I doubt we’ll get feedback on whether the tower’s sustainable features were at all a factor, but W.P. Carey & Co. has purchased and leased back 21 of the New York Times Company’s 27 floors at 620 Eighth Avenue. The 750,000-square-foot deal had been rumored for a while and a W.P Carey spokesperson told GlobeSt.com that the firm was attracted by “the opportunity to secure a very attractive current return, while limiting our downside risk because of the very good price per square foot.” The $225 million transaction contemplates a 15-year lease term; the Times will pay $24 million in the first year with rents increasing annually. The newspaper can purchase back its condominium interest in the tower in the tenth year of the lease for $250 million but will use immediate proceeds to pay down its debt. The deal does not include the six stories that the Times currently leases out to other tenants, nor was Forest City Ratner, which owns the rest of the 52-story building, part of the transaction.
The Times and Forest City opted not to pursue a LEED rating at 620 Eighth Avenue despite the building’s significant sustainable features. You may recall that, last fall, the company described energy savings from its interior lighting systems as “stunning,” noting $300,000 in annual savings thanks to a 70 percent increase in energy efficiency derived in part from an intelligent interior lighting system and the building’s exterior solar shading system. For comparison’s sake, the purchase price works out to $300 per square foot; note that CoStar’s study from March of 2008 found LEED buildings to sell at an average of $438 per square foot. I know this is a sale-leaseback transaction of a non-LEED-certified building so looking at these numbers together probably isn’t fair, but just thought I would point the figures out as we’ve yet to see a LEED-certified commercial office building trade hands here in the New York City metropolitan area.
- Times, W.P Carey Ink $225 Sale-Leaseback (GlobeSt.com)
- Times Tower Archive (gbNYC)
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Whether it is LEED certified
Whether it is LEED certified or not is not the paramount question. What was the cap rate? How did the purchased assess the credit risk of the tenant? How did this cap rate compare to other recent investment sales? Given how low cap rates got during the "bubble" understanding where this transaction lined up would be very interesting. The LEED part is not the story.
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