NEW YORK CITY-Locally based SL Green Realty Corp. entered in an agreement to sell 440 Ninth Ave. here to a joint venture between locally based duo Paramount Group Inc. and Sherwood Equities Inc. for $160 million. The sale price on the 339,000-sf office building was approximately $472 per sf.

The 18-story property is situated on Ninth Avenue between 34th and 35th streets. Since acquiring the property in 1998 for $31.7 million, shortly after SL Green’s initial public offering, the company invested approximately $24 million of additional capital in a targeted repositioning plan that, according to a statement, helped attract and retain the property’s three largest tenants: B&H Photo, Duane Reade and eEmerge. The property is currently 100% occupied to other tenants including Kopff, Nardelli & Doff, EngenderHealth and Uncle Jack’s Steakhouse.

For SL Green, the sale of 440 Ninth Ave. will generate a gain of approximately $111 million with a capitalization rate of 4.6%. The proceeds of this sale will be reinvested tax free as part of a 1031 exchange.

A source close to the deal tells that, according to previous company statements, in early 2007, SL Green indicated that it anticipated being “a significant net seller of non-core properties this year, with the proceeds being applied primarily to the Reckson acquisition.” The Reckson Associates Realty Corp. and SL Green merger was a done deal this past January, when the company paid $31.68 for each of Reckson’s shares.

The source adds that SL Green has a “history of maximizing value and harvesting substantial gains from its non-core investments, regardless and then reinvesting.” In September, the company indicated that 440 Ninth Ave., along with 470 Park Ave. S., which sold for $157 million, were put on the market in late summer and that there appeared to be significant interest. The source says that both properties still had upside potential for SL Green to realize if current market conditions prevented a good enough price.

Andrew Mathias, president of SL Green, says in a prepared release that “the sale of 440 Ninth Ave. further showcases our ability to harvest gains in a tax efficient manner and redeploy capital into higher quality properties with greater profit potential. Despite widely-cited disruptions in the real estate finance sector–leading to much negative sentiment in the marketplace–we have been able to sell two non-core assets recently, 470 Park Ave. S. and now 440 Ninth Ave., thereby generating substantial gains to reinvest into our core portfolio.”

Cushman & Wakefield represented SL Green on this transaction. The transaction, which is subject to customary closing conditions, is expected to close in the first quarter of 2008. As of Sept. 30, SL Green owned 31 New York City office properties totaling approximately 22.4 million sf.

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