Principal Acquires Travelers’ Stake in NYC Office Tower for $117.6M

By and | September 3, 2014

An affiliate of Principal Financial Group Inc. bought a 49 percent stake in 77 Water St., a lower Manhattan office tower in New York City, from fellow insurer Travelers Cos. for $117.6 million.

The interest in the 26-story building was acquired on behalf of institutional investors and 401(k) retirement fund clients, Des Moines, Iowa-based Principal said Tuesday in an e- mail. The other 51 percent of the tower is owned by the William Kaufman Organization, a New York real estate company.

“This fits our overall strategy of owning well-leased, high-quality office buildings in gateway cities at a discount to replacement cost,” Jim Halliwell, managing director of Principal Real Estate Investors, said in the e-mail. The “downtown market is very vibrant and we believe it is poised for above-average growth in the future.”

New York real estate values have surged in the past three years as insurers, pensions and sovereign-wealth funds seek steady returns from investments seen as relatively safe. The average price of a lower Manhattan office building, based on a two-quarter rolling average, climbed to $399 from about $245 three years ago, according to data from CoStar Group Inc., a Washington-based real estate research firm.

Principal’s Water Street deal values the 600,000-square- foot (56,000-square-meter) tower at more than $235 million, or about $390 a square foot.

The building is leased to Goldman Sachs Group Inc., which subleases its space to various tenants, according to Real Capital Analytics Inc., a research firm that tracks commercial real estate sales. The subtenants include AT&T Inc., the engineering firm Arup Group Ltd. and the law firm Lewis Brisbois Bisgaard & Smith LLP, CoStar data show.

Patrick Linehan, a spokesman for New York-based Travelers, said the insurer bought its stake more than 30 years ago. He declined to comment on the reasons for the sale.

With assistance from Noah Buhayar in New York.

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Topics Mergers New York

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