Two of New York’s smartest real estate chess players are trying to overturn each other’s billions of dollars in control of Midtown’s office assets.
SL Green Realty and Ben Ashkenazy have been on a collision course in the last few years, which is expected to peak in 16 months, when the company is expected to make an astronomical increase in rents for SL Green’s 625 Madison Avenue land lease.
The REIT, led by Marc Holliday, has some bargaining power: The company recently acquired a piece of debt that Ashkenazy borrowed against the ground below Madison Avenue, The Real Deal said, giving SL Green influence over its landlord. Court records show Ashkenazy was lagging behind in payments, and a judge ordered him in January to raise more than $ 20 million.
But Ashkenazy – who went through an increase in rents at Barney’s Madison Avenue, which sent the company bankrupt, and threatened “Going for nuclear energy” in the family that owns the Century 21 department store – is still in the driver’s seat when it comes to resetting rents next year.
In documents filed with a Manhattan state court, Ashkenazy Acquisition lawyers accuse SL Green’s “real estate monster” of standing out of the way of aggressively leaning on a debtor over the $ 20 million – an attempt, the company says, to gain influence. about rent.
“It should be reasonably clear,” Ashkenazy’s lawyers wrote earlier this month in their appeal to the January decision, “that something else is going on. [this] behaviour.”
Representatives of SL Green and Ashkenazy declined to comment.
The two investors first took off in 2014, when Ashkenazy bought land under the SL Green building – the main office building one block from Central Park – for $ 400 million.
The purchase price raised an eyebrow. SL Green paid only $ 4.6 million in rent per year, which is hardly a number that would justify such a high valuation. But Ashkenazy was looking forward to July 1, 2022, when land rent was to be renewed.
Marketing materials for the property estimated that the land rent could reach up to $ 50 million. But Ashkenazy Michael Alpert, estimating in 2016 that the property was worth $ 1.4 billion, said the rent could reach $ 80 million.
But SL Green eventually found a way to gain leverage over his landlord.
When Ashkenzy bought the land in 2014, he financed the purchase with a $ 195 million mezzanine loan from the British Children’s Investment Fund.
One of the loan provisions required Ashkenazy to repay a debt of $ 40 million by November 2018. But when the deadline came, he repaid only $ 30 million, leading to a default that required him to repay not only the remaining $ 10 million but more An additional 10 million.
At some point – it is not entirely clear when – SL Green obtained part of Ashkenazy’s debt from the Children’s Investment Fund, a source for TRD confirming its knowledge of the situation. The terms of the purchase are not public, but one debt expert speculated that SL Green had paid a premium due to his position with Ashkenaza.
In March last year, the Children’s Investment Fund filed a lawsuit to force Ashkenazy to pay the $ 20 million he said he owed. SL Green, which provides credit services, Green Loan Services, is listed as a party to the proceedings as a special administrator and the case is handled by REIT lawyers at Fried, Frank, Harris, Shriver & Jacobson.
In January, a judge in the case ordered Ashkenazy to pay $ 20 million plus another $ 4 million in interest. Ashkenazy appealed against the decision, challenging the full amount of interest due.