As lawyers for two of the city’s biggest developers, Joe Moinian and Stephen Ross, litigated in New York Supreme Court last month over the future of the homely office tower at 3 Columbus Circle, a representative for SL Green sat quietly next to Mr. Moinian’s team. SL Green, a publicly traded real estate trust and the city’s biggest office landlord, had no skin in the game, but the representative was ready with a check for nearly $260 million to buy Mr. Ross out of the building.
SL Green is used to cozying up to troubled developers–the Sapirs and the Macklowes of the world–as well as to healthier ones like Mr. Ross of the Related Companies (he declined SL Green’s check, and litigation over 3 Columbus Circle drags on).
If confidence is at a premium in New York’s post-recession real estate market, SL Green’s size and stability are in demand. It is difficult to overstate the rapacious company’s reach into the nuts and bolts of buildings where hundreds of thousands of New Yorkers spend most of their waking hours.
The company controls 25 million square feet of office space in the city, occupied by some 900-plus tenants. The company’s total holdings include close to 90 buildings, when you consider everywhere SL Green owns debt; everywhere the company has entered into a mezzanine lending agreement; everywhere the company owns development rights; and all the land the company owns under buildings, including the former home of Bernard L. Madoff Investment Securities, Phillip Johnson’s Lipstick building on Third Avenue, whose owners filed for bankruptcy protection in November. All told, SL Green has more than $14 billion of assets in New York. (The Observer, in the accompanying map, set out to document this tentacular reach using information from the trust itself, interviews, media reports and other research.)
At the end of 2008, with all that year’s uncertainty, CEO Marc Holliday told SL Green investors that “I can now confidently say that the worst is behind us,” and everyone in the industry breathed a sigh of relief. Two days later, SL Green began buying up debt on Harry and Billy Macklowe’s 510 Madison Avenue. At the time, the building, which was supposed to replace the Seagram Building as the go-to for the city’s hedge funds, was barely occupied, with only two tenants, both of which were suing to break their leases after construction troubles. Eight months later, SL Green walked away with $66 million after stabilizing the building’s future and selling it off to Boston Properties.
Mr. Holliday, who joined SL Green just 10 years out of college, in 1998, after advising the company’s IPO earlier that year, took over as CEO in 2004 from founder Stephen L. Green, older brother of former public advocate Mark Green, and turned the company’s attentions to gobbling top-shelf real estate in Manhattan.
He has insisted that his trust will lead the market, not follow. The company’s bread and butter has been acquiring embattled office buildings, many of them of so-called Class B quality (solid bones, but nothing spectacular), and repositioning them for top-tier clients. Or, as one broker told The New York Times, “SL Green does a good job of fixing up buildings and jacking up the rent.” Their largest tenants include some of the city’s lifeblood companies: Citigroup, Credit Suisse, Viacom, Polo Ralph Lauren, Random House and BMW.
During the tougher times, which hit just after the company started its acquisition spree, SL Green employed a “Nobody Gets Out” approach to retaining its tenants. “All of our agents are under strict instructions that nobody gets out–nobody–unless there’s just nobody there. But if they’re there, they don’t get out,” Mr. Holliday told a Citigroup-organized conference of real estate CEOs last spring (the bank, by the way, leases almost 4.5 million square feet from SL Green citywide).
Last week, in SL Green’s most recent presentation to investors, Mr. Holliday said that he was ready to start pursuing more competitive rents again. “Writing off the relevancy of New York was a bit premature,” he said. “Those arguments have been a bit marginalized. And in a macro sense, that’s why we remain very excited about the prospects for this city over the next two to three years.”
Graphic by E.F. ANGEL