SL Green is fighting to retain control of 2 Herald Square, a commercial building across the street from Macy’s, after defaulting on $30 million worth of rent on a ground lease.
The city’s biggest commercial landlord operates the 370,000 square-foot building whose land underneath, measuring two-thirds of an acre, is owned by a partnership between TIAA and Norges Bank Investment Management. After SL Green’s default, TIAA and Norges Bank took over its ground lease and accused the developer of “effectively squatting” when it refused to leave the premises, according to a lawsuit filed last month.
On Tuesday, SL Green fired back by calling on a judge to dismiss the case. The developer argued its landlord made procedural errors when moving to seize 2 Herald Square.
SL Green said the legal argument for seizing the ground lease is “flawed” and a “clear violation of terms.” SL Green intends to “exercise its rights under the ground lease.”
It’s unclear how persuasive SL Green’s argument will be considering that last month Judge Jennifer Schecter found that the land owners followed all the necessary steps when taking over the ground lease. She granted a preliminary injunction, which ordered SL Green to avoid interfering with its foes in their day-to-day operation of 2 Herald Square.
“There’s no condition that wasn’t satisfied here in terms of their doing what they did,” Schecter saie.
She added the case is “very much like” a battle that unfolded at the Chrysler Building, where tower operator RFR Holding was evicted from the premises earlier this year after defaulting on $21 million worth of rent and taxes owed to landlord Cooper Union.
The battle at 2 Herald Square features some of the biggest players in real estate. SL Green owns 30 million square feet of Manhattan property, including 1 Vanderbilt Ave., 245 Park Ave., and 1515 Broadway, where it seeks to develop a casino. TIAA manages $1.3 trillion in assets for nearly 5 million clients, and Norges Bank manages Norway’s sovereign wealth fund, the world’s largest with $1.7 trillion in assets.
2 Herald Square is a 40%-vacant building at the intersection of West 34th Street and Sixth Avenue. SL Green acquired the building when it bought out a partner in late 2023 for no money and persuaded its lender to settle the property’s $182.5 million mortgage for just $7 million. The developer then tried to renegotiate the terms of the ground lease with its landlord, a limited liability company called T-C 2 Herald Square Owner.
Early last year SL Green allegedly stopped paying about $2 million in monthly rent and property taxes, even as it continued trying to fill the building. This past Feb. 19, an SL Green executive told a TIAA official that a “large institutional user” had agreed to lease 120,000 square feet for 26 months at a price of $65 per square foot. The TIAA official replied a few hours later: “I suggest that communications/negotiations should go through our respective lawyers.”
