PWM cancels property auctions; SL Green unit to sponsor plan for one

By Sarah Lizee

Olympia, Wash., July 22 – PWM Property Management LLC canceled auctions for its 245 Park Avenue and 1818 West Madison properties, according to a notice filed Thursday with the U.S. Bankruptcy Court for the District of Delaware.

The company named 245 Park Member LLC, the stalking horse bidder, and also an affiliate of SL Green Management Corp., one of PWM’s largest stakeholders, the winning bidder for the 245 Park Avenue property.

Earlier this year, the company began a process to solicit sale, financing and plan sponsor proposals for the two properties. One of the proposals came from SL Green.

Ultimately, seven proposals were received to either provide debt financing, invest equity capital, or purchase one or both properties through a plan of reorganization. As a result, the debtor expected to either consensually amend and restate 181 West Madison’s $240-million mortgage loan or, absent consensus, reinstate the mortgage loan under a plan of reorganization.

However, the company said a variety of factors had made it challenging to lock in a committed stalking horse bidder for 245 Park Avenue. Some potential bidders had expressed concerns over SL Green’s desire to own the property.

The company said the best way to maximize value was to schedule an auction where all potentially interested parties – including SL Green – could bid in an open, transparent manner. PWM added that authorizing it to conduct an auction without a stalking horse would allow it to avoid the costs of expensive bid protections.

However, following the filing of the bid procedures, the debtors accelerated discussions with SL Green regarding a potential stalking horse bid for 245 Park Avenue. The talks later resulted in a definitive agreement for 245 Park Member to sponsor a competitive plan of reorganization for the debtors with respect to 245 Park Avenue.

After multiple rounds of negotiations, SL Green proposed a bid under which it will exchange at least $40 million of its preferred equity interests in 245 Park JV LLC for 100% of the common membership interests in 245 Park JV, which indirectly holds 100% of the equity interests in the entity that owns 245 Park Avenue.

In addition, SL Green will contribute cash of about $68 million at closing to satisfy the obligations necessary to effectuate the restructuring.

The stalking horse bid, if consummated, will:

• Discharge 100% of the debtors’ preferred equity obligation;

• Provide for the payment in full in cash of administrative, priority and general unsecured claims;

• Reinstate 245 Park Avenue’s mezzanine debt on a consensual basis, as agreed to by SL Green and a super-majority of the mezzanine lenders, without the need to pay over $20 million in asserted default interest claims; and

• Replace 181 West Madison Holding LLC with SL Green Realty Corp. as guarantor of 245 Park Avenue’s funded debt on a prospective basis effective from and after the effective date.

The stalking horse bid was subject to higher or better offers under the previously set bid procedures.

However, the company said it did not receive any other qualified bids for the 245 Park Avenue property by the deadline.

The company said that due to market feedback prior to the bid deadline for the 181 West Madison property, the debtors will seek to reinstate the mortgage loan under a plan of reorganization.

The hearings to consider confirmation of the plan are scheduled for Aug. 30 and Aug. 31.

New York-based PWM is a property management company. It filed Chapter 11 bankruptcy on Oct. 31, 2021 under case number 21-11445.

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