The future of the office market may be in question, but at least one Manhattan tower looks well-positioned to weather any pandemic-related fallout.
Brookfield Property Partners and Qatar Investment Authority’s One Manhattan West has a rent roll with a weighted average lease term of over 17 years, according to a presale report from rating agency DBRS Morningstar. The landlord last month refinanced the newly completed, 70-story tower with $1.5 billion in CMBS debt, and ratings documents provide a detailed look at the property’s finances.
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The 2.1 million-square-foot office portion of the building was 94-percent leased to seven major tenants and three Brookfield affiliates as of Aug. 1, according to the report. Average base rent was about $91 per square foot, with most smaller tenants paying more than $120 per square foot while several anchor tenants enjoy significant discounts from market rent.
The two largest tenants, each with about 640,000 square feet or 31 percent of the property’s total net rentable area, are AM Law 200 top-five law firm Skadden Arps and “big four” accounting firm Ernst and Young, which pay base rents of about $77 and $85 per square foot, respectively. Consulting giant Accenture pays nearly $120 a foot for its 280,000 square feet, while the National Hockey League is paying $85 per square foot on a lease that extends until 2041.
While most tenants’ leases last well into the next decade or beyond, Skadden Arps, Ernst and Young and the NHL also have options to give up some of their space at the 10- or 15-year mark. The NHL in particular has the option to terminate its entire lease in 2026, if it provides 30 months notices and pays a $21.8 million fee.
Given the development’s recent completion, all the property’s leases are very new and several tenants had barely begun moving into their space before the coronavirus hit. According to DBRS, Skadden Arps, the NHL and law firm McKool Smith have completed their build outs, while Ernst & Young and Accenture are only 25-percent complete and are set to move in next February. Ernst & Young and the NHL both pushed back their move-in dates this summer due to “construction pauses attributable Covid-19.”
In addition to the $1.5 billion CMBS loan, the refinancing of the property also included two mezzanine loans totalling $300 million. The loan sponsor is a joint venture between Brookfield and the QIA, and the financing does not cover the retail condominium that spans the building’s five lower floors.
The single-borrower CMBS deal for the office building — described by DBRS as “ultra-Class A” — was already heavily oversubscribed in mid-August, with one BBB tranche covered more than nine times over, Bloomberg reported.