The Real Deal New York

SL Green, Citigroup speed up 388-390 Greenwich deal

Banking giant accelerating $2B purchase of 2.7M sf Tribeca HQ

April 20, 2016 05:05PM
By Rey Mashayekhi

Citigroup SL Green Realty

From left: Citigroup CEO Michael Corbat, 388 Greenwich Street in Tribeca and Marc Holliday

UPDATED, 6:00 p.m., April 20: SL Green Realty and Citigroup are accelerating the banking giant’s buyback of its headquarters complex at 388-390 Greenwich Street in Tribeca, the real estate investment trust said Wednesday.

In January, SL Green announced that Citigroup would exercise a $2 billion option to reacquire the 2.7 million-square-foot office complex that the bank sold to SL Green and Ivanhoe Cambridge for nearly $1.6 billion in 2007. The buyback option was part of a $1 billion lease renewal deal that Citigroup signed with the city’s largest office landlord in 2013.

On Wednesday, SL GreenTRData LogoTINY said the two sides have agreed “to accelerate the sale” of the property to June 2016 — from a previously slated closing date of December 2017 — and had subsequently “reached an agreement for the early termination of Citi’s lease” as part of the deal.

The Marc Holliday-led REIT noted that it will “realize approximately $1.8 billion” in proceeds at the deal’s closing, including a $94 million lease termination payment from Citigroup. SL Green expects to use the sale proceeds “to repay approximately $345 million of its corporate credit facility and retire the $1.45 billion mortgage” on 388-390 Greenwich Street.

SL Green, which analysts have noted is heavily leveraged compared to rival commercial REITs like Vornado Realty Trust, said its use of the sale proceeds to pay off existing debt would result “in reduction of company indebtedness of approximately $1.8 billion.”

“By retiring approximately $1.8 billion of debt, we further strengthen our balance sheet and enhance our liquidity position to in excess of $1.4 billion,” Holliday said in a statement.

The office complex at 388-390 Greenwich Street is currently undergoing an expansive curtain-walled makeover that will transform the property upon completion in 2019.

Citigroup moved its global headquarters — previously located at 399 Park Avenue in Midtown — to the property earlier this year and is “in the process of modernizing and unifying the buildings,” a Citigroup spokesperson said in a statement. “Accelerating the purchase of these buildings will result in significant cost savings,” the spokesperson added.

SL Green also announced several other transactions that it completed in the first quarter of 2016, including its March acquisition of 183 Broadway in the Financial District for $28.5 million.

The five-story, 9,100-square-foot mixed-use retail and residential building is located near the Fulton Transit Center and adjacent to 187 Broadway and 5-7 Dey Street, which the REIT acquired last August for a combined $63.7 million. The seller was not disclosed.

The company also disclosed several office leasing deals signed in the first quarter, including a 186,000-square-foot renewal with Credit Suisse at 11 Madison Avenue, where the banking firm occupies around 1.2 million square feet in total; a nearly 104,000-square-foot renewal with Wells Fargo at 100 Park Avenue; a new 71,000-square-foot lease with Media Assembly at 711 Third Avenue; and a new 35,000-square-foot lease with CBS Broadcasting at 555 West 57th Street.

In addition, SL Green is finalizing a deal with the Visiting Nurse Service of New York that would give the nonprofit healthcare provider a 308,000-square-foot leasehold condominium interest at the Daily News Building at 220 East 42nd Street, as The Real Deal reported today.