Hines Sells 2 Manhattan Trophy Towers for $1B-Plus

American Realty Advisors won the competition for 499 Park Ave. in Midtown Manhattan.

By Gail Kalinoski, Contributing Editor

Two Midtown Manhattan trophy towers owned by Hines have been sold to separate buyers for a combined total of more than $1 billion, the company announced yesterday.  American Realty Advisors won the competition for 499 Park Ave., and J.P. Morgan Asset Management has acquired 425 Lexington Ave.

Hines did not disclose the prices of the individual assets, only the combined total. Two media outlets reported that 425 Lexington Avenue traded for between $650 million and $750 million. But Tommy Craig, senior managing director of Hines’ New York City office, disputed those reports. “Nothing that has been released has been accurate nor has it been verified,” he told CPE.

Craig said potential buyers were invited to bid on one or both of the towers. “There were several combined bids,” he said. “But we were really after the highest pricing asset by asset.” He reported that that both assets “had a very high and very deep level of interest for all types of capital.”

“We were very pleased with the outcome of this competitive sales process,” Sherri Schugart, senior managing director, president & CEO of Hine’s Core Fund, added in a statement. “These trophy assets will deliver exceptionally strong returns to our investors.”

Both buildings were both owned by a subsidiary of Hines U.S. Core Office Fund L.P. Hines put the buildings up for sale in February and, in an unusual move, tapped competitors Eastdil Secured and CBRE Group Inc. to jointly market the properties.

J.P. Morgan Asset Management is the successful bidder for 425 Lexington Ave., located across from Grand Central Terminal in Midtown Manhattan.

“We were very pleased with the work that CBRE and Eastdil have done and particularly have done together,” Craig told CPE. He noted that Hines has “active and very deep relations with both firms.”

Located on the southeast corner of 59^th Street and Park Avenue, 499 Park is a 28-story, 300,000-square-foot office tower designed by I.M. Pei & Partners and completed in 1980. Hines has its eastern regional office in the building. Other tenants include M. Safra and Cantor Fitzgerald.

The second property, 425 Lexington, is a 31-story, 750,000-square-foot office building designed by Helmut Jahn of Murphy/Jahn. It occupies the block between 43^rd and 44^th streets and is located directly across from Grand Central Terminal. The building has been fully occupied since its completion in 1987. The original anchors, Simpson Thacher & Bartlett L.L.P. and CIBC, are still tenants.

Last month, Hines announced that Simpson Thacher had renewed its lease for 595,000 square feet through August 2033. Craig suggested that the extension boosted the property’s value.  “Without the Simpson Thacher lease, the building might have been completely empty in five years,” he said. “We know that the Simpson Thacher lease was accretive to value.”

Craig told CPE that Hines plans to reinvest the proceeds from the sales in New York City. He explained that the sale of 499 Park and 425 Lexington “reinforces our predilection to put capital into gateway markets like New York and Washington.”

On the Manhattan development front, Hines is partnering with investment entity Pacolet Milliken and institutional investors advised by J.P. Morgan Asset Management to build 7 Bryant Park, a 28-story, tower that will have feature 470,000 square feet of state-of-the art office space. Construction began in February at the former site of 1045 Sixth Avenue, located between 39^th and 40^th Streets. Completion is scheduled for 2015,   Craig said.