Foreign, Domestic Players Vie for Trophy Assets

NEW YORK CITY-Big Apple trophy buildings are being negotiated left and right after a slow start earlier this year. Following the recent sale of the GM Building and three other towers for $3.95 billion , a majority of the Chrysler Building at 405 Lexington Ave. is reportedly on the block for $800 million, and the Credit Lyonnais Building, or 1301 Avenue of the Americas, is expected to trade for $1.45 billion, although sources say that number is a “ballpark figure.”

GlobeSt.com has also received confirmation that two other Midtown towers, including Park Avenue Tower and 850 Third Ave., are changing hands. Although oil-rich sovereign-wealth funds are becoming a major player in New York City’s real estate market due partly to an exchange rate that is in their favor, domestic players have not left the game.

850 Third Ave.

An unidentified source confirms to GlobeSt.com that San Francisco-based Shorenstein Properties has purchased two Macklowe Properties assets, including the 610,000-sf Park Avenue Tower at 65 E. 55th St. and the 562,567-sf 850 Third Ave., for just shy of $1 billion. The source says that Shorenstein paid $930 million for a 93.5% interest in the partnership that controls both buildings.

1301 Ave. of the Americas

Shorenstein sources tell GlobeSt.com that they cannot confirm the deal at this time, but an industry source close to the deal tells GlobeSt.com that the two sales to Shorenstein “are pretty much done,” adding that the properties are in contract and expected to close June 30th. The source noted that the $930 million number is accurate.

In other Macklowe news, Paramount Group is set to take Macklowe’s 1.8-million-sf 1301 Avenue of the Americas for $1.45 billion; however a Paramount spokesperson tells GlobeSt.com that they have “no comment regarding 1301 Avenue of the Americas.” But an industry source confirms that the Paramount Group deal is “in the works.” The source notes that the number is in the right ballpark, although “it might be a little low.” Although 850 Third Ave., Park Avenue Tower and 1301 Sixth Ave. are owned by Macklowe, since Macklowe turned over the properties to Deutsche Bank, they are Deutsche deals. Deutsche Bank sources could not provide GlobeSt.com with confirmation.

Chrysler Building

Another anonymous industry source tells GlobeSt.com that they think it is “a strong statement to the market when three dominant institutional players–Boston Properties, Shorenstein Properties, and Paramount Group-—step in to buy these assets for very high prices.” The source continues that “cap rates are in the 4.5% range and pricing for the trophy assets is well north of $1,000 per sf.”

Foreign investors are also continuing to be a major player in Manhattan real estate. As the New York Post reported this morning, the Abu Dhabi Investment Council is negotiating to buy a 75% stake in the 1.3-million-sf Chrysler Building for $800 million. The assets would be purchased from TMW, the German arm of an Atlanta-based investment fund. Tishman Speyer would reportedly remain in charge of the building, with the Abu Dhabi fund acting as a silent partner. Queries to Tishman Speyer were unanswered by deadline.

Hugh Finnegan, an attorney in the real estate group at Sullivan & Worcester LLP, tells GlobeSt.com that there are a “plethora of possibilities” as to why TMW would be eager to cash out of its Chrysler stake. Some potential reasons include that “they are looking at other opportunities, they had hoped to get cash through a refinance but the market is against them, or the offer was too good to pass up.”