RCA in the commercial property press:

SL Green Selling Stakes in 1221 Avenue of the Americas and Buying 125 Park Ave

BusinessWeek reports: SL Green Realty Corp., New York’s biggest landlord, agreed to sell its minority stake in McGraw-Hill Cos. headquarters building in Midtown for $576 million to help pay for the purchase of two other Manhattan office towers.

The company will sell the 45 percent non-managing ownership interest in the building at 1221 Avenue of the Americas to the Canada Pension Plan Investment Board, according to a statement today. The pension board also said it formed a joint venture with SL Green to acquire a 45 percent stake for 600 Lexington Ave.

SL Green agreed to buy 125 Park Ave., which occupies the block between 41st and 42nd streets across from Grand Central Station, for $330 million. The resurgent demand for office space indicates landlords such as SL Green expect to be able to raise rents, said Dan Fasulo, managing director of global commercial property research firm Real Capital Analytics Inc.

“They’re really shocking a lot of investors who didn’t realize the market had come back this violently for Class-A office,” Fasulo said. “You don’t buy an asset at this type of yield unless you think you can raise the income over time. The pricing wouldn’t make sense if you were expecting rents to fall from here.”

SL Green acquired its ownership interest in McGraw-Hill’s headquarters in 2003. The building is one block from Rockefeller Center and across the street from Radio City Music Hall.

With the McGraw-Hill building fully leased through 2020, “it doesn’t seem like there’s anything left to do” for SL Green to find income at the property, Fasulo said.

“They have a history of maximizing the value of their real estate assets and they also have a history of selling when they think there’s nothing else they can do to continue to maximize value."

At the McGraw-Hill property, “You have a dedicated income stream and that’s it. It’s a bond yield at that point.”

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Posted by: Nina Turner

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