Rapidly Expanding REIT Spending $440M On 2 NYC Luxury Towers
SL Green is selling its first-ever ground-up residential development — a deal that adds a blue-chip apartment building to the portfolio of a nascent apartment REIT.
GO Residential REIT has reached a deal to buy the residential and retail components of 7 Dey St. from SL Green for $222.6M, the companies announced Monday.
The 34-story tower has 209 apartments that are 99% leased, plus 17K SF of ground-floor retail and 26K SF of offices across three floors, which aren't part of the deal. SL Green completed the development in 2021 after assembling the site across three deals in 2015 and 2016 totaling $111M, Crain's New York Business previously reported.
“We are pleased to partner with GO Residential in a transaction that allows us to prove the value of best-in-class, new construction residential and retail properties, while retaining ownership of three office floors to realize future incremental value,” SL Green President and Chief Investment Officer Harrison Sitomer said in a statement.
The deal brings SL Green closer to its goal of selling $2.5B of properties. JLL's Drew Isaacson and Rob Hinckley represented SL Green in the deal, and Prince Realty Advisors' David Ash represented GO.
GO Residential was launched last year by NYC investors Meyer Orbach and Joshua Gotlib with a $2.7B portfolio of luxury apartment buildings, and it has continued to grow its asset base. It trades on the Toronto Stock Exchange.
Concurrently with the purchase of 7 Dey, GO on Monday announced it agreed to buy a majority stake in 409 Eastern Parkway, a 185-unit building in Brooklyn's Crown Heights neighborhood that opened in 2018.
Adam America Real Estate Group, that building's developer, agreed to sell an 81% stake to GO for $217M and retain 19% ownership. The property's apartments are 95% occupied, and its three ground-floor retail spaces are fully leased.
Both deals are expected to close in the second quarter, according to a release. GO plans to finance its purchase of 7 Dey St. with a $150M fixed-rate loan, and it plans to assume the $66.6M mortgage tied to 409 Eastern Parkway.
In addition to the debt, the REIT is offering $223M in new shares of the company to finance the purchases. It has already struck deals, one with investment firms led by CIBC Capital Markets and RBC Capital Markets, and another private placement, to raise more than $75M in equity from shares of newly issued stock. It also plans to draw down about $18M from its credit facility to provide cash to the property sellers.
“These acquisitions are expected to enhance our scale, asset quality and long-term growth profile, in addition to generating diversity within our portfolio,” Gotlib said in a statement. “Importantly, they have been structured in a manner that reflects our disciplined approach to the balance sheet.”
The deals come less than a month after GO announced deals to acquire three apartments buildings on the West Side of Manhattan. It agreed to pay Friedman Management $150.5M for the 321-unit Ivy Tower at 345 W. 42nd St. and 350 W. 43rd St., along with striking a $230M deal with Maddd Equities and Joy Construction for 411 and 445 W. 35th St.
Those deals are being funded by new debt, $183.2M in cash on hand and $77.3M in stock being issued to the building sellers.
Orbach said in a statement that the five purchases “should serve as a clear signal to the market: GO Residential REIT is well-positioned to execute on accretive acquisition opportunities.”
When the deals close, GO will own more than 3,000 luxury NYC apartments across 10 buildings. It was trading for roughly $9.90 per share on Tuesday, down 34% from its opening price of $15 per share and at a significant discount from its most recent net asset value of $23.70 per share.
