An investor backed by California’s massive state pension fund is in contract to buy an office building in the Hudson Yards neighborhood for more than $1 billion.
The deal comes as Manhattan continues to struggle to get workers to return to the office and companies make plans to downsize their space. It also highlights a growing chasm between top-quality properties and those that will bear the brunt of the shift to work-from-home.
Los Angeles’ CommonWealth Partners — an adviser to the California Public Employees’ Retirement System fund — is in contract to buy the Hudson Commons office building on Ninth Avenue for a 10-figure sum, sources told The Real Deal.
It’s the largest deal to come together since Google announced plans in September to buy its Hudson Square office building for $2.1 billion.
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But owner occupiers like the massive tech company are driven by different factors than investors like CommonWealth Partners are. Whereas Google’s purchase indicates the desire of Big Tech firms to return to the office, the CommonWealth deal is a sign that investors are still willing to write big checks for a certain class of Manhattan office buildings, despite headwinds.
Representatives for CommonWealth Partners could not be immediately reached for comment. The seller is a partnership between Cove Property Group and Baupost Group. A representative for Cove Property declined to comment.
Despite big-ticket deals for Manhattan offices, the market still faces serious challenges. Just 8 percent of Manhattan office workers were back in the office five days a week in late October, according to a survey released today by the Partnership for New York City.
On top of that, 34 percent of companies said they plan to reduce their office requirements over the next five years.
Cove Property Group and the Baupost Group, the developers of the 700,000-square-foot Hudson Commons, bought the property at 441 Ninth Avenue for $330 million in 2016, riding the wave of demand for Manhattan’s West Side after Hudson Yards opened.
They redeveloped the former warehouse that had been converted to offices for EmblemHealth and added 17 floors of office space above, then leased it to tenants including Peloton and Lyft.
The developers put the property up for sale earlier this year with a team from CBRE.
CommonWealth Partners, led by CEO Brett Munger, is a major landlord on the West Coast. It owns the 1.7 million-square-foot 787 Seventh Avenue office tower near Rockefeller Center.
The company has been an investment adviser to CalPERS dating back to 1998. In 2019, CalPERS allocated $3.1 billion to new core real estate acquisitions, sending $750 million of that to CommonWealth.