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Monday, May 26, 2008

Boston Prop buys New York buildings for US$3.95b

CHICAGO: Boston Properties Inc said on Saturday it reached a deal to buy the General Motors Building in Manhattan, along with three other buildings, from New York developer Harry Macklowe for about US$3.95 billion (RM12.68 billion).

Boston Properties, which owns and operates office buildings, said it would acquire the properties through joint ventures with unidentified partners.

The company said it would pay about US$1.47 billion (RM4.72 billion) in cash and US$10 million (RM32.10 million) of common units of limited partnership interest. The company also agreed to take on about US$2.47 billion (RM7.92 billion) in debt.

The company said in a statement it would also buy three other New York properties: 540 Madison Avenue, 125 West 55th Street and Two Grand Central Tower.

The GM Building is seen as one of the most successful real estate redevelopments and arguably the most coveted office building in Manhattan.

Macklowe Properties bought the building, previously half-owned by Donald Trump, in 2003 for a then-record US$1.4 billion (RM4.49 billion).

Macklowe turned the 50-storey structure into a hot property, luring hedge funds and private equity firms as tenants and commanding some of the highest rents - more than US$150 (RM481.50) per sq ft - in the US.

Macklowe spent about US$7 billion (RM22.47 billion) last year for seven Manhattan buildings previously owned by Equity Office Properties Trust.

He has since struggled to refinance those loans and has reached extension agreements with his chief lenders, Fortress Investment Group LLC and Deutsche Bank AG.

Proceeds from the GM Building will be used to repay Macklowe's lenders.

Last year, Deutsche Bank headed a group that provided US$5.8 billion (RM18.62 billion) in short-term loans for the buildings.

Those loans and a US$1.2 billion (RM3.85 billion) equity loan from Fortress Investment were to be replaced by longer-term loans.

But the tightening credit markets wiped out Macklowe's ability to secure new funding. In February, he defaulted on the loans.

Macklowe's troubles became emblematic of those of large borrowers who relied on temporary financing to foot the bill for huge acquisitions, only to have the credit crunch crush plans.

Borrowing terms have become less generous and more expensive.

By Reuters

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