Starwood Sells Mortgage Stake To Vornado on Times Square Gateway Center Development

Alessia Pirolo — Tue, 23 Oct 2012 18:08:55 -0400

Starwood Property Trust and Starwood Capital Group sold to Vornado Realty Trust a 25 percent participation in the $375 million financing on 701 Seventh Avenue, where a joint venture of developers is planning to build Times Square Gateway Center, a 340,000-square-foot multi-use complex.

Rendering of Times Square Gateway Center.

Last week,Starwood Property Trust and Starwood Capital Group announced the co-origination of a first mortgage and mezzanine financing for the acquisition and redevelopment of the 10-story retail building in Times Square. The building will be partially demolished to make way to the new complex. Times Square Gateway Center will feature retail space, a hotel tower and the nation’s largest single LED screen for Broadway’s iconic lights and advertising.

Starwood Property Trust, Starwood Distressed Opportunity Fund IX, and Vornado have now funded $210.9 million, $70.3 million and $93.8 million, respectively. Other $100 million will be funded upon reaching certain milestones during the transformation of the property.

The lenders intend to sell the first mortgage in the near term to increase their investment returns and retain the mezzanine loan. Following the completion of the sale, the existing lenders expect that the mezzanine loan will generate an IRR in excess of 14 percent before attributing value to the equity participation received in the transaction which could be material.

apirolo@observer.com

The Commercial Observer » Starwood Sells Mortgage Stake To Vornado on Times Square Gateway Center Development

Starwood Sells Mortgage Stake To Vornado on Times Square Gateway Center Development