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REA
August 08, 2018  

Vanbarton in Talks to Buy 425 Lexington Ave.

Vanbarton Group is poised to buy a Midtown Manhattan office tower for just over $700 million.

The New York investment manager is close to an agreement to acquire the 750,000-square-foot building, at 425 Lexington Avenue in the Grand Central submarket, from institutional clients of J.P. Morgan Asset Management. The price works out to about $935/sf.

The purchase would be the largest so far by Vanbarton, which is acting on behalf of an unidentified separate account. HFF is handling the marketing campaign for J.P. Morgan.

The 31-story property is 95% occupied. Law firm Simpson Thacher has a lease on 557,000 sf, or almost three-quarters of the space, through 2033, and CIBC is occupying 138,000 sf until 2024. Simpson Thacher is expected to give back some 40,000 sf around yearend. Vanbarton would likely look to lease that space at higher rents.

There is some 15,000 sf of street-level retail space that includes a Bank of America branch and a Pret A Manger eatery.

Overall, the weighted average remaining lease term is 13.3 years. Simpson Thacher’s lease provides 81% of the contractual revenue, according to marketing materials.

The property stretches from East 43rd Street to East 44th Street on the east side of Lexington Avenue. It’s across from the Chrysler Building, opposite Grand Central Terminal.

The marketing campaign has highlighted the neighborhood’s vibrancy. SL Green Realty of New York is developing the roughly 1,400-foot-tall One Vanderbilt Avenue skyscraper on the other side of Grand Central. And J.P. Morgan plans to replace its headquarters building at 270 Park Avenue with a 2.5 million-sf tower.

The glass building at 425 Lexington Avenue is distinguished by its cantilevered top. It features gardened terraces on three floors.

The property, designated LEED silver, was developed in 1988. J.P. Morgan bought it in 2013 for $664.4 million, or $887/sf, from Hines U.S. Core Office Fund, operated by Houston investment manager Hines and Sumitomo Life Realty. CBRE and Eastdil Secured jointly brokered that sale.

Vanbarton, which was spun out of Emmes Asset Management of New York in 2015, has been an active buyer in Manhattan this year. In one deal, it purchased the 187,000-sf office building at 305 East 46th Street for $118.5 million, or $634/sf. Eastdil brokered that sale for Government Properties Income of Newton, Mass. Vanbarton also acquired the 320-unit Vogue apartment building at 990 Sixth Avenue for $316 million, or $988,000/unit. Cushman & Wakefield arranged that transaction for a partnership of local investors.

Vanbarton’s founders and managing partners are Gary Tischler and Richard Coles.