RCA in the commercial property press:

Zell's Recent NYC Purchases May Boost Confidence

The Real Deal reports: It's hard to find a real estate figure with a better reputation for timing the markets than Sam Zell. The blunt, motorcycle-riding, Chicago-based mogul is known for snapping up distressed assets when prices hit bottom.

"Does it get any better than when Sam Zell starts buying property in your market?" said Dan Fasulo, managing director at New York-based research firm Real Capital Analytics. "I don't know how much more confidence investors need to start making decisions. Everybody has got to realize that the world is not over."

Zell's very publicized New York City buying spree began in January, when Equity Residential reportedly shelled out about $12 million for a distressed lot on the corner of 10th Avenue and West 23rd Street owned by developer Shaya Boymelgreen. The purchase was the company's first deal in the city in more than three years, and on a recent earnings call, Equity Residential disclosed that it plans 111 market-rate apartments and about 10,000 square feet of retail space on the site.

However, it was Zell's recent deal to purchase Harry Macklowe's last three Manhattan apartment buildings -- the 323-unit River Tower at 420 East 54th Street, along with Longacre House at 305 West 50th Street and 777 Sixth Avenue, each with 293 units -- for $475 million that has really gotten attention.

Most observers estimate Equity Residential acquired the properties at an average cost of $500 to $550 per square foot, well below replacement costs of about $800-plus per square foot. One veteran industry source described the price as "exceedingly low," noting that the apartments are all market rate and would have been sold at between $800 and $1,000 a square foot at the market peak, assuming they would have been converted to condos.

Fasulo noted that "it's going to be several years until we see a full recovery in rents and occupancy markets." But he added: "I think it's fair to say that the mass layoffs are over; that we are starting to see some spot hiring, which at the end of the day does bode well for the rental market."

A full recovery, he said, "is going to get priced into the market much faster than many believe."

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Posted by: Nina Turner

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