Boston Properties buys 399 Park Ave

Real Estate Weekly, Sept 11, 2002 by Parke Chapman

A key Midtown property changed hands last week for one billion dollars. 399 Park Ave. -- Citigroup's corporate headquarters--now belongs to Boston Properties. The 1.7 million-SF, fully-leased building will give Citigroup a pretax gain of $830 million.

Last year, Boston Properties bought a 66% share of the 59-story Citigroup Center, which is located across the street from 399 Park Ave.

The deal is expected to close by the end of this month.

Some major REITs that included Equity Office Properties, Brookfield Properties and Vornado were all in the running for 399 Park Avenue. Several pension funds were also reportedly bidding for the property.

But Boston Properties won out, adding another property to their family of five major Midtown office towers. Another project--the Times Square Tower--is being built on 42nd Street.

Tenants at 399 Park Ave. include Lehman Brothers, Bingham McCutchen, Arnold & Porter and JP Morgan Chase.

The New York Post reports that Boston properties will "fork over a whopping $650 a foot" for the building. Citigroup controls over 600,000 SF of the building, half of that being subleased to Lehman Brothers.

The Post also reports that two years ago, Citigroup and partner Da-ichi Life valued the building at only $225 million in a swap deal that traded Citigroup's half of the Citigroup Tower for Dai-ichi's half of 399 Park Ave.

One sales broker isn't too surprised at the how much Boston Properties paid for the building.

"Remember that Lehman Brothers bought Morgan Stanley's building for over $600/SF. It's not that rare to see buildings sell for over $600/SF now," said Woody Heller, executive managing director at Insignia/ESG.

Last year, Lehman Brothers bought Morgan Stanley's new office tower at Seventh Avenue and 49th Street.