Blackstone Nears Acquisition Valuing Tower at $2.85 Billion

A deal would be the latest sign that the Covid-19 pandemic and even the spread of the Omicron variant aren’t deterring investors from paying top dollar for the most-modern and highest-quality office buildings. The stake in the office tower would fetch one of the highest prices ever paid for New York office property, according to brokers and real-estate investors.

Investors are paying up for trophy office buildings despite higher office vacancy rates overall. Tenants are gravitating toward these buildings as they try to coax employees who have been working from home for over 20 months back to the office. Businesses say that great views, cool amenities and state-of-the-art air-filtration systems have helped them overcome resistance from employees who became used to their new working patterns.

Brookfield and its partner, Qatar Investment Authority, opened the 2.1-million-square-foot building in 2019 with features including a 2.5-acre plaza lined by restaurants and stores. Located across the street from the new Moynihan Train Hall, it is over 90% leased by such tenants as law firm Skadden, Arps, Slate, Meagher & Flom, consulting firm Accenture PLC and the National Hockey League.

The success of One Manhattan West and other new developments such as nearby One Vanderbilt comes as concern is growing over the future of more-ordinary office buildings. The share prices of office real-estate investment trusts are down an average of about 15% since the pandemic, according to real-estate analytics firm Green Street.

Many businesses are saying that when they do return employees to offices they will do so on a hybrid basis, meaning they will continue to allow employees to work some days at home. Some companies are delaying return dates because of the new Omicron variant of the Covid-19 virus.

Office leasing has also been depressed. Before Omicron appeared, brokers and other market participants were hoping that leasing would return to pre-pandemic levels by the end of next year. “It now seems that perhaps that gets pushed back as well,” said Daniel Ismail, a Green Street analyst.

New trophy buildings such as One Manhattan West have apparently avoided the pain. Before the pandemic, Brian Kingston, chief executive of Brookfield’s Real Estate Group, estimated at an investor presentation that the 67-story office tower was worth $2.9 billion, almost exactly the valuation in the imminent Blackstone deal.

One Manhattan West is part of an 8-acre development by Brookfield and Qatar Investment Authority that includes the Pendry Manhattan West hotel, which opened earlier this year; a luxury rental apartment building that opened in 2017; and what will eventually be 6 million square feet of office space.

Brookfield put One Manhattan West up for sale in September through a Cushman & Wakefield team led by Doug Harmon and Adam Spies. The team represented Brookfield in its 2017 sale of a 49% percent stake of its office tower at One Liberty Plaza—also to Blackstone—in a deal that valued that tower at over $1.5 billion.

Bloomberg earlier reported that Brookfield was exploring a possible sale of One Manhattan West.

Write to Peter Grant at [email protected]