SL Green's $105m bid wins 28 W44th Street.

Buildings may fetch record values in an incredibly competitive real estate market these days, but that doesn't mean the bidding process for the sale of a property must drag on round after round as competing buyers try to outgun one another, ratcheting up their offers.

Sometimes the bidding doesn't even have to advance past the first round for a bidder to hit the winning number.

Such was the case with the recent sale of 28 West 44th Street, a 21-story 359K s/f class B property, when SL Green stole the show in the opening act, taking the building with a top shelf $105 million offering.

The winning bid, which came just before the Thursday January 20 deadline for the first round, was enough above the roughly 12 other competitors' offerings that owner, the Transwestern Investment Group, agreed to the sale without seeing if any further proceedings might raise the price.

The day after the deadline, the other bidders showed what might have happened had the bidding continued, submitting offers on Friday and over the weekend that bested SL Green's bid by up to a million dollars in a push to initiate an impromptu second round regardless of Transwestern's agreement with the Manhattan REIT.

"A number of the bidders weren't very happy about the finish and they tried to squeeze back in with some late bids after the deadline," said Brian Ezratty, vice chairman at Eastern Consolidated properties, who was the broker representing Transwestern. "But Transwestern already had committed to SL Green and they weren't going to break that agreement."

Ezratty was still surprised that the deal didn't wind up entering into another round.

"I assumed there would be at least a second round. But a number of the bidders were at or around the same price and if one bidder pops his head above the crowd and is a real closer, the seller will go with them. And that's what happened."

SL Green's successful acquisition capped a wild week of due diligence for them, a process whose speed was perhaps enabled by the REIT's extensive experience in the Grand Central sub-market of which 28 West 44th Street is a part.

SL Green already owns 15 properties in the area, including 19 West 44th Street, a 300K s/f building. According to SL Green chief investment officer Andrew Mathias, the two 44th Street properties "makes us the dominant landlord in the prestigious ... "Club Row" location."

Both the Princeton and Columbia clubs are located on 43rd Street and both universities have office space in 28 West 44th Street.

SL Green's focus on the Grand Central sub-market reflects mainly the area's rapidly improving fundamentals.

"Vacancy was 15.1% in the area a year ago and now it's 12.5%," said Michelle LeRoy, vice president of investor relations at SL Green. "Rents right now are about $30-$32 per square foot, and we think We can take them up to $35. 19 West 44th Street is getting about $36 per square foot so we know it can be done."

Transwestern's leasing efforts in 28 West 44th Street over the past year means that SL Green won't have to launch anything close to a massive repositioning effort.

Transwestern conducted new leasing and renewed some key existing leases--most notably CUNY's renewal of 50K s/f space in the building--in a string of deals that, by November, had accumulated to around 100K s/f of transactions.

Roughly 13% of the building remains vacant, which will allow master leasers, SL Green, to improve on the reported 6% cap rate it bought into.

"This property features solid in-place cash flow with additional up side to be realized through repositioning and lease up of vacant space," Mathias said in a press release issued by SL Green.

SL Green purchased the property using a reverse 1031 tax exchange and a source within the firm said that the REIT may complete the exchange and unload a property in the coming weeks, avoiding having to pay capital gains tax.

The source wouldn't cite which property it might be but hinted that it is an older asset of SL Green's in the Grand Central sub-market, "that has been long repositioned and has realized its potential."