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CMA
September 30, 2016  

Brookfield Refinancing Lower Manhattan Tower

Brookfield Property is looking for a mortgage of up to $600 million to refinance one of its marquee holdings, the office building at 200 Liberty Street in Lower Manhattan.

The company is considering a fixed- or floating-rate loan package with a term of 5-10 years. If Brookfield opts for a floater, it would likely swap it to a fixed rate at closing or shortly afterward. While balance-sheet lenders — banks and insurance companies — have expressed interest, the word yesterday was that commercial MBS lenders were favored to win the assignment.

The loan collateral is a 1.7 million-square-foot building a couple blocks south of One World Trade Center, a short distance from the Hudson River. It’s one of the four towers that make up Brookfield Place, a complex formerly known as the World Financial Center.

Brookfield, seeking a loan equal to 65% of the property’s value, is serving as its own loan broker, as many large property owners do. It is providing would-be lenders with full financial information and asking them to pencil in the amount of loan proceeds that they’re willing to provide.

The loan amount could come in around $600 million, given an estimated value of $925 million for 200 Liberty Street. That estimate is based on the property’s annual net operating income of about $37 million, and, according to a recent review by CBRE, an average capitalization rate of 4% for top-performing office properties in New York. The talk is that CMBS platforms are quoting proceeds in that range, with balance-sheet operations offering closer to $500 million.

The complex was constructed in the mid-1980s by Toronto developer Olympia and York. The company filed for bankruptcy a few years after the property was completed, and Brookfield emerged as the owner in 1996 after taking control of the largest stake, about 47%. Olympia and York’s partners included Citigroup and CIBC. Brookfield later bought out the stakes of those banks and others, and it now owns the entire development.

Part of the proceeds from the new loan would be used to pay off the $310 million balance on the loan package that Deutsche Bank originated on 200 Liberty Street in 2007. The mortgage was securitized the same year in a $6.6 billion CMBS deal (2007-CD4). Brookfield has made only interest payments on the fixed-rate mortgage, which carries a coupon of 5.83% and matures in February. It can be prepaid without a penalty.

Brookfield Place encompasses four office towers — at 200 & 250 Vesey Street, and at 200 & 225 Liberty Street — with 7.5 million square feet of space among them. Each building has a relatively small retail component in addition to offices. Lying among the buildings is a 277,000-sf lower-rise portion that houses an enclosed luxury retail and restaurant component at 100 West Street. That piece features a two-story vaulted glass atrium looking out on a plaza and harbor for small watercraft along the Hudson River.

About five years ago, Brookfield said it would spend up to $250 million to renovate the buildings and draw new tenants. That initiative eventually led to an effort to rebrand the complex to appeal to a wider base, beyond financial-services companies. The name was changed from World Financial Center a couple years ago.

The 40-story building is fully occupied. Among the major tenants is Associated Press. The news organization agreed last year to take 172,000 sf as its global headquarters, beginning in 2017.