SL Green Secures Trophy Asset in Ashkenazy's 625 Madison Ave After 10-year Saga

After a decade of conflict, the battle for control over the prime real estate beneath the 625 Madison Avenue office tower, just a block from Central Park, concluded this week. This intense struggle pitched two of the industry's most astute players against each other, shedding light on the ruthless nature of New York's real estate scene.

Let's take a step back and review the key chapters in this saga:

• 1956: A 17-story building emerges at 635 Madison Avenue, nestled between East 58th and East 59th streets. It serves as Nabisco's headquarters.

• 1986: The building changes hands as Stephen Ross' Related Companies takes ownership. Substantial renovations breathe new life into the aging structure, and Ron Perelman's cosmetics giant, Revlon, becomes the anchor tenant.

• 2004: Marc Holliday's SL Green, at the helm, acquires the leasehold for the office building, effectively separating it from the ground underneath.

• 2013: A pivotal moment arrives when Ben Ashkenazy and his partner, Michael Alpert, outmaneuver institutional investors and well-funded buyers to secure ownership of the ground beneath 625 Madison, a transaction valued at a staggering $400 million. At this juncture, Polo Ralph Lauren primarily occupies the building for its offices, and SL Green pays a relatively modest annual rent of $4.6 million on the ground lease, with a rent reset looming in 2022. Ashkenazy's substantial investment indicates his anticipation of a substantial rent increase in the coming years.

• 2016: Michael Alpert, Ashkenazy's partner, adopts an aggressive stance. With luxury super tall condominiums sprouting up along Billionaires' Row, he envisions 625 Madison as a prime residential development site, potentially worth a staggering $1.4 billion. This projection would necessitate a dramatic rent hike, potentially reaching $80 million annually. Alpert asserts that "the land under 625 Madison Ave. is absolutely one of the best development sites in Manhattan," citing a clear valuation clause in the ground lease.

• 2018: As tensions escalate, it is revealed that Ashkenazy had financed his position with a $195 million mezzanine loan from the UK-based hedge fund Children's Investment Fund. This fund is known for backing significant projects such as HFZ Capital's One High Line and Related's 35 Hudson Yards. The loan agreement required Ashkenazy to repay $40 million of the debt by November 2018, but when the deadline arrived, only $30 million had been settled. As Ashkenazy grapples with the hedge fund in court, SL Green makes a strategic move by acquiring a portion of the mezzanine debt. This shrewd maneuver bolsters Holliday's negotiating position with his landlord.

• 2021: Ashkenazy's legal team presents a theory, suggesting that SL Green's hardball tactics are driven by ulterior motives aimed at gaining an advantage in rent negotiations. They assert that "it should be reasonably apparent that something else is driving [this] behavior."

• 2023: The moment of reckoning arrives for Ashkenazy as an arbitrator sets the annual rent at $20.25 million, delivering the anticipated rent hike. However, this increased ground-lease rent effectively diminishes the value of SL Green's $230 million investment in the building, making it appear worthless. Nevertheless, SL Green holds a trump card. As holders of the mezzanine debt on Ashkenazy's stake in the property, SL Green and its partners move to foreclose on it. In a dramatic turn of events, the lenders take control of the site in August 2023 through a UCC auction, now wielding the reins of this coveted piece of Manhattan real estate.

This decade-long saga serves as a stark reminder of the high-stakes, cutthroat nature of the New York real estate arena.