Savanna Recaps One Court Square in $880M Deal

The deal's total capitalization is expected to rise to more than $1.1 billion

Savanna has closed an $880 million recapitalization of its One Court Square in Long Island City nearly a year after Amazon (AMZN) backed away from a plan to lease space in the building, Commercial Observer has learned.

Funds managed by Apollo Global Management provided a $580 million senior loan in the deal, which closed on Friday, and SL Green (SLG) Realty Corp. provided $100 million of subordinate debt, according to sources familiar with the transaction. Junius Real Estate Partners provided the remaining $200 million in the form of a preferred equity stake, which it converted from a previous ownership position. The company is an investment division of J.P. Morgan Asset Management.

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The debt replaces a $315 million CMBS loan that Natixis originated in 2016. That debt was set to come due this September, and Savanna had reportedly struggled to find a lender in the wake of Amazon’s about-face.

Cushman & Wakefield‘s Adam Spies, Doug Harmon, Marcella Fasulo, Adam Doneger and Josh King began sourcing equity for the deal a year ago, a competitive process that resulted in Junius taking the preferred equity position. Kellogg Gaines, Aaron Neidermayer and Brian Buglione of JLL (JLL) also represented Savanna in the debt negotiations, according to deal sources. He didn’t immediately respond to an inquiry.

Built in 1990, the 50-story building once stood out like an exclamation point above what used to be an often-overlooked neighborhood of warehouses and factories. Today, it stands in the middle of a newly dense district of skyscrapers that’s now home to all five of Queens’ tallest buildings, including five towers of at least 50 stories.

For almost 30 years, Citigroup (C) lent its name to the tower and served as the building’s anchor tenant. But as its lease neared a renewal date early last year, the bank moved out to make way for Amazon, which pledged to rent 1 million square feet in the building as part of its nascent plan, announced in November 2018, to build a headquarters in New York City,

The tech giant withdrew on Valentine’s Day last year, temporarily leaving Savanna in the lurch. In June, the landlord got some relief when Altice, the telecommunications company behind the Optimum, agreed to lease 103,000 square feet at the tower. And by summertime, Centene, a healthcare company that offers managed-care plans, eased the burden further when it leased as much as 500,000 square feet in the building, according to Bloomberg and Crain’s.

Earlier, in February, the Wall Street Journal reported that Savanna had been shopping for a $750 million refinancing while the Amazon deal was still alive. But talks with investors soon disintegrated when the e-commerce company decided to focus on building a headquarters just outside Washington, D.C., instead of coming to Queens. Amazon executives changed plans after locking horns with activists and local politicians who questioned whether the company’s arrival would be an economic benefit to native New Yorkers.

Until 2012, SL Green and J.P. Morgan Asset Management owned the tower outright. That year, they sold it to Joel Schreiber’s Waterbridge Capital and to David Werner, who together paid $481 million to buy One Court Square. Savanna paid more than $500 million to take over the tower three years later.

In addition to its office space, the building features a large, multi-level lobby and a branch of the Queens Public Library. Skidmore, Owings and Merrill was responsible for the tower’s design.

Representatives for Apollo didn’t immediately respond to inquiries late on Friday evening. SL Green officials weren’t immediately available for comment. A spokeswoman for Junius declined to comment, as did Savanna officials.