09/24/2010

NYSTRS Shops for $200 Million Office Loan

A New York State Teachers partnership is trying to line up a $200 million mortgage on the office building at 525 Market Street in San Francisco.

Lenders are being asked to submit proposals for a five- or 10-year loan, with either a fixed or floating rate. The loan-to-value ratio would be roughly 55%, pegging the building's value at about $365 million.

The partnership's advisor, Eastdil Secured, is shopping the assignment to domestic and foreign banks, commercial MBS shops and life insurers.

New York State Teachers and its partner, J.P. Morgan Asset Management, would use the proceeds to retire a $150 million interest-only mortgage from MetLife that matures in the spring. The sponsors are hoping to take advantage of aggressive bidding by lenders for assignments from established sponsors on Class-A properties in top markets.

The 1 million-square-foot tower is 94% leased, with Wells Fargo as the lead tenant. It has a LEED energy-efficient certification from the U.S. Green Building Council.

The 38-story building, at First Street, was constructed in 1972. Nomura gained control of it in September 1997 by exercising a clause in a restructured mortgage it had provided to Tishman Speyer of New York. The next year, New York State Teachers bought the building from Nomura for $240 million in an all-cash deal. J.P. Morgan acquired its ownership stake later.

The property was unencumbered when MetLife originated its five-year, fixed-rate mortgage in 2006. New York State Teachers originally preferred a floating-rate loan, but it also asked for fixed-rate proposals, and MetLife's competitive bid persuaded it to go that route. One market player suggested that New York State Teacher's experience last time prompted it to solicit both fixed- and floating-rate quotes again this time.

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