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 seeking an extension on a $743 million loan associated with the New York City property.
A recent report from Morningstar stated that the loan on 1515 Broadway entered special servicing in late October, indicating a potential default. Despite this, the real estate investment trust (REIT) is actively pursuing an extension on the loan, which is due in March.
The Morningstar report highlighted that the property has full occupancy and generates significant cash flow, with its overall performance described as “stellar.” Loan data confirms that SL Green is up-to-date on mortgage payments for the property and is managing its debt obligations effectively.
In October 2022, SL Green announced a partnership with Caesars Entertainment to establish a casino in Times Square. Roc Nation entertainment agency, owned by Jay-Z, later joined the venture. The group proposed a $4 billion casino hotel at 1515 Broadway.
SL Green Faces Debt Challenges
Real estate operations require significant capital investment, and SL Green, like many others in the industry, carries substantial debt.
As of the end of the second quarter of 2024, SL Green’s share of debt, including joint venture debt, totaled $10.5 billion, with approximately $0.4 billion in excess cash and investments. This results in net debt of $10.1 billion,” noted Morningstar analyst Suryansh Sharma.
The research firm pointed out that SL Green’s current interest rate on 1515 Broadway is below 4%, and a potential refinance could lead to a higher rate. However, declining interest rates and expected Federal Reserve rate cuts may help mitigate any increase.
New York is unlikely to award the three downstate casino licenses, which could benefit SL Green if Caesars secures one, before the end of 2025.
Challenges at 1515 Broadway
While SL Green’s tenant base is diverse overall, this is not the case at 1515 Broadway. Paramount, the parent company of CBS News, occupies the majority of the space and announced layoffs in August, impacting workers at SL Green buildings. Paramount is also facing a contentious takeover battle.
Creditors may demand additional tenants at the building or raise concerns about SL Green’s reliance on Paramount for the property.
If the proposed Caesars casino project receives approval from New York regulators, SL Green plans for the gaming venue to take over the space currently used by the Miskoff Theater, home to “The Lion King,” one of Broadway’s longest-running shows.