Aby Rosen, the Manhattan real-estate developer and owner of trophy properties like the Lever House and the Seagram Building, doesn’t make many missteps. He has a long record of buying buildings at distressed prices, sprucing them up and then enjoying top-level rents for years.
So it was unusual that 18 months ago he jumped at the opportunity to buy seven Stamford, Conn., office buildings at what turned out to be the top of the market – plunking down $850 million for 1.6 million square feet, an eye-popping $513 per square foot.
The buildings were a part of Sam Zell’s perfectly timed sale of his 500-plus building, Equity Office Properties, two years ago this month for $39 billion. Private-equity powerhouse Blackstone Group, which bought the company and then sold off most of the collection for about $21 billion, sold the buildings to Rosen.
Today that deal looks like a very bad bet. The buildings are now worth far less than what Rosen’s RFR Holding paid. Stamford tax assessment records show the total value of one of the properties, 300 Atlantic Street, has plummeted 33 percent in just one year, to $101.2 million in 2008, from the sale price of $151 million in 2007. RFR’s 177 Broad Street plunged 35 percent to $51.6 million last year, from $79 million when RFR bought it.
Based on current conditions for investment sales, the portfolio’s value has dropped 24 to 32 percent to between $575 million and $650 million, according to an estimate from Real Capital Analytics.
“It’s never fun to buy at the top of the market, let’s face it,” said Dan Fasulo, managing director at Real Capital Analytics.
Rosen and his partner, Michael Fuchs, paid such a hefty price assuming they could rely on Stamford’s staple tenants – banks and financial services firms – to keep expanding their space and pay ever-rising commercial rents.
Now, as the financial crisis deepens and the government struggles to keep the banking system afloat, RFR is caught in the downdraft. The 10 percent annual rent increases the buildings had been logging have evaporated in the widening commercial real estate leasing slump.
While Rosen is licking his wounds from the Stamford misstep, it is not likely to rock his real-estate world. The seven Stamford buildings comprise less than 25 percent of RFR’s northeast properties – the company also has buildings in Las Vegas, Miami and West Palm Beach, not to mention abroad.
Frankfurt native Rosen burst on Manhattan’s real estate scene in the early 1990s, buying up buildings on the cheap during a real-estate slump before diving into residential development. He quickly learned to fuse art, fashion and real estate to establish himself. Rosen hit the social scene, collected trophies like the Seagram Building and bought up Andy Warhol’s art with equal panache.
Rosen doesn’t just develop hotels and apartments: he makes fashion statements designed by starchitects. He didn’t just buy the iconic modernist skyscraper Lever House: he stamped it with his own brand of status, adding a trendy restaurant and stocking the lobby with flamboyant contemporary art.
Rosen likes to hang out at art auctions and openings with attention-getting friends – dealer Larry Gagosian and Andre Balazs, the developer and Uma Thurman ex – who help keep him in the spotlight. Before settling down with his second wife, socialite doctor Samantha Boardman in 2005, Rosen was said to be dating actress Gina Gershon. Now his family vacations at sprawling homes in Southampton and St. Barts.
RFR is known for holding onto real estate investments and upgrading them. Rosen is spending millions to upgrade lobbies, bathrooms and walkways in his Stamford buildings. According to a source, a few tenants are looking at the available space in the buildings – not, perhaps, because they want to expand but because it carries an asking rent per square foot a few dollars below the rates last February.