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March 22, 2017  

Paramount Shops Stake in Midtown NY Tower

Paramount Group is marketing a 49% interest in the office building at 900 Third Avenue in Midtown Manhattan.

Bids are expected to value the 596,000-square-foot property as high as $500 million, or nearly $839/sf. Eastdil Secured is representing the New York REIT.

Paramount has owned the property since 1999, making it one the company’s longest investments in New York.

The 36-story building, at the northwest corner of Third Avenue and East 54th Street, is 98% occupied. The tenants include merchant bank Carl Marks & Co., investment firm Columbus Nova, Folger Hill Asset Management, Kellner Capital, Shiseido Americas and law firms Littler Mendelson, Tannenbaum Helpern and Thompson & Knight, according to CoStar.

The building was constructed in 1984. Paramount acquired it 15 years later for $164.8 million, or $277/sf, from a JMB Realty partnership. In 2003, Paramount sold a 49% stake to ING Office Fund, an Australian REIT advised by ING Clarion of New York. In 2012, Paramount bought back that interest from the vehicle, then called Investa Office Fund, for $172.7 million. That deal valued the property at $352.5 million, or $591/sf.

Now Paramount is looking to again monetize a portion of its investment while retaining the majority interest. By limiting the listed stake to 49%, the company should draw interest from sovereign wealth funds and non-U.S. insurance companies, which avoid majority stakes because of onerous tax implications. Even if a foreign buyer doesn’t end up acquiring the interest, the bigger field of bidders could drive up the price.