THE pack chasing the GM Building is getting thinner and pinching its pennies.
Just as we were ready to “out” SL Green Realty Corp. as the third of three bidders vying for the tower, we discovered the local real estate investment trust will likely sit out the second round of bids that are due tomorrow.
Macklowe Properties, the GM Building’s current owner, needs about $3.4 billion to pay off debt used to acquire the 50-story building at 767 Fifth Ave. Anything short of that could force Macklowe – which is hoping to retain an equity stake in the building and continue managing the property – to sell other assets in order to meet his debt obligations.
The first round of bids that were received by Darcy Stacom and Bill Shanahan at CB Richard Ellis were just over $3 billion, and the hope is that tomorrow’s deadline will push bidders to put together their “best and final” offer.
But now there are rumors that the second round of offers could come in even lower than the first – in the range of $2.8 billion to $3 billion.
World Trade Center developer and GM bidder Larry Silverstein will likely remain a GM Building bidder with joint venture partner CalSTRS, but because the deal could prove to be too many bricks for the California-based pension fund to put in one basket, they might need to bring in another partner.
Meanwhile, Midtown Equities’ Joseph Cayre last week was trolling Dubai for cash to add to the Middle East investors backing his bid.
For its part, SLG is a company that as a policy does not get into bidding wars. However, they will sit patiently, waiting for the prey to come to them, which in this case could happen.
Recall late last year when SLG’s lower bid of $1.575 billion for Citigroup’s sale-leaseback of its 88-90 Greenwich St. buildings was ultimately accepted after winning bidder Shorenstein unsuccessfully tried to renegotiate the deal.
SLG bought that downtown complex with partner Canadian pension fund SITQ Immobilier.
It is likely that SITQ was also a partner on the GM Building bid.
This week, SITQ was part of the SLG venture that closed the sale through Cushman & Wakefield of 1250 Broadway to Murray Hill Properties and David Werner for $310 million.
As part of its GM Building value-added strategy, SLG was also planning on having retail maestro Jeff Sutton work his magic at the base of the tower, which is primarily occupied by FAO Schwartz and studios for TV network CBS.
GM Building owners Harry Mackloweand son Billy have already accomplished a lot at the white marble edifice.
The recently reported termination of the General Motors lease also means the owners can recapture valuable interior lobby space previously dedicated to showing off SUVs. That space could be rented for more than $1,200 a foot.
We also hear that for most of the last year, Billy Macklowe, Macklowe Properties’ president, has been doing the heavy lifting on the family’s portfolio.
That includes the wheeling and dealing that first got them the Equity Office Properties portfolio from The Blackstone Group, the complicated cross-portfolio financings, and now, finally, the refinancings and workouts.
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In contrast to the last two months, commercial brokers suddenly report a quieting of leasing activity and showings.
While they continue to work on large transactions that always take months and years to complete, and smaller ones that must take place, others are being put off as tenants retrench.
Renewals are also becoming more commonplace.
But despite the doom, gloom and write-offs from the roiling credit market and tanking stocks, large financial tenants are not yet giving up big blocks of space.
That’s because their layoffs have created a “Swiss Cheese” effect – with vacant desks scattered throughout departments and floors.
Right now, they believe it would cost too much to consolidate, “restack” the employees and give up the space to the building owners or sublease the empty.
That is especially the case given these firms know that in a few years they would have to pay more to expand.
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Credit Suisse isn’t worried about layoffs. The Swiss bank and its affiliates, are taking over another 257,837 feet at its One Madison Ave. headquarters in the basement, first floor, mezzanine and sixth floors.
Credit Suisse is also leasing an other 56,745 feet nearby at 315 Park Ave. South.
Spokes people had no comment.
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Ben Ashke nazy has another week to wrap up financing for his $695 million purchase of 650 Madison Ave. Marketplace grumblers feel he won’t get it and will try instead to get a lower price. Stay tuned.
