Content area
Full Text
Real estate has always been a risky business, but this is getting scary.
Harry Macklowe set the precedent last summer when he agreed to pay $1.4 billion, or $800 per square foot-nearly 40% above the going ratefor the General Motors Building.
This year it was Equity Office Properties that reset the bar, agreeing to pay $500 million, or $500 per foot, for the 1.1 million-square-foot Verizon Building on Sixth Avenue, which will be left nearly empty in late 2005.
"A lot of dollars are chasing too few deals, so buyers are bidding up prices and taking bigger chances," says Evan Denner, managing director with Hypo Real Estate Capital Corp. in Manhattan. "At some point, the music has to stop."
The people behind some of those deals beg to differ. They insist that a spate of residential conversions, a paucity of new commercial construction and a rebounding leasing market bode well for today's risk-takers.
Among the true believers is SL Green Realty Corp. Last year, the big real estate investment trust stunned the market by buying two adjoining midtown buildings from TIAA-CREF for $480 million.
The rub...