$39-a-foot in Midtown? A REIT snaps it up.

In a transaction that might take away one of the last below-market properties in the Grand Central South sub-market, SL Green Realty Corp. is currently in negotiations with Argent Ventures to purchase fee and mortgage interests for, One Park Avenue, a 913,000 SF, 20-story building, with rents of $39 per SF.

Rents that low are uncommon in the highly desirable Midtown area, but the building's unique location marks it as one of the exceptions to the rule. According to, Marc Holliday, the chief investment officer at SL Green Realty, One Park Avenue was built on the intersection of three sub-markets -- Grand Central South, Penn Station East and North Park Avenue -- a gray territory, where rent prices vary greatly from one building to the next.

"This property really sits at the border of three sub-markets," he explained. "In those sub-markets you find a number of leased properties which have rental rates substantially below the market value, even though in Midtown rents are solidly in the mid-50's range."

As a result, SL Green is planning to purchase the fee interest, the mortgage interest, and an option to purchase the ground lease position in the building. The company has agreed to pay $233.9 million for the deal, although Holliday was careful to point out that SL Green did not buy a 100% of the interest for the property.

"It's not necessarily that there was an advantage to doing it that way," he explained. "It was just the position we bought from Argent Ventures. The lease hold position is held by various third parties."

One Park Avenue boasts such enviable advantages as large floor plates and a Park Avenue address, and would present a perfect investment opportunity when the current tenants' leases expire in 2002.

"There will be a significant roll-over in 2002, and there will be an opportunity to capture a lot of rental increase," Holliday said. "That's the nearest term opportunity in the building, and the focus of our investment. Our strategy will revolve around that block of space that will become available in 2002."

According to Stephen L. Green, the chairman and CEO of the company, "One Park Avenue is a perfect example of our investment strategy at work. The property interests to be acquired will provide long-term contributions to SL Green's cash flow and internal earning growth. The building encompasses the most valuable elements in today's leasing market, large floor plates, good light and air, and a Park Avenue address. One Park Avenue is located within a ten minute walk of both Grand Central and Penn Stations, securing its position as a core asset in any business environment."

"We made the investment because it fits within the strategy that we are pursuing right now to buy investments in core assets in the Midtown areas with respectable tenants and large floor plates," Holliday-added. "We think those kinds of investments will contribute to the long-term growth of the company, as below market rentals will become available when the leases expire."

One Park Avenue was built in 1925 by York & Sawyer, Inc. The block-long building was completely renovated in 1986, and is currently occupied by such tenants as The Mt. Sinai Hospital Center, NYU Hospital Center, Martin E. Segal & Company, Loews Corporation, and Coty Inc.

The executives at Argent Ventures would not comment on the deal.