- What An Ivanhoé Cambridge joint venture is looking for US$1.3bn of debt
- Why The loan would refinance 1.2m sq ft of office space at 3 Bryant Park in Midtown Manhattan
- What next JLL is advising on the financing
An Ivanhoé Cambridge joint venture is pitching a potential US$1.3bn ($1.8bn) loan deal that would refinance its 3 Bryant Park office property in Midtown Manhattan, Green Street News can reveal.
The Montréal-based firm is leading talks about a new mortgage via JLL. The collateral is a 1.2m sq ft trophy office condominium in the tower at 1095 Avenue of the Americas.
Ivanhoé, the real estate investment unit of Caisse de dépôt et placement du Québec, bought the property from Blackstone for US$2.2bn in 2015. The following year, the Hong Kong Monetary Authority sovereign fund bought a 49% interest in a transaction that valued the property at US$2.4bn.
The 42-story tower is at the southwest corner of West 42nd Street, overlooking Bryant Park. The office condo encompasses 33 floors, with the remainder of the building owned by Verizon and used for telecommunications operations. There’s also a retail component and a public plaza of some 16,000 sq ft.
In line with its 2015 acquisition, Ivanhoé obtained US$1.3bn of fixed-rate financing from Deutsche Bank running 10 years. The bank securitized the senior US$1.13bn piece in a single-borrower CMBS deal (COMM 2015-3BP). Another US$215m chunk was structured as mezzanine debt.
Proceeds from a new loan would be used to extinguish that existing debt, which is set to mature in February but could be paid off without a penalty beginning in about a month.
The financing pitch is bound to receive looks from lenders, given the office condo’s location and profile. It also could face headwinds, though, linked to the generally uncertain outlook for leasing in the office sector.
Occupancy is nearly 97%, and the weighted average remaining lease term is around 7.2 years. MetLife occupies almost 417,000 sq ft, or 36%, of the space under an agreement that matures in April 2029. That could be seen by prospective lenders as a relatively near-term issue to be resolved.
Law firm Dechert has another 209,000 sq ft, but its lease runs until March 2035. A Whole Foods store with a food hall-style eatery occupies 43,000 sq ft of the retail component on the building’s lower floors.
In 2016, Salesforce won naming rights on the building, dubbing it Salesforce Tower, as the company sought to sublease a sizable amount of space — possibly as much as 300,000 sq ft. A portion of that space likely comprised the offices formerly occupied by MetLife, as the insurer had indicated it planned to vacate much or all of its offices there as it consolidated its functions at 200 Park Avenue, four blocks away.
Since the pandemic cut into office leasing nationally, though, Salesforce has looked to shrink its footprint. Last summer, The Real Deal reported that the company was subletting 34,000 sq ft at 3 Bryant Park to another tenant, VTS. It’s unclear exactly how much Salesforce currently subleases, but it appears to be well over 200,000 sq ft. The company announced at the beginning of last year that it was laying off about 10% of its workforce and was looking to reduce office space in multiple markets as it allowed some employees to work remotely.
The push to refinance 3 Bryant Park likely will be viewed as the latest test of the market for large, splashy office financing deals. Sources familiar with the details noted that preliminary marketing materials sent to lenders didn’t list a proceeds number, a sign that the owners might consider injecting fresh equity and obtaining a smaller mortgage.
One person with knowledge of the situation said the Ivanhoé venture is likely also in discussions about restructuring and extending the existing CMBS debt. That scenario is common now, particularly with office properties, which tend to be under some pressure. Wells Fargo was the original special servicer on the CMBS deal, but Green Loan Services, a servicer affiliated with SL Green Realty, is now in that position.
It’s possible the owners are kicking the tires on both options: refinancing or modifying the current loan package. Either option could result in a lower outstanding debt load.
The securitized senior debt pays a coupon of 3.25%. The property generated US$16.7m of net operating income in Q1, compared with US$79.1m last year and US$87.9m in 2022.
