With the maturity wave rising higher, the commercial mortgage-backed securities market is already seeing some major deals in the first month of the year.
Citigroup is gearing up to provide a $300 million CMBS loan to the 91-year-old family-operated real estate firm Haymes Investment Company for its office property at 5 Penn Plaza in Midtown Manhattan, Commercial Observer can first report.
The 10-year deal, which has yet to close, will refinance a $203 million CMBS loan on the property that is due to mature next year. In April 2007, J.P. Morgan Chase provided the borrower with the previous mortgage, which was securitized in JPMCC 2007-LD11, and is the third largest deal in the conduit, comprising 6.4 percent of its total collateral.
The sponsor informed Moody’s Investors Service late last year that it planned to defease on the J.P. Morgan loan—meaning Haymes would replace the debt with U.S. Treasuries that replicate the cash flows of the loan and, in doing so, would avoid prepayment penalties. (A December 2015 report from Moody’s stated that a potential defeasance of the 5 Penn Plaza loan would not affect its ratings of the J.P. Morgan conduit.)
But Haymes stuck with the CMBS market for reasons that were not disclosed. The new loan from Citigroup will be securitized in the next few weeks, one person close to the transaction said on the condition of anonymity.
The 24-story building, which sits on Eighth Avenue between West 33rd and West 34th Streets, is 98.5 percent leased. The building contains 630,551 square feet of office space and 26,273 of retail space, according to CoStar. Office tenants include Sirius XM Radio and the Visiting Nurse Service of New York. CVS/pharmacy is a ground-floor retail tenant at the property.
Jon Estreich and Christopher Barnet of the New York-based brokerage Estreich & Company worked on the new CMBS deal.
A representative for Citigroup declined to comment. Representatives for Haymes Investment Company and Estreich & Company were not available for comment.