SL Green has scored a $1.25B construction loan to build a large Midtown South office tower at the height of a pandemic that has fundamentally altered the outlook for Manhattan offices.

The debt, provided by Wells Fargo, TD Bank, Goldman Sachs, Bank of America, Deutsche Bank and Axos Bank, will fund the construction of One Madison Avenue, the largest commercial project to commence since the coronavirus pandemic took hold in the city this March, the real estate investment trust announced today. SL Green is partnering with Hines and the National Pension Service of Korea — the same partners behind One Vanderbilt — to develop the tower.

“Our commitment and belief in New York City is unwavering,” SL Green Chairman and CEO Marc Holliday said in a statement. “Despite the headwinds presented by current and temporary challenges, we remain focused on boosting the New York City economy by creating thousands of construction jobs and bringing a new, best-in-class office tower to the highly sought-after Flatiron/Midtown South submarket for the first time in a decade.”

Construction will begin this week and is set to be completed in 2024. The loan has an interest rate of 3.35% over Libor and could see that rate decrease to 2.5% if it hits leasing and completion targets, according to the release.

“The groundbreaking of One Madison Avenue symbolizes confidence and optimism in New York City's resiliency as a safe and vibrant urban center," New York City Deputy Mayor for Housing and Economic Development Vicki Been said in the release.

The new 1.4M SF office tower redevelopment, located between East 23rd Street and East 24th Street near Madison Square Park, will include retail space, a 15K SF food market, a fitness center and an event space.

Construction on the redevelopment comes as the future of New York City's office market remains uncertain amid the pandemic and work-from-home revolution. Availability is at a 16-year high and available sublet space is set to surpass the peak of the Great Financial Crisis.

In an investment presentation in 2018, SL Green Director of Leasing Steve Durels said that the real estate trust was expecting to lease out the space for $135 to $175 per SF, similar to the rents it received for space at One Vanderbilt.

Asking rents for Manhattan Class-A office spaces dropped 5% year-over-year in the third quarter, from $98.33 per SF to $93.43. Former One Madison tenant Credit Suisse paid $60 per SF for its office space, according to the investment presentation. Credit Suisse paid $40.9M to terminate its lease early and pave the way for the presentation, SL Green disclosed in a regulatory filing.