Macklowe and SL Green to face off over 510 Madison foreclosure
March 02, 2010 03:00PM By David Jones
510 Madison Avenue, Harry Macklowe of Macklowe Properties (top) and Marc Holliday of SL Green (bottom)
Macklowe, after filing yesterday in New York State Supreme Court, was granted a hearing next month to determine whether SL Green can move forward with a scheduled April 20 auction of the property's mezzanine debt.
Lawyers for Macklowe claim that SL Green wants to cash in on the property despite an agreement he had to extend his original construction deadline. SL Green acquired the senior mortgage and mezzanine loans in December and called in a new default after a new appraisal showed the building was underwater.
"They say we don't pass the loan-to-value test and that's why they're not offering the renewal," Macklowe attorney Stephen Meister told The Real Deal.
According to the lawsuit, Macklowe took out $398 million in February 2008 to finance the project, including a $267.5 million senior mortgage loan from Union Labor Life Insurance, a $61.5 million mezzanine loan from Deutsche Bank unit German American Capital and a $61.2 million junior mezzanine loan with O'Connor North American Property Partners. The loans had a May 31, 2009 completion deadline for construction, with two six month options, according to the complaint.
A February 2009 fire caused $70 million in damage to the building, however, Macklowe claims insurance covered $65 million worth of the damage. As The Real Deal previously reported, Macklowe also faced off in court against anchor tenant Jay Goldman & Sons and luxury retailer Tourneou, who tried to get out of their leases.
In December, SL Green, one of the city's biggest commercial developers, bought the senior mortgage for $170 million, and later acquired the senior mezzanine loan for less than $15 million, according to the suit. Macklowe claims that SL Green reneged on prior agreements to extend the construction deadline, saying the fire was considered a legitimate excuse to avoid any default claim.
"Defendants arranged for this purchase for the sole predatory purpose of increasing their leverage in refusing to honor the explicit extension set forth in the loan documents," Meister said in the complaint.
The complaint argues that SL Green called in a default based on a new appraisal by Cushman & Wakefield that values the property at $180 million. Meister says the newly appraised value, however, is $60 million to $70 million less than what SL Green will wind up paying for the property, factoring in the loan purchases, transfer taxes and renovation costs.
Following an agreement reached yesterday, both sides will be able to examine the appraisal and begin discovery, which is a mutual sharing of evidence.
A spokesperson for SL Green declined to comment.
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Comments
Anonymous
Give it to them Harry. Now that you did all the work they want to take it from you. Forget it. The bank is a bunch of traitors. All the money you made for them and for them to do this, its bad of them.
Comment #1 Posted By: Anonymous 03/02/10
Anonymous
you are so right number 1. Harry lets talk it over. Lets meet at the lobby bar at the Drake Hotel............oh wait.......
Comment #2 Posted By: Anonymous 03/02/10
Anonymous
It's not a bank. It's SL Green. They bought the debt from Union Labor Life Insurance, whose loan was not close to being paid off. No money was made for anyone.
Comment #3 Posted By: Anonymous 03/02/10
Anonymous
If, as Macklowe asserts, it is worth more than the debt then he can simply refinance and pay off SL Green! Personally I'm more inclined to believe it is underwater. Having said that I do think that he has a point regarding the fire, normally that falls under the "acts of God" clauses and extends, subject to the specific wording of any agreement, time periods.
Comment #4 Posted By: Anonymous 03/02/10
Anonymous
The building has no tenants, correct?
Comment #5 Posted By: Anonymous 03/02/10
Anonymous
Macklowe kicked out the last tenants back in 2006 and built a ghost building in its place.
Comment #6 Posted By: Anonymous 03/02/10
Anonymous
How does this make scene????? SL Green, bought the senior mortgage for $170 million and the senior mezzanine loan for less than $15 million. Appraisal by Cushman & Wakefield that values the property at $180 million. Meister says the newly appraised value, however, is $60 million to $70 million less than what SL Green will wind up paying for the property, factoring in the loan purchases, transfer taxes and renovation costs.
Comment #7 Posted By: Anonymous 03/02/10
Anonymous
Doesn't Macklowe only have two buildings left in his portfolio?
Comment #8 Posted By: Anonymous 03/02/10
Anonymous
I just be 50 large on Green, Vegas is taking book on this
Comment #9 Posted By: Anonymous 03/02/10
Anonymous
There were actually some nice smaller buildings at this site too. not as nice as the Drake, but still. It is ironic that Harry now lives at the Plaza - while he hates midtown's older buildings and was intent on glassing over all of midtown, leaving no stone or brick.
Comment #10 Posted By: Anonymous 03/02/10
Anonymous
Forty-five million for that Plaza apartment. Ouch.
Comment #11 Posted By: Anonymous 03/02/10
Anonymous
shut him down Holliday
Comment #12 Posted By: Anonymous 03/02/10
Anonymous
This is the same predatory tactics SL Green used on the Sapirs to take Church St. SL Green is smart but also slimey. If they keep this up they could build up a bad rep in the industry which can hurt them in the long run. I'm no fan of Sapir or Macklowe but definitely some merits to accusations of predatory lending
Comment #13 Posted By: Anonymous 03/02/10
Anonymous
Predatory lending? SL Green didn't originate the loan, Union Labor Life Insurance did, several years ago. Macklowe hasn't been able to put a single tenant in the building, which also sustained a major fire. Macklowe has nobody but himself to blame.
Comment #14 Posted By: Anonymous 03/02/10
Anonymous
Swig and Macklowe should open a new company called MacSwig
Comment #15 Posted By: Anonymous 03/03/10
Anonymous
agree with 14.completely. its ruthless and cutthroat and macklowe and sapir get no sympathy as they have done far worse. but these type of business is not exactly gentlemanly
Comment #16 Posted By: Anonymous 03/03/10
Anonymous
I also agree with 14. While Green didn't originate the loan, it acquired the loan with the sole intent of eventually taking over the building, much like with Church. As a borrower, I don't think I'd be interesting in approaching Green anytime soon to originate any loans. Green will have to buy all its debt from now on.
Comment #17 Posted By: Anonymous 03/04/10
Anonymous
Does SL Green originate loans? It's a real estate company. Buying debt with the intent to acquire or evict is standard practice in real estate. Macklowe has certainly done it. What's good for the goose is good for the gander.
Comment #18 Posted By: Anonymous 03/04/10
Anonymous
YES, 19 , SL Green does originate loans via their vehicle Gramercy Capital. usually mez or bridge. What real estate borrower would ever get a loan from then now?
Comment #19 Posted By: Anonymous 03/04/10
Anonymous
One that was capable of paying them back, #20.
Comment #20 Posted By: Anonymous 03/04/10
Anonymous
This is #14, my comment was not that Macklowe or Sapir didnt have it coming but this could have just as easliy been any firm with a good/great reprutation whos been negatively effected by the market only to have someone buy their debt with the sole intention of taking over the property. All business is based on personal relationships and these tactics, although somewhat legal, will tarnish Green's reputation. Eventually, GREEN will be the ones to have it coming. What goes around comes around.
Comment #21 Posted By: Anonymous 03/04/10
Anonymous
I think you're generalizing from a very specific example. Incidentally, what prevents Macklowe from refinancing the property, getting another lender to pay off this loan, and give him more favorable terms? A good/great firm might have the credit and reputation to do that. A good/great firm might have the collateral to do that. A good/great firm might have been able to put some tenants in the building, and make it a reasonable business prospect.
Comment #22 Posted By: Anonymous 03/04/10
Anonymous
Thats all fine and dandy but not a fair statement either. I work for a good firm with a great reputation and relationships with tenants. However, when one of our major anchors pulled out of our development project we were scrambling. We were fortunate to get a new anchor but I would be lying if I didnt beleive luck had somethign to do with it. Cant blame the Macklowes for everything...
Comment #23 Posted By: Anonymous 03/05/10
Anonymous
I think you wouldn't have had that luck at all if you had a poor reputation.
Comment #24 Posted By: Anonymous 03/05/10
NextstoreNeighbor
Did they ever determine the cause of the fire? I'm glad they built this building it got rid of the rats from The Derby.
Comment #25 Posted By: NextstoreNeighbor 03/23/10
Anonymous
attorney Stephen Meister is one ugly greedy ruthless lawyer. his children must be so proud of him.
Comment #26 Posted By: Anonymous 03/27/10