SL Green Investment Marks REIT’s Entry into Hudson Yards District
The firm, which issued multiple significant ownership and leasing announcements at properties in Manhattan, also released today sweeping redevelopment plans for its One Madison Ave. office building next to Madison Square Park.
NEW YORK CITY—In a very busy day for the office REIT, SL Green Realty Trust reports it plans to purchase a majority interest in the Kaufman Organization’s 460 W. 34th St. office building here and plans to undertake a major redevelopment of the property.
The firm, which issued multiple significant ownership and leasing announcements at properties in Manhattan, also released today sweeping redevelopment plans for its One Madison Ave. office building next to Madison Square Park.
In terms of its deal at 460 W. 34th St., SL Green states it has entered into a contract to purchase a majority and controlling interest in 460 West 34th St. in Manhattan. The current owner of the building is the Kaufman Organization and the deal was characterized by SL Green as an “off-market transaction.” The deal marks SL Green’s first major investment in the Hudson Yards neighborhood.
The transaction values the 20-story Class-A office building at a gross purchase price of $440 million. After considering earlier structured investments made through SL Green’s Debt and Preferred Equity platform, SL Green’s blended average basis in the property will be $528 per square foot. The transaction is expected to close in the first half of 2019.
According to Dow Jones, SL Green originally invested in 460 W. 34th St. in 2014 by making a loan to a small minority investor at the building, which was then managed by the Kaufman Organization.
The property is located along the full block front of 10th Avenue between 33rd and 34th streets in the heart of the Hudson Yards submarket and directly across the street from the new Manhattan West development projects.
SL Green plans a comprehensive building wide redevelopment that will include the relocation of the building entrance from the 34th Street side of the building to 33rd Street, as well as new elevators, storefronts, windows and infrastructure. The redevelopment will also activate numerous roof setback terraces.
SL Green’s managing director Brett Herschenfeld, says, “Through our direct real estate relationships, we were able to finance multiple off-market investments in the property. Following a series of successful 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.”
SL Green EVP, director of leasing and real property, Steven Durels, adds, “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.”
In terms of its redevelopment initiative at One Madison Ave., SL Green states that it has reassembled the design and development team currently constructing One Vanderbilt—Kohn Pedersen Fox and Hines and Gensler—to undertake the project.
SL Green plans to build an addition to One Madison, which occupies a full city block bounded by Madison and Park avenues between 23rd and 24th streets, that will increase the size of the rentable square footage of the building to nearly 1.5 million square feet.
The REIT is using 218,000 square feet of available development rights in the redevelopment of the property. One Madison will be reduced to its existing ninth floor in order to create 18 additional new column-free floors above. Interior and exterior work to the existing podium will include revitalizing the lobby, modernizing core elements and activating retail space, along with a multi-purpose auditorium and below-grade space. Demolition and construction are expected to start in 2020 or 2021 following the expiration of existing tenant leases.
“One Madison Avenue has 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,” says Marc Holliday, CEO of SL Green. “To take on such a sophisticated project, we’ve gathered the team responsible for constructing the ahead-of-schedule, 1,401-foot-tall One Vanderbilt. I’m confident their expertise will help us successfully revitalize One Madison into an exclusive address for today’s leading companies.”
The newly-constructed tower will feature 32,000-35,000 rentable-square-foot floor plates. SL Green did not release any cost for the redevelopment of One Madison Ave.