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Zell/Merrill Lynch fund buys 2 buildings in Stamford, CT.

Sam Zell, one of the industry's best-known bottom fishers, is casting his reel in the tri-state area.

Zell/Merrill Lynch Real Estate Opportunity Partners II, an investment fund with an excess of $400 million in equity capital to invest in U.S. real estate has purchased two buildings in downtown Stamford, Connecticut, for a supposed $40 million.

Both buildings, Canterbury Green and 301 Tresser Boulevard had fallen into the hands of affiliates of Bank of New York. Together they total 550,000 square feet of commercial, residential and retail space.

Completed in 1987, Canterbury Green is a mixed-use commercial and residential complex that was a partnership of local developer David Crandall and JC Penney Real Estate. While the building's office, retail and residential portions are all nearly 100 percent occupied, sources say the building was turned over to the lender in October following J.C. Penney's decision to divest itself of its real estate.

The first of its kind in Stamford, the building contains 217,500 square feet of office space, 11,700 square feet of ground floor retail space and 106 rental apartments units.

Crandall is being retained as an asset management consultant.

301 Tresser Boulevard, formerly known as 8 Stamford Forum, was built by F.D. Rich Co. in 1981. The 242,000-square-foot building served as the headquarters for Singer Co. until November 1989. An affiliate of the Bank of New York foreclosed on the building in June of 1991. There are currently 110,000 square feet of space available for lease.

The property is just one of a number a major F.D. Rich buildings in Stamford to fall into bank possession. The purchases, therefore, are said to give stability to a central business district in which the ownership of much of the commercial space is in flux.

Second Fund

This is the second acquisition in Fairfield County for the Zell/Merrill Lynch fund, comprised mostly of pension fund monies. In 1991, the fund purchased Shelton Pointe, a 162,000-square-foot office building, in Shelton, Connecticut. The property has since undergone renovation and new leases for more than 20,000 square feet have been signed.

Brian Lipson, vice president of Acquisitions/Northeast for Zell, confirmed the fund is currently scouting selected acquisitions throughout the Northeast.

The fund is the second of two such funds. The Zell/Merrill Lynch Real Estate Opportunity Partners I started in 1987 and was fully invested by the end of 1991. That fund focused on the Southwest and Southeast. Zell/Merrill Lynch Real Estate Opportunity Partners II was fully closed and began its investment cycle by the summer of 1991.

While it is becoming appropriate to purchase in the Northeast, Lipson said, there is a significant way to go before the market reaches stability.

"Our ability to make additional capital investment allows up to hold [properties] for a long enough period to justify acquisition at this point in the cycle," he said.

Zell has earned a reputation for buying good buildings in difficult markets and enhancing their value. Lipson said the company understands the "inherent illiquidity" in real estate and they are prepared to be a 10- to 15-year owner, infusing whatever capital is necessary.

"We're looking at a long-term turnaround," he said. "This is a new world. If you are going to buy at this point in the market, you better be ready to fund whatever it takes."

He said they have been "tracking" Manhattan, primarily Midtown, for the past three years. He said it would not be "surprising" to see the fund purchase a large, well-located property in The Big Apple within the next couple of years.

Bank of New York provided about $35 million in financing. First Office Management, an affiliate of the new owner, will manage and lease the properties.
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Title Annotation:Zell/Merrill Lynch Real Estate Opportunity Partners II
Author:Fitzgerald, Therese
Publication:Real Estate Weekly
Date:Dec 30, 1992
Previous Article:What now for 40 Wall?
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