Investcorp takes bath in Garment District office short sale

Bahrain-based Investcorp is taking a bath on a pair of Garment District office buildings, selling them for at least 68 percent below what it paid to acquire them less than a decade ago.

Josh Rahmani’s Empire Capital Holdings is set to acquire the properties at 256 West 38th Street and 229 West 36th Street for less than $50 million, people familiar with the matter told Bloomberg. The final price was not reported, but that’s at least two thirds off of the $157 million Investcorp paid for the properties in 2017.

The deal was a short sale, meaning Investcorp sold the properties for less than the outstanding amount on the mortgage. Investcorp and Empire Capital declined to comment.

CBRE’s Doug Middleton and Jack Stillwagon brokered the sale.

The future of both properties is in doubt, as they don’t stand up to the city’s newer trophy office stock. Both the 151,000-square-foot building on West 36th Street and the 117,000-square-foot building on West 38th Street were built more than a century ago.

While the properties may remain offices, Empire Capital could also turn them into storage facilities, sources told Bloomberg. A residential conversion could be possible for either, as they both sit within a rezoning district.

Empire Capital is no stranger to the short sale process. Last year, the firm teamed up with Namdar Realty Group and Mason Asset Management to purchase Related Fund Management’s property at 321 West 44th Street for $40.5 million, a 73 percent discount on its 2018 purchase price of $153 million; the outstanding balance on the mortgage was reportedly above $100 million.

Bahrain-based Investcorp has been pushing deeper into the student housing sector. At the end of last year, the bank purchased four properties in the asset class totaling nearly 3,000 beds, picking up off-campus sites near Texas A&M University in College Station, Texas State University in San Marcos, the University of Kentucky in Lexington and the University of Oklahoma in Norman.

— Holden Walter-Warner