The furor of the week over the Bear Stearns buyout has focused on the 2 dollar share price JP Morgan paid. What is interesting in the deal is how JP Morgan has gotten a high priced real estate asset, The Bear Stearns Headquarters, for a relative pittance. The building is valued at roughly 1.1 billion while the total cost of the buyout was 236 million.
Of course their is debt on the building, about 570 million, but there was also an alternative need. JP Morgan is looking to move from their present building and the Bear Stearns Headquarters is much newer. The location near Grand Central Terminal does not hurt either.
JP Morgan will have to absorb the risk and poor decisions Bear Stearns has made, but once that is complete the upside could be fairly dramatic.
Located at 383 Madison Avenue, the building is coveted for its proximity to Grand Central Terminal and for its relative newness. While J.P. Morgan had planned to move its investment-banking and trading operations to a building that is planned for the World Trade Center site, it will now move those operations to the Bear Stearns headquarters. However, J.P. Morgan will retain the right to build at the World Trade Center site
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