NEW York real estate developer Harry Macklowe plans to sell the General Motors Building on Manhattan's Fifth Avenue this month to help settle debts to Deutsche Bank AG.
Bloomberg News reported bids for the GM Building were due February 15, according to a source who declined to be identified because he wasn't authorized to discuss the plan.
The developer pledged his stake in the 50-story tower as collateral for a US$1.2 billion bridge loan by Fortress Investment Group LLC that financed the acquisition of seven Manhattan office buildings a year ago, according to the Wall Street Journal.
Macklowe, 70, bought the seven office towers from billionaire Sam Zell's Equity Office Properties Trust for US$7 billion in February last year, the same day that Blackstone Group LP bought Equity Office for US$39 billion including debt in the biggest leveraged buyout up to that time.
Macklowe is selling as lenders limit the availability of credit in the wake of rising delinquencies in the subprime mortgage market.
Since he bought the seven buildings, the cost of borrowing has climbed by one-third.
"The market has totally changed," said Howard L. Michaels, chairman of New York-based Carlton Advisory Services Inc, which helped Macklowe refinance the GM Building in January 2004.
"He paid an appropriate price at the time he bought the properties. It was a major score for him.
"It was unforeseeable by him or anybody else that the market would change so drastically."
Macklowe reached an agreement to turn the properties over to lenders because he was unable to refinance as real estate values declined over the past year, the Wall Street Journal reported.
A trip by Macklowe to the Middle East to drum up equity partners proved fruitless.
Macklowe had no comment, said spokesman Steve Solomon.
Macklowe's son and business partner, William, declined to comment as did Deutsche Bank spokesman John Gallagher.
Macklowe is a college dropout who got into the New York real estate business in 1959 as a broker, according to Forbes magazine.
He left three colleges, including New York University and the University of Alabama, to pursue real estate.
In the mid-1960s, he founded Macklowe Properties to develop office and residential buildings.
He amassed 12 million square feet of office space and owned buildings including 666 Fifth Avenue.
In the 1980s, he built several skyscrapers including the black glass Metropolitan Tower on 57th Street and the residential RiverTower on the East Side.
Macklowe was worth about US$2 billion as of October, according to Forbes.
"He's a visionary," said Eric Anton, a principal at Eastern Consolidated Properties Inc, a New York-based commercial property broker.
"There's no question he'll come back. This is really going to hurt him and I think it's bad for the market, but he'll come back."
In 2003, Macklowe acquired the GM Building for a record US$1.4 billion from Donald Trump and Conseco Inc.
It was constructed for General Motors Corp in 1968 and once included a showroom featuring its automobiles.
Now, tenants include hedge funds and financiers such as billionaire Carl Icahn, and a recent renovation of the plaza in front of the building includes a two-story-high glass cube entrance to the underground Apple Inc retail store.
The building could be sold for as much as US$3.5 billion.