David Rosenberg and Seth Grossman of Meridian's New York Cityoffice negotiated on behalf of the borrowers, Jeff Sutton oflocally based Wharton Properties and Manhattan based SL GreenRealty Corp., to secure an interest-only, floating-rate loan. TheJV partnership was created to identify and invest inunder-performing retail assets. The first venture was to acquirethe fee interests in two adjoining retail buildings at 1551 and1555 Broadway, and in a third retail and commercial building at 21W. 34th St. The second joint venture included acquisition of amixed-use property at 141 Fifth Ave. The transactions totaledapproximately $162.5 million.

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After purchasing the property several years ago, Suttonbought-out Hugo Boss from its ground-floor retail lease and thensignedluxury retailer Armani to a 15-year, multi-floor lease, for morethan 40,000 sf. The four-level retail condominium at 717 Fifth Ave.boasts a three-story glass atrium. Laura Pomerantz of PBS RealEstate represented Armani in that transaction. The space iscurrently being built-out by Armani and the anticipated openingwill be early 2009, which Grossman says is still on track.

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Grossman tells GlobeSt.com that completing the refi now wasextremely important. "Existing debt came due on the day that weclosed with no extensions—it needed to happen with no room forerror or the borrower would have needed to write a check for $192million to payoff the existing that day." He continues "that timingwas on there side however, because the Armani lease was signed andHugo Boss was bought out of their space to make that happen sincethe initial mortgage was put on." The borrowers increased rents"tremendously" since the original financing, which is why, Grossmansays, "the borrowers were able to replace a $192.5-millionloan—which included roughly $60 million of mezz--with a new firstmortgage of $285 million."

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Rosenberg tells GlobeSt.com that refinancing for anything ismore of a stretch now, and is not at all limited to retail. "Dealsare getting done with two, three, and four times more work thanthey used to, and terms are often less favorable," he says. "Thisdeal was great, but also an atypical transaction because it hasclass A everything--location, building, tenants, borrowers, and thebusiness plan was executed.

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Grossman says that general refinances are much tougher acrossthe board. "Deals are getting done, but they are not under termspeople are necessarily happy with. Borrowers are literally havingto come out of pocket for some deals to refinance in order topayoff their existing, even in cases where they executed theirplans because the deals were simply over leveraged to begin withand that type of financing is not available."

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Grossman continues that getting a loan in today's environmentwas hard. "This was one of the most difficult deals I have everworked on, solely because of the lenders backing out of themarket," he says. "The asset is fantastic… .Historically this dealwould have been simple and just a function of beating up lendersfor the highest dollars and lowest spread. This time it was notnearly that simple, and many of our initial, most ideally suitedlenders couldn't even bid the loan at all because they were totallyclosed down."

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Grossman explains that "others that loved the deal--and thoughtthey were going to win it--bid about $160 million or $200 millionetc. The entire process was very challenging and filled withfluctuations of highs and lows. The loan closed because all sidesworked very, very hard and well together to close what at the endof the day was a fantastic loan, especially for thisenvironment.

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According to SL Green's website, there are a few units availableat 717 Fifth Ave. A first floor retail space has an asking price is$250 per sf, and a fourth floor office space has an asking rent of$80 per sf.

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Jeff Sutton of Wharton Properties owns more than one hundredproperties and has developed Manhattan trophies such as 609 FifthAve.--flagship store for American Girl Place--720 FifthAve.--flagship store for Abercrombie and Fitch--and 1551 Broadwayin Times Square, currently being developed to be the Flagship storefor American Eagle, which are owned through JVs with SL Green. SLGreen owns more then 30 New York City office properties consistingof roughly 24 million sf.

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Natalie Dolce

Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.