Here’s how SL Green snagged a Chicago office tower

SL Green, New York City’s largest office landlord, owns little property outside its home base. Yet the company is on track to seize control of a prominent Chicago tower while its former Chinese owner trudges through bankruptcy.

A federal judge in New York this month ordered the turnover of two properties — the 50-story Loop tower at 181 West Madison Street and a conference center in upstate New York — to SL Green amid an ongoing legal fight with China-based HNA International.

The long-running dispute stems from an investment a subsidiary of SL Green made in a New York office tower at 245 Park Avenue. SL Green has since taken over that tower. 

Judge John Koeltl for the federal Southern District of New York court ruled HNA North America must hand over the other two assets to SL Green, and denied a motion for relief from HNA International.

The judge wrote in his opinion that HNA International “plainly has attempted to frustrate and obstruct 245 Park’s efforts to collect on the judgment,” which led to the turnover of the two assets.

HNA International had tried to transfer the two properties to China-based affiliates that would have shielded the assets from the court proceedings, according to the ruling.

Mark P. Ressler, an attorney with Kasowitz Benson Torres LLP representing SL Green, said the litigation will continue until SL Green collects on a $185 million judgment against HNA, and that could include looking for other assets HNA owns.

The judge ordered HNA North America and its assets be handed over to SL Green within seven days, but it’s unclear when SL Green will take possession of the Madison Street property or what it plans to do with it long term. It’s also unclear how much of the judgment against HNA will be satisfied by SL Green’s takeover of the properties.

HNA took out a $240 million senior mortgage against the Loop tower in 2019, two years after it purchased the 950,000-square-foot building for $359 million. The loan was sold off to investors in commercial mortgage-backed securities, and it matures in 2026, according to credit ratings agency DBRS Morningstar.

The property was 86 percent occupied as of December, meaning it’s outperforming the downtown Chicago average office occupancy of 78 percent, with Northern Trust its largest tenant across 400,000 square feet in a lease that runs through 2025, Morningstar shows. The property generated $14.7 million in net cash flow in 2022, the ratings agency said.

“We’re gratified that the courts are not going to permit HNA to be a deadbeat judgment creditor,” Ressler said. “There’s a $185 million judgment outstanding and SL green is going to pursue collection of that amount in full and fortunately the courts will prohibit HNA from obstructing those collection efforts.”

SL Green invested $148 million in 2018 when it joined as property manager at 245 Park Avenue. The REIT negotiated protections for the investment in case of issues such as bankruptcy, which proved to be necessary.

Because of those protections, SL Green pursued arbitration to recover its investment, where it was awarded $185 million. A judge later confirmed that HNA must pay SL Green the $185 million awarded in arbitration. The amount represents SL Green’s investment in 245 Park Avenue and other fees. It stemmed from HNA allegedly breaching agreements regarding SL Green’s initial investment and terms of guarantee.

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