Manhattan’s largest landlord SL Green Realty is seeking an option to convert its 1.2-million-square-foot headquarters tower, known as the Graybar Building, into five commercial condominiums.
The company filed a notice Aug. 28 seeking a “no action letter” to create the condo units in the 31-story office tower at 420 Lexington Avenue, located adjacent to Grand Central Terminal, between 42nd and 43rd streets, according to information filed with the New York State Attorney General’s Real Estate Finance Bureau.
The AG’s office issues a no action letter when it determines that a condo development can go forward without an offering plan, including when potential buyers would be fully aware of the conditions of the building.
The plan is part of an ongoing trend in which owners divide their existing commercial properties into commercial condos, such as SJP Properties’ 11 Times Square. In most instances, the company sells off one or more portions of the building.
The filing had only sparse information. The sponsors of the plan, dubbed the Graybar Building Condominium, were two entities that own the building, SLG Graybar Mesne Lease and SLG Graybar New Ground Lessee.
SL Green “had no intention at this point” in selling all or a portion of the building and instead was “preserving options” by filing for condos, a source familiar with the company’s plans said.
Real estate attorney Jay Neveloff, a partner at law firm Kramer Levin Naftalis & Frankel, said dividing a commercial property provides potential advantages with virtually no drawbacks.
“Oftentimes in real estate the sum of the parts equals more than the whole, and that is often true with condos,” said Neveloff, who is not involved with and had no knowledge of this project.
Retail condos are in high demand, and there can be tax benefits for nonprofits, he noted, which could be driving the decision to form a condo.
He added, “There is no downside to doing this.”
SL Green controls the building through a leasehold it first acquired in March 1998 for approximately $78 million, the company’s financial filings show. The building is the sixth highest revenue generator in its Manhattan portfolio, bringing in $63 million in annualized rent, the company reported in July.