In less than a year, Boomer Baron Steve Witkoff has made a killing on his downtown office building at 10 Hanover Square.
Witkoff, who bought the 22-story tower late last year from Helmsley Enterprises, is about to take out a $55 million mortgage on the property from Credit Suisse First Boston, industry sources say.
And that’s after paying only $15 million to get the building.
The deal is a dramatic sign that the city’s real estate industry is once again off to the races. Investors haven’t been able to make fast profits like that since the buying frenzy of the roaring 1980s.
“There’s been an enormous rise in values,” said Peter Hauspurg, president of Eastern Consolidated Properties.
Big bucks are being made, especially by Witkoff, who gobbled up office buildings at huge discounts before the market began to turn around.
Witkoff, who also purchased such properties as 80 Maiden Lane and the News Building on 42d Street, picked up 10 Hanover when the downtown market was still in the doldrums.
At the time, many real estate experts felt Witkoff was making a big mistake. The 530,000-square-foot building, which had been the headquarters of the now-defunct investment bank Kidder Peabody, was virtually empty in a market awash in vacant space.
But what a difference a year makes. The downtown market has rebounded thanks to the good times on Wall Street, the growth of the new media industry and the conversion of numerous office properties into apartment buildings.
Earlier this year, investment banking giant Goldman Sachs leased all of the space in 10 Hanover at rents in the $30-a-square-foot range.
The strength of that leasing triggered a bidding war among lenders interested in giving Witkoff a mortgage on the building. After coming close to a deal with Deutsche Morgan Grenfell, Witkoff opted instead for Credit Suisse First Boston, sources said.
Witkoff, who declined to comment, doesn’t get to put the entire profit in his pocket. Much of it has to go to finance more than $30 million of improvements he agreed to put into the building to attract Goldman Sachs.
Nevertheless, Witkoff is sitting on a pot of gold. Experts say that lenders these days typically provide mortgages that are no more than 75 percent of office buildings’ values.
In other words, if Witkoff can borrow $55 million on 10 Hanover, the property is probably worth at least $75 million.
