SL Green Realty Corp., Manhattan's largest office landlord, agreed to buy Gramercy Capital Corp. real estate investments for $390.8 million, including the right to a 100% leasehold on New York's Lipstick Building.
The accord includes the assumption of $265.6 million in debt for leased-fee interests in the Lipstick Building at 885 Third Ave., as well as 2 Herald Square and 292 Madison Ave., SL Green said Monday. The New York company expects the deals to be completed within 90 days.
"These transactions conclude an important consolidation in our ownership of land and improvements representing 1.2 million square feet of prime midtown properties, all with long-term operating leases to third parties," Andrew Mathias, the president of SL Green, said in a press release.
SL Green, founded by the developer Stephen L. Green in 1980, has been active this year as a buyer and seller of real estate and an investor in distressed property debt. It has also been raising rents at its Midtown office towers in anticipation of higher demand for space in the biggest U.S. office market.
The transaction for the Lipstick Building, nicknamed for its elliptical shape and red granite exterior, gives SL Green the entire stake in the joint venture that owns the fee and leasehold interests in the property. The company and Gramercy Capital bought a 79% interest in the ground beneath the office tower in 2007, and leased the land back for 70 years.
The owner of the Lipstick Building, Metropolitan 885 Third Avenue Leasehold LLC, filed for bankruptcy reorganization last month. The filing followed a lawsuit in June by Royal Bank of Canada, which sued to force a sale of the 34-story tower because the landlord had defaulted on a $210 million loan.
SL Green also acquired $38.7 million in mezzanine debt on 601 West 26th St., known as the Starrett-Lehigh Building, the company said Monday. The purchase adds to an existing investment in the property. Mezzanine loans are a form of higher-interest debt that's subordinate to a first mortgage. They're backed by an equity stake in the company owning a property, typically enabling the landlord to leverage more of the asset's value than a primary lender would allow.
SL Green has bought properties including 125 Park Ave. and 600 Lexington Ave. in Manhattan this year. It agreed in October to provide financing to developer Joseph Moinian to complete 3 Columbus Circle, a 26-story tower at 1775 Broadway.