SL Green Partners Up on $3B NYC Office Project

By Barbra Murray, Contributing Editor

New York—SL Green Realty Corp. has recapitalized One Vanderbilt Avenue, its 1.7 million-square-foot trophy office project in Midtown Manhattan, to the tune of a half-billion dollars. The REIT sold minority interests in the asset to the National Pension Service of Korea and project development manager Hines Interest LP, keeping the $3.2 billion project right on schedule.

One Vanderbilt

NPS took a 27.6 percent stake in One Vanderbilt, while Hines snapped up a 1.4 percent interest, with the new partners committing a total minimum equity investment of $525 million. “The completion of a joint venture with NPS and Hines brings to a successful conclusion our capitalization goals for the project that we set forth on this call one year ago,” Marc Holliday, CEO of SL Green Realty Corp., said during the company’s fourth quarter 2016 earnings call on January 26. Lofty goals for some, but not so much for New York City’s largest office landlord. One Vanderbilt is practically a money magnet.

In September 2016, SL Green landed $1.5 billion of construction financing for the 58-story structure, which, at 1,401 feet in height, will hold the title of Midtown Manhattan’s tallest building and New York City’s second-tallest tower. The financing allowed construction of the Kohn Pedersen Fox Associates-designed, skyline-altering building to get underway, which it did with a groundbreaking in October.

Securing Hines as a new partner was a no-brainer; the real estate company has been aboard the project since its conception seven years ago. NPS’s involvement came as a result of what Holliday described as a “global exploratory process.”  The pension fund’s decision to invest in a premier U.S. office asset dovetails with current trends in foreign investment in U.S. commercial real estate. South Korea was among the five largest investors in the U.S. market last year, according to a mid-2016 report by real estate investment services firm Marcus & Millichap.

The recapitalization of One Vanderbilt, Holliday continued, “strikes the right balance between reducing SL Green’s overall capital commitment to the project while still maintaining 71 percent ownership for the future.”

Tishman Construction is aboard the One Vanderbilt project as general contractor. Construction of the project, which will span an entire city block adjacent to Grand Central Terminal, is on track to reach completion in 2020.