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Stephen Green’s SL Green Realty is stepping up its game a little bit now Spring is on the way finally, both with respect to the New York economy perhaps, as well as in Central Park.
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Yesterday SL Green announced it is buying out its’ Canadian partner Ivanhoé Cambridge’s 49.4% stake in the huge 2.6 million square foot office building at 388-390 Greenwich Street in Lower Manhattan. The property consists of a 39 storey tower and an adjacent 8 storey connected extension. SL Green are buying the stake in a transaction that it reports values the whole property at US$1.58 billion. The deal will now provide them with 100% ownership.
Ivanhoé Cambridge is the real estate arm of the Quebec Pension Plan, la Caisse de Dépôt et Placement. The two firms acquired the property together in 2007 for US$1.575 billion from Citigroup, which at the time was retreating up town to its 399 Park headquarters.
In the meantime however the economic prospects for the building have stabilized considerably. Just in December Citigroup, who had remained their tenancy in the building after the sale, signed a new 22 year, triple net, lease with SL Green and will now consolidate their entire global banking headquarters there. Citigroup will themselves also spend a massive US$1 billion to totally upgrade the property, to make it fit for a world banking headquarters.
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How all that impacts the valuations is not quite certain though, as when the two partners bought the property they also put on it at the time a US$1.1 billion mortgage with a German bank, maturing in 2017. On the one hand the property may have gone up a lot, if the new reported valuation relates to the equity interest only. Alternatively if it relates to the total “enterprise” valuation before considering the debt then it may have merely maintained its value, through the recession and its aftermath – and obviously there is a big difference between the two. Sl Green’s own announcement of the purchase yesterday simply refers to the valuation of what it calls the “consolidated investment interest” in the building as being $1.585 billion, perhaps implying the latter interpretation.
SL Green President Andrew Mathias commented on the purchase yesterday, “We have enjoyed a successful partnership with Ivanhoé Cambridge at 388-390 Greenwich, capped by Citi’s recent lease extension, which was one of the largest lease transactions ever executed in New York. Citi is one of the world’s great financial institutions and has been a valued tenant at several SL Green properties. We look forward to an ongoing strong relationship with Ivanhoé Cambridge and Citi as we continue to grow as New York City’s largest office landlord.”
The shares of SL Green Realty have been doing well too, reflecting improved operating performance all round, and optimism about renewed growth in the office segment of the real estate industry, and particularly in Manhattan now, where they are of course very strong.
At just under US$100 per share the market capitalization of the company is now about US$9.4 billion. The shares have basically risen steadily over nine times, since hitting a low of just below US$11 in 2009. Of course there is still some way to go to their pre-recession peak of US$146 per share, but it is nevertheless a solid start to the year
About SL Green Realty
SL Green is a fully integrated real estate investment trust, or REIT, that is focused primarily on acquiring, managing and maximizing value of commercial properties in Manhattan. The company is today New York City’s largest office landlord.
The company has interests in 92 Manhattan buildings totaling over 44 million square feet. This included ownership interests in almost 28 million square feet of commercial buildings, and debt and preferred equity investments secured by buildings with over 16 million square feet of space.
In addition SL Green holds ownership interests in properties totaling over 5 million square feet in New York’s surrounding suburban areas, and has ownership interests in 28 properties totaling 3.7 million square feet in southern California.
About Stephen Green
Stephen 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.
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.
Stephen Green is married to Nancy Peck who runs Nancy Peck & Co. He has three sons, Daniel, Gary, and Scott Green. Nancy has a son, Jonathan Peck.
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