Manhattan Office Building’s Lease Sells for $230 Million

Commercial property sales overall have greatly cooled off in New York during the pandemic, but there have been exceptions for well-located properties that have leased most of their space to tenants with good credit.

The tower at 860 Washington “is very well-leased for the long-term,” said Jeffrey Sussman, chief executive of Property Group Partners, one of firms in the venture that sold the building to Meadow. “That’s an attraction in a market of uncertainties.”

Mr. Sussman declined to comment on the financial terms of the transaction.

As of the end of November, only $5.5 billion of Manhattan office properties had been sold in 2020, according to Real Capital Analytics. Office sales volume during the same period in 2019 was $13.3 billion, the data firm said.

Volume has fallen because no one knows when the pandemic will be over or when people who have been hunkering down will start returning to office buildings, hotels, stores and other commercial spaces. Even when conditions return to normal, the outlook for office-space demand is unclear because of the newfound popularity of remote working.

Manhattan’s Meatpacking District long ago was a gritty area of slaughterhouses and packing plants. But it started attracting bars, restaurants and technology firms especially after the popular High Line park opened in 2009.

In the years leading up to the pandemic, asking office rents soared close to $200 a square foot for the top spaces. “The Meatpacking District produces some of the highest rents in the country, let alone the city,” said Douglas Harmon, chairman of capital markets at Cushman & Wakefield. Mr. Harmon, Adam Spies and Kevin Donner led a Cushman team that advised on the 860 Washington deal.

The building at 860 Washington was developed about five years ago by a group including Property Group Partners, a unit of W.R. Berkley Insurance Co., and New York’s Romanoff family, which had owned the site for decades. The recent sale was structured so Property Group and Berkley could cash in on their investment while the Romanoff family could stay in the deal.

This was done by selling the land under the building to a new entity created by the Romanoff family and selling the 99-year lease to Meadow. Under that lease, Meadow will control the building and keep paying ground rent to the Romanoffs.

The transaction valued the 99-year lease at about $230 million and the land at $80 million, according to people familiar with the matter. Both deals together valued the entire property at about $310 million, the people said.

A 12-year-old firm, Meadow has about $2 billion in real-estate assets under management, according to Timothy Yantz, a partner in the firm. He said the deal was “fairly bulletproof” given that tenants have “eight years of average lease term remaining across the building.”

That is enough time “to weather the current climate and get us into the next cycle,” Mr. Yantz said.

Write to Peter Grant at [email protected]