Broadway Partners in talks for deal at Madison Ave.

Broadway Partners looks like it had an ace up its sleeve when it laid down $550 million for 340 Madison Avenue in mid October.

As the real estate investment firm was putting together its winning bid, it is said to have been in talks with Pricewaterhouse Coopers to fill a significant block of empty space in the building--vacancy that had led most potential investors to the understanding that the property came with a degree of risk.

Although the tightening midtown office market has made available big blocks a sought after opportunity among landlords eager to take advantage of the city's soaring rents, 340 Madison Avenue's 40,000 s/f floors weren't nearly so attractive. Sources say that the space suffers from an awkward layout and numerous structural columns that hadn't made it an easy sell to tenants, especially at the high rents a buyer would need to achieve to justify the building's price.

But Pricewaterhouse Coopers was drawn to the space because it offered the growing firm a place to expand only two blocks from its headquarters at 300 Madison, where it occupies 25 of the 1.15 million s/f building's 35 floors.

And with PricewaterhouseCoopers in the wings to take the space at rents in the $80s per s/f, Broadway Partners was able to convert the block of uncertainty into a likely cash cow and vault itself over competing bidders who all undoubtedly discounted their bids to compensate for the building's vacancy.

Now, sources say that what had begun as simply an informal conversation between the two has indeed taken on the tenor of a leasing negotiation and that Pricewaterhouse-Coopers will soon take at least 200,000 s/f and possibly the entire 300,000 s/f block.

The lease with PricewaterhouseCoopers isn't the first time Broadway Partners has purchased a building with significant vacancy only to fill it in a dramatically quick fashion with a single large deal.

The firm purchased 522 Fifth Avenue at the beginning of May for $420 million in another deal that left many investors wary to pay top dollar because of vacancy issues.

The property's 600,000 s/f were being completely vacated by longtime tenant JP Morgan Chase and buyers and brokers alike expressed skepticism about Broadway's deal because they said it would require the firm to secure very high rents for a property that, in fact, had generated very little leasing interest during a marketing campaign in the preceding months.

Yet, less than two months after purchasing the building from a partnership between Stellar Management and the Rockpoint Group, Broadway Partners leased the entire space to Morgan Stanley for rents that brokers said was in the $80s per s/f.