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The Stoler Report
 
Fortune 100 Companies Capitalize on Record Prices

by Michael Stoler

All of a sudden, a number of prominent Fortune 100 companies are selling New York real estate. JPMorganChase is shedding its real estate assets. Last month, the bank entered a contract to sell the 23-story, 595,000-square-foot office building at 522 Fifth Ave. to Stellar Management. Stellar had previously purchased the land under the building in 2004. In May, the bank sold three other office buildings, totaling 425,000 square feet, which had served as the location of the bank's credit operations in Hicksville, Long Island. Apollo Real Estate Advisors paid about $30 million for the property. The bank is marketing for sale the 36-story, 663,000-square-foot building at 75 Wall St. The building was built by Barclays Bank in 1986 and sold to Chase in the 1990s. According to industry sources, Chase purchased land under the building last month from Barclays Bank. Industry leaders also expect that later this year, when the sale of 75 Wall St. is completed, Chase will begin marketing for sale the 22-story, 999,305-square-foot tower at Four New York Plaza in Lower Manhattan.

On December 31, 1999, HSBC Bank USA purchased the assets of Republic National Corporation, and became the owners of a number of prize properties in the region. One of the locations, at West 42nd Street and Eighth Avenue, had served as a branch of Crossland Savings Bank, which was acquired by the bank in the 1990s. Earlier this summer, the bank sold the property, which was converted into a Duane Reade store. The buyer, a partnership of Jeff Sutton and Joe Cayre, paid $30 million for the site, which will probably be developed into a mixed-use retail and residential tower. In May, HSBC sold the landmark Williamsburg Savings Bank - the tallest building in Brooklyn, located at 1 Hanson Place - to a partnership of the Dermot Company and Canyon-Johnson Urban Funds. The partnership paid about $72 million, and plans to convert the property into 216 luxury residential condominiums.

In May, Reckson Associates Realty entered a contract to buy the 50-story, 1.4 million-square-foot Citibank tower in Long Island City for $470 million. Before the close of the sale, the bank signed a 15-year lease for 100% of the tower for a net rent of about $22 a square foot. In September 2002, Citigroup sold its 39-story tower at 399 Park Ave. to Boston Properties for $1.06 billion, the largest real estate deal in America that year.

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Last year, Verizon announced plans to sell corporate real estate in the city. In March, Equity Office Properties Trust announced it had entered a contract for the 42-story, 1.2 million square-foot Verizon building at 1095 Avenue of the Americas. Equity agreed to pay $505 million for about 1.03 million square feet, or 80% of the tower. After the sale, Verizon will still own a condominium portion of the building that is about 200,000 square feet in size. In April, Verizon sold a development site on West 42nd Street between Eleventh and Twelfth avenues to the developer Joseph Moinian. Mr. Moinian paid $120 million, or $200 a developable square foot, for the three sites at 563 Eleventh Ave., 604 W. 43rd St., and 605 W. 43rd St., where he is developing residential condominiums. Verizon is now marketing for sale a 47,000-square-foot lot at 555 W. 34th St. and 550 W. 35th St. in the rezoned Hudson Yards. In May, the company sold its 27-story office building at 101 Willoughby St. in downtown Brooklyn. The new owners plan to convert the tower into residential condominiums.

This summer, TIAA-CREF, sold four small office buildings that have a total of 40,000 square feet of space at 116, 118, and 120 E. 55th St. and 119-121 E. 54th St. The State University of New York bought the property and will use it to house a graduate school. In July 2004, TIAA-CREF sold two of its buildings, which cover an entire block at 750 Third Ave. and 485 Lexington Ave., and have about 1 million square feet of space, to a partnership of SL Green Realty, the City Investment Fund, and the Witkoff Group for $480 million.

MetLife, the country's biggest life insurer, bought the 58-story, 2.8 million-square-foot office building at 200 Park Ave. from Pan American Airlines for $401 million in 1981. In April, MetLife entered a contract to sell the building for $1.72 billion. The buyers are Tishman Speyer Properties and its partners: the New York City Employees' Retirement System and the New York City Teachers' Retirement System. The $1.72 billion purchase price was the highest recorded price for an office building in America, exceeding the $1.4 billion price paid by the Macklowe Organization in September 2003 for the General Motors building at 767 Fifth Ave. During the same month, MetLife sold its 1.4 million square-foot former headquarters at One Madison Ave. to SL Green Realty for $918 million. In December 2003, MetLife sold the adjacent building at 11 Madison Ave. to a partnership of Zar Realty Management Corporation and Dave Werner. In July, MetLife entered a contract to buy the 40-story, 522,346-square-foot building at 575 Fifth Ave. from Sterling Equities, paying about $385 million.

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New York Life Insurance Company owns several office and residential properties in the tri-state region. Last month, a partnership of Richard Kalikow's Manchester Real Estate and the O'Connor Partnership entered a contract to buy the 19-story, 587-unit rental apartment building, the Manhattan House, which occupies an entire block on East 66th Street and East 67th Street between Second and Third avenues. The partnership is paying about $636 million to New York Life, which developed the residential building in 1950.

According to industry sources, later this year, Sony will sell its 36-story, 700,000-square-foot headquarters at 550 Madison Ave. The tower was originally built in 1982 to serve as the headquarters of AT&T, which net leased the building to Sony in 1993.Two years ago, Sony bought the tower. Industry leaders expect the building to fetch close to $360 million. Last month, the $2.5 billion pension fund, CalSTERS, sold the 146,000-square-foot tower that sits across the street from the Sony building at 551 Madison Ave. The property sold for about $90 million.

These institutions and others are following the lead of property owners from all around the world to capture record prices for New York real estate. In many instances, these companies have consolidated operations and no longer need the space. For others, executives and board members have taken the initiative to seize the opportunity as well as increase the financial strength of their company.

Mr. Stoler is a television broadcaster and vice president at First American Title Insurance Company of New York. He can be reached at mstoler@firstam.com.

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