The 8 September 10 WSJ reports that 3 Columbus Circle, a 700,000 square foot office building, might be razed and replaced with a residential tower. A residential tower with this much square feet (and the small foot print of this tower) should exceed 300m.
http://online.wsj.com/article/SB1000...DDLETopStories
NY REAL ESTATE COMMERCIALSEPTEMBER 8, 2010.Ross Raids Wobbly Tower
Related Cos. Boss Eyes Debt-Laden 3 Columbus Circle for City's First Nordstrom
By LINGLING WEI And ELIOT BROWN
Stephen Ross, one of the nation's leading developers, has swooped in to try to snatch a troubled office tower near Columbus Circle from a smaller rival in hopes of turning the property into the city's first Nordstrom department store, according to people familiar with the matter.
The 26-story 3 Columbus Circle is at the center of a struggle for control between developers Joe Moinian and Stephen Ross.
.The 26-story building at 1775 Broadway, which has been renamed 3 Columbus Circle, is one of the crown jewels in the real-estate empire belonging to Joe Moinian, who bought many properties near the market's peak.
Mr. Moinian has been trying to hold on to the building and was close to restructuring its $250 million mortgage. But a venture led by Mr. Ross's firm, Related Cos., and Deutsche Bank AG came out of nowhere to purchase the mortgage on the property and is now seeking to foreclose, the people said.
Related has been talking to Nordstrom about its intent to foreclose on 3 Columbus Circle then demolish it and build a new tower in its place, these people said.
Related, which developed the $1.7 billion Time Warner Center a block away on Columbus Circle, is thinking about putting apartments on top of the store and will seek architects to design the building in coming weeks, the people said. Nordstrom has been eyeing Manhattan for years. Representatives at Related and Nordstrom declined to comment. Mr. Moinian also declined to be interviewed.
The fight is the latest example of firms that have avoided getting clobbered by the property downturn now moving to take advantage of weakened competitors. Mr. Moinian—a 56-year-old Iranian-born developer who had his first job in a restaurant in Forest Hills, Queens, after coming to the U.S. at 16—went on a buying spree during the boom years. His portfolio grew to over 20 million square feet, but it left him with a bad hangover of over-leveraged buildings that he has been attempting to save. So far he has succeeded in restructuring most of his problem loans.
Mr. Moinian had been hoping to save 3 Columbus Circle, a 700,000-square-foot building he acquired in 2004 in a deal that valued the property at about $250 million. He spent about $100 million upgrading it. The tower is only 16% occupied, according to real-estate-services firm CoStar Group Inc. A spokeswoman for Mr. Moinian said in a written statement last month that his company, the Moinian Group, "is now actively marketing" the building and "closings [are] expected soon on major office and retail tenants."
But the struggles made 3 Columbus Circle a target for the opportunistic investors who have been circling commercial real estate, particularly in Manhattan and other prime markets. A common strategy of these investors has been to buy the debt on troubled buildings at a discount and then try to foreclose.
What's unusual about 3 Columbus Circle is that the Related venture bought at close to full face value the $250 million mortgage debt on the tower from the firm overseeing the loan, the people said. The move indicates that the Related group is determined to win control of the building in a bet that the property is worth more than the mortgage debt.
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Developer Stephen Ross
.Mr. Moinian could still fend off the foreclosure attempt by paying off the mortgage debt. But that's going to be tough in a credit-starved real-estate market. Mr. Moinian also could buy time by seeking bankruptcy protection for the property, real-estate experts say.
The grab for 3 Columbus Circle is a high-stakes bet for Mr. Ross, 70 years old, who founded Related in 1972 to focus on developing government-subsidized housing. In the 1980s, the company expanded into developing luxury rentals, office towers and other commercial property. Related also is the designated developer of the massive Hudson Yards project on the West Side and is building a 1.2 million-square-foot hotel and apartment project on West 42nd Street.
In this current real-estate downturn, Mr. Ross's company has been brought in by lenders to help rescue many troubled developments. For instance, lenders to the failed Xanadu project in New Jersey have been talking to potential partners, including Related, to help complete the retail and entertainment development after a group led by Colony Capital decided to give it up to creditors last month.
The bet on 3 Columbus Circle shows that Mr. Ross is getting more aggressive, going directly after distressed commercial real-estate assets rather than waiting to be hired by an interested party. Still, the company has its share of problems, too. Among them is the company's $3 billion plan to redevelop the village at the base of the Snowmass ski mountain near Aspen, Colo. A four-bank group in July filed a notice to foreclose on the first phase of the Snowmass Base Village project due to missed payments on a $386 million construction loan. Last month, Related sued the bank group for failing to fulfill its funding commitments for the project.
While Mr. Moinian is playing defense in the struggle for 3 Columbus Circle, he has some powerful allies. He has been advised in some of his restructurings by Robert Verrone, the former head of the commercial real-estate unit of Wachovia Corp., now part of Wells Fargo & Co. Mr. Verrone, who earned the nickname "Large Loan Verrone" for his penchant for big deals during the boom times, left Wachovia in 2008 and has since been advising troubled property owners and developers.
"We have stabilized our portfolio to a great extent and will always be vigilant about protecting our assets and tenants/residents, as well as our investment partners," Mr. Moinian said in the August statement. "This is a job that never ends."
Write to Lingling Wei at
lingling.wei@wsj.com