other neighborhoods. It had 17.6 million square feet of commercial and multi-family construction under development in the last two years, which represents 28 percent of the neighborhood’s built space. There was one pre-foreclosure suit filed among other office buildings in the past 12 months.

The block

On this tax block, PincusCo has identified the owners of 11 of the 25 commercial properties representing 949,483 square feet of the 1,446,501 square feet. The largest owner is Tokyu Land Corporation, followed by Time Equities and then Sol Goldman Investments.
On the tax block, there were three new building construction projects totaling 624,252 square feet. The largest is a 511,538 square-foot business (B) building submitted by L&L Holding Company and filed by William Potts with plans filed September 18, 2013 and permitted August 18, 2014. The second largest is a 62-unit, 59,819 square-foot residential (R-2) building submitted by Zeckendorf Development and filed by Arthur Zeckendorf Iii with plans filed August 12, 2019 and permitted January 28, 2020.

The majority, or 82 percent of the 1.4 million square feet of built space are office buildings, with hotel buildings next occupying 6 percent of the space.

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