iStar-managed REIT signs $620M contract to buy ground lease at L&L’s 425 Park

L&L Holding Company’s $1B office development is on the property
By Erin Hudson | August 06, 2019 03:52PM

From left: A rendering of 425 Park Avenue, iStar CEO Jay Sugarman, and Nuveen managing director Nadir Settles (Credit: rendering via L&L Holding/Sugarman by Emily Assiran/Settles via Nuveen)

From left: A rendering of 425 Park Avenue, iStar CEO Jay Sugarman, and Nuveen managing director Nadir Settles (Credit: rendering via L&L Holding/Sugarman by Emily Assiran/Settles via Nuveen)

L&L Holding Company will soon have a new landlord at its $1 billion 425 Park Avenue office development.

Safehold Inc., a REIT managed by iStar and led by Jay Sugarman, has signed a contract to buy ground lease of the under-construction office development for $620 million, according to a notice released yesterday. The seller was Nuveen, formerly TIAA, which acquired the ground lease for $315 million in 2011, according to public records.

The publicly-traded company also signed a letter of intent with an unnamed sovereign wealth fund to form a joint venture for the acquisition of the ground lease 425 Park Avenue, according to the statement.

SEE RELATED: The resurrection of 425 Park 

If the JV is formed as intended, Safehold will retain an ownership of 55 percent of the asset. The statement noted that “ closing is not conditioned on completing the joint venture.”

The REIT, which focuses on originating and acquiring ground leases, expects the deal to close by the end of the year.

L&L is retaining the leasehold on the property and is redeveloping the property and erecting a 47-story office building on the site. L&L’s position has stayed the same and the deal has no impact on the office project’s construction schedule, a source said.

The tower is 48 percent leased, with Ken Griffin’s hedge fund Citadel as its sole reported tenant so far. The fund is taking a total of 16 floors.

Nuveen’s managing director who oversees New York office real estate investments, Nadir Settles, declined to comment on the ground lease sale. Safehold and L&L declined to comment.

On Safehold’s website, the company claims to be “leasehold lender friendly” and says its strategy allows “building owners targeting a 15 percent [return on equity to be] no longer saddled with owning the underlying land at a 5 percent ROE.”