Profitable exit beckons for New York tower owner

New York: British gambling and horseracing millionaire Michael Tabor plans to auction the Manhattan skyscraper he acquired in 2007 with US private equity company Somerset Partners, aiming to profit from heated demand for premier New York property assets.

The $509 million acquisition of 450 Park Avenue was struck through Tabor’s family trust at the peak of the property market and bought for a record price per square foot for a North American office tower.

The building sits at the intersection of the most expensive office and shopping districts in New York City - at Park Avenue and East 57th Street - and is now valued at about $600 million (Dh2.2 billion), according to a person close to the planned sale.

High-quality office towers with long-term tenants and retail properties, particularly along the shopping corridors popular with tourists and luxury goods buyers, have seen rising occupancy and rents. Foreign investors in particular have sought out these trophy assets as haven investments, pouring $1.96 billion into Manhattan property in the first half of 2013, according to the commercial property group Real Capital Analytics.

Norway’s sovereign wealth fund agreed to buy a 45 per cent stake in midtown Manhattan’s Times Square Tower from Boston Properties for $684 million in cash, in a deal announced earlier in the week. In June, the families of Chinese property developer Zhang Xin and Brazil’s Safra banking empire bought a 40 per cent stake in the General Motors Building for about $1.4 billion.

Tabor, a resident of Monaco, has a fortune of about £550 million (Dh3.15 billion) from bookmaking, horse breeding and property, according to the Sunday Times Rich List. His family trust has collaborated on several US property deals with Somerset Partners for multi-family apartment blocks and office properties in New York and Washington, with investments totalling more than $1 billion, according to people familiar with the matter.

“Over the past six months we got some very pointed inquiries for the building, so we thought the market may be ripe for a sale,” said Keith Rubenstein, principal at Somerset Partners. “If we can harvest a profit here we hope to make other strategic purchases in New York City to position us well for the next decade.”

Completed in 1972 and renovated in 2006, the 32-storey building is 96 per cent occupied, with boutique auction house Phillips as the anchor retail tenant.

Industry watchers say rents and property values are set to increase as a host of luxury residences spring up in the area. “450 Park is in the sweet spot for global investors looking for best in class office with huge inherent upside,” said Douglas Harmon at Eastdil Secured, who is representing Somerset. “By 2018 I would expect the net operating income to have doubled.”

— Financial Times