Big, Juicy Stake
Seven months into 2009, SL Green agreed to sell 49.5 percent of its stake in 485 Lexington Avenue for $504.2 million, in one of the biggest trades of a major Manhattan building in more than a year.
Once the deal is approved by SL Green’s mortgage lender, Wachovia, a joint venture between the Israeli technology firm Optibase and its Nigerian partner, Gilmor USA, will assume the company’s $450 million of outstanding debt and extend SL Green an additional $20 million loan, secured by SL Green’s pledge to sell all but 1 percent of its remaining interest in the building to the partnership within five years.
No one would have batted an eyelash at the deal two years ago, when low-interest financing, foreign investors and price tags upward of $500 per square foot in Manhattan were common. But, in August, it was greeted as the first sign of a thaw in what has been a glacial commercial market for more than a year.
In an Aug. 10 press release, SL Green’s chief executive, Marc Holliday, said, “If ultimately approved, the transaction would demonstrate that the midtown Manhattan office market continues to stand as one of the world’s top locations and that investor interest is once again on the rise.”
Though the proposed sale is certainly a welcome sign after a year of almost total paralysis, Isaac Zion, a managing director at SL Green, does not expect it to set a new bar just yet.
“In a market like this, where there are just a handful of trades, it’s hard to say what, if anything, is the new benchmark,” Mr. Zion told The Commercial Observer. “For any one particular transaction to set a benchmark in this climate is unlikely.”
THIS IS NOT THE This is not the first time observers have looked to 485 Lexington Avenue to gauge the future prospects of Manhattan’s commercial market. A little more than a half-century ago, Uris Brothers managed to quell mounting fear of a drop in demand for midtown office space with the news that 90 percent of the 921,370-square-foot tower then under construction at 485 Lexington had been leased.
Uris Brothers was among the pioneers of a decade-long commercial development boom following World War II, which saw Manhattan businesses migrate from single-tenant office buildings to the multi-tenant corporate towers common today.