Published 6 August 2006
SL Green Realty Corp said on Friday it had entered into an agreement to buy Reckson Associates Realty Corp for $US6 billion, including assumption of $US2 billion of debt but then disposing of $US2.1 billion of assets to an investment group led by existing Reckson executive management & Marathon Asset Management.
SL Green had its eyes on 6 midtown Manhattan properties containing 520,000mÂ² of under-rented office space, but also gets “suburban” properties in Westchester County & Stamford, Connecticut, which it may offload.
From the other side of the fence, Reckson chairman & chief executive Scott Rechler has achieved his third major offload at a market highpoint. The Rechler family entered the New York development market in 1958, when it developed an industrial park in Brooklyn. The business was listed in 1995, with a substantial proportion of its 72-property portfolio on Long Island. Redeveloping industrial properties has been a key to Reckson’s success.
Last September Reckson created an Australian listed property trust to invest in its suburban portfolio. The offer was oversubscribed and the trust raised $A263 million to take 75% of a $US422 million portfolio of 25 tri-state properties. Reckson kept the other 25%, and in the SL Green transaction Mr Rechler’s interests will retain that, plus management of the trust, plus other assets.
In the latest transaction, he has sold the Manhattan portfolio on yields of about 5.25% (financing arrangements change the numbers â€“ it may be as low as 4.6%), Westchester at 6.7%, Stamford at 5.5%. As Mr Rechler & his team take out $US2.1 billion of assets, SL Green gets $US3.9 billion of assets roughly 50% geared. Reckson investors will end up with 15.2% of SL Green.
Both the Green & Reckson boards have approved the transaction, but it requires approval from Reckson shareholders before settling, due to happen in January.
On completion, SL Green will own 2.6 million mÂ² of office buildings consisting of 28.0 million square feet, of which 2.28 million mÂ² will be in New York City, making it the largest public owner & operator of office properties in the city.
Mr Rechler said: “After 11 exciting years in the public arena, we have decided to recognise the significant value we have created in our portfolio and combine with SL Green to create the premiere office reit in the metropolitan New York area.”
Websites: SL Green
Attribution: Company releases, SL Green teleconference, story written by Bob Dey for this website.