APF Takes Full Ownership of Building on Manhattan’s ‘Club Row’

By Scott Baltic, Contributing Editor

APF Properties, of New York, has taken 100 percent ownership of The Club Row Building at 28 W. 44th St., buying out the 80 percent equity stake previously held by its joint venture partner, Prudential Real Estate Investors, APF announced Monday. The transaction reportedly valued the property at $235 million.

Built in 1919, the 22-story, 372,000-square-foot Class B+ office/retail building was purchased by APF and PREI in 2011. Under a $9 million capital improvement plan, the owners renovated the exterior, lobby, elevators, mechanical equipment and common areas; added a complimentary ground-floor bicycle storage room; and brought the building up to LEED Gold (EB) certification.

Along the way, the building went from 88 percent occupancy to 98 percent, with a reported 28 percent increase in NOI.

“After learning of PREI’s decision to monetize their gains, our initial goal was to pursue an institution to replace them,” Kenneth Aschendorf, principal of APF Properties, said in a release.

APF soon realized, however, that its best approach would be to “de-institutionalize” the investment and buy out Prudential.

PREI thus proceeded with its planned exit from the building, while APF was able to recruit new private investors (many of them CRE professionals) to supplement the investors who were part of the original investor group and agreed to add significantly to their original investments, Aschendorf added.

APF cited several factors in its decision to double down on the building: a growing market for Class B office buildings in Midtown; relative lower appreciation in the Grand Central submarket, poising it for increased rents; the upgrades to the building; and the building’s immediate environs.

Club Row, a.k.a. 44th Street between 5th and 6th avenues, is so called for being home to many of New York’s most exclusive clubs, such as the Harvard, Princeton, Yale, Penn and New York Yacht Clubs. The location is also a block from Bryant Park, two blocks from Grand Central Station and close to some of Manhattan’s most iconic hotels, including the Royalton, Algonquin and Sofitel.

APF also noted that the Grand Central submarket benefits from record-high rents in the competing Midtown South submarket and that the supply of Class B office buildings is decreasing through both demolitions and conversions for hotel or residential use.

A third-quarter report from Marcus & Millichap bolsters APF’s judgment that Class B buildings in New York are in a good position. The report states that average vacancy at Class B/C properties has dipped 30 basis points to 9 percent in the 12 months ending mid-year. Over the same period, falling vacancies have allowed owners of Class B/C properties to push up average rents for available space 11.9 percent, to $46.10 per square foot.