SL Green Realty records $1.77B acquisition of 245 Park from HNA Group

The commercial landlord SL Green Realty recorded the acquisition of the equity interest in the 1.8 million-square-foot office tower 245 Park Avenue from the Chinese conglomerate HNA Group, with the transfer valued at $1.7699 billion. That was approximately the value of the in-place mortgage and mezzanine loans totaling $1.768 billion, as SL Green reported in a press release announcing the acquisition on September 12. Those loans mature in 2027.

HNA bought the building for $2.21 billion from Brookfield Properties in May 2017. Then on October 31, 2021, HNA filed to place the building in chapter 11 bankruptcy in Delaware, in part blaming SL Green for not replacing an important tenant. The bankruptcy case link is here.

SL Green is still fighting to win a $185 million arbitration award from HNA related to the dispute over control of the building.

SL Green took control through the entity 245 Park Acquisition LLC from HNA Group’s 245 Park Avenue JV LLC.

The transfer closed on September 9, 2022 and was recorded on September 27, 2022. The property has 1,586,876 square feet of built space according to PincusCo analysis of city data, which is typically lower than the marketing square feet because of loss factor. The sale price per built square foot, using the city figure of 1.586 million square feet, is $1,115 per the PincusCo analysis. (The price per square foot analysis is the transaction price divided by square feet as reported in public records and assumes no air rights have been sold.)

Prior sales and revenue

The 1,586,876-square-foot property generated revenue of $182.1 million or $115 per square foot, according to the most recent income and expense figures.

The property

The 245 Park Avenue parcel has frontage of 200 feet and is 405 feet deep with a total lot size of 81,336 square feet. The zoning is C5-3 which allows for up to 15 times floor area ratio (FAR) for commercial and up to 10 times FAR for residential with inclusionary housing. The city-designated market value for the property in 2022 is $830.8 million.

Violations and lawsuits

The property was involved in one lawsuit and one bankruptcy over the past two years. The suit was a $185.4 million money judgment concerning a preferred equity filed on May 20, 2022, by SL Green Realty against HNA Group. The bankruptcy was filed on October 31, 2021, by HNA citing assets of $1.2 billion. In addition, according to city public data, the property has received three DOB violations in the last year.

Development

For the tax lot building, it received its initial certificate of occupancy on August 29, 2014. On the lot, there are two active new building construction projects and major alteration projects with initial costs more than $5 million, totaling 1,452,099 square feet. The largest is a major alteration project for a 1,452,099 square-foot B building developed by Matt Duthie with plans filed July 25, 2022 and it has not been permitted yet. The second largest is a major alteration project for a one square-foot B building developed by Susan Busciolano with plans filed September 24, 2012 and permitted January 8, 2013.

The neighborhood

In Midtown East, the majority, or 82 percent of the 61.5 million square feet of commercial built space are office buildings, with hotel buildings next occupying 7 percent of the space. In sales, Midtown East has 4.2 times the average sales volume among other neighborhoods with $1.4 billion in sales volume in the last two years and is the 9th highest in Manhattan. For development, Midtown East is the most active neighborhood among other neighborhoods. It had 15.1 million square feet of commercial and multi-family construction under development in the last two years, which represents 24 percent of the neighborhood’s built space.

The block

On this tax block, PincusCo has identified the owners of three of the three commercial properties representing 3,092,049 square feet of the 3,092,049 square feet. The two identified owners are HNA Holdings Group and SL Green Realty.
there are no active new building construction projects on this tax block.

All properties are office.

Surrounding

Within a 400-foot radius of 245 Park Avenue, PincusCo identified eight commercial real estate items of interests occurred over the past 24 months.
Of those eight items, one was in new building development. It was a new building permit issued on November 30, 2021 for a 1,862,831-square-foot B building at 270 Park Avenue.
Of those eight items, two were for major renovation including a certificate of occupancy change. They were two permit applications with a total initial cost of $4.4 million. The most recent of these two items was the filing on July 1, 2022 for a 1,849,931-square-foot E building with zero residential units at 277 Park Avenue.
Of those eight items, two were sales above $5 million totaling $49.9 million. The most recent of the two was Timeshare Acquisitions which bought the 92,501-square-foot, four-unit hotel (H3) on 501 Lexington Avenue for $41.4 million from Roger Smith Hotel on February 25, 2022.
Of those eight items, three were loans above $5 million totaling $735.9 million. The most recent of the three was Timeshare Acquisitions which borrowed $34 million from Western Alliance Bank secured by the 92,501-square-foot, four-unit hotel (H3) on 501 Lexington Avenue on February 25, 2022.

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