Monday morning brought a flurry of news from SL Green Realty, with the city’s largest office landlord announcing a number of deals — including a surprise new lease with Giorgio Armani at 760 Madison Avenue that ends a legal feud with the Italian luxury retailer.
The new lease will keep Armani at the Gold Coast location through 2024, with the retailer seeing its annual rent immediately increase from $3.35 million to $13.35 million, SL Green president Andrew Mathias said during the company’s 2015 Analyst Day presentation.
Mathias described the REIT’s contentious recent history at the property, which it acquired the leasehold on from David Frankel in 2012 before buying outright as part of a $282 million deal two years later.
The landlord faced legal battles after entering negotiations with Armani, which Mathias said did not have a non-disturbance lease agreement. The talks were “a little rocky in terms of how the tenant appreciated the fact that they were facing possible eviction,” Mathias added, and the retailer filed suit against SL Green for allegedly conducting an “illegal and collusive scheme” to squeeze it out of the roughly 16,000-square-foot location.
“It looked like we were setting up for a long battle in court,” Mathias told analysts and shareholders. “But we kept talking and had a good relationship with the folks at Armani.” The executive then queued up a video clip from “The Godfather,” depicting the famous scene where Marlon Brando’s Don Corleone says he would “Make them an offer they can’t refuse.”
The playful and entertaining Analyst Day presentation also included a bit that featured Mathias and SL Green CEO Marc Holliday play the role of “MythBusters” — channeling the popular Discovery Channel television program in dispelling rumors and reports surrounding the REIT.
REIT buys out 600 Lexington Ave, sells 250 Bedford Ave
SL Green also announced it’s buying out the Canada Pension Plan Investment Board’s 45 percent stake in 600 Lexington Avenue, a 36-story, 303,500-square-foot Midtown office building the two sides jointly acquired in May 2010.
The transaction – valued at $284 million, or $936 per square foot – is expected to close before year-end and will give SL Green total ownership of the office tower. Occupancy at the building stood at 95 percent as of this month, with the REIT and its partner having already completed capital improvements at the property.
The company also said it had sold its 90 percent stake in the Williamsburg Social, a 72-unit rental building at 250 Bedford Avenue in Williamsburg, in a transaction valued at an estimated $49.5 million.
SL Green owned the multifamily building in partnership with Ben Shaoul’s Magnum Real Estate Group. The partners acquired the 44,000-square-foot property as well as the adjacent Williamsburg Townhomes development for nearly $52 million in March 2013.
The REIT said it had sold off the 12 townhomes in the Williamsburg Townhomes development for a gross sales price totaling $25.5 million, while the sale of its 90 percent stake in the rental building valued the asset at $55 million, or $1,242 per square foot.
The company will retain its interest in 250 Bedford Avenue’s 51,470-square-foot street-level retail condo.
Lease deal inked at 562 Fifth Avenue
In addition, SL Green announced a 49-year, full-building net lease at 562 Fifth Avenue. While declining to name the lessee, the deal includes a $100 million purchase option on the 13-story, 42,000-square-foot building, which SL Green placed on the market earlier this year.
The property holds the potential for an extensive retail redevelopment, as the New York Daily News reported earlier this year. While SL Green owns the building and the land beneath it, Joe Sitt’s Thor Equities reportedly had a triple-net lease at 562 Fifth Avenue through 2025 worth $1.23 million in annual income.
Mathias said the new deal would increase that figure to $4.6 million in annual cash rent for SL Green. The REIT acquired the property, as well as retail development sites at 570 and 574 Fifth Avenue, from Gary Barnett’s Extell Development for more than $146 million last year.