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

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On the GM building itself, the firm is assuming $1.9 billion ofsecured and mezzanine loans. Boston Properties is also buying the292,000-sf 540 Madison Ave. building at Madison Avenue and 55thStreet, a 591,000-sf office building at 125 W. 55th St. and the664,000-sf Two Grand Central Tower at 44th Street between Lexingtonand Third avenues. Those deals are also being financed with acombination of secured and mezzanine loans and are expected toclose later.

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At the quarterly members' luncheon held by REBNY, Zuckerman gaveHarry Macklowe, chairman of Macklowe Properties, high marks formaking the GM building into one of the most desirable office assetsin the city, particularly with the 2006 opening of the heavilytrafficked Apple Store there.

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Zuckerman devoted much of his presentation to a discussion ofthe "extraordinary period of turmoil" facing the US economy, andexplained why his firm nonetheless committed to its largesttransaction to date amid this economic uncertainty. He said the GMbuilding purchase reflected a long-term commitment, long-termconfidence in the value of the properties and an underlyingconfidence in the New York City economy. Zuckerman noted thatnearly half of Boston Properties' overall assets are locatedhere.

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Notwithstanding the confidence in New York City, which hedescribed as "part of the global economy, not just the nationaleconomy," Zuckerman painted a bleak picture of the nationwidelandscape. He noted that for the first time in 70 years, there havebeen year-over-year declines in residential property values. "Wehad a once-in-a-century bubble in real estate and now we have aonce-in-a-century downturn," said Zuckerman, adding that nobodycould predict the length or depth of the downturn.

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In response to a question from the audience, Zuckerman said WallStreet would recover from the current crisis of confidence and findnew products to sell. The problem, he said, is that "we have themost asinine fiscal policy this country has ever seen." A BarackObama win in November was likely, Zuckerman said, especially as theBush administration's approval ratings are worse than RichardNixon's in the weeks before his resignation. He pointed out that hehad supported George W. Bush for re-election, "on account of thefact that I know Sen. John Kerry."

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.