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The Carlton Group's Howard Michaels
If anyone knows about the art of restructuring and raising large amounts of capital, it’s Carlton Group chairman Howard Michaels(seen speaking at a recent B'nai B'rith luncheon), who’s in the midst of working on $2B of restructures and recaps and was recently involved in complicated deals with 1180 Avenue of the Americasand One Park Avenue. An investment sale is a much simpler transaction than a recap because it's a two-party transaction with a buyer and a seller. But he adds that recaps are a lot morecomplicated because they typically involve an existing investor who is taking a big loss, a new investor who has a certain return expectation, and a variety of lenders and the owner, all who may havedifferent objectives with respect to the outcome.
The Carlton Group's Howard Michaels and Joseph Korbar
However, Howard, here with Carlton Group director Joseph Korbar, says there’s good news: rising property values, low interest rates, and over $300B of investor capital are creating a perfect confluence of events to transact business. Foreign investors, in particular, are very interested in investing today as evidenced by the 1180 Avenue of the Americas transaction. This property was facing foreclosureand the Carlton team was able to access an overseas investor to partner with the existing owner to avoid the foreclosure and keep control of the asset. Howard expects more capital coming into Manhattan from Canada and overseas, as investors worldwide are seeking the stability and upside associated with investing in New York.
One Park Avenue, New York, NY
One Park Avenue saw the closing of a $430M equity and debt recapitalization and restructure after the $375M first mortgage loan was in default and was headed to a foreclosure or discounted note sale. The deal gained consensus from all four subordinate debt holders to accept a significant discounted payoff and negotiated with the senior lender to allow the recapitalization to go forward. Eventually, Vornado bought a 95% interest in 1M SF tower. Usually, a deal like this takes six months to close, Howard says, but this took only six days (with some nail biting). He points out that both transactions are a testament to quality sponsorships, as Murray Hill Properties will continue to operate and have a pari passuownership stake with Vornado in the building.