07/20/2011

JP Morgan Buys Stake in 498 Seventh Avenue

J.P. Morgan Investment Management last week acquired a 49.9% stake in the virtually fully occupied office building at 498 Seventh Avenue in Manhattan for $205 million.

The transaction valued the 933,000-square-foot Garment District property at $439/sf. That was slightly above the expected price of $429/sf, reflecting the heated demand for stabilized buildings in core markets. J.P. Morganís initial annual yield is about 5.5%, market players said.

CB Richard Ellis represented the seller, SITQ Immobilier, the real estate arm of Canadian pension-fund advisor Caisse de Depot et Placement du Quebec. The remaining interest in the building is held jointly by Loeb Partners Realty and George Comfort & Sons, both of New York.

J.P. Morgan evidently divided the investment among several of its vehicles. The well-capitalized investment manager has been an active buyer across the country, and especially in New York. Earlier this month, one of its funds agreed to buy a majority stake, estimated at 90-95%, in the 852,000-sf International Toy Center building at 200 Fifth Avenue, between West 23rd and West 24th Streets. The transaction values the property at about $700 million, or $822/sf. L&L Holding of New York holds the remaining interest. Eastdil Secured is brokering that sale for Lehman Brothers.

The building at 498 Seventh Avenue is 99% leased, with a weighted average remaining lease term of 7.5 years. Tenants include Group M Worldwide, LN Holdings and Massachusetts Mutual.

SITQ bought its interest in the property in 2001 from NorthStar Capital Investment for $101 million.

Under the recap, the propertyís $181.5 million floating-rate loan remains in place. That would put J.P. Morganís cash investment at roughly $114 million. The mortgage, arranged in December 2009, has a five-year term.

George Comfort manages the property, which is at the southwest corner of West 37th Street.

SITQ has been selling off New York properties this year. In April, it sold its minority stake in the 1.8 million-sf building at 1515 Broadway in Times Square to SL Green, the New York REIT. The deal valued the property at $1.2 billion.

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