New York City REIT to Buy Midtown Manhattan Office Asset

American Realty Capital NYC REIT will pay $180 million to acquire the Manhattan office asset from an affiliate of The Blackstone Group.

By Barbra Murray, Contributing Editor

1140 Avenue of the Americas, New York
1140 Avenue of the Americas, New York

New York—Slowly but surely, American Realty Capital New York City REIT Inc.’s portfolio is getting bigger and bigger. The public non-traded REIT will add a quarter-million square feet of office space to its collection with the acquisition of 1140 Avenue of the Americas in Manhattan. NYCR just signed on to pay BPGL Holdings LLC, an affiliate of Blackstone Real Estate Partners VI LP, $180 million for the Class A asset.

Oh, what a difference five years can make. Blackstone snapped up 1140 Avenue of the Americas in 2011 for just $98.25 million, having acquired the loans secured by the 250,000-square-foot building from a consortium of banks led by Landesbank Baden-Württemberg. Originally developed in 1926, the property has seen its share of owners over the last 10 years, beginning with SL Green Realty Corp., which sold the asset to Stellar Management and Rockpoint Group for $97.5 million in 2006. A few years later, the office building fell into the hands of  Landesbank Baden-Württemberg.

Located in Midtown Manhattan’s Bryant Park neighborhood, 1140 Avenue of the Americas has a lot going for it today, including a recent $85 million capital investment and a respectable occupancy level. The 22-story tower is 91 percent leased and counts City National Bank—which occupies roughly 30,000 square feet under a lease scheduled to expire in 2023—as its largest tenant. Ultimately, NYCR plans to increase the value of the asset by capitalizing on below-market leases. Midtown’s Class A office property segment closed 2015 with an average asking lease rate of $66.96 per square-foot, according to a report by ABS Partners Real Estate.

NYCR expects to fund the acquisition of 1140 Avenue of the Americas with financing and cash on hand yielded from its initial public offering, which closed in May 2015.

“We believe the sale of 1140 Avenue of the Americas is a solid transaction for both parties and marks another successful deal with AR Global,” Jon Gray, Global Head of Real Estate for Blackstone, said in a prepared statement. Indeed, Blackstone and AR Global entities have executed more than a few transactions together. Among the most notable deals was Blackstone’s $2 billion joint venture purchase of a group of 71 shopping centers from American Realty Capital Properties (now VEREIT) in 2014.

If all goes as planned, NYCR and Blackstone will complete the 1140 Avenue of the Americas transaction in the second quarter of this year. With the purchase of the building, NYCR will have increased the number of assets in its portfolio to six, and pushed the total square footage over the 1 million mark.

Image courtesy of Iu + Bibliowicz Architects LLP