The 50-story, nearly 2.6-sf million 1221 Avenue of the Americas, which sold for approximately $394 per sf, will continue to be known as the McGraw Hill Building. McGraw Hill's corporate headquarters offices and two of its businesses--BusinessWeek and Standard & Poor's Corporate Value Consulting--will remain at the Rockefeller Center location in a 17-year lease deal. Other tenants at the 100% leased site include Rockefeller Group International Inc., Morgan Stanley, and JP Morgan Chase & Co. Sublease space is currently available at prices ranging from $55 to $65 per sf.
Harold McGraw III, McGraw Hill chairman, CEO and president, says the sale is consistent with its strategy to focus on core assets and that the timing was right for the deal. The company has owned its interest and maintained a significant presence in the building since its construction in 1972. McGraw Hill also has long-term leases, rather than ownership interests, at many of its major offices, including 2 Penn Plaza and 55 Water St. in New York City and its new London headquarters at Canary Wharf.
Strategy was also a key factor for SL Green. "It aligns perfectly with our strategy of consistently upgrading the portfolio while generating substantial and immediate earnings growth, long-term value creation and investing with top caliber partners," explains Marc Holliday, president of SL Green.
Woody Heller and Carly Borg, formerly of CB Richard Ellis and now with Studley's Capital Transaction Group, together with Stephen Siegel of CBRE represented McGraw Hill on the sale of its interest.
Heller calls it one of the "largest building deals of the decade," noting that it is a virgin building--no interest had traded until now--and that the transaction took a long time to be completed. "The pricing is an indication of the strength of the market," he adds.
In a statement, the Rockefeller Group says, "As the majority partner, the Rockefeller Group will continue to manage the McGraw-Hill Building so for our tenants the transition should be seamless."
The purchase price was reduced by an amount equal to 45% of underlying property ownership indebtedness in the amount of $175 million, provided by Wachovia Capital Markets LLC and was paid in cash. SL Green funded the cash component, in part, with proceeds from its offering of approximately $158 million Series C Redeemable Preferred Stock that closed earlier in the month. The balance of the proceeds was funded with the company's unsecured line of credit and a $100-million term loan provided by Wells Fargo Bank, Na. The going-in unlevered cash NOI yield on investment is 8% based on fully escalated in-place rents averaging $51.62 per sf.
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