Related nearing deal for $2.5B financing package at 50 Hudson Yards: sources
Project set to be city's most expensive office tower; loan could be largest of its kind
Related Companies, which is developing what’s slated to be New York’s most expensive office building at 50 Hudson Yards, is in advanced talks to secure a $2.5 billion financing package for the property, The Real Deal has learned.
The financing would include a roughly $700 million equity injection and a $1.8 billion senior loan from a syndicate of banks, sources familiar with the discussions said. The loan, if it closes, would be among the largest-ever construction loans for an office tower.
Bank of China, Deutsche Bank and Wells Fargo are putting together a five-year mortgage for the construction of the 2.9 million-square-foot tower, which Related is developing in partnership with Oxford Properties Group. Wells Fargo and Deutsche Bank are acting as the lead arrangers on the deal, sources said. It’s unclear which lender will act as the administrative agent, the liaison between the borrowers and lenders.
Sources said a foreign institutional investor is stepping up to provide the additional equity, with two sources naming Mitsui Fudosan America, a subsidiary of Tokyo-based Mitsui Group that already owns a majority stake in 55 Hudson Yards.
The term sheet on the loan is still weeks away, sources said. Representatives for Related didn’t immediately respond to requests for comment, nor did representatives for Bank of China and Wells Fargo. Representatives for Deutsche Bank declined to comment. A representative for Mitsui Fudosan declined to comment.
In January, Related and Oxford filed plans with the Industrial Development Agency, showing that the all-in development costs — land acquisition, construction and soft expenses — for the Foster + Partners-designed, 62-story, 985-foot tall skyscraper would be $3.94 billion, a record for New York. The IDA application pegged the tower’s size at 2.8 million square feet, which breaks down to north of $1,400 per square foot.
Related originally sought a $2.5 billion construction loan for 50 Hudson Yards, and its preference was to borrow from a syndicate of banks, similar to SL Green Realty’s $1.5 billion financing package for One Vanderbilt, sources said. That lineup included Bank of China, Bank of New York Mellon, J.P. Morgan Chase, TD Bank and Wells Fargo.
A number of lenders said, however, that a senior loan of that size was unrealistic for 50 Hudson Yards, given that the project is still considered speculative. As of now, BlackRock is the property’s only committed tenant, having agreed to lease 850,000 square feet across 15 floors late last year. In February, news broke that Morgan Stanley was mulling buying a 2 million-square-foot office condo at the tower, but the financial firm is also exploring other options at the 17 million-square-foot Far West Side megadevelopment.
Given the price tag of the building, the current debt package carries a loan-to-cost ratio of 45.7 percent. Had the partnership snagged a $2.5 billion loan as they originally hoped, the LTC would have been roughly 63.5 percent, which is relatively standard as far as construction deals go.
Other recent mammoth construction loans include the $1.25 billion Children’s Investment Fund provided to HFZ Capital Group at 76 Eleventh Avenue, as TRD first reported. When Anbang Insurance Group was in talks with Kushner Companies to redevelop 666 Fifth Avenue, the parties were said to be seeking a loan of north of $4 billion. That deal, however, never came to pass.
Over the years, Related and Oxford have spent more than $200 million piecing together several parcels at the northwest corner of West 33rd Street and 10th Avenue to make way for the skyscraper. Related paid $30 million for a five-story manufacturing property at 507-511 West 33rd Street in August 2015, $152.3 million for 427 10th Avenue in January 2016, and acquired a 75-year ground lease for 503-505 West 33rd Street in December 2016. Related will pay $60.8 million in rent for the property.
Related and Oxford also nabbed $195 million in tax breaks from the IDA, and will be making fixed payments in lieu of property taxes.
As of August, Related and Oxford had locked up about $14 billion in debt and equity for Hudson Yards, which is estimated to cost about $25 billion in total. To get there, the developers executed a playbook that included EB-5 funds, the Israeli bond market, hedge fund capital and owner-occupied office condo deals. Companies who’ve pledged to make the move to the complex include KKR, Wells Fargo, Steve Cohen’s Point 72, Daniel Loeb’s Third Point, and Boies, Schiller & Flexner.
Katherine Clarke contributed reporting.