SL Green and new partner seek $1.4bn loan modification

SL Green has sold off a 40 percent stake in Eleven Madison Avenue to PGIM Real Estate for $480 million — and the joint venture is seeking to modify the mortgage it used to buy the property last year.

SL Green used $1.4 billion of 10-year, interest only, fixed-rate (3.838 percent) financing from Deutsche Bank, Morgan Stanley and Wells Fargo on its $2.285 billion purchase of the property from CIM Group and the Sapir Organization in August of 2015.

If the existing mortgage is not modified six months after closing, it “may result in SL Green repurchasing the sold interest from PGIM Real Estate,” though the partnership expects the modification to be granted during the Q4 2016,  according to a statement from SL Green.

The transaction values the 2.3 million sq ft, Class-A Midtown South office property at $2.6 billion, inclusive of the costs associated with “lease stipulated” improvements to the property. SL Green $480 million in cash proceeds “will be used for debt reduction and other investment opportunities.”

PGIM Real Estate, the real estate investment business of PGIM, Inc., the global investment management businesses of Prudential Financial. The company retains a one-year option to acquire an additional 9 percent stake in the venture at the same gross property valuation of $2.6 billion.

SL Green, a real estate investment trust which often touts its standing as New York City’s largest office landlord, is primarily focused on acquiring Manhattan commercial properties.