The Real Deal New York

Moinian, SL Green land record Freddie Mac loan for Sky rental tower

$550M in new funding replaces $539M Bank of China loan
By Konrad Putzier | August 22, 2017 04:40PM

From left: 605 West 42nd Street, Moinian’s Joseph Moinian, Greystone’s Drew Fletcher, Freddie Mac’s David Leopold

The Moinian Group and SL Green Realty refinanced their Far West Side luxury rental tower Sky with a $550 million loan from Freddie Mac. The deal marks the government-backed firm’s largest-ever tax-exempt financing of a single building.

The financing for the property at 605 West 42nd Street comes in the forms of bonds issued by the New York State Housing Finance agency. Around 30 percent of the bonds, or $164 million, are tax-exempt. Freddie Mac agreed to buy the bonds and plans to securitize them.

A Greystone Bassuk team led by Richard Bassuk and Drew Fletcher represented the borrowers, while their colleagues Steve Rosenberg, Billy Posey, Joe Mosley, and Jeff Englund worked with Freddie Mac to structure the deal.

Sky is a luxury rental tower – studios there ask north of $3,000 per month, it boasts amenities such as a full-length Indoor Basketball Court and three swimming pools, and it’s reportedly home to New York Knicks star Kristaps Porzingis. But it was also built under the 421a tax abatement program: A quarter of its units are designated affordable, which allowed it to qualify for tax-exempt financing.

The new financing replaces $539 million in HFA bonds issued in 2014 and held by the Bank of China. The project first broke ground in 2005 but came to a halt during the financial crisis. Work picked up again in 2014. In November, Moinian sued the city claiming that construction started in 2014, not 2008, and arguing that the later date should be the start date for its 421a benefits. The tower now falls under the 421a successor program, Affordable New York.

The 71-story, 1,175-unit tower is one of New York’s largest rental buildings. SL Green was initially a mezzanine lender on the project, and bought a 20-percent stake in the property last year.

Greystone’s Englund said the parties have been working on the financing for over the year and underwrote the building when it was only 80 percent occupied. The firm said the tower is now fully leased.

Freddie Mac, like its sister company Fannie Mae, stamps real estate loans with a repayment guarantee and sells them off as bonds. The bulk of its business is in single-family mortgages, but it also securitizes some multifamily loans, including tax-exempt bonds. According to Greystone, the Sky financing is the first deal in which Freddie Mac bought tax-exempt bonds in a private placement before securitizing them.

Greystone’s Fletcher called the deal a “landmark financing,” adding that the switch from 421a to Affordable New York, which increased the building’s below-market component from 20 to 25 percent, increased the appeal for Freddie Mac.

David Leopold, head of Freddie Mac’s affordable housing team, said the firm agreed to finance close to $1 billion in HFA bonds for New York City mixed-income housing over the past 12 months, excluding the Sky deal.