Google Inc., owner of the world’s most popular search engine, signed a contract to buy its New York office building at 111 Eighth Ave. for about $1.8 billion, according to a person with knowledge of the agreement.
The sale probably will close by the end of the year, said the person, who asked not to be named because the deal hasn’t been made public. Google, based in Mountain View, California, will expand beyond the 550,000 square feet (51,000 square meters) it currently occupies in the building, the person said.
Aaron Zamost, a spokesman for Google, declined to comment.
The sale is the biggest transaction for a single building in the U.S. this year, according to Real Capital Analytics Inc., a New York-based real estate research firm. The deal signals strong demand for Manhattan property as the market recovers, said Dan Fasulo, a Real Capital managing director.
“You can’t get a stronger vote of confidence for the strength of the New York office market,” Fasulo said. “When one of the most prestigious modern corporations makes a bet on your marketplace, it’s not just a bet on your real estate, but in New York as a place to retain and attract the best talent.”
The building at 111 Eighth takes up an entire block between West 15th and 16th streets in the Chelsea section of Manhattan, south of Midtown. The former industrial warehouse has 2.94 million square feet, according to Real Capital. At that size, it has more floor space than the Empire State Building.
The price comes to about $600 a square foot. That’s almost the $636 a square foot SL Green Realty Corp. paid in May for 600 Lexington Ave., a 94-percent occupied office tower in midtown Manhattan, the nation’s most expensive office leasing area, Real Capital’s data show.
“They can afford to pay more for this building because they’re already the occupant,” said Ben Thypin, Real Capital senior market analyst. “A third party that wasn’t already a tenant might not have been able, actually definitely wasn’t able, to bid as high as they were.”
The 18-story property sits near the Meatpacking District, which has seen a surge of high-end residential, retail and hotel development in the past decade, including an Apple Inc. store and the Standard Hotel.
The sellers are Jamestown, an Atlanta-based real estate investment firm; Taconic Investment Partners; and the New York State Common Retirement Fund. They were advised by Doug Harmon, senior managing director of Eastdil Secured LLC.
Google was represented by attorney Rob Sorin of Fried Frank Harris Shriver & Jacobson LLP. Sorin declined to comment.
Messages left after business hours yesterday for Martha Wallau, an Eastdil Secured spokeswoman, and Jessica Forman, a spokeswoman for Taconic, weren’t returned. A call to the Reynolds Group, an Atlanta-based public relations firm listed as a media contact on Jamestown’s website, also wasn’t returned.
The Wall Street Journal reported the agreement yesterday.
Jamestown, which represents German investors, bought an interest in 111 Eighth in 2004 in a deal that valued the building at $1.1 billion, according to Real Capital.
The property was completed in 1932 as the headquarters of the Port of New York Authority, where it stayed until it finished building the World Trade Center in the 1970s. The agency is now known as the Port Authority of New York and New Jersey.
The building was originally a freight terminal serving the authority’s Hudson River piers, according to Taconic’s website for the property. Taconic acquired it in 1998 and did $68 million of capital improvements, including upgrading its elevators and power plants.
Besides Google, tenants include Nike Inc., Lifetime Networks, Knoll Inc., Barnes & Noble Inc. and Armani Exchange, according to the property’s website.
The building has a $500 million securitized loan originated by Greenwich Capital, according to data compiled by Bloomberg. It was 99 percent occupied as of June 30.
To contact the editor responsible for this story: Kara Wetzel in New York at email@example.com