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CMA
October 11, 2019  

PBC Shopping for Fifth Avenue Office Loan

The owner of an office property overlooking Bryant Park in Midtown Manhattan is in the market for a mortgage of up to $650 million.

Property & Building Corp. USA is talking to lenders about refinancing the 865,000-square-foot building at 452 Fifth Avenue. The firm is seeking a fixed-rate debt package to run about 10 years. It’s taking quotes at two proceeds levels: $600 million and $650 million. AKS Capital is advising New York-based PBC, an affiliate of Israeli conglomerate IDB Group.

The building, across West 40th Street from the main branch of the New York Public Library, houses the New York headquarters of HSBC. The U.K. bank sold it to PBC in 2010 for $330 million.

PBC, headed by former Winthrop Realty executive Eli Elefant, sank $25 million into a renovation that, among other things, upgraded more than a dozen floors and involved the construction of a new lobby with Italian-marble floors.

The property encompasses a 30-story glass tower, developed in the early 1980s for Republic National Bank, and an attached Beaux Arts-style building constructed in 1902. That landmark structure was designed by John Duncan, who also was the architect for Grant’s Tomb. HSBC acquired Republic National in 1999.

In 2010, as HSBC was recovering from the last recession and looking to raise capital, it sold off its headquarters buildings in London and Paris, as well as the New York property.

The existing debt on 452 Fifth Avenue was originated in 2012 and is slated to mature in 2022. J.P. Morgan wrote a $400 million fixed-rate loan and securitized the $300 million senior component (JPMCC 2012-HSBC). The senior mortgage, with a 4.55% coupon, would have to be defeased if retired within the next two and a half years. The $100 million mezzanine piece was sold to MetLife.

A year after that financing was obtained, PBC received unsolicited offers for the property but decided against selling.

In 2017, HSBC renewed its lease on some 548,000 sf, extending it to 2025. The property is 98% occupied. Other tenants include Baker & McKenzie (106,000 sf until 2028) and Man Group (49,000 sf until 2022). Net operating income was $37.3 million on a trailing 12-month basis ended June 30, up from $32.5 million in the full year 2017, according to servicer reports.