Experts Mull Sale Possibilities for AIG Headquarters

Beleaguered insurance giant American International Group Inc., which announced this week that it would put its Downtown Manhattan headquarters up for sale, will likely receive significantly less in sales proceeds than if it made this move two years earlier. The 66-story, 775,000-square-foot building at 70 Pine Street is an “architectural icon,” said Richard Baxter, executive vice president of Cushman & Wakefield Inc. AIG is also selling its 16-story, 279,000-square-foot building at 72 Wall Street. Icon or not, however, the 775,000-square-foot building is unlikely to command the price it would have fetched in 2006 or 2007. Whereas the building will likely sell in the $50 to $150 square foot range today, the price would have more in the “north of $300 per square foot” neighborhood at the top of the market, according to one source with an intimate knowledge of New York’s office investment market. With what Baxter called “breathtaking” views on the top floors, and narrow floorplates, the building could attract an entrepreneurial buyer who sees the building as an ideal candidate for conversion to a mixed-use development containing office on the lower floors, a hotel in the middle, and condominiums for the top floors. “[Conversion] is probable,” said Nat Rockett (pictured), managing director in the capital markets group at Jones Lang LaSalle. “Once AIG is not there, the building could be converted to another use.” But with the capital markets still in a straitjacket, AIG may have to offer seller financing to entice potential buyers. All-cash buyers may also take a look, Baxter said, and foreign buyers could also enter the fray if they feel the price is right. The building also could be attractive to a large Downtown user looking to expand, though Baxter characterized that possibility as “unlikely.”If AIG plans to remain in the building, a sale-leaseback is possible. The insurer occupying the building, for the next year or two, will likely be attractive to potential buyers, said Baxter. “It takes away some near-term lease-up risk for a buyer,” he said. A sale-leaseback is likely to make the transaction more palatable to lenders, as well, Rockett said. “An interesting question is whose credit are you underwriting-AIG’s or the U.S. governments?” he said. Baxter and Rockett agree that the lightning rod that AIG has become will have no effect on the sales process. “That’s going to have no effect on the investors who buy New York real estate,” he said. “A buyer with a long-term vision will see the potential of this asset.” “The only question a potential buyer is going to ask is if AIG is going to continue to pay the rent,” Rockett said.