Macklowe digs in at 510 Madison

Embattled developer makes deal to keep a prized asset

He’s had a portfolio of buildings, including his crowned jewel, the GM Building, ripped away. He’s faced a barrage of lawsuits from lenders. And last month his son left him to start up a competing company.

So it should come as no surprise that Harry Macklowe is hanging onto 510 Madison Avenue, which he built on spec in 2007, for dear life. It is, after all, one of his few remaining New York City buildings.

But many in the industry are wondering whether it’s worth all that trouble for Harry Macklowe to tether himself to what has become a 30-story rope in a foreclosure tug-of-war between his firm and senior lender SL Green.

Macklowe and SL Green reached a détente recently, giving Macklowe until Sept. 1 to make an $822,500 payment on his roughly $250 million debt to keep his prized asset, according to Crain’s. The rest is due March 1.

Now, with that first deadline quickly approaching, many are watching to see whether he’ll deliver that payment. And while Macklowe may be committed to the project, some say from a financial perspective it doesn’t make much sense for him to hold on.

“The new money he puts into the deal is likely so underwater you have to question whether it makes good business sense to do so,” said Wayne Heicklen, a real estate attorney and partner with Pryor Cashman, who is not involved with 510 Madison. “Unless he gets somebody in the capital stack to give him some kind of discount, he’s just throwing good money after bad.”

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Still, it’s easy to get “emotionally involved,” Heicklen said.

“You don’t want to lose control, [especially] to someone he considers a rival,” he said, referring to SL Green.

But experts agree that 510 Madison — which has a fitness club, a pool and state-of-the-art amenities — isn’t just any building.

“It’s an asset that any real estate investor would love to own,” said Robert Knakal, chairman of Massey Knakal Realty Services, noting that the “high barriers to [construct] new office property” make the building all the more appealing. “When it comes to finding value in real estate, Harry is one of the best,” Knakal said.

But Heicklen said SL Green is going to be aggressive. And Macklowe is also fighting off the junior mezzanine lender, O’Connor North America, which has filed a suit related to the property at least two times in the last four months.

A host of insiders — who declined to be identified by name because they may work with either Macklowe or SL Green on various deals — told The Real Deal they will be watching as the drama unfolds.

Neither Macklowe nor SL Green responded to requests for comment.