Real-Estate Firm Betting Big on Hudson Yards With New Deal

By Peter Grant 

SL Green Realty Corp., New York's largest office building owner, is making its biggest investment in the booming Hudson Yards area by acquiring a 91-year-old building in a deal that values the property at $440 million.

The real-estate investment trust is buying a majority stake in the 21-story building at 460 W. 34th St. from the Kaufman Organization, which is holding on to a minority interest.

The building, formerly known as the Master Printers Building, is across the street from the modern glass and steel towers rising in the sweeping Hudson Yards development from Related Cos. on what used to be 26 acres of windswept rail yards. That project has attracted such big name tenants as Time Warner Inc., BlackRock Inc. and Kohlberg Kravis & Roberts.

SL Green plans to compete with Related's and other modern buildings rising in the area by upgrading 460 W. 34th St., but maintaining its older, funky vibe. It will appeal to media and technology firms "that wouldn't' be attracted to new construction," said Marc Holliday, SL Green's chief executive.

SL Green has been investing heavily in New York office space even as some analysts voice concern about how much longer New York's economy will continue to grow. Its high-profile projects include One Vanderbilt, the 1,401-foot tower being developed across the street from Grand Central Terminal, scheduled to open in 2020.

Manhattan's office leasing market has been healthy. But historically, at this late stage of an economic cycle, the market is seeing sharper rent increases and vacancy declines.

The Manhattan vacancy rate was 9.5% at the end of the third quarter, up from 9% one year earlier, according to Cushman & Wakefield. The average asking rent was $72.65 a square foot a year, down from $72.67 a square foot at the end of the third quarter of 2017, the commercial real-estate services firm said.

SL Green executives say they remain bullish on New York. "There's still very strong job growth and that's before Amazon gets to town," said Andrew Mathias, the firm's president.

SL Green has sold more than $1.1 billion in assets this year and used the proceeds to repurchase shares and make new investments. The firm originally invested in 460 W. 34th St. in 2014 by making a loan to the Kaufman Organization to help it buy out its partners.

"This has been incubating for quite some time," Mr. Mathias said.

SL Green also expects to unveil Monday detailed plans for developing a modern tower above One Madison Ave., the century-old building it purchased in 2005 for $918 million. The redevelopment project, which will add an 18-story tower above the existing limestone podium, will cost more than $1 billion, SL Green executives said.

Write to Peter Grant at [e-mail]

(END) Dow Jones Newswires

December 02, 2018 17:14 ET (22:14 GMT)

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