Clarion forms NY office joint venture

Clarion Partners has formed a new joint venture with Murray Hill Properties, a New York-based real estate owner and operator focused on Manhattan office investments. On behalf of an undisclosed investor, the New York-based real estate investment manager, along with Murray Hill, will target value-added office properties in New York City.

Clarion and its partner recently agreed to purchase their first asset for the joint venture, 180 Maiden Lane in Manhattan’s Financial District, from SL Green Realty and The Moinan Group for $470 million, according to an announcement from SL Green last week. SL Green and Moinan had formed their own joint venture to recapitalize and refinance the 41-story, Class A office tower property, which comprises more than 1.2 million square feet, in November 2011. The transaction is expected to close during the fourth quarter.

Clarion declined to comment on the amount of capital it would potentially commit to the joint venture, but PERE understands that the partnership could execute on two to four additional transactions over the next one to three years. The investments, which have no size limitations, would strictly focus on value-added office buildings, with the goal of repositioning and leasing up those assets.

180 Maiden Lane, for example, previously served as the headquarters of American International Group, which relocated to nearby 175 Water Street earlier this year. Following AIG’s exit from the building, the occupancy rate dropped from 97.6 percent as of March to 22.9 percent as of June, according to a quarterly report from SL Green.

The Financial District continues to be one of the strongest office submarkets in New York City. Clarion projects rent growth in the submarket to average 4.5 percent annually over the next five years. Meanwhile, the overall volume of office transactions in the city increased by 30 percent during the first quarter from the same year-ago period, the firm noted. While the finance, insurance, real estate and legal professions have been the traditional drivers of real estate demand in New York City, technology firms and start-ups have been leasing significant office space both in Midtown South and Downtown Manhattan.