(Updates with comments from analyst starting in third paragraph.)
Oct. 3 (Bloomberg) -- SL Green Realty Corp., New York’s biggest office landlord, agreed to buy eight Manhattan retail and multifamily properties in a joint venture with Stonehenge Partners for $416 million.
The deal includes 724 Fifth Ave., in the world’s most expensive shopping district, New York-based SL Green said in a statement today. Prada SpA, the Milan-based luxury-goods maker, occupies about 20,700 square feet (1,900 square meters) in the building, according to the statement.
The purchase marks SL Green’s first foray into New York’s apartment market and raises the real estate investment trust’s profile as an owner of Manhattan street-retail properties. Even with this purchase, apartments are likely to remain “tangential to their business,” said Alex Goldfarb, an analyst with Sandler O’Neill & Partners LP in New York.
“I wouldn’t think SL Green is becoming an apartment company,” Goldfarb, who recommends investors buy the company’s shares, said in a telephone interview. “Their partner Stonehenge will take the lead on that, but SL Green has opportunities with any ground-floor retail that’s associated with those properties.”
Since July, partnerships including SL Green have bought or signed contracts to acquire retail buildings in Times Square at 1552 and 1560 Broadway, and 747 Madison Ave. on the Upper East Side.
New York Focus
The housing part of the transaction helps SL Green diversify its portfolio while maintaining its New York focus, Andrew Mathias, the REIT’s president, said in the statement.
Stonehenge, based in New York and co-founded by investor Ofer Yardeni, will manage and reposition the multifamily portion, which totals 402 rental units in Midtown and the Upper East Side. Yardeni’s company has stakes in about 2,560 New York apartments, according to the statement.
Besides the 12-story 724 Fifth Ave., the properties in the deal announced today include 762 Madison Ave.; 400 East 57th St.; 400 East 58th St. and stakes in 752 Madison Ave., occupied by clothier Giorgio Armani, and 19-21 East 65th St.
Manhattan apartment rents rose 7 percent in the second quarter as lower vacancies prompted landlords to cut concessions, the firms Miller Samuel Inc. and Prudential Douglas Elliman Real Estate reported in July. Apartments are benefiting from a stagnant home sales market, the firms reported.
Retail rents have leveled off on Manhattan’s Fifth and Madison avenues as the most prestigious locations have been taken, the Real Estate Board of New York reported in May. Upper Fifth Avenue rents averaged $2,250 a square foot, while Madison Avenue between 57th and 72nd streets averaged $919 a square foot, the third-highest rate in the city after upper Fifth Avenue and Times Square, according to the trade group.
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