Vornado Realty Trust (VNO) and SL Green Realty Corp. (SLG) merged their mezzanine debt positions with equity partners Broadway Partners and Investcorp to form a new ownership structure for 280 Park Avenue, a class A office property in Manhattan along with a funding of $150.0 million to reposition the property and find new tenants for the same.
Vornado Realty and SL Green formed a 50/50 joint venture combining their debt positions which stood at $400.0 million. This venture will own a significant majority interest in the property. Broadway Partners which co-owned this property is planning to add capital to retain its ownership and will remain in a co-management role as well.
During the market downturn a lot of office properties were negatively impacted but now they offer great potential and give investors an opportunity to take advantage. 280 Park Avenue is one of the best office properties spanning 1.237 million square feet of space located close to Grand Central Terminal.
The property has a large block of combined space available which is a major advantage since very few such blocks are available in midtown Manhattan.
This recapitalization gives an opportunity to its partners to further explore the potential of this property. The venture partners will execute a redevelopment program to further develop the building infrastructure and upgrade all public areas.
This redevelopment is expected to generate strong returns for its shareholders and both Vornado Realty and SL Green have an excellent record in repositioning properties. With rising asset values and recovering of fundamentals in midtown Manhattan this property is expected to be attractive going forward.
New York-based Vornado Realty is one of the largest real estate investment trusts (REIT) in the United States, engaged in acquiring, owning and leasing office properties, retail space, and temperature-controlled logistics and refrigerated warehouses.
Vornado Realty currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Brookfield Properties Corporation (BPO) currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
BROOKFLD OFFICE (BPO): Free Stock Analysis Report
SL GREEN REALTY (SLG): Free Stock Analysis Report
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