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September 16, 2016  

Paramount Eyes Mortgage on 60 Wall Street

Paramount Group is seeking a loan of up to $650 million on 60 Wall Street, a Lower Manhattan office building in the process of being recapitalized.

The 1.6 million-square-foot property, valued at roughly $1.2 billion, is currently owned by New York-based Paramount and a Morgan Stanley fund. The vehicle, Morgan Stanley Real Estate’s Special Situations Fund 3, is seeking to sell its 37.7% stake, and Paramount will likely sell a portion of its 62.3% piece and continue to serve as the general partner. In the meantime, Paramount has begun searching for a mortgage that would finance the new ownership group. HFF is advising on both the recapitalization and the financing.

Bank balance-sheet lenders and commercial MBS shops are expected to compete for the lending assignment. Paramount prefers a term of 5-7 years and will consider fixed- and floating-rate proposals. Lenders said the requested loan size is about $550 million, but could range up to $650 million.

The 50-story tower stretches from Wall Street to Pine Street, between Pearl and Williams Streets. It was constructed in 1988 for J.P. Morgan and served as its headquarters until the bank’s acquisition by Chase Manhattan in 2001. That year, Deutsche Bank acquired the tower for $610 million for use as its North American headquarters. In 2007, Deutsche sold the building to the Paramount-Morgan Stanley team for $1.2 billion and leased back all of the space for 15 years.

In conjunction with the sale, Deutsche originated a $925 million mortgage on the property. Deutsche securitized $540 million of the interest-only loan via three CMBS deals (COMM 2007-C9, CSMC 2007-C5 and MSC 2007-IQ16). The remaining $385 million was sold to various shops, mainly German banks. The 10-year loan, with a 5.77% coupon, matures in July 2017, but the prepayment penalty expires four months earlier.

The property’s valuation is constrained because Deutsche is retrenching and its lease expires in only six years. As a result, the capitalization rate at the estimated $750/sf value would be a relatively high 5.5%, based on $66 million of projected net operating income this year.