SL Green Plans $1B NYC Opportunity Debt Fund

SL Green Realty plans to start raising funds for a $1 billion opportunity debt vehicle this month targeting New York City, according to its quarterly earnings statement.

It is joining numerous other investors eager to take advantage of the distress and/or troubled assets expected to come online in the US markets over the next year. Many of these properties and paper have sound fundamentals – not counting the office asset class – but are underwater on debt and the owners do not have the wherewithal or desire to kick in further equity for refinancing.

Another recent example is a $1 billion fund that RXR and Ares Management are forming to buy distressed office assets in New York City. The two have kicked in $500 million and expect to raise the remainder. They are only planning to invest in assets that are still competitive but need new capital for renovations or debt restructuring – a category that RXR CEO Scott Rechler described to the Financial Times as “that middle, class-A part of the market.”

Then there is the launch of Reven Office REIT by commercial real estate leaders Ethan Penner and Chad Carpenter. The newly-formed company is seeking to raise $1 billion, through a lead investor and a blind pool IPO, to provide office owners and investors with such financing as first mortgages, mezzanine debt and preferred equity. The company will also make investments in distressed office debt and properties.

SL Green believes it can launch its fund by the first half of this year.

“We’ve been out speaking with folks domestically, Middle East and Asia,” Marc Holliday, SL Green’s CEO said in December at a conference, according to Bloomberg.  “We’re sizing it at about $1 billion, which is not to mean that’s the dimension of opportunity. That’s just where we want to peg the first fund.”