Silverstein takes loss on Lexington Avenue in $360M deal with Normandy

Larry Silverstein is cutting his losses and moving on from Lexington Avenue. His Silverstein Properties and the California State Teachers’ Retirement System have entered contract to sell the 35-story office building at 575 Lexington Avenue for about $360 million to Normandy Real Estate Partners and New York Life Insurance, the Wall Street Journal first reported.

The deal is worth $10 million less than the agreement the owners nearly struck with Rockrose Development, before Henry Elghanayan walked away.

Silverstein and CalSTRS paid $416 million for the building near the market’s peak in 2006, expecting higher-paying tenants to boost the value of the property. But when those tenants never materialized the building fell into distress and was the subject of a foreclosure filing in January 2011. The ownership duo avoided losing the building by making a $75 million payment toward the loan on the building. While they took a loss on the building, Silverstein and CalSTRS earned more than the $281 million the building was valued at last year, the Journal said.

The tower floors of the 740,000-square-foot property are vacant, while the lower floors are occupied by a New York Sports Club, Cornell University and several other tenants. The building was marketed by Doug Harmon and Adam Spies of Eastdil Secured. [WSJ] and [Post, 1st item]