Why The Office Market Continues To Love 31 West 27th St.
For the third time in five years, 31 West 27th St. is about to sell. Westbrook Partners hired the Hodges Ward Elliott New York investment sales team to market the 144K SF property early this spring, and it recently went under hard contract with Savanna for $126M. Bisnow sat down with HWE Managing Directors Will Silverman and Paul Gillen and Senior Vice President Daniel Parker to get an inside view from the deal-makers.
Bisnow: Investors seem to universally covet 31 West 27th St. Is it true that your team gave over 100 tours of the asset?
Silverman: Yes. The tour schedule kept us very busy, and we had more than a few disappointed bridesmaids! I’ve worked on all three sales, as well as the 2016 refinancing. We have seen the market’s view on this property evolve since 2012. The building has tracked the institutionalization of the Midtown South market in general and the NoMad market specifically.
Bisnow: How has the market’s view of NoMad evolved?
Silverman: During the 2012 sale process, a lot of people didn’t fully understand the NoMad office market. We would literally walk investors to the entrance of the recently opened NoMad Hotel to show them how the neighborhood north of 23rd Street was becoming more upscale.
Bisnow: How did your team depict NoMad more recently?
Silverman: This time we pointed out to investors that if you go up the middle of Manhattan from Tribeca to SoHo to the Village to Flatiron you have thriving neighborhoods all with beautiful architecture and excellent transportation. We reasoned that NoMad has the same recipe and is clearly the next to fill in. Investors agreed.
Bisnow: Why do you think that there was so much demand for 31 West 27th St.?
Gillen: Most investors find it difficult to achieve attractive risk-adjusted yields in New York. We were able to position the asset to give the market what it wanted: good risk-adjusted yield at a manageable price point. The asset offered both downside protection from in-place leases and several upside opportunities, like adding a rooftop amenity and repositioning the retail.
Parker: 31 West 27th St. is what everyone imagines as the best of Midtown South. The building has interesting architecture with ornate detail, high ceilings, big windows and original wood flooring that collectively produce an authentic creative office aesthetic. The building also has plenty of elevators because the former freight lobby was converted to a second lobby with passenger elevators, which gives 31 West 27th St. a competitive leasing advantage.
Bisnow: What kind of tenants has the building attracted?
Silverman: The best evidence of the property’s desirability is the mature tenancy. We highlighted that the average tenant at the property has been in business 40 years, combating some preconceived notions that Midtown South assets like this are filled with a bunch of startups. Part of that is due to the floors that are 11,500 SF, which is sized for a more mature tenant. A larger company is often more creditworthy and has more choices. 31 West 27th St. is Midtown South for grown-ups.
Bisnow: With over 100 tours, there must have been a wide investor pool. What was the profile of the typical investor?
Gillen: The transaction had enough in-place cash flow to attract core-plus capital and enough upside for value-add investors. Given the dearth of similar-sized, quality product in the market, investors from both buckets were eager to make the deal work.
Silverman: Not only did it work for multiple risk-return profiles, the transaction size made it accessible to a range of investors. It was small enough for private investors and small funds, large enough for institutional capital, and everyone else in between. We could have easily cleared five more assets like this one to meet the demand we generated.
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