Harry Macklowe and SL Green have reached a settlement on 510 Madison Avenue, the speculative office tower Macklowe began building during the boom and that SL Green tried to foreclose on earlier this year as the vacant tower struggled to find tenants.
The agreement, which was filed in state supreme court on Wednesday, will grant Macklowe a yearlong extension on his debt against the property, giving him a chance to try to arrange leases for the tower and put it on firmer financial footing.
SL Green had moved to take control of the roughly 350,000 square foot building in March after buying up its senior mortgage and a mezzanine loan against the property late last year and alleging that it could call in the expiring debt because the building no longer met certain thresholds of value stipulated in the mortgage agreements.
According to the settlement, Macklowe has outstanding principal balances on the loans of $191.6 million and $61.5 million.
Macklowe sued to block a takeover and through his attorney, Stephen Meister, won a temporary injunction that essentially paved the way for the settlement because it would have prevented SL Green from seizing the building for the duration of the lawsuit, which could have dragged on for months.
Macklowe and his son Billy Macklowe began developing 510 Madison at the height of the office market with a plan to lease it to high-flying boutique financial firms that could pay top dollar rents. That market evaporated during the depths of the economic downturn and though it has begun to show signs of reemerging, the exorbitant rates the building’s financial projections were built on appear to be difficult to achieve.
The fight over the building’s ownership has appeared to deal the most damage to leasing. Brokers familiar with the tower say that tenants have steered away from committing to space there because of uncertainty who will control the tower in the future an if the lawsuits swirling around the property and suggestions of its tenuous financial position could interfere with its upkeep and management.
Securing a clearer window of control may give Macklowe the chance now to do deals and refinance his debt.