Dealmaker: Vornado Sells 45% of New York Portfolio for $5.5B

Michael Tucker

April 23, 2019

Vornado Realty Trust, New York, transferred a 45.4 percent interest in a portfolio of New York retail assets on Upper Fifth Avenue and Times Square in a $5.5 billion transaction.

The Sovereign Wealth Fund Institute reported Crown Acquisitions, New York, and Qatar Investment Authority, Doha, Qatar, acquired the minority interest. Equity real estate investment trust Vornado will continue to own 51 percent of the portfolio's common equity.

The properties included 640 Fifth Avenue, 655 Fifth Avenue, 666 Fifth Avenue, 689 Fifth Avenue, 697-703 Fifth Avenue, 1535 Broadway and 1540 Broadway in New York, totaling 489,000 square feet of retail and 327,000 square feet of office space plus signage at 1540 Broadway and 1535 Broadway, a parking garage at 1540 Broadway and a theatre at 1535 Broadway.

Before the acquisition, the Qatar Investment Authority had $320 billion assets under management. QIA CEO Mansoor bin Ebrahim Al-Mahmoud said the fund plans to "substantially" increase its U.S. investment. He noted the purchase shows the soverwign wealth fund's belief in New York City's long-term possibilities.

Mahmoud told Reuters the fund prefers "classic" investments such as U.S. real estate and financial institutions.

Vornado expects to net $1.1 billion on the sale after paying off a $390 million mortgage on 666 Fifth Avenue and a $140 million mortgage on 655 Fifth Avenue plus anticipated proceeds from a new $500 million loan on 640 Fifth Avenue, $26 million to purchase minority investors' interests and $56 million in transaction costs.

In conjunction with the transaction, Vornado retained preferred equity interests in some properties totaling $1.8 billion. The preferred equity has an annual coupon of 4.25 percent for the first five years, increasing to 4.75 percent for the next five years and thereafter and can be redeemed under certain conditions.

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