Canadian pension fund the Ontario Municipal employees retirement System, or OMERS for short, was announced today as the winner of a bidding to process to acquire atrophy office skyscraper in the Plaza district of Midtown Manhattan.
OMERS is buying 450 Park Avenue, at the corner of 57th Street and Park, for an officially undisclosed amount, purported to be around US$575 million dollars, acting through its real estate subsidiary Oxford Properties Group.
Like many other well-heeled foreign investors, including pension funds, sovereign wealth funds and private companies, Oxford Properties has been increasing its presence in New York lately. Oxford Properties are indeed in partnership with The Related Companies in the massive US$15 billion Hudson Yards development project in Midtown on the west side – the Far West Side as the project is now called.
450 Park Avenue is a beautifully maintained 33 storey office building with over 330, 000 square feet of space, making the price over US$1, 700 per square foot, not too far from the top price ever paid in Manhattan for office space. That record currently belongs to 650 Madison Avenue right around the corner, though, which went for US$2, 235 per square foot in 2013.
(L-R) Keith Rubenstein and Michael Tabor
With the Four Seasons Hotel just across the street and the GM building and the Plaza Hotel around the corner the location could not be better. Midtown East has some of the highest retail rents in the world and office rents there too are in the stratosphere, in the high eighties in 2013. Further over a little bit, at 9 West 57th Street, in Sheldon Solow’s building, they are even higher.
The sellers of 450 Park Avenue are New York development firm Somerset Partners, which is led by Keith Rubenstein, and the family trust of UK horse racing tycoon Michael Tabor, though it is not quite clear in what proportions they shared the ownership.
The two partners bought the building in the summer 2007 for US$509 million, then also a record price, just before the market crashed, and just after selling another one, 85 10th Avenue, for US$425 million. The profit on that sale provided enough equity to put into the new trophy acquisition to ride out the recession that followed shortly thereafter, one that wiped out a number of other players.
Now Somerset and Tabor have got their money back plus a very decent return and can look forward to the next deal, though they initially had to work hard along the way, to repurpose the retail space at ground level ultimately bringing in auction house Phillips de Pury & Co. as a single key tenant. This also raised the tone of the property to something more equivalent to its location.
Key to selling this property has been not just its location however, but also what is going on next door. Right beside it, at 432 Park Avenue, Harry Macklowe’s development company Macklowe Properties is currently building the tallest residential condominium tower ever built in New York, or the Western hemisphere either for that matter, at 1, 398 feet. As an address for the uber rich 432 Park Avenue will be unparalleled. It has already made US$1 billion in sales, and should be completed some time next year.
After he went under himself during the last financial crisis, losing many of his properties, including indeed the nearby GM building itself, 432 Park Avenue has clearly been redemptive therapy for Macklowe, building it in partnership with the west coast CIM investment group, founded by Israelis Shaul Kuba and Avi Shemesh.
Again it is not clear how the ownership interests are divided up, but the mix of the explosive, volatile, creative but sometimes excessive risk taking Macklowe and the more analytical modus operandi of the CIM guys is an interesting one for sure. CIM bought in by buying the building’s debt and then taking equity in exchange thus keeping the development on an even keel. On the other hand, the purely development aspects of the building itself has Macklowe’s imprint all over it, so perhaps the two groups together make for an excellent partnership.
From the renderings 432 Park looks like it may turn out to be a very beautiful building, which is unusual for a commercial development and with a sensitive eye clearly having been devoted to its many details and not just to the big picture. Clearly Oxford Properties is betting some of that lustre will rub off on their building next door as well.