Macklowes Sell G.M. Building for .9 Billion NYTimes.com

A group led by Mortimer B. Zuckerman, chief executive of Boston Properties, a publicly traded real estate company, is buying the General Motors Building and three other Midtown towers from the financially troubled Macklowe family for .95 billion.

The sale of the General Motors Building on Fifth Avenue is part of a .95 billion deal.

The deal, which had been brewing for months as the Macklowes sought to get out from under more than billion in debt, is a victory for Mr. Zuckerman, owner of The Daily News, and his partners, Goldman Sachs and the nations of Qatar and Kuwait, who paid about .9 billion for the 50-story, white marble G.M. Building on Fifth Avenue at 59th Street. It is the highest price ever paid for an American office tower.

The sale of the building represents the loss of the crown jewel of the Macklowe real estate empire. The travail of the Macklowes and the fate of the G.M. Building have been closely watched by real estate and banking executives, both for the family drama and as an indication of the health of the real estate market.

The deal was struck about 2 a.m. on Saturday. Hours later, Boston Properties issued a press release announcing its purchase of the G.M. Building as well as 540 Madison Avenue, a 39-story building at 55th Street; 125 West 55th Street, a 23-story building between Avenue of the Americas and Seventh Avenue; and 2 Grand Central Tower, a 44-story building between Lexington and Third Avenues.

“We’re thrilled,” Mr. Zuckerman said in a telephone interview. “It is a real commitment to Manhattan and New York City and a real commitment to the future.”

As for the G.M. Building, he said it was a good match for his company’s collection of towers in New York, Washington, San Francisco and elsewhere. “Obviously,” he said, “it’s perhaps the most outstanding building in Manhattan and the country.”

Mr. Zuckerman declined to discuss the partners involved in making the deal. Boston Properties posted a 5 million deposit. The closing is scheduled to take a place over the next several months.

For the Macklowes, it is a bittersweet transaction. Harry Macklowe, a consummate real estate gambler, ruthless negotiator and talented developer, and his son, William S. Macklowe, had struggled for more than six months to find a solution that would allow them to pay off their debts while retaining control of the G.M. Building. But in the end, they had to relinquish the tower, where they had had so much success since they bought it in 2003 for .4 billion.

Barry M. Gosin, chief executive of Newmark Knight Frank, a real estate company, said: “It’s a cautionary tale. The market doesn’t always go up. You can’t assume that rents will go up 15 percent a year ad infinitum.”

Fifteen months ago, the Macklowes sought to double the size of their holdings in Midtown by buying seven towers from Equity Office Buildings for billion. But as the subprime mortgage crisis buffeted Wall Street, they found themselves unable to obtain permanent financing and were crushed by billion in short-term, high-interest loans from Deutsche Bank and Fortress Investment Group.

Still, it is remarkable that they could orchestrate a multibillion-dollar deal at a time when the capital markets are in turmoil and rival developers were circling their real estate holdings, hungry for cheap deals. The deal for the G.M. Building and the three others was not without some drama. Vornado Realty Trust and other competitors tried to make higher offers and upend the agreement with Boston Properties.

“We were determined to last five minutes longer than the other side,” Mr. Zuckerman said.

The Macklowes will now be able to pay off a nearly .4 billion loan from Fortress and consolidate their remaining real estate holdings.

Peter Briger, co-president of Fortress, said that the company would continue to hold a small note, 0 million, backed by the remaining Macklowe buildings. He said he was pleased with the transaction. “They pulled off a coup in terms of the restructuring and an orderly sale,” Mr. Briger said of the Macklowes. “It could’ve been a very litigious and costly process.”

Earlier this year, the Macklowes relinquished control of the seven towers that led to their troubles. Those building are now up for sale. Harry Macklowe may not make the next Forbes 400 list, but he and his family will continue to be players in the New York real estate world.

“You can never count Harry out,” said the developer Douglas Durst. “The Macklowes will be back.”

They will continue to own four office towers — at 400 Madison Avenue, 610 Broadway, 1330 Avenue of the Americas and one under construction at 510 Madison Avenue — and three residential buildings, including Rivertower, where Harry Macklowe and his wife, Linda, have a duplex penthouse. In addition, the Macklowes will keep a prime development parcel, the former Drake Hotel site at Park Avenue and 56th Street.

“Over all, it’s a net positive outcome,” said William Macklowe, 40. “We still have a premier operating platform. We’ll continue to expand on what we have.”

William Macklowe took the lead in negotiating with Fortress and Boston Properties, assembling a team that included Paul J. Ingrassia, who heads Citigroup’s North American real estate group; Jonathan Mechanic, a real estate lawyer; and Darcy Stacom, the real estate broker from CB Richard Ellis who handled the sale.

“Hindsight gives everyone 20/20 vision,” William Macklowe said. “The ability to harness the past for the future is what makes someone a smarter and better investor.”