sale-leaseback of the HSBC tower

"This transaction would be notable in any market, but represents a particularly good sign in light of the real estate world of 2010," says Carl Schwartz, chair of Herrick Feinstein's commercial real estate department. Schwartz represented Bank Leumi with Herrick partner Jeffrey Kaufman and associate Jonathan Kramer. Bank Leumi Le-Israel B.M. took a participation interest in Bank Leumi USA's loan.

The SPV, 452 Fifth Owners LLC, involves a partnership of Koor Industries Ltd., and Property and Building Ltd.—both subsidiaries of Israel-based IDB Holding Corp. Ltd., controlled by Nochi Dankner—and locally-based Joseph Cayre's Midtown Holdings. The two IDB subsidiaries each put up $52.5 million as collateral. GlobeSt.com first reported on the deal last October.

In Schwartz's view, the deal is notable not so much because it is the first nine-figure office sale in some time that didn't involve some element of distress, but because transactions of any caliber have been so seldom seen—and it doesn't have to be that way. "My sense is that there are lenders out there who want to put money out for the right deal," he tells GlobeSt.com. "The parameters may have changed, but there are banks out there that are in the lending business, and Leumi is one of them."

And it's been a lack of deals that make sense, rather than a lack of credit, that has contributed to the low numbers of sales. Schwartz says. "There have been so few transactions because everyone is looking for smart deals," he says. "These borrowers found a deal that they liked and a lender that believes in it." Attorneys Harry Silvera, Robert Sorin and Jennifer Yashar, all of Fried Frank Harris Shriver & Jacobson, represented 452 Fifth Owners.

Under terms of the sale-leaseback, HSBC Bank USA is leasing all of 452 Fifth building for one year, and floors one through 11 for 10 years. The headquarters of HSBC Bank USA will remain in New York, and the bank has an option to extend its lease.

The 29-story 452 Fifth was formerly the headquarters of Republic National Bank, and became the base of HSBC's US operations when it acquired Republic for $10.3 billion in 1999. Included in the deal is the adjacent 1 W. 39th St., a landmarked 12-story property. Combined, the two buildings 900,000 aggregate square feet of leasable space.

When the deal was first reported this past fall, HSBC made it clear that it was not a distressed sale, although it was also looking to sell of its 1.1-million-square-foot headquarters at Canary Wharf in London and an office building in Paris. A company spokesman told the Wall Street Journal last October that "the sale of the New York office was carried out as part of an active property management program, and not to raise capital."

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.

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