SL Green (SLG) Signs Deal To Sell 43% Stake In Office Tower
Zacks Investment Research | Nov 14, 2017 08:23PM ET
SL Green Realty (NYSE:SLG) announced that it has entered into a contract with Allianz (DE:ALVG) Real Estate, pursuant to which the commercial property owner will sell 43% stake in 1515 Broadway to the real estate investment division of German-based company Allianz Group.
The above-mentioned deal values the Class-A Times Square (NYSE:SQ) office property at $1.95 billion and is expected to generate $416 million in cash proceeds for SL Green. Notably, 70% of the transaction will likely close on Nov 30, 2017, while the balance is slated to close in the first quarter of 2018.
Per SL Green’s management, the agreement reflects the confidence of foreign investors in New York City’s office realties. Per Allianz Real Estate, this joint venture is a strategic move as well as consistent with the company’s plan of expanding its footprint in the city. Moreover, this trophy asset is anticipated to add significant value to Allianz’s portfolio in the future.
Spanning 1.86 million square feet of space, the 57-storeyed building is well placed between the 44th and 45th street of New York's Times Square. This enables the property to boast an enviable tenant roster and enjoy high leasing activity. The building is currently 98% leased to well-known tenants such as Skechers, Milano, Line Friends as well as the Minskoff Theater, which hosts the top grossing show — The Lion King — in Broadway.
SL Green initially owned interest in the building through a joint venture in 2002 after which it gained full ownership in 2011. The company then redeveloped the property in 2012 by adding new elevators, signage and a lobby, as well as repositioning the retail spaces. This enabled the company to sign a lease renewal with Viacom. Per a long-term lease renewal, the media giant will occupy the building's office space through 2031.
Increasing demand associated with job growth is helping reverse the persistent office-space efficiency trends which have continued to limit robust growth in the office sector fundamentals. Further, with corporate sectors renting more space to accommodate the increased workforce, we anticipate a healthy revival in office leasing activities. The aforementioned joint venture further reaffirms strength of the retail and office real estate market in the Times Square locality.
Shares of SL Green have underperformed the Zacks Investment Research
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