Finance  ·  Distress

SL Green, Vornado Extend $1B Senior Loan at 280 Park, Buy Back Mezz at Discount

The $1.075 billion mortgage secured by 280 Park Avenue was sent to special servicing in December

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SL Green (SLG) and Vornado Realty Trust (VNO), Manhattan’s two largest office landlords, announced Wednesday that they have modified and extended a $1.075 billion mortgage secured by 280 Park Avenue, 60-year old, 1.3-million square-foot office complex in Midtown. 

The borrowers also purchased the $125 million mezzanine loan secured by the property for the discount price of $62.5 million. A consortium of Korean banks provided the financing on this mezzanine debt, according to sources. 

SEE ALSO: RFR, Kushner Companies Extend $480M Loan for Dumbo Heights Property

The mezz loan was marketed by Newmark (NMRK)’s Adam Spies, Adam Doneger, Jordy Roeschlaub and Daniel Fromm and received several bids, one source said. Ultimately, the borrowers bought their own debt — a sign of their commitment to the property, the source said.

The April 2024 loan extension on 280 Park Avenue extends the maturity date on the loan to September 2026 (at an interest rate of 1.76 percent over term SOFR) with an option for SL Green and Vornado to extend until September 2028.

The most recent Data from CRED iQ, a CRE data analytics firm, shows that the $1.08 billion loan secured by 280 Park is current but that it was sent to special servicing on Dec. 20, 2023. 

SL Green and Vornado secured the loan modification and extension on 280 Park Avenue “after lengthy negotiations,” and that in exchange for this initial round of extensions, the borrowers were required to contribute $100 million to cover “current and anticipated shortfalls,” according to CRED iQ data.   

“The fact that the borrower is willing to contribute equity is a good sign and that they’re not running away from it,” said Mike Haas, founder and CEO of CRED iQ, a CRE data analytics firm.”  

Moreover, all cash securing the non-recourse loan has been trapped until the loan is paid off, and each extension will require the borrowers to contribute an additional $25 million. SL Green and Vornado also delivered a standard recourse guarantee carveout to the lenders, with the stipulation that the $1.08 billion loan will only be returned to the master servicer after three successful payments, according to CRED iQ. 

The $1.08 billion CMBS loan on 280 Park Avenue was provided by a consortium of lenders, including Deutsche Bank (DB), Barclay, Citi and Goldman Sachs (GS), according to CRED iQ.  

The financial machinations at 280 Park Avenue come after CO reported in October that the $1.1 billion loan secured by the building did not pay off on its original maturity date of Sept. 9, 2023.

At the time, SL Green CEO Marc Holliday told CO that he would not comment on whether SL Green would extend or refinance its debt on 280 Park, but he did emphasize that the building currently has 94 percent occupancy. 

Year end data for 280 Park Avenue showed the property generated a net-operating-income of $78.4 million while yielding a debt-service coverage ratio (DSCR) of 1.1 — slightly below the benchmark DSCR of 1.50. 

“That’s not good,” noted Haas. “You want your DSCR around at least 1.25 and a solid DSCR would be in the 2s. 1.50 is the underwriting average, so 1.1 doesn’t really give you much cushion.” 

Brian Pascus can be reached at bpascus@commercialobserver.com.