NPS hits jackpot with fourth-tallest skyscraper in NYC

New York City boasts the world’s most dazzling skylines and urban night views, attracting a number of global tourists to its observatories.

The city has five observatories: the main deck observatory of The Empire State Building; Top of the Rock at Rockefeller Center; One World Observatory at One World Trade Center; Edge at Hudson Yards; and SUMMIT at One Vanderbilt.  

SUMMIT, the city’s newest observation deck that opened last October, attracts an average of 75,000 visitors a month. It is famous for its Ascent elevators, the world’s largest exterior glass-floor elevators leading to the highest panoramic viewing point in Midtown Manhattan.

One Vanderbilt, where SUMMIT is located, was named in memory of American railroad tycoon Cornelius Vanderbilt. He created Grand Central Depot in 1871, which was reconstructed and renamed Grand Central Station in 1900.

The current structure of the station, Grand Central Terminal, was opened in 1913 and has been the main transportation hub in Midtown since then. The station is also a world-famous landmark -- K-Pop boy band BTS filmed their performance of ON in the lobby of the terminal when they appeared on The Tonight Show in 2020.   

As the infrastructure of the terminal and the surrounding area of East Midtown lags behind the rest of the city, the city started a modernization project in the early 2010s. SL Green Realty Corp., a leading real estate investment trust (REIT) and developer in Manhattan, participated in the redevelopment project by investing $220 million in upgrading the infrastructure of Grand Central Terminal and building a skyscraper near the terminal, which later became One Vanderbilt. The building opened in September 2020.

One Vanderbilt, SL Green Realty’s ambitious landmark, is the fourth-tallest building in New York City as high as 428 meters with a spire. The construction cost of the building reached $3.3 billion – now, the 93-story skyscraper is one of the trophy assets in New York. 

South Korea’s National Pension Service (NPS), together with US real estate investment manager Hines, acquired a 27% stake in the building for around $500 million from SL Green Realty in 2017. It garnered attention from the market as it was NPS’ largest-ever investment in overseas real estate development at the time. The pension service employed a build-to-core approach, a high-risk and high-return strategy, which involves taking on the risk of completing construction and securing tenants in return for a low acquisition price.

The strategy has been successful so far – 95% of the skyscraper is leased out, and SL Green is asking $322 per square foot for the top floor of the tower, according to US real estate news outlet The Real Deal. 

Located at the corner of 42nd Street and Vanderbilt Avenue in Midtown, the building is crowded with commuters to Manhattan using the suburban rail service Metro-North Railroad. The brand-new building stands out as most of the offices in East Midtown are old due to restrictions on developments until several years ago.

NPS sold around a 7% stake in the skyscraper in 2019 and used the realized gains to acquire another New York-based landmark – the pension fund and Hines teamed up and bought a 49.5% stake in One Madison Avenue from SL Green Realty for $492.2 million in May 2020.

The Korean pension fund and Hines have intensified partnerships in build-to-core strategy. In December 2020, they set up a $1.5 billion joint venture for a build-to-core portfolio, aiming to invest in a wide range of properties in high-entry-barrier markets globally. Last September, the two parties acquired the headquarters complex of Pacific Gas & Electric Company (PG&E) in San Francisco for $800 million.

NPS has been securing overseas core assets at low prices by investing in early-stage developments. It expects demand for Manhattan-based trophy office assets to grow in line with increasing sale prices and long-term ownership, the pension fund said.

Write to Young-Yeon Kang at yykang@hankyung.com
Jihyun Kim edited this article.