Sloan Kettering signs contract to buy 414K sf from SL Green in Midtown East for reported $300M

Memorial Sloan Kettering through the entity S.K.I. Realty, Inc. signed a contract as buyer for a reported $300 million with SL Green Realty through the entity 885 3rd Avenue Master Lessee LLC for 414,317 square feet of the Lipstick Building (O4) at 885 Third Avenue in Midtown East, Manhattan.
The memorandum of contract was signed on August 18, 2022 and was recorded on September 6, 2022. The entire property has 554,180 square feet of built space according to PincusCo analysis of city data.
The signatory for SL Green Realty was Jeffrey T. Steiner. The signatory for Memorial Sloan Kettering was Michael P. Herrington. The New York Post first reported the hospital was buying a portion of the Lipstick Building, totaling 414,317 square feet as a condominium, for $300 million.

Prior sales and revenue

Prior to this transaction, PincusCo has no record that the buyer Memorial Sloan Kettering had purchased any other properties and has no record it sold any properties over the past 24 months.
The seller SL Green Realty purchased six properties in six transactions for a total of $811.9 million and sold 17 properties in 14 transactions for a total of $1.6 billion over the same time period. The 554,180-square-foot property generated revenue of $51.4 million or $93 per square foot, according to the most recent income and expense figures.

The property

The 885 3rd Avenue parcel has frontage of 200 feet and is 160 feet deep with a total lot size of 26,108 square feet. The lot is irregular. The zoning is C6-6 which allows for up to 15 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $241.4 million.The most recent loan totaled $272 million and was provided by SL Green Realty on March 1, 2021.

Violations and lawsuits

There were no lawsuits or bankruptcies filed against the property since September of 2020. In addition, according to city public data, the property has received $7,400 in ECB penalties and $9,350 in OATH penalties in the last year.

Development

There are no active new building construction projects or major alteration projects with initial costs more than $5 million on this tax lot.

The neighborhood

In Midtown East, the majority, or 82 percent of the 61.5 million square feet of commercial built space are office buildings, with hotel buildings next occupying 7 percent of the space. In sales, Midtown East has 4.2 times the average sales volume among other neighborhoods with $1.4 billion in sales volume in the last two years and is the 9th highest in Manhattan. For development, Midtown East is the most active neighborhood among other neighborhoods. It had 16.3 million square feet of commercial and multi-family construction under development in the last two years, which represents 26 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of five of the 19 commercial properties representing 594,117 square feet of the 802,176 square feet. The largest owner is Ceruzzi Properties, followed by Empire Management and then Sol Goldman Investments.
There are two active new building construction projects totaling 287,685 square feet. The largest is a 130-unit, 245,946-square-foot R-2 building developed by Shaz Mossanen with plans filed October 28, 2015 and permitted September 19, 2017. The second largest is a 29-unit, 41,739-square-foot R-2 building developed by Abraham Lokshin with plans filed November 13, 2019 and it has not been permitted yet.

The majority, or 75 percent of the 777,349 square feet of built space are office buildings, with elevator buildings next occupying 8 percent of the space.

The seller

The PincusCo database currently indicates that Sl Green Realty owned at least 83 commercial properties in New York City with 18,612,270 square feet and a city-determined market value of $7.4 billion. (Market value is typically about 50% of actual value.) Within the portfolio, the bulk, or 94 percent of the 18,612,270 square feet of built space are office properties, with elevator properties next occupying 4 percent of the space. They are all located in Manhattan.

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