The Real Deal New York

SL Green sells Tower 45, stake in 131 Spring Street

Deals free up cash for $2.6B buy of 11 Madison

July 13, 2015 11:16AM
By Konrad Putzier

From left: 120 West 45th Street, SL Green's Marc Holliday and 131-137 Spring Street

From left: 120 West 45th Street, SL Green’s Marc Holliday (credit: Steve Friedman) and 131-137 Spring Street

SL Green sold stakes in two Manhattan office properties for a combined $587 million in an attempt to free up cash for its blockbuster purchase of 11 Madison Avenue.

The REIT announced this morning that it sold Tower 45, a 460,000-square-foot office building at 120 West 45th Street, to an unnamed buyer for $365 million. JLL’s Richard Baxter and CBRE’s Darcy Stacom brokered the deal.

SL Green also sold an 80 percent stake in the mixed-use building 131-137 Spring Street in Soho to Invesco. According to the release, the sale values the property at $277.8 million, which would put the sales price at $222.2 million. The two firms will run the property as a joint venture.

“After repositioning both of these assets to unlock additional value, we will realize in excess of $400 million of net cash proceeds from these transactions, which were executed at a blended cap rate of 3.3 percent,” said SL Green’s President Andrew Mathias in a statement.

The announcement arrived the same day that Goldman Sachs downgraded SL Green’s stock from “neutral” to “sell,” citing high leverage that could make it hard to fund new deals.

But by the looks of it, SL Green won’t use the money from the two sales to stock up its cash reserves. Instead, it will use it to help finance its purchase of 11 Madison Avenue for $2.6 billion. After going in contract to buy the art deco office building in May, the REIT has been looking to sell properties to get the cash needed to close on the deal.

In an SEC filing from early June, SL Green announced it is looking to rake in between $1.1 billion and $1.2 billion through asset sales and recapitalizations. The SEC filing showed Tower 45 and 131-137 Spring Street as possible assets for sale, along with 609 Fifth Avenue and 885 Third Avenue.

“Our intention is to fund the Company’s pending acquisition of the iconic 11 Madison property through a strategic combination of property sales, joint ventures, new financing and existing property debt refinancings, while retaining substantial cash for other investments in the pipeline,” Mathias said in the statement. “These transactions announced today are consistent with that plan.”