Here’s how much money the GM Building makes

Fitch report offers insight into office tower’s financials

New York /
Jul.July 13, 2017 11:00 AM

Harry Macklowe may not want to look at these numbers. The GM Building, which the developer lost during the 2008 financial crisis, could make a whopping $184.3 million annually in net operating income over the coming years, according to a new analysis from Fitch Ratings. After deducting debt payments and capital expenses that would still leave the building’s owner, Boston Properties, with an annual profit of close to $90 million.

In June, Boston Properties closed on a $2.3 billion interest-only mortgage from Morgan Stanley with an interest rate of 3.43 percent, or around $79 million per year. The loan replaces a $1.6 billion financing package with an interest rate of 6 percent.

The $184.3 million figure is Fitch’s estimate of how much the building can realistically make per year during the term of the mortgage, which matures in June 2027.

The lender had the office tower appraised at $4.8 billion and underwrote the loan assuming an NOI of $227.3 million — significantly more than Fitch’s estimate and more than what the building achieved in recent years. According to Fitch, the 1.8-million-square-foot tower generated $150.5 million in NOI in 2015, down from $165.3 million in 2014 and $168 million in 2014.

Fitch’s estimate assumes an occupancy of 91 percent and includes all leases in place as of June 1, 2017. In 2014 law firm Weil, Gotshal & Manges inked a new 489,867-square-foot lease at the tower that starts in 2019 and increases its average rent from $90 to $114 per square foot, according to Fitch.

The GM Building’s profitability contrasts with another nearby office tower whose financials were recently publicized: Kushner Companies’ 666 Fifth Avenue. Bloomberg reported in April that 1.5-million-square-foot tower, which was 80 percent leased at the end of last year, made $41.3 million in net operating income in 2016 and lost $14.5 million after debt payments.

SL Green Realty recently disclosed that it expects its planned 1.7-million-square-foot office tower One Vanderbilt to generate an NOI of $198 million per year once built and fully leased.

It’s unclear how much equity Boston Properties and its partners still have tied up in the property, but after taking out an additional $1 billion in debt, annual profits of more than $90 million would likely amount to a hefty double-digit return on the investment.


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