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SL Green JV Closes on $1.6B Purchase of Citigroup Towers

Struggling Bank Completes Sale-Leaseback of Massive Office Complex in Lower Manhattan
December 22, 2007
SL Green Realty Corp. and Canadian real estate investor SITQ have closed on their joint venture purchase of Citigroup's Tribeca office complex in lower Manhattan, acquiring one of the Financial District's premier office complexes for $1.57 billion, or a little less than $600 per square foot.

News of the blockbuster deal broke earlier this month, at which time SL Green declined to identify the specific property. The city's largest office landlord sealed the deal for the 2.6 million-square-foot complex after Citigroup's negotiations stalled with San Francisco-based Shorenstein, which was reportedly close to making the purchase in November. (For prior coverage, please see Citigroup Sells Pair of NYC Office Buildings in $1.5 Billion Deal With SL Green.)

"This acquisition is a terrific investment for us - with attractive low-rate committed financing. In addition to normal rental income, our innovative joint venture structure with SITQ provides for fees and promotes that will enhance SL Green's returns," SL Green CEO Marc Holliday said in a statement.

Under the joint venture, SL Green has a 50.6% interest and SITQ has a 49.4% interest. The purchase is immediately accretive to SL Green’s earnings and was structured in a tax efficient manner in order to reinvest proceeds from the intended sale of 1250 Broadway, in accordance with 1031 guidelines.

Citigroup is leasing back the entire complex -- which it currently fully occupies -- for a 13-year term at $37.66 per square foot, triple-net, with annual escalations based on the NY & NJ CPI.

The complex was developed in the 1980s and consists of a 40-story high-rise tower and an adjacent 10-story building at 388 and 390 Greenwich St.

Richard Baxter, Yoron Cohen, Jonathan Caplan and Scott Latham of Cushman & Wakefield brokered the transaction. Westdeutsche ImmobilienBank AG provided mortgage financing.

Please refer to CoStar COMPS #1452670 for more information on this transaction.

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