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Macklowe offer Big Apple REIT.

Several development sites and office buildings are expected to be acquired by Harry Macklowe when his company goes public in July.

He filed an approximately $520 million plan to register for the city's first office and residential real estate investment trust with the Securities and Exchange Commission on May 14th.

The 26 million shares, expected to be priced from $19 to $21, are being underwritten by Lehman Brothers as lead manager, and by Prudential Securities.

Once formed, the new REIT would go by the name of Macklowe Properties, Inc., with the New York Stock Exchange symbol of MLO. The company would own interests in 12 commercial properties and four apartment buildings.

Eight office properties will contain 2.9 million rentable square feet, including the 92,270 square-foot medical portion of Riverterrace, and there are four apartment properties with 608 apartment units. Another three properties are under development or redevelopment, while six land parcels are being held for future development.

According to the SEC filing, Macklowe will use $35.7 million of the proceeds to purchase the loft office building in the Flatiron District at 150 Fifth Avenue; a development site at 26th Street in the Center Sixth area of Chelsea at 771-791 Sixth Avenue; and the office building at 342 Madison Avenue.

The cost of the 198,000 square-foot 150 Fifth Avenue alone, which has been on the market with Eastern Consolidated Properties and is listed on its web page, is $26 million.

Macklowe has already acquired the first mortgage and promissory note obligation of $70 million on the 529,000 square-foot 342 Madison, and intends to foreclose.

Another 386,000 square-foot Garment District showroom property just south of Times square at 1412 Broadway will be purchased for $98.2 million, of which $24 million will come in the form of 1.2 million Class B Operating Partnership or OP units, with the remainder of the purchase price coming from the proceeds of the offering and the assumption of $48 million in debt.

OP units are used to buy properties without triggering a taxable event for the current owner, who exchanges the property for the OP units. These OP units are non-voting shares in the new REIT, but earn the equivalent in dividends. Usually, there is an agreement by the REIT not to sell the property for a certain number of years.

The building at 16-20 East 53rd Street will be purchased for 1 million OP units with a value of $20 million, and the company will be restricted from selling it for four years. The REIT will have a fee interest at 16/18 East 53rd Street, and an option for 20 East 53rd Street's long-term leasehold on the land and improvements. Macklowe will be reimbursed $7.1 million for already escrowed deposits.

The REIT will also foreclose on the 145,000 square-foot 400 Madison Avenue, where the company is acquiring the first mortgage note of $36 million for $35.5 million plus closing costs.

The company will use $555.7 million of the proceeds towards mortgages, payments (including prepayment penalties), and intercompany debt, with $14.4 million going to pay expenses in forming the company.

The REIT will also include 369 Lexington Avenue; the Macklowe's redeveloped 540 Madison, with its spectacular multi-story glass retail space, soon to be occupied by Callaway Golf; Two Grand Central Tower; and Avenue of the Americas Plaza.

The low-rise building at 140 West 57th Street that is the home of Planet Hollywood would have its upstairs office portion redeveloped into luxury office suites.

The residential portfolio already owned includes Riverterrace, with 409 units; 30 East End Avenue, with 101 units; 345 East 64th Street, with 60 units; and 192 East 75th Street, with 38 units.

The development site at 300 Madison at 42nd Street, across from Grand Central Terminal, will eventually house a new, high-tech building with a sky lobby, trading floors, and a total of 600,000 to a million square feet.

At 1000 Second Avenue, the company intends to construct 120 to 300 units where they own three parcels in fee and have a long-term leasehold in the other parcel. Some of those have already been demolished.

The Center Sixth site is near the Adell family sites, and like those, is expected to become an apartment house in the future.

Another site, across from Trump Place and Riverside Boulevard at 20-30 West End Avenue, will eventually be developed with 250 to 300 units.

At 250 East 60th Street, 40 to 50 units can be developed in the future on a long-term leasehold at the foot of the Roosevelt Island Tram by the Queensborough Bridge.

If the 26 million shares are all sold, including an over-allotment of 3.9 million shares, the company would use $72.5 million in proceeds to acquire additional properties and/or for working capital.

Not included in the REIT is a 21-unit luxury condominium under construction at 76th Street and Lexington Avenue; 865 First Avenue; 800 Madison Avenue; 1018 Lexington; and Three East 66th Street, primarily because they are condominium units.

"He's a talented builder and has built some very prestige properties, including Metropolitan Tower and the Hotel Macklowe, and Riverterrace does very well," said Neil Binder, principal of Bellmarc Properties, which manages, rents and sells apartments all over the city.

Macklowe would become chairman of the new REIT; Warren Cole would be president; and son William S. Macklowe would become vice president of the REIT.

Harry Macklowe began as a broker with Julien J. Studley, and in the 1960's formed his own company, which has since become an active acquirer and developer of both office and residential properties. Macklowe is credited as the architect of Metropolitan Tower, and encourages the use of sleek, elegant materials at his office developments, including seamless silicone-glazed curtain wall exteriors.

The entire SC-11 plan can be viewed at most of the SEC-linked web sites.
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Title Annotation:Macklowe Properties Inc
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:May 27, 1998
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