Paramount Group to Sell Stake in $2.4B NYC High-Rise
- Apr 02, 2020
Five years after taking sole ownership of the trophy office tower at 1633 Broadway in Manhattan, Paramount Group Inc. has signed a deal to sell a 10 percent interest in the 2.5 million-square-foot property. Paramount hasn’t revealed the identity of the buyer or the financial specifics of the deal, but the REIT did disclose that the agreement attributes a value of $2.4 billion to the 48-story skyscraper.
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Originally developed in 1971, 1633 Broadway has maintained its luster through a series of renovations over the years, many of which were executed under the watchful eye of Paramount, as the company has had an ownership interest in the property for the last few decades. In 2015, Paramount acquired the remaining 25 percent stake in the building from Beacon Capital in a transaction totaling $478.3 million, according to New York City Department of Finance records. Today, the skyscraper’s office space is 100 percent leased to a long and varied list of tenants, including investment-grade corporations Allianz Asset Management, Morgan Stanley & Co. and Showtime Networks Inc., as well as Paramount, which has maintained its headquarters in the building since 1976. Retail tenants include TD Bank, an Equinox fitness center and two restaurants.
Paramount’s decision to sell a joint venture interest in 1633 Broadway comes as no surprise to industry observers. “We always said that we want to develop and lease our assets to the full maturity and then capitalize on the improvements that we have done. So, we have done that in Washington, D.C., and that could be an opportunity here [in New York] as well,” Albert Behler, CEO of Paramount Group Inc., said in response to a question about potentially selling a stake in 1633 Broadway during the office REIT’s fourth quarter 2019 earnings conference call on February 13, 2020. News of the pending 1633 Broadway transaction, which is on track to close in the second quarter of 2020, comes on the heels of Paramount’s approximately $1.3 billion refinancing of the asset in November 2019.
Paramount is in the midst of transforming its portfolio, focusing exclusively on investments in New York and San Francisco. In March, the company announced it had entered into an agreement to sell its last wholly owned asset in Washington, D.C., 1899 Pennsylvania Ave., for $115 million. “Our strategy remains unchanged,” Behler added during the conference call. “As we have demonstrated consistently over the past several years, we can recycle capital very effectively by repositioning it into higher growth opportunities or by taking advantage of extreme market dislocation in our share price.”