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May 23, 2018  

TIAA Unit Shops Stake in NY Rental Tower

TH Real Estate is marketing its 49% interest in a luxury apartment tower in Lower Manhattan.

The 898-unit skyscraper, at Eight Spruce Street, is worth about $900 million, or $1 million/unit. That would value the TIAA unit’s stake at some $440 million. At that price, the buyer’s initial annual yield would be about 4.3%, based on the property’s $39.4 million of net operating income last year. CBRE is representing TH Real Estate.

The other owners are Cleveland REIT Forest City Realty, which holds a 26% interest, and National Electrical Benefit Fund, a union pension advised by National Real Estate of Washington, which owns the remaining 25% stake. TH Real Estate bought its minority interest from the duo in 2012, one year after the property opened. That recapitalization valued it at $1.05 billion.

The 76-story tower, near City Hall and the Brooklyn Bridge, was designed by architect Frank Gehry. At 870 feet, it is one of the tallest residential buildings in Manhattan. The exterior, made of glass and titanium, has Gehry’s signature “rippling surfaces.”

The buyer would assume responsibility for a proportionate amount of the building’s $550 million securitized mortgage, reducing the required cash outlay. That interest-only loan, which matures in 2024, has a 3.9% coupon.

Twenty percent of the units are set aside for low- and moderate-income tenants. The apartments range from studios to four bedrooms and include three penthouse units. Rents on available studios start at $3,000. Apartments feature floor-to-ceiling windows, high-end fixtures, oak-plank floors and motorized window shades.

Some 22,000 square feet of indoor/outdoor amenities are spread over Floors 6-8, including a fitness center, a boxing studio, a 50-foot swimming pool with sundeck, a chef’s kitchen, a golf simulator and terraces with grilling stations.

The lower floors include a school, an ambulatory care facility for New York-Presbyterian/Lower Manhattan Hospital, below-grade parking and street-level retail space. Two plazas abut the site.

Liberty Bonds and “80/20” bonds were used to finance construction. Liberty Bonds were issued under a post-9/11 New York City program to spur development in Manhattan. New York State’s 80/20 program provides tax-exempt bond financing for apartment projects where 20% of the units are set aside as affordable housing.