By Daniel Geiger
Rockpoint Group is offering its minority share in the office building 299 Park Avenue for sale, according to sources.
The real estate investment company purchased a 49.5% interest in the 1.2 million s/f skyscraper from the Swiss bank UBS, which is also the building’s largest tenant, at the beginning of 2010. The company paid about $150 million for the stake and assumed a portion of the tower’s $325 million mortgage, according to written reports at the time.
A little over a year later, Rockpoint has now hired an investment sales team from the real estate services firm CB Richard Ellis led by Darcy Stacom and Bill Shanahan to shop the stake.
The deal appears to reflect the strong turnaround of the Manhattan leasing and sales market.
Rockpoint bought the minority share in the building in 2010 for around $625 per s/f, according to written reports at the time, a sharp discount from the over $1000 per s/f prices that prime midtown buildings were trading for before the recession took hold. Since then, however, values have begun to climb back towards pre-recession levels and rising rental rates have emboldened investors to continue to raise their offers for prime opportunities in a market with a dearth of such properties.
Like Rockpoint, other sellers have moved to capitalize on the favorable conditions.
CBRE Investors sold a minority stake in the office tower 1540 Broadway last November to a partnership between Edge Fund Advisors and HSBC Alternative Investments that valued the nearly 1 million s/f building at about $575 per s/f. Like Rockpoint, CBRE acquired the property at a low-point in the market, in March 2009 for under $400 per s/f.
Paramount Group recently consolidated its ownership in the office building 1633 Broadway, buying a minority stake from a joint venture between Morgan Stanley and Merrill Lynch in a transaction that valued the 2.4 million s/f office tower at about $2 billion, a price that translates to over $830 per s/f. Only weeks later, Paramount hired a sales team from Cushman & Wakefield, who is now marketing the minority share.
“It’s a seller’s market and there are a lot of companies that want to take advantage of that and book a gain,” said Ron Cohen, an executive at Jones Lang LaSalle. “If you want to make a profit, this is the time to do it, prices are high and there’s not much to buy and huge eagerness for income. Investors see Manhattan right now as one of the best places to acquire properties, so I think sellers feel this as a great time to cash out and take a profit on the demand.”
Rockpoint bought UBS’s minority share in 299 Park, making it a passive partner to Fisher Brothers, the real estate investment and management company that holds a 50.5% interest in the building and handles it operation and management. Though the building is nearly fully leased, there are questions whether UBS, which occupies hundreds of thousands of s/f in the property, will remain a tenant and what presence it may keep. This uncertainty that could create wildly different economic projections for the building, which in turn could attract different types of investors.