Citicorp talks loom as threat to N.Y. office market

August 24, 1991|By New York Times News Service

NEW YORK -- In a potential real-estate deal sending shivers through New York's already depressed office market, Citicorp, the city's largest lender to developers, said yesterday that it was negotiating the sale of a vacant 42-story office tower that it holds in foreclosure to Bertelsmann AG. The sale would most likely be at a loss.

Bertelsmann, the diversified German concern whose U.S. holdings include RCA Records and Bantam Doubleday Dell, the publishing concern, confirmed the negotiations were going on.

If a deal is struck, the price would almost certainly be far below the $250 million mortgage that Citicorp holds on the building.

Banking analysts say that if Citicorp is considering selling a major building at a large loss, then other banks are likely to be considering similar deals on foreclosed properties, cumulatively undermining Manhattan office prices.

There is potential "to put a real damper on any kind of recovery in prices" in the Manhattan office market, said Michael Giliberto, a real-estate analyst for Salomon Bros.

The vacant building, rising above Times Square at 1540 Broadway, is a sleek glass tower that was completed in 1989.

It came onto the market after the city had sunk into recession, following the ebullience of the 1980s, when more than a dozen other new office towers were added nearby because of city zoning incentives.

In addition to Citicorp, other major lenders, including Chase Manhattan Corp. and Chemical Bank, are burdened with large portfolios of nonperforming real-estate loans and smaller but still troublesome blocks of vacant office space held in foreclosure.

Although New York City so far has not had foreclosures and distress sales on the same scale as the Southwest, "we could see the same kind of overhang develop," Mr. Giliberto said.

Trish Heimers, a spokeswoman for Bertelsmann, said yesterday that its "goal is to find the lowest possible cost of occupancy." The company has 2,000 Manhattan employees, now split between leased offices on the Avenue of the Americas and on Fifth Avenue.

One benefit of acquiring a building would be to have staff in one place, she said.

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