Broadway Partners and Investcorp, equity partners in 280 Park Avenue, have agreed to a recapitalisation with the property’s mezzanine debt holders, SL Green Realty and Vornado Realty Trust. The transaction merges the parties’ respective equity and debt positions to form a new ownership structure for the Class A office building that includes funding for an approximate $150 million repositioning and re-tenanting program.
The recapitalisation follows the formation of a 50-50 joint venture between Vornado and SL Green in March. That joint venture, which combined roughly $400 million in mezzanine debt positions held by the two REITs, will now have a significant majority equity stake in the property.
Meanwhile, Broadway Partners is injecting fresh equity capital into the property to retain an ownership interest and remain in a co-management role. A source familiar with the deal said that Investcorp will no longer maintain an ownership stake in the building, but it has negotiated the right to make an investment in the future. The firm also will have some ability to participate in any upside if the recapitalization is profitable.
“Many great office properties were impacted adversely by the most recent market downturn, but they now offer great upside potential to investors with the resources to take advantage,” said SL Green chief executive Marc Holliday in a statement. “We see 280 Park as one of those opportunities.”
The property at 280 Park Avenue consists of 1.237 million square feet of office space spread among a 31-story tower, a 43-story tower and a 14-story connecting building, all near Manhattan’s famed Grand Central Terminal. The new owners plan to execute a comprehensive redevelopment program to further upgrade all public areas and provide updated building infrastructure. The property also has a large block of contiguous space available, as Deutsche Bank vacated the premises after its lease on 338,700 square feet expired in February.
Broadway Partners and Bahrain-based investment manager Investcorp paid $1.278 billion for 280 Park Avenue in 2007, making it one of the highest prices paid for an office building that year.