News Article

U.S. Steel Tower sold for $250M



A Pittsburgh landmark is in new hands. The U.S. Steel Tower, the city's tallest skyscraper, is now owned by a joint venture headed by New York real estate investor Mark Karasick.

Mr. Karasick completed a transaction with New York-based Area Property Partners Friday to take control of the 64-story skyscraper, the capstone of the Downtown skyline.

The group reportedly paid $250 million for the building, which has an occupancy rate of about 94 percent. Swiss financier UBS provided up to $220 million in financing for the purchase, according to the Commercial Mortgage Alert newsletter.

That includes a $175 million fixed-rate loan with a 10-year term and a $45 million upfront reserve to be used as needed to finance tenant improvements and leasing costs, the newsletter reported.

The deal was completed four months after Five Mile Capital Partners LLC, a secondary lender to Area Property Partners, moved to foreclose on the property when Area was unable to refinance maturing debt.

In February, when news of a potential sale broke, Area released a statement saying it was in discussions with its lenders on an extension and had received unsolicited offers from potential buyers.

The company had no comment Friday. Mr. Karasick could not be reached for comment.

As part of the sale, Five Mile Capital was paid off in full. It held a $25 million mezzanine note on the property. It sought to foreclose when Area was unable to refinance after the debt matured.

Five Mile later agreed to hold off for 90 days to give Area a chance to close on the sale. That extension expired at the end of the month.

U.S. Steel Tower, completed in 1970, serves as the headquarters for U.S. Steel Corp. and the University of Pittsburgh Medical Center, which put its name atop of the building. It's also home to other firms and U.S. Bankruptcy Court.

UPMC currently leases 13 floors in the skyscraper. It recently announced it would add another seven floors by summer 2012. By then, it will occupy nearly a third of the 2.3 million-square-foot building.

"I think it's a great long-term asset. If we didn't get paid off, we would have foreclosed and owned it long term, five to seven years," a representative for Five Mile Capital said Friday.

According to the Allegheny County real estate website, the building is valued at $175 million for assessment purposes.

Peter Sukernek, vice president and general manager for Howard Hanna Commercial Real Estate Services, said it was difficult to tell whether Mr. Karasick got a good deal on the building without knowing all of the financial details.

"However, it is a premiere building in the city. It has the highest occupancy probably that it's had in a long time. Based on its location, the fact that it is the building that it is, and the fact that it has quality tenants in it, I make an intelligent assumption that the buyer knew what he was doing and that the transaction makes economic sense."

Among the properties Mr. Karasick has owned is the Bank of America Center in San Francisco. He bought the property for $879 million in 2004 and sold it about a year later to a group of Hong Kong investors for $1.05 billion. Mr. Karasick also owned two Bronx apartment buildings that fell into foreclosure in 2009.

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