SL Green Realty, Manhattan’s largest office landlord, sold half its interest in a 44-story tower on the corporate headquarters-heavy Park Avenue with an asset valuation of $2 billion, exceeding some estimates in a positive sign of investor confidence for top-tier New York office space.

As the city struggles with record-high vacancy, SL Green said property developer and investor Mori Trust bought a 49.9% interest in the 1.8 million-square-foot building at 245 Park Ave. SL Green bought the property near the Grand Central Terminal transit hub in September with the intention of repositioning it with a partner.

“The formation of this new partnership with Mori Trust reflects the ... resilience of the Park Avenue corridor as New York’s most desirable office market,” Harrison Sitomer, chief investment officer of SL Green, said in a statement, adding the transaction signals “the institutional capital markets’ recognition of the enormous potential for 245 Park.”

The deal is Tokyo-based Mori Trust’s first investment in New York, according to SL Green. It also represents the largest component of the real estate investment trust’s financial plan this year, following the $500 million refinancing of 919 Third Ave. in April.

Pricing on the 245 Park disposition comes out to $1,122 per square foot and "implies positive equity value at the property with the sale above SL Green’s basis," Ronald Kamdem, a Morgan Stanley analyst, said Monday in a note to clients.

The property sold for $2.21 billion in March 2017, CoStar data shows, before the pandemic began disrupting property markets. Kamdem said the latest transaction would be viewed positively as SL Green investors expected the asset valuation would be lower.

SL Green stock, which tumbled from a pre-pandemic peak of over $100 in early 2020, surged about 20% Monday to above $28 per share.

“This is in line with what management stated it would do and moderately better than we expected — and, in our view, likely FAR better than investors and others expected,” Truist analyst Michael Lewis said in a note.

SL Green told CoStar News proceeds from the deal will go toward debt repayment without commenting further.

New York’s office vacancy rate has topped what CoStar data shows as a record high of more than 13%, and the market sale price per square foot has declined to an average of $605.

With that backdrop, the deal showcases investors are still willing to bet on the largest U.S. commercial property market, led by midtown Manhattan. In May, midtown’s office availability rate was lower than that of the south midtown and downtown markets, according to data from real estate firm Colliers.

SL Green said in its annual filing it closed on 245 Park in September at the gross asset valuation of $2 billion.

Evercore ISI analyst Steve Sakwa told clients that “we still see this as a positive for [SL Green] as this marks the first major transaction of ’23 and shows that institutional interest remains for well-located office.”

The property's three largest tenants are investment banks Societe Generale and Houlihan Lokey, and real estate investment firm Angelo Gordon, according to CoStar data.

SL Green has retained Kohn Pedersen Fox Associates to help with a planned redesign of the building that includes updating lobbies, a podium facade, and numerous systems components.

Opened in 1967 with a design by Shreve, Lamb & Harmon Associates, the architectural firm best known for the Empire State Building, 245 Park is billed as a “headquarters caliber” building that transformed Park Avenue into one of the world's most distinguished corporate corridors, SL Green has said.

SL Green bought the property after reaching an agreement via the Chapter 11 restructuring process of the former owner, an affiliate of Chinese conglomerate HNA Group. The property added to SL Green’s holdings in the Grand Central and Park Avenue market, where it purchased the 450 Park tower for $445 million last year.

Those transactions expanded its Manhattan Class A office tower portfolio, which includes One Vanderbilt and the One Madison Avenue redevelopment.

Foreign investors are among joint-venture partners for many of SL Green’s top-tier buildings. For instance, as of Dec. 31, the National Pension Service of Korea is listed as an investor in both One Vanderbilt and One Madison, while Korean and Israeli institutional investors have stakes in 450 Park, SL Green said in its annual report.

Mori Trust recently acquired a partial interest in a laboratory and office development project located in Boston and last year bought an office building in Washington, D.C.