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CalSTRS deal values 1177 Sixth Ave at $860M

Pension fund bought UBS out of Midtown tower, offering optimistic glimpse into office recovery

1777 Sixth Avenue with CalSTRS CEO Cassandra Lichnock (Google Maps, CalSTRS)
1777 Sixth Avenue with CalSTRS CEO Cassandra Lichnock (Google Maps, CalSTRS)

The part-owner of a 1-million-square-foot Midtown skyscraper has sold its stake at a price that may calm investors anxious over the pandemic’s impact on office prices.

UBS Realty Investors sold its roughly 50-percent stake in 1177 Sixth Avenue in a deal that values the 47-story tower at $860 million, sources told The Real Deal.

The valuation represents a capitalization rate of roughly 4.5 percent, one source said, which is about where pricing for similar properties was coming in before the start of the pandemic.

The buyer is the California State Teachers’ Retirement System, which already owned the other half of the property and now owns the entirety through a partnership with Silverstein Properties.

CalSTRS and Silverstein, which bought the tower for about $1 billion in 2007, put the deal into motion when they exercised an option to buy UBS out of the property earlier this year at a price of $825 million. The option, though, gave UBS the right to match the CalSTRS/Silverstein price and buy its partners out.

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UBS hired a CBRE team led by Darcy Stacom and Bill Shanahan to find a potential investor that would come in and buy out its partners. When the bids came in, CalSTRS decided to up its offer to $860 million and came away with the property.

The pension fund is now in the market with a team at Eastdil Secured, looking to find $450 million in debt to refinance the tower.

Representatives from CalSTRS, CBRE and Eastdil Secured declined to comment.

The sale provides a rare data point for investors looking to get a clearer picture of how office properties are being valued as Manhattan recovers from the pandemic.

Sales of Manhattan office buildings totaled just $3.3 billion in the first quarter of 2021, down more than 80 percent from the $19.8 billion worth of deals during the same time period in 2019, according to the appraisal firm Marshall & Stevens.

Office availability in the borough, meanwhile, sat at 17 percent at the end of June, a negligible improvement from the record-high of 17.1 percent in May.

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