TIAA Declares SL Green’s 2 Herald Square Lease Terminated

A major dispute is emerging at a commercial building in the heart of Herald Square.

Pension firm Teacher Insurance Annuity Association filed a complaint against SL Green over issues at 2 Herald Square, PincusCo reported. The fight threatens to remove the city’s largest office landlord from the office and retail building, alternatively addressed at 1328 Broadway.

In a complaint filed with New York State Supreme Court, TIAA alleges SL Green owes $16 million in back rent on its ground lease at the property, as well as $8 million in taxes and other fees adding up to $30 million owed in total over the past year.

TIAA declared SL Green to be in default in December after the tenant didn’t pay what was owed, according to the complaint. The following month, TIAA declared the lease terminated.

Not in SL Green’s eyes, though. Not only has it denied the lease termination, according to the complaint, but it also started seeking a reduction in ground rent due to the commercial real estate market’s downturn.

In a statement obtained by The Real Deal, a spokesperson for SL Green said the complaint was a “distortion of the facts and an attempt by the Fee Owner to interfere with SL Green’s ownership of the property despite our extraordinary efforts on behalf of the asset,” adding the fee owner was endangering a “sizable lease.”

The spokesperson said the company looks “forward to providing a full response to this claim in the coming months.” TIAA declined a request for comment from The Real Deal.

TIAA purchased the fee interest in the property in 2014 from SL Green for $365 million; at the time, Sitt Asset Management was the ground lease tenant. Four years later, SL Green acquired the ground lease following a foreclosure case.

SL Green last year completed a deal to acquire a 95 percent stake in the leasehold, paying a mere $7 million to settle the property’s $182.5 million mortgage. The 370,000-square-foot asset was only 35 percent occupied at the time of the deal and Holliday was floating a potential conversion to residential use.

The property’s leaseholder has the right to purchase the property in 2027 for an undisclosed, set price.

— Holden Walter-Warner