REITs SL Green and Reckson
In Merger, Acquisition Talks
SL Green Realty Corp. agreed to acquire Reckson Associates Realty Corp., two publicly traded office real-estate investment trusts with a sizable New York-area presence, for $6 billion in cash and stock, including about $2 billion in debt.
Under the terms of the agreement, SL Green will buy Reckson's outstanding stock and operating partnership units for $31.68 in cash and a fixed exchange ratio of 0.10387 share of SL Green common stock per share and unit. Based on SL Green's closing stock price of $112 on Aug. 2, the transaction represents $43.31 per Reckson share. Reckson stockholders will own approximately 15.2% of SL Green.
SL Green, with a market capitalization of $5.2 billion, is already one of the New York City's largest landlords with full or joint ownership in more than 18 million square feet of property. Reckson, based in Melville, N.Y., has a market capitalization of $3.6 billion and owns 101 properties with 20.2 million square feet of office space, including five properties in New York City.
The deal was approved by the companies' boards and is expected to close in January pending shareholder approval.
Under a secondary deal, SL Green said it plans to sell some assets of Reckson to an investment group led by existing Reckson management and Marathon Asset Management for $2.1 billion. The investor group will acquire all of Reckson's Long Island real-estate assets, Reckson's 14 property Eastridge portfolio in New York's Westchester County, 711 Westchester Avenue in White Plains, N.Y., Reckson's 20 office properties and three development parcels in New Jersey. The sale is expected to close simultaneously with the closing of the acquisition of Reckson by SL Green. It has been approved by a committee of independent directors of Reckson.
After the completion of the sale, SL Green will own 28 million square feet of office buildings of which 24.5 million square feet will be in Manhattan. The transaction extends SL Green's standing as the largest public owner and operator of office properties in New York City, the company said.
"The portfolio we have acquired is a perfect fit for us -- in one transaction we have added five outstanding buildings totaling over four million square feet in our core market of Manhattan, obtained key properties strategically located in the neighboring submarkets of Westchester and southern Connecticut, and expanded our highly-profitable investment platform," said Marc Holliday, Chief Executive of SL Green, in a statement.
Goldman Sachs and Greenhill & Co. served as financial advisers to the independent directors of Reckson, while Wachtell Lipton Rosen and Katz served as legal counsel. Citigroup served as a financial adviser to Reckson. Merrill Lynch acted as financial adviser to SL Green and Clifford Chance US LLP served as legal counsel.
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