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SL Green High Bidder in Foreclosure of Leasehold Interest at 2 Herald Square in New York

Separately, Agrees to Sell Interest in 635 Madison
May 11, 2018
SL Green Realty Corp. was the successful bidder for the leasehold interest at 2 Herald Square, at the foreclosure of the property this week.

Located on a prime corner of Herald Square at the intersection of Sixth Avenue, Broadway and 34th Street, 2 Herald is a 369,000-square-foot office and retail building in one of Manhattan’s busiest areas. Foot traffic along the 34th Street corridor, driven from Penn Station and Macy’s Department store, exceeds 100 million people per year.

Notable tenants in the building include WeWork, which is primarily occupied by Amazon, Victoria’s Secret and Mercy College.

As part of the deal, SL Green (NYSE: SLG) reached an agreement to create a joint venture for the asset with an unidentified Israeli-based institutional investor, subsequent to closing on the acquisition.

SL Green did not disclose its bid amount.

The acquisition would represent the real estate investment trust's third go-around owning an interest in the property. It sold the land under the property in 2014 to Norges Bank Investment Management and TIAA-CREF for $365 million and reported a gain on the sale of $18.8 million.

Then a year ago, it purchased loans on the property from a CMBS trust. The loans were in maturity default at the time of their acquisition. As of March 31, 2018, the loans had an outstanding principal balance of $250.5 million and an accrued interest balance of $7.7 million.

The leasehold interest had originally been acquired by Sitt Asset Management in 2007 for $500 million and financed with the CMBS debt.

Separately, SL Green agreed to sell the fee interest in the land underneath 635 Madison Ave. in New York for $151 million to Safety, Income & Growth Inc. The transaction, subject to certain closing conditions, is expected to be completed during the third quarter of 2018. SL Green purchased the fee interest in 2014 for $145 million.

SL Green was represented by Adam Spies and Doug Harmon of Cushman & Wakefield in the Madison Avenue transaction.
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