The Real Deal New York

A ‘tender’ offer at 3 Columbus

SL Green's record $258 million cashier's check didn't end litigation, but it paved the way for a deal

July 01, 2011
By Adam Pincus

3 Columbus Circle

Late last year, an attorney for developer Joseph Moinian handed Manhattan’s County Clerk a cashier’s check in the stunning amount of $258,550,838.52. It was drawn from the bank account of SL Green Realty, Moinian’s partner at 3 Columbus Circle, and delivered as a show of good faith. The so-called tender offer was designed to short-circuit litigation among three heavyweight Manhattan office landlords.

But the tender — believed to be by far the largest ever deposited with the Clerk’s office — failed in its immediate goal to end the now-famous saga over the fate of 3 Columbus.

The building, of course, was at the center of a battle between two members of New York City’s real estate elite — the tower’s owner, Moinian, who had defaulted on his loans, and Stephen Ross, whose firm the Related Companies was trying to wrest away control of the asset.

Moinian had bought 3 Columbus Circle in January 2000 and then refinanced it in 2006 with a $250 million mortgage that was later securitized. He quickly began a comprehensive rehab of the property including re-cladding it in glass and paying tenants to leave so he could fill the building with higher-paying companies later.

But the downturn hobbled the developer. In January 2010 he missed a nearly $2 million payment and by March the loan was in default, and transferred to special servicer CWCapital Asset Management, which declared the entire amount due. On Sept. 1, Related took control of the note, and the next day its partner, German American Capital Corporation, filed to foreclose — a move Moinian’s allies deemed predatory.

That’s about when SL Green, which is headed by CEO Marc Holliday, stepped in, positioning itself as Moinian’s white knight. The goal: pay off Related’s attack dog, a division of Deutsche Bank, which was waging a feisty court battle to take control of the 768,565-square-foot office building, and take a 49 percent share of the building.

While SL Green and Moinian ultimately prevailed, the uncertainty of Related’s foreclosure action made it difficult for SL Green to determine the property’s value, the firm’s executives told The Real Deal last month. One major cloud was whether Related was owed a pre-payment penalty of $54 million because the loan didn’t mature until 2016.

“There were a lot of outcomes that were not in our control, and a lot of timelines that could be anywhere from one month to two years,” said David Schonbraun, co-chief investment officer of SL Green.

“[We stepped] into active litigation with uncertainty as to exactly how much money was going in and exactly when it was going in.”

SL Green made the $258 million tender offer two days before Thanksgiving. (James Rossetti, deputy county clerk for New York County, said it may be the largest tender offer ever in Manhattan.) But Related, which was still in control of the loan and holding out for millions more, did not bite.

Despite that, the tender offer played a crucial role, insiders said. In New York, if such an offer is not accepted within 10 days, interest on money owed from that day forward is forfeited unless a higher judgment is won at trial.

“Once Ross allowed the 10 days to expire, he knew he would end up paying Deutsche [Bank] the interest on Moinian’s loan for the duration of the trial unless he won the prepayment issue,” Moinian’s attorney, Stephen Meister, a partner with law firm Meister Seelig and Fein, said.

“That drove the settlement, which resolved the prepayment fee at pennies on the dollar.”

By the end of January, the deal was completed. SL Green pledged $138 million in equity to recapitalize the deal and complete the $175 million building rehab. SL Green also arranged short-term financing to pay approximately $278 million to Related and German American Capital to retire Moinian’s $250 million defaulted loan.

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