Thursday, June 24, 2010

SL Green wins suit against Mazal

SL Green announced last August that they had agreed to sell their 49.5% portion of 485 Lexington Ave to Mazal 485 (a partnership between Gilmore USA and Israel-based technology company Optibase) that valued the building about 21% lower than where SL Green had invested in 2007. Well, CWCapital, the special, apparently was not okay with the deal.

SL Green (and most other REITs) were sucking wind last summer, and then all of a sudden every REIT was able to go out and raise as much money as they needed and everything got better (still blows my mind).

So, Mazal cries foul, and says that in fact SL Green changed their mind once the market "improved" and their stock price went up. They claim it was a result of the deal, but all REITs were behaving similarly insane during that time period. Further, Mazal somewhat ludicrously claimed that SL Green should have fought the Special harder, and therefore now owes them damages. They wanted the damages reflected as a lower sales price on the same building and a $20mm option to buy the remainder of the building at similar terms all without lender consent, and asked a judge for as much.

Well, the court dismissed the claims today. The loan cash flows and doesn't mature until 2017. Citibank and Travelers are the big tenants, both expiring just before maturity. I think we can declare SL Green the winner, but 2017 looks like it's going to be a tough year to refi in.

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