As reported last month by GlobeSt.com, Boston Properties entered into an agreement to acquire the two-million-sf 767 Fifth Ave. and three other Midtown assets for $3.95 billion. The purchase price includes $1.47 billion in cash, $10 million in stock and the assumption of about $2.5 billion in debt.

On the GM building itself, the firm is assuming $1.9 billion of secured and mezzanine loans. Boston Properties is also buying the 292,000-sf 540 Madison Ave. building at Madison Avenue and 55th Street, a 591,000-sf office building at 125 W. 55th St. and the 664,000-sf Two Grand Central Tower at 44th Street between Lexington and Third avenues. Those deals are also being financed with a combination of secured and mezzanine loans and are expected to close later.

At the quarterly members' luncheon held by REBNY, Zuckerman gave Harry Macklowe, chairman of Macklowe Properties, high marks for making the GM building into one of the most desirable office assets in the city, particularly with the 2006 opening of the heavily trafficked Apple Store there.

Zuckerman devoted much of his presentation to a discussion of the "extraordinary period of turmoil" facing the US economy, and explained why his firm nonetheless committed to its largest transaction to date amid this economic uncertainty. He said the GM building purchase reflected a long-term commitment, long-term confidence in the value of the properties and an underlying confidence in the New York City economy. Zuckerman noted that nearly half of Boston Properties' overall assets are located here.

Notwithstanding the confidence in New York City, which he described as "part of the global economy, not just the national economy," Zuckerman painted a bleak picture of the nationwide landscape. He noted that for the first time in 70 years, there have been year-over-year declines in residential property values. "We had a once-in-a-century bubble in real estate and now we have a once-in-a-century downturn," said Zuckerman, adding that nobody could predict the length or depth of the downturn.

In response to a question from the audience, Zuckerman said Wall Street would recover from the current crisis of confidence and find new products to sell. The problem, he said, is that "we have the most asinine fiscal policy this country has ever seen." A Barack Obama win in November was likely, Zuckerman said, especially as the Bush administration's approval ratings are worse than Richard Nixon's in the weeks before his resignation. He pointed out that he had supported George W. Bush for re-election, "on account of the fact that I know Sen. John Kerry."

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Zuckerman: $4B GM Building Deal Closes

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