Top NYC Office Deals of 2016

Key findings:

• Though office leasing activity took a respite in 2016, sales activity remained strong: 7 assets fetched more than $1B in 2016;
• Manhattan reigns as the main target for investors—19 of the 20 largest office transactions closed in the borough;
• The largest office deal of the year was CalPERS’ $1.9B acquisition of 787 Seventh Ave. in Manhattan;
• One Brooklyn asset also made its way among the 20 largest office deals of 2016—the Jehovah’s Witnesses’ Watchtower Building sold for $340 million.

New York City commercial real estate has seen its share of ups and downs in 2016. In the midst of political uncertainty, office leasing activity in Manhattan dropped to the lowest level since 2009, and companies chose to wait for the election results before making any major commitments, according to JLL. Moreover, though office activity remains concentrated here, more and more investors are also shifting their focus towards the outer boroughs, where sale prices are much lower. According to a Marcus & Millichap report, the average price per square foot exceeded $1,000 for high-end office properties in Manhattan, while prices for suburban assets in Brooklyn or Queens hover in the mid-$300’s to mid-$400’s per square foot range.

Top 20 New York City Office Sales in 2016

Though prices in Manhattan continue to surge and the competition for quality office assets is fierce, the borough is still the main target for institutional investors, and they’ve kept very busy in 2016—PropertyShark data shows that 19 of the 20 largest office deals of the past year closed in the same borough. The 7 largest sales topped the $1 billion mark, while the largest office deal of the year closed for nearly $2 billion.

1. CalPERS Shells Out $1.9B for Midtown Manhattan Building

787 Seventh Avenue

The largest office deal of the past year in NYC was the $1.93 billion sale of AXA Equitable Center at 787 Seventh Ave. in Manhattan. In early February, the Sacramento Bee reported that the California Public Employees’ Retirement System (CalPERS) had acquired the 51-story, 1.6 million-square-foot office tower located between West 51^st and West 52^nd streets from AXA Financial. Built in 1985, the 1.6 million-square-foot building is LEED certified and offers major street exposure on Seventh Avenue. The property also includes 49,000 square feet of retail space, a parking garage and access to the underground concourse of Rockefeller Center, according to data from PropertyShark.

2. Citi Nabs TriBeCa Office Asset for $1.8B

388 Greenwich Street

At the start of June 2016, Citigroup paid $1.76 billion to repurchase its TriBeCa headquarters from SL Green Realty. The sale was a portfolio transaction that included 1.9 million square feet of office space and 1,200 square feet of retail at 388 Greenwich St., and 765,244 square feet of office space at 390 Greenwich St., according to Yardi Matrix. The bank had sold the two assets to SL Green and Ivanhoe Cambridge back in 2007 for a $1.6 billion price tag, as reported by The Real Deal. The eight-story building at 390 Greenwich and the 39-story tower at 388 Greenwich were both leased out to Citigroup at the time of sale.

3. RXR Realty Seals $1.6B Deal on Avenue of the Americas

1285 Avenue of the Americas

The third largest NYC office transaction of the past year closed in May, when RXR Realty acquired the former Equitable Building at 1285 Avenue of the Americas for $1.64 billion. According to Crain’s New York Business, the purchase made RXR the third largest office owner in the city, alongside Vornado Realty Trust and Boston Properties, based on market value. The 39-story tower at 1285-1297 Avenue of the Americas features 1.5 million square feet of office space and nearly 30,000 square feet of retail, according to PropertyShark, and in 2009 became the largest office building in the state of New York to earn LEED Silver certification.

4. Sony Building Changes Hands for $1.4B

550 Madison Avenue

The Midtown Manhattan landmark formerly known as the Sony Building found new ownership in late May, when Saudi conglomerate Olayan Group and London-based minority partner Chelsfield agreed to pay $1.4 billion to acquire it from Chetrit Group. ING subsidiary ING Capital provided a $570 million bridge loan for the acquisition. According to the Financial Times, the previous owner had planned to convert the 37-story office tower into luxury condominiums, and had been clearing the 776,000 square feet of office space, leaving it effectively vacant. Olayan stated it would take this opportunity to rebrand the iconic building and reconfigure the existing space. The Class A, 827,686-square-foot property built in 1983 includes first-floor retail and parking space and is just 6 miles away from La Guardia airport, according to CommercialCafe data.

5. Hong Kong Monetary Authority Buys 49% Interest in 3 Bryant Park

1095 Avenue of the Americas

Real Summit Investment, a subsidiary of the Hong Kong Monetary Authority’s Exchange Fund, paid $1.1 billion in August to acquire a 49% ownership stake in 3 Bryant Park (otherwise known as 1095 Avenue of the Americas). The property was acquired by Ivanhoe Cambridge in January 2015 for a whopping $2.2 billion, the second-largest sale of the year, according to data from Yardi Matrix. Located in Hell’s Kitchen in Manhattan, the 42-story tower totals 1.2 million square feet of space, including 105,658 square feet of retail. Originally completed in 1972, the building was completely renovated in 2008 and is LEED Silver-certified.
The 7 largest office deals to close in New York City last year topped the $1 billion mark, proof that investor appetite remains high and companies are willing to pay big bucks to own property here. Though activity was primarily focused on Manhattan, one Brooklyn property also made the list in 2016, fetching a hefty price tag of $340 million. See more office highlights below:

News Corporation Building Goes to Ivanhoe Cambridge

1211 Avenue of the Americas

Midway through June, Ivanhoe Cambridge and partner Callahan Capital Properties acquired the remaining 49% interest in 1211 Avenue of the Americas for $914 million. The joint venture partners had bought a 51% share in the building from Beacon Capital Partners back in 2013, according to Commercial Property Executive. Originally built in 1973, the 45-story tower incorporates nearly 2 million square feet of office space and more than 21,000 square feet of retail, according to PropertyShark data. High-profile tenants include 20^th Century Fox and 21^st Century Fox, News Corp., New York Post and The Wall Street Journal.

Thor Equities Closes $525M Deal on Fifth Avenue

693 Fifth Avenue

Thor Equities closed on a major deal in the summer, selling its office and retail property at 693 Fifth Avenue for $525 million—nearly four times what it paid for it in 2010. According to the Commercial Observer, the company bought the asset for $142.5 million in 2010 and landed Valentino as a tenant for the 19,600-square-foot retail portion of the building. The fashion brand reportedly shelled out a whopping $3,000 per square foot for the space. The 20-story property at 693-695 Fifth Avenue features 81,369 square feet of office space and was acquired by French billionaire Marc Ladreit de Lacharrière, chair and CEO of holding company Fimalac.

SL Green Sells $480M Stake in 11 Madison Avenue

11 Madison Avenue

The $2.3 billion sale of 11 Madison Ave. made the news in May 2015, as one of the largest-ever transactions in New York City history. One year later, owner SL Green Realty sold a 40% stake in the 29-story, 2.3 million-square-foot tower to PGIM Real Estate, the real estate investment arm of Prudential Financial Inc., according to Bloomberg. The $480 million transaction closed in August 2016. 11 Madison offers major street exposure on Madison Avenue and Park Avenue South, and was completely renovated in 1997.

Jehovah’s Witnesses’ Watchtower Building Lands New Owner

Jehovah’s Witnesses Watchtower Building (courtesy of Joan Martinez Sanchez via Google Maps)

The Brooklyn headquarters of Jehovah’s Witnesses changed hands in August for $340 million—one of the largest deals to ever close in the borough. A partnership between CIM Group, Kushner Cos. and LIVWRK acquired the 739,000-square-foot landmark from Watchtower Real Estate, with plans to turn it into a world-class office campus. The 2.3-acre site carries the addresses of 25, 30, 50 and 58 Columbia Heights and 55 Furman St., and is conveniently situated nearby the Brooklyn Bridge and Brooklyn Bridge Park. According to the Brooklyn Daily Eagle, Jehovah’s Witnesses personnel started moving in September to upstate Warwick, N.Y., to a newly built headquarters facility.

Hell’s Kitchen Asset Commands $330M Price Tag

441 Ninth Avenue

Back in December, Cove Property Group and Baupost Group closed on the acquisition of 441 Ninth Avenue in Midtown West, for $330 million. The joint venture landed a $220 million loan from Deutsche Bank to purchase the Hell’s Kitchen asset from EmblemHealth, The Real Deal reported at the time. The insurance firm is set to vacate the building over the following months. Built in 1962, the eight-story building features 320,000 square feet of office space and a 30,000-square-foot parking garage, as per PropertyShark data. The property is also just one block away from Related Cos.’ and Oxford Properties’ massive Hudson Yards mixed-use development.

Ceruzzi Buys Land Beneath Iconic Lipstick Building

885 Third Avenue

In early February of last year, SL Green sold the land below 885 Third Ave. in Manhattan for a total of $453 million—roughly $713 per square foot. The New York Post reported that the leased fee interest was acquired by investor Louis Ceruzzi’s Ceruzzi Holdings. Completed in 1986, the 554,180-square-foot, 34-story building at 885 Third Ave. features 536,149 square feet of office space, according to PropertyShark, and once housed Bernie Madoff’s offices on the 17^th floor. The property incorporates a 30-foot ceiling and large marble concierge desk in the lobby, and offers easy access to the Lexington Avenue/53 Street subway station, less than 500 feet away.

What’s Next?

It’s safe to say that investors will continue to pump money in New York City commercial real estate in 2017, seeking long-term capital appreciation, as Marcus & Millichap predicts. And though Manhattan remains the busiest borough in terms of office activity, we’re likely to see larger and larger deals closing in the outer boroughs, especially Brooklyn and Queens.

Images courtesy of Yardi Matrix

Methodology:

• Data source: PropertyShark database
• Data compiled mid-January 2017
• Property type: office buildings
• We excluded “non-arm’s length” transactions