Carlyle buys NYC office condo conversion for $218m

Meadow Partners sold the remaining units in a building located near the UN campus.

The Carlyle Group has purchased about 70 office condominium units for $218 million, PERE has learned.

The private equity firm bought the condos from Meadow Partners, which purchased the building at 866 UN Plaza in November 2013 for about $200 million. The New York-based private equity real estate firm split the 471,000 square foot building into about 90 condos.

Both firms declined to comment.

A source with knowledge of the transaction said the deal was Meadow’s first office conversion. Capital for the firm’s purchase came from Meadow Real Estate Fund II, an opportunistic fund that closed on $320 million in July 2013, according to PERE data. The firm bought the building at 98 percent occupancy for under $450 per square foot and sold about 20 units for over $1,000 per foot for a total of over $110 million.

Last year, Meadow originally pursued refinancing with Carlyle and other groups to pay a dividend to the fund. However, in the fourth quarter, the firm decided to sell the units outright to Carlyle for better returns than Meadow expected from selling each unit individually over the next few years.

Tenants around the UN, in Manhattan’s east side, often seek to buy their office space rather than rent it, the source close to the deal said. Their office needs fluctuate less than the traditional New York office tenant, and they seek long-term location and budget stability. Some of the tenants in 866 UN Plaza, including non-governmental organizations and nonprofits, had leased their space for over 30 years.

Carlyle has overseen other New York office condo conversions, including two buildings in the Garment District purchased in 2015. The firm will continue to work with Rudder Property Group, a New York-based brokerage, to market its latest purchase.

It was unclear at press time out of which fund the capital for Carlyle’s purchase originated. The firm is expected to hold a first close for its eighth opportunistic fund, Carlyle Realty Partners VIII, this month on $2 billion. Carlyle is continuing to raise capital for its new core-plus real estate fund, Carlyle Property Investors. The firm raised at least $800 million by the end of the fourth quarter for the vehicle, PERE previously reported.

Rob Stuckey leads the firm's US real estate funds.