Norway’s sovereign wealth fund, the Norwegian Government Pension Fund Global, has agreed to acquire a 45 percent interest in Times Square Tower from Boston Properties for $684 million in cash.
The acquisition agreement, signed on September 6, values the entire building at $1.52 billion. Following the close of the sale, Boston Properties will retain management and leasing responsibilities.
Dominated last year by smaller middle-market transactions, New York’s investment sales market has welcomed the return of large institutional transactions in 2013, while leasing activity in the first half of the year also experienced positive year-over-year growth.
With 10 transactions in excess of $400 million under contract through the second quarter, 2013 is set to be the single most active year for large deals since the Great Recession began in early 2008, according to midyear statistics from Cushman & Wakefield.
Earlier this week Vornado Realty Trust reported its first quarter results, with funds from operations, a key metric for judging the performance of real estate investment trusts, falling to $201.8 million, or $1.08 per share, from $348.5 million, or $1.82 per share, over the same period last year.
The decline of over 42 percent is attributable in part to the REIT’s investment in J.C. Penney Co. but does not necessarily represent the REIT’s real estate assets, according to analysts.
Renovation and Repositioning
Vornado Realty Trust is planning renovations to some of its properties around Penn Station, The Wall Street Journal reported this week. The plans are partially motivated by the desire to attract technology and media tenants to the properties, according to the report.
“We benefit from spillover from the Chelsea and Park Avenue South submarkets, which are flooded by tech firms and workers who don’t wear ties,” Steven Roth, newly named chief executive officer, wrote in a recent letter to shareholders.
Though not a traditional owner-operator, TIAA-CREF has begun to draw the attention of the real estate industry in recent months for a bevy of deals, including its acquisition of a stake in the Frank Gehry-designed building at 8 Spruce Street and a joint venture with Norges Bank Investment Management.
The asset management firm’s steady persistence in the real estate market during the downturn has led to a realization of gains, and recent deals could lead to the redeployment of capital in key markets going forward, said analysts familiar with the firm’s strategy going into 2013.
“TIAA is one of the investors that was pretty active in the depths of the market in 2009 and 2010, and some of those investments have turned into significant home runs,” said Dan Fasulo, managing director and head of research at Real Capital Analytics.
Last fall, a group of lenders—including debt funds, insurance companies and international banks—competed for the $80 million assignment to refinance Lehman Brothers Holdings’ On The Ave Hotel on New York City’s Upper West Side.
Ultimately, the borrower tapped Singapore-based United Overseas Bank, which in the last two years has been behind several large office loans in New York and hotel loans on the West Coast, but which was essentially a newcomer to the city’s hotel lending scene. UOB inked the deal during the same late November week when Bank of China closed a $465.9 million loan on the iconic Plaza Hotel, after having refinanced the Mandarin Oriental Hotel for $170 million earlier in 2012.
Times of change and uncertainty are always worrisome for investors—fear takes hold, spending is called into question and valuations become unpredictable.
Mix an election season with the impending threat of a potentially devastating fiscal cliff, then throw in a destructive, rogue tropical storm named Sandy, and you’ve created an environment that is not conducive to a stellar business quarter for the commercial market.
However, thanks to tax law-motivated sales and retail—as well as a handful of big end-of-year leasing deals—the fourth quarter ended on a relatively positive note, despite a slowdown in leasing activity.
Music fans (of a certain vintage) might remember the late James Brown’s famous stage bit when, as his back-up band played “Please, Please, Please,” he would appear to be shuffling his way off the stage while his personal MC (the devoted Danny Ray, who played the role for 30 years) covered him in a cape.
Then, in a sudden reversal of energy, Mr. Brown would throw off the cape and return to the mic to give his fans an encore’s worth of songs.