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SL Green Says Its Big Bet On Midtown East Is Starting To Pay Off

Rendering of the One Vanderbilt skyscraper in Midtown Manhattan.

SL Green is on track to fill more than a third of the office space at its signature development this year.

SL Green has only announced three leases at the $3.1B, 1.7M SF tower, but Director of Leasing and Real Property Steve Durels said on the REIT's first-quarter earnings call Thursday that the company is trading proposals with seven different tenants for leases that range from one to four floors.

“By comparison to a year ago, we are extraordinarily busy,” Durels said on the call, noting SL Green wants to lease up 1.6M SF this year across the entire portfolio. “As the building comes out of the ground, people start to realize how in fact it’s changing the neighborhood and they can start to imagine themselves in the space.”

Some of the discussions, he said, are in an advanced phase, and the firm expects to have at least 37% of the building leased by December. In January, law firm Greenberg Traurig said it will take four contiguous floors in the building across 133K SF.

TD Bank was first in the door, taking 200K SF in the building, and Germany-based DVB Bank followed with 35K SF. Daniel Boulud has signed up to open a new, 11K SF restaurant on the second floor.

Construction on the tower has reached the 14th floor and is ahead of schedule, SL Green CEO Marc Holliday said. 

SL Green CEO Marc Holliday

Durels and Holliday said they believe Midtown East is experiencing something of a renaissance. The area has been plagued by a tenant exodus in recent years, as several big-name companies opt to head Downtown and to Hudson Yards. But Durels said leasing was up 25% year over year in the area in the first quarter.

Holliday said the company was extremely pleased by JP Morgan’s decision to build its new headquarters at 270 Park Ave., a few blocks away.

“We are proud to have helped pave the way for this important new development by taking a leadership role on the passage of the Vanderbilt corridor and East Midtown rezonings,” Holliday said. “We look forward to more announcements like this in the East Midtown market.”

Overall, the REIT inked 28 office leases in its Manhattan portfolio across nearly 376K SF.

Along with Greenberg Traurig’s lease at One Vanderbilt, SL Green's major deals included Investcorp’s renewal for 76K SF at 280 Park Ave. and Compass’ lease for nearly 33K SF at 10 East 53rd St.

Holliday also pointed to the increase in investment sales at the start of the year, saying the city saw more than $12B worth of transactions in the first quarter. This month, SL Green and Ivanhoé Cambridge signed a contract to sell their office condominium at 1745 Broadway for $633M, which will close in the second quarter and generate net proceeds for SL Green of around $126M.

The REIT closed on its sales of 600 Lexington Ave. for $600M and 1274 Fifth Ave. for $44.1M in the first quarter.

"As long as this market exists, we will continue to be active participants both as a buyer and a seller," Holliday said.