Multi-Generation Real Estate Families Stray from Cardinal Rule
New York City is home to several real estate families that over the years have “shaped the cityscape” as real estate portfolios were built with intended long-term ownership and passed down over the years from generation to generation. Until recently, these dynasties shared a similar cardinal rule — Never sell. Since the days of their beginnings, these real-estate family owners have managed to avoid selling their core properties during “world wars, financial meltdowns, and a global pandemic.” However, the post-pandemic world has presented a challenge like no other in history, prompting some to “take a cold hard look” as they re-evaluate their real estate portfolios “to make sure there’s a foundation for the next generation.” At a time when ‘U.S. office vacancies are at near record levels and demand looks permanently impaired by remote work and by companies doing more with less space, some firms have had to make the hard decision to sell some of the properties they owned for many years. The rise of the “flight to quality” has made it increasingly harder for the city’s older buildings to compete with new buildings that boast a wide array of tenant amenities that employers are hoping will incentivize employees to return to the office despite for some, a lengthy commute.
Significant investments in extensive upgrades at some older office buildings in top-tier locations has paid off for some, citing the Tishman Speyer-owned Rockefeller Center, which saw an uptick in leasing activity following an investment of millions of dollars into a redevelopment of the campus that led to a 25-year lease renewal by long-time tenant Christie’s of its 400,000-square-foot space; and the successful negotiation of a loan extension for the DuMont Building at 515 Madison Avenue controlled by the Gural family for over 60 years as a result of the investment of new equity secured following a capital call with partner investors. However, others have had to face the hard reality that investing additional capital back into certain aging buildings did not make sense, citing the $100 million investment in the 1960s-era building at 80 Pine Street made by the Rudin family that failed to significantly turn things around after anchor tenant American International Group left, subsequently leading to decisions to sell. A few other recent sales include 55 Broad Street and 655 Madison Avenue, sold by the Rudin family and Williams family respectively, while longtime owners, the Kaufman family recently went into contract to sell 767 Third Avenue, and the Durst family’s recent decision to introduce the sale offering of 675 Third Avenue, which they developed in the 1950s-1960s. Although “tracking the precise number of sales by these families is tricky,” real-estate investment banking firm Eastdil Secured reportedly said that “New York real-estate families have sold about 10 office buildings over the past 24 months,” in contrast to the previous decade when there were “fewer than five such deals;” and in many cases, now selling “the family jewels at values significantly below what they were five years ago.”