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CMA
April 08, 2016  

AXA, MetLife Poised to Win NY Office Loan

A team of insurers has the inside track to take down a $500 million mortgage on a Midtown Manhattan office building.

AXA Equitable Financial and MetLife are close to tying up the loan, which would be backed by the 787,000-square-foot property at 31 West 52nd Street. The fixed-rate debt would have a term of 10 years, and would be divided evenly between the two insurers, sources said. Eastdil Secured is advising the borrower, Paramount Group.

The New York investment shop consolidated its ownership of the fully occupied building last year, in a deal that valued it at nearly $1.1 billion.

A variety of balance-sheet lenders competed for the assignment. When Paramount started looking for refinancing around the start of the year, it asked for quotes on terms of seven years or more. That put the deal in play for banks that could offer floating-rate debt at the short end of that range, as well as insurers and foreign banks that typically chase fixed-rate loans.

Lenders that reviewed Paramount’s proposal noted that leases on a significant amount of space are set to roll over within the term of a new loan. The lead tenant, law firm Clifford Chance, has a lease on 329,000 sf that expires in 2024, according to CoStar. Law firm Holland & Knight’s lease on 114,000 sf runs out in 2024. In such cases, lenders typically structure protections into their mortgages, like escrow accounts to cover debt service in the event of an extended vacancy.

Most of the proceeds from the new mortgage would be used to extinguish an existing loan of around $420 million that was written by Helaba.

Paramount acquired the 29-story building in late 2007 for $595 million from a partnership between the Deutsche Bank investment unit formerly known as RREEF and Hines, the Houston developer that completed the property in 1986. Paramount sold a 35.8% interest to J.P. Morgan Asset Management in a 2008 transaction that valued the property at around $610 million, then bought back that stake in last year’s deal.

The granite-and-glass building is between Fifth Avenue and Avenue of the Americas, in a district that includes museums, upscale hotels and luxury retailers. The building extends through the block from West 52nd to West 53rd Street, where it faces the Museum of Modern Art. The property has a 120-space underground garage.

CORRECTION (4/15/16): This article has been corrected. The original version incorrectly said that Clifford Chance, a tenant at Paramount Group’s office building at 31 West 52nd Street in Manhattan, has a 264,000-square-foot lease that expires next year. The law firm has a 329,000-sf lease that expires in June 2024.