In June, landlord SL Green Realty announced the sale of a 49.9% stake in a Manhattan office tower to a Japanese investor. The sale valued the building around $2 billion, making it one of the largest and most consequential U.S. office deals of the year. News of the deal boosted SL Green’s share price about 20% that day, and it is up more than 20% over the past year. The sale also helped buoy sentiment across the beleaguered New York office market. But the sale came with an important caveat. SL Green and other investment firms agreed to sell the buyer, Mori Trust, more than $500 million worth of the building’s debt at a roughly 6% discount, according to people familiar with the sale. SL Green didn’t disclose these transactions in its earnings report, earnings call or in the press release announcing the deal, the Wall Street Journal reported. That sale and that discount, while a modest amount, were important in getting Mori to agree to invest in the building at a $2 billion valuation, despite the property’s debt load, these people said. Analysts said that the sale is a success for SL Green, one of New York’s largest office owners, even with the discount, because the company got $174 million in cash in a tough market. Firms also have some leeway over what to disclose, analysts said. Yet some also said complex deals like this mean valuations now often come with an asterisk. “You see the headline number that everybody cares about, and then there’s the story behind it,” said John Kim, a real-estate stock analyst at BMO Capital Markets. “And in this case 90% of the people who heard about this deal just focus on the number.”
