A big Midtown office owner was forced to slash the value of a Third Avenue tower by half to lure in a partner.
Paramount Group sold a 45% stake in 900 Third Ave. to an unidentified party earlier this week, the Midtown-based landlord said, in a transaction that values the 600,000 square-foot property at $210 million. It’s a disappointing sum considering Paramount had sought at least $400 million when it put the building on the market, the New York Post reported in 2019.
The deal involving 900 Third came soon after after the value of a separate Midtown office building, 1211 Sixth Ave., was marked down by 33% when its owner, a Canadian pension fund, sold about half of Fox News’ home to a Manhattan developer.
900 Third is a 36-story tower developed in 1983 and designed by Emery Roth and Cesar Pelli. Pelli later became famous for designing the Salesforce Tower in San Francisco, a tower in London’s Canary Wharf, and the Petronas Towers in Kuala Lumpur. Today 900 Third is 31% vacant, according to Paramount, which describes the building as Class A. But rents, which average $73 per square foot, are closer to a Class B tower.
Paramount owns 12 million square feet of commercial space in Manhattan and downtown San Francisco. Law firm Clifford Chance moved to Manhattan West last year from 31 W. 52nd St. where it leased 40% of the space. Although law firm Wilson Sonsini recently agreed to lease 132,000 square feet at the building, overall Paramount’s portfolio is just 86% leased. The $500 million mortgage for 31 W. 52nd comes due next year, so does the $860 million loan for 1301 Sixth Ave.
Investors are starting to wonder under what terms the landlord might part with some properties if it can’t refinance them. Paramount shares trade for just $4.60 each.
“The stock is clearly caught in an unfavorable macro environment,” Evercore ISI analyst Steve Sakwa wrote in a report last week in which he said he was “slashing” his 2025 forecast because of sagging rent collections.
900 Third, at the corner of East 54th St., is close to three subway lines and an 11-minute walk from Grand Central Terminal. But the building apparently hasn’t been renovated in many years. When the building was put on the market six years ago, the Post reported that the building was about 20% vacant and had below-market leases. This combination, “provide[s] an opportunity for a ‘value-add’ buyer that likes to work on and upgrade assets.”
Paramount CEO Albert Behler said the sale “underscores the underappreciated value of our assets in the market” and “strengthens our balance sheet.”
