$800-million purchase

"There's a new baseline for pricing being established for class A office in Midtown, which is a very healthy sign for the marketplace," says Dan Fasulo, managing director and head of research for Real Capital Analytics. He says that baseline is about 10% to 15% lower than it was at the peak of the market. "That makes sense, because the tremendous amount of liquidity on the debt side created a 10% to 15% froth in pricing levels from the end of 2006 through mid-2007, and the froth has been shaken out."

Fasulo adds that following "a huge disconnect" between buyers and sellers that hampered trading velocity over the past six to nine months, the big deals will help re-establish momentum. "Now that some of these properties are starting to trade and it's very savvy investors who are making these purchases, the rest of the market will go forward at this new confidence level," he says.

The sale of a 90% stake in the iconic tower at 405 Lexington Ave. to the Abu Dhabi Investment Council follows by a few weeks Boston Properties' $4-billion purchase of the General Motors building at 767 Fifth Ave. and Shorenstein's $930-million acquisition of a controlling stake in two other Macklowe Properties office assets, There's also a $1.45-billion deal in the works for the Paramount Group to take the 1.8-million-sf 1301 Ave. of the Americas. "There's no question that sales volume is down, but there are these prolific trades going on right now," Fasulo says. "If we look at the composition of buyers, it's the equity-rich or cash-rich buyers that are winning bids. They're the types of buyers that would have been outbid last year by your more highly leveraged private buyers."