Pressing its campaign to establish a formidable East Midtown core, SL Green added another trophy to its burgeoning portfolio. The city’s largest commercial landlord purchased 245 Park Avenue out of bankruptcy in a deal that closed on Friday.

SL Green’s unexpected, 100% acquisition of the 48-story, 1.8 million square-foot office tower climaxed a grueling battle with the tower’s distressed former owner HNA, an affiliate of China’s PWM Property Management.

The tower’s lenders agreed to maintain in-place $1.2 billion of fixed-rate term indebtedness on mostly the original terms – key to a complex agreement SL Green made with a slew of lenders and creditors who were eager to bring the asset under competent stewardship following years of turmoil.

Scott Weiner, a partner at one major lender, Apollo, said the new owner “worked tirelessly to successfully steer the asset through HNA’s bankruptcy process, demonstrating why they are so well-respected in the institutional capital market.”

The deal gives SL Green total control of the property, which “continues to be subject to the in-place mortgage and mezzanine loans totaling $1.768 billion, which mature in June 2027,” the announcement said.

The 1967-vintage tower stands on the east side of the avenue between East 46th and 47th streets, diagonally opposite the rising new JP Morgan headquarters tower.

HNA bought 245 Park for $2.2 billion in 2017 and SL Green bought a $148 million preferred-equity stake in 2018. The landlords were soon at war as HNA inexplicably placed 245 Park in bankruptcy despite a positive cash flow, and ousted SLG as its management company.

In May, an arbitrator ruled that HNA must pay SL Green $185 million for its actions. In July, a court reinforced the judgment which SL Green will act to enforce.

Some of the building upgrades to be implemented include a re-designed public plaza, infrastructure advances, new retail storefronts and tenants’ amenities.
SL Green

Buoyed by a revitalized Park Avenue-area leasing market, publicly traded SL Green, which developed One Vanderbilt, is on an East Side roll. It’s a joint-venture partner with Vornado in 280 Park Ave. and recently bought 450 Park Ave. for $455 million. It is meanwhile re-developing One Madison Avenue where IBM signed a huge lease. Last week, it sold more than half of the Lipstick Building’s office floors to Memorial Sloan-Kettering for about $300 million.

Chief executive Marc Holliday said that 245 Park will immediately begin a repositioning and upgrading. The plan includes new lobbies on the tower’s Park and Lexington avenue sides, a re-designed public plaza, infrastructure advances, new retail storefronts and tenants’ amenities such as fitness and wellness centers and food services curated by Daniel Boulud’s Dinex company.

KPF architects will assist on the redesign.

Holliday said, “This is another example of what you’ve seen us do over the years. We start out making investments in assets through our debt program. Then we successfully convert to equity ownership.”

SL Green’s initial 2018 investment with HNA “allowed us to lease and get to know the property,” Holliday said.

“The new chapter begins tomorrow,” Holliday told us on Friday. “It’s our goal to take a path where we are improving both the building and the public realms near Grand Central Terminal.

“The plan will  unfold over time,” he said.

A key part will be to re-imagine the Park Avenue-side plaza so as to better integrate it into other pedestrian-friendly changes planned in the corridor.

What’s more, the tower “has an extraordinary rooftop that isn’t much utilized,” Holliday said. “The great views it provides might become open to the public — not like Summit [at the top of One Vanderbilt], but like a park in the sky.”

The building is currently just over 70% leased to tenants including Societe Generale Americas, Houlihan Loukey and Angelo Gordon & Co.

SL Green leasing director Steven Durels said that  roughly 500,000 square feet would roll  by the end of 2023. Floor plates of 70,000 square feet in the podium and 37,000 square feet on higher floors are ideally suited to financial firms. No outside leasing agent has been chosen yet.

Holliday said that asking rents will depend “on the final cost of redevelopment. But our [low acquisition] cost basis allows us to price the building very competitively, far below new construction.” In fact, “monstrously below,” he chuckled — although rents will still be in triple digits.

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