Cantor Lends $270 Million Against NYC’s 26 Broadway

Cantor Commercial Real Estate Lending has provided $270 million of senior and mezzanine financing against 26 Broadway, a 900,000-square-foot office property in Manhattan’s Financial District.

 

The seven-year financing includes a senior loan, with a balance of $220 million, that is expected to be securitized.

 

The 32-story property, also known as the Standard Oil Building, is owned by the Chetrit Group, which in 2007 acquired it, along with three of the four land parcels on which it sits, from the Koeppel family for $225 million. Five years ago, it paid $35 million for the last land parcel.

 

The property previously was encumbered by a $183.5 million loan that Wells Fargo Bank acquired last year from a collateralized debt obligation that was managed by what’s now Gramercy Property Trust.

 

The 26 Broadway building is 90 percent occupied, which is up from 76 percent last year, thanks to some 126,000 sf of new leases that were signed in recent months. Those include a 45,000 sf agreement with the New York Film Academy, which will occupy its space through 2029, and 20,000 sf agreements with graphic-design company Ustwo Studio Inc. and law firm Schlam Stone & Dolan.

Its largest tenant is the New York City Department of Education, in 181,659 sf through January 2039 on behalf of the Lower Manhattan Community Middle School.

 

New York City has designated the 26 Broadway building as a landmark. It was constructed in 1928 by Standard Oil Co., which used it as its headquarters until 1956, when it moved to 150 East 42nd St.

The building includes 3,500 sf of retail space.

Sub-3% Rate Expected on NY Loan

A Silverstein Properties partnership that’s seeking a $360 million loan on the office building at 1177 Avenue of the Americas in Manhattan is in line for a rock-bottom interest rate.

With Treasury yields plummeting and commercial MBS loan spreads on trophy properties tightening, the partnership will likely end up with a rate well below 3% on a seven-year loan. That would be one of the lowest coupons on a long-term mortgage in the current cycle.

The assignment is being pitched to balance-sheet lenders and CMBS shops via Eastdil Secured. CMBS programs appear to have the edge, one market pro said, because the borrowers are focusing on achieving the best pricing rather than flexibility on loan terms, and securitization platforms are currently willing and able to offer cheaper debt because of the prevailing spreads in the CMBS market.

Lenders in the mix said they are hearing that the loan’s coupon will be pegged to only about 90-95 bp over seven-year Treasurys, thanks to the loan’s low leverage and the strong institutional sponsorship. Since the beginning of this year, the seven-year Treasury yield had hovered between 2% and 2.3%. But a flight to quality this week touched off by plunging stock prices drove down the yield, which briefly hit 1.5% on Wednesday before rebounding to 1.8% yesterday. If that level holds, it would put the loan’s coupon around 2.7%.

New York-based Silverstein currently owns the 47-story tower in partnership with California State Teachers. UBS is buying an unspecified piece of the ownership, and the loan is being sought in conjunction with that recapitalization.

Lenders said the proposed mortgage would equal only about 40% of the property’s value. The debt yield, which measures net operating income as a percentage of the loan amount, would be a solid 10.4%.

The 1 million-square-foot building, which stretches from West 45th to West 46th Streets on the west side of Avenue of the Americas, is 92% leased. Law firm Kramer Levin leases 283,000 sf.

Lenders cite spread compression as an ongoing theme in the market. The loan sought by the Silverstein partnership is viewed as something of an outlier, given the low leverage and strong sponsorship. But it illustrates how competition has driven down pricing on trophy properties.

Only a few giant securitized mortgages on New York office properties have carried coupons in the 3% area over the past two years. In March 2013, a Silverstein-UBS Trumball Property Fund partnership lined up a seven-year loan with a 2.72% coupon on the leasehold interest in the 1.9 million-sf office building at 120 Broadway.

Well Fargo securitized the $310 million interest-only mortgage via a stand-alone deal (WFCM 2013-120B). The loan-to-value ratio was 51.7%. The day the loan closed, the seven-year Treasury yield was 1.4%, indicating that the loan spread was approximately 130 bp.

Shares of Blackstone-Backed Real Estate Trust Rise in Debut

Summary:  Blackstone owned REIT, Brixmor Property Group, oversold in its IPO.

New York --(New York Times DealBook)--

Stock market investors continue to show an appetite for real estate.

The Brixmor Property Group, a real estate investment trust owned by the Blackstone Group, sold more shares than it had expected in its initial public offering on Tuesday evening, reflecting strong demand from investors. The shares were priced at $20 each, the middle of an expected range, raising $825 million and giving the company a market value of about $5.9 billion.

The stock rose on Wednesday in the company’s trading debut on the New York Stock Exchange. After opening at $20.65, shares of Brixmor were up as much as 4 percent during the day before closing at $20.40.

“Our story really resonated with investors, and that led to more demand that allowed us to upsize,” Michael A. Carroll, the chief executive of Brixmor, said in an interview.

Investors are looking to gain exposure to the strengthening commercial real estate market in the United States. Vacancy rates are expected to decline for commercial properties and rents are expected to grow modestly, the National Association of Realtors said in a forecast released in August.

In October, the Empire State Realty Trust raised $929.5 million in an initial public offering. Its shares, through Tuesday, have risen 9 percent from the I.P.O. price.

Investors are betting that Brixmor, which has 522 shopping centers across the country, is poised to benefit from the improving property market. The company says it has the nation’s largest wholly owned portfolio of shopping centers anchored by grocery stores.

The company, formerly known as the Centro Properties Group, was in need of capital before Blackstone bought it in 2011. Since then, Brixmor has invested $339 million to improve its assets, the company said in a regulatory filing.

Brixmor said it planned to use the proceeds from the offering to reduce its debt. As of June 30, its total debt was about $6.7 billion, according to the filing.

The company sold 41.3 million shares in the offering, more than the 37.5 million shares it had expected to sell. The deal’s underwriters have the option to purchase an additional 6.2 million shares.

Blackstone will remain the majority owner, with about 73 percent of the company’s shares, according to a filing.

The offering was led by Bank of America Merrill Lynch, Citigroup, JPMorgan Chase and Wells Fargo Securities.

http://dealbook.nytimes.com/2013/10/30/shares-of-blackstone-backed-real-estate-trust-rise-in-debut/?_r=0