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Power Struggle Looms Over the Future of IBM Building

March 03, 1998|From Bloomberg News

NEW YORK — The Odyssey Partners hedge fund hired real estate investment bank Eastdil Realty Inc. to value its stake in the IBM Building, setting up a potential power struggle over the future of one of New York's trophy properties.

Odyssey is pushing for a sale of the 43-story office tower at 57th Street and Madison Avenue to take advantage of lofty prices being paid for Manhattan real estate, according to observers.

New York property brokers estimate that the building is worth about $500 million, more than double the $200 million Odyssey and partner Edward Minskoff paid in mid-1994.

Minskoff, however, said he has no intention of selling.

"Odyssey hired Eastdil for one single purpose, and that is to evaluate their own interest."

The developer added that he is the managing general partner of the partnership that owns the building and has "no plans to sell." Odyssey owns a "less-than-50% stake" and has no power to influence the sale of the building, he said.

The third partner is the Ohio State Teachers Retirement System.

Odyssey, founded by former Oppenheimer & Co. executives Leon Levy and Jack Nash, declined to comment. Eastdil officials also declined to comment.

"Everything we own is for sale at the right price," said Herbert Dyer, executive director of the Ohio teachers' pension fund. The pension fund owns more than 50% of the property, Dyer said.

Odyssey is likely to get more for its stake through a sale of the building than it would by selling out to Minskoff.

Minskoff, meanwhile, is exploring the possibility of packaging his New York real estate holdings in a real estate investment trust, with the IBM Building as the centerpiece, according to observers. But Odyssey, they said, has no intention of being part of a REIT.

Minskoff declined to comment on any plans for a REIT, but said he would consider buying Odyssey's stake.

The New York real estate market, often viewed as a barometer for the rest of the country, is on a tear as a strong economy and job growth pushes vacancy rates to their lowest point since the mid-1980s.

With little new development, rents are rapidly rising and investors are scooping up properties at prices that meet or exceed the highs reached during the last boom.

"The market is out of control," said Woody Heller, a broker at Jones Lang Wootton USA. "Prices are at the point where owners should think about selling."

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