Mortgage Observer

Citigroup and Others to Lend $1.45B to SL Green, as REIT Raises Cash for New Deals

The financial musical chairs at Citigroup’s Tribeca offices continue. The multinational financial services firm signed a contract in December to occupy and possibly buy two buildings, 388 and 390 Greenwich Street, which it already occupies. Now, the bank is also lending a whopping $1.45 billion to the current landlord, SL Green Realty, according to a report from Bloomberg News today.

That loan–which reportedly includes bundled funds from Barclays Plc, Wells Fargo and Bank of China—will be packaged into bonds set to hit the market next month.

388 Greenwich Street

388 Greenwich Street

A source with knowledge of the deal told Mortgage Observer that SL Green would use the cash to buy out the Canadian pension fund, Ivanhoe Cambridge, with whom they own the towers, and will deploy the remaining cash in other new investments. SL Green agreed to buy out Ivanhoe’s stake in the towers for $800 million in March, according to previous reports.

SL Green, a real estate investment trust that is the city’s largest office landlord, is “growth-oriented,” the source said, and looking to harvest capital from previous deals in order to continue investing in new properties.

However, that source, who asked to remain anonymous, underscored that the deal was not yet finalized, and that the consortium of banks Bloomberg News reported would lend on the transaction have not necessarily signed off on it as of yet.

Representatives for Wells Fargo, Citigroup and SL Green declined to comment on the deal; representatives for Barclays and Bank of China were not immediately available for comment.

The towers–one of which is 39 stories, the other 10 stories–have traded between Citigroup and SL Green more than once.

Originally built by financial firm Shearson Lehman, the two buildings were acquired by Primerica, a predecessor to Citigroup, in the 1990s. Citigroup then sold the two buildings to a partnership between SL Green and Ivanhoe Cambridge in 2007 for $1.58 billion, as reported, when Citigroup needed to raise cash as the financial crisis began to build.

Then, last December, the bank brokered a complex deal with the landlord wherein Citigroup renewed its lease on the 2.6 million square feet it occupies in the buildings until 2020, at which point it has the right to either renew for another 15 years or buy its home outright for about $2 billion. Its option to buy reportedly extends to 2050 and as part of the deal Citigroup will gut renovate the properties.

The lease deal late last year was significant for the commercial real estate landscape in New York City, as it is not clear if the bank will retain its Midtown presence at 399 Park Avenue and consolidate personnel in the Tribeca offices (Citigroup representatives also declined to comment on that contingency). But Citigroup will make the Downtown office its global headquarters—a nontraditional area for a multinational financial services institution to be based.

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