Blackstone Snares Times Square Office Condo in $160M Deal

NEW YORK CITY-Having originally been acquired with the idea of accommodating class A office space but then slated for hotel use, the former New York Times Co. building will have an office component after all. The Blackstone Group has paid $160 million to buy an office condominium at the 750,000-square-foot 229 W. 43rd St., now owned by a joint venture of Africa Israel USA and Five Mile Capital Partners and known as the Times Square Building.

Blackstone is acquiring floors 5-16 as well as a portion of the property’s fourth floor, AFI said in a release late Thursday afternoon. AFI USA and Five Mile will continue to own the six-floor retail condo, which is currently 80% occupied by tenants including Daffy’s, Bowlmor, Discovery Times Square Exhibitions’ Pompeii and Harry Potter shows and, most recently, themed restaurant Adventure Entertainment..

“In the last year, as we marketed this property, there was tremendous demand for a hotel with a Times Square address due to the more than 38 million tourists who visit this vibrant neighborhood every year,” Laurie Golub, AFI USA’s general counsel and managing director of business affairs, says in the release. “More recently, however, we have also watched the office market come alive again in Midtown, allowing us to achieve maximum value for this property.” AFI USA CEO Tamir Kazaz adds that the office condo sale represents “a monumental step in our successful completion of the debt restructuring and repurposing plan for the Times Square Building.”

GlobeSt.com reported in December 2009 that AFI and Five Mile had reached an agreement to restructure the debt on 229 W. 43rd, in which Five Mile took more than 50% of the equity in the property by converting its debt. The deal eliminated more than half of Africa Israel’s $652-million debt on the property, which it bought in April 2007 for $525 million from Tishman Speyer Properties while assuming $715 million of debt.

The market was still at its peak four years ago when AFI USA bought 229 W. 43rd, which the New York Times Co. occupied for more than 90 years. At the time, the company’s plans were to convert it into a mix of class A office space and retail. However, this scenario ran aground as rents and vacancy began declining along with the capital markets, and the retail component was increased from the original 13% to 38%.

More recently, AFI USA and Five Mile hired Newmark Knight Frank to market a portion of the property as an office condo, six months after the property’s five-year $267-million refinancing of its senior debt with Five Mile and Banco Inbursa SA. A Newmark Knight Frank team of James D. Kuhn, Neal Golden, Leslie Harwood and Ross Perlman handled the assignment.

In the sale to Blackstone, Golub and Peter Rosenberg, managing director of development for AFI USA, provided in-house representation. The company’s legal counsel on the deal was Jonathan Baumstark and Douglas Heitner of Skadden, Arps, Slate, Meagher & Flom; and Jay Neveloff and Stephen Senie of Kramer Levin Naftalis & Frankel LLP.