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Another O&Y building to get new ownership.

The fate of another Olympia & York building's fate became closer to settlement last week as Mutual of America signed a contract to purchase the property at 320 Park Avenue.

Earlier in the month, an agreement was announced to restructure the ownership of 55 Water Street, the second largest office building in the city and another Olympia & York building on shaky financial footing.

Mutual of America, a strong insurance corporation with $6.5 billion in assets, is not heavily invested in other real estate. It intends to purchase the 34-story office building, located on a prime block between 50th Street and 51st Street, for use as its headquarters. The company said it will invest more than $70 million to renovate the tower, which was built in 1961 by Percy and Harold Uris. The building was designed by Emery Roth & Sons and Skidmore, Owings & Merrill.

The property has been vacant since ITT Corporation moved out two years ago and Olympia & York has been trying to sell the asbestos riddled building to stem a $20 million drain that includes interest payments on a $147 million mortgage as well as property taxes of approximately $4.3 million per year.

Although a purchase price of $128 million was reported for the property in March, it is not yet known if a better price was achieved despite the larger mortgage. While that price works out to approximately $200 per square foot for the 664,000-square-foot building, officials for both the buyer and seller declined to reveal the exact price at this time. Experts said another $100 per square foot would have to be invested in renovations at 320 Park and the $70 million commitment by Mutual is in line with those estimates.

Since spring, the few buildings that have sold have turned over at an average of $130 per square foot with the two primary building sales averaging $163 per square foot. The new office tower at 1540 Broadway, with 1.6 million square feet, is scheduled to close in December for $119 million or approximately $74 per square foot, also well below its initial mortgage before the bankruptcy filing.

Mutual of America has been in protracted negotiations with Olympia & York all year, and in August, they learned from Real Estate Weekly that the State Legislature had passed a measure to allow tax abatements for renovation work on Manhattan office buildings via the Industrial and Commercial Incentive Program (CHIP). The enactment by the City of New York was made a contract contingency and Mayor Dinkins recently signed the measure into law, allowing the deal to go forward.

Last week, Moran said, "We did qualify for the ICIP renovation and it is very pleasant. We didn't seek any special deals from the city nor did we get any. "It has been estimated the company could save $20 million in property taxes.

Moran said the company has been looking at the real estate market since 1987 and has been anxious to buy a headquarters. This deal, he said, reflects the company's commitment to the City of New York. "It's a great decision for Mutual of America and all of its policy holders but also for New York City" he added.

Michael Caretnay Bailkin, a partner in Stadtmauer Bailkin Levine & Masyr who is active in developing incentive packages as well as ICIP benefits, said this deal illustrates the city is achieving its purposes with the legislation.

As a Fortune 50 life insurance company, Moran did not anticipate there would be any problem obtaining financing, nor is he worried about renting the two-thirds of the building that would not become part of their headquarters. "We'll be occupying one-third of it ourselves and will leave the more attractive tower floors for leasing," he said. "This will be one of the more technologically-advanced office buildings along Park Avenue. We'll be in real good shape."

Company chairman, William J. Flynn, said in a statement that "the renovated building will not only meet all our design and engineering requirements, it will help create the optimum business environment for our employees that will facilitate their service to our customers."

The company has been housed at 666 Fifth Avenue and expects to relocate in 1995. The Bertelsmann company, Bantam Doubleday Dell, will be moving from 12 floors in that building into 1540 Broadway next year.

Swanke Hayden Connell, principal, Richard S. Hayden FATA, RIBA confirmed the firm is doing probes and studies of the existing building and proceeding with the renovation design studies. All the asbestos will be removed and there will be exterior changes as well, he said.

Moran is also being besieged by those eager to work on the property. He is close to hiring a construction manager and has already received calls from brokers seeking the listing. "I expect we will continue to get a flood of calls," he said. While he would not identify the outside law firm involved in the purchase contract, Moran said they have a "very fine" law department and rely heavily on the inside counsel.
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Title Annotation:Olympia and York Companies U.S.A.
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Sep 23, 1992
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