SL Green Sheds Stake in Two Buildings, Acquires 125 Park

CPPIB will share ownership of the 2.55-million-square-foot 1221 Avenue of the Americas property with the Rockefeller Group, which owns 55% of the asset and will continue to be responsible for the property management and leasing of what is known as the McGraw Hill Building. SL Green Realty will retain 55% ownership of the 600 Lexington Ave. building. The New York City-based REIT reported on April 15 it had entered into an agreement to purchase the 303,515-square-foot, 36-story office building for $193 million from a joint venture led by Hines US Core Office Fund. SL Green will receive $87 million from CPPIB in connection with its sale of the 45% joint venture stake in 600 Lexington Ave.

SL Green states that it intends to redeploy the estimated $500 million in net proceeds from the two transactions to acquire 125 Park Ave., a 26-story, 651,000-square-foot office tower known as the "Pershing Square Building" from Shorenstein Properties LLC for $330 million. The proceeds will also be used to finalize the acquisition of 600 Lexington Ave. as well as for additional investments and the reduction of corporate debt.

The company reports that it expects to generate a gain of approximately $130 million on its original investment back in December 2003 in the 1221 Avenue of the Americas property.

The proposed transactions at 600 Lexington Ave. and 1221 Avenue of the Americas are expected to close this month, while the deal to purchase 125 Park Ave. is anticipated to close in the third quarter of this year.

The 125 Park Ave. building is currently 99% leased to such tenants as: Meredith Corp., FGIC Holdings, Reed Elsevier, Newmark Knight Frank and Canon Business Solutions.

Commenting on its three major transactions, SL Green President and CIO Andrew Mathias states that the sale of its ownership interest in 1221 Avenue of the Americas "will enable us to dispose of a non-managing ownership interest, monetize our investment gain, free up a significant amount of cash for future investments and further improve our balance sheet." He adds that the addition of CPPIB as a joint venture partner at 600 Lexington Ave. will give SL Green "more flexibility to pursue other near-term market opportunities."

Marc Holliday, CEO of SL Green Realty, notes that SL Green has been able to acquire two of the three major New York City-based office properties that have been introduced to the market for sale in 2010. Sources indicate that 340 Madison Ave. is also in play. "Not only do we have the capital to make these deals, but we continue to be able to take advantage of excellent relationships with many lenders and institutional joint venture partners who are eager to invest in Manhattan." He continues, "As a result, we believe we are well positioned to take advantage of market opportunities now beginning to emerge from the difficulties of the past few years."

Peter Ballon, CPPIB's vice president and head of real estate investments-Americas, relates that he believes it is an attractive time for CPPIB to enter the New York market. "These transactions reflect CPPIB's growing reputation as a major global real estate investor with the capital, and more importantly, the internal capabilities to directly participate in large complex transactions such as these," he says.

Mr. Ballon adds, "With SL Green, we are investing alongside the largest office landlord in Manhattan with a proven investment track record and top tier operating platform. We look forward to building this partnership as we continue to explore new opportunities in Manhattan."

Kevin R. Hackett, president and CEO of The Rockefeller Group says of the minority ownership stake sale by SL Green, "We are very pleased to have CPPIB as our new partner in 1221 Avenue of the Americas. We look forward to a productive partnership between CPPIB and The Rockefeller Group in maximizing the value of this Rockefeller Center asset. Our partnership with SL Green lasted six years and prior to that, we enjoyed a 40-year partnership with the McGraw-Hill Company. We hope to have an equally rewarding relationship with CPPIB."