J.P. Morgan & Co. is advising New York City on its $102 million sale of the U.N. Plaza Hotel to Regal Hotels International Holdings Ltd., a Hong Kong company.

The transaction, expected to close in July, is part of an initiative launched in 1994 by New York Mayor Rudolph Giuliani to privatize city-owned businesses through the Economic Development Corp.

J.P. Morgan is also advising the Port Authority of New York and New Jersey on the possible privatization of the World Trade Center.

J.P. Morgan has been aggressively mining the real estate industry for the last three years. In 1994, the bank brought managing director Jon Zehner back from London to "make real estate a 'client' group." Until then, real estate had been more of a "product" group.

"Real estate has always been an asset class," Mr. Zehner said. "In the last two to three years, it is being recognized as a developing industry, no different from natural resources or financial institutions." Mr. Zehner's group now includes 55 bankers.

Advising on the sale of the U.N. Plaza Hotel-which is contingent on Regal refinancing $160 million in existing debt-is a coup for J.P. Morgan, observers said. The deal is considered a complicated one because it involves turning a portion of the property, across from the world headquarters of the United Nations, into a condominium.

Also, the U.N. Plaza is leased by the U.N. Development Corp., which pays the property's New York City taxes. But once Regal subleases the hotel from the U.N. Development Corp., , its taxes will be increased. Through its advisory role, J.P. Morgan had to oversee this transition.

"Getting it (the mandate) is the first hurdle; executing it at the right price is the next one," said Arthur Adler, a Coopers & Lybrand partner specializing in lodging and gaming.

The bank is set to receive a 1.5% real estate transaction fee for its work on the deal.

J.P. Morgan is also leading a $287.5 million initial public offering for Security Capital Group, a Santa Fe, N.M.-based company that Phil Wharton, president of Property Information Exchange, called "the fastest growing publicly traded real estate vehicle in the country." It's "a very big assigment" for Morgan, he said.

Mr. Zehner plans to return to London this summer to head Morgan's global real estate investment banking group, making Morgan the only major American investment bank with a real estate effort led from outside the United States.

"Now that the real estate business is growing up, it's being financed by top quality Wall Street firms," said Richard Moran, chief financial officer of Kilroy Realty, a Los Angeles-based real estate investment trust.

J.P. Morgan led an $84 million securitized mortgage loan for Kilroy in January. In addition to that loan, J.P. Morgan also arranged for Kilroy a $12 million bridge loan, a $150 million credit facility, and participated in its initial public offering, led by Prudential Securities.

Mr. Kilroy praised J.P. Morgan's work and said he was particularly impressed by the bank's client focus.

Overall, real estate executives say banks have implemented stricter underwriting standards that have helped to smooth out the peaks and valleys inherent to the industry.

"What we had in the 1980s was a financial regime that exaggerated that cycicality," Mr. Moran said.

"Credit underwriting has become much more restrictive over the last decade and although its more painful for us borrowers, it's better for the business," he added. u

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