Carlyle Group in sky-high deal for Manhattan tower

The Carlyle Group, a US private-equity company partly owned by Mubadala Development, has struck New York's biggest commercial property deal in three years.

The Carlyle Group looks set to offload its New York office and retail block for $1.3 billion. Victor J Blue / Bloomberg News

The Carlyle Group has struck New York's biggest commercial property deal in three years.

The Washington, DC-based company, in which Abu Dhabi's Mubadala Development is an investor, is spearheading a deal with two US property specialists to sell its 600,000 square foot 650 Madison Avenue office and retail block for twice what it paid for it five years ago.

A joint venture between the New York-based retail developer Crown Acquisitions and Highgate Holdings is under offer to buy the skyscraper in prime Manhattan for US$1.3 billion.

Carlyle led a group of investors that bought the 27-storey glass-fronted skyscraper between East 59th and 60th streets close to Central Park for $680 million in 2008.

The Nasdaq-quoted company then spent the next four years refurbishing it and leasing out more than 400,000 sq ft of space in the tower.

"This is a great outcome for our investors and validates our opportunistic approach," said Robert Stuckey, the managing director and head of US real estate at Carlyle.

The deal is positive news for Mubadala, a strategic investment vehicle owned by the Abu Dhabi Government, which acquired a 7.5 per cent stake in Carlyle in September 2007, and raised it to 9.35 per cent in 2010.

If the deal goes through it will be the biggest purchase of a single building in the US since Google bought the 2.9 million square feet 111 Eighth Avenue in December 2010 for $1.8bn.

The deal would equate to $2,167 per sq ft - beating the last record price for an office tower in New York of $1,566 per sq ft paid by the private equity firm Somerset Partners for the 325,000 sq ft 450 Park Avenue tower before the global financial crisis in 2007.

Crown and Highgate are thought to have beaten off bids from rival investors including HFZ Capital Group, Vornado Realty Trust, Brookfield Office Properties and General Growth Properties, all of which were attracted by the 75,000 sq ft of ground floor retail space located in the prime Plaza district.

Carlyle is best known for strategic investments in the aerospace and defence sectors but it also invests heavily in property, media, telecoms, technology, health care and car manufacturing.

The company is also known for its high-profile alumni, having employed the former US president George HW Bush and the former UK prime minister John Major.

Office markets in the US were hit hard by the global financial crisis. However, values are recovering fast in parts of the country, with New York, Washington, DC and San Francisco leading the way and demand now spreading to secondary markets such as Seattle, Houston, Dallas, Austin and Denver.

According to CBRE, office values in the US rose the fastest of all global regions during the first quarter of this year, growing 1.5 per cent during the three months to March 2013 and by a total of 5.9 per cent over the previous 12 months.

Mubadala declined to comment when contacted yesterday.