08/17/2012

Big Loan Sought for Recap of 1411 Broadway

 

A $375 million mortgage is being sought in conjunction with the pending recapitalization of the office building at 1411 Broadway in Midtown Manhattan.

Blackstone last month agreed to sell its 49.9% stake in the property to Ivanhoe Cambridge, the real estate unit of Canadian pension-fund advisor Caisse de Depot et Placement du Quebec. The transaction values the 1.1 million-square-foot property at $735 million.

Now Ivanhoe and San Francisco-based Swig Co., which holds the remaining 50.1% stake, are seeking to refinance the property, which occupies the block bordered by Broadway, Seventh Avenue, West 39th Street and West 40th Street. Their broker, Eastdil Secured, is asking a range of lenders, including banks and insurance companies, to offer proposals for a fixed-rate mortgage with a seven-year term.

The 40-story building, known as World Apparel Center, is 89.4% leased, according to CoStar. Many of the tenants are connected to the fashion industry and use their space for showrooms. Among them: Jones New York (356,000 sf through 2025), Danskin and Levi Strauss & Co. Also, J.P. Morgan leases 120,000 sf.

Swig and the Weiler family of New York developed the building in 1970. In 1997, Trizec Properties acquired Weiler’s stake. In 2006, Blackstone assumed Trizec’s stake via its $7.2 billion takeover of the Chicago REIT.

Under the recap, Swig and Blackstone will pay off an existing $203.5 million mortgage that is scheduled to mature in 2014. That 5.5% loan, which had an original balance of $219 million, was written in 2004 by the team of Morgan Stanley, Lehman Brothers and J.P. Morgan. They carved it up and securitized the pieces in four deals (J.P. Morgan Chase Commercial Mortgage Securities Corp., 2004-LN2; Morgan Stanley Capital I Trust, 2004-IQ8; Bear Stearns Commercial Mortgage Securities Trust, 2004-PWR5; and LB-UBS Commercial Mortgage Trust, 2004-C7).

The building’s occupancy rate was 98% when the loan was originated, but performance suffered during the downturn. Net operating income, which was $31.8 million in 2004, plummeted to $17.9 million in 2010, though it rebounded to $23.3 million last year.

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