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CMA
October 12, 2018  

Fresh Debt Sought for New Manhattan Rentals

The owners of a recently completed, upscale apartment property on Manhattan’s East Side are seeking up to $825 million of new debt.

A JDS Development partnership is talking to lenders via Eastdil Secured about refinancing the 761-unit American Copper Buildings, a two-tower complex a few blocks south of the United Nations headquarters. The preference is for a five-year loan with proceeds between $725 million and $825 million.

The new debt would replace a $660 million package that was originated less than two years ago to retire construction financing. Bids are being invited from commercial MBS shops and balance-sheet lenders, and the borrower will consider either a fixed- or floating-rate deal.

JDS, headed by Michael Stern, developed the property in a joint venture with Largo Investments, also of New York, and Boston investment manager Baupost Group. The project started in 2014 and units began renting last year. The current occupancy rate isn’t known.

In mid-2016, as development was nearing the finish line, the JDS team retained CBRE to market a 45-49% stake in the property. The word at the time was that its valuation was roughly $1 billion. No sale materialized, and near the end of the year the partners refinanced construction debt with a $500 million mortgage from insurer AIG and $160 million of mezzanine debt from Apollo Global and SL Green. That package, with interest-only payments, was slated to run three years.

The partnership’s return to the debt market just 22 months into the existing loan reflects a trend toward early refinancings spurred by rising interest rates and a crowded field of lenders willing to accommodate borrowers (see article on Page 1). In this case, the borrower is also seeking a significant jump in proceeds, likely pegged to the increasing value of the property as it leases up.

The property is at 626 First Avenue, between East 35th and East 36th Streets. It includes 60,000 square feet of amenity space, some 13,000 sf of retail space on the lower floors and a 294-space garage. The towers, rising 48 and 41 stories, have an unusual angled shape and are named for their copper cladding, a design choice that will result in the facades changing color over time as a patina forms.

The buildings are joined by a three-story skybridge connecting floors 27-29, which house much of the amenity space — including a climbing wall, a fitness center and an indoor pool. Atop one tower is another pool, a lounge, grilling stations and private event space.

Twenty percent of the apartments are reserved as affordable housing, which allowed the project to receive a 20-year tax abatement. The market-rate units have luxury touches including oak floors, stainless-steel appliances, marble countertops, kitchen islands and washer/dryers. Many apartments, which have floor-to-ceiling windows, have sweeping views of the East River. Rents start at around $4,055 for studios and run as high as $30,000 for the largest three-bedroom apartments.