In early 2017, on the heels of a four-year, $65 million renovation of the trophy office building at 237 Park Avenue, private equity firm Walton Street Capital put its 49 percent stake in the property on the market.
Walton Street had teamed up with Scott Rechler’s RXR Realty to acquire the 21-story Midtown tower for $810 million in 2013, and managed to bring in major creditworthy tenants like NewYork-Presbyterian Hospital and the Consulate General of Canada while completely redeveloping the lobby, atrium and retail space.
After just a few months on the market, Walton Street changed its plans. In a low interest rate environment, the partners secured a $850 million refinancing package from Morgan Stanley and Societe Generale instead, the bulk of which was then securitized in the CMBS market.
Documents associated with the securitization provide an inside look at 237 Park Avenue’s sturdy, highly creditworthy rent roll.
At the time of the latest refinancing, the 1.2 million-square-foot building was 96 percent leased, according to the offering circular. The top five tenants, all with “investment grade” credit ratings, accounted for 93 percent of the rentable area and 98 percent of underwritten gross rent.
The largest tenant, NewYork-Presbyterian Hospital, has an atypical arrangement for its “lease” at the building, which extends through 2048. As a nonprofit, the hospital can enjoy tax benefits by owning rather than leasing its office space, so RXR created an office condo for the hospital that dissolves after 30 years. The purchase price for the condo is paid in monthly installments, and this “rent” comes out to $65 per square foot, the lowest base rent among the building’s five major tenants.
The other corporate tenants at the building are investment bank JPMorgan Chase, advertising agency Wunderman Thompson (known as J. Walter Thompson before a 2018 merger), and Prudential Financial subsidiary Jennison Associates. Rounding out the top five, the Canadian government’s Permanent Mission to the United Nations and Consulate General in New York occupy a total of 72,900 square feet at the property.
Co-working firm Convene has a 29,800-square-foot space that caters to “executive retreats, corporate offsites, product launches, roadshows, and private receptions,” according to its website.
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The building occupies the entire city block bound by Lexington and Park Avenues and 45th and 46th Streets, to the northeast of Grand Central Terminal and the MetLife Building. The west side of the property features a public plaza with retail space that RXR and Walton Street renovated between 2013 and 2017.
In January 2019, the landlords were reportedly close to selling a 40 percent stake in the property to real estate investor David Werner, in a deal that would have valued it at $1.25 billion. According to property records, ownership in the building has not changed since that time.
Stacking chart for 237 Park Avenue, as of 2017. Source: CMBS offering circular via Trepp (Click to enlarge)