SL Green, Citigroup Push Up Sale of NYC’s 388-390 Greenwich St.
- Apr 22, 2016
New York—SL Green Realty Corp. and Citigroup Inc. have agreed to speed up the $2 billion sale of 388-390 Greenwich St. in downtown Manhattan by more than a year and it appears to be a win-win for both. Citigroup is saying the earlier purchase will result in “significant cost savings” and SL Green plans to pay off the mortgage on the 2.6 million-square-foot property early.
The deal will now close in June instead of December 2017 as the two firms had previously announced in January. In a cost-cutting move, Citigroup had said earlier this year it wanted to consolidate its offices in Downtown Manhattan and move its global headquarters at 399 Park Ave. to 388-390 Greenwich St. The property had been triple-net leased to an affiliate of Citigroup through 2035. The banking giant had an option in its $1 billion lease with SL Green to acquire the property up until Dec. 31, 2020.
In addition to the purchase price, Citigroup will pay SL Green $94 million for ending its lease early.
SL Green, New York City’s largest office landlord, said it will realize approximately $1.8 billion from the deal, including the lease termination fee. The REIT plans to use the proceeds of the sale and termination payment to repay part of its corporate credit facility and retire the $1.45 billion mortgage on the property.
“We are pleased to reach an agreement on the early sale of 388-390 Greenwich Street. In addition, by retiring approximately $1.8 billion of debt, we further strengthen our balance sheet and enhance our liquidity position to in excess of $1.4 billion,” SL Green CEO Marc Holliday said in a prepared statement.
SL Green has owned the property since late 2007, when it acquired it with an affiliate of Ivanhoe Cambridge. Seven years later, SL Green bought Ivanhoe’s 49 percent stake in the asset that was valued at $1.6 billion at that time.
Citigroup said in January it planned a major remodeling at the property, including integrating the two buildings into one with a curtain-walled makeover and a single lobby “town square,” rooftop terrace, new cafeteria and fitness center. The renovations are expected to be completed by 2019 and the building will be LEED certified.
A Citigroup spokesman told Bloomberg in an emailed statement that the plan was to modernize and unify the buildings, which are now the company’s global headquarters.
“Accelerating the purchase of these buildings will result in a significant cost savings. We look forward to completing the renovations to further deepen our ties to lower Manhattan, where our company was founded more than 200 years ago,” the spokesman said.
The agreement to move up the sale of 388-390 Greenwich St. is just one of several dispositions the REIT has completed or announced in recent months, according to the company’s first quarter 2016 financial results released Wednesday.
SL Green, which also owns interests in 31 suburban buildings in Brooklyn, Long Island, Westchester County, Connecticut and New Jersey, said this week it had reached an agreement to sell 500 West Putnam Ave., a 121,500-square-foot office property in Greenwich, Conn., for $41 million. The deal is expected to close in the second quarter. Jeff Dunne of CBRE represented SL Green in the transaction.
Isaac Zion, the REIT’s co-chief investment officer, said the sale is a “continuation of our plan to strategically monetize assets that are not core to SL Green and generate incremental equity proceeds that can be applied to the company’s balance sheet.”
Other recent deals included the March sale of 7 Renaissance Square, a 65,600-square-foot office building at the Ritz Carlton complex in downtown White Plains, N.Y. SL Green and its joint venture partner, Renaissance Office Partners LLC, sold the building for $20.7 million.
In February, the company closed on the sale of the leased fee interest in 885 Third Ave. in Manhattan, also known as “The Lipstick Building,” for $453 million. The deal for the 34-story office tower was announced in October. The company said it retained a 5.7 percent senior equity investment valued at $135 million in the property.