S&P Global downgraded the credit rating for 1515 Broadway, saying its future bodes ill unless SL Green snags a casino license for the big Times Square tower.
The property is where Carson Daly hosted “Total Request Live” in the late ‘90s and early 2000s, and MTV’s offices are still there. The 57-story tower at West 45th Street is 90% leased to Paramount Global, owner of CBS, Nickelodeon and Showtime. But Paramount piled up $5 billion in operating losses last year and announced layoffs at 1515 Broadway, with more to come, S&P reckons, whether or not Shari Redstone sells her enterprise to Skydance Media.
“Sustainable” cash flow at the building has fallen nearly 10%, S&P said in a report late Thursday, adding that one measure of the 1.7 million-square-foot tower’s value has fallen by 40%, to $634 million. The rating agency also said that, measured by performance alone, 1515 Broadway’s $735 million mortgage merited larger downgrades than it received, but S&P “tempered” its actions because there’s a chance SL Green and its partners will succeed in their quest for the holy grail of a casino license.
“We expect to put all of our efforts as of Jan. 1 right into that project,” SL Green Chief Executive Marc Holliday told investors in December, “and hopefully we’ll prevail.”
Should he prevail, Holliday stands to get a $10 million cash bonus.
To collect, he’ll have to persuade the state gaming board to give him one of three casino licenses designated for downstate. At least 10 other parties are bidding for a license. His casino would take up eight lower floors at 1515 Broadway, or 250,000 square feet, with nearly 50 floors of hotel rooms above. SL Green would “be able to transform Times Square the way it should be,” Holliday said in December.
Achieving that transformation would require winning at a table with other deep-pocketed players including Miriam Adelson’s Las Vegas Sands, Mets owner Steve Cohen and The Related Cos.
Also, Holliday would have to persuade state officials that there’s deep community support for a Times Square casino. He and his partners at Caesars Entertainment and Roc Nation have lined up backing from Actors Equity and Laborers’ Local 79. But they have a formidable foe in the Broadway League, an influential producers group that doesn’t want a casino in Times Square. State officials are expected to unveil the winning bids by December.
If a casino isn’t in the cards for 1515 Broadway, the tower would become one of several in the area with a lot of space to rent. S&P figures the occupancy rate will stabilize at 83%, a bit worse than average for Times Square office buildings. It adds that the property “may not be competitive in its current state” and will require $68 million worth of work to become marketable.
In a statement, SL Green said: “Any concerns about this asset are misplaced,” adding that “1515 Broadway is an extraordinary asset that is fully leased.”
Last October the building’s $735 million mortgage was sent to special servicing after SL Green indicated it would be unable to refinance when the loan came due in March. SL Green got the loan extended for three years by kicking in $20 million cash. S&P said it has “concerns” about whether the loan could be rolled over again without a casino.
SL Green responded by saying the extension provides the flexibility needed to pursue a gaming license while “maintaining the option of continuing the use of the building as a premier office headquarters.”
