IBM sells Madison Ave. building to partnership

Real Estate Weekly, May 18, 1994 by Lois Weiss

A partnership comprised of Edward J. Minskoff and Odyssey Partners expects to purchase the IBM Building on Madison Avenue. Industry sources claim the price totals around $205 million, while the computer giant will also receive a favorable ten-year lease back for a third of the 1.1 million square-foot building. After renovations, the joint venture will have spent over $300 million on the deal.

Leon Levy and Jack Nash, originally from Oppenheimer & Co., formed Odyssey in 1982. Their resources are invested in marketable securities and designated investments such as Caldor and Forsthmann & Co., a textile company.

Developer Minskoff is a former Olympia & York executive who is now president of Edward J. Minskoff Equities. At O&Y he played a major role in the development of Battery Park City and the acquisition of the Uris portfolio. His eponymous company developed 1325 Avenue of the Americas, completed construction on 101 Avenue of the Americas and acquired the Marriott Corporation's World Headquarters in Bathesda, Maryland, where he plans to develop a new adjacent office building

The Edward S. Gordon Company was the exclusive sales agent and company president, Stephen B. Siegel, credited Gordon himself with arranging the transaction. "He and Marty Turchin and Carol Nelson worked on this," said Siegel. "Ed was the orchestra leader. It was a major thing."

Gordon said the process had been underway for nine months. "We were just analyzing what would serve IBM's best interests," he said.

IBM will leaseback 315,000 square feet for ten years and it will continue to be known as the IBM Building. According to IBM spokesperson Scott Brooks, it is yet to be determined what portion of the 43-story tower IBM's 1,000 employees will occupy.

Since the company has been downsizing and encouraging consultants to work in the clients' offices, he said, the same number of employees will remain based in the Madison Avenue and 57th Street black glass structure designed by Edward L. Barnes. While the 11,000 square-foot gallery is expected to close, the fate of the public atrium is unclear, but it will probably remain in place. IBM has already received over $35 million in real estate incentives from the City of New York.

Area real estate executives were pleased with the transaction but stressed the real benefits to IBM would depend on the lease terms.

Barry Gosin, CEO of Newmark & Company Real Estate, Inc., said the rental of the gallery and retail space would be worth a lot of money because of the fabulous location.

"It could be 15,000 feet between the basement, the ground and the gallery and that could be worth $4 million to $6 million dollars, so that reduces the price of the building," he explained. "I believe there's a good market for the space and it would be an opportunity to do something creative with retail at one of the best locations in the city."

He also predicted the office component would help relieve the current demand for large blocks of space.

IBM is also seeking to sell an I.M. Pei designed headquarters-type quality building situated on 47 acres in Purchase, New York through the Edward S. Gordon Company's Westchester office.