SL Green set to profit from Reckson buildings

Oct.October 31, 2007 05:14 PM

The recent acquisition by SL Green of Reckson Associates Realty will benefit SL Green’s investors, analysts say, by improving the portfolio of New York’s largest office landlord. SL Green announced the $6 billion acquisition in early August.

Analysts of the public real estate investment trust forecast a sizable earnings upside from the five Manhattan buildings acquired in the deal, which add about 4.1 million square feet to SL Green’s holdings. Three of the five buildings, however, are already 100 percent leased, which cuts into short-term gains through rent hikes. SL Green paid around $669 per square foot for the Manhattan buildings.

“SL Green was able to acquire five quality properties in arguably one of the best markets in the country in a situation where there was not a pure bidding war for each property,” said Dan Fasulo, director of market analysis at research firm Real Capital Analytics.

The fully occupied buildings Green acquired are 919 Third Avenue (1.45 million square feet), 810 Seventh Avenue (690,000 feet) and 120 West 45th Street (445,000 feet).

The other buildings in the deal, 1185 Avenue of Americas (1 million feet) and 1350 Avenue of Americas (560,000 feet), are more than 98 percent occupied, but have a substantial near-term lease rollover. “They’ll basically raise yield by raising rents when they have tenant rollovers, improving returns over time,” said Fasulo.

Steven Durels, executive vice president and director of leasing at SL Green, said the acquisitions diversify the REIT’s Midtown holdings. “The majority of our buildings are near Grand Central,” said Durels. “This was the perfect opportunity to diversify and upgrade the quality of our portfolio.”

SL Green also picked up a number of suburban properties located off the train lines that feed into Grand Central, which will benefit SL Green’s tenants, said Fasulo. “SL Green will be able to service existing tenants,” he said, “with overflow space in their Midtown portfolio or at a lower price point in the suburbs.”

When it closes in January 2007, the deal will increase SL Green’s office space ownership to 28 million square feet, of which 24.5 million square feet are in the city.


Related Articles

arrow_forward_ios
(Image by Wolfgang & Hite via Dezeen)
Hudson Yards megadevelopment inspires a new line of sex toys
Hudson Yards megadevelopment inspires a new line of sex toys
Cammeby's International Group founder Rubin Schron and, from top: 194-05 67th Avenue, 189-15 73rd Avenue and 64-05 186th Lane (Credit: Google Maps)
Ruby Schron lands $500M refi for sprawling Queens apartment portfolio
Ruby Schron lands $500M refi for sprawling Queens apartment portfolio
Wendy Silverstein (Credit: Getty Images)
Wendy Silverstein, co-head of WeWork’s real-estate fund, is out
Wendy Silverstein, co-head of WeWork’s real-estate fund, is out
Madonna and The Weeknd with the Hidden Hills home (Getty, Redfin)
Madonna heads for the Hills; she’ll stay more than The Weeknd
Madonna heads for the Hills; she’ll stay more than The Weeknd
The housing market needs 3.8 million single-family homes to meet current demand (iStock)
US needs 4M homes to meet demand from buyers
US needs 4M homes to meet demand from buyers
Photo illustration of Brookfield Property Partners’ Brian Kingston (Brookfield, iStock)
Struggling hotel company handing Brookfield the keys
Struggling hotel company handing Brookfield the keys
Ian Bruce Eichner and his unit
Eichner sells his Continuum South Beach penthouse for $35M
Eichner sells his Continuum South Beach penthouse for $35M
New York State Senator Michael Gianaris (Getty, iStock)
New York deals a blow to Opportunity Zones program
New York deals a blow to Opportunity Zones program
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...