(Bloomberg)—The California State Teachers’ Retirement System, the second-largest U.S. pension fund, is expected to provide part of the equity for the $880 million acquisition of the Terminal Stores building in Manhattan’s Chelsea neighborhood, according to people with knowledge of the transaction.
The fund, which is being represented by a unit of JPMorgan Chase & Co., is partnering with L&L Holding Co. in the purchase of Terminal Stores and is likely to provide at least $100 million of equity, said one of the people, who asked not to be identified because the deal is private. Normandy Real Estate Partners LLC is also involved in the acquisition, but isn’t part of the Calstrs-L&L joint venture, another person said.
The buyers want to convert the former warehouse, which was completed in 1891 and has more than 1 million square feet (93,000 square meters), into office space, among other uses. The property is part of a historic district, meaning that any work to modernize the structure has to be approved by the city Landmarks Preservation Commission.
Representatives for Calstrs, JPMorgan, L&L and Normandy declined to comment on the deal.
Last month, L&L co-founder David Levinson said that his company and Normandy are in contract to buy Terminal Stores, which takes up the entire block from 11th to 12th avenues and 27th to 28th streets. GreenOak Real Estate LP bought a stake in the building in 2014 in a deal that valued it at about $300 million.
Calstrs said in a report that it allocated as much as a $500 million to a fund administered by JPMorgan, part of roughly $4.4 billion of commitments to new or existing partners in the second half of 2017. The JPMorgan-managed fund has a “core” strategy, meaning it makes relatively conservative investments with lower returns than typically accompany higher-risk deals.
Uber Technologies Inc. and L’Oreal USA are among companies with offices at Terminal Stores. Levinson said last month that about $200 million in upgrades are planned for the property, a brick building recognizable for its arched windows. About half of the structure is still used for storage.
Chelsea and nearby neighborhoods such as the Meatpacking and Flatiron districts have become magnets for technology companies. Earlier this year, Google paid $2.4 billion for Chelsea Market, a 1.2 million-square-foot former cookie factory that’s across Ninth Avenue from the company’s New York headquarters. Other tech and creative tenants have flocked to the area, driving up property values.
--With assistance from John Gittelsohn.To contact the reporters on this story: Gillian Tan in New York at [email protected]; David M. Levitt in New York at [email protected] To contact the editors responsible for this story: Daniel Taub at [email protected]; Alan Goldstein at [email protected] David Scheer
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