SL Green Realty Corp. confirmed today that it will buy 11 Madison Avenue for a blockbuster $2.285 billion.
The city’s biggest landlord will then fork out another $300 million for “lease stipulated improvementsˮ to the building.
The sale is the second biggest in the city after the GM Building, which was sold to Boston Properties for $2.8 billion in 2008.
“Eleven Madison Avenue is one of the best assets in New York City’s vibrant Midtown South submarket,” said SL Green co-chief investment officer, Isaac Zion who noted the building’s favorable floor-plate sizes, amenities, and “robustˮ infrastructure.
Occupying a full block across from Madison Square Park, 11 Madison is connected to One Madison Avenue, a 1.2 million s/f building that is leased to Credit Suisse and also owned by SL Green.
The building is being sold by a joint venture of The Sapir Organization and CIM Group, which paid $675 million for the 2.3 million s/f building back in 2003 when the midtown south office market was not the popular tech and media hub is has become.
In 2010, CIM Group bought a stake in property originally built in 1929 as the headquarters of Metropolitan Life Insurance Company.
After a $700 million modernization in the 1990s, 11 Madison became the North American headquarters of Credit Suisse, which continues to be the largest tenant in the building today.
The owners managed to secure a 550,000 s/f lease with Sony this year at rents in the $70s per square foot, according to published reports, and signed online dining reviewer Yelp and talent agency William Morris Endeavor, all at higher rents. Restaurant 11 Madison and Fidelity Investments are two of the retail tenants.
While Zion praised the building’s current selling points and physical attributes, the extra $300 million tacked onto the deal for promised renovations suggests that SL Green harmonizes with comments recently made by Robert Lapidus whose L&L Holding Company transformed the tired former Toy Building at 500 Fifth across the park into the showpiece it is today.
An an April NAIOP luncheon, Lapidus hailed the attributes of the Midtown South market, but said, “Tenants today want new product. So in Manhattan, that’s why Hudson Yards and World Trade Center sights are doing well I’ve spoken with many of the tenants in the Hudson Yards. They didn’t necessarily want to go there. I mean the 7 line is not enough there. You’re going to be living in a construction site for ten years. New York needs it though.”
SL Green opted to not comment on the nature of the coming improvements at the art-deco building that on the National Register of Historic Places.
Alex Sapir, president of the Sapir Organization, said, “After the past two years of repositioning the asset and value creation through lease-up and renovations, we are pleased to consummate this sale with SL Green.
“We trust that they will continue to own and operate this trophy asset in the same manner that we have over the past 12 years.”
The law firm of Greenberg Traurig, LLP represented SL Green. The seller was represented by Darcy Stacom and Bill Shanahan of CBRE, Inc. along with the law firm of DLA Piper (US).