Skyscrapers Follow Foreclosed Condos to Auction Houses

As tenants walk away from commercial leases and developers are defaulting on their millions of dollars in mortgages because of lack of financing available, skyscrapers have been following foreclosed condos to auction houses.

The 40-level skyscraper called 1330 Avenue of the Americas, located on Sixth Avenue near the Museum of Modern Art in New York and in the nation’s wealthiest commercial district, was sold in April for only $100,000 to Canada’s biggest pension fund Cadim after building owner Harry Macklowe failed to make required payments on his $130 million mortgage loan.

Macklowe bought the skyscraper for $498 million in 2006, borrowing $130 million to help pay his equity. Two-thirds of the skyscraper is leased, with the Financial Times as its most prominent leaseholder.

In March, the building called John Hancock Tower, considered the tallest skyscraper in Boston, also followed the fate of foreclosed condos thrown into auctions. The tower was sold for only a little over $20 million in an auction.

Next month, the 33-level Equitable Building in the central business district of Atlanta will be auctioned just like foreclosed condos after its owners failed to lease half of the structure and defaulted on over $50 million.

Real property analysts said that developers are losing sources of cash as their tenants are leaving and units are unsold or abandoned and they are having a difficult time finding financing to help them weather the foreclosure crisis and the recession.

The analysts added that the rising number of loan delinquencies in the commercial real estate sector have created a glut in distressed commercial properties, including foreclosed condos, pushing down the prices of prominent skyscrapers.

But together with the low prices, buyers must agree to take on the large debts owed by the sellers to the banks and other lenders.

Matthew Haines, head of real estate service Propertyshark.com, said the flood of foreclosures in the commercial sector will drastically reduce the values of prime real estate.

According to commercial real estate research firm Real Capital Analytics, the total value of distressed commercial properties across the country has reached $86 billion in April, with distressed Manhattan properties valued at more than $6 billion.

Dan Fasulo, a top executive of Real Capital Analytics, said that other New York City skyscrapers in danger of following the fate of foreclosed condos are the Moinian Group building facing the New York Public Library, which was acquired at $160 million in 2007, and a Fifth Avenue office building which Moinian and Whitehall purchased in 2007.

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