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April 24, 2020  

SL Green Eyes Refi After Sale Fell Through

Aareal Capital is in position to refinance a landmark office building in Midtown Manhattan for SL Green Realty after a deal to sell the property collapsed about a month ago.

The German lender is talking to the New York REIT about leading a $510 million debt package on 220 East 42nd Street, once known as the Daily News Building. The word is that Aareal will likely fund the debt in conjunction with a small group of other lenders, though the details have yet to be finalized. Cushman & Wakefield is advising SL Green on the financing.

Sources said the loan is expected to close in the next month or so, despite the financial-market turmoil that has delayed or wrecked financing deals for many property owners and buyers. Indeed, SL Green struck a deal late last year to sell the 1.2 million-square-foot building at 220 East 42nd Street to New York investor Jacob Chetrit for $815 million, or $679/sf. But the transaction unraveled in late March after Chetrit’s lender, Deutsche Bank, backed away.

After the deal fell through, SL Green president Andrew Mathias told The Wall Street Journal that the REIT would keep Chetrit’s deposit — which the Journal pegged at about $35 million — and hold on to the property for the time being. He also said the company would consider selling, recapitalizing or refinancing the building “after the market settles.”

Why SL Green is looking to refinance now is unclear. Recent filings indicate the property is unencumbered by debt. A previous mortgage of $275 million was paid off in 2018.

But with rent collections drying up because of business closures caused by the pandemic, owners are looking for liquidity options to hedge against plunging cashflows and debt-service-coverage ratios. For some, that could include leveraging unencumbered assets to support other positions in their portfolios.

SL Green’s property, at the corner of Second Avenue, was built in 1930 as the headquarters of the Daily News, which occupied the building until the 1990s. It was designated a city landmark in 1981. Its distinctive features include a large, rotating globe in the lobby. The building appeared in the 1978 “Superman” movie as the headquarters of the fictional Daily Planet newspaper.