SL Green Realty, Manhattan’s largest office landlord, and its partners agreed to sell a tower a block from Central Park for $632.5 million in what could be New York City's second-biggest office deal of the year.
The transaction is another sign of investor interest in desirable properties even as record-high office vacancies and a sharp spike in interest rates have hurt overall investment sentiment.
SL Green and its partners are selling the fee ownership interest in 625 Madison Ave., between 58th and 59th streets, to an unidentified global real estate investor. The sale price equates to $1,123 per square foot, the New York firm said Monday when it hosted an investor conference. Net sale proceeds will be used to repay corporate debt.
In connection with the sale, SL Green and its partners will originate a $234.5 million preferred equity investment in the property. As higher interest rates have curbed the appetite for traditional lending, preferred equity has become an increasingly popular type of financing that gives lenders more protection, industry professionals have said.
The sale came after SL Green said it converted its previous mezzanine debt investments in the fee interest at the 17-story, 563,000-square-foot office building to a 90.43% ownership interest after a foreclosure auction this year.
The deal would rank as New York’s second-largest office transaction this year after SL Green’s sale of half its interest at 245 Park Ave. to Japan’s Mori Trust for $998 million in June, CoStar data shows.
Both deals also would count as two of the four $100 million-plus deals in the city this year that command sales per square foot of at least $1,000, according to CoStar data.
“This deal, and our recent capitalization of 245 Park, reaffirm that well-located office real estate in New York is still among the most sought-after asset classes in the world,” Brett Herschenfeld, SL Green's executive vice president of retail and opportunistic investments, said in a statement.
He added that “whether properties are upgraded to state-of-the-art office or are converted into a multitude of other uses that are in high demand, the appetite for Class A office properties in prime Manhattan locations remains strong and growing.”