Aug 06, 2009
By: Barbra Murray, Contributing Editor

Flying in the face of the still chilly credit market, SL Green Realty Corp. has managed to get its hands on a $145 million leasehold mortgage for the refinancing of the 1.2-million-square-foot office tower at 420 Lexington Ave. in Midtown Manhattan. TIAA-CREF, a longtime lender and investment partner of SL Green, provided the loan.

The credit crunch may be loosening a bit, but a solid partnership and a long track record are evidently worth, well, millions and millions.

Known as the Graybar Building, the 30-story structure above Grand Central Terminal at 420 Lexington Ave. was constructed in the 1920s and features 50,000 square feet of retail space, 40,000 square feet of which is occupied by an Equinox fitness center. SL Green, New York City's largest office landlord, acquired the operating interest in the property from the Helmsley organization for, according to SEC documents, $78 million in March 1998. SL Green has since invested $84 million in a capital improvement program. Presently, the Graybar Building is nearly 97 percent leased to a long list of occupants, including such credit-worthy tenants as Bank Leumi USA, Metro-North Commuter Railroad Co. and New York Life Insurance.

SL Green relied on real estate services firm Cushman & Wakefield Sonnenblick Goldman to orchestrate the Graybar Building loan, which carries a 7.5 percent fixed rate and matures in 2016; the option for two one-year extensions is also built into the deal. The funding allows the REIT to erase the property's previous mortgage, which came with an interest rate of 8.44 percent and a maturity date of November 2010.

SL Green was able to walk away from the transaction with $23 million in cash proceeds to be directed toward addressing other near-term debt maturities. Last month, the company wrapped up the $40 million upsize to its financing secured by the office building at 625 Madison Ave; proceeds from that deal will also be used to deal with near-term debt maturity issues. "These successful efforts," SL Green CEO Marc Holliday noted in a prepared statement, "demonstrate that even in the worst of credit markets, well-located, well-managed commercial office buildings owned by strong landlords like SL Green are attractive to institutional lenders."

Premier properties with premier locations--and with, in the best of circumstances, premier relationships- go a long way in today's frosty lending climate, but frequently, not long enough. However, large financing deals are popping up more often than they did six months ago, so perhaps some of the new activity can be at least partially attributed to a slight credit market thaw. Just a few days ago, Vornado Realty Trust completed the refinancing of its 442,000-square-foot office property at 2011 Crystal Dr., in Arlington, Va., with an $82.5 million loan with a fixed rate of 7.3 percent.

Neither SL Green nor Cushman & Wakefield responded to requests for comment by deadline.

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