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REA
July 11, 2018  

REIT, Deutsche Joining Werner on NY Deals

Syndicator David Werner has lined up Alexandria Real Estate Equities and Deutsche Asset Management as his equity partners for two adjacent office buildings in Midtown Manhattan he is buying from pharmaceutical giant Pfizer.

Werner in April agreed to pay about $365 million for the 350,000-square-foot building at 219 East 42nd Street and the leasehold interest in the 825,000-sf building at 235 East 42nd Street. Pfizer, which is being represented by Cushman & Wakefield, will lease back both properties for five years.

Werner typically strikes deals and then brings in one or more partners to supply the bulk of the equity. Working via Cushman, he lined up Alexandria for 219 East 42nd Street and Deutsche for the adjacent building. Both sales are scheduled to close this week. The properties, between Second and Third Avenues, are Pfizer’s global headquarters.

The transaction with Alexandria values 219 East 42nd Street at about $200 million, or $570/sf. The Pasadena, Calif., REIT, will hold the majority interest. After Pfizer’s lease expires in five years, Alexandria would solely own the property. The REIT will then redevelop it as a life-science/biomedical facility. The 10-story building was constructed in 1905 and renovated in 1964.

Alexandria has already made a big investment in Manhattan. It developed the three-tower Alexandria Center for Life Science office/lab complex, at 430 East 29th Street, in phases, starting in 2011. The deal for 219 East 42nd Street is its first purchase in Manhattan, where the REIT had been hunting for an acquisition for several years. The investment could help pave the way for the area to become a hub for life-science and biomedical facilities.

Deutsche will hold the controlling interest in 235 East 42nd Street, which has a ground lease that runs for roughly another 40 years. The transaction values the property at about $165 million, or $200/sf. The partnership’s plans for the building are unclear. In light of the recent rezoning of the surrounding Midtown East submarket, it could be redeveloped into a larger office building. The 34-story property was built in 1960 and renovated in 2004.

Pfizer is leasing back space to gain time to move into its new global headquarters. The firm announced in April that it had pre-leased 800,000 sf at the Spiral, a 2.9 million-sf skyscraper that a Tishman Speyer partnership is developing in the Hudson Yards district. That 20-year lease, at 66 Hudson Boulevard, is the largest signed this year in Manhattan.