SL Green Sells Manhattan Office Condo for $300M

Lipstick Building

Memorial Sloan Kettering Cancer Center has agreed to acquire 414,317 square feet of vacant office leasehold condominium units at 885 Third Ave., also known as the Lipstick Building, in Midtown Manhattan from SL Green Realty Corp. for $300.4 million.

The sale, one of the largest in Manhattan this year, is expected to close in the fourth quarter. MSK, one of the nation’s leading cancer care centers, will use the space for academic and research administrative offices.

SL Green, Manhattan’s largest office landlord, will retain the remaining 218,796 square feet, which is currently 91.7 percent leased. SL Green has had an interest in 885 Third Ave., since 2007.

In April 2017, a joint venture between Ceruzzi Holdings LLC and SMI USA received a $272 million loan to purchase the majority stake in the ground lease position at the tower. In 2021, SL Green assumed full control of the building and began a comprehensive repositioning program to bring state-of-the-art amenities and infrastructure to the tower. Renovations included a new lobby with upscale coffee bar, new elevator cabs, new corridors and bathrooms, façade restoration, new fitness studio and bike room.

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Located at the corner of Third Avenue and East 53rd Street, The Lipstick Building, has 34 stories and sweeping curved setbacks of red granite and stainless steel. Built in 1986 by Hines, the 633,000-square-foot, Class A office tower has a public plaza and is near public transportation. The property also has 8,031 square feet of retail space including Wolfgang’s Steakhouse, a 5,000-square-foot restaurant.

The office condominium space acquired by MSK is the space vacated by law firm Latham & Watkins, which moved to 1271 Avenue of the Americas.

Midtown Manhattan office tower near full occupancy

Harrison Sitomer, SL Green chief investment officer, said in a prepared statement demand for office space from the medical industry remains strong throughout New York City. He said the addition of MSK brings the tower near full occupancy and validates the quality of the building, the location and repositioning program.

Tenants at the trophy office high-rise include Toll Brothers; Herald Square Properties; Stone Hill Capital Management, Fox Horan & Camerini; Viridian Capital Management and Reitler. Rents range from $78.28 per square foot to $107.58 per square foot, according to CommercialEdge data.

Neil Goldmacher and Jason Perla represented Memorial Sloan Kettering in the transaction. Brian Waterman, Scott Klau, Eric Harris, Cole Gendels and Zach Weil of Newmark represented SL Green in the transaction.

As of June 30, SL Green held interests in 64 buildings totaling 34.4 million square feet. This includes ownership interests in 26.3 million square feet of Manhattan buildings and 7.2 million square feet securing debt and preferred equity investments.

On Monday, SL Green announced it had acquired 245 Park Ave., a 44-story, 1.8 million-square-foot, Class A office property in a bankruptcy deal that closed last Friday. In 2018, SL Green acquired a preferred equity investment in the property owned by an affiliate of HNA Group of China in two tranches totaling $148.2 million. SL Green is still pursuing collection of its $185 million arbitration award from HNA and the property continues to be subject to the in-place mortgage and mezzanine loans totaling $1.77 billion, which mature in June 2027.