Paramount buys, sells midtown office towers
In two separate but equally sweet deals, the Paramount Group Inc. has bought and sold two class A midtown buildings.
Paramount has gone to contract with an affiliate of W.P. Carey & Co., LLC, to buy the 222,000 s/f Candler Tower in the Times Square District.
The 24-story class A tower is sandwiched between the New Amsterdam Theater and Madam Tussaud’s Wax Museum at 220 West 42nd Street and is triple-net leased to SFX, one of the world’s biggest producers and promoters of live entertainment.
Meanwhile, Princeton International Properties Corp. reportedly paid Paramount $120 million for its 300,000 s/ f, office and retail tower at 150 East 52nd Street.
Broker, Ephraim Hirsch, played matchmaker in the off-market deal, bringing Princeton to the table when Paramount indicated it may be willing to consider offers on the 35-story property.
With such class A offerings virtually unheard of in the midtown arena, Hirsch said he pounced on the chance to broker the sale between the two parties, both of whom he has come to know well over 25 years in the investment sales market.
“The location, the quality and the way the building was managed made it an irresistible opportunity for the buyer,” said Hirsch. “And working with the seller is always a pleasure.”
According to David Tawfik, president of Princeton International, the purchase presents his firm with a terrific opportunity to capitalize on midtown’s strong leasing market.
“The quality of the asset and its location are unparalleled,” said Tawfik, whose family-run firm owns several other buildings in the city, including 232 Madison, 650 First Avenue and 940 Eighth.
Tawfik said the building is currently 94% occupied by predominantly financial and legal services companies, a sector his firm will continue to court. “The building works for them,” Tawfik said, explaining plans to upgrade the building through a series of major capital improvements to elevators, hallways and common areas.
“We are excited about the chance of improving the quality of the building through upgrades and looking forward to the brokerage community bringing us new tenants.
“Right now, average rents are significantly below market. There will be significant turn-over in the next three years and we feel very good about the leasing prospects, especially in midtown where a tightening market will cause rents to go up. We don’t expect to have a lot of vacancies in our portfolio.”
Tawfik praised the building’s previous owners, saying, “Paramount run their buildings very well and are professional in every respect. It was a pleasure dealing with them.”
As thrilled as the firm was to bag a rare midtown offering, Princeton continues to scan the horizons for similar midtown opportunities.
“We feel we have room for growth,” said Tawfik. “And we aren’t afraid of buildings that have vacancies or short leases because we are able to use our expertise to improve cash flow.”
Princeton typically seeks out buildings where they can carry out infrastructure improvements and buildouts to attract new tenants. Following a repositioning and renovation program, the company recently brought occupancy to 98% at its North Shore Plaza complex in Jericho, Long Island, which it bought from Stellar Management in 2004.
Paramount declined comment on the Princeton deal, but in a statement regarding its purchase of 220 West 42nd Street, president and CEO, Albert Behler said, “Candler Tower is a unique addition to Paramount Group’s Manhattan portfolio.
While perhaps not in the same league as Paramount’s trophy assets in Manhattan, such as the two million square feet 1633 Broadway, Behler said 220 W42nd represented an unprecedented opportunity for Paramount.
“The property represented an unprecedented opportunity to acquire a fully leased, recently renovated Class A property with guaranteed escalating rental income through the year 2020 at a significant discount to replacement cost,” he said.
“In addition, its location at the Crossroads of the World, the unsurpassed Times Square, only made the buy that much more attractive.”
One of the last remaining white terra-cotta skyscrapers in the city, Candler Tower’s retail space is occupied via sublease to McDonald’s for its flagship Times Square location, one of the chain’s highest grossing units. McDonald’s recently invested $13 million in improvements to the first three floors of the property, two of which are restaurant space.
COPYRIGHT 2006 Hagedorn Publication
COPYRIGHT 2006 Gale Group