Grocon’s $834m NYC deal flops

Property developer's attempt to get into the US has fallen by the wayside.

Grocon's attempt to get into the US has fallen by the wayside after an agreement it had with a midtown Manhattan office building valued at $US775 million ($834m) fell apart, prompting the owner to pull the listing.

The unravelling of the deal comes shortly after executive chairman Daniel Grollo stepped back as chief executive of Grocon to further its push into global markets.

Last week the building’s owner, Shorenstein Properties, announced it had withdrawn the Park Avenue Tower from sale because Grocon was unable to close the deal before the exclusivity period concluded.

Grocon had already brokered a $US530m mortgage from Citibank for its planned purchase of the 35-storey building at 65 East 55th Street. According to local reports the deal fell apart after Grocon was unable to raise the additional $US200m capital required to close the deal.

A spokeswoman from Grocon declined to comment on the exact reason behind the deal falling apart. However, it is believed to have been instigated by tenants looking to renegotiate lease terms with the building’s owner ahead of a fresh sale campaign.

The building is 96.6 per cent occupied, with law firm Paul Hastings the anchor tenant in the building on a lease that expires in 2016.

“The asset presents a very attractive opportunity in our eyes,” the spokeswoman said.

“We will continue with that view, and should the asset come back to the market we will remain interested.”

She declined to comment on whether the company’s ability to obtain a joint investment partner for the building had affected the sale process.

Grocon had agreed to purchase 95 per cent of the 57,228sq m Park Avenue Tower in a deal that came to light last December. The remaining 5 per cent was to be owned by US real estate mogul George Klein, whose Park Tower Realty developed the property in 1986. Mr Klein is believed to have retained the stake for tax reasons.

The deal is outside of Grocon’s recently established joint investment venture with Swiss bank UBS which is part of Grocon’s aspirations to roll out a property funds management business. The joint venture is yet to purchase an asset.

The unwinding of Grocon’s midtown office deal comes as the company works to secure joint investment partners for the 2018 Commonwealth Games athletes village on the Gold Coast.