Carlton Arranges JV Buy of 485 Lex Interest

NEW YORK CITY-In a deal arranged by Carlton Group chairman Howard Michaels, the long-rumored sale of S.L. Green Realty’s 485 Lexington Ave. has taken shape. A joint venture of Israel-based Optibase and Gilmor USA LLC has entered into an agreement to acquire 49.5% of the beneficial interest in the 921,000-square-foot office tower, which S.L. Green bought in 2004 along with adjoining 750 Third Ave. for $480 million.

According to a release from Optibase, the JV is paying $20.8 million, along with a loan of approximately $20 million secured by a pledge of an additional 49.5% interest in Green 485 JV LLC. S.L. Green will retain an unencumbered 1% interest in the JV.

The transaction is based on a valuation of approximately $504.2 million, or $547 per square foot, and a cap rate of 6.25%. It’s subject to approval by Wachovia Bank, which holds a $450-million non-recourse loan on 485 Lexington. The JV will assume the debt as part of the agreement.

“Four-eighty-five Lexington is an anomaly,” Michaels tells GlobeSt.com. “It’s a tremendous asset located two blocks from Grand Central, which is 98% leased to credit-quality tenants with virtually no turnover for seven years.”

Additionally, Michaels says, 485 Lexington “has almost eight years remaining on a fixed-rate, 5.61% mortgage. The combination of these factors is what made the transaction palatable to our investors. Most of the larger deals which have traded this year have had large vacancies and short-term financing. Four-eighty-five Lexington has it all: location, great tenants and great financing.”

In a release, S.L. Green CEO Marc Holliday calls the deal “a first, but significant step towards the sale of interests in 485 Lexington.” If the transaction is ultimately approved, it would demonstrate that the Midtown office market “continues to stand as one of the world’s top locations and that investor interest is once again on the rise,” he adds. Cushman & Wakefield represented the REIT in the deal.

Optibase CEO Tom Wyler says in a release that the JV is the outcome of the video services company’s decision to diversify. “We are excited about this particular transaction being our entry point into the fixed-income real estate sector in North America and we believe our shareholders would benefit from this in the long run,” he says.