Firm’s Towering Loss

Peter Grant - New York Daily News

In another example of a foreign investor getting clobbered from a Manhattan real estate investment Jamaica’s largest insurance company has bailed out of a disastrous office building purchase, losing more than $8 million.

The Jamaica Mutual Life Assurance Society which had invested more than $20 million in the 100,000-square-foot office building at 866 Second Ave., has sold it to a New York investment group for about $12 million, sources said.

The company was hurt partly because it purchased the 15-story building in 1986 when the city’s real estate market was hot. Like many foreign owners, Jamaica Mutual took so long to make leasing decisions it could not compete effectively against aggressive New York landlords.

But the company’s loss could well turn into a big gain for Mitchell Rutter and Jake Frydman, the New York investors who bought the property at 46th St.

They were planning to convert the building, which is virtually vacant, into office condominiums ranging from $235 to $250 a square foot.

Brokers familiar with the area say that’s a good strategy given the large number of foreign governments who want to own office space near the United Nations.

“It’s the kind of property the UN buyer is going to be hungry for,” said Louis Buffalino, a managing director at Edward S. Gordon Co. who brokered the deal.

Rutter said that many foreign governments already have contacted him and his partner about space in the building. If demand is heavy enough, they might add two floors for additional office space or apartments for diplomatic personnel, he said.

“Countries like to own their own space because that way they don’t pay property tax,” Rutter noted.

The building was developed in 1971 by Harry Macklowe, and for years its largest tenant was the Jamaican consulate and trade mission. Jamaica Mutual purchased it in 1986 apparently on the assumption that the Jamaican government would stay there.

But in 1993 the government offices were lured to 767 Third Ave. by the Kaufman Organization, the owner of that building.

“The Kaufmans needed a deal for the base of the building,” said Michael Myers, who brokered that deal. “They said we’ll do whatever we have to do to get you guys to take the space.”

Jamaica Mutual officials could not be reached.

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