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CMA
November 06, 2015  

5 Banks Join in Debt Deal on Midtown Tower

Five banks are teaming up to originate $1.25 billion of debt on the massive Paramount Plaza office building in Midtown Manhattan.

Landesbank Baden-Wuerttemberg, Wells Fargo, Deka Bank, Helaba and ING Real Estate Finance have agreed to provide a seven-year mortgage on the 2.6 million-square-foot tower, at 1633 Broadway. Each bank will take a $250 million piece and determine independently how much to sell down after the closing, which is expected within a few weeks. LBBW organized the lending group and is the administrative agent. Wells will oversee the syndication.

Some $1 billion of the proceeds will be funded up front, with the rest to be drawn down as performance measures are met. The floating-rate loan is expected to be swapped to a fixed rate. Eastdil Secured is advising the borrower, Paramount Group, which has its headquarters in the building.

Last year, Paramount, the U.S. real estate arm of Germany’s Otto Group, took full ownership of the property, buying the 25% stake it didn’t already hold from Beacon Capital of Boston.

The November 2014 transaction valued the building at $2.2 billion. Given the steadily rising prices for New York office space, the property’s value has almost certainly increased in the past year, so the new loan has only modest leverage.

The presence of ING in the lending group is noteworthy, since the Dutch bank exited the U.S. commercial mortgage market about three years ago. It made its re-entry this year and hired a few staffers in New York. Its participation in the Paramount Plaza deal shows it has the bandwidth to handle large loans.

The property stretches from West 50th to West 51st Streets, filling most of the block between Broadway and Eighth Avenue. In addition to the office space, it contains the Gershwin Theatre and the Circle in the Square Theatre.

The 48-story tower was completed in 1970. It’s 90.1% leased, according to CoStar. Among the largest tenants are Warner Music (leasing 288,000 sf until 2030), Allianz (213,000 sf until 2030), Deloitte (212,000 sf) and CBS (200,000 sf until 2026). A below-grade plaza with a subway entrance and retail space is set in front of the Broadway entrance.