Stellar Taps CMBS Market for $900M Refi of One Soho Square [Updated]

Goldman Sachs and Paramount Group provided the debt

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Stellar Management and Imperium Capital have sealed a $900 million refinance of One Soho Square, officials at Stellar told Commercial Observer. The deal closed on May 23.

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Goldman Sachs provided a five-year, $730 million CMBS loan—as first reported by Commercial Mortgage Alert—which will soon be securitized in a single-asset, single borrower CMBS transaction. The recapitalization also included a $170 million mezzanine loan, originated by Paramount Group‘s investment management platform, sources told CO. The platform has originated roughly $500 million of debt over the past 12 months.

“Goldman was a good fit because they were already one of the lenders on the asset and we knew they had the best economics,” Ryan Jackson, a principal of Stellar Management, told CO. “Their reputation gave us assurance of their certainty to close in our desired timeframe.”

CMBS offered the best execution for a deal of this size, Jackson said. And, with the debt markets hot to trot, “it’s a very good time to be a borrower.”

The Gensler-designed Class A property sits on the border of Soho and Hudson Square, and consists of the 15-story One Soho Square East and the 13-story One Soho Square West.

Tenant amenities include an exclusive rooftop deck and private outdoor terraces. The property also features a new, glass lobby and nine new passenger elevators.

The building is roughly 92 percent leased to a roster of tenants that includes MAC, Glossier, Warby Parker, Aveda and Trader Joe’s. In October, CVS inked a 13,266-square-foot deal to open a new location in One Soho Square’s base.

The robust leasing activity played into the refinance’s timing. “[It] did play a role as we only have one floor left to lease,” Jackson said.

“As evidenced by the forward-thinking and name brand companies that have offices here, One Soho Square continues to set the standard for office space in Manhattan’s most desirable submarket,” Adam Roman, Stellar Management’s chief operating officer, added in prepared remarks. “Our team has done a terrific job molding these buildings into something really special that appeals to companies looking for one-of-kind space that their employees will love.”

Larry Gluck’s Stellar acquired the former stand-alone pre-war buildings—at 223 Spring Street and 161 Sixth Avenue—for $200 million in 2012 before joining them with an elongated common core and two-story lobby. Stellar bought out former partner Rockpoint Group’s 25 percent interest the 750,000-square-foot project in 2016 for $260 million, as reported by Crain’s New York Business.

Jackson said that “to an extent,” the landlord’s vision has since been realized for One Soho Square.

“We’re always striving to improve and provide our office users a leading-edge experience every day they come to work,” he said. “The property will always be where it is, but we need to make sure it always gets to where tenants want to go.”

Cushman & Wakefield’s Steve Kohn, Alex Hernandez, Alex Lapidus and Noble Carpenter negotiated the financing together with C&W’s Adam Spies.

“Both the domestic and international capital markets were eager to participate in such a bespoke offering as One SoHo Square,” Hernandez said. “The quality of the property, amenities, tenancy and location make it a truly one of a kind financing opportunity.”

While Jackson offered no tidbits regarding upcoming financings, “getting large marquee transactions like this one done is going to be a continued theme for 2019,” he said. “As mentioned earlier, it’s a good time to be a borrower.

This story was updated to include the fact that Paramount Group provided a mezzanine loan in the deal’s capital stack.