Sumitomo lists 600 Third Avenue in NY

Real Estate Alert, April 21, 2004

Sumitomo is preparing to shop a Midtown Manhattan office building that it has owned for more than 20 years.

The 525,000-square-foot building, at 600 Third Avenue, is expected to sell for up to $400/sf, or $210 million. At that price, the buyer's initial annual yield would be less than 6.5%--in line with the shrinking yields on Midtown properties.

CB Richard Ellis was awarded the listing last week, beating out Cushman & Wakefield and Eastdil Realty, among others.

The 42-story tower, which was built in 1972, is located on the west side of Third Avenue, between East 39th and East 40th Streets. Sumitomo Corp. of America, the largest subsidiary of Japanese conglomerate Sumitomo Corp., acquired the property in 1982 and renovated it in 1992.

The occupancy rate is 95%, with asking rents of up to $48/sf; plus electricity costs. Sumitomo plans to lease back the 50,000 sf it occupies. Other tenants include L-3 Communications, Neuberger & Berman, Court TV and Loral Space & Communications.

Yields for stabilized office properties in Midtown have fallen because of strong demand from private investors, REITs, German fund operators and others. The low in the current cycle is less than 5%, which Harry Macklowe accepted last year when he paid $1.4 billion for the 1.8 million-sf GM Building. More recently, the initial yield is put at roughly 6% for the pending sale of the 414,000-sf building at 530 Fifth Avenue. A partnership among Joe Chetrit, Joe Moinian and David Werner is buying the property from GE Asset Management and Larry Silverstein for $210 million.