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REA
May 17, 2017  

TIAA, Wealth Fund Pitch 685 Third Avenue

A TH Real Estate partnership is preparing to market a Midtown Manhattan office building valued at about $450 million.

The 646,000-square-foot property, at 685 Third Avenue, is 93% occupied, according to CoStar. A buyer could seek to raise below-market rents on some leases when they roll over.

The estimated value approaches $700/sf. At that price, the buyer’s initial annual yield would be about 5%. CBRE is representing TH Real Estate, which is the real estate investment arm of TIAA, and its partner, Australian Government Future Fund.

The building was formerly occupied by pharmaceutical giant Pfizer, which acquired it in 2003 from California State Teachers for $250 million, or $384/sf. In 2010, Pfizer decided to vacate most of the property and sold it to TIAA for $190 million, or $293/sf. In 2011, TIAA sold a 49.9% interest to the Australian sovereign wealth fund.

Renovations in 2012 and 2013 redesigned the entryway and lobby, upgraded the elevators and turned a plaza into a “pocket park.” Pfizer had spent some $85 million on renovations that included upgrades of the infrastructure systems, the back-up generator and the shipping/receiving center and loading dock.

The building stretches from East 43rd to East 44th Streets, one block east of Grand Central Terminal and two blocks west of the United Nations. The tenants include Commonwealth Land Title Insurance, Commonwealth Secretariat, Crain’s New York, Foundation for the Global Compact, law firm Outten & Golden and Tribune Co., according to CoStar.

The 93% occupancy rate exceeds the 86.4% average for the 45.8 million sf in the surrounding Grand Central submarket. The area’s average asking rent was $76.12/sf in the first quarter.

The building was constructed in 1961, expanded in 1976 and completely overhauled in 1996. It has changed hands five times in the past 20 years. CalSTRS bought it in 2000 for $210 million from a Blackacre Capital partnership. The Blackacre team had acquired it two years earlier for $100 million from Leucadia National, which bought it in 1995 for $50 million.