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Landlord SL Green Realty has just signed an agreement to buy out one of its tenants for $51 Million, so they can re-let the space for a higher price.
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New York commercial real estate company SL Green Realty is a major publicly listed real estate investment trust (REIT), founded in 1997 as the public successor corporation to SL Green Properties which had earlier been set up, in 1980, as a private company by Stephen Green.
SL Green recently acquired a 49 year leasehold interest in the retail portion of the major, 36 floor, commercial office building 650 Fifth Avenue, acting in partnership with another major real estate group in New York Jeff Sutton’s Wharton Properties. The financial terms of the leasehold acquisition have not it seems been disclosed.
The deal was transacted with an official Monitor, Judge Kathleen A. Roberts, appointed by a federal court to re-organize the property after it had been confiscated by the US government for being secretly owned by Iranian bank Bank Melli, in violation of sanctions on Iran.
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The new deal with Green covers the basement, ground floor, second and third floor retail spaces totaling about 32, 000 square feet of leasable space. Current tenants include clothing retailer Juicy Couture, Godiva chocolate and Devon & Blakely. Juicy Couture holds about 18, 000 square feet of the space, including the ground floor store-frontage.
In its early years of operation SL Green had traditionally operated by buying up Class B office buildings around town, investing in them to improve their lobbies, facades and other amenities and then to raise the rents closer to Class A levels whenever leasing expiries offered the opportunity for re-merchandising the space. As the firm got larger it made greater investments in Class A buildings to begin with, but has never lost its eye for reorganizing a rent roll to enhance its yield.
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And that is what is happening here with the announcement yesterday that SL Green has just bought out the lease of the mid priced clothing retailer Juicy Couture for US$51 million. Its flagship store there is now expected to close early in 2014, and presumably will move to another less expensive location.
The lease was purchased from Juicy Couture’s owner Fifth & Pacific Company, formerly Liz Claiborne. The buy-back will now allow SL Green to eventually re-merchandise the whole retail component of 650 Fifth Avenue to better fit the upscale image of the neighbourhood, and of course obtain much higher rents as well.
Accordingly, in addition to the 18, 000 square feet currently occupied by Juicy Couture, it seems according to a report in the New York Post, that another 11, 000 of the remaining space may also become available to a new tenant if SL Green should then buy out the other existing tenants out too. This would then allow a much larger, 29, 000 square foot store to be created, or almost 90% of the total. This should make a very attractive leasing proposition for a new prime tenant as a result. SL Green’s partner in the deal, Jeff Sutton’s Wharton Properties, are expert at negotiating with the highest ranking tenants that one would expect to come to such a location.
SL Green and Sutton already control 717 Fifth Avenue nearby, which features the Giorgio Armani and Dolce & Gabbana flagships in addition to 720 Fifth Avenue, home to Abercrombie & Fitch, and 724 Fifth Avenue, Prada’s flagship store – who we learned in a separate announcement just a few days ago have recently extended their lease all the way to 2028.
SL Green President, Andrew Mathias, said, “Situated in the heart of Fifth Avenue’s prime retail corridor at 52nd Street, 650 Fifth Avenue is a perfect fit for our expanding retail investment portfolio in partnership with Jeff Sutton. Our retail investments have proven to be a profitable complement to our core office and structured finance businesses and we will continue to seek new opportunities in New York City’s best retail locations.”
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650 Fifth Avenue
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About SL Green Realty
SL Green is a fully integrated REIT that is focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties. It also claims to be New York City’s largest office landlord.
As of September 30, 2013, SL Green owned equity and financial interests in 89 Manhattan properties totaling 42.3 million square feet. Of this its ownership interests totaled 23.9 million square feet.
In addition to its Manhattan investments, SL Green holds ownership interests in 31 suburban assets around New York, totaling 5.4 million square feet. The Company also has ownership interests in 28 properties totaling 3.7 million square feet in southern California.
About Stephen Green
Stephen L. Green, who is 75, lived in Brooklyn until he was ten years old, when his family moved to Long Island. His father was a lawyer and apartment landlord. His mother was a public school teacher. He has one brother Mark, seven years his junior.
Green received a BA from Hartwick College and graduated from Law School at Boston College in 1962. He subsequently worked as an attorney for several years before gravitating towards entrepreneurship and eventually to real estate, culminating in his founding of SL Green Properties in 1980.
When the New York office market boomed in the mid 1990’s, Stephen Green formed SL Green Realty as the first public REIT to focus solely on New York City, and has since aggressively expanded its portfolio and built up the company to its present stature.
Green is member of the Board of Governors and the Executive Committee of the Real Estate Board of New York. He is also on the Board of Directors of Street Squash, an urban youth enrichment program providing academic tutoring and squash instruction.
Stephen Green is married to Nancy Peck who runs Nancy Peck & Co, which specializes in being an “office watchdog” during building construction and refurbishment. He has three sons, Daniel, Gary, and Scott Green. Nancy has a son, Jonathan Peck.
As a first rate squash player Green participated in both the 1985 and 1989 Maccabiah Games in Israel, and in 1985 actually won the bronze medal in squash. He endows the SL Green National Open Squash Championships for US Squash.
About Jeff Sutton
Jeff Sutton was born to a Sephardic Syrian family in Brooklyn, the son of an importer of retail merchandise.
He graduated Summa Cum Laude from the Wharton School at the University of Pennsylvania in 1981. Sutton is married and has five children. In June 2013, he purchased a residential property on the Jersey Shore for US$22.6 million.
Jeff donates much of his time and money to many charities and is actively involved with the youth of his community through various organizations.
In business he is the Founder and President of Wharton Properties, named after his alma mater, a commercial real estate company based in New York City. Over the past 20 years, Jeff has amassed over 120 properties in prime locations throughout New York City.
One of Sutton’s business strengths is his strong relationship with triple-A national retail chains, which he has placed in almost all of his properties. Jeff’s persistence in securing American Girl Place as the retail tenant at 609 Fifth Avenue led to his winning The Real Estate Board of New York’s award for “Most Creative Deal of the Year” in June of 2003.
