Cash-rich buyers seize their moment

Snap up major towers as leveraged players falter

Buck Ennis

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In recent years, Shorenstein Properties stood by as competitors repeatedly topped its bids on Manhattan office towers.

In June, with the real estate market in the grip of the credit crisis, the San Francisco-based company’s luck finally turned. It bought two of the seven office buildings the once high-flying Harry Macklowe was forced to return to lenders when he couldn’t repay a loan. The buildings’ price tag of about $940 million was roughly 30% less than Mr. Macklowe had paid just 16 months earlier.

Shorenstein typifies the new type of cash-rich, conservative buyer that is beginning to dominate the market. The breed’s rise comes after the demise of lax lending standards that allowed buyers to snap up properties using mountains of debt and only a sliver of equity. Such highly leveraged buyers are now sidelined.

“Sixteen months ago, we couldn’t get close to some of these buildings because all people cared about was price and not anyone’s ability to actually close a deal,” says Robert Underhill, Shorenstein’s Manhattan-based head of capital transactions. “Now stressed sellers want certainty of execution.”

Founded in 1960 by Walter Shorenstein and now run by his son Doug, the family-owned firm ranks as one of San Francisco’s largest landlords. It owns 122 buildings across the United States and has a $2 billion investment fund.

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