NEW YORK CITY-Gramercy Capital Corp. and SL Green Realty Corp. have purchased the fee interest in 2 Herald Square for $225 million. The 354,400-sf office and retail building is located at 1328 Broadway at 34th Street. Gramercy will own 45% of the venture with SL Green owning the remaining parts.
At the same time Sitt Asset Management acquired the leasehold interest in the 11-story building for more than $275 million. Sitt has signed on to lease the site from the JV for 70 years.
A spokesperson for SL Green would not disclose the building’s seller due to a confidentiality agreement. RFR Realty LLC lists the property among its holdings on its website and previous reports list the company as the building owner.
“Our success in Manhattan is due to our extensive network in the real estate community, and our proven ability to creatively structure value-add situations for buyers, sellers and co-investors,” says Andrew Mathias, CIO of Gramercy and SL Green, in a statement. “In this acquisition, we connected with Sitt Asset Management, a savvy New York City real estate investor with which SL Green has transacted on several occasions, and devised and executed a transaction in which the joint venture and Sitt were able to accommodate tax-free 1031 exchanges. We believe this acquisition in particular will deliver secure debt-like returns with the potential for equity upside.”
The 2 Herald Square property, located directly across the street from Macy’s department store, is 96.4% leased to tenants that include H&M and Publicis USA. The facility contains 128,500 sf of retail space and 149 underground parking spaces. According to RFR’s website the asking rental rate is $48 per sf for the office space.
The acquisition was financed with a $191.3-million, 10-year fixed rate loan from Goldman Sachs & Co.
Herald Square, located in lower Midtown, has seen a number of deals recently. In March, Brack Capital Real Estate USA purchased a six-story parking garage at 63-67 W. 35th St. for $31 million. As GlobeSt.com the firm plans to build an upscale hotel on the site formerly owned by Darryl Mallah of Icon Parking. Also, the 354,000-sf 1333 Broadway is set to receive $50 million in renovations. W&H Properties is overseeing the renovation project, which is slated to start this June.