Blackstone Group LP agreed to buy a roughly 50 percent stake in six New York-area office properties from RXR Realty, its largest acquisition yet in an expansion toward purchasing stable, well-leased real estate.
RXR plans to sell Blackstone part ownership in the 5.3 million-square-foot (492,000-square-meter) portfolio, valued at $4 billion, the companies said in a statement Wednesday. The deal involves Manhattan’s Starrett-Lehigh building; 1330, 620 and 1166 Avenue of the Americas; 340 Madison Ave.; and University Square Campus near Princeton, New Jersey.
RXR, a Uniondale, New York-based real estate company run by Scott Rechler, said it will continue to operate the properties.
RXR is “uniquely positioned to unlock the incremental upside in the portfolio,” Jon Gray, global head of real estate for Blackstone, said in the statement. “We look forward to finding more opportunities to work on together in the future.”
Blackstone, the world’s biggest private-equity investor in real estate, is raising a new fund to buy core-plus real estate, or prime properties that may require relatively minor leasing or renovations to boost returns. Chairman and Chief Executive Officer Stephen Schwarzman said last year the company could have $100 billion of such properties under management over the next decade.
For RXR, the deal offers the opportunity to “harvest value” from Manhattan properties acquired since 2009, as the market recovered from the global financial crisis, Rechler said in an interview. Prices for office buildings in New York have surpassed the prior peak, propelled by demand from both domestic and foreign investors seeking safety and steady growth.
“It’s a way of taking chips off the table, and allows us to invest in new opportunities to create value,” Rechler said. “That’s always been our mantra.”
RXR DealsNew York office rents and property values should continue to rise, Rechler said.
“If I thought we had hit the top, we would have sold 100 percent of our interests and we wouldn’t be buying 32 Old Slip, 61 Broadway, 530 Fifth,” he said, referring to recent RXR transactions.
The transaction is the first large-scale recapitalization of the RXR portfolio since the company was created in 2007, following the sale of Rechler’s Reckson Associates Realty Corp. to SL Green Realty Corp., he said.
Deal CompromiseThe deal with Blackstone is “something of a hedge” by RXR, said Ben Carlos Thypin, director of market analysis at New York-based property-research firm Real Capital Analytics Inc.
“It’s a compromise between selling outright and calling a top, and continuing to ride things out,” he said. “It’s the best of both worlds.”
Read More: http://www.bloomberg.com/news/articles/2015-02-11/blackstone-to-buy-stake-in-new-york-area-rxr-buildings
Barry Sternlicht’s Starwood Capital Group agreed to sell New York’s luxury Baccarat Hotel to an affiliate of China’s Sunshine Insurance Group.
The 114-room property on Manhattan’s West 53rd Street is scheduled to open next month, Starwood said in a statement Monday. The Beijing-based insurer agreed to pay $230 million for the hotel, which occupies the first 12 floors of the 50-story Baccarat Hotel & Residences project, the Wall Street Journal reported on Feb. 6.
Chinese companies have accelerated real estate investments in global gateway cities such as New York. In October, Beijing’s Anbang Insurance Group Co. agreed to pay $1.95 billion for the Waldorf-Astoria Hotel on Park Avenue, an Art Deco landmark and one of the city’s signature properties. It would be highest price paid by a Chinese buyer for a standing U.S. building, Kevin Mallory, global head of hotels for CBRE Group Inc., said when the deal was announced.
That the buyer for the Baccarat “is yet another Chinese insurer could signal an increase in the pace of Chinese institutional capital looking abroad for diversification and safety,” said Ben Carlos Thypin, director of market analysis at property-research firm Real Capital Analytics Inc.
At about $2 million per room, the price for the Baccarat would be the second-highest on that basis for a New York hotel, behind the $2.5 million per room paid for a 75 percent stake in the Plaza Hotel in 2012, Thypin said. That price included the Plaza’s retail space, he said.
General Growth Properties Inc. (GGP) agreed to buy the Crown Building on Manhattan’s Fifth Avenue in partnership with New York landlord Jeffrey Sutton to build its presence in the world’s most-expensive retail district, two people with knowledge of the negotiations said.
The partners agreed to pay about $1.75 billion for the 390,000-square-foot (36,200-square-meter) tower at 730 Fifth Ave., at the southwest corner of 57th Street, one of the people said. Both people asked not to be identified because the negotiations are private.
At about $4,490, the price per square foot sets a world record for an entire office building, according to Ben Thypin, director of market analysis at Real Capital Analytics Inc., a New York-based real estate research firm. Much of the tower’s value is in its roughly 50,000 square feet of retail space.
The property is part of Fifth Avenue’s “golden mile,” from about 49th Street to the edge of Central Park at 59th Street, home of Apple Inc.’s “cube” store, Jacques Gordon, global strategist for LaSalle Investment Management, said in an interview. The building’s retail tenants include jewelers Bulgari SpA and K. Mikimoto & Co.
The Korean Teachers Credit Union and TIAA-CREF are staking a claim on Manhattan’s Socony-Mobil building in the first investment of a $1 billion joint venture.
The partners last week acquired a $175 million loan on the landmark office tower across the street from the Chrysler Building, according to Suzan Amato, head of managed accounts and joint ventures in global real estate at New York-based TIAA-CREF. The financing was part of David Werner’s $900 million purchase of the property this year.
Asian investors, seeking higher returns and a safe haven for cash, are the source of some of the global flood of money into Manhattan real estate that’s pushing office-building values to records. While China has been the top Asian buyer in New York, investors from Korea andSoutheast Asia are poised for more deals as the relatively shallow real estate markets in their home countries become saturated, according to Amato.
“Asian countries are on a rapid growth trajectory,” she said. “This is a very fertile area for us.”
South Korea is the fourth most-active Asian equity investor in Manhattan property, behind China,Singapore and Australia, according to Real Capital Analytics Inc., a real estate research company.
Rather than buying equity interests in buildings, TIAA-CREF and KTCU are seeking to invest in mortgages backed by office towers, retail properties, warehouses and apartments in major U.S. cities. The venture between the two companies, which manage teachers’ savings in their respective countries, is 51 percent owned by TIAA-CREF and 49 percent held by Seoul-based KTCU.
“In the Korean investment environment, where interest rates remain low at about 2 percent, we believe this is a good opportunity to diversify the portfolio through investments in prime assets in theUnited States with strong fundamentals and steady income streams,” Sung-Seok Kang, head of global investments at KTCU, said in an e-mail. “We plan to expand this relationship further into other investment types.”
The Socony-Mobil investment is a mezzanine loan, which is junior to a first mortgage and pays a higher yield to compensate for the risk. Such investors typically have the right to seize the borrower’s equity in the event of default. KTCU last year underwrote $50 million in mezzanine debt on the Seagram Building, another New York landmark.
Mezzanine lending is a complex approach to property investment that not all foreign investors are comfortable with, said Ben Thypin, an analyst at New York-based Real Capital. Koreans typically prefer a direct ownership stake in a property because it gives them more control of the asset, he said.
Read More: http://www.bloomberg.com/news/2014-12-12/manhattan-towers-lure-koreans-in-1-billion-joint-venture.html
Six years after construction started, the developer of 3 World Trade Center is planning to bring a $1.63 billion long-term tax-exempt financing for the project to the market.
Experts say that the bonds will have unusual, though not worrisome, features for a municipal bond.
The unrated tax-exempt refunding bonds will be sold through New York Liberty Development Corp. A professional familiar with the bonds said he expected they would be sold on Oct. 28 or Oct. 29.
Proceeds will be used for the development and construction of 3 World Trade Center in downtown Manhattan. With construction having started in 2008, the first seven floors of the building have been completed.
The building is ultimately planned for 69 floors above grade and 2.5 million rentable square feet, with 58 office floors.
One way the bonds will be unusual is that they are municipal bonds that will fund the construction of a private office building.
Federal laws passed after the attacks of Sept. 11, 2001 to boost the recovery of New York, particularly downtown, permitted the issuance of Liberty Zone and Recovery Zone Bonds on a tax-exempt basis for projects that would normally have to be issued on a taxable basis.
This month's bonds will provide a long-term financing structure for 3 WTC by refunding short-term debt issued under the Liberty Zone and Recovery Zone programs.
It is unusual for tax-exempt municipal bonds to be issued to build a commercial office building, a professional involved with the deal said. This explains why the bonds will be unrated, he said.
When the ratings agencies were contacted about giving the bonds a rating they either said they could not because they were unusual for a muni or they could but would need more time than the developer had to give, according to the deal professional. The developer is 3 World Trade Center, LLC, an affiliate of Silverstein Properties.
In response a professional at one of the ratings agencies said he was unaware of anyone coming to his agency to seek a rating for 3 World Trade Center. He said that securitizations for construction loans are unusual but not unheard of. He said his agency had rated such securitizations before but they were more difficult to rate than more run-of-the-mill bonds.
The bonds are similar to bonds sold by the New York Industrial Development Authority in 2005 for 7 World Trade Center, the professional familiar with the deal said. The tax-exempt $475 million bond was for constructing the building and was sold without ratings, he said.
When the bond was refinanced in 2011 or 2012 there was a rating. The key difference was that the building was then occupied and with a demonstrated revenue stream could more easily get a rating, he said.
Group M Worldwide has signed an agreement to lease a little more than 20% of the office space at 3 WTC. There are no other contracts to lease the office space.
Noting that the bond's preliminary official statement was 2,700 pages, Municipal Market Advisors managing director Matt Fabian said he had not read it. He said the size of the bond and the size of the POS made the bond unusual.
MMA's indexes of high yield municipal funds were up 8 to 11% from the start of the year to Oct. 10, before the most recent rally, Fabian said. If there is sufficient yield connected with the 3 WTC bonds there should be no problem finding buyers, he said.
The bonds are to be sold in three tranches: classes 1, 2, and 3. Class 1 bonds that will have a payment priority over Class 2 bonds, which will have a priority over Class 3 bonds. According to the POS, the tentative dates for maturity of the Class 1 and 3 bonds is 2044 and for the Class 2 bonds is 2041. The POS indicates there will be a general optional redemption date and a make-whole optional redemption date, but these dates have not yet been set.
The Port Authority of New York and New Jersey owns the site and will own the building. The developer will lease the building through 2100. The Port Authority has made several promises to support the bond and the construction of the building. Among these are to contribute $210 million in funds from New York City and New York State for construction. It has also promised to hand over $159 million in insurance payments from the events of Sept. 11, 2001 toward the construction of the building. The authority made a variety of other financial promises to support the project.
"The most interesting thing [about this deal] is how the Class 3 bonds are structured," said Ben Thypin, director of market analytics at Real Capital Analytics, who is familiar with office building construction financing. "The Port Authority's backstop financing has a higher lien priority than the class 3 bonds and it cannot be used to fund the debt service payments on those class 3 bonds."
Read More: http://www.bondbuyer.com/news/regionalnews/unrated-16-billion-deal-for-3-wtc-coming-soon-1067117-1.html
The city’s affordable housing finance unit is planning for the first time to issue bonds that will be packaged as commercial mortgage backed securities. This inaugural group of loans pegged at $550 million will be secured by the market-rate residential high-rise 8 Spruce Street, known as New York by Gehry, located in Lower Manhattan.
The Housing Development Corporation, which generally focuses on financing affordable housing for the city, will issue the bonds, which will then be packaged and divided into different risk levels and sold into the CMBS market. Wells Fargo will be the loan servicer.
Sources within the city agency said there were special circumstances that made the CMBS structure useful here, and it was not expected to become a common practice. This bond deal is similar to two the state’s New York Liberty Development Corporation structured to finance 1 Bryant Park and 7 World Trade Center, but this is the first for the city.
Nonetheless, insiders said it showed an inventive use of market tools.
“It demonstrates HDC’s willingness to get creative on structuring in order to diversify how HDC-financed projects are capitalized,” Ben Thypin, director of market analysis with data firm Real Capital Analytics, said.
New York City has a new most expensive apartment for sale: $130 million. And it’s not even built yet.
The 12,394-square-foot triplex topping a new luxury tower at 520 Park Avenue would be the most expensive apartment price tag New York has ever seen, surpassing the $118.5 million asking price for three separate units currently being marketed together in Battery City’s Ritz-Carlton tower.
The 54-story condominium tower at 520 Park Avenue is scheduled to begin rising by February 2015, says Arthur Zeckendorf of Zeckendorf Development. Set on 60th Street two blocks east of Central Park, 520 Park Avenue is designed to rival another, wildly successful Zeckendorf project: 15 Central Park West, now a billionaire enclave and one of New York’s most prestigious addresses.
“Clearly 520 Park is the 15 Central Park West of the Upper East Side,” Arthur Zeckendorf told Forbes. “Both buildings were designed to be sister buildings.” He described the penthouse at 520 Park as having 15-foot ceilings, with old world finishes and modern amenities.
The luxury condos at 15 Central Park West sold out in four years to buyers including Goldman Sachs CEO Lloyd Blankfein, hedge fund billionaire Daniel Loeb, Spanx billionaire Sarah Blakely, the musician Sting, and actor Denzel Washington. The tower even inspired a book:House of Outrageous Fortune, by Michael Gross, which documented a supposed war for one of its penthouses between Loeb and activist investor Carl Icahn.
The Zeckendorfs are hoping for another home run, but there is a real question of how much more luxury the New York City market can take. Several other high-rise residential luxury developments are underway just south and east of Central Park, including Extell’s One57 tower at 57th Street, Harry Macklowe’s 432 Park Avenue, and the super-skinny 111 West 57th Street, which will be just 60 feet wide. The first of the super towers, One57 quickly sold half its apartments in 2012, but now stands at only about 70% sold, sources tell Forbes.
“My gut feeling is that there’s only so much demand for this type of product,” says Ben Thypin, director of market analysis at Real Capital Analytics. “One 57 is seeing trickling demand.”
Read More: http://www.forbes.com/sites/erincarlyle/2014/09/24/manhattans-new-most-expensive-listing-a-130-million-park-avenue-penthouse/
Fresh off the acquisition of a 45 percent stake in Boston Properties’ 601 Lexington Avenue, the sovereign fund that manages Norway’s substantial oil wealth is making a play for Blackstone Group’s 1095 Sixth Avenue, according to a source familiar with the talks. A deal for the tower, expected to fetch up to $2.25 billion, would be the biggest office tower sale in New York since the GM Building traded hands in 2008.
Norges Bank Investment Management is gunning to buy the 42-story, 1.2 million-square-foot tower, which is located between 41st and 42nd streets and overlooks Bryant Park, a source with knowledge of its moves told The Real Deal. It’s also interested in buying into two Boston Properties’ assets in Boston: a 37-story office tower at 100 Federal Street and a 31-story office tower in the Atlantic Wharf complex.
The $5.6 trillion fund, which is associated with nearly $14 billion in total property acquisitions over the last decade, was given a mandate in 2010 to invest up to 5 percent of its assets in real estate outside Norway, according to Real Capital Analytics.
Blackstone acquired 1095 Sixth in 2007, as part of its $39 billion purchase of Sam Zell’s Equity Office Properties Trust. The building, which is 99 percent leased, is anchored by insurance giant MetLife, and Verizon Communications recently reestablished its headquarters there. Whole Foods is also taking about 32,000 square feet at the building.
Besides its investment in 601 Lexington, Norges’ recent Manhattan investments include a $684 million stake in Boston Properties’ 7 Times Square and an investment in 470 Park Avenue South, Real Capital data show. If Norges manages to acquire the tower, the move would be in line with some of these recent deals, according to Ben Thypin, Real Capital’s director of market analysis.
Read More: http://therealdeal.com/blog/2014/09/17/norwegian-fund-pushing-to-buy-blackstones-2-2b-1095-sixth-source/#sthash.ydRuXLEk.dpuf
Blackstone Group LP (BX) is preparing to sell New York’s 1095 Avenue of the Americas, a 42-story office tower that may fetch one of the highest prices ever for a U.S. skyscraper, according to two people familiar with the plans.
Blackstone has hired Eastdil Secured LLC to market the 1.2 million-square-foot (111,500-square-meter) property, said one of the people, who asked not to be identified because the plans are private. The building, soon to be the headquarters of Verizon Communications Inc. (VZ), may sell for about $2.25 billion, the person said.
“If they were to hit this number, it would show the market is still extremely strong for these assets,” said Ben Thypin, director of market analysis at property-research company Real Capital Analytics Inc. “If you want to buy an office building of this size, you only have so many choices.”
Blackstone, the world’s biggest alternative investment manager, has been selling some assets from its 2007 takeover of Sam Zell’s Equity Office Properties Trust as real estate in prime U.S. coastal markets rebounds. The tower, between 41st and 42nd streets and also known as 3 Bryant Park, was purchased as part of the $39 billion acquisition. It houses insurer MetLife Inc. (MET)’s administrative offices in addition to Verizon, which will make the building its headquarters on Sept. 1.
Christine Anderson, a spokeswoman for New York-based Blackstone, declined to comment on plans to sell the building. A telephone call to Martha Wallau, an Eastdil spokeswoman, wasn’t immediately returned.
The highest-valued building in the U.S. is New York’s General Motors Building, according to New York-based Real Capital. The families of Chinese real estate developer Zhang Xin and Brazil’s Safra banking empire bought a 40 percent stake in the tower for about $1.4 billion last year, implying a $3.4 billion value for the 50-story property.
A sale of more than $2 billion would be the biggest of a single U.S. property since the GM Building sold to Boston Properties Inc. in 2008, according to Real Capital.
Blackstone has been taking advantage of strong demand for high-quality U.S. real estate from foreign wealth funds and pension plans to sell assets it has improved through leasing gains or renovations. The Bryant Park building has undergone a “successful three-year, $300 million renovation,” according to the building’s website. Itsoffice space is 99 percent leased, according to CoStar Group Inc., a Washington-based research firm that tracks office leasing.
Building KeptWhile it sold many of the buildings it bought in the Equity Office deal almost immediately, including seven midtown Manhattan towers, Blackstone kept 1095 Avenue of the Americas, which was being completely rebuilt from its steel frame out. Blackstone paid about $1.47 billion for the building as part of the takeover, according to data compiled by Real Capital.
“The office market has come a very long way” since the acquisition, Thypin said in a telephone interview. “Even if this doesn’t sell for exactly what they’re asking, it’s still going to be a very high price.”
READ MORE: http://www.bloomberg.com/news/2014-08-28/blackstone-said-to-plan-nyc-sale-for-more-than-2-billion.html
Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.