TIAA CREF has arranged to buy 685 Third Avenue according to a report in Bloomberg News Tuesday morning.
Real Estate Weekly first identified that the pension-fund and insurance company was a potential buyer of the roughly one million square foot office tower last Thursday.
A spokeswoman for TIAA CREF, Abby Cohen, didn’t respond to an REW inquiry into the deal on Monday but was quoted in the Bloomberg article in a way that seemed to confirm the company’s acquisition.
“We continually seek to improve the quality of our real estate portfolio through carefully identified, high-quality acquisitions,” Cohen was quoted as saying.
The Bloomberg story said that its information came from two unnamed sources familiar with the sale and put the purchase price between $180 and $190 million for the 635,000 square foot office tower. That amount, if accurate, would put the value of 685 Third at nearly $300 per square foot, higher than initial bids for the tower, which were in the mid to low $200s, but still far lower than other office building sales this year.
One of the hurdles that has hampered 685 Third Avenue’s value is that the building will be turned over to its new owner fully vacant. The pharmaceutical company Pfizer, which is selling the property and has long occupied it as its New York headquarters, plans to relocate its operations from the tower into other Manhattan office buildings where it has space in an effort to downsize and consolidate.
Even though the office market has begun to show signs of recovery, big tenants that could fill 685 Third Avenue’s vacancy have been hard to come by. Those who are in the market have been in a position to command bargain rental rates and concessions from landlords such as money to outfit their space with office facilities, an expense that tenants usually have to fund themselves during hot periods in leasing.
TIAA CREF would likely have to pay millions of dollars on top of the sales price to pay for this work and also cover the cost of brokerage commissions.
The company, which invests in real estate assets nationally, has had recent experience arranging deals at the bargain end of Manhattan’s leasing market however.
In October last year, with leasing activity only beginning to emerge from the doldrums of the recession, TIAA CREF subleased about 120,000 square feet to the United Nations at 730 Third Avenue, an office building TIAA CREF owns and uses for its Manhattan headquarters.
Rents in the deal were not disclosed, but it was hard to imagine they were significantly higher than a deal done just a few months earlier in July, when TIAA CREF leased another, smaller portion of space in the building for $37 per square foot, well below what rental rates in other areas of midtown dropped to during the downturn.
CB Richard Ellis executives Darcy Stacom and William Shanahan handled the sale for Pfizer. Stacom did not respond to a request for comment on the deal by press time.