SL Green Says Converting 750 Third Ave. Will Cost $805M
New York City office owners have spent the last couple of years wringing their hands as they describe how expensive it will be to convert old office buildings into housing.
Now, the city’s largest office landlord, SL Green, has provided a price tag.
The REIT’s plan to turn the 35-story office tower at 750 Third Ave. into a 639-unit apartment building will cost $805M, according to a presentation by SL Green as part of an investor day Monday.
The developer plans to take advantage of 467-m, the city’s tax abatement for conversions that applies to buildings where a quarter of the units are designated as affordable housing. But even with the tax break, SL Green will have to pour in $320M in cash and take out $485M in loans to make it happen.
SL Green declined to comment to Bisnow, but it described the 560K SF Midtown East office tower as the “poster child for Midtown conversions,” Crain’s New York Business reported Tuesday.
“That’s a lot of capital we’ve got to get on the road and start raising,” SL Green CEO Marc Holliday said.
The proposed conversion is expected to take three years and will involve taking a chunk out of 13 floors in the building’s middle. It will also mean adding 11 floors on the western side, while interior spaces will become storage facilities, according to the investor presentation.
SL Green plans to start renovations in the summer, which includes turning the lower floors into neighborhood retail, a fitness center, coworking space and a membership club. SL Green is also planning rooftop terraces that will amount to half an acre of outdoor space for residents.
The assumed rents in the building for affordable units are $25 to $45 per SF, while rents in the market-rate apartments are estimated to range from $90 to $113 per SF, according to the presentation. At the size of the average newly built apartment in New York City — 737 SF, according to RentCafe — that would rent for between $5,528 and $6,940 a month.
Holliday has been publicly enthusiastic about the potential for office-to-residential conversions for several months, telling investors this spring that Midtown's obsolete offices aren’t necessarily bad buildings.
“They're just buildings that can be optimized as residential and should be optimized as residential,” he said.
SL Green may have more Midtown development ambitions beyond 750 Third. JPMorgan Chase's SL Green analyst said the REIT is eyeing the Roosevelt Hotel as a potential acquisition as it aims to replicate its success with the One Vanderbilt office tower, Crain’s reported Tuesday.
The hotel is owned by the Pakistani government and leased to the city to serve as a migrant shelter so large it has been dubbed “the new Ellis Island.”
