Wells Fargo, Morgan Stanley Lend $860M on 1301 Avenue of the Americas
By Cathy Cunningham August 3, 2021 7:32 pm
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Wells Fargo and Morgan Stanley are the lenders behind the $860 million refinance of Paramount Group’s 1301 Avenue of the Americas, Commercial Observer has learned.
Paramount announced the transaction on the 1.7 million-square-foot Midtown office early Tuesday, although didn’t identify the lenders at the time.
Wells Fargo and Morgan Stanley served as the transaction’s co-leads, sources said, with each lender providing $430 million in debt, broken down into a $355 million first mortgage loan and a $75 million mezzanine loan.
An Eastdil Secured team arranged the balance sheet financing, sources said.
The 45-story trophy asset, between 52nd and 53rd streets, is 71.5 percent leased to a variety of tenants and includes 30,000 square feet of ground floor and concourse-level retail space. The building provides lower-level access to Rockefeller Center and features views across Central Park and Midtown.
“With the refinancing of this high-quality Class A asset in today’s attractive credit markets, we have strengthened our balance sheet and improved financial flexibility,” Wilbur Paes, chief operating officer, chief financial officer, and treasurer of Paramount, said in the announcement Tuesday. “This transaction is a strong endorsement of the strength of the New York City office market and a testament to the confidence the capital markets have in our platform.”
The five-year, interest-only loan includes a $500 million tranche with a fixed-rate interest rate of 3.11 percent, plus a $360 million tranche with a floating rate of LIBOR plus 2.65 percent. It retires a $850 million loan that was provided by a trio of life insurance companies back in October 2016: AXA Equitable Life Insurance Company, MetLife and New York Life. The five-year loan was set to mature in November, but the refinance has pipped it to the post.
The deal marks one of the largest office refinances to close post-COVID in New York City.
“This building is in a phenomenal location, with super strong sponsorship behind it,” Robert Rosenberg, a managing director at Wells Fargo, told CO. “We think Paramount is top notch, and there’s nobody better to manage an asset like this, through the near term and the long term. Ultimately, New York City is not going away, and we’re long on New York City. Prior to COVID, the city was busting at the seams on both the residential and commercial fronts and occupancy and rents were at the highest levels. We expect some adjustments in the future and lent at a leverage profile that accounts for those. This is not a super high leverage loan; the LTV was reasonable based on in-place value and stabilized value once more leasing is completed.”
Barclays announced late last year that it would be leaving its 500,000-square-foot space at the building. The resulting vacancy meant the financing worked better as a balance sheet loan “where Paramount could have more flexibility with their lenders and have discussions around future potential leases,” Rosenberg said.
Still, the loan was heavily competed by both balance sheet and CMBS lenders.
“There’s really good demand for well-located properties with top sponsors, and we’re willing to compete,” he said, adding that “Wells Fargo is very fortunate in that it is one of the largest balance sheet lenders in the New York City metro area. So while there was a lot of competition, it’s a market we know very well and are comfortable with, and so we were willing to provide a fully underwritten proposal.”
Earlier this month, Goldman Sachs led the $900 million loan on Stellar Management’s One Soho Square, although few can compete with the $3 billion refi for SL Green Realty Corp.’s One Vanderbilt, which closed in June and was also led by Wells Fargo, along with Goldman Sachs.
“We’re busier than ever in terms of our pipeline,” Rosenberg said. “There are a lot of large loans out there that we’re bidding on: some multifamily, office, self storage, industrial and even some retail —both grocery anchored and top tier malls.”
In terms of their own activities in the capital stack, Paramount Group recently participated in the $1.25 billion construction loan for L&L Holding Company and Columbia Property Trust’s redevelopment of Terminal Warehouse into creative office space. The company was a mezzanine lender in the deal, alongside Oaktree Capital Management, as first reported by CO.
A Paramount spokesperson declined to comment. Wells Fargo officials were not immediately available for comment. A Morgan Stanley spokesperson did not return a request for comment.
