The Real Deal New York

SL Green considering JV opportunities for One Vanderbilt

REIT's performance driven by resurgence of financial sector

April 23, 2015 05:30PM
By Rey Mashayekhi

One Vanderbilt

From left: Marc Holliday (credit: Steve Friedman), rendering of One Vanderbilt (credit: KPF) and Steven Durels

SL Green Realty is considering “joint venture alternatives” for its One Vanderbilt office tower, CEO Marc Holliday said during the real estate investment trust’s first-quarter earnings call Thursday.

“There’s real value to be created between now and the next 12 to 24 months” in the development of the 64-story, 1.6 million-square-foot Midtown East project, Holliday said, citing the support of Manhattan borough president Gale Brewer and the City Planning Commission.

A “robust” leasing pipeline driven by demand from financial services tenants has SL Green on track to exceed full-year leasing projections, executives said.

The REIT secured 44 Manhattan office leases totaling 466,248 square feet in the first quarter – which, in addition to the recent signings of Bloomberg and WeWork to Midtown office leases covering more than 390,000 square feet, “should allow us to meet or exceed this year’s goals,” Holliday said.

The company noted strength in leasing activity across the board, but pointed to the financial services sector as being “more active today than at any time in the last couple of years,” according to director of leasing Steven Durels.

Nine of SL Green’s 10 largest leases so far this year were secured with financial services clients, Durels said, including the Bloomberg lease at 919 Third Avenue and Franklin Templeton’s 126,000-square-foot commitment at 280 Park Avenue

“I don’t think it’s unique to our portfolio,” Durels said of the company’s leasing numbers for the year. “The brokers are out there telling their clients that the balance is shifting towards the landlords, that the market is rising and that they don’t see it slowing down in the near to intermediate future.”

Holliday cited SL Green’s focus on “structured-type, off-market deals” for acquisitions and noting that asset sales will be dictated by “growth trends in those assets over the next five, seven, 10 years.”

Regarding the company’s recent leases, executives said the company is “pretty excited about WeWork as a tenant and a business,” describing how the shared space provider has “a substantial amount of cash in the bank” and “substantial institutional backing.”

WeWork’s lease at 315 West 36th Street “fell into the hotspot of Midtown South, where TAMI tenants want to be,” Durels said, adding that “the rents that we got on the building were well in excess of underwriting when we bought the building and what we would have budgeted 18 months ago.”

SL Green outperformed both the MSCI US REIT Index and the S&P 500 Stock Index with a 8.37 percent stock return in the first quarter.