NEW YORK CITY-SL Green Realty Corp., the city’s largest office REIT, is expanding its footprint in Manhattan’s tightest office market: Midtown South. The company has snatched up 304 Park Avenue South—a prime mixed-use building on the corner of 23rd Street where the Flatiron District and Gramercy converge—from seller Walter & Samuels for $135 million, or $628 per square foot.
Under the deal, SL Green will acquire the property with approximately 50% cash and 50% in operating units, marking the fifth time this year the REIT has used operating units in making new acquisitions. It is expected to close officially on June 1.
Andrew Mathias, president of SL Green, describes the buy as a “careful” decision. While the Midtown South office market boasts one of the lowest and tightest vacancy rates in the nation (6%), Mathias says the “substantial” lease activity in the area have driven cap rates on marketed deals below the company’s investment thresholds. However, Mathias says the REIT's relationship with the seller and the building itself presented a “unique opportunity” to emerge into the growing submarket.
“It’s a classic SL Green investment – off-market, potential repositioning, and creating value upon acquisition for both the company and the seller,” he says, in a statement.
The property—which recently received upgrades such as new elevators, windows, bathrooms and HVAC systems—is 95% occupied by boutique office tenants like IMG Models, a model management firm. The building is also home to various retail tenants, including Bath & Body Works, H&R Block and Time Warner Entertainment.
Douglas Harmon, senior managing director of Eastdil Secured who orchestrated the 304 Park Avenue South transaction, tells GlobeSt.com in an e-mail that the property benefits from its “unique crossover location between Madison Square Park, the Flatiron District and Gramercy, while also transitioning south into Union Square, “encompassing significant upside in the retail and the office components.”
In the same neighborhood, Harmon has also brokered deals such as the $1.9 billion sale of 111 Eighth Ave. to Google, as well as many recent property sales in the Midtown South market, including the Toy Center, Chelsea Market, 620 Avenue of the Americas and the Milk Building.
Walter & Samuels represented the seller, and did not return a phone call seeking comment.
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