Fund flies solo for $154m Ave. of the Americas buy.

Already a partner in a number of joint ventures in Manhattan, including a 75% stake in the Chrysler Building, TMW Property Funds--Prudential Real Estate's property fund management arm--decided it was time to go it alone for its $154 million acquisition of 1180 Avenue of the Americas on February 15. The 22-story, 365K-s/f office building was the perfect sized deal for TMW to get its start as sole owners.

"It's really a unique size," said Barry Howell, head of TMW's real estate transactions. "The fact that we could come in and wholly own a property like this, a property that has such a great address and great floor plates, was very appealing to us and our investors."

Although the deal's midlevel pricing gives the impression of affordability for a Midtown office asset, its over $400 per s/f price tag paints a slightly different picture.

Frothy competition compressed the cap rate down to what Howell described as "a number commensurate with most other Manhattan office properties these days."

But tight returns present a particular problem for TVM, which predominantly invests for German funds and syndicators, groups long known for their sensitivity to low cap rates. TVM, which used financing for 60% of the property, overcame this hurdle by employing interest-only loans, an oft-used tactic for widening immediate returns.

A big bonus to the building's income is that its rents, which range in the mid $30s to low $40s, are sure to soon increase.

"The existing rents in the building are about 10-15% below market right now," Howell said.

"The property has been well maintained and needs basically no capital improvements. We forecast that we'll be able to push rents up by about 7-10% this year."

TVM plans to own the building for between 5-7 years and expects 9-11% percent returns on its investment.