In a strategic move to strengthen its financial position and capitalize on high-demand office assets, Paramount Group, Inc. (NYSE: PGRE) has sold a 45% non-controlling interest in 900 Third Avenue, a premier Class A office building in Midtown Manhattan. The transaction values the 36-story tower at $210 million, underscoring the continued allure of high-quality office properties in prime locations, even amidst a challenging market landscape.
A Landmark Deal in Midtown Manhattan
The 900 Third Avenue property, located between 54th and 55th Streets in the prestigious Plaza District, is a 600,000-square-foot office tower. Designed by renowned architects Cesar Pelli, Viñoly Design Architects, and Emery Roth and Sons, the building offers a blend of architectural brilliance and functional efficiency. Paramount Group retains a 55% controlling interest and will continue to manage and lease the property.
Albert Behler, Chairman, CEO, and President of Paramount, expressed confidence in the deal’s strategic implications:
“This transaction underscores the underappreciated value of our assets in the market. It also strengthens our balance sheet and offers enhanced flexibility in our capital allocation strategy.”
Features and Tenancy at 900 Third Avenue
Built in 1983 and certified as a LEED Gold property, the tower is a model of sustainable and efficient design. Its large floorplates—ranging from 4,000 to 18,000 square feet—feature exceptional light and panoramic views, making it a magnet for tenants across various industries.
The property’s tenant mix includes leading firms such as Bank of America, Virtu Financial, Littler Mendelson, and White Oak Healthcare Finance, demonstrating its appeal as a sought-after business address. Additionally, the building features 12 passenger elevators and a freight elevator, while its recently renovated lobby adds to its modern charm.
Despite the prestige, the building’s occupancy rate currently stands at 83%, with 237,700 square feet of office space and 14,800 square feet of retail space available. This indicates potential for further growth in leasing activity as Midtown Manhattan’s office market shows signs of recovery.
Strategic Implications for Paramount Group
Paramount Group originally acquired 900 Third Avenue in 1999 for $163.2 million. While the current deal values the property at approximately $350 per square foot, it marks a significant step for Paramount in its efforts to optimize its portfolio. The partial sale highlights a broader trend among property owners seeking innovative ways to unlock asset value and navigate an evolving market.
The undisclosed buyer’s acquisition of the minority stake reflects investor confidence in high-quality, Class A office properties in desirable locations. Paramount’s continued role as manager and majority owner ensures the property remains under its expert oversight.
Midtown Manhattan Office Market: Signs of Recovery
The Manhattan office market has faced substantial challenges in recent years, with declining property values and increased vacancies driven by the pandemic and changing workplace trends. However, the landscape is showing signs of revival. According to Cushman & Wakefield, the fourth quarter of 2024 saw 6.7 million square feet of new leasing activity, the highest quarterly total since 2022.
Demand for premium office space remains robust, particularly in prime locations like Midtown Manhattan. Recent notable transactions include:
- SL Green Realty’s sale of an 11% interest in One Vanderbilt, valuing the 1.7 million-square-foot skyscraper at $4.7 billion.
- Bloomberg LP’s lease renewal and expansion at 919 Third Avenue, increasing its footprint to 924,900 square feet.
Why This Matters
The partial sale of 900 Third Avenue signals a growing trend of strategic asset management in the office market. Owners are finding innovative ways to realize the value of their properties while maintaining operational control. For Paramount Group, this transaction not only highlights the enduring demand for Class A office spaces but also positions the company for future flexibility in capital allocation.
The Midtown office market is poised for recovery, with increased leasing activity and investor interest in top-tier properties. As Paramount continues to focus on managing and optimizing its assets, the 900 Third Avenue deal serves as a testament to the resilience of premium office real estate in New York City.
