Boston Properties say it will buy GM building

CHICAGO (Reuters) - Boston Properties Inc on Saturday said it has reached a deal to buy the General Motors building in Manhattan, along with three other buildings, from New York developer Harry Macklowe for about $3.95 billion.

Boston Properties, which owns and operates office buildings, said it would acquire the properties through joint ventures with unnamed partners. The company said it would pay about $1.47 billion in cash, $10 million of common units of limited partnership interest. The company also agreed to take on about $2.47 billion in debt.

According to a statement from Boston Properties, the company would also buy three other New York properties: 540 Madison Avenue, 125 West 55th Street and Two Grand Central Tower.

The GM building is seen as one of the most successful real estate redevelopments, and arguably the most coveted office building, in Manhattan.

Boston properties did not immediately disclose the amount of cash it would pay for the GM building, but said the principle debt it would assume for the property amounts to $1.9 billion of secured and mezzanine loans having a weighted average interest of 5.97 percent per year.

Macklowe Properties bought the building, previously half-owned by Donald Trump, in 2003 for a then record $1.4 billion. Macklowe turned the 50-story structure into a hot property, luring hedge funds and private equity firms as tenants and commanding some of the highest rents -- more than $150 per square foot -- in the United States.

Macklowe spent about $7 billion last year for seven Manhattan buildings previously owned by Equity Office Properties Trust. He has since struggled to refinance those loans. Macklowe reached extension agreements with his chief lenders Fortress Investment Group LLC and Deutsche Bank AG.

Proceeds from the GM Building will be used to repay Macklowe's lenders.

Last year, Deutsche Bank headed a group that provided $5.8 billion in short-term loans for the buildings. Those loans, and a $1.2 billion equity loan from Fortress Investment, were to be replaced by longer-term loans. But the tightening credit markets wiped out Macklowe's ability to secure new funding. In February he defaulted on the loans.

Macklowe's troubles became emblematic of those of large borrowers who relied on temporary financing to foot the bill for huge acquisitions, only to have the credit crunch crush their plans. Borrowing terms have become much less generous and more expensive.

While, Boston Properties did not disclose the identities of its financial partners, a source told Reuters on Tuesday the group includes Goldman Sachs and two Middle Eastern Investors. A call to a Boston Properties representative was not immediately returned.

The company said the purchase of the GM building was expected to close in June.

(Reporting by Kyle Peterson and Ilaina Jonas, editing by Jackie Frank)