What Does PBC’s 100 Percent Occupancy Milestone Mean for its Future?

By Steve Cuozzo

July 20, 2015

New York Post

PBC USA Real Estate has achieved a milestone at 452 Fifth Ave. Two small but precious penthouse-floor leases have brought to 100 percent occupancy the 865,000 square-foot tower the company bought for just $330 million in 2010.

PBC USA Chief Executive Eli Elefant said both deals were in the triple digits.

Investment firm Varadero Capital took 7,636 square feet, and private investment banking firm Triangle Capital took 7,054 square feet — both deals on the 30th floor.

As Elefant sees it, the full lease-up helps justify PBC USA’s commitment to own the tower long-term, rather than cash in on a sale that could fetch up to $1 billion.

(PBC USA is a division of Israeli-owned IDB Group).

“It affirms our asset-management strategy,” Elefant said. The deals signify the extraordinary run-up in values near Bryant Park, “where even five years ago, there was a 20 percent rent discount south of 42nd Street,” Elefant said.

Today, with the arrival of 7 Bryant Park on Sixth Avenue and the success of redesigned and repositioned 1095 Sixth Ave., the sky seems to be the limit.

But CBRE investment-sale whiz Bill Shanahan recently stirred things up when he said that in his view, IDB should take advantage of the hot market by selling 452 Fifth Ave. now.

That prompted Elefant to tell The Real Deal in May that they had “no intention of selling.”

Elefant told The Post this week that PBC “has a very strong appetite for acquisitions” in the US, and views 452 Fifth as “a beacon of what we can do going forward in the US real estate market.”

He said Shanahan, “a friend and a very smart broker, is entitled to his opinion,” which Elefant acknowledged is shared by some others. “We filled the tower and technically — meaning by conventional wisdom — “we should be selling.”

When PBC’s parent IDB bought the tower from HSBC in a sale-leaseback in 2010, some 300,000 square feet of offices and a retail block were available.

PBC swiftly signed Staples to the store frontage and found tenants for 14 of 18 vacant office floors.

The owners upgraded systems and amenities. All that was left to lease was the penthouse floor. It was once the offices of Republic National Bank founder Edmond Safra, who died in a fire in Monaco in 1999, the same year Republic was acquired by HSBC.

HSBC remains the largest office tenant, with floors 1-12. Despite its size, 542 Fifth has a “boutique” air thanks to smaller floors from 13 up, many leased to a single tenant each. “It’s the beauty of it compared to buildings nearby,” Elefant said.

But the “big elephant in the room,” Elefant said, is HSBC’s 580,000 square-foot lease, which is up at the end of 2020.

Asked about HSBC’s future at 452 Fifth after that, Elefant said, “They are a fantastic tenant, and we see this as an unbelievable partnership.

“We’d do our best to try and keep them, but we are absolutely prepared for the alternative. I see upside either way.”