Calstrs to Sell Majority Stake in Landmark Downtown New York Office Tower

The California State Teachers’ Retirement System plans to sell its majority stake in 120 Broadway, a lower Manhattan office tower and national historic landmark co-owned by developer Larry Silverstein.

Calstrs, as the second-biggest U.S. public pension fund is known, is seeking to profit from its 2004 investment in the 40- story skyscraper, according to an e-mailed statement from its adviser, CB Richard Ellis Investors LLC. Silverstein will hold on to his interest, said two people with knowledge of his plan who asked not to be named because it hasn’t been made public.

The tower “has proven to be an excellent investment,” Ryan Gill, a CBRE Investors spokesman, said in the statement. “Calstrs has a continuing good relationship with the Silverstein organization, but has decided to harvest some of the gains through the disposition of its interest in 120 Broadway.”

The offering may test the market for properties in downtown New York, where only five office buildings have changed hands since the credit crisis deepened in the third quarter of 2008, according to Real Capital Analytics Inc. Those deals include American International Group Inc.’s headquarters at 70 Pine and 72 Wall streets, and JPMorgan Chase & Co.’s tower at 4 New York Plaza, data from the real estate research firm show.

At 120 Broadway, “a lot of the tenants there are pretty high quality, and the state has a lot of space,” said Ben Thypin, an analyst with New York-based Real Capital. That will help it fetch a premium to deals such as 70 Pine Street, which sold at a discounted price of $103 a square foot because AIG was planning to vacate the property, he said.

90% Occupied

The New York state attorney general has seven floors in the building, according to Silverstein Properties’s website. Other tenants include Bank of New York Mellon Corp., New York Life Insurance Co. and the Alliance for Downtown New York. Its 1.85 million square feet (171,870 square meters) was 90 percent occupied as of March 31, according to Bloomberg data.

The tower, also known as the Equitable Building, was valued at about $300 million, or $173 per rentable square foot, when Calstrs bought its stake through CBRE Investors in 2004, according to Real Capital data.

Gill declined to say what Calstrs originally paid for its stake.

Ricardo Duran, a spokesman for Sacramento-based Calstrs, referred questions on the sale to CBRE Investors.

“We are proud of our ongoing relationship with Calstrs and are gratified that our partnership at 120 Broadway has produced such solid returns for the pension fund and its beneficiaries,” Dara McQuillan, a Silverstein spokesman, said in an e-mailed statement.

2006 Partnership

Silverstein formed a real estate partnership with Calstrs in 2006, seeking to invest as much as $2 billion of commercial properties in the New York metropolitan area.

Calstrs had $129.8 billion in assets as of June 30, second only to the California Public Employees’ Retirement System, with $201.5 billion.

The 120 Broadway tower, with its “triumphal arches and classical ornamental detail” was the largest office tower in the world by square feet when it was completed in 1915, according to the city’s official Guide to New York City Landmarks. Public outrage over the building’s bulk helped spur passage of the first U.S. zoning law in 1916, the guide said.

The building is two blocks east of Ground Zero, where Silverstein holds the rights to build three skyscrapers, one of which is under construction. A block to the south, Bank of New York Mellon has said it may sell 1 Wall Street, a 52-story limestone tower.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net

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