SL Green Realty Corp. (SLG:US), New York City’s biggest office landlord, agreed to buy a recently completed apartment building in Brooklyn for its first residential investment in the borough.
The 84-unit property in the Williamsburg section is atop a commercial condominium that the New York-based real estate investment trust bought in 2010, SL Green said today in a statement. The price, seller and address weren’t disclosed.
SL Green has been seeking to expand into New York residential property and tap into the rising market for apartments. In January, it joined Stonehenge Partners in a $193 million deal to acquire seven retail and multifamily properties in Manhattan’s Midtown and Upper East Side neighborhoods.
“We’re taking a very measured approach to getting our toes wet in apartments,” SL Green President Andrew Mathias said today during an investor presentation. The company hopes multifamily housing “will become a meaningful piece of our business,” he said.
The Williamsburg property, which includes 72 apartments and 12 townhouses, is three blocks south of the L subway line, according to the statement. The three-bedroom townhouses each have 1,850 square feet (172 square meters), a ground-level garden and rooftop terrace. The statement didn’t make clear whether the units would be rented or sold.
The property’s retail portion includes a Duane Reade drugstore, an HSBC Bank branch, and a 142-car garage.
The acquisition of a new building “will give us the high returns associated with new construction without any construction risk,” Brett Herschenfeld, SL Green senior vice president, said in the statement.
The deal is expected to be completed by the end of March, the company said. Rick Matthews, an SL Green spokesman, declined to comment beyond the statement.
Rents for one-bedroom apartments in Williamsburg rose 11 percent in the 12 months through October to $3,332 a month, according to the brokerage MNS. Rents for two-bedroom units rose 17 percent to $4,155.
SL Green Chairman Stephen L. Green became known in the 1980s as “king of the Bs” for his strategy of buying older, so-called Class B offices that he renovated and later sold for a profit. After becoming a REIT in 1997, the company traded up to such properties as the Graybar Building near Grand Central Terminal; and 1515 Broadway, the Times Square home of Viacom Inc. (VIAB:US), owner of Paramount Pictures and MTV.
The company’s “main focus is still office,” Mathias said. “We’re still finding a lot of great office to do. But residential is very complementary to our skills, and it’s something that we want to grow.”
SL Green projected 2013 funds from operations of $4.90 to $5 a share, according to a regulatory filing today. The average estimate (SLG:US) of 14 analysts surveyed by Bloomberg is for $4.91 a share. FFO gauges a property company’s ability to generate cash.
In a separate statement today, SL Green said it sold a trust that has a leasehold interest in London’s Procession House, a 105,195-square-foot office building, for $100 million. It also bought a non-performing mortgage on 315 Park Avenue South in Manhattan, a 20-story tower leased primarily to Credit Suisse Group AG. (CSGN)
SL Green rose 0.8 percent to $75.95 today in New York trading. The shares have gained 14 percent this year, compared with an 11 percent increase in the Bloomberg REIT Index.
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