Banking Consortium Provides $1.3B CMBS Refinance on Manhattan’s Grace Building
Four lenders combined to originate the debt on the iconic, 1.6-million-square-foot tower in Midtown
By Mack Burke November 5, 2020 7:00 am
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Bank of America (BAC), JPMorgan Chase (JPM), Credit Suisse (CS) and Deutsche Bank (DB) have combined to originate $1.25 billion in debt to a joint venture led by Brookfield (BN) Property Partners and The Swig Company to refinance the Grace Building, an iconic, curved, 49-story office property that borders Bryant Park in Midtown Manhattan, according to ratings agency analysis of the transaction.
The 10-year, interest-only loan pays interest at a fixed-rate of 2.75 percent, according to analysis from Kroll Bond Rating Agency (KBRA). It retires $900 million in existing commercial mortgage-backed securities (CMBS) debt that had been provided by Deutsche Bank in 2014.
Bank of America and JPMorgan Chase each took a third of the loan amount, while Credit Suisse and Deutsche Bank each took 20 percent of the total, according to KBRA.
The borrowing party was able to recoup around $320 million in equity as part of the transaction, per KBRA.
Of the $1.25 billion total, $750 million is being securitized in the GRACE 2020-GRCE single-asset, single-borrower (SASB) CMBS transaction, per KBRA. Overall, a $883 million portion of the whole loan is split across 20 pari-passu senior A notes, while the remaining $367 million is divided among four subordinate B notes. This CMBS SASB includes four of the senior A notes, totaling $383 million, and the four remaining subordinate B notes. The remaining $500 million not in this securitization is split among 16 pari-passu A notes that will be included in future CMBS transactions.
Built in 1974 and designed by Skidmore, Owings & Merrill, the roughly 1.6-million-square-foot tower — also known as the W.R. Grace Building — borders Bryant Park along West 42nd Street in the heart of Midtown. The Class A office is known for its curved vertical facade and located at 1114 Avenue of the Americas — between West 42nd and West 43rd Streets — just a couple blocks from both Grand Central Terminal and the Times Square-42nd Street subway junction.
It features 1.5 million square feet of office space, just under 31,000 square feet of retail, nearly 16,000 square feet of storage space, and there’s also a 65,000-square-foot, 188-space parking garage under the asset, per KBRA’s analysis.
Brookfield bought an interest in the property in 2006, a deal that was part of its $8.9 billion acquisition of office owner Trizec Properties.
According to KBRA, the joint venture owners have injected more than $160 million into the property for various improvements such as a lobby renovation, a “reconfiguration” of its 30,000-square-foot outdoor plaza and for general tenant improvements and leasing expenses.
The Grace Building is almost 95 percent occupied by a variety of 38 tenants, as per KBRA analysis done last month. The tenant who’d leased the most space in the asset is global advertising software company The Trade Desk, which is housed in almost 15 percent of the property’s rentable area. Several other of its largest tenants include Boston-based management consultancy Bain & Company Inc., which is one of the world’s largest of its kind; Bank of America; venture capital firm Insight Partners; and the Israel Discount Bank of New York. Its retail tenants include Gabriel Kreuther, Joe & the Juice, STK Steakhouse and Sweetgreen, all of which are open and operating under proper COVID protocols as of last month.
Bank of America is using the Grace Building as one of a handful of Manhattan properties in the general vicinity to assemble what’s essentially a campus for its employees, per KBRA. The bank is an anchor at the nearby One Bryant Park and has taken all of 386,000 square feet at 1100 Avenue of the Americas.
