SL Green Bags $250M for Opportunistic Debt Fund
A major Canadian pension fund, reportedly Caisse de Dépôt et Placement du Québec, has committed $250 million for a new SL Green Realty Corp. opportunistic debt vehicle.
The fund will focus on distressed credit opportunities in New York’s office and retail real estate sectors, including existing loans, loan portfolios and controlling CMBS securities. It will also originate loans.
The $250 million commitment is just the beginning, since SL Green plans to raise roughly another $250 million by the end of this year. New York offers a robust pipeline of investment opportunities, according to a company statement.
“After nearly a four-year hiatus, we are now… lending on and investing in mortgage and mezz loans and debt securities,” SL Green Chairman & CEO Marc Holliday said during the company’s most recent earnings call in October.
“This quarter, we invested nearly $110 million in various debt and debt-like investments, and that’s on top of the other DPE investment activity we did earlier this year,” Holliday said. “This marks the return to an extremely profitable business.”
The debt investments closed thus far combined with the pipeline that the company has been building throughout 2024 will serve to seed the debt fund, Holliday said.
“The fund will provide additional capital resources enabling us to reestablish ourselves as the dominant provider of subordinate capital for New York City commercial assets,” he predicted.
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A major commercial landlord in New York, SL Green holds an interest in 55 buildings totaling 31.8 million square feet. That includes interests in 28.1 million square feet of Manhattan buildings and 2.8 million square feet securing debt and preferred equity investments.
CDPQ, based in Montreal, has about $452 billion in assets under management, including $45.6 billion in real estate in more than 1,500 properties.
Manhattan office market still struggles
The Manhattan office market continues to suffer from weak demand. The number of office-using jobs in the market dropped 0.53 percent year-over-year in September, according to CommercialEdge, losing positions in all major categories: financial services, information and professional and business services.
Asking rents in Manhattan decreased by 3.2 percent year-over-year in November, averaging $68.48 per square foot, CommercialEdge reports. For the first time in years, Manhattan wasn’t the most expensive office market in the country. San Francisco now has that distinction, besting Manhattan by 66 cents per square foot.
Investors are still interested, however. Manhattan continues to lead the nation in office asset sales volume, reaching almost $3.3 billion year-to-date through October, CommercialEdge noted.
This is nearly double Manhattan’s $1.7 billion recorded during the same period last year, though average sale prices in the market have dropped in recent months, to $344 per square foot, putting Manhattan fourth for sale prices among U.S. office markets.
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