The Real Deal New York

No discount for Barclays on Lehman buy

September 17, 2008 06:17PM
By Adam Pincus

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Although the ink may still be drying on the agreement to buy Lehman Brothers’ headquarters at 745 Seventh Avenue, brokers said it appears that Barclays did not get as good a deal as JP Morgan Chase did when it snapped up the failed investment bank Bear Stearns.

London-based Barclays said it agreed to pay $1.5 billion for Lehman’s west Midtown tower and two New Jersey data centers, as well as $250 million for the firm’s North American investment banking and capital markets business, subject to court approval.

But, unlike in the Chase deal, Barclays did not get a great discount off market value.

Barclay’s said in a statement that the building purchases were “for close to their current market value.”

Ron Cohen, chief marketing officer at Besen and Associates, who was not involved in the sale, said there was not enough public information to know what the deal meant for the turbulent office market.

However, he said, “it sounds like they are not getting quite the deal that JP Morgan Chase got at 383 Madison.”

In March, JP Morgan Chase snapped up the failed investment bank Bear Stearns for a reported $236 million, which included its headquarters at 383 Madison Avenue, valued at about $1 billion.

The Barclays news came days after Lehman Brothers Holdings filed for the largest bankruptcy in United States history on Monday.

An investment sales broker not involved in the Barclays deal and who asked not to be identified said the Lehman building would likely sell for a lower price if offered on the market under normal conditions.

“In the current financial market they couldn’t get financing especially with one [company]… It would have to have two investors or more instead of just one guy,” he said.

The sale of the Class A headquarters on Seventh Avenue at 50th Street does not provide a barometer of market conditions due to the conditions of the sale – it was arranged under pressure within a few days –  real estate experts said.

Eric Anton, executive managing director at Eastern Consolidated, said rapidly constructed deals are often done on estimates.

“They didn’t do it for the real estate, they did it for the company…and they got the building as well,” he said.

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