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June 02, 2017  

SL Green, Vornado Seek $1.2 Billion

Barely a year after refinancing the office complex at 280 Park Avenue in Midtown Manhattan, SL Green Realty and Vornado Realty are looking to do so again.

The New York REITs are talking to lenders about a $1.2 billion debt package on the two-building property, which encompasses 1.2 million square feet. The preference is for an interest-only loan of 7-10 years, and the borrowers are considering both fixed- and floating-rate proposals. Commercial MBS lenders are likely to pursue the assignment.

The existing debt is a $900 million floater originated last May by Deutsche Bank, Bank of China and ING Real Estate Finance. It’s priced at 200 bp over one-month Libor and has a three-year term with extension options totaling four years. At least eight other banks — Aozora Bank, Bank of East Asia, BNY Mellon, China Construction Bank, Helaba, J.P. Morgan, Mega International Commercial Bank and Wells Fargo — took portions of the loan.

That mortgage was smaller than the borrowers originally sought. SL Green and Vornado had started shopping in late 2015 for as much as $1.2 billion of debt. But that would have required a hefty junior-debt component, which was problematic for some lenders. After months of negotiations, the two REITs eventually settled for the $900 million loan.

Now, the partners are taking another crack at borrowing the larger amount. In the interim, they’ve improved the property’s occupancy. The same month that the current mortgage closed, Four Seasons restaurant signed a lease on 19,000 sf. Private equity firm Antares Capital has agreed to lease about 55,000 sf, and Wells renewed and expanded its lease from 30,000 sf to 49,000 sf. The property was 82.3% occupied at yearend, but that figure likely doesn’t include some of the recent activity.

With those agreements in place, a $1.2 billion loan will probably qualify as a lower-leverage deal this time around, market pros said, adding that this year’s stronger CMBS market could also work in the borrowers’ favor. Spreads at issuance on the most-senior classes of single-borrower CMBS deals have been running well below their year-ago levels.

The complex was previously owned by Bahrain-based Investcorp and New York fund operator Broadway Partners, who bought it in 2007 for $1.3 billion and assumed a $1.1 billion debt package.

Three years later, two big tenants, Deutsche and the National Football League, let their leases expire and the complex’s cashflow stalled. SL Green and Vornado, which held $300 million of mezzanine debt, converted that position into an equity stake in 2011. They now hold full ownership on a 50-50 basis.

The property, on the west side of Park Avenue between East 48th and East 49th Streets, is made up of a 31-story building constructed in 1963 as the headquarters of Bankers Trust and a 43-story tower developed in 1971. The buildings are joined by a low-rise structure.