Citigroup Inc. is lending $1.45 billion to its landlord in downtown Manhattan as the property owner buys out a partner, according to people with knowledge of the deal.
The loan to SL Green Realty Corp., which acquired the two-building complex in the city’s Tribeca neighborhood from Citigroup at the start of the financial crisis in 2007, will be packaged into bonds and marketed to investors next month, said the people, who asked not to be identified because the negotiations aren’t public. The New York-based bank plans to share 50 percent of the transaction with Barclays Plc, Wells Fargo & Co. and Bank of China, the people said.
Representatives for Citigroup, Barclays, Wells Fargo and SL Green declined to comment. Telephone calls to a press officer at Bank of China in Beijing weren’t immediately answered.
The biggest banks are vying for large commercial mortgages that can be packaged into securities as investors snap up new offerings. Billion-dollar deals such as Citigroup’s are too big for most insurance companies and regional banks to hold on their balance sheets, leaving the field open for Wall Street firms hunting for property loans to be sold off as bonds.
Citigroup, which sold the complex at 388 and 390 Greenwich Street to SL Green for $1.58 billion to raise cash as losses mounted amid the housing-market collapse, renewed its lease on about 2.6 million square feet at the property in December. The lease agreement gives the bank the option to buy back the buildings, including a 39-story tower, in 2017 for $2 billion.
SL Green, said in March that it was assuming full ownership of the complex, acquiring a stake owned by the real estate arm of Canadian pension fund Caisse de Depot & Placement du Quebec. The buildings, known as Shearson Lehman Plaza when they were constructed in 1988, house Citigroup’s investment-banking offices and trading floors.
Values for office buildings in the most desirable locations in big cities such as New York have recovered all the ground lost during the economic downturn, and they are now 8.6 percent above their peaks in late 2007, according to a Moody’s Investors Service report yesterday. The property on Greenwich Street was valued at about $1.6 billion as of last month, according to SL Green, New York’s largest office landlord.
Deutsche Bank AG beat at least three other banks including Citigroup to lend $1.9 billion to the operator of a group of Hawaiian resorts, people with knowledge of that deal said yesterday. The loan to Kyo-ya Hotels & Resorts LP is also slated for sale to investors as securities, the people said.