SL Green Cleans House

The REIT implements its strategic disposition and reinvestment strategy.

By Gail Kalinoski, Contributing Editor

Brett Herschenfeld, SL Green
Brett Herschenfeld, SL Green

SL Green Realty Corp., continues clearing out some of its Manhattan inventory to help pay for its record-setting $2.3 billion acquisition of 11 Madison Avenue, this time selling two Fifth Avenue retail development sites for $125.4 million.

The REIT sold 570 Fifth Ave. and 574 Fifth Ave. to an unidentified single buyer, who paid about $13,690 per square foot for the sites. SL Green bought the two properties in November 2013 for $78.7 million and vacated the tenants in preparation for a retail development, according to the REIT.

SL Green is now selling the sites as another step in its strategic real estate disposition and reinvestment strategy outlined in May when it announced plans to buy Eleven Madison Avenue, a 29-story, 2.3 million-square-foot Class A office building in Manhattan’s Midtown South. The deal also called for SL Green, the city’s largest office landlord, to pay $2.3 billion plus approximately $300 million in lease-stipulated improvement costs to the owners, a joint venture of The Sapir Organization and CIM Group.

Sale of the Fifth Avenue sites is expected to close before the end of the year.

“With this transaction, SL Green will realize returns on its original investment that are consistent with our original underwriting without having incurred any development risk,” SL Green Managing Director Brett Herschenfeld said in a prepared statement. “In addition, the sale provides a source of equity capital that can be tax efficiently redeployed into Eleven Madison on an immediately accretive basis.”

Earlier this summer, SL Green said it was selling Tower 45, a 440,000-square-foot office building at 120 W. 45th St. for $365 million, about $830 per square foot, to an unidentified buyer. The company also formed a joint venture with Invesco Real Estate and sold it 80 percent of the ownership of 131-137 Spring St., a 73,000-square-foot mixed-use building in SoHo. SL Green retained 20 percent ownership of the property valued at $277.8 million.

SL Green President Andrew Mathias said in July, when the Tower 45 and SoHo deals were announced, that the company was funding the purchase of Eleven Madison with “a strategic combination of property sales, joint ventures, new financing and existing property debt refinancings.”

The company is also building One Vanderbilt, a 1 million-square-foot, 67-story tower across from Grand Central Terminal that will have office and retail space. After New York City officials approved rezoning in May, demolition of current buildings began this summer. SL Green is funding more than $210 million in upgrades around the terminal, including new subway entrances and a public plaza.

As of June 30, SL Green held interests in 120 Manhattan buildings totaling 44.1 million square feet. The REIT also owns interests in 37 buildings totaling 5.9 million square feet in Brooklyn, Long Island, Westchester County, Connecticut and New Jersey.