Crain's New York Business reports: After his company purchased 1330 Sixth Avenue - a property that is just two-thirds leased and anticipates large lease expirations in the next two years – for $400 million, Crain’s New York recently quoted RXR Realty head Scott Rechler as stating “Trophy buildings [like 1330] are where you will see the rents pop first…It is the type of building that is going to do very well.” Dan Fasulo, managing director at research firm Real Capital Analytics, described the sales as aggressively priced and remarked that “It shows there is a lot of bullishness about the New York office market – especially in midtown.” Mr Rechler is betting that Manhattan rents will steadily increase as the recovery reaches critical mass. The new addition to his portfolio currently has rents ranging between $75 to $85 per-square-foot, but Mr Rechler hopes to ratchet that up to $100 per-square-foot in the coming years.Other companies are begging to purchase so-called value-add buildings as well. Crain’s mentioned Boston Properties’ $1,000-per-square-foot purchase of 510 Madison Avenue in Manhattan, which was entirely vacant at the time of sale, and two other deals by SL Green. With treasury bonds at historic lows and other equity investments returning yields equally as low, Mr Fasulo suggested that commercial real estate’s cap rate returns could be the best an investor can currently hope for.
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