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October 19, 2018  

Banks May Sweeten NY Loan for Brookfield

The bank group behind the $1.25 billion construction loan for Brookfield Property’s One Manhattan West is expected to boost its size and lengthen the term, while trimming the spread.

The giant floating-rate loan was originated in 2015 by Wells Fargo, BNY Mellon, TD Bank and Deutsche Bank. In all, 20 banks ultimately participated in the financing. The group held a meeting a week ago to discuss tacking on another year to the debt’s five-year term, adding about $100 million of funding and cutting the spread by about 25 bp.

Brookfield’s request for the changes generally was well-received by the lenders. While it’s possible some banks could choose to exit the deal, they would likely be replaced by others. One source with knowledge of the process noted that the planned 2.1 million-square-foot skyscraper is now largely pre-leased, “so it’s appropriate to look at proceeds, pricing and recourse and all that.”

The reopening of the deal also comes as stiff competition among lenders is driving down spreads on new mortgages. As previously reported, that’s motivating borrowers to ask lenders to reduce pricing on existing floating-rate loans, or to refinance them early at tighter spreads — mitigating recent increases in the benchmark Libor rate.

The new terms being discussed for the One Manhattan West loan would bump the maximum proceeds to $1.35 billion, from just under $1.25 billion. The spread would be reduced by 25 bp. The loan was originated with a spread of 335 bp, but it’s unclear whether it has since stepped down, as sometimes happens with construction loans.

Wells is administrative agent on the financing package. BNY, TD and Deutsche are syndication agents and share lead-arranger and bookrunner credit with Wells. Four others — Banco Bradesco, Credit Agricole, HSBC and Landesbank Baden-Wurttemberg — came in at the closing as documentation agents.

Shortly after the closing, the syndicate brought aboard Bank of East Asia, BBVA Compass, CIT Real Estate, EverBank, Fifth Third Bank, First Commercial Bank of Taiwan, Industrial and Commercial Bank of China, Mega ICBC, Raymond James, Santander Bank, Sumitomo and SunTrust.

The 67-story building, designed by Skidmore, Owings & Merrill, is being constructed on a platform over rail lines at Ninth Avenue between West 31st and West 33rd Streets. The structure topped out a few months ago and should be completed in about a year.

When the project was getting under way and the loan was originated, less than 30% of the space had been pre-leased — mostly to law firm Skadden Arps, which took 635,000 sf. Since then, several other major tenants have signed leases, including Ernst & Young (675,000 sf), Accenture (250,000 sf) and the National Hockey League (175,000 sf).

The property is part of Brookfield’s Manhattan West development, which will encompass some 7 million sf of office, residential and retail space.