Financing Sought for Manhattan Office Deal
Savanna is seeking $323 million of debt to finance its purchase of an office building in Midtown Manhattan that it owned once before.
The New York fund shop, via Cushman & Wakefield, is soliciting proposals for a floating-rate mortgage, with a total term of six years, backed by 1375 Broadway. Some $289 million would be funded at closing, with the balance reserved to cover planned renovations and leasing expenses.
The loan would close in conjunction with the property sale, likely in June, assuming Savanna can line up financing amid the financial turmoil caused by the coronavirus crisis. The fact that 1375 Broadway is well-leased and Savanna is a known sponsor gives the deal a decent chance, sources said. It’s unknown whether Savanna put down a hard deposit.
One banker who’s looked at the deal said lenders will likely bid on Savanna’s proposal given its experience navigating adverse market conditions. “Savanna cut their teeth in ’08 and ’09, being some of the smartest and savviest people during the [last] downturn,” he said.
Savanna struck a deal in February to buy the 513,000-square-foot property from local firm Westbrook Partners for about $435 million, or $848/sf. Westbrook had acquired the building from Savanna in 2015 for $310 million, or $604/sf.
The 27-story building, at West 37th Street in the Garment District, initially was acquired by Savanna in 2010 for $135 million. The per-foot price of about $265 was among the lowest for a Midtown office trade that year. But Savanna invested in renovations to the lobby, storefronts and facade, which helped boost occupancy and rents.
Westbrook has spent an additional $15 million upgrading tenant space. The building was 98.4% leased when it went on the market late last year. Cushman also is representing Westbrook on the property sale.
In 2017, Westbrook refinanced the building with a $300 million loan arranged by Credit Agricole. Three lenders took down slices of the senior debt: China Construction Bank, Deutsche Pfandbriefbank and Mercantile Bank. Brookfield contributed $70 million of mezzanine debt.
The building’s largest tenant, accounting firm Anchin, occupies 120,000 sf, but its lease expires in 2023, the Real Deal reported in February. That would give Savanna an opportunity to raise rents, but also represents potential credit risk for a lender.
The building was developed in the early 1900s by Abraham Lefcourt, who constructed a number of Art Deco buildings in the city.