SL Green Realty Corp. has entered into an agreement to acquire 304 Park Avenue South, a 215,000-sq.-ft. mixed-use office and retail building for $135 million, or $628 per sq. ft., from a partnership headed by David Berley, chairman of Walter & Samuels Inc. SL Green will acquire the property with approximately 50 percent cash and 50 percent operating partnership units. The transaction is expected to close June 1, 2012.

The property is located on the southwest corner of Park Avenue South and 23rd Street, directly across the street from SL Green’s One Madison Avenue in the Midtown South sub-district, an area that offers steadily increasing rents and an office market vacancy of sub-6 percent. The property features close proximity to Madison Square Park, Union Square, Gramercy Park and the Flatiron districts.

The property is 95 percent leased to a boutique office tenancy including lead tenant IMG Models, ranked as the world’s number one model management firm. Retail tenants include H&R Block, Bath & Body Works and Time Warner Entertainment.

Andrew Mathias, president of SL Green, said in a statement, “We’ve been monitoring Midtown South, carefully looking for acquisition opportunities; however, the consistently tightening vacancy rates and substantial lease activity in the area have driven cap rates on marketed deals below our target investment thresholds. This unique opportunity came to us because of the attractiveness of our operating partnership units and our relationship with the seller. It’s a classic SL Green investment—off-market, potential repositioning, and creating value upon acquisition for both the Company and the seller. This is the fifth time in the past year we have used operating partnership units in an acquisition, as sellers recognize the unique benefits of our currency.”

Walter & Samuels represented the seller. Advisor for the transaction was Doug Harmon of Eastdil Secured.