Manhattan Office Deal Tops SL Green’s Big Day

By Gail Kalinoski

460 W. 34 St.

SL Green, New York City’s largest office landlord, has entered the Hudson Yards district on Manhattan’s Far West Side by taking a majority stake and the controlling interest in 460 W. 34^th St., a 20-story, Class A office building valued at $440 million. The off-market purchase capped a day of announcements by the office REIT that included redevelopment plans at One Madison Avenue, recapitalization of 2 Herald Square and lease signings there and at its new trophy tower, One Vanderbilt.

The acquisition of the majority stake at 460 W. 34 St. from the Kaufman Org., which will retain a minority share in the 91-year-old building, marks SL Green’s first major investment in the burgeoning Hudson Yards district. After earlier structured investments made through SL Green’s Debt and Preferred Equity platform, the firm’s blended average basis in the property, previously known as the Master Printers Building, will be $528 per square foot. The deal is expected to close in the first half of 2019.

“Through our direct real estate relationships, we were able to finance multiple off-market investments in the property. Following a series of negotiations, those investments are now resulting in ownership of a controlling majority, direct ownership stake in a building which will undoubtedly deliver value to our shareholders in the years to come,” Brett Herschenfeld, SL Green’s managing director, said in a prepared statement.

Herschenfeld was referring to a loan SL Green made in 2014 to a small minority investor at the building, which was then managed by the Kaufman Org., according to the Wall Street Journal.

One Vanderbilt (image courtesy of SL Green Realty Corp.)

Located along the full block of 10^th Avenue between 33^rd and 34^th streets, the building is directly across the street from the new Manhattan West development projects, which includes a 67-story office tower at One Manhattan West, being constructed by Brookfield Property Partners. It is also near the $25 billion mega mixed-use project being developed by Related Cos. and Oxford Properties Group. SL Green will redevelop 460 W. 34^th St., which will include relocating the entrance from 34^th Street to 33^rd Street, installing new elevators and windows, upgrading storefronts and infrastructure and creating several roof setback terraces. Renovations will feature new oversized, industrial design windows, 13-foot high-floor slaps and new in-lobby coffee bar.

“We believe this is an incredible opportunity for SL Green to reposition the building as a creative alternative, which will appeal to tenants seeking a high design industrial vibe with modern infrastructure while also being highly competitive in location, amenities and rent,” Steven Durels, SL’s executive vice president, director of leasing and real property, said in prepared remarks.

More redevelopment plans

SL Green is also looking to give One Madison Avenue in the Midtown South submarket a major makeover too. The REIT has tapped Kohn Pedersen Fox, Hines and Gensler—the same team design and development currently constructing One Vanderbilt—to design and redevelop the Class A office tower overlooking Madison Square Park. An addition on top of a nine-story redeveloped podium will increase the property’s total rentable square footage to nearly 1.5 million square feet. Plans call for the building, which occupies a full block bounded by Madison and Park avenues between 23^rd and 24 streets, to be reduced to its existing ninth floor to create 18 new column-free floors above. Other work will include revitalizing the lobby, activating retail space, adding a multi-purpose auditorium and creating several private tenant terraces.

“One Madison Avenue had an unbeatable location overlooking Madison Square Park, and after the redevelopment it will become one of the most sought after addresses in all of New York City,” SL Green CEO Marc Holliday said in a prepared statement.

Leasing, Financing Deals

Meanwhile, SL Green has now leased 52 percent of One Vanderbilt, the 60-story, 1.7 million-square-foot trophy office tower being constructed next to Grand Central Terminal. The firm released details about four new tenants, including itself, that have signed or expanded leases and helped accelerate the opening of the tower to early August 2020. SL Green also said it had refinanced the construction facility, increasing the loan size from $1.5 billion to nearly $1.8 billion and decreasing the interest rate by 75 basis points. The improvement in terms was due, the company said, in large part to the rapid pace of leasing and construction.

In addition to SL Green, which is relocating its headquarters from 420 Lexington to One Vanderbilt with 70,000 square feet on the 27^th and 28^th floors, the other new leases are:

• TD Securities, which signed a 20-year lease for 119,000 square feet on two and a half podium floors at the base of the building and also took an additional 52,450 square feet at SL Green’s 125 Park Ave.;
• MFA Financial Inc., which signed a 15-year lease for 30,000 square feet on the entire 47th floor and was represented by Newmark Knight Frank’s Chairman of National Tenant Representation Neil Goldmacher, Executive Managing Director Andrew Sachs and Managing Director Bill Levitsky;
• McDermott Will & Emery, an international law firm that expanded its 20-year lease with an additional 10,000 square feet. The firm will take floors 44 through 46 and floor 67.

SL Green also signed leases totaling 177,081 square feet and recapitalized 2 Herald Square by securing a $150 million first mortgage financing and selling a 49 percent interest to an Israeli institutional investor. WeWork, the co-working giant that has been expanding rapidly in Manhattan in recent months, has signed a 29,388-square-foot lease to expand its space. Mercy College agreed to a 30-year leasehold condominium covering 95,370 square feet. The deal, which covers the third, fourth, and seventh floors, gives Mercy 40,370 square feet of additional space. New leases were also signed with retailers Victoria Secret and Happy Socks, bringing the building’s occupancy to 93.2 percent.