Posted on: November 13, 2024, 09:43h.
Last updated on: November 13, 2024, 09:43h.
SL Green (NYSE: SLG), the real estate partner in a proposed effort to bring a casino hotel to Times Square, is looking to get an extension on a $743 million loan tied to the New York City property.
A recent report from Morningstar indicated the loan on 1515 Broadway entered special servicing in late October, implying default is imminent. However, the real estate investment trust (REIT) is seeking an extension on the loan, which comes due in March.
The Morningstar report noted the property is fully leased, generating ample cash flow, calling its overall performance “stellar.” Loan data confirm SL Green is current on its mortgage payments on the property and that the landlord is not be strained by its debt obligations there.
In October 2022, SL Green announced it is partnering with Caesars Entertainment in a quest to open a casino in Times Square. Jay-Z’s Roc Nation entertainment agency joined the consortium the following month. The group pitched at a $4 billion casino hotel at 1515 Broadway.
SL Green Has Big Debt Burden
Real estate is a capital-intensive industry and as is the case with most of its counterparts, SL Green carries significant debt.
The company’s share of debt which also includes its share of unconsolidated joint venture debt, was $10.5 billion, and the company had approximately $0.4 billion of excess cash and investments on its balance sheet, resulting in net debt of $10.1 billion as of the end of the second quarter of 2024,” wrote Morningstar analyst Suryansh Sharma.
The research firm pointed out that SL Green’s current interest rate on 1515 Broadway is below 4% and a refinance of the property could result in a higher rate. A potential increase could be buffered by declining interest rates and the expectation that the Federal Reserve will continue cutting borrowing costs in the months ahead.
As for when New York will award the three downstate casino licenses — something that could help SL Green should Caesars win one — that’s unlikely to happen prior to the end of 2025.
Drama at 1515 Broadway
SL Green’s overall tenant base is diversified, but that’s not the case at 1515 Broadway. CBS News parent Paramount controls nearly all the space at the property and that company announced layoffs in August, including some pertaining to workers at the SL Green buildings. Additionally, Paramount is in the midst of a testy takeover battle.
It’s possible potential creditors may demand to see more tenants at the building or “tax” SL Green for the property’s dependence on Paramount.
As for the proposed Caesars casino, should that project win approval from New York regulators, SL Green has said the gaming venue would occupy the space currently used by the Miskoff Theater. That’s home to “The Lion King” — one of the longest-running shows in Broadway history.
