Foreign lenders and insurance companies footing commercial real estate bills

TRD New York /
Jan.January 05, 2010 02:38 PM

While many of the money center banks are sitting on the sidelines when it comes to providing mortgage financing, Chinese, German and European financial institutions and insurance companies are dipping their feet into the water to provide much needed financing for commercial real estate.

Foreign and domestic lenders and insurance companies prefer to lend to real estate investment trusts.

Later this month, a syndicate led by Westdeutsche ImmobilienBank is expected to close on a $135 million loan on the 25-story office tower at 300 Park Avenue. The 15 floors of the tower serve as the world headquarters for Colgate Palmolive. The borrowing entity is controlled by Tishman Speyer Properties.

As reported in The Real Deal today, a syndicate of banks led by the Bank of China, provided SL Green Realty with a five-year, floating rate mortgage for $475 million for the landmark Times Square office tower at 1515 Broadway. The new mortgage replaces the former $625 million mortgage that was due to mature in November 2010.

The building is owned by a joint venture of SL Green and SITQ, a real estate investment subsidiary of the Caisse de depot of Quebec, which purchased the property in 2002. The refinancing for $475 million represents one of the largest financings by a bank syndicate over the past year and a half. It should be noted that the joint venture was required to inject additional equity of $150 million to secure the new long-term mortgage.

It should also be noted that 1.3 million square feet of the building is leased to Viacom International, the third largest lease ever signed in Midtown Manhattan. If Viacom did not have the lease or had it expired, the $475 million refinancing would not have transpired.

Furthermore, the loan, based upon a 65 percent loan-to-value ratio, values the tower at $730 million, or $384 per square foot. This valuation per square foot is similar to what was relied upon in CB Richard Ellis’ $355 million purchase last year of the 1 million-square-foot office component of the tower directly across the street at 1540 Broadway.

It is interesting that the syndicate for the financing was led by the Bank of China since the bank has not provided any loans over the past three years, and is now responsible for two major loans for office towers — 1515 Broadway and the New York Times Tower — in New York City. It’s reminiscent of the Japanese banks which were active in the early 1990s when nobody wanted to lend.

In September 2009, the Bank of China provided a $120 million loan to W.P. Carey for the 21 stories, or approximately 750,000 square feet of space, at the New York Times Building on Eighth Avenue between 40th and 41st streets.

Earlier that year, W.P. Carey paid $225 million for the sale leaseback by the New York Times. The purchase by W.P. Carey was acquired by two of its publicly held, non-traded REIT affiliates.

In the case of the New York Times and 1515 Broadway, the financing was predicated by long-term leases by alleged high-rated companies.

Rick Coppola, managing director at the Teachers Insurance and Annuity Association of America, an insurance company which provided more than $5 billion in financing last year as well as providing financing last year to SL Green for the Graybar Building at 420 Lexington Avenue between 43rd and 44th streets, told me on my TV show that the majority of loans his firm financed last year were to real estate investment trusts.

As was reported in The Real Deal last September, a joint venture of SL Green and Prudential Real Estate Investors completed a $215 million refinancing of 100 Park Avenue. Two German lenders, DekaBank and Helaba, led a group of banks in the refinancing. The other lenders included German lenders PB Capital, Westdeutsche Immoblien Bank and New York-based Modern Bank.

Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” and “Building New York” on CUNY TV and on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is a director at Madison Realty Capital as well as an adjunct professor at NYU Real Estate Institute, and a former contributing editor and columnist for the New York Sun.

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