Wednesday, May 21, 2008

Harry Macklowe Close to Unloading GM Building

Harry Macklowe, aka "I like to pay the high in commercial property prices," is reportedly close to a deal to sell the GM building to Goldman Sachs, Boston Properties, and two Middle Eastern investors. The deal would value the GM building at $2.8 billion, $200 million less than Mr. Macklowe's target price, but still a record for a single office building. Mr. Macklowe recently defaulted on $7 billion in short-term loans to Deutsche Bank and was forced to hand over the keys on seven buildings that he bought from Blackstone Group in early 2007. In addition to the properties he lost, Mr. Macklowe must now sell the GM building to pay off a loan from Fortress Investment Group. If the sale fails to satisfy the debt to Fortress, his personal assets are in danger. Those assets include some pretty fancy digs at New York City's Plaza hotel, where real estate developers have shown that they love to pay the high in their personal property purchases as well. The elevator at The Plaza Hotel is meanwhile becoming the place to exchange humorous anecdotes on "how I lost a bunch of money in the 2008 credit debacle." Apparently, Mr. Macklowe paid over $60 million to purchase several units at the Plaza in June 2007 with plans to combine them. Recently, Mr. Macklowe was joined at the Plaza by Jim Cayne, who closed on a relatively paltry $28 million apartment at the Plaza in March of 2008, right as his firm Bear Stearns was imploding. Apartments at the Plaza have been changing hands at prices of around $4,000 to $6,000 per square foot, but an Italian businessman is currently trying to punt his unit, on which he has yet to close, for over $10,000 a square foot. According to the Wall Street Journal on April 7,2008, Luigi Zunino was attempting to sell his apartment at the Plaza for $100 million. Mr. Zunino is in the real estate business, much like Mr. Macklowe, as his property development company bought the Manhattan flagship of Barney's last year, at the high. The stock of Mr. Zunino's property company is down significantly since then, so he is probably looking to make a quick buck and sell to a greater fool before he is forced to pony up the cash for his closing. The problem is, it appears as if all the greater fools already reside at the Plaza.