SL Green unloads its 44% stake in an office portfolio, including holdings here in Los Angeles.

NEW YORK CITY—SL Green Realty Corp. has reached an agreement to sell its 44% interest in a Southern California office portfolio for $100 million. The buyer is an affiliate of joint venture partner, Blackstone Real Estate Partners VII, which now will take full ownership.

The portfolio consists of 28 properties totaling 3.7 million square feet, located in various submarkets including Los Angeles, Orange County and San Diego, which was originally part of a 31-property, 4.5 million-square-foot portfolio that SL Green acquired through foreclosure. SL Green’s servicing arm advised on the foreclosure and the restructuring of the approximately $750 million of in place financing.

Simultaneously, SL Green recapitalized the portfolio, forming a new partnership with Blackstone. SL Green then acquired the other two minority partners’ interests and sold three properties for a total of $223 million. In addition, a capital improvement and lease-up program was mounted by Blackstone affiliate Equity Office Properties.

Says David Schonbraun, SL Green’s co-CIO, “This is the culmination of a three-year process. We felt that the Southern California office market was on the upswing, so we made a strategic decision to take over the portfolio, restructure the capital stack and bring in an equity partner.

“Our market judgment proved correct,” he continues, “and in combination with the outstanding job Equity Office did in managing and leasing the properties, significant value was created in the portfolio. While Blackstone stands to enjoy additional success with the portfolio, we are now ready to exit this non-core investment at a significant gain and intend to redeploy the proceeds back into New York City assets.”

Blackstone declined to comment.