(Save the date: RealShare New York comes to the Grand Hyatt, New York, NY, October 9.)
NEW YORK CITY-After repositioning the retail space and bringing in high-street tenants like Armani and Dolce & Gabbana, joint venture partners SL Green Realty Corp. and Jeff Sutton have more than doubled its net operating income at 717 Fifth Avenue—and plan on creating even more value in years to come. In a joint statement released this morning, the Manhattan office REIT and the retail titan have restructured and recapitalized their 123,000-square-foot retail condominium project between East 55th & 56th Streets in the Plaza District.
Under the transaction, SL Green has sold 50% of its interest to Sutton and retains a 10.92% stake in the property at a price valued at $618 million, or $5,015 per square foot at a 4.9% cap rate, according to the REIT. In addition, the venture has also received $590 million of new financing for the site, including a $300 million fixed-rate mortgage loan from New York Life and TIAA as well as a 10-year, $290 million mezzanine loan originated by RREEF. Overall, SL Green received $85 million in net cash proceeds from the transactions.
The move is highly characteristic of SL Green’s overall corporate strategy. The REIT – which primarily focuses on maximizing value of Manhattan commercial properties – acquired a condominium interest in the ground floor and floors 2-4 for $230 million from the Feil Organization and BLDG Management in 2006. In turn, Andrew Mathias, president of SL Green, described the investment with Sutton as a “resounding success,” as evidenced by the realization of net operating income through creative repositioning and leasing over the past six years.
“The result is a sizable gain in asset value, as recognized by our lenders, as well as our ability to monetize a portion of our position and generate substantial cash proceeds,” he says, in a statement.
Also this week, Sutton and SL Green have tied up the 15-year, 30,000-square-foot Express lease at 1552 Broadway. As previously reported by GlobeSt.com, the retailer was considering to take a 45,000-square-foot space inside the former ESPN Zone at 4 Times Square owned by the Durst Organization, but Express CEO Michael Weiss said the Times Square “bowtie” site was a more desirable location.
“The age old mantra of ‘location, location, location’ was certainly at work,” he says, in a statement. The chain operates more than 600 stores with approximately 5.2 million gross square feet across the US, Canada and Puerto Rico. The new flagship will open in 2013, and existing tenant TGI Friday’s will move out. “These flagships will not only reflect the strength of our fashion authority within these two cities, but also serve as a gateway to our brand for international visitors and shoppers as part of our international expansion strategy,” he adds.
SL Green and Sutton acquired the fee interest in 1552 Broadway for $136.55 million, as well as a 70-year leasehold at 1560 Broadway last year The space – featuring ground level frontage on Broadway that wraps around onto 46th Street – was being marketed with “premium” signage on the building’s fa
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