Sold $12.2M - June 22 auction for Fisher, Kahn buildings

[emu steve]

This is one of the finest office towers ever constructed, anywhere . And they're throwing in the Kahn building, which is also pretty nice. All for the price of a small home in the Hamptons.

This is a good example why Detroit is still a long, long way from having any semblance of a non-subsidized real estate market. It still lacks the fundamentals. I mean, a minor renovation of the Fisher would cost far more than the sales price for these two buildings.

800,000 square feet of office space, thousands of parking spaces, and an iconic design worthy of a global landmark. Would go for billions if in a global city.

As a rejoinder, would someone indicate the sales prices for the most recent office building sales in the CBD so we can see the difference between an appreciating market and a depressed market?

[3WC]

The Stott Bldg sold last year to a Chinese investor on auction.com for $9.8 mil. bid up by Gilbert. who was probably toying with them. That building is a Cass C building, if that, with no parking.

The Chinese obviously view our dollars as Monopoly money.

They lost interest, or woke up, and decided not to throw our good Monopoly dollars after bad, and sold it to Gilbert this year for, probably, a fraction of what they paid for it.

Maybe Gilbert was the high bidder for the Fisher, as the buyer has not been identified the last I heard.

[Dream]

Winning bidder appears to be Ziel Feldman of New York. [[HFZ Capital Group). HFZ is involved in many high end condo projects in New York.

[Scottathew]

Winning bidder appears to be Ziel Feldman of New York. [[HFZ Capital Group). HFZ is involved in many high end condo projects in New York.

With a local partner, which I have no evidence, but I'd say it smells like Bedrock! I think that would be a good thing, they move fast on projects.

[Lowell]

Lowell, "What a steal?" I respectfully disagree. There is no such thing as a bargain in real estate, especially real estate exposed to the world-wide market.

All of the interested and presumably qualified bidders, except one, thought the price was too high.

Yeah I know what you mean. I'm just considering it as an incredible work of art inside and out. $12.2M will barely buy a second tier artwork in today's art market. This place is filled with paintinfgs and bronze and marble sculpted elements. It's the closest thing to the Sistine Chapel we have in Detroit.

[emu steve]

There is a good point in this article that the buildings will require a big $ investment so its a lot more than a 12.2M buy.

http://www.freep.com/story/news/loca...ults/29182433/

"And the need to invest substantially in upgrades in the two buildings in Detroit's New Center area to keep them competitive may also have held down bidding.Some real estate insiders said those needed upgrades could run tens of millions of dollars."

P.S. Gilbert is not the unnamed partner per the article.

[mikeg19]

Glad to see thee buildings sold to an investment group with a lot of good press and a nice background in property management. I don't think we are looking at another case of apathetic property owners, especially with word that the buildings need a lot of upgrading.

[Dream]

Redico is the local partner.

[EL Jimbo]

I think location has as much to do with the low bid prices as much as anything else other than the additional money that will be needed by the purchaser to invest in renovations. It isn't like these are complete turnkey developments. There is a LOT of square footage to upgrade. That will cost money too.

I don't think this is a reality check as much as it is a confirmation of what everyone already knew about the Detroit real estate market. It's all about location. The CBD and Midtown markets are doing significantly better than the rest of the city. New Center seems like the logical place for the next "hot" neighborhood to be, but it isn't there yet. If these buildings were a few miles south of where they are, their value would go up significantly.

[Mzsuzuki]

I wonder if DPS will remain in the Fisher/Kahn buildings. I guess it is time for them to move into one of the closed schools.

[A2Mike]

Location really is everything in real estate. Can anybody imagine what price the Fisher Building would get if it were on Fifth Av., La Salle St., Union Sq. or Wilshire Blvd.?

[Bham1982]

Location really is everything in real estate. Can anybody imagine what price the Fisher Building would get if it were on Fifth Av., La Salle St., Union Sq. or Wilshire Blvd.?

A friend of mine works in the Crown Building, which sits on Fifth Avenue and is less than half the size of the Fisher Building [[and not nearly as nice). It just sold for 1.8 billion.

At those prices per square foot, assuming you could move the Fisher Building to Fifth Avenue, it would probably sell for around 4 billion. Location is truly everything in real estate.

[mikeg19]

Whoa! Looks like at least a partial conversion to residential units in the Fisher, and possibly a full residential in the Albert Kahn. That's very interesting.

http://www.freep.com/story/money/bus...dico/29261101/

[ekleezy]

http://www.freep.com/story/money/bus...land/29268347/

Should've actually gone for 13M+

[Richard]

They really cannot say it would have sold for 13 because the bidding would have continued and somebody would or could have jumped in.

The reserve was only 8 million which kinda shows what the perceived value was to start with.

It is a bit perplexing as why the real estate values remain low in the city when it is clear in the path the city is heading in,maybe a lot of it is engineered .

[emu steve]

http://www.crainsdetroit.com/article...rnoon-20150625

[Gistok]

Good to know that Peter Cummings is involved.... he is married to Julie Fisher Cummings, the daughter of the late Max Fisher. The entire Fisher family has always been good for Detroit.

http://maxmfisher.org/resource-cente...peter-cummings

[Király]

I sit here in the west side of Vancouver and watch this architectural gem go for the same price as six tear-down houses on standard size lots here where I live. It boggles the mind.

I came to Detroit last summer on vacation and spent several hours in the Fisher and Guardian buildings. One of my photos of the Fisher interior is on the Wikipedia page.

[erikd]

We have discussions seemingly weekly regarding the health of the local real estate market and we argue often over "rebirth" and whether or not this is a hot market. It will be interesting to see the spin job people put on this but how is this anything other than a massive reality check emphasizing the true demand [[or lack there of) for property in the city?

The Fisher Building will require many tens of millions in renovations and upgrades to bring the building up to Class A level. The buyers of the Fisher building will not be able to just lease out the available space at market rates without first making tremendous capital investments to upgrade the building.

As a comparison, the One Detroit Center was recently sold for an estimated $100 million. Unlike the Fisher Building, One Detroit Center was a turnkey Class A building that did not require tens of millions in upgrades to bring it up to modern standards.

As another comparison, the David Whitney Building was purchased in 2011 for a mere $3.3 million, but the purchase price alone doesn't reflect the reality of the market demand. The apartments in the David Whitney Building are leasing for over $2 per square foot, but it took $92 million to bring the building up to that level.

To be sure, $100 million for a signature downtown building is still a bargain compared to similar buildings in NYC or other international cities, but don't let the purchase price of a building in need of massive renovations and upgrades fool you.

The test is not the selling price of the Fisher building. The test is how much the new owners are willing to spend on renovations and upgrades to the building. If they spend a million bucks to deal with the most pressing building issues, and then run it as a class B building, it will tell us that they don't think the New Center market is strong enough to support downtown-level investment.

[emu steve]

The Fisher Building will require many tens of millions in renovations and upgrades to bring the building up to Class A level. The buyers of the Fisher building will not be able to just lease out the available space at market rates without first making tremendous capital investments to upgrade the building.

As a comparison, the One Detroit Center was recently sold for an estimated $100 million. Unlike the Fisher Building, One Detroit Center was a turnkey Class A building that did not require tens of millions in upgrades to bring it up to modern standards.

As another comparison, the David Whitney Building was purchased in 2011 for a mere $3.3 million, but the purchase price alone doesn't reflect the reality of the market demand. The apartments in the David Whitney Building are leasing for over $2 per square foot, but it took $92 million to bring the building up to that level.

To be sure, $100 million for a signature downtown building is still a bargain compared to similar buildings in NYC or other international cities, but don't let the purchase price of a building in need of massive renovations and upgrades fool you.

The test is not the selling price of the Fisher building. The test is how much the new owners are willing to spend on renovations and upgrades to the building. If they spend a million bucks to deal with the most pressing building issues, and then run it as a class B building, it will tell us that they don't think the New Center market is strong enough to support downtown-level investment.

Excellent post!!

[TTime]

The Fisher Building will require many tens of millions in renovations and upgrades to bring the building up to Class A level. The buyers of the Fisher building will not be able to just lease out the available space at market rates without first making tremendous capital investments to upgrade the building.

As a comparison, the One Detroit Center was recently sold for an estimated $100 million. Unlike the Fisher Building, One Detroit Center was a turnkey Class A building that did not require tens of millions in upgrades to bring it up to modern standards.

As another comparison, the David Whitney Building was purchased in 2011 for a mere $3.3 million, but the purchase price alone doesn't reflect the reality of the market demand. The apartments in the David Whitney Building are leasing for over $2 per square foot, but it took $92 million to bring the building up to that level.

To be sure, $100 million for a signature downtown building is still a bargain compared to similar buildings in NYC or other international cities, but don't let the purchase price of a building in need of massive renovations and upgrades fool you.

The test is not the selling price of the Fisher building. The test is how much the new owners are willing to spend on renovations and upgrades to the building. If they spend a million bucks to deal with the most pressing building issues, and then run it as a class B building, it will tell us that they don't think the New Center market is strong enough to support downtown-level investment.

It is easy to say the test is not the selling price after the price comes in low but if that price would've come in high then of course people would be shouting proof of revival for all to hear. Simply put, the market has spoken and it doesn't put much value in these buildings at the moment. It will definitely be interesting to see how much they are willing to put into the buildings though.

[Bham1982]

As a comparison, the One Detroit Center was recently sold for an estimated $100 million.

We don't know that. The building was being marketed at that price, but the deal hasn't been publicly recorded yet. Gilbert never revealed the sales price.

In any case, that property has 1 million square feet of space, is basically fully leased now with Ally, comes with thousands of parking spaces, probably the most valuable building in Michigan, and still sold for less than the price of some apartments in NYC or London.

In a healthy market buildings would sell somewhere close to replacement cost. If you built One Detroit Center today, it would probably be a close to billion dollar proposition.

Another test is whether buildings are more valuable full or vacant. In a strong market buildings are more valuable vacant, because you want new tenants paying top dollar. In a weaker market you want a guarantee of tenants, so you have that predetermined rent roll. In Metro Detroit you most definitely want occupied buildings.

[Richard]

We don't know that. The building was being marketed at that price, but the deal hasn't been publicly recorded yet. Gilbert never revealed the sales price.

In any case, that property has 1 million square feet of space, is basically fully leased now with Ally, comes with thousands of parking spaces, probably the most valuable building in Michigan, and still sold for less than the price of some apartments in NYC or London.

In a healthy market buildings would sell somewhere close to replacement cost. If you built One Detroit Center today, it would probably be a close to billion dollar proposition.

Another test is whether buildings are more valuable full or vacant. In a strong market buildings are more valuable vacant, because you want new tenants paying top dollar. In a weaker market you want a guarantee of tenants, so you have that predetermined rent roll. In Metro Detroit you most definitely want occupied buildings.

That is kinda of a yes and no situation,in this case we are not privy to the due diligence aspect.

Bits and pieces would be we know it needs updates so add $20 million from day one.

We do not know the terms other then the purchase price of the DPS owned 3 floors,but we do not know what the maintenance agreements were and other common area contributions.

It was advertised or mentioned that many of the currant tennants are on long term locked in leases so take away that sqft in regards to added income.

So occupied does have its drawbacks or can get expensive buying out leases to convert to residential verses buying a empty building and increasing the rents on incoming tenants.

Or it can increase value in funding because you have income from the get go and can operate in a bit of a more comfortable situation.

It can backfire also,the guy that sold the building to the Chinese turned around and sued them because the elevator was not working and withheld tax credits which in their case they were screwed the second the check cleared.In his case they would have been better obtaining and empty building.Or invited the seller to a look inside of the elevator shaft.

It is a guide of sorts as to the city's condition if you base it on two years ago,it most likely would not even have sold so it is progress.Most properties have been sold after the exit from bankruptcy because there is light at the end of the tunnel.

But it still shows that you have to be invited to purchase properties in the city and have that Detroit connection and that is what needs to change.

[emu steve]

Per Crains:

"$80 million


The high-end of the investment planned by a joint venture that acquired the Fisher Buildingand Albert Kahn Building for $12.2 million on Wednesday. The joint venture is between New York-based HFZ Capital Group and Southfield-based Redico LLC.
[Redico is local partner buying Fisher, Kahn buildings for $12.2 million]"

So I figure it is a 100M [[give or take) building net after spending what needs to be spent.

[TTime]

The Stott Bldg sold last year to a Chinese investor on auction.com for $9.8 mil. bid up by Gilbert. who was probably toying with them. That building is a Cass C building, if that, with no parking.

The Chinese obviously view our dollars as Monopoly money.

They lost interest, or woke up, and decided not to throw our good Monopoly dollars after bad, and sold it to Gilbert this year for, probably, a fraction of what they paid for it.

Maybe Gilbert was the high bidder for the Fisher, as the buyer has not been identified the last I heard.

He sure toyed with them on this one. Ha http://www.deadlinedetroit.com/artic...r#.VbA16FL3anM