05/27/2011

MetLife, NY Life Zero In on Blackstone Loan

MetLife, New York Life and Singapore’s sovereign wealth fund have the inside track on a $1.3 billion loan on a West Coast office portfolio owned by Blackstone.

While a final agreement evidently hasn’t been reached, rival lenders said that Blackstone was moving ahead on the loan with the trio.

Under the plan, MetLife and New York Life would fund the senior portion of the mortgage. The wealth fund, GIC, would take down the subordinate part, which would exceed $400 million. The floating-rate loan would have a two-year term, with three one-year extension options.

The assignment was originally expected to go to a securitization shop, both because it was too large for a single insurer and because insurers primarily originate fixed-rate loans. But MetLife and New York Life joined forces on a bid and further reduced their exposure by bringing GIC into the transaction.

MetLife and New York Life were attracted by the quality of the collateral, according to a person briefed on the negotiations. “The insurance companies — they’re looking to lend against high-quality assets,” he said.

While insurers aren’t active originators of floating-rate loans, they will pursue such assignments on top-notch properties, especially if the leverage is low. For example, MetLife recently originated a $180 million floater for Blackstone on the 823,000-square-foot office building at 60 State Street in Boston.

Blackstone usually seeks floating-rate debt when it wants to maintain flexibility to sell or refinance properties in the near term without incurring the prepayment restrictions associated with fixed-rate mortgages.

In the latest financing, Blackstone sought proposals for a loan on 20 California properties with 5.5 million sf and a market value of $1.9 billion. The properties included:

Sorrento Towers (618,000 sf), at 5375 Mira Sorrento Place in San Diego.

Wells Fargo Center (500,000 sf), at 11601 Wilshire Boulevard in Los Angeles.

Westwood Center (329,000 sf), at 1100 Glendon Avenue in Los Angeles.

9665 Wilshire Boulevard (171,000 sf) in Beverly Hills.

It’s unclear if the makeup of the portfolio changed during the loan negotiations. Blackstone will use the proceeds to retire existing debt.

Most of the buildings were formerly owned by Trizec Properties of Chicago or CarrAmerica Realty of Washington. Blackstone acquired the Trizec buildings before it teamed up with Brookfield Office Properties of New York to buy the REIT for $7.2 billion in 2006. Blackstone bought CarrAmerica by itself for $5.6 billion, also in 2006.

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