EXCLUSIVE-Blackstone to buy stake in major NYC office building

Summary

Companies

Blackstone plans to buy stake in 1345 Avenue of the Americas

Building occupancy back to 96% post-pandemic, Morningstar reports

New debt financing to have floating rate

WASHINGTON/NEW YORK, Feb 13 (Reuters) - Blackstone (BX.N), opens new tab plans to take out a loan of about $800 million to finance the purchase of a stake in a 50-story office building in New York City, according to two sources familiar with the matter.

The deal is likely to be closed, and any new financing will occur after it is finalized, said the first source, who declined to be identified discussing private negotiations.

The world's largest alternative asset manager is in talks to buy a sizeable stake in a building at 1345 Avenue of the Americas in Manhattan from institutional investors advised by JPMorgan Global Alternatives, Reuters reported last month, citing sources. The JPMorgan-linked investors own a 49% stake in the building, while Fisher Brothers owns the remaining 51%, said a third source familiar with the situation.

Blackstone's renewed interest in New York office real estate comes after it slimmed down its portfolio, diversifying into other areas such as logistics, data centers and rental housing.

Blackstone's current office exposure accounts for less than 2% of its real estate holdings, versus more than 60% in 2007, according to company data.

The building is already backed by a current loan with an outstanding balance of roughly $600 million, according to the third source.

Blackstone had a dual approach to the deal, initially approaching it as a lender to refinance the existing loan, and later deciding to buy the equity stake, the first and second sources said.

The outstanding debt in the current loan package from 2005 is set to mature in August, according to Morningstar Credit Analytics.

Blackstone's planned purchase comes after several years of sustained challenges facing office landlords and borrowers, brought on by rising interest rates and the proliferation of remote work.

Occupancy at the 1345 building fell after the pandemic, but never to alarming levels, according to Morningstar, an investment research firm specializing in commercial real estate. By the end of 2023, the building's cash flow was on par with its original underwritten level, and its occupancy was back to 96%, Morningstar said.

The building's largest tenant, investment firm AllianceBernstein, vacated the building at the end of 2024. But global law firm Paul, Weiss, Rifkind, Wharton & Garrison recently took on roughly 38% of its 1.9 million square feet on a lease that runs into 2047. Another lease is being finalized to take on the remaining space vacated by AllianceBernstein, Morningstar said.

Blackstone took interest in deals for New York City office buildings last year as the U.S. Federal Reserve began lowering interest rates, the first source said.

The new debt financing will have a floating rate, and the current Fed funds rate of 425 to 450 basis points is a reasonable basis level for the debt, the first source added.

Reporting by Matt Tracy and Saeed Azhar; Editing by Lananh Nguyen and Lisa Shumaker

Thomson Reuters

Saeed Azhar is a Reuters financial journalist and part of the U.S. banking team, which covers Wall Street's biggest banks. He focuses on Goldman Sachs and Bank of America, and also writes about regional banks. Before moving to New York in July 2022, he led the finance team in the Middle East from Dubai, and also worked in Singapore, covering Southeast Asia finance.