Zuckerman Exhales: GM Building Deal Closes
This article was published in the June 16, 2008, edition of The New York Observer.
“I got great sleep last night,” Mort Zuckerman said on Tuesday afternoon, the day after he and his partners closed on the most expensive single-building purchase ever. Nine hours of sleep, no less.
As chairman of Boston Properties, Mr. Zuckerman on Monday closed on the $2.8 billion purchase of the General Motors Building, New York City’s most coveted trophy tower in a city teeming with trophy towers. The precise closing happened at 4:42 p.m., when he was at home working on an editorial for his magazine, U.S. News & World Report, the topic of which he wouldn’t reveal. (“You will only find out when you buy the magazine.”)
That Mr. Zuckerman was busy working on something else during the culminating moment of an agonizing four-month-long series of negotiations does not mean that the moment was anticlimactic. He just doesn’t sit in on closings. That, apparently, is what lawyers are for.
“I was absolutely delighted,” he said, about going from the “agony” of negotiations to “the peace” of the done deal. “I’ve been to too many of these [closings],” he added. “I just celebrate them by not having anything to think about.”
And he’d been thinking about it plenty. Much as the real estate world has been riveted by the collapse of Macklowe Properties, the most prominent New York victim of the credit crisis, Mr. Zuckerman said the negotiations with that firm have occupied the bulk of his time for months, even during his recent trip to Israel to celebrate the nation’s 60th anniversary.
“I spent about four hours a day [on the phone] with New York working on this transaction,” Mr. Zuckerman said.
He first announced early Monday afternoon that the deal was closing, during a speech at a luncheon hosted by the Real Estate Board of New York at the Sheraton on Seventh Avenue.
During his remarks, Mr. Zuckerman said Boston Properties was closing on the GM Building at 767 Fifth Avenue “as we speak,” and that the deal underscored his confidence in the New York market, the recession notwithstanding.
“This is the most difficult time we’ve had in 70 years,” said Mr. Zuckerman at the luncheon, as hundreds of real estate types divided their attention between his prognostications and the breaded chicken breast on their plates.
“There are an estimated nine million homes whose mortgages exceed the value of the homes, and no one knows what will happen,” he said. “It brings to mind what Adam said to Eve in the Garden of Eden: ‘Stand back. I don’t know how big this is going to be.’”
That said, “New York, principally Manhattan, stands a little bit isolated, because Manhattan is part of the global economy.”
Boston Properties has a 60 percent interest in the GM Building, heading up a consortium that includes U.S. Real Estate Opportunities I, LP, a partnership of Goldman Sachs and the Dubai-based Meraas Capital LLC. Boston Properties will be responsible for the building’s management and leasing.
The $2.8 billion purchase price includes approximately $890 million in cash, and the assumption of $1.9 billion in debt that matures in 2017.
Boston Properties estimated in a release that it could get twice the current rents at the 50-story, marble and black glass tower.
On Tuesday, Mr. Zuckerman said that Boston Properties had another 60 days or so to close on the other three Macklowe properties it bought in May along with the GM Building—540 Madison Avenue, 125 West 55th Street and Two Grand Central Tower. But at least the most significant purchase is now behind him.
“The thing that is the most important thing is that it got done,” he said.