Tycoons' trophy towers

The US stock market is in the doldrums and fears of more Wall Street lay-offs are growing. But the market for picture-postcard office properties in New York remains hot. Just last week, the World Trade Center complex fetched a spectacular $3.25bn, crowning a season of skyscraper sales that also saw the Citigroup Center and Rockefeller Center change hands at lofty prices. On the surface, the Manhattan skylinegrab suggests concerns about a Wall Streetled downturn in New York may be overblown. However, property analysts suggest the recent sales could be a signal that the economic cycle is indeed turning. Sellers have tended to be investors with shorter time horizons, including funds targeting depressed real estate when there was still such a thing in New York. These investors seem to be sensing a market at its peak and are cashing in. The buyers are generally longer-term holders who are willing to take chances at a time when low vacancy rates and declining financing costs make it relatively easy to get deals done. "This is really brought about by sellers trying to take advantage of the current strength of rental markets," said Matthew Lustig, a Lazard managing director specialising in real estate. "This sort of property shows up at inflection points where future rental growth is more uncertain." Among those selling up in recent weeks have been some of international finance's best-known names. Those selling their Rockefeller Center stakes last December for $1.85bn included Goldman Sachs; Italy's Agnelli family; the estate of Greek shipping tycoon Stavros Niarchos; and David Rockefeller, the former Chase Manhattan chairman, whose family developed the complex during the Depression. Dai-ichi Life Investment Properties of Japan stands to reap $725m from its January deal to sell Citigroup Center, the slantroofed tower that has been described as the most dramatic skyscraper to have been built in New York since the second World War.

The World Trade Center represents something of an exception: it was put up for bid by a public agency, the Port Authority of New York and New Jersey. But Vornado Realty Trust of New Jersey, which offered $3.25bn for a 99-year lease, is typical of longer-term investors buying trophy towers. Vornado only jumped into Manhattan real estate in 1996 after accumulating a chain of shopping centres around the country. It now sits atop one of the larger office property empires in the city. The Hadar family, who bought the Citigroup Center, are also relative newcomers to the local property market. Eric Hadar began nibbling at local real estate in the early 1990s, using money from his father, Richard, who made a fortune selling jewellery by direct mail. Property analysts say both groups reckoned it was the time to move because trophy properties such as the World Trade Center and Citigroup Center only come to market on rare occasions. www.ft.com/americas www.ft.com/financialservices (Financial Times service).