Edge, HSBC Take 49% Stake in 1540 Broadway

NEW YORK CITY-CB Richard Ellis said Tuesday it had sold a 49% stake in the office portion of 1540 Broadway to a partnership of Edge Fund Advisors and HSBC Alternative Investments Ltd. Based on a valuation of $520 million for the 907,427-square-foot property, or approximately $575 per square foot, that translates into a purchase price of $254.8 million for the Edge/HAIL stake.

The deal comes a little more than a year and a half after the CBRE Strategic Partners Value 5 fund acquired the office portion of the 1.1-million-square-foot, 44-story tower in a distressed sale for a reported $355 million. It was one of the last two unsold properties in the Macklowe/Equity Office portfolio that Deutsche Bank took back in early 2008.

In a release, Vance Maddocks, president of CBRE Strategic Partners US, says 1540 Broadway represents “a major turnaround story and a success story for not just our fund investors but also for the Midtown Manhattan office market.” Having brought its occupancy level from 78.1% to 85.4% since acquiring it, the CBRE fund will maintain a majority interest and retain management of the office component.

“What a difference a year makes,” Dan Fasulo, managing director of Real Capital Analytics, tells GlobeSt.com. “That’s a 50% increase in value in 18 months.” Fasulo notes that the deal “basically brings the value back to 2006 levels when EOP bought the office portion.”

In fact, the current valuation is just a few million dollars shy of the $525 million EOP paid the Paramount Group for 1540 Broadway’s office component in May 2006. At that time, Vornado Realty Trust paid $260 million to take control of the property’s retail, parking and signage components. In all, Paramount realized a $400-million profit on its 2004 acquisition of the asset.

Edge CEO Mark Keller says in a statement that the 1540 Broadway deal represents the company’s “first major investment in the New York office market. We are pleased to have a new partner in CB Richard Ellis Investors and to have CB Richard Ellis providing property management and leasing services. We believe that 1540 Broadway represents one of the top-tiered trophy office assets in Midtown Manhattan.”