SL Green’s Gem Tower Buy Backed by $190M From Wells Fargo
Wells Fargo (WFC) lent approximately $190 million on the office condominium package SL Green (SLG) bought at Extell Development’s International Gem Tower for $295 million, a source told Mortgage Observer.
The non-recourse acquisition loans closed Oct. 31, the source said. The three-year loans have two one-year extension options.
The funds include some debt assumed by SL Green in the complex transaction, the source added.
News broke in August that the REIT planned to take the office condos off Extell’s hands. While at first industry sources projected the buy was worth close to $400 million, the actual purchase price was more than $100 million less than that, the source confirmed.
The Diamond District office condo tower sits between Fifth Avenue and Avenue of the Americas, at 50 West 47th Street. Extell, primarily a residential developer, began construction on the skyscraper in 2009 and it hit the market last year—only to find demand tepid. While the lower floors are aimed at tenants in the gem business, the upper floors are for all types of office tenants.
The package SL Green bought includes floors 22-34, the 2nd floor and the garage and fitness center of the Gem Tower as well as a retail space that fronts on 46th Street, as previously reported.
Just today SL Green Managing Director Robert Schiffer explained why the purchase made sense for the firm, which has tried to buy counter-intuitively—a difficulty in the Manhattan market, where prices have almost universally risen precipitously of late.
“We’re thinking that there is probably going to be a 10 percent spike in office rents next year,” in Manhattan, Mr. Schiffer said today at a panel hosted by the Commercial Real Estate Development Association at architectural consultant Gensler’s office.
This buy might have been one of few value-add opportunities left in Manhattan, in fact. As Crain’s New York Business reported in August, Extell had had little luck renting out the top floors of the glassy, 34-story tower. Now SL Green, the city’s largest office landlord, will take a turn pushing the well-appointed office spaces.
Additional reporting by Tobias Salinger