SL Green Wraps Up JV Acquisition of Citigroup Office Towers in Manhattan

Citigroup's digs at 388 and 390 Greenwich Street are now officially owned by SL Green and joint venture partner SITQ. The banking concern pocketed nearly $1.6 billion in the deal, and walked away with a triple-net lease that allows it to stay put as sole occupant of the 2.6 million square-foot complex for the next 13 years.

Developed in 1989 and 1986 respectively, the premier office buildings at 388 and 390 Greenwich sit between the World Financial Center and Tribeca submarkets. As per terms of the transaction, SL Green is majority owner of the properties, with a 50.6 percent interest, and SITQ holds a 49.4 percent stake. At a purchase price of approximately $598 per square-foot the partners picked up the structures at 50 percent of replacement cost. Cushman & Wakefield Sonnenblick-Goldman L.L.C. orchestrated the mortgage financing, which was provided by Westdeutsche ImmobilienBank AG and PB Capital Corp.

Citigroup's long-term lease agreement calls for the company to pay rent of $37.66 per square-foot for the first year; the figure will increase on an annual basis. Citigroup's likely motivation for selling was "to manage its earnings and find gains to offset coming losses from the credit crunch," Michael Knott, senior analyst with REIT industry research and consulting firm Green Street Advisors Inc., told CPN. "Sad but true."

New York-based SL Green, widely known as the largest office landlord in the city, is a self-managed REIT focusing predominantly on the acquisition, repositioning and management of office properties in Manhattan. The company’s Big Apple portfolio consisted of 31 properties totaling nearly 22.4 million square feet as of the close of the third quarter. Its holdings outside the city include 36 properties totaling approximately 7.9 million square feet in other areas of New York, as well as Connecticut and New Jersey. For SL Green however, the current credit climate is not entirely negative.

"We are a well-capitalized REIT, and we're well-positioned because of how we're capitalized and because we are able to transact quickly," Isaac Zion, managing director with SL Green, told CPN today. "So for us, there should be more opportunities for acquisitions."

SITQ, which is headquartered in Canada, is in an even better position.

"SITQ actually benefits from the subprime crisis in the U.S. as many of our competitors who needed important leverage to complete a deal cannot get the financing they need in the actual circumstances; therefore, we can take advantage of buying opportunities," a company spokesperson shared with CPN today.

Additionally, SL Green has investment interests in 10 retail properties offering an aggregate 393,000 square feet. Headquartered in Montreal, SITQ is a 23-year-old real estate investment, management and development firm with a portfolio of 114 office and business park properties totaling over 35 million square feet in Canada, the U.S., France, the U.K. and Germany.

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source: commercialpropertynews.com