SL Green Trying to Stop TIAA’s Ground Lease Termination at 2 Herald Square

SL Green (SLG) Realty is trying to hang on to its 11-story office building in Midtown.

Pension giant Teacher Insurance Annuity Association (TIAA), which owns the land below 2 Herald Square, said it terminated SL Green’s $120 million ground lease on the property after the real estate investment trust allegedly defaulted on more than $30 million in rent and taxes in the past year, according to a filing this week in New York State Supreme Court.

TIAA said the lease went into default in December, and then was terminated in January, court records show.

Meanwhile, SL Green has denied its ground lease was terminated and is now seeking a rent reduction, as its default “was justified because there had been a downturn in the commercial leasing market,” according to the filing.

“This filing is a distortion of the facts and an attempt by the fee owner to interfere with SL Green’s ownership of the property despite our extraordinary efforts on behalf of the asset,” a spokesperson for SL Green said in a statement sent to Commercial Observer.

“Unfortunately, the fee owner has changed course on this asset multiple times, which is demonstrated by this most recent attempt to block SL Green’s signing of a sizable lease that would restabilize the property,” the spokesperson added. “We sincerely hope that the fee owner’s interference does not jeopardize this pending lease. We look forward to providing a full response to this claim in the coming months.”

Further details on the “pending lease” were unclear. TIAA declined to comment. PincusCo first reported the news.

TIAA bought the fee interest for the land at 2 Herald Square, also known as 1328 Broadway, from SL Green for $365 million in 2014, when property management company Sitt Asset Management was the ground lease tenant, PincusCo reported.

SL Green acquired a portion of the ground lease in 2018 following a foreclosure and completed a deal to acquire a 95 percent stake in the leasehold in January 2024, paying just $7 million to settle the property’s $182.5 million mortgage, The Real Deal reported at the time.

But TIAA said in its filing this week that the “tenant has refused to pay rent or property taxes,” and “not because [the] tenant did not have the funds to pay.”

“[The] tenant has received millions of dollars in rental payments from its occupants of the premises, in addition to a $44 million payment in connection with a litigation against one of the occupants,” TIAA added in the filing. “[The] tenant had more than enough money to satisfy all of its payment obligations.”

TIAA said SL Green stopped making payments in late 2023 when the two parties could not agree on negotiating the terms of the ground lease, according to the filing.

Since then, TIAA said SL Green has defaulted on $16 million in back rent, $8 million in taxes and other amounts totaling more than $30 million, PincusCo reported.

Current tenants of the building, which sits at the corner of Broadway and West 34th Street, across Herald Square from Macy’s flagship department store, include Mercy College, which signed a 30-year leasehold condominium there in 2018, as CO previously reported.

Isabelle Durso can be reached at idurso@commercialobserver.com.