Boston Properties snaps up Macklowe’s 510 Madison for $281M

TRD New York /
Aug.August 20, 2010 05:45 PM
Mortimer Zuckerman and 510 Madison Avenue

[Updated: 8:27 p.m., Aug. 22, 2010 and 2:32 a.m., Aug. 21, 2010] Boston Properties said today that it has agreed to buy Harry Macklowe’s embattled office tower at 510 Madison Avenue for about $280.5 million.

The 350,000-square-foot property had been the subject of a bitter legal fight between Macklowe, SL Green and junior mezzanine lender O’Connor Capital Partners for several months, before Boston Properties acquired the loan for $22.5 million Aug. 10.

“Our previous relationship with Harry [Macklowe], which began with the acquisition of the General Motors Building and other assets in 2008, has fostered a relationship that helped us successfully acquire 510 Madison Avenue,” said Boston Properties Chairman Mortimer Zuckerman, in a statement.

Macklowe, as part of the agreement, will serve as project consultant and co-chairman of the marketing and leasing advisory committee, and may receive additional compensation based on the performance of the property. CB Richard Ellis broker Paul Amrich will continue to manage leasing at the building.

Macklowe, in a statement, said he was pleased by the agreement and looked forward to helping complete 510 Madison.
Macklowe originally built the speculative office tower in 2008, and then the property was damaged by a February 2009 fire and anchor tenant Jay Goldman & Sons battled Macklowe to get out of its lease. By December 2009, SL Green acquired the senior mortgage for $170 million and the senior mezzanine loan for $15 million and tried to foreclose on the building.

Macklowe fought what it considered a predatory takeover attempt in court and won an agreement with SL Green to buy extra time to work out a deal. Boston 

Meanwhile, O’Connor Capital Partners sued Macklowe recently decided to reopen talks and rescue its junior mezzanine loan, which would have been wiped out by an SL Green foreclosure. 

O’Connor allegedly tried to bring Tishman Speyer into the deal to buy out the debt and take over the property, but Tishman said it had no interest in acquiring the property and a state Supreme Court judge threw out the O’Connor suit.

Ben Thypin, senior market analyst at Real Capital Analytics, said the 510 Madison acquisition is a big win for both Zuckerman and Macklowe, as it not only gives Zuckerman’s Boston Properties a potential trophy property and saves what’s left of Harry Macklowe’s remaining business empire.

“Not only does Macklowe free up capital to stabilize or expand its portfolio, but they receive something on the back end of this deal as well,” Thypin said.

Properties said the deal is expected to close by Sept. 1, but warned that there is no assurance that the deal will be completed under the same terms or completed at all.

But it remains unclear whether SL Green will allow this deal to go through unchallenged. SL Green has been on something of an acquisition spree for troubled assets in New York, buying 100 Church Street, 125 Park Avenue and 600 Lexington Avenue in the past year.

Boston Properties said it already made a $5 million deposit on the building and will be responsible for all transfer taxes and other acquisition costs, totaling a combined $12 million to $15 million.

 

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