The Mall-Buying 'Bottom Feeder' Has His Sights Set On Manhattan's Older Office Buildings
Namdar Realty Group, which has amassed a nationwide portfolio of unwanted malls, is moving in on Manhattan’s worn-out office buildings.
Namdar's joint venture with Empire Capital Holdings has spent almost $180M acquiring two old Manhattan office towers in the last two months, swooping in on distressed assets as other real estate investors back away from the borough’s office market — and he plans to buy more, Bloomberg reports.
Namdar and Empire bought the 13-story, 64-year-old 830 Third Ave. office building for $72M this month after acquiring 345 Seventh Ave., which is 24 stories high and more than 90 years old, for $107M last September. The buildings were purchased for less than $500 per SF — far lower than the average Manhattan office price of $896 per SF, which is down over 10% from its 2019 peak, according to MSCI Real Assets data as reported by Bloomberg.
“New York City’s hitting a rough patch now, but we believe long-term, people are not going to work at home,” Namdar Realty founder Igal Namdar told Bloomberg. “Once everything is settled and, hopefully, the economy gets better, you’re going to see a lot more companies come back and rent space.”
Namdar’s bet centers on New York City-based companies downsizing their office space as they contend with hybrid work or moving to higher-quality spaces in more attractive locations. As interest rates rise, borrowing may get more complicated for some office owner — giving Namdar an opportunity to swoop in as properties seek new financing.
JLL Managing Director Max Herzog, who advised the financing deal on the 830 Third acquisition, told Bloomberg that Namdar and Empire Capital’s joint venture will need to acquire buildings at low prices if their strategy is to be successful.
“It’s really a function of the cost basis, and a contrarian play — similar to his previous mall acquisitions,” Herzog said.
Namdar figures to have more opportunities as more office buildings go into distress. In March this year, Blackstone gave the keys back to its lender for its 1950s Midtown office tower at 1740 Broadway. Earlier this week, the bank lender of a Financial District office property filed to foreclose on the owner, Crain’s New York Business reported.
Namdar has a personal net worth of approximately $2B, according to the Bloomberg Billionaires Index. The majority of this figure was built during his decadelong venture making all-cash offers on distressed malls, MarketWatch previously reported.
During that time, Namdar acquired more than 250 distressed malls and filled vacancies with down-market retailers, while limiting debts and improving capital spendings before selling the properties at a profit, Bloomberg previously reported. The strategy also resulted in multiple lawsuits alleging the properties had lower revenues and higher costs than Namdar presented.
“They’ve been a bottom feeder, historically, buying on the cheap, for pennies on the dollar and making a go of it,” MSCI's Jim Costello told Bloomberg last year. “It’s not the high end of the market, but it’s solid retail if you can set it up right.”
But unlike with malls, which are tricky to repurpose, Namdar and Empire Capital told Bloomberg they have deliberately chosen office properties that have strong occupancy but enough windows that they could be turned into residential apartments.
“We like optionality,” Namdar said. “We can stay with the office or we can go with the residential route.”
UPDATE, SEPT. 27, 3:30 P.M. ET: This story has been updated to include comments from MSCI's Jim Costello about Namdar's mall purchases.