Some analysts worry that SL Green Realty [TRDataCustom] may struggle to fill its office project One Vanderbilt with tenants amid a lackluster Midtown office market.
On last week’s earnings call, SL Green’s CEO Marc Holliday said the real estate investment trust will likely not start leasing until next year. The announcement “kind of reset expectations,” KeyBanc Capital Markets analyst Craig Mailman told the Wall Street Journal.
So far, SL Green has only signed on one tenant, TD Bank, which will take 200,000 square feet in the planned 1.7-million-square-foot tower. The company expects to average rents of $150 per square foot in the tower — far above the current Midtown average of $80.45, according to CBRE. But during the call Holliday said even rents of $135 would still yield a 6 percent return on the tower.
Last year, SL Green landed a $1.5 billion construction loan from a syndicate led by Wells Fargo to fund the tower and earlier this year it announced that the National Pension Service of Korea had bought a 27.6 percent stake in the project.
“With the $525 million equity commitment that we now have in the project, combined with the $1.5 billion of construction financing, which is locked and loaded, our future equity commitment to the project between now and 2020 is less than $100 million a year,” Holliday said.
In a statement, a spokesperson for SL Green defended the leasing timeframe.
“Construction is ahead of schedule, we’ve signed a great anchor tenant in TD Bank, partnered with a restaurant icon in Daniel Boulud and finalized a strong joint venture with the National Pension Service of Korea and Hines. We’ve consistently said that leasing commitments will begin in earnest in 2018, more than two years ahead of building completion, and we expect extraordinary demand for this unparalleled product on that timeline,” the spokesperson said.[WSJ] — Konrad Putzier
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