SL Green Sells Half its Interest in 717 Fifth Ave. to JV Partner Jeff Sutton
- Jul 26, 2012
In a transaction that provided $85 million in net cash proceeds, SL Green Realty Corp. has restructured and recapitalized its joint venture at 717 Fifth Avenue in New York City, the company announced Wednesday.
The company sold half of its interest to JV partner Jeff Sutton, retaining a 10.92% stake in the retail condo property at a price that values the asset at $618 million, or $5,015 per square foot. This valuation reflects a 4.9 percent cap rate on in-place net operating income.
The venture also has received $590 million of new financing in the form of a $300 million, 10-year, 4.45 percent fixed-rate mortgage loan and a $290 million, 12-year, 9.0 percent fixed-rate mezzanine loan. The mortgage loan was originated by New York Life and TIAA, and the mezzanine loan was originated by RREEF.
SL Green acquired its interest in the property in 2006 at a price valuing the asset at $230 million. Over the subsequent six years, NOI was increased by about 2.5 times through the execution of new retail leases with Armani and Dolce & Gabbana and the relocation of Escada to new space on 55th Street.
The retail condominium totals 123,000 square feet on four floors, with 81.5 feet of sidewalk frontage on Fifth Avenue. The long-term leases with Dolce & Gabbana and Escada were executed in 2011.
The restructuring is likely to be discussed during a conference call and audio webcast on Thursday at 2 p.m. Eastern.
Per SL Green’s second-quarter financials, also released Wednesday, same-store NOI on a combined basis increased by 1.8 percent to $199.5 million for 2012 as compared to 2011. Consolidated property same-store NOI increased by 1.0 percent to $169.2 million, and unconsolidated joint-venture property same-store NOI increased 6.9 percent to $30.3 million.
A July 2012 Commercial Property Price Indices report from Moody’s/RCA shows the CPPI for retail in major markets climbing by 16.28 percent from 12 months earlier. This sector has now, according to the report, regained 56.2 percent of its peak-to-trough loss (October 2007 to June 2010).