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NEW YORK CITY-Locally based, SL Green Realty Corp., a self-administered and self-managed REIT, and Gramercy Capital Corp., a New York City-based majority-owned subsidiary of SL Green, have agreed to pay $317 million for a 79% fee interest and 21% leasehold interest in the property located at 885 Third Ave., better known as the Lipstick Building.
Gramercy owns 45% of the investment in the 607,000-sf, 34-story, class A office building, with SL Green owning the remaining 55% stake. The transaction was financed with a $267.7-million, 10-year fixed rate loan by Goldman Sachs Commercial Mortgage Capital. Simultaneously, both companies have entered into a 70-year leasehold/sub-leasehold arrangement for the building.
Hugh Hall, COO of Gramercy comments, "The Lipstick investment is intended to generate long-duration, quality earnings for Gramercy, and build long-term net asset value through a highly secure ownership position of an attractive Midtown land parcel."
Isaac Zion, managing director at SL Green, tells GlobeSt.com that he seconds Hall's comment, noting that, "Hall summed things up perfectly when referring to what this investment does for Gramercy and I couldn't have put it better myself in describing what it means for SL Green." The Lipstick Building, located at Third Avenue and 53rd Street, is 99% occupied by a tenant roster including the law firms Latham & Watkins and Ropes and Gray.
"The acquisition of 885 Third Ave. again demonstrates our ability to source compelling deals in today's highly competitive Midtown Manhattan acquisition market," notes Andrew Mathias, CIO of Gramercy. "We created the fee/leaseback structure for situations like this: tremendous real estate, long-term value creation opportunities for the leasehold and attractive, secure cash-flows for GKK and SLG's shareholders."
This transaction is the latest in a series of net lease investments undertaken by Gramercy jointly with SL Green, including the recently announced 2 Herald Square, an 11-story retail and commercial office property along 34th Street. Other recent net leases investments include 55 Corporate Dr., a 670,000-sf office building in Bridgewater, NJ leased to Sanofi-Aventis as its North-American headquarters; and One Madison Ave., Credit Suisse's headquarters on Madison Square Park, as GlobeSt.com recently reported.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
