TIAA alleges it has terminated SL Green’s $120M ground lease at 2 Herald Square

UPDATED 10:55 a.m., March 4, 2025: The pension giant Teacher Insurance Annuity Association, known as TIAA, which owns the fee below the commercial building 2 Herald Square in Manhattan, alleges in a complaint file yesterday that the ground lease tenant SL Green Realty owes $16 million in back rent, $8 million in taxes, and other amounts, totaling $30 million, over the past year. Because of the alleges refusal to pay, TIAA in December 2024 declared the lease in default and in January 2025 declared it was terminated. SL Green, according to the complaint, denies the ground lease has been terminated, and is seeking a ground rent reduction, “claiming that Tenant’s [SL Green’s] default was justified because there had been a downturn in the commercial leasing market,” according to the complaint. In a fourth quarter supplemental document for SL Green, the landlord values the 2 Herald Square ground lease at $120 million.

TIAA’s affiliate filed the case March 3, 2025, in New York State Supreme Court in Manhattan. TIAA has an affiliate, Nuveen Real Estate, which is an asset manager for a portion of its holdings.
Case LINK

Court filings represent the position of one party and are not necessarily accurate or complete.

A spokesperson for SL Green provided a statement to PincusCo: “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. 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 re-stabilize the property. 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.”

In 2014, TIAA bought the fee interest in 2 Herald Square from SL Green for $365 million. At the time, Sitt Asset Management was the ground lease tenant, and in a public call SL Green disclosed the leaseholder has an option to buy the property in 2027 for a certain undisclosed price. In 2018, SL Green acquired the ground lease following a foreclosure.

According to the complaint, “Plaintiff brings this action because, in breach of the ground lease, Tenant has refused to pay rent or property taxes on the Premises for more than a year. Tenant now owes more than $30 million under the ground lease, and it has made clear that it has no intention of paying.
“This is not because Tenant did not have the funds to pay. In the past two years alone, 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. Tenant had more than enough money to satisfy all of its payment obligations…
“In late 2023, Tenant indicated that it wanted to renegotiate the terms of the Ground Lease in an attempt to decrease the rent that they were required to pay to Plaintiff. By January 2024, the parties had not reached an agreement to modify the terms of the Ground Lease. Presumably in an attempt to gain leverage in negotiations, Tenant unilaterally stopped paying the Rent it owed under the Ground Lease…
“In total, Defendant presently owes more than $16 million in Rent in addition to interest and other applicable fees… On December 23, 2024 Plaintiff served a superseding Default Notice (the “Default Notice”) outlining Tenant’s Rent arrears owed to Plaintiff in the amount of $16,701,581.79, and additional unpaid real estate taxes in the amount of $8,131,878.00…. In the letter, Tenant threatened [a subtenant] with legal action if it complied with its obligations under the recognition and non-disturbance agreement and paid Plaintiff rent…On January 16, 2025, Tenant’s interest in the Ground Lease was deemed assigned to Plaintiff and/or Plaintiff’s affiliates…”
According to SL Green documents filed with the SEC, “The Company [SL Green] has an option to purchase the ground lease for a fixed price on a specific date.”

SL Green reported in public filings, “In January 2024, the Company closed on the acquisition of interests in the joint venture that owns the leasehold interest at 2 Herald for no consideration, which increases the Company’s interest in the joint venture [in the leasehold] to 95.0%. In addition, the joint venture entered into an agreement to satisfy the existing $182.5 million mortgage on the property for a net payment of $7.0 million, which closed in February 2024.”

In November 2018, SL Green obtained a $150 million loan from MUFG Union Bank, then obtained $75 million more in October 2019. That loan was satisfied in January 2024.

The property

The building in Garment District is divided into four commercial condominium units, and has 329,989 square feet of built space according to a PincusCo analysis of city data. The parcel has frontage of 178 feet and is 150 feet deep with a total lot size of 28,710 square feet. The lot is irregular. 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 block

On this tax block, PincusCo has identified the owners of 12 of the 16 commercial properties representing 1,309,345 square feet of the 1,462,940 square feet. The largest owner is Bldg Management, followed by Denis Xhari and then Icecap Group. On the tax block, there was one new building construction project filed totaling 173,835 square feet. It is a 363-unit, 173,835 square-foot hotel/dormitory/shelter (R-1) building submitted by Wharton Properties and filed by Andrew Lester with plans filed April 29, 2021 and it has not been permitted yet.

The surrounding

Within a 400-foot radius of 4 Herald Square, PincusCo identified 10 commercial real estate items of interests occurred over the past 24 months. Of those 10 items, two were sales above $5 million totaling $46.5 million. The most recent of the two was Landry’s and Tilman Fertitta which bought the 16,000-square-foot, one-unit mixed-use building (K4) on 72 West 36th Street for $30 million from Keens Steakhouse on November 21, 2024. Of those 10 items, eight were loans above $5 million totaling $476.2 million. The most recent of the eight was Devli Real Estate in which borrowed $5.4 million from Spencer Savings Bank secured by the 17,160-square-foot, three-unit mixed-use building (K4) on 49 West 33rd Street on February 6, 2025.

Updated with a comment from SL Green Realty.

Direct link to the property’s ACRIS page.