As the Federal Reserve pushes up interest rates faster than it has in decades, GFP Real Estate landed a $191 million loan for 40 Worth Street.
Jeff Gural’s firm secured the seven-year loan from a collection of banks led by Wells Fargo and including TD Bank and BankUnited. It will use the money in part to build out the Legal Aid Society’s new 199,000-square-foot offices at the Tribeca building.
The new loan replaces a $150 million loan provided by Capital One and TD Bank in 2015 that was set to mature in 2025.
The unusual deal included $155.7 million in permanent financing at a fixed rate and $35.3 million in construction financing at a floating rate. Generally, a permanent loan replaces a construction loan. In this case, the package included construction and permanent financing to reflect the building’s different phases of construction.
Legal Aid plans to occupy 125,000 square feet by August and 75,000 square feet in the remaining space under construction by March.
The nonprofit signed a 30-year lease at 40 Worth Street last June, moving from 199 Water Street and 80 Pine Street.
Paul Talbot of Newmark represented GFP Real Estate in the deal.
All available space in the building is leased. The property houses the East Coast headquarters of The Gap along with nonprofits the Acumen Fund, the Innocence Project, Legal Services NYC, Public Health Solutions, Weill Cornell and the Center for Family Representation.
Also known as the Merchants Square Building, 40 Worth Street was constructed in 1929.
Talbot declined to disclose the interest rates on the loan, but they were certainly lower than if the deal had closed a few weeks later. On Wednesday, the Fed hiked the Federal Funds Rate to 1.5 to 1.75 percent to combat inflation. It was the largest increase since 1994.
Rising interest rates make borrowing more expensive for landlords, squeezing profits and sometimes putting their control of properties in jeopardy. Industry sources say that a number of deals have been put on hold or repriced because rates have gone up.