SL Green Realty Corp. agreed to buy 11 Madison Avenue, the Manhattan tower that houses Credit Suisse Group AG’s U.S. headquarters, for $2.29 billion in one of the biggest real estate transactions ever in New York City.
The seller is a partnership of the Sapir Organization and CIM Group, according to a statement Tuesday. The 29-story, 2.3 million-square-foot (213,700-square-meter) property is between 24th and 25th streets in the Flatiron section of midtown south, overlooking Madison Square Park. The real estate investment trust will also pay about $300 million in costs tied to lease-stipulated improvements at the tower.
The deal is the biggest for a single building in Manhattan since the 2008 acquisition of the General Motors Building for $2.8 billion, and the second-largest in U.S. history, according to research firm Real Capital Analytics Inc. The purchase allows SL Green, New York’s biggest owner of office buildings, to increase its dominance in midtown south, the area roughly from 30th to Canal streets, where office-vacancy rates have been the lowest of any central business district in the country.
The building’s Flatiron neighborhood “has been a hotbed of activity from financial services to technology and media companies, as well as residential development, hotels and retail,” Anthony Paolone, an analyst at JPMorgan Chase & Co., wrote in a note to clients after the deal was announced.
SL Green will “have a good deal of options” with the property, including taking advantage of about 200,000 square feet of development rights associated with nearby 1 Madison Ave., which the company also controls, Paolone wrote.
Commercial real estate values in places such as New York and San Francisco are surging as foreign and domestic buyers pour cash into high-profile assets in a wager on the economic stability of large U.S. cities. Centrally located office towers are fetching prices 33 percent above records set in 2008, according to an index from Moody’s Investors Service and Real Capital.
The sale of a minority stake in the GM Building in 2013 valued the skyscraper at $3.4 billion, according to Real Capital. Earlier this year, a deal to refinance debt on the MetLife Building valued the property perched above Grand Central Terminal at almost $3 billion, people familiar with the transaction said in February.
Eleven Madison Ave. was originally designed as part of Metropolitan Life Insurance Co.’s headquarters complex, which also included the clock tower building to its south. The art deco-style tower, with an exterior of Alabama limestone, was built in 1929 and is listed on the National Register of Historic Places, according to the statement. It was featured in the Woody Allen film “Radio Days” and is home to the Eleven Madison Park restaurant.
Credit Suisse is the biggest tenant in the building, which also will be the new headquarters of Sony Corp.’s U.S. unit.
SL Green’s properties include Citigroup Inc.’s headquarters in Tribeca, the Graybar Building near Grand Central Terminal in Midtown and the Viacom Building in Times Square. The company plans to develop one of the city’s tallest office towers on the block just west of Grand Central, to be called 1 Vanderbilt.
The REIT has sought to dominate midtown south, where buildings dating from the 1880s to 1940s have been a magnet for growing media and technology companies such as Facebook Inc., Twitter Inc., EBay Inc. and Foursquare Labs Inc.
Along with 1 Madison, a 1.2 million-square-foot building that was also part of MetLife’s old headquarters complex, SL Green controls 635 and 641 Avenue of the Americas, and 215 and 304 Park Ave. South. After buying 304 Park Ave. South in 2012, President Andrew Mathias said the landlord was “monitoring midtown south carefully, looking for acquisition opportunities.”
As of March 31, the company had interests in 117 Manhattan properties totaling 43.6 million square feet, according to its quarterly earnings statement.