Boston Properties Inc. agreed to buy New York’s 510 Madison Ave. from Harry Macklowe for about $280.5 million, two months after the developer settled a lawsuit to halt a foreclosure on the office tower.
The price equals the principal and accrued interest on the property’s senior mortgage and senior mezzanine loan, the Boston-based real estate investment trust said in a statement yesterday. Macklowe will remain a consultant, and co-chairman of the property’s marketing and leasing advisory committee.
Boston Properties, led by Mortimer Zuckerman, will become the sole owner of the vacant 30-story tower. Macklowe sold the company the General Motors Building in Manhattan in 2008 to raise cash after falling behind on debts on other properties.
“Our previous relationship with Harry, which began with the acquisition of the General Motors Building and other assets in 2008, has fostered a productive relationship that helped us successfully acquire 510 Madison Avenue,” Zuckerman said in the statement.
The deal would give Boston Properties, the biggest U.S. office REIT, control of a new 350,000 square-foot tower at a time when Midtown Manhattan’s office market may be rebounding. The Class A vacancy rate for the market fell to 12 percent in July from 12.4 percent, the fourth monthly drop after peaking in March at 13.9 percent, brokerage Cassidy Turley reported earlier this month. Rents rose for the third month in a row, after falling steadily since mid-2008.
The tower “is the only new office development in the Plaza District,” Zuckerman said in the statement. “It is well positioned to attract the highest-quality tenants.”
The size of the building’s floors, from 11,000 to 16,500 square feet, and its amenities are intended to lure hedge funds and boutique financial firms. Property features include a pool, a health club and a garden terrace, according to Macklowe’s website.
Macklowe settled a lawsuit he brought against SL Green Realty Corp., which controls the building’s senior mortgages, on June 28. The agreement allowed him to remain in control of the property until March, giving him time to settle the debts.
William Macklowe, Harry Macklowe’s son, said in an e-mail there would be no further comment from them on the deal. William Macklowe was chairman of his father’s company before leaving in July to start his own firm.
Harry Macklowe may receive payments for those positions depending on the property’s performance, according to the statement.
Ties to Zuckerman
In the statement, Harry Macklowe cited his friendship and business relationship with Zuckerman. He said he looks forward “to working with Boston Properties to complete 510 Madison Avenue and make the building a tremendous success.”
Rick Matthews, an SL Green spokesman, said that company had no comment. The REIT is New York’s biggest owner of office buildings.
SL Green in December acquired the first mortgage on 510 Madison for about $170 million and bought mezzanine debt for $10 million to $15 million, according to a complaint Macklowe filed when he sued the company in March. Macklowe owed SL Green $253.1 million on the loans, according to the settlement.
Boston Properties said it paid about $22.5 million on Aug. 10 to an unidentified third party for a junior mezzanine loan on the property. The loan was secured by a subordinate ownership interest. It also said it would pay $12 million to $15 million of transfer taxes and other acquisition costs. The closing is scheduled for Sept. 1.
Mezzanine loans are higher-interest debt tied to a borrower’s equity interests in commercial buildings. They are usually backed by a stake in the owner’s company, rather than by a lien on the property itself.