SL Green Acquires Former Magazine HQ for $105M

NEW YORK CITY-SL Green Realty Corp. is in the process of acquiring 28 W. 44th St. from a Chicago-based real estate investment company for $105 million. The deal equals $293 per sf for the 359,000-sf former headquarters of the New Yorker . The Green team reacted quickly, chief investment officer Andrew Mathias explained yesterday in the company’s earnings conference call, allowing the firm to, “pre-empt the marketing process that we believe would have pushed up the taking price had it been allowed to continue.” The deal is part of the firm’s strategy for this year, according to CEO and president Marc Holliday. He stated SL Green is estimating $250 million worth of acquisitions for this year. “While we hope to exceed this projection, as we have done in prior years, we have the luxury of being very selective in this market as we have good earnings momentum coming into 2005.”The 21-story office building is two blocks from Grand Central Station and directly across from another SL Green property, 19 W. 44th St. It is 87% occupied and the tenant roster includes the City University of New York, Accel Healthcare, LLC and the American National Standards Institute. In addition to office space, the property includes 15,800 sf of retail. No tenants occupy more than 15% of the property.”This asset is a natural complement to 19 W. 44th St., our first-quarter acquisition from last year. The market dynamics in the Grand Central submarket, and more specifically in the immediate area of these properties, have continued to strengthen over the last year,” Mathias said. “These properties will benefit from the diminution in supply as two key competitive buildings are being repositioned out of the competitive set, one by redevelopment into class A office and the other in a residential conversion. This, combined with rising occupancies in other competitive buildings, sets the stage for very solid bottom growth for 28 West 44th St.”There is also a substantial lease up play at 28 West 44th as we look to drive occupancy from its current 87% to a level more commensurate with the rest of our portfolio,” he added. The transaction is slated to close in the first quarter of this year and SL Green had initially intended to acquire the property with funds drawn under the company’s unsecured line of credit; however, this may change, according to chief investment officer Andrew Mathias.

“We are currently exploring various alternatives with respect to the capitalization of the acquisition from both the debt and equity perspective. We have already begun to receive the inevitable inquiries from unsuccessful bidders of the asset, all potential joint venture partners,” Mathias said. “Additionally, while it is our intention now to close the acquisition on SL Green’s unsecured line of credit, we have received some very compelling secured financing proposals that would have the added benefit of fixing our rate on the acquisition in today’s very attractive Treasury environment.”