A spokesman for RXR tells GlobeSt.com that the deal as announced this week differs from earlier published reports that said the Uniondale, NY-based owner/developer would acquire 340 Madison outright in phases from its current ownership, a joint venture of Broadway Partners and the D.E. Shaw group. As it's now structured, the deal calls for Broadway to retain a 51% interest in the property. RXR will lead the recapitalization on behalf of the RXR/Broadway venture, as well as the refinancing of the existing $400-million first mortgage debt with ING Real Estate Finance.
RXR will utilize capacity from its balance sheet and recently raised real estate opportunity fund to acquire the interest, according to a release. "By structuring this transaction in a creative manner, it allowed us to underwrite more attractive returns than could otherwise be expected from an outright purchase of the property," RXR CEO Scott Rechler says in the release.
He adds that now is "the opportune time to be investing in Manhattan, as the leasing markets have bottomed and are primed for a near-term recovery." It's anticipated that RXR will assume the day-to-day management of 340 Madison in the near future, while Broadway and RXR will serve as co-asset managers, the release states.
The $570-million valuation represents a cap rate of 6% on in-place NOI and represents a 35% discount to replacement cost. Less than 4% of the 23-story tower's rentable square feet will expire over the next three years and less than 15% will roll in the next eight years, according to the release.
Broadway and D.E. Shaw paid $550 million in 2006 to acquire 340 Madison from Macklowe Properties, which had spent $100 million to reposition and enlarge the 1920s-vintage tower. The JV raised its occupancy level from 43% to 92%. Its tenant roster includes Facebook, McDermott Will & Emery, Mass Mutual, PNC, SunGard and the Office of the Comptroller of Currency. Vice chairmen Darcy Stacom and William Shanahan of CB Richard Ellis represented Broadway and D.E. Shaw in the current deal with RXR.
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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.
