The Wall Street Journal-20080115-Sotheby-s Is Buying Back Its Building- Ending Spat
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Sotheby's Is Buying Back Its Building, Ending Spat
Sotheby's is buying back its Manhattan headquarters for $370 million after selling it for about half as much almost five years ago to pay fines tied to a price-fixing scandal.
The move indicates that Sotheby's, newly flush with cash from a global art boom, is moving to regain what the company lost in tougher times. Sotheby's auctioned $5.3 billion of fine and decorative art last year, up 45% from 2006. With prices soaring for New York office space, the building may double as a financial buffer should the art market flag.
The auction house said the sale also resolves its months-long dispute with the building's landlord, RFR Holding Corp., co-owned by Aby Rosen, a well-known contemporary-art collector. Mr. Rosen's company controls New York's Seagram Building and Lever House.
Sotheby's said it paid $50 million upfront for the 10-story building at 1334 York Avenue and plans to finance the deal by assuming the building's existing $235 million mortgage using ready cash and credit lines, according to a filing to the Securities and Exchange Commission. The sale closing is expected sometime after April 1.
As part of the deal, Sotheby's will also give Mr. Rosen and other RFR principals "favorable" commission rates should they sell art through the auction house, said Bill Sheridan, Sotheby's chief financial officer, during an interview yesterday. Mr. Rosen and RFR declined to comment.
Sotheby's initially bought the 1921 property eight years ago for $11 million and spent $140 million transforming it into a glassy box filled with plush galleries and salesrooms. When the auction house pleaded guilty later that year to price-fixing with rival Christie's, executives began selling assets to pay related debts and fines. In early 2003, RFR bought its building for $175 million and agreed to let the auction house stay on as a tenant.
Last year, RFR put the building up for sale -- reportedly for over $500 million -- and Sotheby's balked, saying its lease terms gave it the right to buy back the building for much less. In June, a state Supreme Court judge temporarily halted the landlord from putting the building on the block, and the two sides agreed to mediate the matter.
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Corrections & Amplifications
The average per-square-foot sale price for Manhattan office buildings dropped in the fourth quarter of 2007 after hitting a cyclical peak in the third quarter of that year, according to data provided by Reis Inc. An article yesterday about Sotheby's purchase of its headquarters building incorrectly said New York office prices are soaring.
(WSJ Jan. 16, 2008)
