NEW YORK — SL Green Realty Corp. (NYSE: SLG) has divested two New York-based properties for a total of $642.8 million, which will be used to partially fund the pending acquisition of the 11 Madison Ave. office building.
The company sold Tower 45, a 440,000-square-foot office building at 120 W. 45th St., for $365 million.
SL Green also agreed to sell 80 percent of its ownership interest in a 73,000-square-foot, mixed-use asset located at 131-137 Spring St. in SoHo to Invesco Real Estate. SL Green will retain a 20 percent ownership interest in the SoHo property and will continue to manage and lease the asset. The transaction is valued at $277.8 million.
SL Green will acquire the 11 Madison Ave. office building for a reported $2.6 billion. The Art Deco-style building serves as the U.S. headquarters for Sony and Credit Suisse AG.
“As illustrated by these transactions, the demand for high-quality commercial assets in the Manhattan market continues to be very strong, even as interest rates have risen in recent months,” says Andrew Mathias, the company’s president. “After repositioning both of these assets to unlock additional value, we will realize in excess of $400 million of net cash proceeds from these transactions, which were executed at a blended cap rate of 3.3 percent.”
The company intends to fund its pending acquisition of the iconic 11 Madison Ave. property through a strategic combination of property sales, joint ventures, new financing and existing property debt refinancings, while retaining cash for other investments in the pipeline. “These transactions announced today are consistent with that plan,” says Mathias.
SL Green acquired Tower 45 in 2007 as part of the company’s merger with Reckson Associates. The company then undertook a significant capital improvement program to reposition the property. The office building is currently 96.2 percent leased. Richard Baxter of Jones Lang LaSalle and Darcy Stacom of CBRE represented SL Green in the transaction.
The six-story, mixed-use building features 100 feet of ground-floor frontage on Spring Street. It houses the multi-level flagship stores for Diesel and Burberry. The remaining space includes office and residential rental units.
“These transactions fit perfectly with the acquisition of 11 Madison, which is well leased for the long term and located in one of New York City’s strongest commercial office submarkets,” says Isaac Zion, SL Green’s co-chief investment officer. “We expected to sell certain assets and create joint ventures for others during 2015 and deploy the proceeds into more accretive opportunities. Clearly, the pieces are coming together nicely.”
The transactions, which are expected to close in the third quarter, are subject to customary closing conditions.
SL Green is a New York-based, publicly held REIT that acquires, owns, repositions and manages Manhattan office properties. The company’s stock price closed Friday, July 10, at $114.93 per share, up from $107.58 a year ago.