Credit crunch or not, major New York office buildings are still finding takers. The consensus among local real estate professionals is that the recent sale of four New York office buildings by Macklowe Properties — including the iconic General Motors Building — is a good omen for the city's office property market.

Boston Properties in late May reached a deal to buy the four properties for $3.95 billion, assuming more than $2.4 billion in debt. For the 2 million sq. ft. GM Building alone, the price was about $2.8 billion, or $1,400 per sq. ft. The REIT acquired the building as part of a joint venture with US Real Estate Opportunities, a partnership of Goldman Sachs and Meraas Capital, a Dubai-based private equity investor.

The deal included three other properties: 540 Madison Avenue, 125 West 55th Street, and Two Grand Central Tower. Boston Properties had bid on the GM Building in 2003 when it was sold by Donald Trump and Conseco Inc. But Harry Macklowe snapped it up for $1.4 billion, outflanking the REIT.

Macklowe Properties was forced to sell the four buildings from its legacy portfolio to quickly raise capital to meet other loan obligations. Macklowe had bought eight properties from Blackstone Group for $7 billion in 2007, after Blackstone's acquisition of Equity Office Properties. Macklowe funded that deal with short-term financing from Deutsche Bank and Fortress Investment Group, but couldn't refinance on favorable terms in the current market.

Dan Gorczycki, a managing director of Savills Granite, a New York investment banking firm, says that given the sense of urgency surrounding the sale, everyone is pleasantly surprised. “For all the talk of having a desperate seller, he [Macklowe] hung in there until he got the right deal.”

The selling price implies a capitalization rate on the properties of about 2% to 3% in the first year, Gorczycki says. That takes into account the initial capital outlay and leasing commissions. The return rises to 5% on a longer 10- to 15-year period, with projected rent increases.

Sam Chandan, chief economist at data research provider Reis, says the sale of the Macklowe office buildings provides cause for optimism in a soft investment climate. “It has a mildly restorative impact on the confidence of market participants that this deal was able to move forward.”

The caveat is that the GM Building is unique and not necessarily a bellwether deal, says Chandan, who urged restraint in evaluating the sale's implication for major market transactions.

If the GM Building had been significantly devalued it would have sent a negative signal to the market, says Chandan. “The circumstances of the debt and the peculiar idiosyncrasies under which the sale was taking place do not seem to have seriously undermined the value of the asset.” New York's ability to attract buyers, including foreign investors, has helped hold up prices, adds Chandan.

In a June 12 teleconference on the GM Building sale, executives from Boston Properties credited Macklowe with “unlocking a lot of value in the building.” Mort Zuckerman, chairman of Boston Properties, admitted he had “screwed up” in 2003 when he lost the building to Macklowe by bidding too conservatively.

Zuckerman calls the GM building the “best single acquisition we have made as a public company.” The cost to replace it would be significantly higher than what he paid, he says. The building was completed in 1968 when it was valued at about $75 million.