The real estate investment trust cemented a $700 million loan to refinance existing debt on the 1.2-million-square-foot Noho office building, officials at the firm announced during an earnings call on Wednesday morning.
The identity of the lender was not disclosed, but executives stated that the interest-only financing package carries a five-year term at Libor plus 1.75 percent, which was swapped for four and a half years to a fixed rate of 2.56 percent.
Vornado acquired the former Wanamaker’s department store, between East Eighth Street and Wanamaker Place, in the late 1990s and transformed it into an office building that houses creative tenants including J.Crew and AOL, which just took over a third floor at the property last week. AOL’s 82,000-square-foot expansion coincided with social media giant Facebook expanding its offices by 80,000 square feet. The Silicon Valley, Calif.-based tech tenant first signed on for 156,948 square feet at the building in 2013, and the recent growth brings the firm’s total footprint to 355,000 square feet.
“I think 2.56 percent fixed [rate] for what is actually a 4.5-year swap on a $700 million loan is a truly spectacular rate, and by the way, just for reference, that rate is a full 59 basis points better than the rate on a similar loan we closed just two months ago,” Steven Roth, Vornado’s chief executive officer and chairman of the board, stated.
Mr. Roth noted that the credit markets “are becoming a tale of the haves and have nots.”
“For sponsors such as Vornado, the credit markets are open at historically low rates,” he said. “On the other side of the spectrum for risk assets and less established sponsors, the credit markets are clogged and choppy.”
The new debt provides Vornado with net proceeds of $330 million and replaces a $353 million loan that Column Financial provided in February 2006, according to city records. The old loan carried a 5.65 percent rate and was slated to mature in March 2016, Stephen Theriot, Vornado’s chief financial officer, said later on the call.
But Vornado’s refinancing of 770 Broadway isn’t where the firm’s loan maturities end.
The REIT has a total of $708.6 million set to mature through December 2016, including a $115 million mortgage on The Bowen Building at 875 15th Street in Washington, D.C., and a $550 million loan on the 4.2-million-square-foot office center Merchandise Mart in Chicago, Mr. Theriot said.
“We are well along working on these refinancings,” he added.