Investors are downright ravenous for top-shelf office towers. This morning, for example, one of the most elegant and renowned skyscrapers in Manhattan — One Madison Avenue — fetched $918 million in a deal that left analysts fumbling with their calculators and market watchers gasping.

New York-based SL Green Realty Corporation (nyse-SLG) prevailed in a bidding war that included other REITs and private investors for the property. The end result is a handsome payday for owner MetLife, while SLG gets credit for structuring what many are calling an extremely creative deal.

MetLife built the towers in 1909 as its original headquarter office, and the firm has owned the property since then. One Madison Avenue, located between 23rd and 24th street across from Madison Square Park, consists of two physically imposing marble towers with roughly 1.4 million sq. ft. of office space.

Observers credit SLG for engineering an incredibly creative deal. “It’s amazing how sophisticated these real estate players have become, to come up with deals like this,” says Dan Fasulo, an associate at Manhattan-based Real Capital Analytics. The landmark property is 95.5% leased to Credit Suisse First Boston through 2020. SLG — which is an office REIT — plans to physically separate the conjoined buildings and convert the 41-story North Tower into residential condo units while the South Tower will be kept as office space. SLG will also secure air rights to the two properties that would allow the firm to add roughly 470,000 sq. ft. of additional space to the structure.

On the financing side, SLG will tap as much as $805 million to pay for the acquisition and subsequent conversion activity on the property. Credit Suisse First Boston is providing the financing. SLG has also secured $690 million of 15-year fixed rate financing on the property. Not only will CSFB finance the deal, but the investment bank will also share in the profits of the residential component.

“I'm not going to weigh in on the price, but I will say it's a very creative deal to involve the tenant who will finance the acquisition and vacate early to make way for a residential conversion,” says Bob White, president of Real Capital Analytics.

That doesn’t happen too often, says White. “In fact, most sellers work hard to keep the buyer and tenant from talking,” adds White.

When asked if the sale price was perhaps too rich, Fasulo of Real Capital says that it really depends on the condo market. “If it’s as strong once they’ve done the conversion as it is now, I think it’ll be a home run,” he says.

The acquisition is expected to close in the second quarter of 2005.