The Real Deal New York

Here is how Pfizer’s sale-leaseback stacks up to other big deals

The owner-occupiers include Time Warner, Sony and Coach
By Mark Maurer and Rich Bockmann | April 12, 2018 01:10PM

Clockwise from top left: 550 Madison Avenue,60 Wall Street and the Time Warner Center

Clockwise from top left: 550 Madison Avenue,60 Wall Street and the Time Warner Center

In 2016, Pfizer embarked on a daunting task: a search for both the buyer of its longtime two-building headquarters on East 42nd Street and for a new office in New York City.

When it came time for investment-sales brokers to pitch Pfizer to market the buildings for sale, Cushman & Wakefield appeared to have the inside track — it had previously represented the company in leasing negotiations. Cushman did pick up the contract in January 2017, at a time when Pfizer sought $500 million for its Midtown East headquarters.

Cushman utilized a two-pronged approach to get the job done: a leasing team led by Josh Kuriloff and an investment-sales team led by Adam Spies and others. This week, news broke that Pfizer agreed to sell the properties to Brooklyn investor David Werner for about $360 million and that it had finalized an 800,000-square-foot lease at Tishman Speyer’s proposed office tower the Spiral.

Those two deals, even when occurring simultaneously, are often handled by different brokerages. In the case of Pfizer, star investment-sales brokers Doug Harmon and Spies, who had handled some of the city’s other larger sale-leasebacks, left Eastdil Secured for Cushman just months before their team won the assignment. Cushman, which placed No. 2 on The Real Deal’s ranking of commercial brokerages by office leasing volume, offered a robust leasing operation, unlike Eastdil, which specializes in sales and financings.

Tenants that own and occupy their space find sale-leaseback agreements beneficial because they can help the companies monetize their real estate assets and put that extra cash into investing in their businesses. They also shift the responsibilities for managing space onto professional real estate owners.

Here’s a look at some of the other big sale-leasebacks in recent years:

10 Hudson Yards (2016)

Luxury accessories company Coach, the first tenant to commit to the Related Companies and Oxford Properties Group’s Hudson Yards in 2011, sold its 738,000-square-foot office condo in five years later to Allianz Real Estate for $707 million. Coach then leased the space from Allianz for 20 years. Harmon and Spies, then at Eastdil Secured, represented Coach in the sale. CBRE, which moved Coach into Hudson Yards, represented the tenant in its leaseback.

Time Warner Center (2014)

In one of the first major office leases inked at the Hudson Yards megadevelopment, Time Warner Center bought an office condo at 30 Hudson Yards spanning 1.5 million square feet. At the same time in January 2015, the telecommunications giant struck a deal to sell its 1.1 million-square-foot office at Time Warner Center to Related Companies, the Abu Dhabi Investment Authority and GIC for $1.3 billion. The 80-story Hudson Yards tower, which Related is co-developing, is expected to open next year. Until then, Time Warner is leasing back the Upper West Side space. Eastdil Secured represented Time Warner in the sale, and Studley (now Savills Studley) represented Time Warner in the Hudson Yards deal. CBRE represented Related and Oxford Properties at Hudson Yards.

Sony Building (2013)

In 2013, when Sony sold its namesake property at 550 Madison Avenue to Chetrit Group and Clipper Equity for $1.1 billion, it marketed the end of an era. The Japanese conglomerate first leased the 37-story property, then called the AT&T Building, in 1992. Then, in 2002, it acquired it for $236 million. When it came time to sell, Sony made plans to sign a lease for more than 500,000 square feet at 11 Madison Avenue, now owned by SL Green Realty and PGIM Real Estate. (The Sony Building again made headlines in 2015, when Chetrit and Clipper abandoned their condo conversion plans and sold it to Olayan Group and Chelsfield for $1.4 billion.) Eastdil Secured brokered the 2013 sale, and CBRE brokered Sony’s new lease.

60 Wall Street (2007)

In one of the big sale-leaseback deals from the previous market cycle, Deutsche Bank sold the Financial District Tower to Paramount Group for $1.2 billion in 2007. Deutsche – which had acquired the property in 2001 — stayed put as a tenant. In recent months, Deutsche has begun the search for a new headquarters, potentially at Time Warner Center.  JLL brokered the 2007 sale and is also handling the search for a new office.

388-390 Greenwich Street (2007)

In another deal from the last cycle, Citigroup sold its Lower Manhattan headquarters at 388-390 Greenwich Street to SL Green and Ivanhoe Cambridge for $1.57 billion, and then executed a 15-year sale-leaseback for the building’s 2.6 million square feet. Nearly a decade later, Citigroup in 2016 exercised a purchase option to buy the building back for $1.8 billion. The bank was required to pay SL Green $94 million to terminate its lease early. Cushman & Wakefield brokered the 2007 sale, and in 2014 it won a contract replacing JLL as the property manager for Citigroup’s 27 million square feet of commercial real estate across the country.

In 2013, Citigroup renewed its lease through 2035 at the building.