USAA Real Estate Company (RealCo) has bought two mid-block office buildings in Times Square South in a move to capitalize on the emerging Hudson Yards neighborhood.
“With its proximity to Midtown South and the new Hudson Yards development, the Times Square South Submarket is experiencing a renaissance and we believe tenant demand will be quite strong,” said Len O’Donnell, president and CEO of USAA Real Estate Company.
The buildings at 142 West 36th Street and 234 West 39th Street were brought to market in February by Eastdil Secured on behalf of the owners, Herald Square Properties and the Davis Company, with a $125 million price tag, according to Crains.
There was no comment on the purchase price from RealCo. , which has partnered with Waterman Interests on the deal. The company said Savitt Partners, LLC, led by Robert Savitt, will be spearheading a new leasing strategy for the portfolio, which is expected to see a leasing roll-over of the bulk of tenants within the next few years.
Tom Bermingham, managing director of USAA Real Estate Company’s New York office commented, “The buildings are presently fully leased at rents that are below market, thus offering significant upside potential in a one of Manhattan’s hottest neighborhoods.”
The two office buildings are located in Manhattan’s highest growth submarket, Times Square South which gives onto the 34th Street retail corridor, a high traffic pedestrian neighborhood located between Time Square, Penn Station and Hudson Yards.
Hudson Yards, expected to open to its first tenants in 2016, is the largest redevelopment project in the history of the United States, and with its mix of office, residential, restaurant and retail will be transformative to New York City and likely drive property demand and values throughout its own market and surrounding submarkets.
RealCo’s portfolio, known as “The Midtown West Collection” includes 234 West 39th Street, a 91,466 s/f, 10-story property built in 1921, and 142 West 36th Street, a 118,338 s/f 17-story office building built in 1922. They are within walking distance of the Times Square and Herald Square subway hubs as well as Penn Station and the Port Authority Bus Terminal. The area is attracting many fast-growing technology, advertising, media and information technology tenants.
Philip Waterman III, founder and managing member of Waterman Interests, commented, “We are thrilled to have the opportunity to form a partnership with USAA Real Estate Company on the Midtown West assets and know that this transaction will allow us to utilize all of our team’s core competencies to reposition this portfolio and deliver exceptional results for the benefit our investors, USAA RealCo, and the tenants in these buildings. We are also very happy to again be collaborating and investing with Savitt Partners.”
Gerard Nocera, co-founder and Principal of Herald Square Properties, said, “We recognized the investment potential in this golden triangle of transportation, especially due to pricing pressures in the adjacent areas.
“We joined forces with The Davis Companies and immediately implemented strategic improvements, while working with a great CBRE leasing team that included Paul Amrich and Neil King.”
Added Michael Reid, co-founder and principal of Herald Square Properties, “By focusing on the burgeoning TAMI market at 142 West 36th Street and maintaining the original fashion niche at West 39th Street, both buildings leased up quickly and the tenant profiles were elevated with several top-tier companies.”