Deutsche, HSBC Close $800M Refi of 28 Liberty
While most were recovering from Thanksgiving dinner overindulgences or snapping up Black Friday bargains, transaction parties in Fosun International’s refinance of 28 Liberty Street were busy sealing the deal.
Deutsche Bank and HSBC wrapped the $800 million, six-year, floating-rate loan on the landmarked 2.1-million-square-foot office tower around noon on Friday, sources close to the transaction told Commercial Observer. The two lenders funded the entire transaction and will begin the syndication process shortly.
While it’s too early to say which lenders will be included in the syndicate, numerous banks had interest in the deal and are potential candidates, sources said.
Officials at Fosun International and HSBC could not immediately be reached for comment. A spokesman for Deutsche Bank declined to comment. CBRE’s James Millon and Tom Traynor secured the financing on behalf of the borrower, but also declined to comment on the transaction.
Competition to finance the FiDi trophy asset was fierce, sources said. Deutsche Bank and HSBC initially competed with one another as well as other lenders to take the entire loan down. Fosun, a Chinese conglomerate with global banking relationships, had its pick of capital sources but Deutsche and HSBC were the best fit for the deal and the loan was divided between them for “relationship reasons,” one source told CO.
The Real Deal first reported that HSBC and Deutsche would lead the refi.
Fosun opted for a balance sheet refi as opposed to a CMBS execution because of the loan’s future funding component. The office tower’s refinance acts more like a transitional/renovation loan.
Meeting this need, Deutsche and HSBC’s loan provides $500 million at closing and close to $300 million for tenant improvements, leasing commissions and capex further down the line.
The property’s roughly 70 percent occupancy will drop to mid-60 percent when law firm Milbank, Tweed, Hadley & McCloy departs its 340,000-square-foot space in the tower for 55 Hudson Yards. Milbank’s departure plays into the sponsor’s business plan however, sources said, as the tenant currently occupies the building’s highest floors—with the best views—and pays only around $42 a square foot. When the law firm moves out, Fosun will continue to renovate 28 Liberty and secure higher rents.
As first reported by TRD, Booking.com just signed a new lease for 53,000 square feet at the property with a starting rent in the $60s.
“Deutsche Bank and HSBC did a really good job with the structure,” one source told CO. “It allowed Fosun to execute on its business plan while keeping a good, sound credit position that is also highly liquid when they go to syndicate.”
As reported by CO, the New York State attorney general’s office secured a 345,000-square-foot lease for 15 years in January and Alamo Drafthouse inked a lease for a 40,000-square-foot, 10-screen theater in the base of the landmarked building in May, The New York Post reported.
The refi marks the first time that 28 Liberty has been financed by the debt markets. A build-to-suit asset for J.P. Morgan Chase, the property was previously known as One Chase Manhattan Plaza. When Fosun acquired the property in 2013 for $725 million, it did so in cash.
When the time came to refinance, Fosun had executed a significant chunk of its business plan for 28 Liberty, having closed roughly 700,000 square feet in new leases in the past year alone. And the wheels of the refinance began rolling in December 2016, meaning it was underway before restrictions on Chinese investment in foreign real estate clamped down.
Fosun has built up an impressive team in New York over the past few years including Erik Horvat (hired from the Port Authority of New York and New Jersey), Tom Constanzo (hired from Vornado) and Jason Berkeley (hired from Stellar Management). “In addition to 28 Liberty being a great property in a great location, Fosun has a great team. That made HSBC and Deutsche Bank comfortable with having such a large transaction on their balance sheets,” the source said.
It’s not the first behemoth deal closed by Traynor and Millon since the duo joined CBRE Capital Markets from Deutsche Bank last year. The two arranged HNA Group’s $1.75 billion loan for its purchase of 245 Park Avenue in May, as well as a $1.1 billion loan for Stonemont Financial Group’s $1.3 billion acquisition of 100 triple net lease properties in August.