After a lengthy battle among several investors, SL Green Realty acquired the leasehold for the troubled Midtown office building 2 Herald Square, The Real Deal has learned.
SL Green, the property’s lender, announced Thursday it had successfully bid on the leasehold interest, which it was in the process of foreclosing on. The real estate investment trust also said it reached an agreement with an Israeli partner, but did not disclose the identity or the purchase price.
According to sources familiar with the property, the bid was somewhere around $270 million, accounting for the $250 million first mortgage that SL Green bought in May 2017 as well as accrued interest and roughly $10 million in transfer taxes.
Although SL Green claims it was a “successful bidder” for the leasehold, sources said there were no other bidders. The auction was not marketed to outside investors. SL Green had been considering taking control of the asset since it bought the debt last year.
SL Green declined to comment.
The Sitt family’s Sitt Asset Management, which bought the 70-year leasehold for $275 million in 2007, no longer has any equity in the property. The family had been immersed in a legal feud at the same time it was scrambling to find a ground-floor retail replacement for H&M and sell the leasehold to an investor. (One of those lawsuits, between Eddie and his brothers Ralph and David, was settled in January.)
The 369,000-square-foot property is home to Victoria’s Secret, Mercy College and a WeWork space largely occupied by Amazon. The building has had a string of high-profile owners such as Harry Helmsley and Aby Rosen and seen periods of both neglect and aggressive investment.
The leasehold has nearly fallen into the hands of several different would-be buyers over the past year, from JEMB Realty and Jamestown nearing an outright purchase to preferred-equity investor Paramount Group negotiating to take control. Then, in November, after those deals fell through, a New York State Supreme Court judge granted summary judgment in favor of SL Green over the mortgage and ordered a sale of the leasehold.