With credit as scarce as flecks of gold in a prospector's pan, 2008 was a lean year for mega deals. Commercial real estate investment sales shrank by up to 70% in 2008 compared with the $524 billion in deals completed in 2007. Many of this year's top transactions were forced sales as Manhattan's Harry Macklowe became the poster child for a particularly rough year.

Macklowe, the developer who cobbled together a highly leveraged portfolio glittering with trophy assets including the General Motors Building at 767 Fifth Avenue in New York, lost the properties, including those he had bought just a year earlier from Chicago-based Equity Office Properties Trust, after he defaulted on nearly $7 billion in loans. Deutsche Bank seized the assets in February.

When the final numbers are counted, 2008 commercial real estate sales could total only $150 billion. The top deal, the $2.8 billion sale of the GM building, was a far cry from the astral $39 billion that New York-based The Blackstone Group paid in 2007 for Equity Office Properties, triggering the largest real estate privatization in U.S. history.

The smallest deal among the Top 10 was the $888 million the Abu Dhabi Investment Authority paid for a 90% stake in the Chrysler Building, the iconic, 77-story tower in Manhattan.

Only one of the new Top 10 deals was a retail transaction. Real estate advisers say potential shopping center investors are hanging back, fearful that additional major retailers may declare bankruptcy after the holiday season. The investors are waiting until the first quarter of 2009 before making purchase decisions.

Macklowe Properties' forced sales had the dubious distinction of occupying three spots on the 2008 Top 10 list of mega deals. “The dollar value of his acquisitions was so tremendous, I certainly do think he could be the poster child,” says Dan Fasulo, managing director of Manhattan-based research firm Real Capital Analytics (RCA). The firm compiles an annual Top 10 list based on commercial real estate sales of at least $2.5 million.

The most expensive of the three portfolio segments sold by Macklowe and Fortress Investment Group included the GM Building. The agreement with buyer Boston Properties, aided by Goldman Sachs and Dubai-based Meraas Capital, called for a total portfolio investment of $3.95 billion, with nearly $1.5 billion in cash. The deal included a 39-story building on Madison Avenue, Two Grand Central Tower and a building on West 55th Street.

The default was a stunning reversal for Macklowe, who has stepped down as chairman and CEO of the company; his son William now runs day-to-day operations. “He's very lucky he didn't get personally wiped out,” says Fasulo. “Hopefully he's got one yacht left and is riding off into the sunset.”

New York-based Paramount Group and Allianz Life Insurance Co., based in Minneapolis, spent nearly $1.5 billion to buy a second portfolio segment from Macklowe and Fortress, the Credit Lyonnais Building at 1301 Avenue of the Americas. San Francisco-based Shorenstein Properties paid $990 million, according to RCA, to pick up a third Macklowe segment, Park Avenue Tower on East 55th Street as well as 850 Third Avenue.

Apartments ignite interest

Arguably, office and retail properties represented the weakest markets among the five major property types that also include apartments, hotels and industrial real estate. While the second-largest property sale raised needed cash for the seller, it also demonstrated the strength of the apartment sector.

DRA Advisors LLC, a New York-based investment firm, and Steven D. Bell & Co., a real estate investment and management company based in Greensboro, N.C., paid more than $1.7 billion to buy 25,700 apartments from Denver-based UDR, a multifamily real estate investment trust (REIT).

UDR sold 86 apartment communities for $1.5 billion in cash and a $200 million note. According to UDR, the apartment units posted an average rental income of $744 per month, and average occupancy of 94.4%. UDR said it planned to use at least 40% of the proceeds to pay down its debt, and roughly the same amount for acquisitions.