acquisition

Gramercy will own a 45% interest and SL Green will own a 55% interest in the 1.2-million-sf South Building. The property is almost entirely occupied by Credit Suisse First Boston, New York pursuant to a 15-year remaining term lease. Gramercy and SL Green will acquire the building on a pari passu basis for approximately $803 million. The closing is scheduled for the second quarter of 2005. SL Green and CSFB currently intend to physically separate the South Building and the North Tower and convert the North Tower to residential condominiums. SL Green and CSFB will share in the profits of the residential component. Gramercy elected not to invest in the residential portion.

With the agreement, Gramercy entered the credit tenant lease business that is expected to generate an income stream through 2020 based on the CSFB lease. Gramercy executives say the investment will also provide significant tax shelter and the venture has the ability to redevelop the retail component of the South Building in participation with CSFB. "The venture between SL Green and Gramercy once again signifies the strength of combining the experience and relationships of our management team with established infrastructure, market knowledge and real estate capabilities to source and share transactions that satisfy the business objectives of both companies," says Marc Holliday, CEO of Gramercy Capital Corp.

Under the terms of the joint venture, each member will be required to fund its pro-rata share of any additional capital contributions. The joint venture has arranged for a $690-million, 15-year, fixed-rate mortgage loan secured by the South Tower. SL Green created Gramercy to continue its structured finance business as a separate public company. SL Green has a significant ownership interest in the externally managed REIT.