Silverstein Bids Above $3 Billion for G.M. Building

The bids are in for the highly coveted General Motors Building, and it looks like it may be anointed the priciest property in America. The developer of ground zero, Larry Silverstein, who is thought to be partnering with the California State Teachers' Retirement System, has offered more than $3 billion for the property, according to sources with knowledge of the proposals. The news confirms what was first reported in The New York Sun in December 2006, that the building's value could reach more than $3 billion.

The $3 billion price tag would topple the current record for an American office building of $1.8 billion, which Kushner Properties paid to Tishman Speyer Properties when it acquired the 41-story building at 666 Fifth Ave. in 2006.

On a square foot basis, $3 billion for the 1.9 million-square-foot General Motors Building would come to roughly $1,578 a square foot, just barely besting the $1,566 a square foot that Somerset Partners paid when it acquired 450 Park Ave. from Taconic Investment Partners and New York State Common Retirement Fund last year.

"It's clear now that the final sale price will be a record," a managing director at the real estate research firm Real Capital Analytics, Daniel Fasulo, said.

In addition to owning the iconic skyscraper, the new owner of the General Motors Building will have valuable naming rights, as its namesake, General Motors, is relocating its offices to the Citigroup Center, and its naming rights are set to expire in 2010.

It could not be determined by press time who else is bidding for the property, but two companies that have been mentioned as possible buyers, Boston Properties and Brookfield Properties, have not thrown their hat in the ring, according to sources familiar with the deal.

A spokeswoman for Brookfield, Melissa Coley, declined to comment, as did a spokesman for Mr. Silverstein, Jody Fisher. The chairman of Boston Properties, Mortimer Zuckerman, denied that the firm is a bidder.

The $3 billion sale price would be good news for the current owner of the General Motors Building, Harry Macklowe, who is seeking to repay more than $7 billion in short-term loans that came due last week for seven high-end office buildings he bought last year at the height of the real estate market.

Last February, Mr. Macklowe, aided by his son and business partner, William Macklowe, acquired a portfolio of seven office buildings from the Blackstone Group for $7.1 billion, doubling the size of his portfolio. But after the credit crunch hit, Mr. Macklowe, who had financed the deal mostly with debt, could not refinance the loans, and he was forced to offer up the General Motors Building as collateral.

Mr. Macklowe, known in the industry as an investor willing to take a gamble to gain big properties, bought the building from the insurance firm Conseco in 2003 for $1.4 billion, which observers said at the time was too high. As the market soared in the last several years and Mr. Macklowe redeveloped the plaza in front of the building to include an Apple store, the value of the building rose along with it.

Mr. Macklowe owes about $5.8 billion to Deutsche Bank and a pool of about 20 subordinate lenders that include General Electric Capital and Vornado Realty Trust, as well as about $1.4 billion for a bridge loan from the Fortress Investment Group. The Fortress loan is secured by a stake in the General Motors Building and $1 billion of Mr. Macklowe's personal wealth.

Last Friday, Mr. Macklowe said in a statement that he had reached a deal with Deutsche Bank, but the Sun reported earlier in the week that Vornado was holding up the deal in the hopes of getting more money or possibly gaining an edge in acquiring some of the buildings. While the process of foreclosure has already begun on both loans, Mr. Macklowe could still try and work out a deal.

Mr. Silverstein, who is the head of Silverstein Properties, has a relationship with the multibillion-dollar fund CalSTRS, which helped his company finance the acquisitions of three buildings in the last year: 99 Church St., where Mr. Silverstein is planning an 80-story condo/hotel, 1177 Sixth Ave., and 575 Lexington Ave. The fund, which has pledged $2 billion for those buildings, could contribute as much as $2 billion more for additional acquisitions, Reuters reported yesterday.