NEW YORK CITY-When Boston Properties agreed last week to acquire the General Motors Building and three other Manhattan assets from Macklowe Properties for almost $3.95 billion, the office REIT illustrated one of the points that Boston Properties president Douglas Linde emphasized during the company’s first-quarter conference call.

“We are still in the business of buying, developing, and operating buildings that are very dependent upon jobs,” Linde said in that call. The deal for the two-million-sf General Motors building, located between 58th and 59th streets at Fifth Avenue and Central Park South, is expected to close this month. The sales of the other buildings are scheduled to close after the GM deal. Boston Properties is paying just under $1.47 billion in cash for the assets, along with $10 million in stock, and is assuming about $2.5 billion of debt.

As Linde outlined in the Boston Properties conference call, the Manhattan office market remains solid despite the “general market uncertainty.” He pointed out that impending job reductions in the New York City market “haven’t yet been accompanied by a significant increase in sublease space in Midtown Manhattan.”

While the major financial institutions are absent from the market, Linde pointed out that “activity is still healthy and driven by tenant consolidations, expansion from smaller financial and non-financial users and normal lease expirations.” He added Midtown building owners still enjoy a direct vacancy rate of less than 5% and availability of 8% counting all of the sublease space and new deliveries.

As Linde described it, the Manhattan office market is a mixed bag, depending on the type of tenant. Banks and investment banking tenants continue to make decisions to either greatly cut back or eliminate lines of business, which in some cases has or will likely result in job reductions in Manhattan.

In addition, the legal profession is going to be affected by these same conditions, Linde said, but the law firms “have shown great resiliency” thus far and some are even taking more space. “We have three separate firms in our existing buildings that are taking additional space in 2008 and 2009 as they assimilate new practice groups,” the Boston Properties chief pointed out. He explained this is part of a consolidation in the legal profession that is going to continue “is going to result in some additional space requirements as well as some additional sub-letting.”

According to a Boston Properties’ public filings the day after it announced the $4-billion deal, the company entered into the acquisition agreements through LLCs, but expects to admit one or more new members to those entities and consummate the acquisitions through joint ventures. The identity of the company’s joint venture partners and specific terms and conditions of the JV arrangements have not been finalized, but Boston Properties estimates that it will ultimately own about 49% of the real estate. It also expects to provide property management and leasing services for the buildings.

In the Boston Properties’ conference call, Linde pointed out that “we in the real estate business are still getting accustomed to an environment where debt for commercial real estate is difficult to arrange and/or very expensive relative to the conditions that were prevalent over the last few years.” Unless sellers’ expectations change or they are left with no choice but to sell, he said, “We think it’s going to take some time to see meaningful volumes of sales.”

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