The Real Deal New York

Silverstein venture seen as leading candidate for GM Building

February 15, 2008 07:01PM
By David Jones

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As today’s bidding deadline loomed on the sale of Harry Macklowe’s prized General Motors Building, industry sources say a joint venture led by developer Larry Silverstein seems to be the leading candidate to capture the jewel of Macklowe’s real estate empire.

The sale, which could set a record for the most expensive building in U.S. history, might not happen immediately. Macklowe reached an agreement today with creditors Deutsche Bank and Fortress Investment Group for an extension on his overdue debt.  

Silverstein and his venture partner, the California State Teachers Retirement System, have purchased three major properties in New York since 2006, and industry observers say the tight credit market combined with the steep asking price for the GM Building gives the venture a huge advantage. 

“My sense of it is to come up with multiple billion dollars in capital at this juncture — it’s likely to be sources backed by major pension funds, sovereign wealth funs or REITs,” said Scott Singer, executive vice president at Singer & Bassuk Organization.

Silverstein’s venture, called the Metro Fund, agreed to buy 1177 Sixth Avenue for more than $1 billion in December, as well as 575 Lexington Avenue for $400 million in 2006. It bought Moody’s headquarters at 99 Church Street, the site of a planned Four Seasons hotel-condo tower, for $170 million

A spokesman for Silverstein Properties declined to comment.  
 

Besides Silverstein, the building is expected to receive bids from Vornado Realty Trust, SL Green, Paramount Group, Kushner Cos. and Tishman Speyer, among others.

Macklowe is seeking upwards of $3.5 billion for the trophy tower at 767 Fifth Avenue, as he tries to refinance more than $7 billion in debt he incurred from the 2007 purchase of seven Manhattan buildings from Equity Office Properties Trust. The proceeds from the GM sale will help Macklowe cover $1.2 billion in bridge loans from Fortress Investment Group.

Several industry executives expressed skepticism that Macklowe could get a deal approaching his asking price, because few players can afford the amount of equity required to finance such a big deal in such a tight market.

“I’d be surprised if he gets anything over $3 billion,” said Eric Anton, principal at Eastern Consolidated. 

Sapir Organization President Alex Sapir said he considered making a bid for the GM tower, which he considers one of New York’s best properties. But Sapir, whose big buys include paying $675 million for 11 Madison Avenue in 2003, said he declined to put together an offer.

“I don’t think the purchase price is right,” Sapir said.

A spokesperson for Vornado Realty Trust said the company would not comment on the matter “as a matter of policy.”

Jared Kushner, a principal at Kushner Cos., was not immediately available for comment.

CB Richard Ellis Inc. is marketing the building, which overlooks Central Park. Macklowe paid only $1.4 billion for it in 2003.

Deutsche Bank reportedly served Macklowe with a default notice four days ago on $3.1 billion owed on four buildings. After reaching a tentative deal with Deutsche Bank to cede control of the properties, the deal was reportedly blocked by Vornado, a subordinate lender.
 

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