The Real Deal New York

Blackstone wins note on Gluck’s 1140 Sixth

March 31, 2011 03:37PM
By Adam Pincus

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From left: Blackstone CEO Stephen Shwarzman, Laurence Gluck, 1140 Sixth Avenue, Andrew Scandalios, and Rockpoint head Pat Fox

Private equity firm Blackstone was the winning bidder in the highly competitive process to buy the $116 million non-performing note for the leasehold on the entire building at 1140 Sixth Avenue, which is owned by Stellar Management and Rockpoint Group, sources said.

Blackstone will pay something close to — but a little bit less than — $100 million for the note held by German lender Landesbank Baden-Wurttemberg, sources said, but the precise figure could not be obtained. In addition, the owners have an agreement to transfer the leasehold to Blackstone, a source said, but it was not clear if Blackstone would pay for the title, or when the exchange would happen.

The building is controlled through the leasehold, while the land is owned by the estate of Sol Goldman.

There were about 30 bidders for the note, which were whittled down to a group of final bidders, from among which Blackstone was picked on Tuesday, a source said. The deal is expected to close next week, an unusually quick timeframe, insiders said.

Andrew Scandalios, a senior managing director at real estate advisor Holliday Fenoglio Fowler, brought the note to market earlier this year. Holliday Fenoglio Fowler, as well as Stellar and Rockpoint declined to comment. Blackstone did not respond to a request for comment.

At $100 million, the approximately 191,000-square-foot building has a value of $523 dollar per square foot.

In 2006, Laurence Gluck’s Stellar partnered with Boston-based Rockpoint to pay SL Green Realty $97.5 million for the leasehold of the 22-story building at 44th Street.

At the time, they took out a $116 million loan from Lehman Brothers, city records show. In addition, Lehman Brothers agreed to lend them an additional $12.9 million through a mezzanine loan, court documents show.

In 2007, Lehman Brothers transferred the loan to German lender Landesbank Baden-Wurttemberg, which will sell the loan to Blackrock.

The building has gone through enormous changes in recent years including a large renovation project that converted the 1930s-era brick facade to glass.

The building has an availability rate of 41 percent, data from CoStar Group shows.

In the past, Blackstone has bought mortgages either to gain control of the title or just to re-sell the debt. For example, in 2009 it bought a first mortgage on the office portion of a mixed-use San Francisco building at 655 Montgomery Street for 70 cents on the dollar, then about a month ago sold it for between 90 cents and 95 cents on the dollar, Commercial Mortgage Alert reported.

Blackstone “has experience buying debt and the flexibility as to how they capitalize, whether they take control of the asset or flip it,” said Ben Thypin, senior market analyst at real estate tracking firm Real Capital Analytics. “The bottom line is the note sale at this price reflects the high level of demand for Class A office [space].”

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