New York mega-developer Harry Macklowe is feverishly trying to find buyers for at least $1 billion worth of office assets as the global credit crunch wreaks havoc on his ability to refinance the $7 billion takeover of eight office buildings from The Blackstone Group.
According to multiple sources familiar with the situation, Macklowe Properties has hired Perella Weinberg Partners to quietly raise the long-term equity capital they need to pay off more than $3.5 billion in short-term debt due in February.
Perella Weinberg, whose headquarters are located in Macklowe’s GM Building, has deep ties with Middle Eastern financiers who have been keen to invest in Manhattan real estate.
Perella Weinberg’s Tarek Abdel-Meguid sits on the board of Kingdom Holdings and is said to hold great sway with the company’s boss, Saudi Prince Al-Waleed bin Talal, whose $20 billion-plus fortune ranks him as the 13th richest person in the world, according to Forbes magazine.
Dubai-based investment firm Istithmar, which recently bought luxury retail chain Barneys, is also an investor in Perella Weinberg along with Gulf Investment Corp., a Kuwaiti company.
Officials at Perella Weinberg and Macklowe declined to comment.
Yesterday, Macklowe disclosed that he increased his mortgage on the GM Building by $500 million through an agreement with Deutsche Bank. Many believe the move was made to raise additional cash to help service the debt on the Blackstone deal.
Blackstone flipped the buildings to Macklowe in February as part of its $38 billion leveraged buyout of Equity Office Properties. To pay for the 6.6 million square-foot portfolio, Macklowe put up only $50 million of his own cash and borrowed the remaining $6.95 billion.
As part of the debt package, also arranged by Deutsche Bank, he pledged his highly successful investment in the GM Building and other assets as collateral.
Hedge fund giant Fortress owns nearly $900 million worth of preferred equity and has a claim on some of Macklowe’s assets including the GM Building if he does not refinance, sources said.
In buying the EOP properties at such a premium – nearly $1,000 a square foot – Macklowe bet he would be able to flip some buildings at a higher price or refinance the debt at similar terms.
But now, with the global credit markets virtually shut down, Macklowe is having trouble finding lenders for such highly leveraged buildings at a time when many believe Manhattan office rents are about to fall, sources said.