Stung by its exposure to the home mortgage market, Citigroup is trying to capitalize on its strength in commercial real estate: trophy office buildings. Citigroup clinched a $1.575 billion deal to sell two of its Manhattan office properties, 388 and 390 Greenwich Street, according to the buyer, SL Green Realty Corp. Citigroup no doubt will make a tidy profit on these buildings, which it inherited through its 1998 merger with Travelers Group.
Not a bad strategy to offset some of its losses. As I reported in this month's cover story, rising real estate prices are a hindrance to office tenants, but represent a boon to office owners — or even would-be owners, as was the case with Infosonics CFO Jeff Klausner.
Indeed, Klausner helped his company pocket $2 million earlier this year by exercising a fixed-price option to buy the single-tenant building Infosonics was leasing — and then immediately turned it over to a REIT, which paid a market rate for it. The deal hinged on the fact that the building value had nearly doubled, Klausner told CFO, making it worth his while to broker the exchange. (See "Coming to Terms" sidebar of the December cover story for a list of deal tips to keep rent-hungry landlords at bay.)
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