SL Green and Stonehenge to Acquire NYC Portfolio

NEW YORK, NY - SL Green Realty Corp. announced that it has formed a venture with Stonehenge Partners and entered into a contract to acquire eight retail and multifamily properties for $416 million. Stonehenge, one of New York City’s most prominent multifamily property operators, will reposition and manage the residential portion of the portfolio. The transaction is expected to be completed in the first quarter of 2012.

SL Green indicated that a key component of the transaction is 724 Fifth Avenue, a prestigious retail location located between 56^th and 57^th streets in Manhattan’s Plaza District. The renowned Italian fashion house Prada currently occupies approximately 20,700 square feet including the grade, mezzanine, second floor and lower level retail, as well a boutique office floor. The property enjoys prime position along the “Gold Coast” of Fifth Avenue – a retail corridor known to achieve some of the highest retail rents in the world. It is situated in the vicinity of other retail properties which SL Green has ownership of, including 717 Fifth Avenue, home to Giorgio Armani’s flagship store and the future flagship store of Dolce & Gabanna, in addition to 720 Fifth Avenue.

The residential portion of the portfolio includes a total of 402 rental units located in prime Midtown and Upper East Side submarkets. The SL Green/Stonehenge venture plans to significantly upgrade a selection of units and building amenities in an effort to maximize value. Stonehenge, which currently owns and manages over 2,560 apartment units in New York, will bring to bear its specific expertise to the venture and will be responsible for day-to-day management and marketing of the multifamily assets along with the execution of the renovation/upgrade program.

The transaction is the latest in a series of significant investments by SL Green that have involved premier retail properties and locations. Previous notable examples have included the recently-concluded 1552-1560 Broadway transaction, the American Eagle and Aeropostale flagships in Times Square, and the recently acquired 747 Madison Avenue.

The full portfolio being acquired in the transaction announced today includes:

• 724 Fifth Avenue, a 12-story building that currently includes the Prada retail space and several floors occupied by gallery tenants.
• Interests in 752 Madison Avenue, a four-story retail building completely occupied by Armani under a sub-lease arrangement that expires in 2025.
• Interests in 19-21 East 65^th Street, a pair of mixed-use properties adjacent to 752 Madison Avenue. The combined properties include 9,000 square feet of retail, office, and gallery space, along with 17 multifamily units.
• 762 Madison Avenue, a five-story building located between 65^th and 66^th streets and also adjacent to 752 Madison Avenue. The asset includes 6,000 square feet of office, retail and gallery space, with the lease on the ground floor retail space expiring in 2013.
• 44 West 55^th Street, a five-story commercial building located between Fifth and Sixth Avenues. With two floors currently vacant and leases on two additional floors scheduled to expire in 2012, the well-located midtown building offers a significant repositioning opportunity.
• 400 East 57^th Street, a 260-unit multifamily building located on the southeast corner of 57^th Street and First Avenue. While already featuring attractive common areas, the SL Green/Stonehenge venture plans to implement a strategic capital plan to upgrade select building amenities. In addition the venture will upgrade the ground floor retail space as needed in order to capture market-level rents from credit tenants.
• 400 East 58^th Street, also located along First Avenue. The building features 125 multifamily units and 4,000 square feet of ground floor retail space, with the latter currently leased at below-market rents to non-credit tenants.

Andrew Mathias, President of SL Green, commented “This is an exciting opportunistic investment for SL Green, which already has an outstanding track record in acquiring and repositioning New York City office and retail properties. We also are excited about making our first significant equity investment in the multifamily area, which helps to diversify our portfolio further while still maintaining our New York City focus.”

Marc Holliday, Chief Executive Officer of SL Green, added, “In joining forces with Stonehenge Partners, we have brought together two companies with complementary strengths. Along with our property renovation and repositioning know-how, we have considerable experience in underwriting residential transactions through our structured finance program. Stonehenge is one of the city’s best multifamily property operators. We believe the residential portion of this venture will produce solid returns.”

Ofer Yardeni, managing partner and co-founder of Stonehenge Partners, said, “The Stonehenge footprint in New York City continues to expand and this venture with one of New York City’s pre-eminent real estate companies further enhances our presence and brand. We look forward to collaborating with the SL Green team in repositioning these properties and bringing them to their full potential value.”

FTI Consulting Inc. served as an advisor to SL Green and Stonehenge in the transaction. Fried, Frank, Harris, Shriver & Jacobson LLP represented SL Green and Kirkland & Ellis LLP represented Stonehenge Partners in the transaction. Greenberg Traurig, LLP acted on behalf of the seller.

SL Green Realty Corp., New York City's largest office landlord, is the only fully integrated real estate investment trust, or REIT, that is focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties. As of June 30, 2011, SL Green owned interests in 57 Manhattan properties totaling more than 33.6 million square feet. This included ownership interests in 25.8 million square feet of commercial properties and debt and preferred equity investments secured by 7.6 million square feet of properties. In addition to its Manhattan investments, SL Green holds ownership interests and debt and preferred equity interests in 32 suburban assets totaling 7.3 million square feet in Brooklyn, Queens, Long Island, Westchester County, Connecticut and New Jersey, along with four development properties in the suburbs encompassing approximately 465,000 square feet.

Founded in the early 1990’s by Ofer Yardeni and Joel Seiden, Stonehenge Partners is a fully integrated real estate company based in New York. The firm which has 55 employees is primarily invested in Manhattan multifamily real estate. Stonehenge, together with its investment partners, currently owns and manages a real estate portfolio valued at nearly $1.8 billion. The portfolio is comprised of 19 properties representing approximately 3.2 million square feet, including 2,560 residential apartment units, office, retail and garage space.