Property Acquisitions

6 Months Ended

Jun. 30, 2012

Property Acquisitions

Property Acquisitions

3.  Property Acquisitions

2012 Acquisitions

In June 2012, we acquired a 215,000 square foot mixed-use office and retail building at 304 Park Avenue South for $135.0 million. The property was acquired with approximately $102.0 million in cash and $33.0 million in units of limited partnership interest in the Operating Partnership. We are currently in the process of analyzing the fair value of the in-place leases; and consequently, no value has yet been assigned to the leases. Therefore, the purchase price allocation is preliminary and subject to change.

In October 2011, we formed a joint venture with Stonehenge Partners and, in January 2012, we acquired five retail and two multifamily properties in Manhattan for $193.1 million, inclusive of the issuance of $47.6 million aggregate liquidation preference of 4.5% Series G preferred units of limited partnership interest in the Operating Partnership. Simultaneous with the closing, we financed the residential component, which encompasses 385 units and 488,000 square feet, with an aggregate 12-year $100.0 million fixed rate mortgage which bears interest at 4.125% and one of the retail properties was financed with a 5-year $8.5 million mortgage. We hold an 80% interest in this joint venture which we consolidate as it is a VIE and we have been designated as the primary beneficiary.

The following summarizes our allocation of the purchase price of the assets acquired and liabilities assumed upon the closing of these 2012 acquisitions (amounts in thousands):

	Stonehenge Properties
	(Preliminary)
Land	$	65,723
Building	122,049
Above market lease value	598
Acquired in-place leases	9,038
Other assets, net of other liabilities	2,278
Assets acquired	199,686
Fair value adjustment to mortgage note payable	—
Below market lease value	6,578
Liabilities assumed	6,578
Purchase price allocation	$	193,108
Net consideration funded by us at closing	$	78,121
Equity and/or debt investment held	$	—
Debt assumed	$	—

2011 Acquisitions

In November 2011, we acquired all of the interests in 51 East 42nd Street, a 142,000 square-foot office building for approximately $80.0 million, inclusive of the issuance of $2.0 million aggregate liquidation preference of 6.0% Series H preferred units of limited partnership interest in the Operating Partnership.

In November 2011, we, along with The Moinian Group, formed a joint venture to recapitalize 180 Maiden Lane, a fully-leased, 1.1 million-square-foot Class A office tower. The consideration for our 49.9 percent stake in the joint venture included $41.0 million in cash and Operating Partnership units valued at $31.7 million. In connection with the issuance of these Operating Partnership units, we recorded an $8.3 million fair value adjustment due to changes in our stock price. Simultaneous with the closing of the recapitalization, the joint venture refinanced the existing $344.2 million indebtedness with a five-year $280-million mortgage. We consolidate this joint venture due to the control we exert over leasing activities at the property. We consolidate this joint venture as it is a VIE and we have been designated as the primary beneficiary.

In May 2011, we acquired a substantial ownership interest in the 205,000-square-foot office condominium at 110 East 42nd Street, along with control of the asset. We had previously provided a $16.0 million senior mezzanine loan as part of our sale of the condominium unit in 2007. The May 2011 transaction included a consensual modification of that loan. In conjunction with the transaction, we successfully restructured the in-place mortgage financing, which had previously been in default.

In April 2011, we purchased SITQ Immobilier, a subsidiary of Caisse de depot et placement du Quebec, or SITQ’s, 31.5% economic interest in 1515 Broadway, thereby consolidating full ownership of the 1,750,000 square foot building. The transaction valued the consolidated interests at $1.23 billion. This valuation was based on a negotiated sales agreement and took into consideration such factors as whether this was a distressed sale and whether a minority discount was warranted. We acquired the interest subject to the $458.8 million mortgage encumbering the property. We recognized a purchase price fair value adjustment of $475.1 million upon the closing of this transaction. This property, which we initially acquired in May 2002, was previously accounted for as an investment in unconsolidated joint ventures.

In January 2011, we purchased City Investment Fund, or CIF’s, 49.9% interest in 521 Fifth Avenue, thereby assuming full ownership of the 460,000 square foot building. The transaction valued the consolidated interests at approximately $245.7 million, excluding $4.5 million of cash and other assets acquired. We acquired the interest subject to the $140.0 million mortgage encumbering the property. We recognized a purchase price fair value adjustment of $13.8 million upon the closing of this transaction. In April 2011, we refinanced the property with a new $150.0 million 2-year mortgage which carries a floating rate of interest of 200 basis points over the 30-day LIBOR.  In connection with that refinancing, we acquired the fee interest in the property for $15.0 million.

The following summarizes our allocation of the purchase price of the assets acquired and liabilities assumed upon the closing of these 2011 acquisitions (amounts in thousands):

	51 East 42nd Street		180 Maiden Lane		110 East 42nd Street		1515 Broadway			521 Fifth Avenue
Land	$	44,095	$	191,523	$	34,000	$	462,700		$	110,100
Building	33,470		233,230		46,411		707,938			146,686
Above market lease value	5,616		7,944		823		18,298			3,318
Acquired in-place leases	4,333		29,948		5,396		98,661			23,016
Other assets, net of other liabilities	—		—		—		27,127			—
Assets acquired	87,514		462,645		86,630		1,314,724			283,120
Fair value adjustment to mortgage note payable	—		—		—		(3,693		)	—
Below market lease value	7,514		20,320		2,326		84,417			25,977
Liabilities assumed	7,514		20,320		2,326		80,724			25,977
Purchase price allocation	$	80,000	$	442,325	$	84,304	$	1,234,000		$	257,143
Net consideration funded by us at closing	$	81,632	$	81,835	$	2,744	$	259,228		$	70,000
Equity and /or debt investment held	—		—		$	16,000	$	40,942		$	41,432
Debt assumed	$	—	$	—	$	65,000	$	458,767		$	140,000