Nassi gets “monkey off his back” with 315 Park Avenue S. sale

Dozen of investors rejected soon-to-be vacant office tower
By Katherine Clarke | May 14, 2013 08:30PM

Real estate honcho Craig Nassi of BCN Development said the $250 million sale of his former office building at 315 Park Avenue South, which closed today, was a relief, both personally and for his company, which has faced foreclosure at the property since August 2012.

“It’s definitely a monkey off my back,” Nassi told The Real Deal today. “This was such a milestone to get it closed and have the threat of foreclosure off our shoulders.”

San Francisco-based Spear Street Capital bought the 20-story, 356,000-square-foot office property in a deal brokered by Doug Harmon and Adam Spies of Eastdil Secured on behalf of Nassi.

The deal satisfied the debt held on the property by SL Green Realty, which paid CWCapital Asset Management $218 million in December for the chance to take control of the property.

Over the past year, up to 75 separate investment groups eyed the property, which first came on the market in March 2011 as an out-and-out sale, as well as in the form of a joint venture partnership opportunity with Nassi. But all passed as the result of complications arising from the building’s tenant occupancy status, which is in flux.

Credit Suisse, which is the building’s credit tenant and occupies more than 80 percent of the property, has a lease that expires in 2017 and has already vacated six floors of the building in advance of a move. More recently, conglomerate Leucada National Corporation, which occupies the remaining portion of the building, announced that it would be departing the property by the end of 2013 following its recent merger with the investment bank Jefferies Group. Its space will be subleased prior to the expiration of its lease, which is also ending in 2017.

Meanwhile, the Related Companies is rumored to be courting Credit Suisse as a tenant for its Hudson Yards development on the west side. No deal has been announced.

The prospect of being left with a vacant building made prospective buyers nervous, Nassi said.

“[Spear] was the one group willing to take a chance,” Nassi said. “[Other groups] were too scared that it was too much space and they wouldn’t be able to lease it up.”

SL Green had not been forced to take a haircut on the note and mortgage, Nassi said. The total outstanding balance was $219 million in 2012, when CWCapital filed to foreclose on the property. UBS Real Estate Securities originally issued the loan to BCN in June 2007, but the debt was reassigned several times before it was snapped up by SL Green.

When Nassi purchased the property in 2007 for $265 million, he viewed it as a potential conversion opportunity, to condominium or hotel, but when the market soured following the collapse of Lehman Brothers, the developer was left high and dry with a five-year loan that could not be extended.

“The loan wasn’t in default because of [a lack of] payment,” said Nassi, who continued to make payments on the loan right up to the point of default. “It was in default because the term expired and they could not extend it because it was a CMBS loan and they weren’t permitted to extend those loans.”

BCN struggled to refinance the property due to a lack of equity.

“The best new loan on the market at that point was for about $180 million,” Nassi said. “The payoff for the mortgage was about $220 million so we would have needed to come up with another $40 million.”

While the property retains its potential as a prospective residential conversion opportunity, the new owners intend to preserve the property as an office asset, Nassi said.

Neither Spear nor Harmon immediately responded to requests for comment.

Meanwhile, with the deal having closed, BCN is focused on finding “conversion and value-add” opportunities in Manhattan, its CEO said, and is working on a couple of “bite-sized” deals.

“We’re bullish on everything in Manhattan,” he said, “even up to 240th Street.”