02/02/2011

GE, L&L Marketing Stake in 195 Broadway

A joint venture between GE Pension Trust and L&L Holding is seeking to recapitalize the office building at 195 Broadway in Lower Manhattan.

The partnership has begun sounding out investor interest in acquiring a stake in the 1 million-square-foot property, one block east of the World Trade Center site. It is valuing the building at roughly $285/sf, or $285 million, according to a market player familiar with the matter. The partners acquired the tower in 2005 from H.J. Kalikow & Co. of New York for $265.7 million.

It's unclear how large a stake is being offered, or whether one of the partners is seeking to exit the partnership entirely. In its joint ventures, L&L, a New York investment shop headed by David Levinson and Rob Lapidus, usually takes minority interests and serves as operating partner. Eastdil Secured is advising the joint venture.

While most recapitalizations these days are being conducted by owners under pressure from heavy debt loads, there's no sign that's the case with 195 Broadway. The property's $196 million securitized mortgage doesn't mature until April 2012. And the cashflow is easily covering the loan payments. Over the first nine months of last year, the building threw off $16.8 million of net operating income on an annualized basis, more than 1.5 times the amount needed for debt service, according to the most-recent figures available in a servicer report.

The building is 84% occupied, shy of the 90.7% average for the 80.7 million-sf Lower Manhattan market at yearend, according to the report. The average rent in the building was $29.55/sf in 2005, when the seven-year loan was originated. The average asking rent in Lower Manhattan currently is $38/sf.

The largest tenants are Thomson Reuters (399,000 sf until 2015), Cardinia Real Estate (181,000 sf until 2023) and True North Communications (72,000 sf until 2015). Leases on only 13% of the space roll over within three years.

A retail component is slated to be added. New York City's Landmarks Preservation Commission has approved some 30,000 sf of retail space, at street level and below, although the build-out hasn't yet begun.

The 29-story tower, which runs from Dey to Fulton Streets on the west side of Broadway, was built between 1913 and 1924 to serve as American Telephone & Telegraph's headquarters. The interior is reputed to contain more marble than any other building in New York.

The property should benefit from the completion of a surrounding $1.4 billion transit hub. After multiple delays, the Fulton Street Transit Center is now scheduled to be finished by June 2014. It will improve access to a dozen subway lines and the PATH system, which links Manhattan with New Jersey.

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