In one of the largest U.S. real estate deals in recent memory, a pair of Am Law 100 firms are advising on a proposed $1.1 billion sale of consumer electronics giant Sony’s U.S. headquarters to the Chetrit Group, a family-owned property management and development company.
The deal, which was announced earlier this month, is expected to close sometime in March. Sony issued a public statement that its main motivation for the unloading the building— located at 550 Madison Avenue in midtown Manhattan—was a desire to raise $770 million in cash to bolster its balance sheet. The remaining proceeds from the sale will be used to pay down Sony’s debt on the office tower.
The Tokyo-based conglomerate moved into the 37-story skyscraper in the early nineties and began consolidating its office space in the building, eventually buying it at the discounted price of $236 million in 2002 from former owner AT&T.
Greenberg Traurig real estate practice chair Robert Ivanhoe, who is advising the Chetrit Group on its acquisition of the building, says it’s too early to say what plans his client has for the property.
But Ivanhoe, who is considered one of Manhattan’s top real estate lawyers, notes that the building’s 14-foot ceilings make it an ideal mixed-use property capable of housing condominium, hotel, and retail space. Ivanhoe adds that Sony has signed a three-year net lease that will allow the company to remain in the building while it searches for new office space in order to accelerate its departure.
Skadden, Arps, Slate, Meagher & Flom is advising Sony on the proposed transaction through real estate partners Marco Caffuzzi and Benjamin Needell, counsel Russell Wohl, and associate J. David Holtzmuller. ( Wohl joined Skadden last September from Patterson Belknap Webb & Tyler.) Sony is a longtime Skadden client.
Nicole Seligman—the wife of News Corporation executive and former Justice Department antitrust chief Joel Klein—has long served as general counsel for Sony’s U.S. affiliate, which includes the company’s electronics, entertainment, motion picture, and music units. Last year Seligman was promoted to president of Sony’s New York–based arm, while longtime in-house attorney Mark Khalil was named general counsel, according to sibling publication Corporate Counsel. Kahlil and Seligman both worked on the sale of Sony’s U.S. headquarters to Chetrit.
Greenberg’s Ivanhoe says that Chetrit was one of about four finalists angling to buy the building once Sony put the property on the auction block. Other potential buyers included property giants SL Green Realty and Vornado Realty Trust, two public real estate investment trusts whose involvement in the bidding process Ivanhoe calls a good sign that a comeback is in the offing for the large real estate deals that largely disappeared with the onset of the economic downturn several years ago.
The sale price for the Sony Building is the highest paid for a U.S. office tower since 2010, when Fried, Frank, Harris, Shriver & Jacobson advised Google on its $1.8 billion acquisition of its Manhattan headquarters at 111 Eighth Avenue in Chelsea. (Disclosure: This reporter spent a summer in high school working in one of the building’s massive former grain elevators.)
“[The market] is gradually improving, but it won’t take off like a rocket ship,” says Ivanhoe, adding that the apartments and hotels that function as mixed-used properties now command better prices for developers than traditional office space.
Also working on the deal for Chetrit are Greenberg real estate partner Keith Reich, who specializes in leasing issues, and Jehoshua Graff, a name partner at New York’s Sukenik, Segal & Graff, which acts as a captive firm for Chetrit.
Ivanhoe says that more Greenberg lawyers will likely start working on Chetrit’s purchase of the Sony Building as the anticipated March closing approaches. The transaction, as noted this week by Crain’s New York Business, is being financed with $600 million from a Middle Eastern sovereign wealth fund, which Sony deemed crucial to completing the sale before the end of its fiscal year.
Partnering with Chetrit on the acquisition is David Bistricer, a well-known New York real estate investor and fellow Greenberg client who teamed up with Chetrit last year on the $81 million purchase of the 103-year-old Hotel Bossert in Brooklyn Heights. A legal entity of the Jehovah’s Witnesses called the Watchtower Bible and Tract Society of New York sold the building, according to sibling publication New York Law Journal, which notes that Greenberg’s Ivanhoe advised Bistricer and Chetrit on the deal.
Ivanhoe previously advised Chetrit on its $80 million purchase in 2011 of the Chelsea Hotel. Chetrit itself is an investment firm controlled by Joseph Chetrit, a Moroccan-born investor once deemed the ” most mysterious big shot in New York real estate” by The New York Observer. ( The weekly newspaper is owned by real estate scion Jared Kushner.)
Chetrit has been on a bit of a buying spree lately, spending $117 million this month to buy the 424-room Miami Beach Resort, according to sibling publication the Daily Business Review.