AVR considers selling 5 Times Square

Yonkers-based AVR Realty has hired CB Richard Ellis with an eye towards putting 5 Times Square on the market, according to the Wall Street Journal. AVR bought the 1.1 million-square-foot building, which houses the U.S. headquarters of Ernst & Young, at the height of the market in 2007 for $1.28 billion.

Stephen Siegel, the firm’s global chairman, said that AVR will decide whether or not to market the building this fall. “It’s a fabulous asset, a magnificent building where there’s very limited risk,” he said.

If sold for a profit, the sale of 5 Times Square could be an indication that trophy commercial buildings are once again trading at record prices, the Journal said. “The sales market is picking up, and the question is: Does it keep going?” Siegel said.

AVR bought the building from Boston Properties for $1,162 per square foot in 2007, but CEO Allan Rose later admitted that it may have paid too much. “Everybody was in that irrational exuberance in those days and we probably paid too much for the building,” he said in a 2009 interview.

AVR’s purchase was financed by a $1.1 billion loan from Wachovia, then sold to investors as commercial mortgage backed securities. The income from tenants in the building proved insufficient to cover loan interest for the first five years. However, the property’s income will cover the payments starting in 2012 when Ernst & Young will see a rent increase and a jump in revenue from a retail lease to Sephora. [WSJ]