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NEW YORK CITY-SL Green Realty Corp. entered into an agreement to acquire the long-term leasehold interest in 461 Fifth Avenue for $62.3 million, or $312 per sf. The property is being acquired from an affiliate of Mitsui Fudosan America Inc.

The approximately 200,000 sf Class A building is located between 40th and 41st Streets, in close proximity to Grand Central Station. The going-in unlevered cash NOI yield on investment is 7.74% based on fully escalated in-place rents averaging in the high $50′s per sf. The property is subject to a ground lease expiring in June, 2084, which provides SL Green the ability to acquire the fee interest in the future. The discounted present value of the ground lease payments, inclusive of fee acquisition costs through the anticipated option closing date of September, 2021, is $110 per sf.

The leasehold acquisition will be funded, in part, with proceeds from the previously announced sale of 1370 Broadway. As a 1031 tax-free exchange, the transaction will enable SL Green to defer gains from that sale and from the sale of 17 Battery Place South, which was initially reinvested in 1370 Broadway. The balance of the acquisition will be funded using the company’s unsecured line of credit. The transaction is expected to close at the end of the third quarter.

“SL Green will receive an additional benefit by deferring approximately $18.5 million of taxable gain through this acquisition,” notes Marc Holliday, president of SL Green.

Sonnenblick-Goldman Co. acted as the sole and exclusive broker in arranging for the acquisition. The property is 95.2% leased with major tenants including Ameriquest Mortgage Co., Shenkman Capital Management, Pier 1 Imports and Marathon Asset Management.

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