March 2, 2010 / 1:04 AM / 7 years ago

Macklowe sues to prevent SL Green from foreclosing

3 Min Read

* Macklowe wants SL Green to back off

* SL Green holds two loans on office building

By Ilaina Jonas

NEW YORK, March 1 (Reuters) - New York office building owner Harry Macklowe on Monday filed suit against affiliates of SL Green Realty Corp (SLG.N), a real estate investment trust Macklowe accuses of trying to foreclose on loans for a Madison Avenue building under construction.

Macklowe says SL Green, through two specially created companies, holds two loans on the 30-story office building under construction at 510 Madison Ave at 53rd Street.

It is refusing to grant Macklowe a rightful loan extension and instead plans to move to foreclose on the property to get it for a fraction of its value, according to the lawsuit filed in New York Supreme Court in Manhattan.

The 372,000-square-foot building was under construction and carried loans of about $390 million, according to the lawsuit.

The $257.5 million senior loan, secured by the property, was granted by Union Labor Life Insurance Co in 2008. A junior loan of $61.5 million from German American Capital Corp was secured by interest in the borrower, also in 2008.

Another loan was secured earlier for $69 million and was also secured by interest in the borrower.

The loans were to come due on March 1, but because of a fire last year, its construction was delayed. That gave Macklowe the right to extend the loan, according to the documents filed.

But in the meantime, SL Green bought two of the three loans -- the senior mortgage, for $170 million, and the $61.5 million loan junior to that one for less than $15 million, according to court documents.

SL Green will not honor the extension and has said the property, based on an appraisal, is worth only $180 million, Macklowe says in the lawsuit. Instead, it said last month it would demand full repayment of the loans on March 1.

A spokesman for SL Green could not be reached immediately for comment.

Macklowe wants the court to order SL Green to grant the extensions and to bar it from foreclosing. (Reporting by Ilaina Jonas; Editing by Gary Hill)

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