Tishman Rides Manhattan Demand
With $1.8 Billion Property Sale

Tishman Speyer is selling a skyscraper in Midtown Manhattan for $1.8 billion, one of the highest prices ever paid for a single U.S. office building, a company spokesman said last night.

Tishman Speyer, which also recently purchased a massive New York apartment complex for a record $5.4 billion, has agreed to sell the 41-story office tower -- 666 Fifth Avenue -- to the Kushner Companies, based in Florham Park, N.J., said spokesman Steven Rubenstein.

The Kushner Companies own 22,000 apartment units and about five million square feet of office, industrial and retail space in addition to several thousand acres of land in New Jersey, New York, Pennsylvania, Maryland and Delaware.

Tishman Speyer is selling the building for more than three times what it and some partners paid in 2000, according to a person with knowledge of the deal.

The sale, earlier reported on the New York Times Web site, represents another example of the skyrocketing values of Manhattan real estate, and these transactions simply prove that "the New York office market is on fire," said Jim Sullivan, a principal with Green Street Advisors, a Newport Beach, Calif.-based real-estate research and trading firm.

It is the third largest real-estate transaction in the U.S. since mid-2000, according to statistics compiled by Real Capital Analytics, a real-estate research firm. The largest deal was Tishman Speyer's $5.4 billion purchase of Peter Cooper Village and Stuyvesant Town, in partnership with a unit of money manager BlackRock Inc., earlier this fall. The second largest transaction was Tishman Speyer's purchase of Rockefeller Center in December 2000 for $1.85 billion.

While these transactions are setting new historical highs in the United States, "when you look at London or Tokyo, these prices aren't outlandish by any means," Mr. Sullivan added.

The sale of 666 Fifth Ave. -- between 52nd and 53rd Streets -- comes as the Midtown office market is almost as strong it was in the heady days of 1999 and early 2000, when technology stocks sent the stock market zooming. Many tenants are now finding it difficult to find any large space in that area and, in some extreme cases, have signed leases for more than $100 a square foot.

As in most markets, the demand for Manhattan office space directly correlates to job growth. Data from Moody's.com show that Manhattan lost 89,000 office-related jobs from 2001 to 2002. That trend has reversed, and it has gained about 23,000 such jobs in the past two years, though the work force is still smaller than in 2001. The recovery was boosted by the relatively few new office buildings that have been built in the city over the past decade.

With limited choices for space right now, limited supply coming on line, and intense demand for office space among tenants, particularly from firms in the financial sectors, investors are betting that rental rates will continue to climb significantly, making such an expensive bet pay off in the coming years, says Mr. Sullivan.

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