The Skyscraper Gauge. Deutsche Bank To Sell 3 Properties In Manhattan.

June 11, 2008
JENNIFER S. FORSYTH and JONATHAN KARP
Wall Street Journal

Deutsche Bank is cutting deals to sell three of the seven skyscrapers it took back from New York developer Harry Macklowe in transactions that reflect a 20% to 30% decline from what he paid last year at the top of the market, according to three people familiar with the matter.

Shorenstein Properties has signed a deal to buy a 93% stake in Park Avenue Tower and 850 Third Avenue for about $930 million. Meantime, another of the skyscrapers, 1301 Sixth Avenue, will likely be bought by Paramount Group Inc., for about $1.45 billion, those familiar with the deal said.

The transactions are being watched to gauge where prime Manhattan real estate is pricing in a market in which so few deals are being done. Deutsche Bank -- as the seller -- is providing debt financing for the distressed properties.

For Shorenstein, San Francisco, acquiring Park Avenue Tower and 850 Third Avenue is a savory consolation prize after it narrowly lost out on 1301 to Paramount, a company founded by Werner Otto in Hamburg, Germany that has moved strongly into New York real estate in recent years. A spokesman for Shorenstein declined to comment; Paramount did not return calls. Eastdil Secured and Cushman & Wakefield represented Deutsche Bank in the two deals.

In another Manhattan deal, Italy's Sorgente Group SpA is negotiating to raise its stake in the Flatiron Building to become the largest shareholder, testifying to the strength of the euro and the appeal of landmark property. The deal, which would increase Sorgente's stake from less than one-fifth to about one-half, values the building at $180 million.

The sellers purchased a 52% stake in the triangular Manhattan skyscraper 11 years ago for less than $10 million.

"Certainly the euro is a factor in the timing of this decision. We believe the U.S. dollar will get stronger in the future," said Stefano Cervone, executive director of Sorgente.