NEW York developer Harry Macklowe has agreed to sell the General Motors Building and three other Manhattan skyscrapers to Boston Properties for US$3.95 billion in cash and debt, to pay off delinquent loans.
Boston Properties will pay US$1.47 billion in cash, assume about US$2.47 billion of fixed-rate debt and issue US$10 million in units of limited partnership interest, the company said. Goldman Sachs and Morgan Stanley are contributing an unspecified amount.
The deal will retire the US$1.4 billion Macklowe owes to Fortress Investment Group, which made a US$1.2 billion loan to him last year as part of his US$7 billion acquisition of seven New York towers from Equity Office Properties Trust, said real estate broker Darcy Stacom. Macklowe had pledged the GM Building as collateral for that debt, which matured in February.
"In these capital markets, that is an extraordinary feat," Stacom said. The transaction values the GM Building at almost US$3 billion, making it the most expensive office building in the world, she said.
"It's a great address to put on your letterhead," Lawrence Longua, director of the real estate investment trust center at the New York University Real Estate Institute, said yesterday. "It's a special location - across from the Plaza Hotel, Central Park."
In 2006, Macklowe persuaded Apple to open a store beneath the building plaza with a glass cube entranceway. Until then, the space had been difficult to lease.
Macklowe, who has been investing in New York real estate since the 1960s, used short-term debt that came due this year to buy the seven Equity Office buildings last year, at the peak of the market. All but US$50 million of the US$7 billion was borrowed.
He was unable to refinance after access to bank financing dried up amid writedowns and losses by financial institutions worldwide of more than US$300 billion in mortgage-related assets, Bloomberg News reported.
He bought the towers the same day the Blackstone Group acquired Equity Office, the biggest US real estate investment trust, for US$39 billion, including debt.
The purchase of the GM building is expected to close next month, with the other buildings at 540 Madison Avenue, 125 West 55th Street and Two Grand Central Tower coming after that, Boston Properties said.
The sale of these four towers will leave Macklowe Properties a leaner company, positioned to grow, Stacom said.
"There's a ton of money coming in from offshore right now, but it doesn't have an operating base," she said. "You have the team that created the GM Building sitting with real capacity now."
The General Motors Building has about 185,806 square meters of rentable space, Boston Properties said.