Hines sells NYC office to SL Green for $193m

Hines has sold 600 Lexington Avenue in New York for $193 million – or roughly $636-per-square-foot. The buyer was US REIT SL Green, the real estate investment trust confirmed today.

The 36-storey office tower was one of three deals in Manhattan being closely monitored by real estate investment professionals, amid suggestions cap rates have already peaked as prices are pushed back to 2006 – even 2007 – levels.

We have worked hard to build our cash position in order to be able to take advantage of opportunities quickly as the market recovers. With that in mind, we moved aggressively to lock up this opportunity. SL Green chief executive officer Marc Holliday

The Lexington Avenue property had been marketed by Richard Ellis. Hines originally bought the property on behalf of its US Core Office Fund for $91.6 million in 2004, for a cap rate of 7.2 percent, according to data provider Real Capital Analytics.

In a statement, SL Green said the $193 million cost included the assumption of a $49.9 million interest-only loan, set to mature in March 2014.

Richard Ellis is also marketing 340 Madison Avenue and Shorenstein’s 125 Park Avenue. The Park Avenue property is expected to achieve a sales price of between $700-per-square-foot and $800-per-square-foot, according to various New York brokers PERE has spoken to. San Francisco-based private equity real estate firm Shorenstein bought the office block in 2004 for $225 million or $373-per-square-foot, RCA said.

Investment capital – including REITs, institutional investors, sovereign wealth funds, individuals and private equity funds – is actively searching US markets for deals, particularly trophy core assets at so-called distressed prices. Delegates at this week's ULI spring conference in Boston though have been warned US cap rates may have already peaked, as a wall of capital outstrips the supply of assets on the market.

SL Green chief executive officer Marc Holliday said New York City office fundamentals, combined with increasingly debt availability, had seen the city’s “real estate market beginning to open up after two years in which there has been a dearth of institutional quality offerings”.

Having raised  fresh equity from the public markets in 2009, Holliday said SL Green had planned to take advantage of opportunities “quickly as the market recovers. With that in mind, we moved aggressively to lock up this opportunity, and there exists a strong likelihood that we will be able to attract a joint venture partner on this asset”.

More than half the leases in 600 Lexington Avenue are set to expire in the next three years, giving SL Green the chance to boost rents at the office property.

Greenberg Traurig represented SL Green.  SL Green owned 29 New York offices comprising 23 million-square-feet of space, as of the end of 2009, as well as eight retail properties, three developments, two land interests and ownership interests in 31 assets across New York City, Connecticut and New Jersey.