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Blackstone Said to Plan NYC Sale for More Than $2 Billion

By David M. Levitt
August 28, 2014 5:18 PM EDT 59 Comments
Blackstone Group LP 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.
Source: Blackstone LP via Bloomberg
Blackstone Group LP 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 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.

General Motors

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. Its office space is 99 percent leased, according to CoStar Group Inc., a Washington-based research firm that tracks office leasing.

Building Kept

While 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.”

Blackstone has been selling office properties in Boston and other markets where it has increased occupancies to more than 90 percent, and buying other assets where it believes there’s a potential for leasing and value gains. In July, the firm purchased Manhattan’s Park Avenue Tower from Shorenstein Properties LLC for about $750 million.

New York had the lowest office vacancy rate in the U.S. after Washington in the second quarter, at 10 percent, compared with 16.8 percent for the country as a whole, according to research company Reis Inc.

Whole Foods

The reconstruction of the Bryant Park tower, including an expansion of its retail space to 100,000 square feet from 11,900 square feet, is almost complete, said the person familiar with Blackstone’s plans. The company is in the process of completing a deal with Whole Foods Market Inc. (WFM) to take 35,000 square feet of that space, the person said.

Michael Sinatra, a Whole Foods spokesman, didn’t return a telephone call seeking comment.

The retail component is about 75 percent leased, the person said, giving a new owner a chance to improve the property’s cash flow in the middle of one of the world’s strongest shopping districts.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net

To contact the editors responsible for this story: Kara Wetzel at kwetzel@bloomberg.net Daniel Taub

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