SL Green Unloads $150M in Loans As Retail Real Estate Tanks Due to Coronavirus

810 Seventh Avenue owned by SL Green the average office for rent is around $25K a month rent (Photo: optimal spaces RE broker)

By Denis Cyr

Large real estate investment trust SL Green is trying to sell a series of loans which Crain’s says is tied to New York’s collapsing retail market.

SL Green L Green Realty Corp. is a real estate investment trust that primarily invests in office buildings and shopping centers in New York City. As of December 31, 2019, the company owned 43 properties comprising 14,438,964 square feet. Notable properties owned by the company are One Astor Plaza, One Vanderbilt, 461 Fifth Avenue, 810 Seventh Avenue, 919 Third Avenue, the Pershing Square Building, and Random House Tower.

Crain’s reported: The company, whose share price has plummeted by as much as 50% in recent weeks amid the coronavirus crisis and dramatic economic downturn, is marketing about $150 million worth of debt for sale, a person with knowledge of the offering told Crain’s.

Crain’s reported: The $3.8 billion public real estate company, which has lost about half its value in the past month amid the pandemic, has hired the real estate services firm Newmark Knight Frank to sell a $130 million portfolio of four mezzanine loans, according to marketing materials viewed by Crain’s.

A mezzanine loan is a form of financing that blends debt and equity. Lenders provide subordinated loans (less senior than traditional loans), and they potentially receive equity interests as well. Mezzanine loans typically have relatively high-interest rates and flexible repayment terms.

The coronavirus pandemic is causing unprecedented shifts for businesses. As physical stores close, consumer demand is also dropping. For most marketers, this means costs need to be cut, including major layoffs . A new Digiday survey about the early effects of the coronavirus on brands and retailers found that 40% of top execs expect to have layoffs due to the crisis.

Forbes pointed out a new report from the Centre of Retail Research (CRR) has predicted that over 20,000 retail stories forced to close in the UK because of coronavirus will never reopen due to the damage caused by the Coronavirus pandemic on retail and consumer spending.

Forbes reported: For the stores that do remain it’s clear, they’ll be expecting significant rent reductions and improved terms in order to keep stores open for the rest of 2020 and beyond, with many predicting Coronavirus will further increase the speed of online shopping adoption across society.

L Green told Crain’s that the loan sale was business as usual for the firm, which periodically monetizes assets to recycle capital into new deals, pay dividends and buy back shares.

“We regularly sell loans as normal course of business and are in the market now — we haven’t stopped doing business,” company spokesman Jeremy Soffin said. “These deals don’t happen overnight, and we will only move forward if we like the terms.”