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CMA
December 21, 2018  

Refi Eyed for Offices at Time Warner Center

A Related Cos. partnership wants to refinance the office condominium at Time Warner Center in Midtown Manhattan with a $1.2 billion mortgage that would include a giant future-funding commitment.

New York-based Related and its equity partners — Abu Dhabi Investment Authority and Singapore sovereign wealth fund GIC — began quietly reaching out to lenders a few weeks ago. While the details are still up in the air, the loan would likely have a floating rate, with $350 million or more reserved for tenant improvements and other expenses incurred as Time Warner vacates the 1.1 million-square-foot condo and Deutsche Bank moves in.

“They’re looking at the future-funding piece and trying to figure out how they can most effectively put together $1.2 billion,” one person said.

Deutsche has agreed to occupy the entire condo starting in 2021. Time Warner is moving to a new building in the Hudson Yards development. A Time Warner division vacated its space in 2016, which lowered the condo’s occupancy rate to 88%, from 100%. Its lease on the rest expires in January, but the timetable for its move is unclear.

While Deutsche’s lease was good news for the owners looking to fill a yawning vacancy, it presents some complications for lenders underwriting a new loan on the condo. The German bank is under pressure on multiple fronts. Its stock price has plummeted 59% from the 52-week high amid sagging profits. And chief executive Christian Sewing has cut nearly 2,000 jobs since taking the reins in April as he seeks to deliver on a promise to slash costs 8% by next year. The bank is decamping from its existing headquarters at 60 Wall Street as part of a planned 30% reduction of its New York footprint.

Deutsche remains a sprawling international bank with an investment-grade corporate-credit rating, which lenders will factor in. However, S&P downgraded its senior credit rating by one notch over the summer, to “BBB+.” Moody’s rating is A3.

“They’re still a formidable, large institution, and they’re not going away. It’s just with all that noise out there, it’s something lenders have to digest,” said a second person familiar with the talks.

A large slice of the proceeds from a new loan would be used to retire a $675 million mortgage provided in 2014 by Deutsche and Bank of China to finance the partnership’s $1.3 billion purchase of the condo from Time Warner. Abu Dhabi Investment and GIC hold a 96.26% interest, evenly divided between them. Related has the remaining stake.

The current debt, securitized in a stand-alone commercial MBS deal (COMM 2014-TWC), has a three-year term and three one-year extension options, two of which have been exercised. The mortgage is slated to mature in February absent a third extension.

The collateral is a portion of the 2.8 million-sf Time Warner Center, which is to be renamed Deutsche Bank Center. Related and AREA Property completed the massive structure in 2004 at a cost of $1.8 billion, then sold the office component to Time Warner.

The complex consists of two 55-story towers atop a multi-story base at Columbus Circle. It stretches from West 58th to West 60th Street, facing the southwest corner of Central Park. The office space is spread across multiple floors in the towers. The other, separately owned components are the 343,000-sf Shops at Columbus Circle, the 250-room Mandarin Oriental Hotel and 225 luxury residential condos.