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NEW YORK CITY-Following the closing of the merger with Reckson Associates Realty Corp. earlier this month and positive increases in FFO for 2006 and Q4, SL Green Realty Corp. executives said the firm plans at least $750 million of dispositions this quarter. Two recent building sales have already made that goal easily attainable.

SL Green, SITQ Group, and SEB Immobilien-Investment GmbH sold One Park Ave. for $550 million or $602 per sf. The building sold at a cap rate of 3.5%, CIO Andrew Mathias said during Tuesday's investor conference. The 913,000-sf, 20-story office building was purchased by SL Green in January 2001 and recapitalized in May of that year bringing SITQ in as a joint partner. Three years later 75% of the property was sold to Credit Suisse who flipped its portion to SEB. Maintaining 16.7% ownership, SL Green will receive about $108 million from the sale.

CB Richard Ellis' Darcy Stacom and William Shanahan represented the joint venture. The buyer was undisclosed, and the deal is scheduled to close this quarter.

Additionally, SL Green has agreed to sell 70 W. 36th St. for $61.5 million to an undisclosed buyer. The 153,532-sf office building was SL Green's headquarters from 1997 to 1998 and an asset that was part of the company's original IPO. "70 West is another great example of market appreciation in Manhattan values as the property's price appreciated more than six-fold from the basis at which it was contributed at the IPO," said Mathias. "Unlevered internal rates of return, for our hold over almost a 10-year period, total a very impressive 22.6% with a price of almost $400 per sf at a cap rate on sale of sub-4%." SL Green was represented by Rich Baxter and Ron Cohen of Cushman & Wakefield. The deal is scheduled to close in Q1.

SL Green is marketing its office condominium building at 110 E. 42nd St. for sale. Should the sale come to fruition, Mathias said it will allow the company to reach it goal of $750 million of dispositions this quarter. "However given market conditions, we are actively evaluating additional properties for disposition and we anticipate expanding the sale program with the goal of increasing aggregate sales above the $1-billion mark." Studley's Woody Heller, Will Silverman and David Endelman are marketing the property.

At the close of its merger with Reckson, SL Green simultaneously sold $2 billion worth of non-core Reckson properties to RexCorp, a newly formed company composed of several former Reckson officials, as reported by GlobeSt.com. The deal makes SL Green the third largest REIT, after Equity Office Properties merges. "The direction of asset prices over the past seven months as well as the crushing amount of capital on the real estate sector supports my belief that the Reckson acquisition was well-timed, well-priced and well-played," said Holliday. "The addition of five prime office towers at an average allocated cost of approximately $650 per sf and containing significant embedded growth in rents bolsters our ability to continue to drive high-quality future earnings growth through continued asset recycling and operational out-performance."

The acquisition of two suburban office properties, reported earlier this week by GlobeSt.com. Mathias labeled these buys as SL Green's first strategic acquisitions in the Stamford, CT and White Plains markets. "We saw this off-market opportunity as a perfect compliment to the properties we acquired in these markets as part of the Reckson portfolio and intend to begin to institute SL Green's value-add strategy with respect to the acquisitions and dispositions in these markets; acquiring growth where it is attractively priced and disposing of mature assets."

In addition to acquisitions and dispositions, SL Green posted positive Q4 and year-end stats. In 2006 FFO increased $4.61 per share, an increase of almost 11% from 2005. Q4's FFO increased 15.7% compared to the same quarter in 2005; jumping from $1.18 from $1.02.

SL Green increased its line of credit to $800 million, from $300 million, according to CFO Greg Hughes. Average office rents continued to increase for the fifth straight quarter, a trend Holliday said he could see continuing as there is little new office space due to come online during the next two years.

SL Green's total portfolio occupancy is 95%, a number Holliday said the company aims to better during 2007 to 97%. In Q4 the REIT closed 38 office leases, totaling more than 452,000 sf.

Instant Insights /

SL Green Plans $750M of Dispositions in Q1

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