July 29 (Bloomberg) -- An affiliate of USAA Real Estate Co. joined a partnership that recapitalized 340 Madison Ave., a midtown Manhattan office tower, expecting its value to rise.
USAA, a commercial-property management unit of San Antonio- based United Services Automobile Association, will share control of the property with Broadway Partners and RXR Realty LLC, the companies said in a statement. RXR, based in Uniondale, New York, and run by investor Scott Rechler, bought a 49 percent interest in the building last year, in a deal that valued it at $570 million.
The transaction gives the partners “the opportunity to invest additional capital alongside USAA to facilitate the de- leveraging of the property to an appropriate level,” Rechler said in the statement.
Manhattan office prices rose 27 percent in the 12 months ended June 30, Green Street Advisors Inc., a Newport Beach, California research firm, said in a July 7 report. Broadway Partners, led by Chief Executive Officer Scott Lawlor, has sold some buildings and brought in partners on others after the low- cost financing it used for acquisitions dried up during the credit crisis in 2008.
Among the buildings Lawlor forfeited was Boston’s John Hancock Tower, New England’s tallest skyscraper. In May, he sold a majority interest in 280 Park Ave. to Vornado Realty Trust and SL Green Realty Corp., while keeping a stake.
“We chose to remain invested in this asset on behalf of our investors through the recent market downturn because we firmly believed in its long-term value,” Lawlor said of 340 Madison in today’s statement.
The partnership received a new 12-year mortgage from Cornerstone Real Estate Advisers LLC, according to the statement. Terms weren’t disclosed. When Rechler bought his stake, the property had about $460 million of debt.
The tower is 92 percent leased and tenants include the law firm McDermott Will & Emery LLP and the U.S. Office of the Comptroller of the Currency.
USAA Real Estate, whose parent company provides insurance to military families, had been looking at the property since it was marketed last year, Chief Executive Officer Pat Duncan said in the statement. He said he expects the long-term leases and location a block east of Grand Central Terminal “will continue to enhance the property’s value.”
--Editors: Christine Maurus, Kara Wetzel
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